A Disadvantage of Using Liability Management to Manage an FI's

question 11

Multiple Choice

A disadvantage of using liability management to manage an FI's liquidity risk is:

• A)the resulting shrinkage of the FI's balance sheet
• B)the high cost of purchased liabilities
• C)the accessibility of international money markets
• D)loss of flexibility as a result of dependence upon purchased liabilities

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Definitions:

Pricing Decisions

Pricing decisions involve determining the selling price of goods or services, taking into account factors like costs, market demand, competition, and margins.

Process Costing

An accounting methodology used to assign costs to masses of similar units of product to calculate the cost per unit, typically used in industries where products are indistinguishable, like chemicals or food processing.

Petroleum

A naturally occurring liquid found beneath the Earth's surface that can be refined into fuel, lubricants, and petrochemicals.

Sugar Refining

The process of converting raw sugar into refined sugar, involving the removal of impurities and color to produce pure, white sugar for consumption.