Exercise

Complete the sentence by selecting the correct term from the word bank.

Net worth

Liabilities

Owners’ equity

Liquid assets

Subordinated debt

Non-allowable assets

Assets

1._____ are illiquid assets, assets that cannot be quickly sold at fair market value.

2._____ are the obligations of a firm to outsiders.

3.Assets that can quickly be converted to cash are called _____.

4._____ is the difference between assets and liabilities.

5._____ are what a firm owns.

6._____ is composed of debt that ranks below other debt in its claims on assets or earnings during bankruptcy or liquidation.

7._____ is a firm’s obligation to its owners.

Answer true or false.

8.If a firm discovers that its net capital is less than 100% of its required minimum, it must notify FINRA and the principal and regional offices of the SEC within 24 hours of its discovery.

9.Carrying firms must have at least $250,000 in net capital.

10.Dealers are required to maintain $100,000 in net capital.

11.For market makers, if the bid price for a security is $10 or less, the firm must carry $1,000 in net capital per security.

12.A member firm that carries customer accounts or clears transactions may not expand its business when a net capital deficiency exists for more than 15 consecutive business days.

13.The alternative net capital requirement is typically preferred by smaller firms.