Explain how capital reduces banking risks. Discuss the importance of cash flows and economic (market) value rather than accounting value.
Answer to relevant QuestionsMany analysts argue that RBC requirements should force banks to raise loan rates. Explain this by assuming that a bank’s management sets loan rates to earn a 16 percent ROE. How does the allocation of equity to a loan ...Explain why increased regulatory capital requirements lead to a greater consolidation of banking firms via mergers and acquisitions. Why do firms or individuals involved in farming need to borrow? What type of inventory does a farmer need? Explain why historical charge off and past due data may not represent the bank’s current portfolio credit risk. Use the following data to calculate the requested ratios: * Prior- period inventory was 170. a. Current ratio b. Days accounts receivable c. Inventory turnover d. Days accounts payable outstanding e. Debt to equity f. ...
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