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Ratio Analysis
Ratio Analysis
Ratio Analysis
A. B. C. D. E. F.
Liquidity ratios Activity ratios Leverage ratios Profitability ratios Investor ratios Bank special ratios
A. Liquidity ratios Current ratios Quick ratios Absolute Liquid ratio B. Activity ratios Inventory turnover ratio Average collection period Average payment period Total assets turnover ratio
C.
Leverage ratios Proprietary ratio Debt ratio Debt to Equity ratio Debt to Tangible net worth ratio Debt to Funds ratio External-Internal Equity ratio
D.
Profitability ratio Return on total assets Return on-equity Return on investment Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances
E. Investor Ratios Earning per share P/E ratio Dividend per share Dividend yield ratio Dividend payout ratio Break up value/Book value per share M/B ratio
F. Bank special Ratios Earning assets to total assets Return on earning assets
Net margin to earning assets Loan loss coverage ratio Equity to total assets Deposit time equity Loan to deposit ratio
Because here we are discussing ratio analysis of bank, therefore we will not discuss A & B category of ratios.
LEVERAGE/SOLVENCY ANALYSIS Solvency analysis of a firm indicates the amount of the other peoples money being used to generate profit. In general, these analyses are more concerned with long term debts, because these commit the firm to a stream of payments over the long run. Solvency analysis includes:
Proprietary ratio Debt ratio Debt to Equity ratio Debt to Tangible net worth ratio Debt to Funds ratio External-Internal Equity ratio
1. PROPRIETARY RATIO
Total equity
Total Assets
Total equity
Total Assets
Equity
Equity
Internal Equity
ratio
11.82 INTERPRETATION
16.81
The overall leverage position is showing better trend as compare to previous year. The contribution of equity in total assets is increasing, while the debt contribution is decreasing which is better for business. Equity ratio is increased which shows the better condition of the bank. Solvency Ratio is in good condition. So we can say that overall Solvency condition of the MCB is better with the comparison to the previous year.
PROFITABILITY ANALYSIS Profitability analysis of a firm indicates the overall efficiently of the management. Without profit a company can not attract the outside capital. Profitability analysis includes:
Return on total assets Return on-equity Return on investment Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances
1. RETURN ON ASSETS
Net Profit after Tax Total Assets
100
2. RETURN ON EQUITY
Net Profit after Tax
Equity
100
3. RETURN ON INVESTMENT
Net Profit after Tax
Investment
100
Fixed Assets
100
No. of branches
Interest Income
100
Total Income
100
Interest Expense
Total Expense
100
9. RETURN ON ADVANCES
Interest Income
Total Loans
100
INTERPRETATION
Profitability analysis shows the entire performance of a business and if we study the profitability trend of bank then it will clear to us that it showing a positive trend. Net profit after tax is increased as compare to previous year, due to it return on assets, equity and investment is increasing. Not only overall profit is increasing but also average profit of all the branches is increasing. Bank interest income is also increasing due to more advances in this year. This year bank total deposits are also increased and thats why interest expenses are showing up ward trend.
INVESTOR ANALYSIS Investor analysis or market analysis are related to firm market valve, as measure by its current share price to certain accounting values. Investor analysis includes:
Earning per share P/E ratio Dividend per share Dividend yield ratio Dividend payout ratio Break up value/Book value per share M/B ratio
2. P/E RATIO
MP Per Share
EPS
No, of Shares
MV Per Share
EPS
100
No. of Shares
Year
2005
2004
7. M/B RATIO
MV Per Share BV Per Share
INTERPRETATION
MCB has also has good investment opportunities for the investors. This bank has more attraction for investors as compare to previous year. Earning per share is increased due to increase in profit. Book value and market valve of one share in also increased as compare to 2004. Only dividend yield and payout ratio is decreased because bank declared fewer dividends as compare to last year but it is also in favor of investors because it will increase wealth of shareholders and ultimate benefit to investors.