Unibank needs to review its liquidity position. According to the head of the division the following information applies:Existing liquid assets (eg. government securities, CDs, BAB) on the balance sheet: $30 million;Credit limit in the money market: $5 million;Existing available cash on the balance sheet: $3 million;Cash on balance sheet utilised in terms of existing daily operations and in terms of minimum regulatory reserve cash requirements: $1 million (part of the 3 million existing cash on the balance sheet); andFunds borrowed from the central bank with rediscounting facility: 1.5 millionYou are required to use the information above to calculate the net liquidity level of the bank and also provide conclusions about your calculation.

Liquidity level of bank means the availability of cash in the bank , It is also known as the ability…

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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Unibank needs to review its liquidity position. According to the head of the division the following information applies:

Existing liquid assets (eg. government securities, CDs, BAB) on the balance sheet: $30 million;
Credit limit in the money market: $5 million;
Existing available cash on the balance sheet: $3 million;
Cash on balance sheet utilised in terms of existing daily operations and in terms of minimum regulatory reserve cash requirements: $1 million (part of the 3 million existing cash on the balance sheet); and
Funds borrowed from the central bank with rediscounting facility: 1.5 million

You are required to use the information above to calculate the net liquidity level of the bank and also provide conclusions about your calculation.

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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