An Analysis of BB&T's Financial Ratios

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Financial Ratio Analysis Financial ratios are extremely useful indicators of a firm’s performance and financial situation. (Financial Ratios, 2007) They are often used to help analyze trends within and industry and to help compare a firm amongst others. Ratios are highly important profit tools that help to implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage. (Bernstein & Wild, 2000) Ratios are often able to help predict performance as well as provide indications of many potential problems. There are several issues to consider when comparing the financial ratios of a public company to the industry averages. It is important to allow for any material differences in accounting policies between the specific company and the industry norms. It is also important to determine whether ratios were calculated before or after adjustments were made to the balance sheet or income statement. (Atrill & McLaney, 1997) It is also extremely important that one make sure that the financial data was developed using comparable accounting methods, classification procedures, and valuation bases. I have chosen to analyze Branch Banking & Trusts financial ratios and compare them to industry averages. It is extremely important to analyze the financial statements of a banking institution. Financial ratios for banks are analyzed in order to determine a bank’s unique risks. There are many different classifications of financial ratios. They are classified according to the information that they provide. Some of the most common types of ratios and the ratios that I have chose to compare, include predictor ratios, profitability ratios, and capital ratios. Predictor ratios help predict a company’s probability of failure. One of the most common predictor ratios is the Altman Z-score. The Altman Z-score combines

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