Asked 4 days ago
I need to calculate the commercial bank's working capital which is the difference between current assets and current liabilities. definitions of a bank's current assets and liabilities vary across the literature. could anybody give me his/her opinion on the attached balance sheet
Thanks
The concept of traditional working capital is not applicable to commercial banks because most of the liabilities and assets are current except buildings and fixture. Also a number of bank obligations are off balance sheet.
Given the asset and liability characteristics of a bank, the concept of working capital (current assets less current liabilities) doesnt apply. Generally youd be looking at a company’s receivables, inventory, payables and accruals which circulate thru a balance sheet rapidly. The goal is to turn them to cash and roll such back into more working capital. All about liquidity.
A banks balance sheet assets and liabilities dont turn over at the same rate given their nature , i.e., loans and deposits.
find your total working capital, use the net working capital formula, also known as the working capital formula:
Net Working Capital = Current Assets – Current Liabilities
A positive number for your net working capital calculation shows that your company has enough cash and other liquid assets to cover short-term debts and expenses.
- Badges
- Science topic
- Similar topics
- Social Psychology
- Attitude