2 Banks merge. What is the impact over ROA (return on average assets) when the commercial...

2 Banks merge.

What is the impact over ROA (return on average assets) when the commercial offices of both are within the new balance sheet?

Expert Solution

Return on Total Assets:

The Return on Total Assets (ROTA) ratio is mainly used to measure a firm’s earnings before interest and tax (EBIT) against its total net assets. This ratio tells us how effectively a company uses its assets to bring out earnings before any interest or taxes must be paid. A low Return on Total Assets ratio indicates that the company is overinvesting in its assets which in turn are not contributing to the net income. there is an overall increase in the Return on Total Assets, this means that the firm is earning more than it is spending. The first two paired samples are negative whereas the next two are positive, which is the indicator that the performance of the company has improved as compared to the data from more than two years before the merger.

in case of merging ROA = income from holding company and subsidary company/total assets

ROA can be changed by the merger

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ekkarill92 answered 2 years ago

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