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 f