Explain the Importance of the Difference Between the Value of a Bank's

question 47

Essay

Explain the importance of the difference between the value of a bank's assets and the value of its liabilities.
If a company is economically viable, the value of what it owns (assets) will exceed the value of what it owes (liabilities). Equity, therefore, will be positive, and the company will be a going concern (will continue operating). If a company is not viable, the value of what it owes will exceed what it owns. Equity, therefore, will be negative, and the company will be economically bankrupt. This does not mean, however, that it will cease operating at that time.

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Definitions:

Standard Deviation

A statistic that measures the dispersion or variability of a dataset relative to its mean, indicating how spread out the data points are.

Margin Of Error

The range within which the true value lies in statistical sampling, with a certain level of confidence.

Confidence Intervals

A span of numbers that predicts the actual value of a population statistic within a certain confidence level.

Margin Of Error

An expression of the amount of random sampling error in a survey's results, defining a range within which the true population parameter is expected to lie.