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This is an integrated asset-liability approach where the appropriate asset allocation can be determined to hedge the liabilities and jointly optimize the assets and liabilities.
Asset and liability management (often abbreviated ALM) is the term covering tools and techniques used by a bank or other corporate to minimise exposure to market risk and liquidity risk through holding the optimum combination of assets and liabilities. [1]
The basic principle is that the account receiving benefit is debited, while the account giving benefit is credited. For instance, an increase in an asset account is a debit. An increase in a liability or an equity account is a credit. The classical approach has three golden rules, one for each type of account: [15]
One detailed application of mental accounting, the Behavioral Life Cycle Hypothesis posits that people mentally frame assets as belonging to either current income, current wealth or future income and this has implications for their behavior as the accounts are largely non-fungible and marginal propensity to consume out of each account is different.
Assets and expenses are two accounting terms that new business owners often confuse. Here’s what each term means and how to use them in accounting. Assets vs. Expenses: Understanding the Difference
Understanding current assets can sharpen your personal finances and help you find good investment opportunities. Discover current ratios and how to use them. Understanding Current Assets ...
The accounting equation relates assets, liabilities, and owner's equity: Assets = Liabilities + Owner's Equity. The accounting equation is the mathematical structure of the balance sheet. Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board (IASB). The following is a ...
A fixed asset, often referred to as a tangible asset or property, plant, and equipment (PP&E), is a long-term asset that holds value over time and can be used to generate income.