lect 5

• A balance sheet is a financial statement that reports the wealth of a firm on a given date
• The balance sheet is usually prepared at the end of the financial year.


  True
• An income statement reports a firm's profitability over a specified period
• Describe the shape of the letter "C" in the image.

  Partially open

  
• The income statement subtracts all costs from all income to measure profitability.


  True
• Order the uses of bank funds from most liquid to least liquid:

  1️⃣ Cash

  2️⃣ Liquid assets (securities)

  3️⃣ Loans

  4️⃣ Other investments

  5️⃣ Fixed assets
• The letter "O" in the image is a complete circle.


  True

  
• Which bank has a higher Equity Multiplier (EM)?

  Bank Beta

  
• Cash and other non-earning assets fall under the category of assets

  
• What is the category that includes commercial paper and other short-term borrowing?

  Liabilities

  
• What is the primary goal of asset management in financial institutions?

  Maximise return on loans

  
• Assets become less liquid as you move down the balance sheet.


  True
• Match the revenue or cost with its source:

  Interest income ↔️ Loans and investments

  Interest expenses ↔️ Deposits and debts

  Staffing costs ↔️ Operating expenses
• The income statement measures bank performance between two-year-end balance sheets
• Bank profit is calculated as income minus costs
• Which bank has a higher Return on Equity (ROE)?

  Bank Beta

  
• Financial ratios are used to assess bank performance and identify early warning signals.


  True
• The Equity Multiplier (EM) is a proxy for leverage
• Match the financial ratio with its area of investigation:

  ROE ↔️ Profitability

  NPL ↔️ Asset quality

  Capital ratio ↔️ Solvency
• One key objective of asset management is to minimise risks.


  True

  
• The primary aim of financial management is to maximize profits and shareholder value.


  True
• Economic Value Added (EVA) is a measure of shareholder value
• Liquidity is a cash flow concept.


  True
• Match the type of reserve with its description:

  Required reserves ↔️ Mandatory reserves

  Excess reserves ↔️ Reserves beyond requirements
• ROE is calculated as ROA multiplied by the Equity Multiplier
• Solvency is a stock concept
• Capital in banking signals the extent to which a bank is safe and sound.

  True
• Underwriting in banking involves guaranteeing to purchase securities that are not taken up by the market.


  True