INTRODUCTION

A financial statement is an organized collection of data according to logical and consistent

accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business firm. It may show a position at a moment of time as in the case of a balance sheet, or
may reveal a series of activities over a given period of time, as in the case of an income
statement.

A financial ratio is an index that relates two accounting number and is obtained by dividing one
by the other. Financial ratios are tools for interpreting financial statements to provide a basis for
valuing securities and appraising financial and management performance. Ratio analysis is
calculating and interpreting financial ratios taken from financial reports to assess a firm.

Trend analysis is the method of time series data (information in sequence over time) analysis
involving comparison of the same item (such as monthly sales revenue figures) over a
significantly long period to (1) detect general pattern of a relationship between associated factors
or variables, and (2) project the future direction of this pattern.

Common-size analysis means an analysis of percentage financial statement where all balance
sheet items are divided by total asset and all income statement items are divided by net sales or
revenue.

Index analysis is the analysis of percentage financial statement where all balance sheet or income
statement figures for a base year equal 100 percentage and the subsequent financial statement
items are expressed as percentage of their values in the base year.
Brief History of United Commercial Bank
Ltd.
Sponsored by some dynamic and reputed entrepreneurs and eminent industrialists of the country
and also participated by the Government, UCB started its operation in mid-1983 and has since
been able to establish one of the largest networks of 139 branches among the first generation
banks in the private sector.

With its firm commitment to the economic development of the country, the Bank has already
made a distinct mark in the realm of Private Sector Banking through personalized service,
innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a
leading role in the economic activities of the country, is firmly engaged in the development of
trade, commerce and industry thorough a creative credit policy

The Bank has in its Management a combination of highly skilled and eminent bankers of the
country of varied experience and expertise successfully led by Mr. Muhammed Ali, a dynamic
banker, as its Managing Director and well educated young, energetic and dedicated officers
working with missionary zeal for the growth and progress of the institution.
Ratio & Trend Analysis of United
Commercial Bank Ltd.
Financial ratios are useful indicators of a firm's performance and financial situation. Financial
ratios can be used to analyze trends and to compare the firm's financials to those of other firms.
Ratio analysis is a widely used tool of financial analysis. The term ratio in it refers to the
relationship expressed in mathematical terms between two individual figures or group of figures
connected with each other in some logical manner and are selected from financial statements of
the concern.

The ratio analysis is based on the fact that a single accounting figure by itself may not
communicate any meaningful information but when expressed as a relative to some other figure,
it may definitely provide some significant information the relationship between two or more
accounting figure/groups is called a financial ratio helps to express the relationship between two
accounting figures in such a way that users can draw conclusions about the performance,
strengths and weakness of a firm.

Financial ratios can be classified according to the information they provide. The following types
of ratios frequently are used:

Classification of ratios:

1. Liquidity ratios.
2. Financial Leverage ratios.
3. Activity ratios.
4. Profitability ratios.
LIQUIDITY RATIOS
▪ Current ratio: This ratio indicates the extent to which current liabilities are covered by
those assets expected to be converted to cash in the near future. Current assets normally
include cash, marketable securities and accounts receivables. Current liabilities consist of
accounts payable, short-term notes payable, current maturities of long-term debt, accrued
taxes, and other accrued expenses (principally wages).

Current Ratio = Current Assets / Current Liabilities

Particulars 2011 2012 2013

Current Asset 21844220312 28084782586 23873054891

Current Liability 18426531137 20697437442 23602175268

Current ratio 1.18 1.35 1.01

Current Ratio

1,35
1,5 1,18
1,01
1

0,5

0
2011 2012 2013

According to result the current ratio of UCBL in 2013, 1.01 in 2012, 1.35 and 1.18 in 2011. In
2013 the current ratio was 1.01 which mean UCBL had the ability to pay off its current liabilities
with its current assets. In 2012 the current ratio was 1.35 but in 2013 the current ratio decreased
1.01 due to the UCBL banking policy. In fact the higher the current ratio is better for the
institution because this higher ratio helps to prevent getting default.
FINANCIAL LEVERAGE RATIOS

Debt –to- Equity ratio: It expresses the relationship between the external equities and internal
equities or the relationship between borrowed funds and ‘owners’ capital. This relationship is
shown by the debt equity ratio. This ratio indicates the relative proportion of debt and equity in
financing the assets of a firm. This ratio is computed by dividing the total debt of the firm by its
equity (i.e.) net worth.

