With regard to financial institutions,what is a shrinking capital base?
A) When an institution's credit rating is downgraded
B) When the institution gives out a lot of large loans
C) When the institution experiences a large influx of new equity
D) When an institution's amount of debt in relation to equity increases
E) When the institution loses a large quantity of its customers in a short amount of time

Question

Quizplus · Accepted Answer

A shrinking capital base occurs when the amount of a firm's debt in relation to equity is high,which may cause it to fall below its minimum capital requirements.

With Regard to Financial Institutions,what Is a Shrinking Capital Base