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Bank's Profile
CHAPTERNO-6
Financial Analysis
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FINANCIAL ANALYSISFINANCIAL ANALYSIS
The financial statement of any organization shows the results of its operation and its position
in business. It is a process which involves reclassification and summarization of information
through the establishment of ratios and trends. The overall objective of financial statement
analysis is the examination of a firms financial position.
Horizontal analysis
Through this analysis we can check that what changes with are in years in the items of
balance sheet and profit and loss account. Last year is become base the for next year. And
change can be easily analyzed.
Vertical analysis
In vertical analysis of balance sheet the percentage of each item of statement is calculated to
total and then the change in the percentages is checked with in years.
Ratio Analysis
Ratio analysis involves methods of calculating and interpreting financial ratio to analyze and
monitor the firm performances. The basic inputs to ratio analysis are the firms balance sheet
and income statement.
BALANCE SHEET
FOR THE YEARS ENDED DECEMBER 31
(2008 2010)
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Assets
(Rupee in Thousands) Year 2008 Year 2009 Year 2010
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Current Assets
Cash and balances with
treasury banks 106,503,756 115,827,868 115,442,360
Balances with other banks 38,344,608 28,405,564 30,389,664
lending to financial
institutions 17,128,032 19,587,176 23,025,156
Account Receivable 24,217,655 25,147,192 26,888,226 Investments 170,822,491 217,642,822 301,323,804
Advances 412,986,865 475,243,431 477,506,564
Total Current Assets 770,003,407 881,854,053 974,575,774
Fixed Assets
operating fixed Assets 3,204,572 3,062,271 6,952,666
deferred tax - - -
other Assets 44,550,347 59,666,438 53,496,240
Total Assets 817,758,326 944,582,762 1,035,024,680
Liabilities Current
Liabilities
Bills Payable 10,219,061 10,621,169 8,006,631
Borrowing 40,458,926 45,278,138 20,103,591
Deposits & other Accounts 624,939,016 727,464,825 832,151,888
Total Current Liabilities 130672708 148642447 145099907
Non-Current
Liabilities
Sub-ordinate Loans - - -
Liabilities against assets
subject to finance lease 25,274 42,629 106,704
Tax liabilities - - -
Other liabilities 46,160,038 42,269,623 39,656,831
Total Liabilities 715,299,108 825,676,384 906,528,852Share
Holders
Equity
Share Capital 8,969,751 10,763,702 13,454,628
Reserves (R.E) 19,941,047 22,681,707 24,450,244
Inappropriate income 52,456,204 60,696,510 65,857,438
Surplus on revaluation of
assets- net of tax 21,092,216 24,764,459 24,733,518
Total Common Equity 102,459,218 118,906,378 128,495,828
Total Liabilities & Owner Equity102,459,218
118,906,378
128,495,828
INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31
(2008 2010)
(Rupee in Thousands) Year 2008 Year 2009 Year 2010
SALES Mark-up/Return/Interest earned 60,942,789 77,947,697 88,472,134
COGS Mark-up/Return/Interest expensed 23,884,768 40,489,649 45,250,476
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Provision against non-performing loans
and advances-net 10,593,656 37,458,048 43,221,658
Provision /(Reversal) for diminution in
the value of investment-net 4,000 605,629 2,954,678
Bad debts Written off directly - - -
26,087,216 25,788,713 33,251,969
Other
Income Non-mark-up/interest income
Fee, commission, and brokerage income 7,925,370 8,930,391 9,631,579 Dividend income 2,878,332 1,920,336 1,099,493
Income from dealing in foreign currencies 3,969,057 3,028,165 2,211,139
Income from sale and Purchase of securities 395,427 4,591,894 2,512,363
Unrealized loss on revaluation of Investments
Classified as held for trading-net 1,707 2,355 6,730
Other Income 1,245,669 552,216 2,171,336
42,503,078 21,300,173 24,415,119
Other
Expenses Non-Mark Up/Interest Expenses
Administrative Expenses 18,171,191 22,571,470 26,202,577
Provision against other assets-net 747,521 620,780 148,026
Other charges 583,361 321,647 118,887 Extra-ordinary/unusual items - - -
23,000,998 21,300,173 24,415,119
Gross
Profit Profit Before Taxation (EBIT) 7,542,408 21,300,173 24,415,119
Taxation Taxation-Current 11,762,650 8,871,513 9,835,048
-Prior Years - (4,133,282) (939,256)
-Deferred - (999,904) (2,043,887)
Profit After Taxation 15,458,590 17,561,846 17,563,214
Unappropriated profit brought forward 45,134,358 52,456,204 60,696,510
Unappropriated profit brought forward
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation 130,456 123,934 117,738
