Relying on one measure distorts performance

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Financial Markets & Institutions
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Chapter 18 / Exercise 19
Financial Markets & Institutions
Madura
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Relying on one measure distorts performance indication
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Financial Markets & Institutions
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Chapter 18 / Exercise 19
Financial Markets & Institutions
Madura
Expert Verified
e.g. Compare to trend shows good ROE but peer performance shows bad ROE e.g. Source of changes – ROE increases due to leverage multiplier? Debt may be used optimally but is this costly in terms of risk? 2. Distinguish between ROE and shareholder's total return.
3. (a) Discuss the inadequacies of financial ratio analysis as a method of assessing bank performance and explain why there is no single measure of bank performance.
(b) What other indicators of bank performance might also be used?
Need to rely on multitude of indicators to measure bank performance – not just a single measure, which may distort financial analysis.

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