Which Partner Is Considered the Most Vulnerable as a Result

question 18

Multiple Choice

Which partner is considered the most vulnerable as a result of a computation of vulnerability rankings?

• A)The partner who has the lowest loss absorption potential
• B)The partner who has the highest loss absorption potential
• C)The partner with the highest capital account balance
• D)The partner with the lowest capital account balance

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Definitions:

Net Float

The difference between checks written against and deposited in an account and those that have been cleared and charged against the account.

Short-term Investments

Financial assets that are expected to be converted into cash or sold within a short timeframe, usually one year or less.

Zero-balance Account

A checking account set up to maintain a balance of zero by automatically transferring funds from a master account in the exact amount of transactions.

Miller-Orr Model

A financial model used for managing cash balances by setting upper and lower limits on cash reserves.