Question

Examine the balance sheet of commercial banks in the following table.

Assets	$ Billion			% Total			Liabilities and Net Worth	$ Billion			% Total
Real assets							Liabilities
Equipment and premises	$	146.2		0.8	%		Deposits	$	10,280.3		56.1	%
Other real estate		68.9		0.4			Debt and other borrowed funds		1,286.0		7.0
Total real assets	$	215.1		1.2	%		Federal funds and repurchase agreements		1,996.0		10.9
							Other		1,598.0		8.7
							Total liabilities	$	15,160.3		82.7	%
Financial assets
Cash	$	896.3		4.9	%
Investment securities		8,032.1		43.8
Loans and leases		6,747.3		36.8
Other financial assets		1,221.2		6.7
Total financial assets	$	16,896.9		92.1	%
Other assets
Intangible assets	$	426.4		2.3	%
Other		800.7		4.4
Total other assets	$	1,227.1		6.7	%		Net worth	$	3,178.8		17.3	%
Total	$	18,339.1		100.0	%			$	18,339.1		100.0	%

Balance sheet of FDIC-insured commercial banks and savings institutions

Note: Column sums may differ from total because of rounding error.

Source: Federal Deposit Insurance Corporation, www.fdic.gov, March 2016.

a. What is the ratio of real assets to total assets? (Round your answer to 4 decimal places.)

b. What is the ratio of real assets to total assets for nonfinancial firms in the following table? (Round your answer to 4 decimal places.)

Assets	$ Billion			% Total			Liabilities and Net Worth	$ Billion			% Total
Real assets							Liabilities
Equipment and software	$	4,447		16.2	%		Bonds and mortgages	$	5,474		20.0	%
Real estate		9,777		35.7			Bank loans		923		3.4
Inventories		1,844		6.7			Other loans		1,470		5.4
Total real assets	$	16,068		58.6	%		Trade debt		1,870		6.8
							Other		4,828		17.6
							Total liabilities	$	14,565		53.1	%
Financial assets
Deposits and cash	$	732		2.7	%
Marketable securities		1,221		4.5
Trade and consumer credit		2,392		8.7
Other		6,993		25.5
Total financial assets	$	11,338		41.4	%		Net worth	$	12,841		46.9	%
Total	$	27,406		100.0	%			$	27,406		100.0	%

Balance sheet of U.S. nonfinancial corporations

Note: Column sums may differ from total because of rounding error.

Source: Flow of Funds Accounts of the United States, Board of Governors of the Federal Reserve System, March 2016.

Answer 1

a]

ratio of real assets to total assets = Total real assets / Total assets

ratio of real assets to total assets = $215.1 billion / $18,339.1 billion

ratio of real assets to total assets = 0.011729, or 1.1729%

b]

ratio of real assets to total assets = Total real assets / Total assets

ratio of real assets to total assets = $16,068 billion / $27,406 billion

ratio of real assets to total assets = 0.586295, or 58.6295%