Bank Balance Sheet
A bank balance sheet is a financial statement that provides a snapshot of a bank's assets, liabilities, and equity at a specific point in time. It shows the bank's financial position and helps assess its solvency and liquidity. Assets include loans and investments, while liabilities consist of deposits and borrowings. Equity represents the bank's net worth.
7 Key excerpts on "Bank Balance Sheet"
eBook - ePubThe Bank Credit Analysis Handbook
A Guide for Analysts, Bankers and Investors
- Jonathan Golin, Philippe Delhaise(Authors)
- 2013(Publication Date)
- Wiley(Publisher)
...Chapter 5 Deconstructing a Bank’s Balance Sheet [ A ] typical bank’s balance sheet presents, on the face of it, an alarmingly precarious situation: its liabilities are mostly short term, but most of its assets are realizable only in the long term, and it is highly geared or “leveraged.” Depositors and other creditors must be persuaded that the whole pack of cards will not come crashing down at a moment’s notice. —Fitch IBCA 1 This book explores the creditworthiness of banks from several angles, many of them articulated around the balance sheet and, increasingly, around off-balance-sheet items. Bank financial statements are very complex. Readers may be familiar with general accounting rules, and this chapter will introduce them more specifically to the bank’s balance sheet—and its off-balance-sheet items. Inevitably, a number of concepts or definitions have to be discussed at this stage, while a more thorough analysis will be offered in later chapters, thereby introducing some degree of unavoidable duplication. The balance sheet, also known as the statement of condition or statement of resources records assets on one side and liabilities and equity on the other. The two sides must balance, hence the term. Some analysts, however, prefer to separate the liability side into equity—which for a bank is usually just a small fraction of the total—and actual liabilities toward third parties, as can be schematically seen in Exhibit 5.1. EXHIBIT 5.1 The Balance Sheet The balance sheet merely captures a snapshot of the composition of a firm’s assets and the claims upon it at one moment in time—usually December 31 or the end of a quarter. Since it is a static picture, it does not say much about the company’s past performance or about its likely future. Hence, the balance sheet provides precious little information about the company’s ability to service debt on an ongoing basis...
- Thomas Herold(Author)
- 2020(Publication Date)
- THOMAS HEROLD(Publisher)
...What is a Balance Sheet? Balance Sheet refers to a corporate financial statement. The purpose of it is to thoroughly summarize the liabilities, assets, and shareholders ’ equity in the firm at a fixed moment in time. The statement provides a revealing glimpse into the things the corporation owns and the money it owes, along with the total amount which shareholders have invested in the going concern. Where these financial statements are concerned, the formula for assets is liabilities plus shareholders’ equity. Balance sheets ultimately derive their names from the equation which pits the assets on one side while the shareholders’ equity and liabilities remain on the opposite site. They have to balance out, which provides the concept behind the name. It makes perfect sense that corporations have only two choices when paying for their assets. They might either borrow the money through assuming liabilities or obtain it off of investors, which happens when they issue shareholder equity. Consider an example to better understand what is involved with this concept. If a corporation obtains a $40,000 bank loan to be repaid in five years, then its assets (cash account section) will rise by the $40,000. At the same time, the total liabilities (long term debt section) will also rise by the $40,000 amount. This restores balance to the equation. Should the firm then receive $80,000 from investors, the assets will also increase by that same amount. On the other side of the equation, the shareholder equity rises by the same $80,000. When the company earns revenues which are greater than the liabilities, these go into the so called shareholder equity account. It is that category that stands for all net assets the owners of the corporation hold...
eBook - ePubAn Introduction to the German Accountancy System
All you need - and not too much
- Wolf-Dieter Schellin(Author)
- 2020(Publication Date)
- Books on Demand(Publisher)
...The Balance Sheet The balance sheet is a comparison between the value of the assets and liabilities in so-called “Kontenform”. The property is shown on the left-hand side of the balance sheet, subdivided by fixed assets and current assets. It represents the assets in the workflow. The capital is shown on the right-hand side of the balance sheet, subdivided by shareholders' equity and liabilities. It represents the liabilities in the workflow. Always apply the equations Assets = Capital and Equity = assets – liabilities Balance Sheet to 31.12.20.. Assets Liabilities Fixed assets Shareholders' Equity Current Assets Liabilities Assets Capital The design - the layout of the balance sheet The structure, or the layout of the balance sheet is not at the discretion of the company. Since the legislator rules, that a "qualified third person" has to be able to get an overview of the situation of the respective company within a reasonable time (→ Proper accounting principles; Page →). In other words, in the case of a tax audit of your business by the surely competent tax authority, the examiner must be able to get an overview of the figures quickly. Also if you apply for a loan from your bank, it must be possible for the bank, to get an overview over your creditworthiness with the help of the balance sheet figures. Changes in the values of the balance sheet Each business transaction has an impact on the items in the balance sheet and in a double way. Even though not every business transaction is shown in the balance sheet, we can expect four possible changes of values: Change in assets = Replacement on assets Change in liabilities = Replacement on liabilities Increase in ass. + liab.= Both sides increase Reduction in ass...
