REQUIRED: A. Compute the bank's return on equity (ROE) and explain its significance. B. Show also that a similar result can be obtained by using the bank's return on assets (ROA) and its equity multiplier (EM). Explain the interrelationship between ROA and EM, and their significance. C. Compute the bank's net interest margin, burden ratio, efficiency ratio and explain the significance of these ratios in analysing bank performance.
REQUIRED: A. Compute the bank's return on equity (ROE) and explain its significance. B. Show also that a similar result can be obtained by using the bank's return on assets (ROA) and its equity multiplier (EM). Explain the interrelationship between ROA and EM, and their significance. C. Compute the bank's net interest margin, burden ratio, efficiency ratio and explain the significance of these ratios in analysing bank performance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:QUESTION THREE (3)
Use the information in the tables to answer the following questions below:
XYZ Bank - Balance Sheet (All amounts are stated as averages)
Assets
K'M
Liability and Equity
75
400
18 Balances due to BoZ
402 Equity
105
1,000 Total Liabilities and Equity 1,000
Cash and balances with other banks
Investments in Government securities
Investments in OMO term deposits (BoZ)
Loans and advances
Premises
Total Assets
ABC Bank - Income Statement
Assets
Interest Income
Interest Expense
Non-Interest Income
Non-Interest Expense
Net Income
K'M
Demand deposits
Time deposits
150
110
11
38
13
K'M
150
325
425
100
Transcribed Image Text:REQUIRED:
A. Compute the bank's return on equity (ROE) and explain its significance.
B. Show also that a similar result can be obtained by using the bank's return on assets
(ROA) and its equity multiplier (EM). Explain the interrelationship between ROA
and EM, and their significance.
C. Compute the bank's net interest margin, burden ratio, efficiency ratio and explain
the significance of these ratios in analysing bank performance.
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