What Is Liquidity Risk

question 27

Multiple Choice

What is liquidity risk?

• A)The risk of a decline in the overall stock or bond market
• B)The risk of unfavorable business conditions caused by weakness in the overall economy
• C)The risk of receiving a lower than market price upon sale of your holding
• D)The risk of an unexpected rise in prices that reduces purchasing power
• E)None of the above

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Definitions:

General Journal Entry

A record in accounting that shows the debit and credit transactions affecting the financial statements, often used for non-routine and complex transactions.

Cash Sale

A transaction in which goods or services are paid for at the time of the sale using cash or other immediate forms of payment.

Credit Sale

A transaction where goods or services are provided to a customer with the agreement that payment will be made at a later date.

Record Keeping

The practice of maintaining and preserving documents, files, and records related to financial transactions for future reference.