Forward Together
• Return on Assets (ROA): ROA shows how profits are generated by utilizing the assets. ROA is a measure to evaluate effectiveness and profitability
• Equity Multiplier: Equity multiplier reflects growth of the assets in comparison with shareholders funds. It can also be defined as measurement of financial leverage
3.2.1.3 Customers and Profit pools don’t stand still
Markets have been dynamie and fragile. What is true today may not hołd true tomorrow. Customers behavior, demands, perceptions and choices change regularly. Organizations need to change the tactics and strategy according to the changes in market. Be proactive or else be out of the market. An in-depth study of customer s behavior and needs by segment is a necessity. This will help in planning futurę strategies.
Keeping a track of customer loyalty and retention is equally important. Usually getting a new customer is much morę expensive then retaining a customer. Different tools can be used to get an indicator of loyalty and probable retention. Based on the above analysis further strategies can be madę. The trends and changes in the industry profit pool are vital.
The ratios under this parameter -
• Operating Expense Coverage Ratio: This ratio is calculated by dividing operating profits with operating costs. The ratio is crucial to understand the profit pool of the bank
• Loans to Deposits Ratio: This ratio explains what proportion of deposits is provided as loans. This is an important ratio as lending and borrowing is a bank's core operating activity
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