Lecture slides Flashcards
What are off-balance-sheet items, and why are they important to some financial firms?
Off-balance-sheet items refer to transactions or activities that a company engages in that do not appear on its balance sheet. These items can take many forms, including leases, joint ventures, and guarantees. Some off-balance-sheet items are used to manage the company’s financial risk, while others are used to manage the company’s financial reporting.
The principal categories that appear on a bank’s balance sheet, also known as a Report of Condition, include:
Assets: These are resources owned by the bank, such as cash, loans to customers, securities, and physical assets like buildings and equipment.
Liabilities: These are obligations that the bank owes to others, such as deposits from customers, borrowings from other financial institutions, and outstanding debts.
Equity: This represents the residual interest in the assets of the bank after liabilities have been settled. It includes capital contributions from shareholders, retained earnings, and other forms of capital.
What is a Certificate of deposit (CD)
A certificate of deposit (CD) is a type of time deposit offered by banks and credit unions. It is a financial product that allows depositors to earn a fixed rate of interest on their deposits for a set period of time, typically ranging from a few months to several years.
