Question

What will be the effect of obtaining a loan from a financial institution on the Book Value Per Share of the borrowing Company?

Answer 1

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The loan-to-deposit ratio (LDR) is used to assess a bank's liquidity by comparing a bank's total loans to its total deposits for the same period. The LDR is expressed as a percentage. If the ratio is too high, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it could be. To calculate the loan-to-deposit ratio, divide a bank's total amount of loans by the total amount of deposits for the same period. You can find the figures on a bank's balance sheet. Loans are listed as assets while deposits are listed as liabilities.