# Basic Ratios

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1. Review and draw the bathtub flow model as it relates to:  Provision for Loan Losses - Allowance for Loan Loss Account - Loan charge-offs
• 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)
2. 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
3. Required ROA ratio definition
Capital Ratio x Asset Growth Rate = * Required ROA

(current/constant) x (choice / Variable) = dependent / variable - to keep CR constant
4. Basis Point - Percentage Points - Decimal Format
100 basis points = 1% = .01

30 basis points = .3% = .003
5. Required ROA ratio definition
Capital Ratio x Asset Growth Rate = * Required ROA

(current/constant) x (choice / Variable) = dependent / variable - to keep CR constant
6. 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
7. Define Income Statement
shows financial flows over time.
8. Define Balance sheet
Shows the credit union's accounts at a point in time and the sources and uses of funds
9. Profit Margin Ratio
Q2 NI / Q2 Gross operating income
10. Asset Utilization Ratio
(Q2 gross operating income) * 4 / Q1 total assets
11. Return on assets ratio
(Q2 NI) *4 / Q1 Total Assets
12. Denominator
On bottom......numerator / denominator
13. Numerator
On top......numerator / denominator
14. Another name for leverage ratio
Equity multiplier
15. Equity multiplier ratio
EM = Assets / Equity
16. Return on Equity
ROE = (Q2 NI)*4 / Q1 Equity
17. Return on Equity
ROE = (Q2 NI)*4 / Q1 Equity
18. GAP Analysis Ratio Equation
^NII = \$GAP * ^i
19. Ratio that measures a credit union's liquidity position
CASH + INVESTMENTS < YEAR / ASSETS
20. Return on Equity Decomposition
• R=Ax|R|=Ax|GRXR|=Ax|GRX|NII+NET NON II|
• E  E    A    E    A   GR  E    A    GR        GR
21. Define when a credit union is "insolvent"
Assets are worth less than the liabilities
 Author: Heatherc ID: 279503 Card Set: Basic Ratios Updated: 2014-07-24 02:08:30 Tags: Ratio CMS Folders: Description: Basic Ratio Study Guide Show Answers: