The situation in which the claims by financial institutions is more considerable for investors then the claims issued by corporations, is classified as _____________?
Correct answer: A. asset transformers
- A. asset transformers
- B. liability transformers
- C. issuing transformers
- D. claiming transformers
Explanation
Financial institutions act as asset transformers by issuing their own claims to investors and using the funds to acquire claims issued by corporations or other borrowers. They therefore convert one type of financial asset into another.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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