Question

What is a distinct feature of the balance sheet of financial firms? Why is this the case?

Answer 1

Financial firms differ form other firms especially in Balance sheet preparation for the financial statements. The assets are mostly the funds let out in the form of loans/advances and investments and liabilities(especially in the case of commercial banks) are deposits, bonds repayable etc. This is because the primary raw material for a financial firm is the money which raised from outside is used to lend out to firms/ individuals by playing the role of intermediary.