PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 18, Problem 24PS

Debt ratios Rajan and Zingales identified four variables that seemed to explain differences in debt ratios in several countries. What are the four variables?

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Burden ratio A. Calculate the burden ratios for Bank X and Bank Y and what can you conclude from the results obtained.B. By decomposing the ratio into its major components, clearly show the sources of the difference in the two banks’ burden ratios. Please summarise the results in a table format.C. What is(are) the major contributor(s) for the difference in the performance of the two banks as revealed by the results in (B) above?
Of the three financial ratios, which do you think is the most important financial ratio? Why?
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