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analysis of a bank involves the application of mathematical
formulas to specific information from the institution. The
bank’s financial statements are typically the primary source for
the requisite data. Liquidity and asset turnover ratios are most
applicable here, along with a few leverage ratios added to the
mix. The ratios allow a stakeholder to assess the financial
viability of a bank. Investors can also use the data gleaned
from the ratio analysis of a bank to determine if they desire
the bank’s stock as an investment vehicle. Liquidity ratios are
often the most common ratios applied to a bank’s financial data.
These ratios provide benchmarks for assessing how well a bank
maintains its internal finances. The current ratio divides
current assets by current liabilities. A high current ratio
indicates lower risk in the bank as the institution has more
assets by which to pay off liabilities. Liabilities include
customer deposits and any other claim ag