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MB-4056
BANK MANAGEMENT and
OTHER FINANCIAL SERVICES
Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
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Key Topics
• An Overview of the Balance Sheets and Income Statements of
Banks and Other Financial Firms
• The Balance Sheet or Report of Condition
• Asset Items
• Liability Items
• Recent Expansion of Off-Balance-Sheet Items
• The Problem of Book-Value Accounting and “Window
Dressing”
• Components of the Income Statement: Revenues and Expenses
• Appendix: Sources of Information on the Financial-Services
Industry
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© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Introduction
• The particular services each financial firm chooses to offer
and the overall size of each financial-service organization
are reflected in its financial statements
• Financial statements can be viewed as a “road map”
▫ Tell us where a financial firm has been in the past, where it is
now, and possibly where it is headed in the future
• The two main financial statements that managers,
customers, and the regulatory authorities rely upon are
▫ The balance sheet (Report of Condition)
▫ The income statement (Report of Income)
McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Bank Management and Financial Services, 7/e Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
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McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Bank Management and Financial Services, 7/e Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
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McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Bank Management and Financial Services, 7/e Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
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McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Bank Management and Financial Services, 7/e Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
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McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Bank Management and Financial Services, 7/e Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.
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McGraw-Hill/Irwin
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McGraw-Hill/Irwin
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McGraw-Hill/Irwin
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Quick Quiz
• What are the principal accounts that appear on a bank’s balance sheet
(Report of Condition)?
• Which accounts are most important and which are least important on
the asset side of a bank’s balance sheet? What accounts are most
important on the liability side of a balance sheet?
• What are primary reserves and secondary reserves, and what are they
supposed to do?
• What accounts make up the Report of Income (income statement of a
bank)?
• What is the relationship between the provision for loan losses on a
bank’s Report of Income and the allowance for loan losses on its
Report of Condition?
• What are the key features or characteristics of the financial statements
of banks and similar financial firms?
McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Bank Management and Financial Services, 7/e Copyright © 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.