The financing aspect
This report on debt ratio analysis is aimed at measuring the financing aspect. The ratios would help users to get an in- depth understanding of the bank’s, financial stability . For the management, their objective would be on how to improve on poor areas and maintain good performance. Its intended users are: the management of the bank, customers, employees and the government, who would use it for taxation purposes. The sources of the data used have been the published financial statements i.
e. the Profit and loss accounts and the balance sheets of 2005,2006 and 2007. The Bank offers and specializes in financial services. From the ratio above there is an improvement of the debt ratio from 714. 6% to 642. 7% from 2006to 2007 respectively . The debt ratio is an indicator of the percentage of current assets that have been financed through borrowed capital. It means that in 2006 714. 6% of the total assets were financed through debt while 2007 they were 642.
7%. It means the bank is financing her assets using debt capita more than equity which is more costly to the organization. Based on the debt ratio, and if the bank is to finance the an investment through external borrowings (debt), then it would be advisable not to do so as this will put the going concern in jeopardy. This is because banks debt management is not efficient as shown huge debt ratio of debt. However, the industrial average ought to be considered.
If additional borrowings is made would however adversely affect the banks balance sheet position. Additional borrowings can increase the bank’s gearing hence subjecting it to financial risk References Sun trust bank financial statement of 2005,2006 and 2007 available at www. financeyahoo. com/suntrustbank White G. I. , Sondhi A. C. and Fried D. , (1997): l Analysis and Use of Finanacial Statements, Wiley, U. S. A. Luecke R (2002) Finance for Managers; Harvard Business School Lindsay R. (1967) Financial Management, An Analytical Approach; R. D IrwinSample Essay of Custom-Writing