Question

You are examining a company's balance sheet and find that it has total assets of $20,134, a cash balance of $2,046, inventory of $4,721, current liabilities of $5,445 and accounts receivable of $2,571. What is the company's net working capital?

Answer 1

The net worth of a bank is calculated by subtracting its total liabilities from its total assets. For the given bank, after setting up the T-account balance sheet, the net worth is determined to be $220, showcasing a positive financial status.

Step-by-step explanation:

To calculate a bank's net worth, you need to list the bank's assets and liabilities on a T-account balance sheet, then subtract the liabilities from the assets. The bank in question has deposits of $400, which are liabilities, and assets including reserves of $50, government bonds worth $70, and loans made totaling $500.

Here's how the T-account balance sheet for the bank would look:

• Assets
• Liabilities

Calculating the net worth:
Asset total = Reserves + Government Bonds + Loans = $50 + $70 + $500 = $620
Liability total = Deposits = $400
Net Worth = Asset total - Liability total = $620 - $400 = $220

Therefore, the bank's net worth is $220, which is a positive number indicating a financially healthy position since total assets exceed total liabilities.