Net Profit Profit available for appropriation 60,933,234 70,141,984 78,377,462
BALANCE SHEET
FOR THE YEARS ENDED DECEMBER 31
(2008 2010)HORIZANTAL ANALYSIS
Particulars
Incur/Dec in
%age
Incur/Dec in
%age
Assets
(Rupee in Thousands) Year 2009 Year 2010 Current Assets
Cash and balances with treasury
banks 8.392759 8.754726
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Balances with other banks -20.7459 -25.9203
lending to financial institutions 34.42966 14.35742
Account Receivable 11.02737 3.838262
Investments 76.39586 27.40876
Advances 15.6227 15.07471
Total Current Assets 26.56772 14.52599
Fixed assets
operating fixed Assets -4.44056 116.9608
deferred tax - -
other Assets 33.93036 20.08041
Total Assets 15.50879 26.56853
Liabilities Current
Liabilities
Bills Payable 3.934882 -21.65
Borrowing 11.91137 -50.3111
Deposits & other Accounts 16.40573 33.15729
Total Current Liabilities 13.75172 11.04071
Non-Current
Liabilities Sub-ordinate Loans - -
Liabilities against assets subject
to finance lease 25,274 322.1888
Tax liabilities - -
Other liabilities 46.16038 -14.0884
Total Liabilities 15.43093 26.73423
Share
Holders
Equity
Share Capital 20.00001 50.00002
Reserves (R.E) 13.74381 22.61264
Inappropriate income 15.70893 25.54747
Surplus on revaluation of assets-
net of tax 17.41042 17.26372
Total Common Equity 16.0524 25.41168
Total Liabilities & Owner Equity
16.0524 25.41168
INCOME STATEMENTSFOR THE YEARS ENDED DECEMBER 31
(2008 2010)HORIZANTAL ANALYSIS
Particulars
Incur/Dec in
%age
Incur/Dec in
%age
(Rupee in Thousands) Year 2009 Year 2010
SALES Mark-up/Return/Interest earned 27.90307 45.17244
COGS Mark-up/Return/Interest expensed 69.5208 89.45328
Provision against non-performing loans
and advances-net 253.5894 307.9957
Provision /(Reversal) for diminution in
the value of investment-net 15040.73 73766.95
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Bad debts Written off directly - -
-1.14425 27.46461
Other
Income Non-mark-up/interest income
Fee, commission, and brokerage income 12.68106 21.52845
Dividend income -33.283 -61.801
Income from dealing in foreign currencies -23.7057 -44.2906
Income from sale and Purchase of securities 1061.249 535.3544
Unrealized loss on revaluation of Investments
Classified as held for trading-net 37.96134 294.2589
Other Income -55.6691 74.31083
-49.8856 -42.5568
Other
Expenses Non-Mark Up/Interest Expenses
Administrative Expenses 24.21569 44.19846
Provision against other assets-net -16.9548 -80.1977
Other charges -44.8631 -79.6203
Extra-ordinary/unusual items - -
-7.39457 6.148085
Gross Profit Profit Before Taxation (EBIT) 182.4055 223.7046
Taxation Taxation-Current -24.579 -16.3875 -Prior Years - -
-Deferred - -
Profit After Taxation 13.60574 13.61459
Unappropriated profit brought forward 16.22233 34.47961
Unappropriated profit brought forward Transfer
from surplus on revaluation of fixed assets on
account of incremental depreciation 5.262478 -4.99944
Net Profit Profit available for appropriation -13.1287 11.74115
LIQUIDIT RATIO
Liquidity ratios measure of the amount of funds a company can quickly use to settle its
debts.
Net Working Capital Ratio: A measure of both a company's efficiency and its
short-term financial health. The working capital ratio is calculated as:
Formula = Total current assets Total current liabilities= NWC Ratio
2010 = 974,575,774 145099907 = 145,099,907
2009 = 881,854,053 148642447 = 148,642,447
2008 = 770,003,407 130672708 = 130,672,708
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120,000,000
130,000,000
140,000,000
150,000,000
20082009
2010
130,672,708
148,642,447
145,099,907
Interpretation
The analysis shows that Net Working Capital Ratio has decreased in 2010 to 145,099,907 but
it has increased in 2009 to 148,642,447, and decreased in 2008 to 130,672,708.
Current Ratio: It measures the firms ability to meet its short term obligation. The
current ratio is the ratio of current assets to current liabilities: It is expressed as follows.
Formula = Current Assets
Current Liabilities
2010 = 974,575,774 = 7.182%
145099907
2009 = 881,854,053 = 6.605%
148642447
2008 = 770,003,407 = 6.065%
130672708
5
6
7
8
20082009
2010
6.065
6.6057.182
Interpretation
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The analysis shows that Current Ratio has increased in 2010 to 7.182, but it has decreased to
6.605 in 2009, and in 2008 to 6.065.
ACTIVITY RATIO
Activity ratios measure how quickly a firm converts non-cash assets to cash assets.
Account Receivable Turnover: It gives the number of times accounts receivables
is collected during the year.
