Balance Sheet and Total Capital Ratio Essay

Decent Essays
1、(1) What are the primary line items within Citigroup’s balance sheet and income statement?
Balance Sheet
Cash and due from banks
Deposits with banks
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Total loans, net
Total deposits
Short-term borrowings
Long-term debt
Common stock
Additional paid-in capital
Retained earnings
Income Statement
Total revenue
Total provisions
Total operating expenses
Net income These are primary line items because of they are either great in amount or great in significance (Referred to as key performance indicators).

1、(2) Using the balance sheet as a reference, what happens during
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Accordingly, banking regulators assessed minimum values for each of these key measures. At 2007, “adequately capitalized” (i.e., minimum) levels were 4% for the Tier 1 capital ratio, 8% for the total capital ratio, and 3% for the leverage ratio; “well capitalized” levels were 6% for Tier 1 capital, 10% for total capital, and 5% for leverage. Well capitalized banks qualified for, among other things, lower premiums assessed by the Federal Deposit Insurance Corporation (FDIC). Undercapitalized banks (e.g., below the 8% minimum required total capital) received a warning from the FDIC; continued violation of capital requirements triggered further regulatory costs, including intervention or (in the extreme) takeover by government regulators.

2、(2) Using Citigroup as an example, estimate the major calculations underlying its 2007 Tier 1 Capital ratio.
Calculation: Tier 1 Capital Ratio= 89,226(Total Tier 1 Capital)/1,235,321(Risk Adjusted Assets) =7.12%

3、Describe the relevant provisions of fair value accounting under SFAS 157(ASC 820). What does a measure like net income mean as a firm moves towards increasing use of fair value accounting (as opposed to historical cost of assets)? The changing nature of business from cost-bases assets and liabilities to more market-oriented assets and liabilities drove the move towards increasing use of fair value accounting. Under the momentum, a measure like net income
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