When a Bank Takes Savings from Many Small Savers and Lends

question 75

Multiple Choice

When a bank takes savings from many small savers and lends it to many borrowers, the bank:

• A)Decreases the risk to savers through diversification
• B)Increases the risk to borrowers through high transaction costs
• C)Decreases the risk to savers through economies of scale
• D)Decreases the return to savers and increases the cost to borrowers

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Definitions:

Current Liability

Financial obligations that are due within one year or within the normal operating cycle of a business.

Reconciled Cash Balance

The adjusted amount of cash on hand after accounting for discrepancies between the cash book and bank statement.

Bank Reconciliation

Bank reconciliation is the process of matching the balances in an entity’s accounting records for a cash account to the corresponding information on a bank statement, aiming to identify discrepancies and ensure the accuracy of financial records.

Reconciled Cash Balance

The process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement, to ensure accuracy.