Essay about Notes On A Bank Balance Sheet

1026 Words Dec 4th, 2016 5 Pages
1. A bank balance sheet is different from that of a typical company. Explain the differences.
It is clear that there are some differences between a bank balance sheet and a company balance sheet, after all, they are different types of business, and although they share some similarities, they do differ in some aspects, let’s take a closer look. A company balance sheet summarizes, “the net assets of a company by subtracting total liabilities from total assets to arrive at total equity.” (Shaftoe, R.) In other words, the main object is to present in a clear manner the company’s financial information. In the other hand, a bank balance sheet, “values more generally approximate fair values and are used by bank management largely to manage interest rate risk.” (Shaftoe, R.) Here, the main focus is the interest risk management.
Now, getting more into more specific details, it is important to mention that in a bank balance sheet, no inventory, accounts receivable, and accounts payable will be found. Instead, under assets, “you 'll see mostly loans and investments, and on the liabilities side, you 'll see deposits and borrowings.” (Lee, E.)
One of the aspects playing a role on a bank balance sheet is “Cash”. This one in particular, does not seem to be crucial, nonetheless, it is important and fundamental, although its percentage seems to be little significant, this is because, “the bank wants to put its money to work earning interest. If the bank simply sticks its cash in a vault and…

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