Matthew_McCoy_Week_8_Chapter_32_Assignment

Matthew_McCoy_Week_8_Chapter_32_Assignment - Matthew McCoy...

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Matthew McCoy ECON201 Week 8 Chapter 32 Assignment July 29, 2011 Professor John Volpe 1. What is the difference between an asset and a liability on a bank’s balance sheet? How does net worth relate to each? Why must a balance sheet always balance? Why are the major assets and claims on a commercial bank’s balance sheet? The balance sheet of a commercial bank (or thrift) is a statement of assets – things owned by the bank – and claims on those assets. A bank balance sheet summarizes the financial position of the bank at a certain time. Every balance sheet must balance; this means that the value of assets must equal the amount of claims against those assets. The claims shown on a balance sheet are divided into two groups: the claims of nonowners of the bank against the firm’s assets, called liabilities, and the claims of the owners of the firm against the firm’s assets, called net worth. Liabilities are things owed by the bank to depositors or others. A balance sheet is balance
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Matthew_McCoy_Week_8_Chapter_32_Assignment - Matthew McCoy...

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