A bank's balance sheet can show a negative net worth and yet its income statement can show a profit for the year.

Question

Quizplus · Accepted Answer

A bank's balance sheet shows its financial position at a specific point in time, while the income statement shows the bank's revenues and expenses over a period of time. It is possible for a bank to have a negative net worth on its balance sheet due to factors such as loan defaults or losses on investments, while still generating a profit in a given year. However, a negative net worth can indicate financial instability and may lead to regulatory intervention or even bankruptcy.

A Bank's Balance Sheet Can Show a Negative Net Worth