11 Questions
What are the three most important guiding principles of asset distribution for a bank mentioned in the text?
Liquidity, profitability, security
Which item on the assets side is considered the 'first line of defense' for a bank?
Cash on hand in vaults
What is the purpose of keeping money at Call and Short Notice according to the text?
To maintain liquidity
How are items on the assets side distributed in terms of liquidity and profitability?
Descending order of liquidity, ascending order of profitability
Where does the bank keep some money apart from cash on hand as a backup?
With central bank
What is the dual nature of bills in hand for a bank according to the text?
Asset and liability
Why is bank capital important for protecting depositors according to the text?
It safeguards against losses to depositors
Which type of capital account is designed to cover unanticipated losses on loans and investments?
Special reserve accounts
How are reserve accounts different from cash reserves for banks?
Cash reserves involve fund transfers, while reserve accounts do not.
According to Crowther, what do assets represent on a bank's balance sheet?
Ownership funds
Why are bills in hand shown on both sides of the balance sheet?
Due to their dual nature as assets and liabilities
Test your knowledge on credit creation, bank deposits, and banking processes with this quiz. Learn about the expansion of bank deposits through loans, primary deposits, derivative deposits, and more.
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