2) The Great National Bank has the following balance sheet and income statement:

Question

2) The Great National Bank has the following balance sheet and income statement: 27 Points Assets Liabilities and Equity Cash and due from banks $8,000 Demand deposits $16,000 Investment securities $20,000 NOW accounts $79,000 Repurchase agreements $35,000 Retail CD's $23,000 Loans $75,000 Debentures $21,000 Fixed assets $20,000 Total Liabilities $139,000 Other assets $6,000 Common stock $10,000 Paid-in capital $5,000 Total assets $164,000 Retained earnings $10,000 Total Liabilities and Equity $164,000 Income Statement Interest on fees and loans $11,000 Interest on investment securities $5,000 Interest on repurchase agreements $7,000 Interest on deposits in banks $1,000 Total interest income $24,000 Interest on deposits $8,000 Interest on debentures $3,000 Total interest expense $11,000 Net interest income $13,000 $ 13,000 = [Total interest income ($ 24,000) less Total interest expense ($ 11,000) Provision for loan losses $3,000 Noninterest income $1,000 Noninterest expenses $1,000 Income before taxes $10,000 Taxes $4,000 Net income $6,000 For The Great National Bank, calculate: a. Return on equity b. Return on assets c. Asset utilization d. Equity multiplier e. Profit margin f. Interest expense ratio g. Provision for loan loss ratio h. Noninterest expense ratio i. Tax Ratio a. Return on Equity = Net income / Total equity capital total equity capital = common stock + paid-in capital + retained earnings = 6,000/(10,000 + 5,000 + 10,000) = b. Return on Assets = (Net income / Total assets) = 6,000/164,000 = c. Asset utilization = Total operating income / Total assets total operating income = interest income + noninterest income = (24,000 + 1,000)/164,000 = d. Equity multiplier = Total assets / Total equity capital = 164,000/(10,000 + 5,000 + 10,000) = e. Profit margin = Net income / Total operating income = 6,000/(24,000 + 1,000) = f. Interest expense ratio = Interest expense / Total operating income = 11,000/(24,000 + 1,000) = g. Provision for loan loss ratio = Provision for loan losses / Total operating income = 3,000/(24,000 + 1,000) = h. Noninterest expense ratio = Noninterest expense / Total operating income = 1,000/(24,000 + 1,000) = i. Tax ratio = Income taxes / Total operating income = 4,000/(24,000 + 1,000) = 2) The Great National Bank has the following balance sheet and income statement: 27 Points Assets Liabilities and Equity Cash and due from banks $8,000 Demand deposits $16,000 Investment securities $20,000 NOW accounts $79,000 Repurchase agreements $35,000 Retail CD's $23,000 Loans $75,000 Debentures $21,000 Fixed assets $20,000 Total Liabilities $139,000 Other assets $6,000 Common stock $10,000 Paid-in capital $5,000 Total assets $164,000 Retained earnings $10,000 Total Liabilities and Equity $164,000 Income Statement Interest on fees and loans $11,000 Interest on investment securities $5,000 Interest on repurchase agreements $7,000 Interest on deposits in banks $1,000 Total interest income $24,000 Interest on deposits $8,000 Interest on debentures $3,000 Total interest expense $11,000 Net interest income $13,000 $ 13,000 = [Total interest income ($ 24,000) less Total interest expense ($ 11,000) Provision for loan losses $3,000 Noninterest income $1,000 Noninterest expenses $1,000 Income before taxes $10,000 Taxes $4,000 Net income $6,000 For The Great National Bank, calculate: a. Return on equity b. Return on assets c. Asset utilization d. Equity multiplier e. Profit margin f. Interest expense ratio g. Provision for loan loss ratio h. Noninterest expense ratio i. Tax Ratio a. Return on Equity = Net income / Total equity capital total equity capital = common stock + paid-in capital + retained earnings = 6,000/(10,000 + 5,000 + 10,000) = b. Return on Assets = (Net income / Total assets) = 6,000/164,000 = c. Asset utilization = Total operating income / Total assets total operating income = interest income + noninterest income = (24,000 + 1,000)/164,000 = d. Equity multiplier = Total assets / Total equity capital = 164,000/(10,000 + 5,000 + 10,000) = e. Profit margin = Net income / Total operating income = 6,000/(24,000 + 1,000) = f. Interest expense ratio = Interest expense / Total operating income = 11,000/(24,000 + 1,000) = g. Provision for loan loss ratio = Provision for loan losses / Total operating income = 3,000/(24,000 + 1,000) = h. Noninterest expense ratio = Noninterest expense / Total operating income = 1,000/(24,000 + 1,000) = i. Tax ratio = Income taxes / Total operating income = 4,000/(24,000 + 1,000) =

Explanation / Answer

answer:

a. return on equity = 6000/ 25000 = 0.24

b. return on assets = 6000/ 164000 = 0.036

c. asset utilization = 25000/ 164000 = 0.1524

d.equity multiplier = 164000/25000 = 6.56

e. profit margin = 6000/25000 = 0.24

f. interest expense ratio = 11000/25000 = 0.44

g. provision for loan loss ratio = 3000/25000 = 0.12

h. non interest expense ratio = 1000/25000 = 0.04

i. tax ratio = 4000/25000 = 0.16

all these have been calculated using the above given formulas.

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