Very useful terms for Promotion exams
Profitability Concepts
1 What is the relevance of profits
Augment economic capital,
Helps retained earnings to increase capital base
Improves Investors confidence
Index of efficient use of funds
Makes a viable organization
2 What is profit and profitability Profit represents an
absolute figure
Profitability is measured by Ratios and shows operational efficiency
3 Name few profitability ratio ROA,NIM,ROE, Book
value,
4 What is ROA, how it is measured and what is the ideal ROA
ROA is Return on Asset and is the ratio of net profit to total assets. The standard measure of ROA
globally is 1%
5 What is NIM, how it is arrived and what is desirable NIM
NIM is Net Interest Margin and is the ratio of net interest income to average earning assets. The desired NIM is
above 3%
6 What is ROE
ROE is Return on Equity / Net worth. It is ratio of Net profit to Average Net worth (Capital + Reserve- intangible
assets)
7 What is Book Value and how it is arrived
It is net worth divided by No. of shares. Market price of share generally factors book value.
8 What is EPS
EPS is Earning Per Share. It is the ratio of net profit to No. of shares
9 What is CRAR, what it indicates
Capital to Risk Weighted Asset Ratio. The total capital, consist of Tier I & Tier II Capital as a ratio of Risk
Weighted Assets. It indicates the soundness and risk bearing ability of a Bank.
10 What do you understand by Yield on Advances
Interest Income on advances divided by average advances indicates average yield on advances. This ratio
enables cost benefit assessment from various loan products.
11 What is yield on Investments
Interest and dividend income on investment divided by average investments indicate yield on investments.
12 What is the cost of deposit
Interest paid on deposit divided by average deposits is called cost of deposit. It consists of Current, SB
and Term Deposit.
13 Which are the operational efficiency ratios,
Cost – Income ratio and Burden ratio is called as operational efficiency ratio.
14 What is Cost Income ratio
Non-Interest Expenditure divided by Net Total Income (Total Income minus
Banking New trends
Profitability Concepts
1 What is the relevance of profits
Augment economic capital,
Helps retained earnings to increase capital base
Improves Investors confidence
Index of efficient use of funds
Makes a viable organization
2 What is profit and profitability Profit represents an
absolute figure
Profitability is measured by Ratios and shows operational efficiency
3 Name few profitability ratio ROA,NIM,ROE, Book
value,
4 What is ROA, how it is measured and what is the ideal ROA
ROA is Return on Asset and is the ratio of net profit to total assets. The standard measure of ROA
globally is 1%
5 What is NIM, how it is arrived and what is desirable NIM
NIM is Net Interest Margin and is the ratio of net interest income to average earning assets. The desired NIM is
above 3%
6 What is ROE
ROE is Return on Equity / Net worth. It is ratio of Net profit to Average Net worth (Capital + Reserve- intangible
assets)
7 What is Book Value and how it is arrived
It is net worth divided by No. of shares. Market price of share generally factors book value.
8 What is EPS
EPS is Earning Per Share. It is the ratio of net profit to No. of shares
9 What is CRAR, what it indicates
Capital to Risk Weighted Asset Ratio. The total capital, consist of Tier I & Tier II Capital as a ratio of Risk
Weighted Assets. It indicates the soundness and risk bearing ability of a Bank.
10 What do you understand by Yield on Advances
Interest Income on advances divided by average advances indicates average yield on advances. This ratio
enables cost benefit assessment from various loan products.
11 What is yield on Investments
Interest and dividend income on investment divided by average investments indicate yield on investments.
12 What is the cost of deposit
Interest paid on deposit divided by average deposits is called cost of deposit. It consists of Current, SB
and Term Deposit.
13 Which are the operational efficiency ratios,
Cost – Income ratio and Burden ratio is called as operational efficiency ratio.
14 What is Cost Income ratio
Non-Interest Expenditure divided by Net Total Income (Total Income minus
Banking New trends
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