Question

Which of the following does not describe an​ off-balance-sheet activity?

A.
A bank writes a mortgage and sells it to a life insurance company.
B.
A bank exchanges dollars for euros for a large corporate customer.
C.
A bank makes a loan to a large corporate customer.

D.
A bank guarantees a​ firm's debt by signing a​ banker's acceptance.

Answer 1

An off-balance-sheet activity refers to a financial transaction or arrangement that is not recorded on a company's balance sheet. Among the given options, A bank makes a loan to a large corporate customer does not describe an off-balance-sheet activity. When a bank makes a loan, it is recorded on its balance sheet as an asset and the customer's debt is recorded as a liability.

Step-by-step explanation:

An off-balance-sheet activity refers to a financial transaction or arrangement that is not recorded on a company's balance sheet. It involves activities that have an impact on the company's financial position but are not disclosed in its financial statements.

Among the given options, A bank makes a loan to a large corporate customer does not describe an off-balance-sheet activity. This is because when a bank makes a loan, it is recorded on its balance sheet as an asset and the customer's debt is recorded as a liability.