USING FINANCIAL RATIOS TO ASSESS THE PERFORMANCE OF BANKS

Abstract

This study attempts to look at the usage of financial ratios to assess the performance of Asante Akyem Rural Bank Limited. The objectives of this study are therefore to help investors and other stakeholders to make sound investment decisions by continuing investing in the Bank. The method employed involved the conducting of interviews with management and some key employees. The financial statements were used to compute the categories of ratios, analyzed and presented. Among the key findings the study revealed it includes the following; 1 Inconsistency in the performance of the bank under the profitability ratios, especially for the return on capital employed. 2. It also showed that the bank had a poor debtor collection period under the activity ratios. 3. The study brought to light that the bank was not liquid when compared the current ratio performance to the standard current ratio. 4. From the calculation of interest cover ratio, the study showed that the Asante Akyem Rural Bank Limited was highly burden by debt expenses. 5. From the calculation of returns on equity ratio under the investor/ shareholder ratios showed that, for every cedi invested by the shareholders or the investors there is profit yielded on it. 6. The last but not the least from the interviews conducted, it brought to light that employees of the bank lack information pertaining to the operation of the bank.