1、(1) What are the primary line items within Citigroup’s balance sheet and income statement?
Balance Sheet
Asset
Cash and due from banks
Deposits with banks
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Investments
Total loans, net
Liability
Total deposits
Short-term borrowings
Long-term debt
Equity
Common stock
Additional paid-in capital
Retained earnings
Income Statement
Income
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
A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit
Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net
The three types of capital mentioned in chapter 18 are, equity capital, economic capital, and regulatory capital. Equity capital, economic capital, and regulatory capital were established a capital standard for banks. Equity capital is defined as the book value of assets less the book value of liabilities. Furthermore, equity capital is also said to cushion debt and equity holders from unexpected losses. Regulatory capital includes the subordinated debt and some adjustments for off-balance sheet items. This is also different from economic capital, which is a statistical estimate of risk and capital, it also reflects the bank’s estimate of the amount of capital needed to support its risk-taking activities; it is not the amount of
The Bank’s Tier 1, Total capital, and Assets-to-Capital multiple ratios were 13.0%,16.0%, and 17.2%, respectively, on October 31, 2011, compared with 12.2%, 15.5%, and 17.5%, respectively, on October 31, 2010.(Refer to Appendix 2) These changes over the period were influenced by increases in Tier 1 capital and Risk Weighted Assets. Risk Weighted Assets
This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.
The fair value of an asset is defined as ‘the price that would be received to sell an asset paid to transfer a liability in an orderly transaction between market participants at the measurement date” (Kieso, Weygandt, & Warfield, 2012). It is a market based measure (Averkamp, 2014). Over the past few years, Generally Accepted Accounting Principles has called for the use of fair value measurement in a company’s financial statements. This is what is referred to as the fair value principle (Kieso, Weygandt, & Warfield, 2012). The fair value of an asset or liability is based on an estimate of what the asset should be worth at the time of sale. This gives rise to some conflict among accounting professionals. It is believed that fair value may not be as accurate
Financial world is at the pace when the accountants are moving their steps towards fair value accounting, moreover FASB and IASB is motivating accountants to increase the use of fair value accounting by establishing new rules. Most of the people concur that fair values are the most reliable measure for financial assets and liabilities that an entity strongly trades, on the other hand some believes if management wants to hold an asset or liability till their maturity then historical method is best for measuring financial assets.
class he had missed had been devoted to a lecture and discussion of the statement of cash flows, and
The primary measure used by regulators and analysts to measure a bank’s capital strength is the Tier 1 capital ratio. Analyzing this ratio indicates the strength and the bank’s ability to
This paper provides the horizontal and vertical analysis of the income statement and the balance sheet. Equally, financial ratios have been computed to show the leverage, liquidity, efficiency, profitability and the equity of the Hewlett Packard enterprises. Recommendations and conclusion have been made on the results depicted by the analysis. Lastly, an evaluation was made on the different ways that stakeholders utilize the financial statements.
1994 Liabilities and Equity Short-term borrowings Accounts payable Progress collections and price adjustments accrued Dividends payable Taxes accrued Other costs and expenses accrued Current liabilities Long-term borrowings Other liabilities Total liabilities Minority interest in equity of consolidated affiliates Preferred stock Common stock Amounts received for stock in excess of par value Retained earnings Deduct common stock held in treasury Total shareowners’ equity Total liabilities and equity $644.9 696.0 1,000.5 72.8 337.2 1,128.1 $3,879.5 1,195.2 518.9 5,593.6 $ 71.2 $ — $465.2 414.5 3,000.5 $3,880.2 (175.9 ) $3,704.3 $9,369.1 $665.2 673.5 718.4 72.7 310.0 1,052.6 $3,492.4 917.2 492.1 4,901.7 50.1 — $463.8 409.5 2,683.6 $3,556.9 (184.5 ) $3,372.4 $8,324.2 $ $120.6 376.2 300.5 58.7 318.3 392.6 $1,566.9 364.1 221.0 2,152.0 41.4 — $455.8 266.9 1,384.5 $2,107.2 — $2,107.0 $4,300.6 1993 1985
Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation
Financial results and conditions vary among companies for a number of reasons. One reason for the variation can be traced to the characteristics of the industries in which companies operate. For example, some industries require large investments in property, plant, and equipment (PP&E), while others require very little. In some industries, the competitive productpricing structure permits companies to earn significant profits per sales dollar, while in other industries the product-pricing structure imposes a much lower profit margin. In most low-margin industries, however, companies often experience a relatively high rate of product throughput. A second reason for some of the
ACC307 INDIVIDUAL ASSIGNMENT TASK 1: Contemporary Issues of Accounting Theory Fair Value Measurement Overview After the International Accounting Standards Board (IASB) released the IFRS 13 Fair Value Measurement in May 2011 for the purpose of completing its joint project with the US Financial Accounting Standards Board (FASB) on fair value, the Australian Accounting Standard Board (AASB) released the Australian equivalent - AASB 13 Fair Value Measurement in the September of the same year. This standard permitted early adoption but generally started to take effect for the financial reporting periods beginning from 1 January 2013. This new standard requires no new requirement for the adoption and but it was accompanied with the issuing of AASB 2011-8 Amendments to Australian Accounting Standards arising from the AASB 13 which has made consequential changes to 32 standards and 9 interpretations for the adoption in Australia. The new standard attempts to unify IFRS and US GAAP by specifying how entities should apply the fair value measurements that applied in previous IFRS standards. It clarifies and redefines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”, sometimes referred to as an “exit price”. It also sets out a single source guidance for a robust measurement framework to ensure that the requirements are applied consistently and have clear
2. At the end of its first year of operations, Matlocke Company has total assets of $2,000,000 and total liabilities of $1,200,000. The owner originally invested $200,000 in the business, but has not made any further investments or taken any withdrawals. What is the first year 's net income for Matlocke Company?