Final answer:
Current liabilities are a company's debts due within a year, including bank deposits which are withdrawable on demand. This presents an asset-liability time mismatch for banks, as their liabilities are short-term while assets are long-term. A bank's balance sheet reflects this disparity between assets and liabilities, impacting its net worth or bank capital.
Step-by-step explanation:
Current liabilities are a company's debts or obligations that are due within one year. For a bank, these can include customer deposits which can be withdrawn quickly. The asset-liability time mismatch is a significant risk for banks because while customers can withdraw a bank’s liabilities in the short-term, assets like loans and bonds, which represent money lent by the bank, are typically repaid over a longer period.
In the context of a bank's balance sheet, the balance sheet is an accounting tool that lists both assets and liabilities. Here, liabilities may include customer deposits and any short-term debt the bank owes. The bank's net worth, also known as bank capital, is calculated as the total asset value minus the total liabilities. Assets such as cash held in bank vaults or reserves at the Federal Reserve contribute to the bank's ability to cover its liabilities.