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

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

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

According the case study of the failure of Superior Bank of Chicago and the FDIC’s takeover of this institution in 2001, the main problem was attributed to misleading accounting practices of inflating asset values and revenues deflating liabilities and expenses. The Sarbanes-Oxley Accounting Standards Act of 2002 addresses this issue and expressly encourages combining auditing and consulting relationships in order to promote efficiency and profitability of financial institutions.

Liquidity risk for a bank examines the quality of the bank's assets and, in particular, the quality of the bank's loans. 

The FDIC is a private credit rating company which provides credit ratings on the short term and long term securities issued by banks. 

The bank's asset utilization ratio reflects the effectiveness of the bank's expense management. 

Smaller banks usually have fewer liquid assets than larger banks. 

The interest rate spread between market yields on bank debt issues (such as capital notes and CDs) and the market yields on government securities of the same maturity is considered to be a measure of market risk in banking.

The ratio of uninsured deposits to total deposits is considered to be a measure of credit risk in banking. 

Charge-offs represent securities a bank decides to sell because they have declined in value. 

The ratio of nonperforming assets to total loans and leases is considered to be a measure of a bank's market risk. 

The noninterest margin is generally positive for most banks. 

In recent years the U.S. banking industry's equity multiplier has generally risen in response to regulatory pressure to raise more capital. 

The measure of a bank's efficiency and return known as the "earnings spread" subtracts total interest expenses from all the bank's interest income and these two items are then divided by total assets. 

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. 

The bank's degree of asset utilization (AU) or ratio of total operating revenue to total assets is a measure of asset management efficiency, especially in terms of the mix and yield on assets. 

During the 1980's the Comptroller of the Currency, the Federal Reserve and the FDIC created a new tool to help them analyze the financial condition of banks.  This new tool is called the Uniform Bank Performance Report. 

The ratio of a bank's net operating income to the number of a bank's full-time-equivalent employees is called the employee productivity ratio. 

The ratio of cash and government securities to total assets is considered to be a measure of liquidity risk in banking. 

Loans past due for 90 days or more are classified as nonperforming assets.

ROA measures how capably the management of a financial institution has been converting the institution's assets into net earnings. 

The most profitable U.S. banks in terms of both ROA and ROE are medium-size institutions in the asset size range of $100 million to $10 billion, according to the textbook. 

If a bank adds more full-time employees and posts the same net operating income, its employee productivity ratio, as defined in the text, must fall. 

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

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. 

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. 

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

The ratio of a bank's interest income from its loans and security investments less interest expenses on debt issued divided by total earning assets measures a bank's: 

The difference between such sources of bank income as service charges on deposits and trust-service fees and such sources of bank expenses as salaries and wages and overhead expenses divided by total assets or total earning assets is called the: 

The so-called employee productivity ratio for a bank is equal to: 

1. According to the textbook the most profitable banks in the United States in 2007 fell in the asset size range of: 

1. The so-called tax-management efficiency ratio consists of: 

1. Which of the following would be the best example of a ratio used to examine the return of one of the bank's assets? 

Carson County State Bank has a ratio of equity capital to total assets of 2.5%.  The FDIC which regulates this bank has determined that this is not enough equity capital and is making the bank issue new stock in the market.  In addition, they are not allowing the bank to issue a dividend to their current stockholders.  Which type of risk would this be an example of?

Amy Farmer is thinking about investing in the Guthrie National Bank.  She is examining certain ratios of the bank including the ratio of the book value of the assets to the market value of the assets and the market value of the bonds held by the bank to their recorded value.  What type of risk is Amy attempting to measure with these ratios?

Which assets are excluded from risk assets?

Chaos State Bank has an old computer system which can go down for weeks at a time, leaving customers unable to access their accounts online.  Many customers have left the bank for banks with more reliable computer systems.  Which type of risk would this be an example of?

In recent years banks have been __________ profitable than (as) S&Ls and Savings Banks. 

Which of the following ratios would be a measure of credit risk? 

A bank that has a low profit margin most likely: 

What do loans and security investments represent for a bank? 

The earnings spread for a bank is equal to: 

ROE for a bank is calculated by: 

Forrest Fennell is thinking about investing in Capital City Bank.  He is examining certain ratios of the bank including the ratio of nonperforming loans to total loans and leases and the provision for loan losses to total loans and leases.  What type of risk is Forrest attempting to measure with these ratios?

A bank's ROE equals its ROA times its: 

The ratio that equals total interest income divided by total earning assets less total interest expense divided by total interest-bearing liabilities is known as the: 

Which of the following would be the best example of a ratio used to examine the cost of one of the bank's liabilities? 

Which of the following would be the best example of a ratio used to examine the cost of one of the bank's liabilities? 

Norman Bank made a loan of $1,000,000 to Jarod LeFevre.  Jarod has declared bankruptcy and Norman Bank has just learned that the judge in the case has ruled that Jarod does not have to pay any of the loan back or forfeit any of his assets.  Which type of risk would this be an example of?

Gerald Wilkens is thinking about investing in Tallahassee State Bank.  He is examining certain ratios of the bank including the ratio of cash assets and government securities to total assets and purchased funds to total assets.  What type of risk is Gerald attempting to measure with these ratios?

A bank's stock price will tend to rise if the: 

1. OE for a bank reflects:

1. A ratio that can be used to measure a bank's credit risk would be: 

1. A bank that has a high asset utilization (AU) ratio most likely: 

1. Which of the following would be the best example of a ratio used to examine the bank's interest rate risk? 

1. Brian Smith, CEO of Carter National Bank, decides that interest rates are going to fall in the future and as a result buys $100 million in 30 year Treasury Bonds for the bank’s security portfolio.  Instead, interest rates rise causing the value of these bonds to fall.  This would be an example of which of the following types of risk?

1. Paul Smith is thinking about investing in Capital City Bank.  He is examining certain ratios of the bank including the ratio of interest sensitive assets to interest sensitive liabilities and uninsured deposits to total deposits.  What type of risk is Paul attempting to measure with these ratios?

1. Paul Smith is thinking about investing in Capital City Bank.  He is examining certain ratios of the bank including the ratio of interest sensitive assets to interest sensitive liabilities and uninsured deposits to total deposits.  What type of risk is Paul attempting to measure with these ratios?

1. Operational risk includes which of the following?

A)  Failure of bank’s computer system

B)  Closure of a bank for three months due to flooding from a major hurricane

C)  Embezzlement of funds of a bank by a teller of the bank

D)  Closure of a bank for two weeks due to a fire from a lightening strike

E)  All of the above are example of operational risk

1. Everett Bank has just learned that there is a disgruntled former employee who has created a blog that is telling everyone that Everett Bank has halved their customer service representatives and so customers have great difficulty getting through to a live person when there is a problem with their account.  Everett is worried that they may lose customers as a result.  Which type of risk would this be an example of?

A)  Operational risk

B)  Legal risk

C)  Compliance risk

D)  Strategic risk

E)  Reputation risk

1. The Garic State Bank of New Orleans was under water for three weeks after Hurricane Katrina hit the state.  The lobby is full of mud and other debris.  Many of the valuables stored in the bank’s safety deposit boxes have been ruined.  John Garic, the President and CEO of the bank, has been working night and day to reopen the bank.  What type of risk has John been dealing with?

A)  Credit risk

B)  Liquidity risk

C)  Market risk

D)  Interest rate risk

E)  Operational risk

1. The ratio of net loans to total assets is considered to be a measure of what form of risk in banking? 

A) Credit risk 

B) Liquidity risk 

C) Market risk 

D) Interest-rate risk 

E) None of the above