Traditional method of assessing economic effectiveness of banks

Abstract

The coefficient-based analysis is the most common method of measuring the results of business activities of each economic entity, including banks. By means of coefficient, one can assess various aspects of economic activities. These coefficients are also used to assess the effectiveness of bank activities. At the same time, it should be remembered to ensure that the selected coefficients carry relevant economic content. They should also be correlated with the objective of a research and the degree of details it is expected to yield. This paper is aimed at presenting the classical method of measuring economic effectiveness of banks that takes advantage of coefficients based primarily on the data from financial statements. These coefficients are presented in the theo-retical part of the paper according to the method of referring them (to the major categories appearing in financial statements), i.e. they are divided into coefficients of operating assets, revenues and capital. The remaining coefficients that could not have been unequivocally classified in any of the groups are referred to as "other" coefficients. In the empirical part, the paper presents a short analysis and assessment of economic effectiveness of the banking sector in Poland between 2005 and 2011.