Quarter 7: Ending on 9/30/2021 he bank has increased assets every quarter (3) si
ID: 2820526 • Letter: Q
Question
Quarter 7: Ending on 9/30/2021 he bank has increased assets every quarter (3) since 12/31/2020, and ssets ratio has increased in each of the 3 quarters. yet the Equity/Total low can this be possible since Total Assets is the denominator of the ratio? In other words, if TA is getting larger, shouldn't the ratio decrease? a. H Assuming your answer to (a above) is correct (I have confidence), how can Owners Equity increase each quarter? Please illustrate the source of the increase in Owners Equity for each quarter.Explanation / Answer
The owners equity has increased each quarter as follows: from 50.735 to 53.026 to 55.537 vis a vis total assets increasing from 882.067 to 891.263 to 908.079 resulting in Equity to Total Assets ratio increasing from 0.0575 to 0.0595 to 0.0612 for the quarters ended 31st March 2021, 30th June 2021 and 30th September 2021 respectively.
The source of increase in the owners equity need not be specified in the bank's balance sheet. However it could be in various forms like the repurchase agreement (if executed with the owners) amounts getting extinguished and getting converted into owners' equity or loans given by the owners to the bank getting converted into equity at a predetermined price, etc.