Ratio Bank A Bank B Return on Equity 22% 24% Return on Assets 2% 2.5% Equity Multiplier Profit Margin 11 X 18 X 15% 16% Asset Utilization 13% 14% Spread Interest Expense ratio Provision on Loan Losses...

Q-1

A security analyst calculates the following ratios for the two banks:

i. How should the financial analyst evaluate the financial health of the two banks?

ii. Discuss each ratio and which bank would you prefer and why?

Extracted text: Ratio Bank A Bank B Return on Equity 22% 24% Return on Assets 2% 2.5% Equity Multiplier Profit Margin 11 X 18 X 15% 16% Asset Utilization 13% 14% Spread Interest Expense ratio Provision on Loan Losses 3% 3% 35% 40% 1% 4%