Question

If the president of a bank told you that the bank was so well run that it has never had to call in​ loans, sell​ securities, or borrow as a result of a deposit​ outflow, would you be willing to buy stock in that​ bank? Why or why​ not?

Answer 1

No

Step-by-step explanation:

Investors would not be willing to buy stock in that bank for these reasons:

You should care more about Return on Equity or ROE than Return on Assets(ROA).

ROE=ROA×EM(equity multiplier)

EM=Assets/Equity capital

ROA indicates the well-being of the bank because it shows much profit is generated by every dollar. However, if ROA is high but EM is low investors would not favour such case. For investors it is important to consult both with ROA and EM ratios.