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Which statement correctly explains why loans are assets for banks?

medium Q15 of 15
Banking Awareness - Basics Of Banking & Banking Terminology
Which statement correctly explains why loans are assets for banks?
AThey are repayable by customers with interest
BThey must be repaid by banks
CThey increase bank expenses
DThey reduce bank profits
Step-by-Step Solution

  1. Step 1: Focus on repayment flow

    Loans result in inflow of money to the bank.

  2. Step 2: Apply asset definition

    Assets bring future economic benefits.

  3. Final Answer:

    They are repayable by customers with interest → Option A

  4. Quick Check:

    Repayment + interest = asset for bank ✅
Quick Trick: Money coming back to bank = asset.
Common Mistakes:
  • Mixing up customer loans with bank liabilities.
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