Investment Management [FIN-1101] Question # 01 [Marks=10] a) Critically evaluate how the financial statement of both corporations and commercial banks differ from each other from the below financial statement [Table-1.3 and 1.4.] TABLE 1.3 Balance sheet of commercial banks, 2011 Liabilities Assets $ Billion % Total and Net Worth $ Billion % Total Real assets Liabilities Equipment and premises $ 110.4 Other real estate 0.9% Deposits $ 8,674.6 71.4% 46.6 0.4 Total real assets $ 157.0 1.3% Debt and other borrowed funds Federal funds and repurchase agreements Other 1,291.8 10.6 499.1 4.1 308.4 2.5 Total liabilities $10,773.9 88.6% Financial assets Cash $ 1,066.3 8.8% Investment securities 2,406.1 19.8 Loans and leases 6,279.1 51.6 Other financial assets 1,153.9 9.5 Total financial assets $10,905.4 89.7% Other assets Intangible assets $ 373.9 3.1% Other Total other assets Total 721.0 1,094.9 $12,157.3 100.0% 5.9 9.0 Net worth 1,383.4 $12,157.3 11.4 100.0% Note: Column sums may differ from total because of rounding error. Source: Federal Deposit Insurance Corporation, www.fdic.gov, July 2011. TABLE 1.4 Balance sheet of U.S. nonfinancial corporations, 2011 Assets $ Billion % Total Liabilities and Net Worth $ Billion % Total Real assets Liabilities Equipment and software $ 4,109 14.6% Bonds and mortgages $ 5,321 18.9% Real estate 7,676 27.2 Bank loans 538 1.9 Inventories 1,876 6.7 Other loans 1,227 4.4 Total real assets $13,661 48.5% Trade debt 1,863 6.6 Other 4,559 16.2 Financial assets Total liabilities $13,509 47.9% Deposits and cash $ 1,009 3.6% Marketable securities 899 3.2 Trade and consumer credit 2,388 8.5 Other 10,239 36.3 Total financial assets 14,535 51.5 Total $28,196 100.0% Net worth 14,687 52.1 $28,196 100.0% Note: Column sums may differ from total because of rounding error. Source: Flow of Funds Accounts of the United States, Board of Governors of the Federal Reserve System, June 2011