Assets Liabilities & Equity S (000) S (000) 10,000 85,000 50,000 55,000 105,000 Cash Savings deposits Investments Fixed deposits Loans Equity 40,000 Other 15,000 Total Liab. Total Assets 180,000 180,000 & Equity The Savings Bank (CB) has been in operations for the past twenty five years. Due to the small operation, the growth of the bank has been very low. Approximately 30% of the loans are fixed rate and the other 70% are floating. The income on the loan portfolio is 8%. The investments are a mixture of equities (50%) and bonds (50%). The income on the equities average 10%. The bonds are fixed at 7% and duration of 5. They are non-callable with an average maturity of 8 years. The fixed deposits are all one year maturities with an average interest at 3%. The savings account pays 1%. You have recently joined the bank and your supervisor is preparing his report for the asset liability management committee and is seeking your help in answering the following questions: A What was the net interest income in 2019.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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