Net deposit drains refer to the amount by which cash withdrawals __________

Question

BlackTom AI · Accepted Answer

The prompt asks to explain the reasoning for the given question. The question states: 'Net deposit drains refer to the amount by which cash withdrawals __________' and the provided answer indicates option 'c. exceed additions – a cash outflow'.

Given only this provided option, we interpret the concept of net deposit drains in the context of cash flow or liquidity analysis. If net deposit drains are defined as the amount by which withdrawals surpass additions, then the logic is that withdrawals reduce the net deposits or balances when they exceed the inflows or deposits. In other words, when outflows (withdrawals) are larger than inflows (additions), the net deposit is drained, resulting in a cash outflow.

Since no other options are presented in the data, we cannot compare this option to alternatives. However, the core reasoning behind the selected statement hinges on the fundamental balance equation: Net Deposits = Additions − Withdrawals. When Withdrawals > Additions, Net Deposits become negative, which is described as a drain or cash outflow. The phrase 'exceed additions' captures this idea by indicating withdrawals surpass additions, causing a decline in net deposits.

If there were other options, we would evaluate them against this definition: does the statement imply withdrawals are equal to, less than, or greater than additions? A correct alternative would need to align with the concept that a drain occurs when outflows exceed inflows. A statement claiming that drain occurs when withdrawals are less than additions would conflict with the standard interpretation.

In summary, the chosen option aligns with the intuitive and financial principle that net deposit drains arise when cash withdrawals surpass cash additions, resulting in a cash outflow.

FINS5530-Financial Institution Mgmt - T2 2025

Net deposit drains refer to the amount by which cash withdrawals __________

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