Question Completion:
A bank’s capital is less than 10 percent of its assets.
Answer:
This 10% percent of the bank's capital will be far less than the capital of manufacturing corporations. The difference in the capital ratio of banks and manufacturing corporations is caused by the nature of a bank's assets and liabilities. A bank's assets are highly funded by depositors' funds but a manufacturing corporation's assets are not mostly funded by creditors' funds but by owners' equity.
Explanation:
Many banks revalue their financial assets more often than manufacturing corporations. Therefore, a bank's assets and liabilities are more volatile than the assets and liabilities of manufacturing corporations. A manufacturing corporation values its assets based on their usefulness and their historical costs. Banks value their assets and liabilities based on regulatory requirements.