Podcast
Questions and Answers
Net Interest income is:
Net Interest income is:
Investment made by a bank in its subsidiary is considered in the following category in its balance sheet:
Investment made by a bank in its subsidiary is considered in the following category in its balance sheet:
Net Interest Income (NII) is calculated using the following formula:
Net Interest Income (NII) is calculated using the following formula:
N.I.M. calculated using the following formula:
N.I.M. calculated using the following formula:
Signup and view all the answers
Economic Equity Ratio is used to assess sustenance capacity of the bank. It is calculated using the formula:
Economic Equity Ratio is used to assess sustenance capacity of the bank. It is calculated using the formula:
Signup and view all the answers
Study Notes
Net Interest Income (NII)
- Represents the difference between the income generated from a bank's interest-earning assets and the expenses associated with paying out interest on its liabilities.
- Serves as a key indicator of a bank's profitability from its core lending activities.
Investment in Subsidiaries
- Investments made by a bank in its subsidiaries are categorized under 'Investments' on the balance sheet.
- These investments help diversify the bank's portfolio and can provide additional revenue streams.
Calculation of Net Interest Income
- NII is calculated using the formula:
- NII = Interest Income - Interest Expense*
- This formula highlights the profitability of the bank's lending and investment activities minus the cost of funding.
Net Interest Margin (N.I.M.)
- N.I.M. measures the efficiency of a bank's investment and lending strategies relative to its net interest income.
- Calculated using the formula:
- N.I.M. = (Net Interest Income / Average Earning Assets) x 100*
- This ratio provides insights into the bank's ability to manage its assets effectively.
Economic Equity Ratio
- Used to assess the sustainability and financial stability of a bank.
- Calculated using the formula:
- Economic Equity Ratio = (Total Equity / Total Assets) x 100*
- A higher ratio indicates better solvency, showing that a larger proportion of assets is funded by equity rather than debt.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of banking and finance with this quiz on net interest income and bank investments. Challenge yourself with questions on different categories in a bank's balance sheet and enhance your understanding of key concepts in the financial industry.
