The transfer of short-term liabilities into long-term investments is called ________.

Question

Quizplus · Accepted Answer

The transfer of short-term liabilities into long-term investments is known as maturity transformation. This is a common practice for financial institutions such as banks to generate profits by earning a higher interest rate on long-term investments while paying a lower interest rate on short-term liabilities such as deposits. Risk transformation refers to transferring risk from one party to another, investment restructuring is not a common term and intertemporal transformation is not relevant to the given context.

The Transfer of Short-Term Liabilities into Long-Term Investments Is Called