30 May In this specific article we shall talk about about the different monetary assets of a commercial bank.
Profitability and liquidity:
To be in a position to satisfy needs for money as so when they have been made a bank should never just organize to own enough money available however it also needs to circulate its assets in a way that a lot of them could be readily changed into money.
Hence, the bank’s cash reserves can be reinforced quickly in the big event of heavy drawings on it. Assets that are easily convertible into money are known as fluid assets, probably the most fluid being money it self. The shorter the size of that loan the greater fluid since it shall soon grow and start to become repayable in money; the less profitable because, other stuff being equal the interest rate differs straight because of the loss in liquidity skilled because of the loan provider.
Hence a bank faces one thing of the dilemma in wanting to secure both profitability and liquidity. It satisfies these evidently incompatible requirements in just how it distributes its assets.