Which of the following is a measure of the potential losses an FI could suffer as the result of fire-sale disposal of assets?
A)Quick ratio.
B)Liquidity index.
C)Financing gap and financing requirement.
D)Peer group ratio.
E)Current ratio.

Question

Quizplus · Accepted Answer

Liquidity index is a measure of the potential losses an FI could suffer as the result of fire-sale disposal of assets. It calculates the amount of cash an FI would have after it sells off its most liquid assets to meet any unexpected obligation. A higher liquidity index indicates that the FI has a greater capacity to absorb losses in such a scenario.

Which of the Following Is a Measure of the Potential