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Holding large amounts of bank capital helps prevent bank failures because ____.
A) it means that the bank has a higher income
B) it makes loans easier to sell
C) it can be used to absorb the losses resulting from bad loans
D) it makes it easier to call in loans
Answer: C
Diff: 2 Type: MC Page Ref: 305
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
Net profit after taxes per dollar of assets is a basic measure of bank profitability called
____.
A) return on assets
B) return on capital
C) return on equity
D) return on investment
Answer: A
Diff: 2 Type: MC Page Ref: 305
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
Net profit after taxes per dollar of equity capital is a basic measure of bank profitability
called ____.
A) return on assets
B) return on capital
C) return on equity
D) return on investment
Answer: C
Diff: 2 Type: MC Page Ref: 306
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
The amount of assets per dollar of equity capital is called the ____.
A) asset ratio
B) equity ratio
C) equity multiplier
D) asset multiplier
Answer: C
Diff: 2 Type: MC Page Ref: 306
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans