How are the financial ratios for banks different from manufacturing companies


2 Answer(s)


Financial ratios of a company belonging to banking industry is different from a company belonging to any industry. Raw material for a bank is its deposits and the loans and advances are its finished products. So in banking, deposits form a major part of input cost.

I will try to shed more light here. banks , by their very nature of activity act as custodians of other peoples money and this amount (deposits) are further lend out to other borrowers. whereas , a company , as we generally know it, is engaged is the conversion of raw materials ( or further classification) / brain power(IT)into a final product or service. The NI made by companies reflects total efforts to sell (revenue) made by a company by converting raw materials / brain power into the final product /service. The banks don't convert money into another shape (physically) but pass it on to others to use and for this service banks charge fees. A bank will receive a fees for lending money as will it pay a fees to those who deposit money with them.