eBook - ePub- Thomas R. Robinson(Author)
- 2020(Publication Date)
- Wiley(Publisher)
...Summary The balance sheet (also referred to as the statement of financial position) discloses what an entity owns (assets) and what it owes (liabilities) at a specific point in time. Equity is the owners’ residual interest in the assets of a company, net of its liabilities. The amount of equity is increased by income earned during the year, or by the issuance of new equity. The amount of equity is decreased by losses, by dividend payments, or by share repurchases. An understanding of the balance sheet enables an analyst to evaluate the liquidity, solvency, and overall financial position of a company. The balance sheet distinguishes between current and non-current assets, and between current and non-current liabilities unless a presentation based on liquidity provides more relevant and reliable information. The concept of liquidity relates to a company’s ability to pay for its near-term operating needs. With respect to a company overall, liquidity refers to the availability of cash to pay those near-term needs. With respect to a particular asset or liability, liquidity refers to its “nearness to cash.” Some assets and liabilities are measured on the basis of fair value, and some are measured at historical cost. Notes to financial statements provide information that is helpful in assessing the comparability of measurement bases across companies. Assets expected to be liquidated or used up within one year or one operating cycle of the business, whichever is greater, are classified as current assets. Assets not expected to be liquidated or used up within one year or one operating cycle of the business, whichever is greater, are classified as non-current assets. Liabilities expected to be settled or paid within one year or one operating cycle of the business, whichever is greater, are classified as current liabilities...
eBook - ePub- David Horner(Author)
- 2020(Publication Date)
- Kogan Page(Publisher)
...The items remaining on the trial balance would then be used to produce the balance sheet. The thinking behind this is that the profit figure will need to be calculated first. Without the profit figure for the most recent period, the balance sheet would not balance. However, more recently there has been a reversal of this thinking. Limited companies following international accounting standards have been encouraged to think of the balance sheet as a statement of the firm’s assets, with the increase in the net value of these assets between one period and the next used to represent the profit generated by the firm over that period. Content of the balance sheet The balance sheet can be thought of as a more detailed presentation of the accounting equation we came across in Chapter 1 : Assets = Liabilities + Capital Each of these terms will have a corresponding section on the balance sheet. It is common practice to subdivide the assets into two distinct classifications – that of non-current assets and current assets. Likewise, liabilities are also subdivided into two classifications – non-current liabilities and current liabilities. This means that the modern balance sheet for nearly all types of organization will consists of five separate sections. Assets Assets are the resources used within the business. These can either be owned outright by the business or have been purchased and financed by borrowing. As stated earlier, assets are divided into two categories: non-current assets and current assets. NON-CURRENT ASSETS Non-current assets (often referred to as fixed assets) are long-term assets that are likely to be held by the business for at least one year. They have normally been acquired specifically to add value to the business. They are not normally acquired to be sold (although they may well be sold at some point in the future, this wasn’t the reason why they were acquired)...
eBook - ePub- Vibrant Publishers(Author)
- 2019(Publication Date)
- Vibrant Publishers(Publisher)
...The Balance Sheet The Balance Sheet contains the company’s Assets, Liabilities and Stockholders’ Equity. The assets and liabilities are further broken up into short-term (called current) and long-term assets and liabilities. There can be several items under each of these depending upon the company’s line of business. Diagram on the following page shows the most common ones. Current Assets These are the assets that the company intends to use within one year. Below is a description of the various current assets. Cash Cash refers to the cash-in-hand or in the company’s bank accounts. Companies carry cash to take care of daily operational expenses and also to mitigate risk of low sales, slowdown or recession. Accounts Receivable When the company sells products and services to its customers, it may do so without collecting money immediately. The credit period could range from a few days to several months. The amount it expects to receive (within a year) out of the credit extended is shown as a current asset. Inventory Companies maintain an inventory of materials, inventory of in-process items (which are still being manufactured) and an inventory of finished goods until they are sold. The value of these inventories is shown as a current asset at cost price (and not at the selling price) as per accounting guidelines discussed earlier under Historical Costs Convention. Prepaid Expenses Most companies pay several expenses in advance for the entire year or at least for a few months. Most common examples are rent and insurance premiums. Since these are prepaid, they appear as an asset in the Balance Sheet until the year completes, when they get expensed. Investment Securities Companies often park excess cash into short-term investment securities to get higher returns...
eBook - ePubMastering Financial Accounting Essentials
The Critical Nuts and Bolts
- Stuart A. McCrary(Author)
- 2009(Publication Date)
- Wiley(Publisher)
...CHAPTER 3 Balance Sheet Chapter 1 presented several accounts that appear on the balance sheet along with how accountants link these accounts together in a highly systematic and structured way. While the chapter discussed only balance sheet accounts, the chapter primarily described the double-entry system. Chapter 2 reviewed some of the conventions accountants use to describe business transactions. This chapter will show how the double-entry system and the conventions described in Chapter 2 are used to create the balance sheet, one of three key statements described in this text (along with the income statement and the statement of cash flows). BALANCE SHEET CONTAINS PERMANENT ACCOUNTS In Chapter 1, we introduced permanent accounts and temporary accounts. Temporary accounts include revenues and expenses. All the remaining accounts, including assets, liabilities, and equity, are reported on the balance sheet (also called the statement of financial position). The chapter begins by explaining how transactions included on the balance sheet differ from other types of transactions. The chapter also shows how the time horizon of the balance sheet affects which transactions to include. The bulk of the chapter describes the most commonly observed assets, liabilities, and equity that businesses use and how accountants handle them. TIME LINE OF CASH FLOWS A balance sheet reflects all journal entries affecting the company since inception. Figure 3.1 contains a time line representing all journal transactions since a company was founded. This particular illustration shows a company that was founded in 2004 and is preparing a balance sheet and income statement at the end of 2008. Notice how all entries that are assembled into the balance sheet are cumulative. That is, they reflect all debits and credits to these accounts for the entire life of the company...
