practice quiz7-2 - Balance Sheets ECON 104 Sections 2 4 Sp17 1 of 3 Due No due date Points 5 Questions 5

practice quiz7-2 - Balance Sheets ECON 104 Sections 2 4...

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Due No due date Points 5 Questions 5 Time Limit None Attempt Time Score LATEST Attempt 1 1 minute 2.5 out of 5 Submitted Apr 25 at 12:25pm Note that with this practice quiz, some of the questions have more than one answer. You will not see this on the in-class quiz. But, it is a good way to get practice on these concepts. 1 / 1 pts Question 1 Consider a business that had some capital destroyed in a storm and they were uninsured. What would then change? their assets Correct! Clearly their assets are worth less as they have less capital (recall that capital is a manufactured item that is owned by a business and is used to make goods and services). Also, recall that net worth is the difference between their assets and liabilities, so their net worth declines as well. But, there is no reason for their liabilities to be affected. Note that the same thing happens to a bank when loans cannot be repaid and the collateral on the loan does not cover the loan. Insufficient collateral happens more often than you might think. For example,just before and during the 2008 financial crisis, housing prices collapsed in many places and when banks repossessed homes they were not able to sell them at a high-enough price to cover the loan. This lead to many bank failures. their net worth Correct! Clearly their assets are worth less as they have less capital (recall that capital is a manufactured item that is owned by a business and is used to make goods and services). Also, recall that net worth is the difference between their assets and liabilities, so their net worth declines as well. But, there is no reason for their liabilities to be affected. Note that the same thing happens to a bank when loans cannot be repaid and the collateral on the loan does not cover the loan. Insufficient collateral happens more often than you might think. For example,just before and during the 2008 financial
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