单选题 In balance sheet terms, the purpose of every bank loan can be assigned to one of three categories. The first is to support or acquire assets -- current assets of seasonal nature, noncurrent assets or normal productive capacity. The second is to replace liabilities. Replacing liabilities can take the form of either assistance in making trade discounts, making tax payments or significantly riskier category of taking out( or "bailing out") other banks or financial institutions. The third is to replace equity. Replacing equity is a risky purpose since the effect of substituting equity will substantially increase leverage. Occasionally, such a loan is appropriate, however, particularly in solving control problems of highly profitable companies.

单选题 Taking out other banks or financial institutions means getting rid of other banks or financial institutions.

单选题 Leverage is the relationship between debt financing and equity financing, also known as the debt - to - equity ratio. High leverage means high risk.

单选题 Making trade discounts is one form of replacing liabilities.

单选题 Replacing equity is risky and therefore not appropriate in solving control problems of highly profitable companies.