Formula = Net Credit Sales
Average Account Receivables
2010 = 88,472,134 = 3.290 times
26,888,226
2009 = 77,947,697 = 3.075 times
25,147,192
2008 = 60,942,789 = 2.516 times
24,217,655
0
2
4
20082009
2010
2.516 3.075 3.29
Interpretation
Analysis shows that Account Receivable Turnover Ratio has decreased to 3.516 in 2008 as
compared to 2009 which is 3.075. It again strengthened in 2010 to 3.290.
Total Assets Turnover: It indicates the efficiency with which the firm uses it assets
to generate sales.
Formula = _____Net Sales ____
Average Total Assets
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2010 = 88,472,134 = 0.090%
974,575,774
2009 = 77,947,697 = 0.088%
881,854,053
2008 = 60,942,789 = 0.079%
770,003,407
0.07
0.08
0.09
20082009
2010
0.079
0.088 0.09
Interpretation
Analysis shows that Total Assets Turnover has decreased to 0.079 in 2008 as compared to
2009 which is 0.088. It again strengthened in 2010 to 0.090.
LEVERAGE/DEBET RATIOS: Leverage/ Capital Structure/ Debt ratios measure
the firm's ability to repay long-term debt.
Debit Ratio
It measures the proportion of the total assets financed by the firms credit.Formula = Total Liabilities (Debt)
Total Assets
2010 = 906,528,852 = 0.875%
1,035,024,680
2009 = 825,676,384 = 0.874%
944,582,762
2008 = 715,299,108 = 0.874%
817,758,326
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0.873
0.874
0.875
20082009
2010
0.874 0.874
0.875
Interpretation
Analysis shows that Debt Ratio has increased to 0.875 in 2010 as compared to 2009 which is0.874 and in 2008 to 0.874.
Debt Equity Ratio
It significant measure of solvency since a high degree of debt in the capital structure maymake it difficult for the company to meet interested charges and principles payments at
maturity.
Formula = Total Liabilities
Total Stock Holders Equity
2010 = 906,528,852 = 7.05%
128,495,828
2009 = 825,676,384 = 6.94%
118,906,378
2008 = 715,299,108 = 6.98%
102,459,218
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6.8
6.9
7
7.1
20082009
2010
6.986.94
7.05
Interpretation
Analysis shows that Debt Equity Ratio has increased to 7.05 in 2010 as compared to 2009which is 6.94. It strengthened in 2008 to 6.98.
PROFITABILTY RATIO: Profitability ratios measure the firm's use of its assets
and control of its expenses to generate an acceptable rate of return.
Gross Profit Margin
It expresses the relationship of gross profit to net sales and is expressed in terms of
percentage. This ratio is a tool that indicates the degree to which selling price of goods per
unit may decline without resulting in losses.
Formula = Gross Profit x 100
Net Sales
2010 = 33,251,969 x 100 = 37.58%88,472,134
2009 = 25,788,713 x 100 = 33.08%
77,947,697
2008 = 26,087,216 x100 = 42.80%
60,942,789
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0
20
40
60
20082009
2010
42.8
33.08 37.58
Interpretation
Analysis shows that Cash Ratio has decreased to 37.58 in 2010 . It again strengthened in
2008 to 42.80 while dropped to 33.08 in 2009.
Return On Total Assets
It measures the overall effectiveness of management in generating profits with its availableassets also at ROI.
Formula = Earning Available for Common Stockholders
Total Assets
2010 = 78,377,462 = 0.075%
1,035,024,680
2009 = 70,141,984 = 0.074%
944,582,762
2008 = 60,933,234 = 0.073%
817,758,326
0.072
0.074
0.076
20082009
2010
0.0730.074
0.075
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Interpretation
Analysis shows that Return on Total Assets has increased to 0.075 in 2010. While it again
decreased in 2009 to 0.074% while dropped to 0.073% in 2008.
Return On Total Equity
It measures the return earned on the common stock holders investment in the firms.Formula = Earning Available for Common Stockholders
Common Stock Equity
2010 = 78,377,462 = 5.82%
13,454,628
2009 = 70,141,984 = 6.51%
10,763,702
2008 = 60,933,234 = 6.79%
8,969,751
5
5.5
6
6.5
7
20082009
2010
6.796.51
5.82
Interpretation
Analysis shows that Return on Total Equity has decreased to 5.82% in 2010 as compared to
2009 which is 6.51%. It again strengthened in 2008 to 6.79%.
Earning Per Share
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.Formula = Net Income Preferred Dividends
Common Stock Standing
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Assuming Share Price Rs.1 then
2010 = 78,377,462 - 0 = 5.82%
13,454,628
2009 = 70,141,984 - 0 = 6.51%
10,763,7022008 = 60,933,234 - 0 = 6.79%
8,969,751
5
5.5
6
6.5
7
20082009
2010
6.796.51
5.82
Interpretation
Analysis shows that Cash Ratio has decreased to 5.82% in 2010 as compared to 2009 whichis 6.51%. It again strengthened in 2008 to 6.79%.
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