A bank's net worth is the:
A) Measure of its profitability
B) Value of its vault cash and loan portfolio
C) Claims of its owners against the bank's assets
D) Claims of its creditors against the bank's assets

Question

Quizplus · Accepted Answer

A bank's net worth represents the claims of its owners (shareholders) against the bank's assets. It is also called shareholders' equity or book value. Net worth is calculated as assets minus liabilities. Therefore, it is not a measure of profitability (choice A), as profitability is determined by a bank's income statement. It is not the value of the bank's vault cash and portfolio (choice B), as these are assets owned by the bank, not the net worth. It is not the claims of its creditors (choice D), as creditors have claims against a bank's assets, but they are not part of the net worth calculation.

A Bank's Net Worth Is The