Last year Stealth Bank received $100 million in interest payments from borrowers. $25 million in loans were written off as uncollectible. It paid out $30 million in interest to its depositors and collected $25 million for various fees it charged. Administration costs were $22 million and taxes were $3 million. What was the value of Stealth Bank's accounting profits?

Question

Quizplus · Accepted Answer

Accounting profits are calculated as total revenues minus total expenses. Here, total revenues are $100 million (interest payments) + $25 million (fees) = $125 million. Total expenses are $25 million (loans written off) + $30 million (interest to depositors) + $22 million (administration costs) + $3 million (taxes) = $80 million. Therefore, accounting profits = $125 million - $80 million = $45 million.

Last Year Stealth Bank Received $100 Million in Interest Payments