Banks

Question 1

What are the 2 factors on a balance sheet?

Answer 1

• Assets
• capital & liabilities

Question 2

What one assets on the balance sheet?

Answer 2

Something the business owns or is owed

Question 3

What are capital & liabilities on a balance sheet?

Answer 3

Something the business owes to someone else (the owner)

Question 4

Liabilities definition?

Answer 4

An outside claim on a businesses assets

Question 5

Capital definition?

Answer 5

The owners share of the business

Question 6

What is debt capital?

Answer 6

Borrowed money from elsewhere may include an interest repayment

Question 7

What is equity capital?

Answer 7

Owners own money, may include dividend payments

Question 8

What is the range of specialised services that investment banks provide?

Answer 8

• Underwriting and advising on securities issues and other forms of capital raising
• advice on mergers and acquisitions and corporate restructuring
• trading on capital markets
• research prove he and and private equity investments

Question 9

What does an investment bank do?

Answer 9

Trades and invests on its own account they deal mainly with corporate customers

Question 10

What type of market is a commercial bank?

Answer 10

Oligopoly

Question 11

What does an oligopolistic market consist of?

Answer 11

Barriers to entry make it harder for new entrants to scale their business and make profits

Question 12

Barriers to entry of commercial banks?

Answer 12

• Cost of IT systems and the cost of establishing branches
• access to payment systems
• established banks have access to cheaper retail deposits from their existing customers
• bank which are viewed by investors a too big to fail are seen a lower risk and benefit from lower wholesale funding costs
• customer resistance to charging accounts = harder to build customer numbers and achieve econ of scales