Liquid asset ratio describes:
A) The minimum ratio of liquid assets to total equity set by the central bank.
B) The minimum ratio of liquid assets to total liabilities set by the central bank
C) The minimum ratio of liquid assets to total assets set by the central bank.
D) None of the listed options are correct.

Question

Quizplus · Accepted Answer

The liquid asset ratio refers to the minimum ratio of liquid assets to total assets set by the central bank. This ratio is used to ensure that financial institutions have enough liquid assets to meet their obligations and cover unexpected cash outflows. It is not related to equity or liabilities specifically, but rather looks at the overall balance sheet of the institution.

Liquid Asset Ratio Describes