interview question, why are banks an example of levered
Interview question I received:
Why is it more advantageous for banks to be highly levered than companies in other industries?
Any thoughts?
Interview question I received:
Why is it more advantageous for banks to be highly levered than companies in other industries?
Any thoughts?
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The reason banks have to be so highly levered is because return on assets is so small that the leverage is the only way to get a respectable return on equity.
It's also much harder to define leverage and debt when it comes to banks, so its convoluted question to begin with...
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