Question

Consider the following simplified balance sheet accounts of Wells Fargo & Company as of September 30, 2011 (in billions of $):


This balance sheet illustrates how Wells Fargo gathers and uses money. More than 87% of the total assets are in the form of investments and loans, and more than 68% of the total liabilities and stockholders’ equity are in the form of deposits, a major liability. That is, financial institutions such as Wells Fargo are in the business of raising funds from depositors and, in turn, lending those funds to businesses, homeowners, and others. The stockholders’ equity is usually small in comparison with the deposits (less than 11% of total liabilities and stockholders’ equity in this case).
1. What Wells Fargo accounts would be affected if you deposited $1,000?
2. Why are deposits listed as liabilities?
3. What accounts would be affected if the bank loaned Jens Olafson $75,000 for home renovations?
4. What accounts would be affected if Isabel Valdez withdrew $5,000 from her savings account?


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  • CreatedFebruary 20, 2015
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