A bank that has a high asset utilization (AU)ratio most likely:
A)is doing a poor job of controlling expenses.
B)has a small amount of financial leverage.
C)has a small amount of liquidity risk.
D)is allocating assets to the most productive investments.
E)None of the options is correct

Question

Quizplus · Accepted Answer

A high asset utilization ratio indicates that the bank is efficiently allocating its assets to generate revenue. This implies that the bank is likely investing in productive assets that are generating income, resulting in a higher AU ratio. Therefore, option D is the correct choice. Option A is incorrect because high AU ratios usually imply effective expense management. Option B is incorrect because financial leverage is not directly related to AU ratios. Option C is incorrect because a small amount of liquidity risk is not a determining factor for a high AU ratio.

A Bank That Has a High Asset Utilization (AU)ratio Most