Ch4 - Chapter 4 The Financial Statements of a Bank...

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Chapter 4 The Financial Statements of a Bank An Overview of Bank Balance Sheets and Income  Statements The Bank’s Balance Sheet (Report of Condition) Components of Income Statement (Report of Income)  Other Useful Bank Financial Statements
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An Overview of Bank Balance Sheets and Income Statements Report of Condition / Balance Sheet: The Report of Condition shows the  - Amount and composition of funds sources (financial inputs) the  bank has drawn upon to finance its lending and investing activities. - How much has been allocated to loans, securities, and other fund  uses (financial outputs) at any given time. 
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An Overview of Bank Balance Sheets and Income Statements Report of Income / Income Statement: The Report of Income shows - How much it has cost the bank top acquire its deposits and other  funds sources. - Revenues (cash flow) generated by selling bank services to the  public.  - Net earnings, after all costs are deducted from the sum of all  revenues.
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The Bank’s Balance Sheets (Report of Condition) The Principal Types of Accounts: - The balance sheet lists the assets, liabilities and stockholders equity. Assets = Liability + Equity Capital
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The Bank’s Balance Sheets (Report of Condition) Assets - Cash in the vault and  deposits held at other  depository institutions  (C) - Government and  private interest bearing  securities (S) - Loans and Lease  Financing to customers  (L) - Miscellaneous Assets  (MA) Liabilities - Deposits made by and  owed to various  customers (D) - Non deposit  borrowings of funds in  the money and capital  markets (NDB) Equity Capital - Long term funds  owners contribute to  the bank (EC) C + S + L + MA = D + NDB +EC
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The Bank’s Balance Sheets (Report of Condition) The Principal Types of Accounts: The bank’s balance sheet identity: Accumulated Uses of = Accumulated Sources of   Bank Funds  Bank Funds - A bank’s assets are its  accumulated uses of funds  which are made to  generate income  for its stockholders,  pay interest  to the depositors  and  compensate the bank’s employees  for their labor and skill. - A bank’s liabilities and equity capital are its  accumulated sources of  funds , which provide the needed  spending power  for the bank to  acquire its assets. 
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The Bank’s Balance Sheets (Report of Condition) Assets: 1. The Cash Account - Cash held in bank’s vault, deposits placed with other banks, cash  items in the process of collection, bank’s reserve, and the bank’s  reserve account held with central bank (Primary Reserves). -
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This note was uploaded on 04/22/2011 for the course BBA FIN 441 taught by Professor Dewanmostafiz during the Fall '10 term at BRAC University.

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Ch4 - Chapter 4 The Financial Statements of a Bank...

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