Question

Bank balance sheets tend to be similar to the balance sheets of other firms in other...

Bank balance sheets tend to be similar to the balance sheets of other firms in other industries. Explain.

True or False?

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Answer #1

Answer-

The statement is False.

The balance sheet of a bank differ a lot from other industries as

The balance sheet of bank contains

Assets
Assets -- Loans
Mortgages, Consumer loans, Lending to companies, lending to government
Assets- Liquid assets
Stocks, corporate bonds, government bonds, interbank claims.

Liabilities & Equity

Equity-- Share capital.
Liabilities --- Borrowed capital
Deposits- CDs, Customer deposits
Financial instruments -- Bonds and derivatives
Interbank market funding

The above balance sheet items are quite different from balance sheet items of other industries as the other industries espeially manufacturing have items such as property plant and equipment (PP&E), inventory and different items.

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