Exam 20: Bank Performance

When only equity counts as capital, the leverage measure is

Interest income generated from all a bank's assets is called

Access to a bank's ROA without any other information reveals when its performance is not up to par and the reasons for its poor performance.

The level of competition is an industry characteristic that will favorably affect cash flows, because a high level of competition may increase a bank's volume of business or increase the pricesit can charge for its services.

Some banks that are experiencing serious financial problems may prefer to overstate their earnings in order to allow more time to correct their operations before the regulators force them toclose.

Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is ____ than Bank B's. Bank A's return on equity is ____ than BankB's.

Which of the following factors affecting a bank's gross interest income is not influenced by the bank's policy decisions?

If the risk premium on a commercial bank rises, so will the required rate of return by investors who invest in the bank.

If a bank has long-term fixed-rate assets and short-term liabilities, and interest rates increase over time, its net interest margin should

Fees charged by a bank on various services allow the bank to generate:

If banks continue to offer new services (such as insurance or securities services), their noninterest income will decrease over time.

Banks with relatively ____ ROAs often incur ____ noninterest expenses.

Small banks tend to make more loans to small local businesses, and the rates on these loans are typically lower than the rates that larger banks charge on the loans they provide to large businesses.

A bank's ROE ____ account for its financial leverage. A bank's ROA ____ account for its financial leverage.

When interest rates fall, the rates that a bank pays on deposits typically decline less than the interest rates that the bank earns on its loans and investments.

If a bank has short-term deposits and provides long-term fixed-rate loans, and interest rates decline over time, its net interest margin should be:

Bank T generally obtains a high percentage of its funds from negotiable certificates of deposit (NCDs). Bank V obtains most of its funds from retail CDs. Bank Z obtains its funds from checkingaccounts. The bank that will likely incur the highest interest expense is ____.

Net income measured as a percentage of assets is

Interest paid on deposits and borrowed funds is called

A bank with ____ management may account for ____ loan losses, which _____ reported earnings now.