2. What is the “Accounting Identity” for the company (including bank) balance sheets

Subject: Consumer Behavior

Paper Model: APA

Paper Type: Assignment

Total Words: 1063

Document Outline

What is the primary task of financial system

How do Finance Decision, the investment decision and the Dividend Policy come into play with your management of your bank in the SBG? Be specific

How do the time value of money, ratio analysis, and portfolio diversification comes into play in your management of your bank in the SBG? Be specific

  1. Use your SBG bank to motivate the idea behind “Eat Well” vs “Sleep Well”. Be specific!

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  1. What is the primary task of financial system?

 

Movement of funds from those who have spare to those is need is the primary function of financial system. This means that financial system focuses on optimal utilization of resources and maximum revenue generation from those resources

 

  1. What is the “Accounting Identity” for the company (including bank) balance sheets?

 

An Accounting Identity is a form of equality that must always be true, it variables deviate as it is the function of a variable to deviate. The accounting identity for a balance sheet in general and a balance sheet of a bank in particular is

Assets=Liabilities+Capital

 

  1. How do Finance Decision, the investment decision and the Dividend Policy come into play with your management of your bank in the SBG? Be specific!

 

Finance Decision plays a vital role in management, as it is the resource allocator, so it sets all the budgets and binds whole of the management. Investment Decision affects management by a dozen of different ways as it may introduce different technology, inducing more capital and machinery or moving to a newer and bigger place at work.

 

  1. How do the time value of money, ratio analysis, and portfolio diversification comes into play in your management of your bank in the SBG? Be specific!

Time value of money affects investment and expansion of business, whereasratio analysis help in studying past performance and set goals for the future accordingly and portfolio diversification reduces risk and enhances chances of profit.

  1. What would happen to your bank if it experienced “Discrimination”? “Intraintermediation”? Be Specific!

 

Discriminationgenerally leads to demotivation and insecurity. I would first identify the cause of demotivation and then eradicate the source, as root of every disease is always the primary cause of regrowth in disease.

 

  1. Use your SBG bank to motivate the idea behind “Eat Well” vs “Sleep Well”. Be specific!

 

The Phrase eat well and sleep well means to reduce the level of risk as risk is a factor that is most critical in terms of profitability. If this factor has been evaluated properly, there is no other factors that rewards more and if our estimate was ill equipped then there is no factor that could lead us to failure.

 

  1. What would the “Shiftability Theory” look like if used within SBG? Be specific!

 

Shiftability is the process in which the bank sells its assets to another bank that has more liquidity.This approach saves a bank in critical state and helps it to revive from insolvency.

 

  1. What would the “Commercial Loan Theory” look like if used within SBG?Be specific!

 

The commercial loan theory of liquidity by Adam Smith is that the loans that are advanced to goods that can be financially sold. These loans are self-liquidating as the goods that are used in the process are to be sold.This type of Loan functions to finance a single transaction or a group of similar transactions. This loan is liquid as the component of this loan is liquid itself.

 

  1. What would “Liability Management theory” look like if used within the SBG? Be specific!

 

This theory illustrates that if a bank tries to manage a proportion of the deposits accepted to the loans forwarded then it is said to be liability management theory. A bank tries to make this gap positive, leading to more deposits that loans forwarded and diversification of loans in a feasible manner

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