Which of the following is a measure of the potential losses an FI could suffer as the result of fire-sale disposal of assets?
A)Quick ratio.
B)Liquidity index.
C)Financing gap and financing requirement.
D)Peer group ratio.

Question

Quizplus · Accepted Answer

The liquidity index is a measure of the potential losses an FI could suffer as a result of a fire-sale disposal of assets. It is calculated by dividing an FI's total liquid assets (cash, marketable securities, and available lines of credit) by its total deposits outstanding. A higher liquidity index indicates that an FI would be better able to withstand a fire-sale situation without suffering significant losses. The other options - quick ratio, financing gap and financing requirement, and peer group ratio - do not directly measure potential losses resulting from fire-sale disposal of assets.

Which of the Following Is a Measure of the Potential