Question

214) A bank is solvent when:

214) A) the value of its total assets exceeds the value of its liabilities. B) the value of its liabilities exceeds its stockholders' equity. C) the value of its liabilities exceeds the value of its assets. D) its stockholders' equity exceeds the value of its assets.

215) A well-capitalized bank:

215) A) does not have stockholders' equity. B) is prone to bank runs. C) owns far more than it owes. D) only accepts deposits but does not advance loans.

216) The difference between a bank's assets and liabilities is referred to as:

216) A) stockholders' equity. B) gross profits. C) retained earnings. D) net profits.

217) Which of the following equations is correct?

217) A) Stockholders' equity - total liabilities = total assets. B) Stockholders' equity × total liabilities = total assets. C) Stockholders' equity + total liabilities = total assets. D) Stockholders' equity/total liabilities = total assets.

218) Investment pools gathered from a small number of very wealthy individuals or institutions are referred to as:

218) A) capital investment. B) institutional savings. C) fixed deposits. D) hedge funds.

Answer 1

214. A bank is solvent when the value of its total assets exceeds the value of its liabilities.

215. A well-capitalized bank owns far more than it owes. Well capitalized banks has generated enough or raised enough capital from its operations.

216. The difference between a bank's assets and liabilities is referred to as stockholders' equity. That can be written as Assets – Liabilities = Stockholder Equity

217. Also we can rewrite the above equation as Stockholder Equity + Total Liabilities = Total Assets

218. Investment pools gathered from a small number of very wealthy individuals or institutions are referred to as Hedge funds.