What distinguishes financial intermediaries from industrial firms?

Question

Quizplus · Accepted Answer

Financial intermediaries primarily deal with financial assets such as loans, securities, and deposits, while industrial firms hold a significant amount of real assets such as factories, inventory, and equipment. Therefore, the balance sheet of FIs is typically comprised of financial assets while industrial firms' balance sheets consist of a mix of real and financial assets.

B and C are incorrect because they make incorrect generalizations about the relationships and activities of FIs and industrial firms.

D is partially correct in that FIs do not produce real goods or services like industrial firms, but they do provide financial services such as lending, investing, and managing assets.

What Distinguishes Financial Intermediaries from Industrial Firms