BUS307 Topic 1 - Topic 1 Financial Intermediaries BUS307 Commercial Banking 1.0 Bank Financial Statements 1.1 Balance Sheet Assets show how funds are

BUS307 Topic 1 - Topic 1 Financial Intermediaries BUS307...

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Topic 1 Financial Intermediaries BUS307 Commercial Banking
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1.0 Bank Financial Statements 1.1 Balance Sheet Assets show how funds are used Liabilities and shareholder’s equity show sources of funds Liabilities are non-owner claims Equity or capital is assets less liabilities, which represents the residual claim of shareholders
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1.1 Balance Sheet (Continued)
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1.1.1 Asset Accounts Cash and due from other institutions Non-interest bearing, therefore minimised Trading and investment securities Debt securities including government, semi- government and corporate debt Trading securities are generally short-term Investment securities are generally longer term
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1.1.1 Asset Accounts (Continued) Loans Commercial Loans Short- or intermediate-term loans to businesses Consumer Loans Loans to individuals including car loans, credit card loans and margin loans Housing Loans Traditionally variable-rate loans, but increasing proportion of fixed-rate loans Leases Assets owned indirectly by ADI Effectively similar to term loan
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1.1.1 Asset Accounts (Continued) Provisions for doubtful debts Contra-asset account to cover expected loan losses General provision for potential future losses Specific provision for identified problem loans Deposits with regulatory bodies Such as exchange settlement account Property plant and equipment Include all premises and facilities Non-earning assets as they don’t directly create revenue All other assets
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1.1 Balance Sheet (Continued)
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1.1.2 Liabilities Accounts Current accounts Savings Accounts Investment savings accounts Fixed deposits Certificates of deposit Borrowed funds
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1.2 Income Statement (Profit and Loss) Income statement measures performance over time Focus on interest related items Allows analysis of effect of unexpected changes in interest rates.
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1.2.1 Revenue
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