What is a bank?
A bank is a business. But unlike some businesses, banks don’t manufacture products or extract natural resources from the earth. Banks sell financial services such as car loans, home mortgage loans, business loans, checking accounts, credit card services, certificates of deposit, and individual retirement accounts.
What do banks do?
At their core banks are a place where people go to deposit (give) their money and the bank in turn invests some of that money as loans to businesses and other people
Without banks, people would have to hide their cash under their mattress, which wouldn’t accrue (grow, gain) any interest or overall be very safe
Also it would be very difficult to start a business or buy a house without the loans that banks offer.
Basic financial definitions
Asset- things of value bought by businesses or people to generate more value.
-For companies this can mean machines and land
-For normal people this means cash accounts, cars, homes
Liability- Legal debt
-Loans, money you’re owed later
Equity- means slightly different things in different contexts, but for our purposes think stocks and bonds representing ownership in a company.