Find the ratio measures and the type of risk

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The ratios below measure the different aspects of risk the bank faces. Bank A Bank B

Interest income to total income ratio 20% 80%

Long term debt to equity ratio 3.0x 2.5x

Capital adequacy ratio 12% 10%

Non-performing loans to total loans ratio 1% 1.5%

(a) For each of the ratios above, briefly discuss what do the ratio mean, what the ratio measures and the type of risk it represents.

(b) Based on the ratios, discuss which is the riskier bank.

Reference no: EM132791773

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