Liquidity Risk Can Only Arise on the Asset Side of an FI's

question 19

True/False

Liquidity risk can only arise on the asset side of an FI's balance sheet as this means that the FI does not hold enough liquid assets such as cash or liquid securities.

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Definitions:

Journal

A record where all financial transactions are initially documented in chronological order.

Record

The act of documenting business transactions in the financial books of a company.

Stockholders' Equity Accounts

Accounts on a company's balance sheet that represent the ownership interest of shareholders, including common stock, retained earnings, and additional paid-in capital.

Credits

Accounting entries that increase liabilities or equity accounts, or decrease asset or expense accounts, reflecting the sources of the value in the transaction.