Chap 6

Financial institutions that pursue the "quiet life" as a goal are really pursuing risk minimization.

• True

• False

Attempting to maximize a bank's stock value is the key objective for banks which should have priority over all other bank goals.

• True

• False

If the expected stream of future bank shareholder dividends rises, a bank's stock price should also rise, other factors held constant.

• True

• False

If the discount factor associated with the value of a bank's stock rises, the bank's stock price should rise, other factors held constant.

• True

• False

A bank's ROA equals its ROE times the ratio of total assets divided by total equity capital.

• True

• False

According to the textbook a bank's asset-utilization ratio reflects the mix and yield on the bank's portfolio of assets.

• True

• False

The bank's profit margin or ratio of net after-tax income to total operating revenue is a measure of financial leverage for a bank.

• True

• False

The ratio of a bank's net after-tax income to pre-tax net operating income is described in the text as a measure of tax management efficiency.

• True

• False

In the textbook the ratio of pre tax net operating income to total operating revenues is described as a measure of the effectiveness of a financial institution’s expense-control efficiency.

• True

• False

The ratio of non-performing assets to total loans and leases is a measure of credit risk in banking.

• True

• False