Table 29-4. The First Bank of Fairfield

question 333

Multiple Choice

Table 29-4.
The First Bank of Fairfield
-Refer to Table 29-4. If $800 is deposited into the First Bank of Fairfield, and the bank takes no other actions, its

• A)reserves will increase by $100.
• B)liabilities will increase by $800.
• C)assets will decrease by $800.
• D)loans will increase by $800.

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Definitions:

Average Collection Period

calculates the average number of days it takes for a business to receive payments from its customers for invoices issued.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Debt-To-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Equity Multiplier

A financial leverage ratio that shows the proportion of a company's assets that are financed by shareholder's equity.