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🦧 a special balance sheet

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🦧 a special balance sheet

Ape of Omaha
Nov 7, 2022
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🦧 a special balance sheet

www.wiseape.fyi

click logo above for 50% off!

 

what’s a balance sheet?

a balance sheet is a type of financial statement that records an organization's assets, liabilities, and shareholders’ equity. the document keeps track of how much belongs to the company, the shareholders, or how much the company owes to other entities

 

the accounting equation

assets = liabilities + shareholders’ equity

  • assets: cash, marketable securities (i.e. equity, debt securities, anything that can be sold on to the market for cash), accounts receivable (revenue the company will soon receive for service it already provided to customers), inventory ("stuff" left in storage that they have yet to sell), land, etc.

  • liabilities: short-term debt, long-term debt, interest owed, salaries payable (to employees), accounts payable, pension fund liabilities (required amount for a company to pay into employees' retirement accounts), etc.

  • shareholders’ equity: "net assets", or total assets minus all liabilities.

 

how is the fed’s balance sheet different?

it’s rather simple. it does not include shareholders’ equity – only assets and liabilities

  • the fed virtually has an "unlimited" supply of currency for puchasing assets, as it is capable of printing money

    • assets are primarily treasury securities and mortgage-backed securities

    • liabilities are bank reserves (because the fed should be able to give back banks their reserves) and currency in circulation

 

currently, the fed’s balance sheet is weakening

released weekly, the fed owns $196b less in treasury securities from peak in early june and $62b less in mortgage-backed securities from peak

  • the fed is intentionally shrinking its balance sheet, making borrowing more costly which helps the fed aggressively raise interest rates

 

here’s an interesting video on why the fed is currently in the red:

 

happy monday!

💡 something im thinking about

experimental drug may reverse neural damage associated with traumatic brain injury (click image)

that's all, folks 🐒

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as always, i’m no financial advisor! (i’m no substitute for professional financial services)
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🦧 a special balance sheet

www.wiseape.fyi
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