RSM428H1 Lecture Notes - Lecture 2: Securities Lending, Cash Flow Statement, Automatic Stay
Document Summary
Bmo"s cash flow statement: trading securities investments classified as operations. Are securities you plan to sell in short term: non-trading securities classified as investments. Securities you plan to hold for longer term: realistically, there is no difference between trading securities and non-trading securities, differences between cfo, cfi, and cff are not really clear. Analysts do not focus on cash flow statement for this reason. Balance sheet is the most important, cash flow statement is least important. Are desirable because provide good return for their term. Borrower is borrowing cash, lending security as collateral and vice versa: borrowers obligated to repurchase and lenders to sell back securities at later date. Lenders protected by securities, borrowers protected by cash if other party defaults. Lender can return a different security, as long as same quality. There is overcollateralization to protect against market risk if lender has to liquidate. Value of securities is more than cash lent.
