Banks Fail When the Value of Bank ________ Falls Below

question 7

Multiple Choice

Banks fail when the value of bank ________ falls below the value of ________,causing the bank to become insolvent.

• A) reserves; required reserves
• B) loans; secondary reserves
• C) assets; liabilities
• D) income; expenses

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Definitions:

Contractual Loan Restrictions

Clauses in a loan agreement that limit the borrower's actions in certain ways to reduce the lender's risk.

Preferred Dividends

Payments made to preferred shareholders before any dividends are distributed to common shareholders, often at a fixed rate and with priority over common dividends.

Retained Earnings

The portion of a company's profits not distributed as dividends to shareholders, but rather reinvested in the business or held as reserves.

Plant Expansion

The process of enlarging a company's physical facilities or increasing its production capacity.