MGT411

Assignment
Solution
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MGT 411 ASSIGNMENTS

RETURN ON ASSETS

ROA = Net profit after tax

Total bank Assets
BANK A = 15
700
ROA of Bank A = 0.0214

BANK B = 10
650
ROA of Bank B = 0.015

RETURN ON EQUITY

ROE = Net profit after tax

Bank Capital

BANK A = 15
100
ROE of Bank A = 0.15

BANK B = 10
50
ROE of Bank B = 0.2

LEVERAGE RATIO

LEVERAGE RATIO = BANK ASSETS

Bank Capital

LEVERAGE RATIO OF BANK A = 700

100

LEVERAGE RATIO OF BANK A = 7

LEVERAGE RATIO OF BANK B = 650

50

LEVERAGE RATIO OF BANK B = 13

DEBT EQUITY RATIO

DEBT EQUITY RATIO = DEBT

EQUITY

DEBT EQUITY RATIO OF BANK A = 150

100
DEBT EQUITY RATIO OF BANK A = 1.5
DEBT EQUITY RATIO OF BANK B = 150
50
DEBT EQUITY RATIO OF BANK B = 3

COMPANY A COMPANY B
ROA 0.02 0.01
ROE 0.15 0.2
LEVERAGE RATIO 7 13
DEBT EQUITY RATIO 1.5 3

QUESTION NO 2

BANK B has more liquidity risk than BANK A as it has less reserve to meet the request of
Immediate funds of the customers so It has a risk of failure.