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    Review Five Types of Ratios-1. Return or Profitability 2. Operating Efficiency 3. Tax Management 4. Liquidity 5. Capital Adequacy

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    kulamullakandy
    This document reviews five types of ratios used to analyze banks: 1) return or profitability ratios like return on assets (ROA) and return on equity (ROE) to measure profitability, 2) operating efficiency ratios to measure costs, 3) tax management ratios, 4) liquidity ratios to measure available cash, and 5) capital adequacy ratios like the capital ratio and leverage ratio to measure financial stability. Specific ratios discussed include net profit margin, net interest margin, operating expenses to income, tax exempt positions, cash to assets, demand deposits to assets, and loan loss reserves to loans.

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    Review Five Types of Ratios-1. Return or Profitability 2. Operating Efficiency 3. Tax Management 4. Liquidity 5. Capital Adequacy

    Uploaded by

    kulamullakandy
    9 views8 pages
    This document reviews five types of ratios used to analyze banks: 1) return or profitability ratios like return on assets (ROA) and return on equity (ROE) to measure profitability, 2) operating efficiency ratios to measure costs, 3) tax management ratios, 4) liquidity ratios to measure available cash, and 5) capital adequacy ratios like the capital ratio and leverage ratio to measure financial stability. Specific ratios discussed include net profit margin, net interest margin, operating expenses to income, tax exempt positions, cash to assets, demand deposits to assets, and loan loss reserves to loans.

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    TRANSBANKRATIOS

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    This document reviews five types of ratios used to analyze banks: 1) return or profitability ratios like return on assets (ROA) and return on equity (ROE) to measure profitability, 2) operating efficiency ratios to measure costs, 3) tax management ratios, 4) liquidity ratios to measure available cash, and 5) capital adequacy ratios like the capital ratio and leverage ratio to measure financial stability. Specific ratios discussed include net profit margin, net interest margin, operating expenses to income, tax exempt positions, cash to assets, demand deposits to assets, and loan loss reserves to loans.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    Download as doc, pdf, or txt
    9 views8 pages

    Review Five Types of Ratios-1. Return or Profitability 2. Operating Efficiency 3. Tax Management 4. Liquidity 5. Capital Adequacy

    Uploaded by

    kulamullakandy
    This document reviews five types of ratios used to analyze banks: 1) return or profitability ratios like return on assets (ROA) and return on equity (ROE) to measure profitability, 2) operating efficiency ratios to measure costs, 3) tax management ratios, 4) liquidity ratios to measure available cash, and 5) capital adequacy ratios like the capital ratio and leverage ratio to measure financial stability. Specific ratios discussed include net profit margin, net interest margin, operating expenses to income, tax exempt positions, cash to assets, demand deposits to assets, and loan loss reserves to loans.

    Copyright:

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    of 8

    RATIO ANALYSIS OF BANKS

    REVIEW FIVE TYPES OF RATIOS-

    1. RETURN OR PROFITABILITY

    2. OPERATING EFFICIENCY

    3. TAX MANAGEMENT

    4. LIQUIDITY

    5. CAPITAL ADEQUACY

    MEASURING RETURNS:

    RETURN ON ASSETS (ROA) =

    NET PROFIT ÷ TOTAL ASSETS

    RETURN ON EQUITY (ROE) =

    NET PROFIT ÷ COMMON EQUITY


    OR ROE =

    NET PROF X G.O.I. X TOT ASSETS

    GROSS OP.INC TOT ASSETS COM.EQ’TY

    NET PROFIT MARGIN =

    NET PROFIT ÷ GROSS OPER INCOME

    NET INTEREST MARGIN =

    TOT INTEREST INCOME - INT EXPENSE

    TOTAL ASSETS OR EARNINGS ASSETS


    INT INC. ON LOANS/AVG LOAN PORTFOLIO

    INT INC ON SECUR./AVG SECUR PORTFOLIO

    MEASURING OPERATING EFFICIENCY:

    TOTAL OPER EXP ÷ GROSS OPER. INC.


    GROSS OPERATING INCOME/ ASSETS

    TOT NON-INTEREST INCOME÷ TOT ASSETS

    TOT NON-INT INC÷ OVERHEAD EXPENSES

    AVERAGE YIELD ON ASSETS =

    TOTAL INTEREST INCOME÷ TOTAL ASSETS


    INTEREST EXPENSE/GROSS OPER.INC.

    TOTAL INTEREST EXP÷ TOTAL ASSETS

    TAX MANAGEMENT MEASURES:

    TAX EXEMPT POSITION=

    INVMT IN TAX EXEMPT SEC ÷ TOT ASSETS


    LOAN LOSS PROV ÷ GROSS OPER INC

    MEASURING LIQUIDITY:

    CASH & DUE FROM BANKS÷ TOT ASSETS

    TOT DEMAND DEPOSITS ÷ TOTAL ASSETS

    TIME DEPOSITS÷ TOTAL ASSETS


    LOANS AND MORTGAGES÷ TOTAL ASSETS

    MEASURING CAPITAL ADEQUACY:

    CAPITAL RATIO =

    EQUITY CAPITAL ÷ TOTAL ASSETS

    LEVERAGE RATIO =

    TOTAL ASSETS ÷ EQUITY CAPITAL


    LOAN LOSS RES ÷ TOT LOANS & MORT.

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