Question

“Manufacturing companies are exposed to more liquidity risk than banks.”                               &nbsp

“Manufacturing companies are exposed to more liquidity risk than banks.”

                       

                        Is this statement true or false? Explain

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The given statement is False.

Supporting explanations:

The manufacturing companies do not face liquidity risks compare with Banks because the manufacturing companies do not deal more with liquidity like banks as they procure the raw materials and labor and manufactures the products by incurring overheads whereas the banks mostly deal with liquidity in the form of deposits from the customers, loans to the customers etc. as the regular activities of the bank is to deal more with liquidity.

Therefore, banks are more exposed to liquidity risks compare with manufacturing companies. Thus, the given statement is False.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following is NOT a main risk faced by US Community Banks? Liquidity Risk...
Which of the following is NOT a main risk faced by US Community Banks? Liquidity Risk Interest Rate Risk Sovereign Risk Credit Risk
1.) Small banks A. act more competitively than large banks. B. usually charge more on loans...
1.) Small banks A. act more competitively than large banks. B. usually charge more on loans relative to what is paid to depositors compared to large banks. C. are generally more efficient than large banks. D. are growing in number. 2.) Which of the following best describes the current banking system in the United States? A. The market is dominated by 10 large banks and there are very few small banks operating any more. B. There are more than 10,000...
There are over 5,000 banks in the United States—more than 10 times more per person than...
There are over 5,000 banks in the United States—more than 10 times more per person than in other industrialized countries. A recent study suggests that the long-run average cost curve for an individual bank is relatively flat. If Congress took steps to consolidate banks (merge some of the banks), thereby reducing the total number to 2,500, what would you expect to happen to average costs within the banking industry? Please explain.
Under Risk-premium Analysis, if the borrower increases its loan amount from 10 million to 100 million,...
Under Risk-premium Analysis, if the borrower increases its loan amount from 10 million to 100 million, the lending outcome is not impacted. Is this statement true or false? If this statement is true, please explain why banks are still using this method. If this statement is false, explain why.  
Investors can reduce risk by holding more than one asset in a portfolio. True or False?
Investors can reduce risk by holding more than one asset in a portfolio. True or False?
Question 3: There are over 5,000 banks in the United States—more than 10 times more per...
Question 3: There are over 5,000 banks in the United States—more than 10 times more per person than in other industrialized countries. A recent study suggests that the long-run average cost curve for an individual bank is relatively flat. If Congress took steps to consolidate banks (merge some of the banks), thereby reducing the total number to 2,500, what would you expect to happen to average costs within the banking industry? Please explain. There are over 5,000 banks in the...
1.Investors should be more concerned about the diversifiable risk rather than non-diversifiable risk in their portfolios....
1.Investors should be more concerned about the diversifiable risk rather than non-diversifiable risk in their portfolios. Do you agree with this statement? Explain 2.Internal rate of return is a better capital budgeting technique than Net Present Value. Do you agree with this statement? Explain.
Explain why banks hold more cash than do most businesses.
Explain why banks hold more cash than do most businesses.
-FICO scores above 550 are considered good. True or False -Net interest margin is the difference...
-FICO scores above 550 are considered good. True or False -Net interest margin is the difference between the yield on a government security and the rate on loans issued by a bank. True or False -Liquidity risk is the probability that a bank will not be able to pay its interest expenses. True or False -Banks do not have the same financial ratios as other companies. True or False
The largest five banks in the United States account for more than 75% of all bank...
The largest five banks in the United States account for more than 75% of all bank assets. The commercial banks have combined assets in excess of $15 trillion. Many banks are owned by holding companies that own other financial services firms. The holding company must own at least 10% of the bank’s stock. Discuss the advantages of a holding company has for a bank. Please do not plagiarize.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT