Description
This pdf is for Askari Bank Ratio Analysis
PROJECT ON
Financial Management
Submitted By
Group Names
MBA (Banking & Finance) 2nd Term
Session 2009-2011
Name of the Students Class Roll No Exam Roll No
Signatures
Romana Nargus
A-1
462
Submitted To
Mr. ZAHID AWAN
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 1
In The Name Of “ALLAH” The Most Gracious, Beneficial & Most Merciful.
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 2
ASKARI BANK LIMITED
Askari Commercial Bank Limited (ACBL) was incorporated in Pakistan on October 9, 1991, as a Public Limited Company. It started its operations during April 1, 1992. The bank principally deals with banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & Islamabad Stock Exchanges and its shares are currently the highest quoted from among the new private sector banks in Pakistan. Askari Bank has expanded into a nationwide presence of 150 branches, and an offshore banking Unit in Bahrain (wadi-e-kalam). A shared network of over 1,100 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service.
FUNCTIONS OF ASKARI BANK
?
Services
Askari Bank offers a wide range of services to its customers and recognizes the importance of efficient business delivery and providing timely solutions.
? ? ? ? ? ?
Personal Banking Mortgage Finance Corporate & Investment Banking Business Finance ASKCAR - Car Finance ASKCARD
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
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? ? ?
Travelers Cheques Ask Smart Profit / Markup Rates on Retail Products
Internet banking
Askari Bank has also introduced online banking. Customers are able to view their bank information and use their accounts for money transfer and use other features.
Services
? Personal Finance ? ASKCARDS
? Business Finance ? Auto Financing
? Travelers Cheques ? Agriculture finance
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 4
(1) (1) Kissan Ever Green Finance
(2) Kissan Tractor Finance.
FINANCIAL STATEMENT
Financial statements are records (Written Report) that provide an indication of an individual’s, organizations, or business’ financial status. There are four basic types of financial statements: balance sheets, income statements, cash-flow statements, and statements of retained. Financial statements are usually compiled on a quarterly and annual basis.
What is Financial Statement Analysis?
Analysis of financial statement means finding out the current position of the company through various tools like ratio analysis, fund flow analysis. It also involves comparing the company figures with regard to industry standards or over a period of time. Data presented in financial statement is of significance to analyst. They develop the relation among the various items of Balance Sheet and Income Statement and interpret their results in theoretical perspective. For this analysis they adopt various tool and techniques.
Types of Financial Statement
? Balance Sheet Balance sheet also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity at a given point in time. ? Income Statement Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. ? Statement of Retained Earnings Statement of retained earnings explains the changes in a company's retained earnings over the reporting period.
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
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? Statement of Chas Flow Statement of cash flows reports on a company's cash flow activities, particularly its operating, investing and financing activities.
Tool of Analysis
1. 2. 3. 4. 5. Comparative Statement. Absolute Increase/Decrease in % ages. Trend Percentages. Common Size Percentages. Ratio Analysis.
1.
COMPARATIVE STATEMENT
In this statement two or more than two years data is presented for comparison.
2.
ABSOLUTE INCREASE/DECREASE
It is a type of Horizontal analysis. It gives changes in absolute data intern of Rupees amount. It enables the analyst to point out the direction of business.
3.
TREND PERCENTAGE
This is the second type of horizontal analysis. It is adopted to know the tendencies of business position. In it one year is chosen as base year and item of financial statement of base year related with other years relevant items.
4.
COMMON SIZE PERCENTAGE
This method is for vertical analysis. It represents the change in percentages in relation to total assets, total liabilities and owner equity. In this method we take total assets, liabilities and owner equity and sales individually 100% and develop relationship with their relevant components.
5.
RATIO ANALYSIS
Ratio is mathematical relationship of one item to other items. For analysis these ratios are compared with other year’s relevant ratios or with the ratios of other companies of the same nature are industrial
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
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averages. Ratios are really adopted to know the liquidity, stability and profitability position of the company.
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 firm’s balance sheet and income statement.
TYPES OF RATIO ANALYSIS
? Cross Sectional Analysis
Comparison of two different firms financial ratios at the same point in the times is involves comparing the firm’s ratios to those of other firms in its industry or to industry averages.
? Time-Series Analysis
Evaluation of the firm s financial performance over time using financial ratio analysis means comparison to current to past performance using ratios enables analyst to access the firm progress.
? Combined Analysis
A combined view makes it possible to access the trend in the behavior of the ratio in the relation to the industry.
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 7
CATEGORIES (LIST) OF FINANCIAL RATIOS
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 8
BALANCE SHEETS OF THE HALF YEARS ENDED (2008 – 2010)
Assets
Current Assets Cash and balances with treasury banks Balances with other banks lending to financial institutions Account receivable Investments Advances Total current Assets Fixed assets operating fixed Assets deferred tax other Assets 3192862 0 2732641 145099907 3810331 0 3812788 166033588 5128428 0 5535038 182171885 11766925 5550148 10172242 85400018 25708194 85976895 I39174404 14879230 7333002 8392950 76438647 28625915 99179372 158410469 13356055 3497054 14444143 34747780 39431005 100780162 171508419 (Rupee in Thousands) Year 2008 Year 2009 Year 2010
Total Assets Liabilities
Current Liabilities Bills Payable Borrowing Deposits & other Accounts Total Current Liabilities Non-Current Liabilities Sub-ordinate Loans Liabilities against assets Subject to finance lease tax liabilities other liabilities
1315680 10562338 118794690
1839077 14964087 131839283
2627051 17553525 143036707 145099907
130672 1486424 708 47
2999700 1459 567217 2271393 136512477 2998500 0 736298 2603113 154980358
2997300 0 471519 3219796 169905898
Total Liabilities
Share Holder’s Equity Share Capital Reserves(R.E) Inappropriate income Surplus on revaluation of assets- net of tax
1507018 5862074 0 1218338
2004333 5814754 1799979 1434164
3006499 6948336 2144810 166342
Total Common Equity
Total Liabilities & Owner Equity 07
8587430
1450999
11053230
166033588
12265987
182171885
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
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INCOME STATEMENTS OF THE HALF YEARS ENDED (2008 – 2010)
(Rupee in Thousands) Year 2008 8780698 4278374 638547 -36555 0 3900332 Year 2009 12596921 6977313 1128137 376 0 4491095 Year 2010 15143241 8685624 3920240 1501 0 2535876
SALES
Mark-up/Return/Interest earned COGS Mark-up/Return/Interest expensed Provision against non-performing loans and advances-net Provision /(Reversal) for diminution in the value of investment-net Bad debts Written off directly
Other Income
Non-mark-up/interest income Fee, commission, and brokerage income Dividend income Income from dealing in foreign currencies Income from sale and Purchase of securities Unrealized loss on revaluation of Investments Classified as held for trading-net Other Income
838561 51143 356218 99825 0 206819 5452898
1013660 109326 584344 112474 -2308 321758 6630349
1072868 137079 655761 2361251 1728 336809 7101372
Other Expenses
Non-Mark Up/Interest Expenses Administrative Expenses Provision against other assets-net Other charges Extra-ordinary/unusual items
2591985 0 1832 0
3277353 0 6141 0
4789536 0 12051 0
2593817
Gross Profit Taxation Profit Before Taxation (EBIT) Taxation-Current -Prior Years -Deferred Profit After Taxation 2859081 828774 -188247 196558 2021996
3283494
3346855 983875 0 113006 2249974
4801587
2299785 98535 -233950 -245812 2681012
Net Profit
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
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1.
LIQUIDIT RATIO
Liquidity ratios measure of the amount of funds a company can quickly use to settle its debts. ? Net Working Capital Ratio ? Current Ratio ? Quick(Acid test) Ratio
? 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 = 2010 2009 2008 Total current assets – Total current liabilities = = = = NWC Ratio
171508419 – 145099907 = 26408512 158410469 – 148642447 = 9768022 I39174404 – 130672708 = 8501696
30000000 25000000 20000000 Percentage 15000000 10000000 5000000 0 2008 2009 2010 Years
Interpretation
The analysis shows that Net Working Capital Ratio has increased in 2010 to 26408512 but it has decreased in 2009 to 9768022, and in 2008 to 8501696.
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 11
? Current Ratio
It measures the firm’s 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 2009 2008 = = = 171508419 145099907 158410469 = = = 1.182% 1.605% 1.065%
148642447
I39174404
130672708
2 1.5 Percentage 1 0.5 0 2008 2009 2010 Years
Interpretation The analysis shows that Current Ratio has increased in 2010 to 1.182, but it has decreased to 1.605 in 2009, and in 2008 to 1.065.
? Quick(Acid-Test) Ratio
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = Current Assets - Inventory Current Liabilities
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 12
2010 2009 2008
= = =
171508419 - 158152364 145099907 158410469 - 14351239
= = =
0.914% 0.969% 0.090%
148642447
I39174404 - 127407479
130672708
Percentage
1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Years
Interpretation Analysis shows that Quick (Acid-Test) Ratio has decreased to 0.090 in 2008 as compared to 2010 which is 0.914. It again strengthened in 2009 to 0.969.
2.
ACTIVITY RATIO
Activity ratios measure how quickly a firm converts non-cash assets to cash assets. ? Account Receivable Turnover ? Average Collection Period ? Inventory Turnover ? Average Age of Inventory ? Total Assets Turnover ? Account Receivable Turnover
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 13
It gives the number of times accounts receivables is collected during the year.
Formula = Net Credit Sales Average Account Receivables 2010 2009 2008 = = = 15143241 34747780 12596921 7643864 8780698 8540001 = = = 0.435 times 0.164 times 0.010 times
Times
0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 Years
Interpretation Analysis shows that Account Receivable Turnover Ratio has decreased to 0.010 in 2008 as compared to 2009 which is 0.164. It again strengthened in 2010 to 0.435.
? Average Collection Period
It measures the average amount of the time that needed to collect accounts receivables.
Formula 2010 2009 = = = _______365 ___365 0.435times ___365 0.164 times
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
_______ = = 839.0 days 2225.6 days
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Account Receivables Turnover
2008
=
___365 0.010 times
=
35500 days
D ays
40000 35000 30000 25000 20000 15000 10000 5000 0 2008 2009 2010 Years
Interpretation Analysis shows that Average Collection Period has decreased to 839.0 in 2010 as compared to 2009 which is 2225.6. It again strengthened in 2008 to 35500. ? Inventory Turnover It measures the activity or liquidity of the firm’s inventory.
Formula = Cost of Goods Sold Average Inventory 2010 2009 2008 = = = 8685624 158152364 6977313 14351239 4278374 127407479 = = = 0.054 times 0.486 times 0.033 times
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 15
D ays
0.6 0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 Years
Interpretation Analysis shows that Inventory Turnover has decreased to 0.033 times in 2008 as compared to 2010 which is 0.054 times. It again strengthened in 2009 to 0.468 times. ? Average Age Inventory Average inventory is determine by the beginning and ending and dividing by 2.
Formula = ______365_______ Inventory Turnover 2010 2009 2008 = = = ___365 0.054 times ___365 0.486 times ___365 0.033 times = = = 6759 Days 751 Days 11060 Days
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 16
D ays
12000 10000 8000 6000 4000 2000 0 2008 2009 2010 Years
Interpretation Analysis shows that Average Age Inventory has decreased to 751 days in 2009 as compared to 2010 which is 6759 days. It again strengthened in 2008 to 11060 days. ? Total Assets Turnover It indicates the efficiency with which the firm uses it assets to generate sales.
Formula = _____Net Sales ____
Average Total Assets 2010 2009 2008 = = = 15143241 182171885 12596921 166033588 8780698 145099907 = = = 0.083% 0.075% 0.060%
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 17
Percentage
0.1 0.08 0.06 0.04 0.02 0 2008 2009 2010 Years
Interpretation Analysis shows that Total Assets Turnover has decreased to 0.060 in 2008 as compared to 2009 which is 0.075. It again strengthened in 2010 to 0.083. ? Current Assets Turnover It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = _______ Sales ______
Average Current Assets
2010 2009 2008
= = =
15143241 171508419 12596921 158410469 8780698 I39174404
= = =
0.088 times 0.079 times 0.063 times
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 18
Times
0.1 0.08 0.06 0.04 0.02 0 2008 2009 2010 Years
Interpretation Analysis shows that Current Assets Turnover Ratio has decreased to 0.063 in 2008 times as compared to 2009 which is 0.079 times. It again strengthened in 2010 to 0.088 times.
? Fixed Assets Turnover
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = _____ Sales ______ Average Fixed Assets
2010 2009 2008
= = =
15143241 182171885 12596921 166033588 8780698 145099907
= = =
0.083 times 0.075 times 0.006 times
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 19
Times
0.1 0.08 0.06 0.04 0.02 0 2008 2009 2010 Years
Interpretation Analysis shows that Fixed Assets Turnover has decreased to 0.006 times in 2000 as compared to 2009 which is 0.075 times. It again strengthened in 2010 to 0.083 times.
3.
LEVERAGE/DEBET/CAPTAL STRUCTURE RATIOS
Leverage/ Capital Structure/ Debt ratios measure the firm's ability to repay long-term debt. ? Debt Ratio. ? Debt/Equity Ratio. ? Time Interest Earned.
? Debit Ratio
It measures the proportion of the total assets financed by the firm’s credit.
Formula = Total Liabilities (Debt) Total Assets 2010 = 169905898 182171885
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
=
0.932%
Page | 20
2009 2008
= =
154980358 166033588 136512477 145099907
= =
0.933% 0.940%
Percentage
0.942 0.94 0.938 0.936 0.934 0.932 0.93 0.928 2008 2009 2010 Year
Interpretation Analysis shows that Debt Ratio has decreased to 0.932 in 2010 as compared to 2009 which is 0.933. It again strengthened in 2008 to 0.940. ? Debt Equity Ratio It significant measure of solvency since a high degree of debt in the capital structure may make it difficult for the company to meet interested charges and principles payments at maturity.
Formula = Total Liabilities Total Stock Holder’s Equity 2010 2009 2008 = = = 145099907 = = = 11.82% 13.44% 15.21%
12265987 148642447 11053230 130672708 8587430
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 21
Percentage
16 14 12 10 8 6 4 2 0 2008 2009 2010 Year
Interpretation Analysis shows that Debt Equity Ratio has decreased to 11.82 in 2010 as compared to 2009 which is 13.44. It strengthened in 2010 to 15.21. ? Time Interest Earned /Interest Coverage Ratio It measures
Formula = ______ EBIT ______ Interest (Expenses)
2010 2009 2008
= = =
2299785
= = =
5.93 times 1.019 times 0.886 times
4
3346855
3
2859081
2
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 22
Times
7 6 5 4 3 2 1 0 2008 2009 2010 Years
Interpretation Analysis shows that Time Interest Earned /Interest Coverage Ratio have decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009.
4.
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. ? Profit Margin. ? Return on Total Assets. ? Return on Common Equity.
? 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.
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 23
Formula
=
Gross Profit Net Sales
x 100
2010 2009 2008
= = =
2535876
x 100
= = =
0.167% 0.356% 0444%
15143241 4491095 x 100 12596921 3900332 x100 8780698
Percentage
0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 Years
Interpretation Analysis shows that Cash Ratio has decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009.
? (Operating) Profit Margin
This ratio establishes a relationship between cost of goods sold plus other operating expenses and net sales. This ratio is calculated mainly to ascertain the operational efficiency of the management in their business operations.
Formula = Cost of goods sold + operating expenses Net sales 8685624 + 4801587
2010
=
=
0.890%
Page | 24
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
2009 2008
= =
15143241 6977313 + 3283494 12596921 4278374 + 2593817 8780698
= =
0.814% 0.782%
0.9 0.85 Percentage 0.8 0.75 0.7 2008 2009 2010 Years
Interpretation Analysis shows that Operating profit Margin has decreased to 0.782 in 2008 as compared to 2009 which is 0.814. It again strengthened in 2010 to 0.890.
? Return On Total Assets It measures the overall effectiveness of management in generating profits with its available assets also at ROI.
Formula = Earning Available for Common Stockholder’s Total Assets 2010 2009 2008 = = = 2681012 182171885 2249974 166033588 2021996 145099907 = = = 0.014% 0.013% 0.013%
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 25
Percentage
0.0142 0.014 0.0138 0.0136 0.0134 0.0132 0.013 0.0128 0.0126 0.0124 2008 2009 2010 Years
Interpretation Analysis shows that Return on Total Assets has increased to 0.014 in 2010. While it again decreased in 2009 to 0.013% while dropped to 0.013% in 2008.
? Return On Total Equity It measures the return earned on the common stock holder’s investment in the firms.
Formula =
Earning Available for Common Stockholder’s Common Stock Equity
2010 2009 2008
= = =
2681012 3006499 2249974 2004333 2021996 2004333
= = =
0.891% 1.122% 1.008%
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 26
Percentage
1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Years
Interpretation Analysis shows that Return on Total Equity has decreased to 0.891% in 2010 as compared to 2008 which is 1.008%. It again strengthened in 2009 to 1.112%.
? Account Receivable Turnover
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = Current Assets - Inventory Current Liabilities 2010 2009 2008 = = = 171508419 - 158152364 145099907 158410469 - 14351239 148642447 I39174404 - 127407479 130672708 = = = 0.914% 0.969% 0.090%
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 27
Percentage
1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Years
Interpretation Analysis shows that ART Ratio …..has decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009.
5.MARKET VALUE
Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. it relates a firm market value as erasure by its current share pries to certain accounting value. ? Earning Per Share. ? Price/Earnings Ratio. ? Book Value Par Share. ? Dividend Yield ? Dividend Payout.
? Earning Per Share
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = Net Income – Proffered Dividends Common Stock Standing
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 28
2010 2009 2008
= = =
2681012 - 0 3006499 2249974 - 0 2004333 2021996 - 0 1507018
= = =
0.891% 1.122% 1.341%
percentage
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 year
Interpretation Analysis shows that Cash Ratio has decreased to 0.891% in 2010 as compared to 2009 which is 1.112%. It again strengthened in 2008 to 1.341%.
? Pries /Earning Ratio
It relates earnings per common share to the market price at which the stock trades, expressing the “multiple” that the stock market places on a firm’s earnings.
Formula = Market Price Per Share Earning Per Share 2010 2009 = = 182171885 3006499 166033588 2004333
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
= =
59.43% 82.83%
Page | 29
2008
=
145099907 1507018
=
96.28%
Percentage
120 100 80 60 40 20 0 2008 2009 Year s 2010
Interpretation Analysis shows that Price Earning Ratio has decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009. ? Dividend Yield It shows the relationship between cash dividends and market price.
Formula = Divided Per Shares Market Price Per Share 2010 2009 2008 = = = 3370000 5573149 2694106 3901279 1638357 3026550 = = = 60.47% 69.06% 54.13%
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 30
10000000 9500000 9000000 Percentage 8500000 8000000 7500000 2008 2009 2010 Years
Interpretation Analysis shows that Dividend Yield has decreased to 54.13% in 2008 as compared to 2010 which is 60.47%. It again strengthened in 2009 to 69.06%.
? Dividend Payout
It determined by the formula cash dividends per share divided by earnings per share.
Formula = Dividend per Shares Earning Per Share 2010 2009 2008 = = = 3370000 5573149 2694106 3901279 1638357 3026550 = = = 60.47% 69.06% 54.13%
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 31
1 00 0 00 00 95 0 00 00 90 0 00 00 Percentage 85 0 00 00 80 0 00 00 75 0 00 00 2 00 8 20 09 20 1 0 Years
Interpretation Analysis shows that Dividend Payout has decreased to 54.13% in 2008 as compared to 2010 which is 60.47%. It again strengthened in 2009 to 69.06%.
Text References
1. Managerial Finance by JAE K. SHIM, JOEL g. SIEGEL. 2. Principle of Managerial Finance 11th Edition by Lawrence J.Gitman. 3. Askari Bank Quarterly Report March of (2010) of ACBL.
References
? www.google.com ? www.pakistanimbajimdo.com ? www.Scribd.com ? www.shlideshare.net ? www.askaribank.com
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 32
doc_273267660.pdf
This pdf is for Askari Bank Ratio Analysis
PROJECT ON
Financial Management
Submitted By
Group Names
MBA (Banking & Finance) 2nd Term
Session 2009-2011
Name of the Students Class Roll No Exam Roll No
Signatures
Romana Nargus
A-1
462
Submitted To
Mr. ZAHID AWAN
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 1
In The Name Of “ALLAH” The Most Gracious, Beneficial & Most Merciful.
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 2
ASKARI BANK LIMITED
Askari Commercial Bank Limited (ACBL) was incorporated in Pakistan on October 9, 1991, as a Public Limited Company. It started its operations during April 1, 1992. The bank principally deals with banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & Islamabad Stock Exchanges and its shares are currently the highest quoted from among the new private sector banks in Pakistan. Askari Bank has expanded into a nationwide presence of 150 branches, and an offshore banking Unit in Bahrain (wadi-e-kalam). A shared network of over 1,100 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service.
FUNCTIONS OF ASKARI BANK
?
Services
Askari Bank offers a wide range of services to its customers and recognizes the importance of efficient business delivery and providing timely solutions.
? ? ? ? ? ?
Personal Banking Mortgage Finance Corporate & Investment Banking Business Finance ASKCAR - Car Finance ASKCARD
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 3
? ? ?
Travelers Cheques Ask Smart Profit / Markup Rates on Retail Products
Internet banking
Askari Bank has also introduced online banking. Customers are able to view their bank information and use their accounts for money transfer and use other features.
Services
? Personal Finance ? ASKCARDS
? Business Finance ? Auto Financing
? Travelers Cheques ? Agriculture finance
Department of Business Administration Gomal University
Khyber.Pakhton.Khwa (Dera Ismail Khan) Pakistan
Page | 4
(1) (1) Kissan Ever Green Finance
(2) Kissan Tractor Finance.
FINANCIAL STATEMENT
Financial statements are records (Written Report) that provide an indication of an individual’s, organizations, or business’ financial status. There are four basic types of financial statements: balance sheets, income statements, cash-flow statements, and statements of retained. Financial statements are usually compiled on a quarterly and annual basis.
What is Financial Statement Analysis?
Analysis of financial statement means finding out the current position of the company through various tools like ratio analysis, fund flow analysis. It also involves comparing the company figures with regard to industry standards or over a period of time. Data presented in financial statement is of significance to analyst. They develop the relation among the various items of Balance Sheet and Income Statement and interpret their results in theoretical perspective. For this analysis they adopt various tool and techniques.
Types of Financial Statement
? Balance Sheet Balance sheet also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity at a given point in time. ? Income Statement Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. ? Statement of Retained Earnings Statement of retained earnings explains the changes in a company's retained earnings over the reporting period.
Department of Business Administration Gomal University
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? Statement of Chas Flow Statement of cash flows reports on a company's cash flow activities, particularly its operating, investing and financing activities.
Tool of Analysis
1. 2. 3. 4. 5. Comparative Statement. Absolute Increase/Decrease in % ages. Trend Percentages. Common Size Percentages. Ratio Analysis.
1.
COMPARATIVE STATEMENT
In this statement two or more than two years data is presented for comparison.
2.
ABSOLUTE INCREASE/DECREASE
It is a type of Horizontal analysis. It gives changes in absolute data intern of Rupees amount. It enables the analyst to point out the direction of business.
3.
TREND PERCENTAGE
This is the second type of horizontal analysis. It is adopted to know the tendencies of business position. In it one year is chosen as base year and item of financial statement of base year related with other years relevant items.
4.
COMMON SIZE PERCENTAGE
This method is for vertical analysis. It represents the change in percentages in relation to total assets, total liabilities and owner equity. In this method we take total assets, liabilities and owner equity and sales individually 100% and develop relationship with their relevant components.
5.
RATIO ANALYSIS
Ratio is mathematical relationship of one item to other items. For analysis these ratios are compared with other year’s relevant ratios or with the ratios of other companies of the same nature are industrial
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averages. Ratios are really adopted to know the liquidity, stability and profitability position of the company.
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 firm’s balance sheet and income statement.
TYPES OF RATIO ANALYSIS
? Cross Sectional Analysis
Comparison of two different firms financial ratios at the same point in the times is involves comparing the firm’s ratios to those of other firms in its industry or to industry averages.
? Time-Series Analysis
Evaluation of the firm s financial performance over time using financial ratio analysis means comparison to current to past performance using ratios enables analyst to access the firm progress.
? Combined Analysis
A combined view makes it possible to access the trend in the behavior of the ratio in the relation to the industry.
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CATEGORIES (LIST) OF FINANCIAL RATIOS
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BALANCE SHEETS OF THE HALF YEARS ENDED (2008 – 2010)
Assets
Current Assets Cash and balances with treasury banks Balances with other banks lending to financial institutions Account receivable Investments Advances Total current Assets Fixed assets operating fixed Assets deferred tax other Assets 3192862 0 2732641 145099907 3810331 0 3812788 166033588 5128428 0 5535038 182171885 11766925 5550148 10172242 85400018 25708194 85976895 I39174404 14879230 7333002 8392950 76438647 28625915 99179372 158410469 13356055 3497054 14444143 34747780 39431005 100780162 171508419 (Rupee in Thousands) Year 2008 Year 2009 Year 2010
Total Assets Liabilities
Current Liabilities Bills Payable Borrowing Deposits & other Accounts Total Current Liabilities Non-Current Liabilities Sub-ordinate Loans Liabilities against assets Subject to finance lease tax liabilities other liabilities
1315680 10562338 118794690
1839077 14964087 131839283
2627051 17553525 143036707 145099907
130672 1486424 708 47
2999700 1459 567217 2271393 136512477 2998500 0 736298 2603113 154980358
2997300 0 471519 3219796 169905898
Total Liabilities
Share Holder’s Equity Share Capital Reserves(R.E) Inappropriate income Surplus on revaluation of assets- net of tax
1507018 5862074 0 1218338
2004333 5814754 1799979 1434164
3006499 6948336 2144810 166342
Total Common Equity
Total Liabilities & Owner Equity 07
8587430
1450999
11053230
166033588
12265987
182171885
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INCOME STATEMENTS OF THE HALF YEARS ENDED (2008 – 2010)
(Rupee in Thousands) Year 2008 8780698 4278374 638547 -36555 0 3900332 Year 2009 12596921 6977313 1128137 376 0 4491095 Year 2010 15143241 8685624 3920240 1501 0 2535876
SALES
Mark-up/Return/Interest earned COGS Mark-up/Return/Interest expensed Provision against non-performing loans and advances-net Provision /(Reversal) for diminution in the value of investment-net Bad debts Written off directly
Other Income
Non-mark-up/interest income Fee, commission, and brokerage income Dividend income Income from dealing in foreign currencies Income from sale and Purchase of securities Unrealized loss on revaluation of Investments Classified as held for trading-net Other Income
838561 51143 356218 99825 0 206819 5452898
1013660 109326 584344 112474 -2308 321758 6630349
1072868 137079 655761 2361251 1728 336809 7101372
Other Expenses
Non-Mark Up/Interest Expenses Administrative Expenses Provision against other assets-net Other charges Extra-ordinary/unusual items
2591985 0 1832 0
3277353 0 6141 0
4789536 0 12051 0
2593817
Gross Profit Taxation Profit Before Taxation (EBIT) Taxation-Current -Prior Years -Deferred Profit After Taxation 2859081 828774 -188247 196558 2021996
3283494
3346855 983875 0 113006 2249974
4801587
2299785 98535 -233950 -245812 2681012
Net Profit
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1.
LIQUIDIT RATIO
Liquidity ratios measure of the amount of funds a company can quickly use to settle its debts. ? Net Working Capital Ratio ? Current Ratio ? Quick(Acid test) Ratio
? 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 = 2010 2009 2008 Total current assets – Total current liabilities = = = = NWC Ratio
171508419 – 145099907 = 26408512 158410469 – 148642447 = 9768022 I39174404 – 130672708 = 8501696
30000000 25000000 20000000 Percentage 15000000 10000000 5000000 0 2008 2009 2010 Years
Interpretation
The analysis shows that Net Working Capital Ratio has increased in 2010 to 26408512 but it has decreased in 2009 to 9768022, and in 2008 to 8501696.
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? Current Ratio
It measures the firm’s 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 2009 2008 = = = 171508419 145099907 158410469 = = = 1.182% 1.605% 1.065%
148642447
I39174404
130672708
2 1.5 Percentage 1 0.5 0 2008 2009 2010 Years
Interpretation The analysis shows that Current Ratio has increased in 2010 to 1.182, but it has decreased to 1.605 in 2009, and in 2008 to 1.065.
? Quick(Acid-Test) Ratio
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = Current Assets - Inventory Current Liabilities
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2010 2009 2008
= = =
171508419 - 158152364 145099907 158410469 - 14351239
= = =
0.914% 0.969% 0.090%
148642447
I39174404 - 127407479
130672708
Percentage
1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Years
Interpretation Analysis shows that Quick (Acid-Test) Ratio has decreased to 0.090 in 2008 as compared to 2010 which is 0.914. It again strengthened in 2009 to 0.969.
2.
ACTIVITY RATIO
Activity ratios measure how quickly a firm converts non-cash assets to cash assets. ? Account Receivable Turnover ? Average Collection Period ? Inventory Turnover ? Average Age of Inventory ? Total Assets Turnover ? Account Receivable Turnover
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It gives the number of times accounts receivables is collected during the year.
Formula = Net Credit Sales Average Account Receivables 2010 2009 2008 = = = 15143241 34747780 12596921 7643864 8780698 8540001 = = = 0.435 times 0.164 times 0.010 times
Times
0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 Years
Interpretation Analysis shows that Account Receivable Turnover Ratio has decreased to 0.010 in 2008 as compared to 2009 which is 0.164. It again strengthened in 2010 to 0.435.
? Average Collection Period
It measures the average amount of the time that needed to collect accounts receivables.
Formula 2010 2009 = = = _______365 ___365 0.435times ___365 0.164 times
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_______ = = 839.0 days 2225.6 days
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Account Receivables Turnover
2008
=
___365 0.010 times
=
35500 days
D ays
40000 35000 30000 25000 20000 15000 10000 5000 0 2008 2009 2010 Years
Interpretation Analysis shows that Average Collection Period has decreased to 839.0 in 2010 as compared to 2009 which is 2225.6. It again strengthened in 2008 to 35500. ? Inventory Turnover It measures the activity or liquidity of the firm’s inventory.
Formula = Cost of Goods Sold Average Inventory 2010 2009 2008 = = = 8685624 158152364 6977313 14351239 4278374 127407479 = = = 0.054 times 0.486 times 0.033 times
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D ays
0.6 0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 Years
Interpretation Analysis shows that Inventory Turnover has decreased to 0.033 times in 2008 as compared to 2010 which is 0.054 times. It again strengthened in 2009 to 0.468 times. ? Average Age Inventory Average inventory is determine by the beginning and ending and dividing by 2.
Formula = ______365_______ Inventory Turnover 2010 2009 2008 = = = ___365 0.054 times ___365 0.486 times ___365 0.033 times = = = 6759 Days 751 Days 11060 Days
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D ays
12000 10000 8000 6000 4000 2000 0 2008 2009 2010 Years
Interpretation Analysis shows that Average Age Inventory has decreased to 751 days in 2009 as compared to 2010 which is 6759 days. It again strengthened in 2008 to 11060 days. ? Total Assets Turnover It indicates the efficiency with which the firm uses it assets to generate sales.
Formula = _____Net Sales ____
Average Total Assets 2010 2009 2008 = = = 15143241 182171885 12596921 166033588 8780698 145099907 = = = 0.083% 0.075% 0.060%
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Percentage
0.1 0.08 0.06 0.04 0.02 0 2008 2009 2010 Years
Interpretation Analysis shows that Total Assets Turnover has decreased to 0.060 in 2008 as compared to 2009 which is 0.075. It again strengthened in 2010 to 0.083. ? Current Assets Turnover It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = _______ Sales ______
Average Current Assets
2010 2009 2008
= = =
15143241 171508419 12596921 158410469 8780698 I39174404
= = =
0.088 times 0.079 times 0.063 times
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Times
0.1 0.08 0.06 0.04 0.02 0 2008 2009 2010 Years
Interpretation Analysis shows that Current Assets Turnover Ratio has decreased to 0.063 in 2008 times as compared to 2009 which is 0.079 times. It again strengthened in 2010 to 0.088 times.
? Fixed Assets Turnover
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = _____ Sales ______ Average Fixed Assets
2010 2009 2008
= = =
15143241 182171885 12596921 166033588 8780698 145099907
= = =
0.083 times 0.075 times 0.006 times
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Times
0.1 0.08 0.06 0.04 0.02 0 2008 2009 2010 Years
Interpretation Analysis shows that Fixed Assets Turnover has decreased to 0.006 times in 2000 as compared to 2009 which is 0.075 times. It again strengthened in 2010 to 0.083 times.
3.
LEVERAGE/DEBET/CAPTAL STRUCTURE RATIOS
Leverage/ Capital Structure/ Debt ratios measure the firm's ability to repay long-term debt. ? Debt Ratio. ? Debt/Equity Ratio. ? Time Interest Earned.
? Debit Ratio
It measures the proportion of the total assets financed by the firm’s credit.
Formula = Total Liabilities (Debt) Total Assets 2010 = 169905898 182171885
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=
0.932%
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2009 2008
= =
154980358 166033588 136512477 145099907
= =
0.933% 0.940%
Percentage
0.942 0.94 0.938 0.936 0.934 0.932 0.93 0.928 2008 2009 2010 Year
Interpretation Analysis shows that Debt Ratio has decreased to 0.932 in 2010 as compared to 2009 which is 0.933. It again strengthened in 2008 to 0.940. ? Debt Equity Ratio It significant measure of solvency since a high degree of debt in the capital structure may make it difficult for the company to meet interested charges and principles payments at maturity.
Formula = Total Liabilities Total Stock Holder’s Equity 2010 2009 2008 = = = 145099907 = = = 11.82% 13.44% 15.21%
12265987 148642447 11053230 130672708 8587430
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Percentage
16 14 12 10 8 6 4 2 0 2008 2009 2010 Year
Interpretation Analysis shows that Debt Equity Ratio has decreased to 11.82 in 2010 as compared to 2009 which is 13.44. It strengthened in 2010 to 15.21. ? Time Interest Earned /Interest Coverage Ratio It measures
Formula = ______ EBIT ______ Interest (Expenses)
2010 2009 2008
= = =
2299785
= = =
5.93 times 1.019 times 0.886 times
4
3346855
3
2859081
2
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Times
7 6 5 4 3 2 1 0 2008 2009 2010 Years
Interpretation Analysis shows that Time Interest Earned /Interest Coverage Ratio have decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009.
4.
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. ? Profit Margin. ? Return on Total Assets. ? Return on Common Equity.
? 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.
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Formula
=
Gross Profit Net Sales
x 100
2010 2009 2008
= = =
2535876
x 100
= = =
0.167% 0.356% 0444%
15143241 4491095 x 100 12596921 3900332 x100 8780698
Percentage
0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 Years
Interpretation Analysis shows that Cash Ratio has decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009.
? (Operating) Profit Margin
This ratio establishes a relationship between cost of goods sold plus other operating expenses and net sales. This ratio is calculated mainly to ascertain the operational efficiency of the management in their business operations.
Formula = Cost of goods sold + operating expenses Net sales 8685624 + 4801587
2010
=
=
0.890%
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Department of Business Administration Gomal University
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2009 2008
= =
15143241 6977313 + 3283494 12596921 4278374 + 2593817 8780698
= =
0.814% 0.782%
0.9 0.85 Percentage 0.8 0.75 0.7 2008 2009 2010 Years
Interpretation Analysis shows that Operating profit Margin has decreased to 0.782 in 2008 as compared to 2009 which is 0.814. It again strengthened in 2010 to 0.890.
? Return On Total Assets It measures the overall effectiveness of management in generating profits with its available assets also at ROI.
Formula = Earning Available for Common Stockholder’s Total Assets 2010 2009 2008 = = = 2681012 182171885 2249974 166033588 2021996 145099907 = = = 0.014% 0.013% 0.013%
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Percentage
0.0142 0.014 0.0138 0.0136 0.0134 0.0132 0.013 0.0128 0.0126 0.0124 2008 2009 2010 Years
Interpretation Analysis shows that Return on Total Assets has increased to 0.014 in 2010. While it again decreased in 2009 to 0.013% while dropped to 0.013% in 2008.
? Return On Total Equity It measures the return earned on the common stock holder’s investment in the firms.
Formula =
Earning Available for Common Stockholder’s Common Stock Equity
2010 2009 2008
= = =
2681012 3006499 2249974 2004333 2021996 2004333
= = =
0.891% 1.122% 1.008%
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Percentage
1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Years
Interpretation Analysis shows that Return on Total Equity has decreased to 0.891% in 2010 as compared to 2008 which is 1.008%. It again strengthened in 2009 to 1.112%.
? Account Receivable Turnover
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = Current Assets - Inventory Current Liabilities 2010 2009 2008 = = = 171508419 - 158152364 145099907 158410469 - 14351239 148642447 I39174404 - 127407479 130672708 = = = 0.914% 0.969% 0.090%
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Percentage
1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 Years
Interpretation Analysis shows that ART Ratio …..has decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009.
5.MARKET VALUE
Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. it relates a firm market value as erasure by its current share pries to certain accounting value. ? Earning Per Share. ? Price/Earnings Ratio. ? Book Value Par Share. ? Dividend Yield ? Dividend Payout.
? Earning Per Share
It measures ability to meet short-term cash needs more rigorously by eliminating inventory.
Formula = Net Income – Proffered Dividends Common Stock Standing
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2010 2009 2008
= = =
2681012 - 0 3006499 2249974 - 0 2004333 2021996 - 0 1507018
= = =
0.891% 1.122% 1.341%
percentage
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2008 2009 2010 year
Interpretation Analysis shows that Cash Ratio has decreased to 0.891% in 2010 as compared to 2009 which is 1.112%. It again strengthened in 2008 to 1.341%.
? Pries /Earning Ratio
It relates earnings per common share to the market price at which the stock trades, expressing the “multiple” that the stock market places on a firm’s earnings.
Formula = Market Price Per Share Earning Per Share 2010 2009 = = 182171885 3006499 166033588 2004333
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= =
59.43% 82.83%
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2008
=
145099907 1507018
=
96.28%
Percentage
120 100 80 60 40 20 0 2008 2009 Year s 2010
Interpretation Analysis shows that Price Earning Ratio has decreased to 0.155 in 2007 as compared to 2006 which is 0.184. It again strengthened in 2008 to 2.28 while dropped to 0.20 in 2009. ? Dividend Yield It shows the relationship between cash dividends and market price.
Formula = Divided Per Shares Market Price Per Share 2010 2009 2008 = = = 3370000 5573149 2694106 3901279 1638357 3026550 = = = 60.47% 69.06% 54.13%
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10000000 9500000 9000000 Percentage 8500000 8000000 7500000 2008 2009 2010 Years
Interpretation Analysis shows that Dividend Yield has decreased to 54.13% in 2008 as compared to 2010 which is 60.47%. It again strengthened in 2009 to 69.06%.
? Dividend Payout
It determined by the formula cash dividends per share divided by earnings per share.
Formula = Dividend per Shares Earning Per Share 2010 2009 2008 = = = 3370000 5573149 2694106 3901279 1638357 3026550 = = = 60.47% 69.06% 54.13%
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1 00 0 00 00 95 0 00 00 90 0 00 00 Percentage 85 0 00 00 80 0 00 00 75 0 00 00 2 00 8 20 09 20 1 0 Years
Interpretation Analysis shows that Dividend Payout has decreased to 54.13% in 2008 as compared to 2010 which is 60.47%. It again strengthened in 2009 to 69.06%.
Text References
1. Managerial Finance by JAE K. SHIM, JOEL g. SIEGEL. 2. Principle of Managerial Finance 11th Edition by Lawrence J.Gitman. 3. Askari Bank Quarterly Report March of (2010) of ACBL.
References
? www.google.com ? www.pakistanimbajimdo.com ? www.Scribd.com ? www.shlideshare.net ? www.askaribank.com
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