Basic Ratios
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Review and draw the bathtub flow model as it relates to: Provision for Loan Losses  Allowance for Loan Loss Account  Loan chargeoffs
 The faucet is the Provision for loan losses
 The bath tub is the allowance for loan loss account
 Loan Charge offs is the drain
the water stays in the tub by adequately allowing for charge offs in your provision for Loan Loss  the water becomes the net difference between the 2 (Your ALL)

Compare and Contrast a balance sheet versus an income statement
Balance sheet shows where you are for the year  running total
Income statement shows the quarter total  a snapshot of information for the particular point in time

Required ROA ratio definition
Capital Ratio x Asset Growth Rate = * Required ROA
(current/constant) x (choice / Variable) = dependent / variable  to keep CR constant

Basis Point  Percentage Points  Decimal Format
100 basis points = 1% = .01
30 basis points = .3% = .003

Required ROA ratio definition
Capital Ratio x Asset Growth Rate = * Required ROA
(current/constant) x (choice / Variable) = dependent / variable  to keep CR constant

Compare and Contrast a balance sheet versus an income statement
Balance sheet shows where you are for the year  running total
Income statement shows the quarter total  a snapshot of information for the particular point in time

Define Income Statement
shows financial flows over time.

Define Balance sheet
Shows the credit union's accounts at a point in time and the sources and uses of funds

Profit Margin Ratio
Q2 NI / Q2 Gross operating income

Asset Utilization Ratio
(Q2 gross operating income) * 4 / Q1 total assets

Return on assets ratio
(Q2 NI) *4 / Q1 Total Assets

Denominator
On bottom......numerator / denominator

Numerator
On top......numerator / denominator

Another name for leverage ratio
Equity multiplier

Equity multiplier ratio
EM = Assets / Equity

Return on Equity
ROE = (Q2 NI)*4 / Q1 Equity

Return on Equity
ROE = (Q2 NI)*4 / Q1 Equity

GAP Analysis Ratio Equation
^NII = $GAP * ^i

Ratio that measures a credit union's liquidity position
CASH + INVESTMENTS < YEAR / ASSETS

Return on Equity Decomposition
 R=AxR=AxGRXR=AxGRXNII+NET NON II
 E E A E A GR E A GR GR

Define when a credit union is "insolvent"
Assets are worth less than the liabilities