Debt to equity Ratio = Total Debt / Shareholders’ Equity

Particulars 2011 2012 2013

𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭 --- 1200021000 3617132258
𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲 15963171945 18166882999 20504781695
Total Debt to Equity 0 6.60% 17.64%
Ratio

Total Debt to Equity Ratio

17,64 %

20
6,60 %

10 0%

0
2011 2012 2013

Alike all bank UCBL’s most of the fund collected from deposits or borrowing from other bank.
In year 2013, 2012, 2011 ratio was 17.64, 6.60 and 0 consequently. Here the graph shows bank
debt ratio was higher than previous year. The higher this ratio, the more leveraged the company
and the greater its financial risk.
Debt-to-total Asset ratio: Total liabilities divided by total assets. The debt/asset ratio shows the
proportion of a company's assets which are financed through debt. If the ratio is less than one,
most of the company's assets are financed through equity. If the ratio is greater than one, most of
the company's assets are financed through debt. Companies with high debt/asset ratios are said to
be "highly leveraged," and could be in danger if creditors start to demand repayment of debt.

Debt-to-total Asset ratio = Total Debt / Total Assets

Particulars 2011 2012 2013

𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭 0 1200021000 3617132258

𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬 168688543506 207244365339 225620285172

Debt to Total Assets 0 0 .57% 1.60%
Ratio

Debt to Total Assets Ratio

0,02 1,60%

0,015

0,01 0,57%

0,005
0%
0
2011 2012 2013

Almost all of the UCBL’s assets are financed by its debt. It works by taking the deposits from
the general and invest it in different sectors. From the year 20110 to 2013 the ratios were 0%,
0.57% and 1.60 % which was increased gradually. The higher ratio may increase more risk
because if UCBL defaults in any investment than the depositors will also default.
Equity –to- Asset ratio: Total equity to total asset ratio is one of the leverage ratios which is
used by the organization like banking sectors. It determines how much of the bank’s assets have
been financed by the equity.
Total Equity to Total Asset Ratio = Total Equity / Total Asset

Particulars 2011 2012 2013

𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲 15963171945 18166882999 20504781695
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬 168688543506 207244365339 225620285172
Equity to Total Assets 9.46% 8.76% 9.08%
Ratio

Total Equity to Total Asset Ratio

9,46%%
9,50% 9,08%
8,76%
9,00%

8,50%

8,00%
2011 2012 2013

The outcome of this ratio over the years was upward and downward. In year 2013, 2012 and
2011 the ratios were 9.08%, 8.76% and 9.46%. But in 2011 the ratio was higher.
PROFITABILITY RATIOS

Net profit Margin: Net profit ratio establishes a relationship between net profit (after taxes) and
sales. It is determined by dividing the net income after tax to the net interest income for the
period. Net Profit Margin gives us the net profit that the business is earning per dollar of interest.
The equation is as follows:

Net Profit Margin = Net profit after tax / Interest income

Particulars 2011 2012 2013

𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 2945202204 1585233380 3069357562

𝐀𝐟𝐭𝐞𝐫 𝐓𝐚𝐱
Interest Income 5148417337 6613710010 7080363593

Net Profit Margin 57.20℅ 23.96% 43.35%

Net Profit Margin

80,00%

60,00% 57,20%%
40,00% 43,35%

20,00% 23,96%

0,00%
2011 2012 2013

The greater the outcome the better the UCBL’s performance is. In 2013 the result was 43.35%
that means in 100 taka of net interest income UCBL’s net profit was 43.35 taka. On the other
hand in 2012 and 2011 the net profit was taka 23.96 and 57.20 against 100 taka of net interest.
Between the years in 2011 the bank had a handsome profit margin in percentages.
Return on Equity: Return on Equity measures the amount of Net Income earned by utilizing
each dollar of Total common equity. It is the most important of the “Bottom line” ratio. By this,
we can find out how much the shareholders are going to get for their shares. The equation is:

Return on Equity = Net profit after tax / Shareholders equity.

Particulars 2011 2012 2013

𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 2945202204 1585233380 3069357562
𝐀𝐟𝐭𝐞𝐫 𝐓𝐚𝐱
Shareholder Equity 15963171945 18166882999 20504781695

ROE 18.44 8.72 14.96

Return on Equity

20,00%
18,44%%
15,00% 14,96%

10,00%
8,72%
5,00%

0,00%
2011 2012 2013

ROE is very popular ratio toward the shareholders of any bank. After doing the analysis from
UCBL’s financial statements its shows those in years 2013, 2012 and 2011the return from 100
taka invested by the shareholders was respectively 14.96, 8.72 and 18.44.The higher the
percentage is the better for the bank as well as for shareholders.
Return on Asset: It indicates the profitability on the assets of the firm (after all expenses and
taxes). Return of total asset measures the amount of Net Income earned by utilizing each dollar
of Total Assets. The equation is:
Return on asset = Net profit after tax / Total Assets

Particulars 2011 2012 2013

Net Profit After 2945202204 1585233380 3069357562
Tax
Total Asset 168688543506 207244365339 225620285172
ROA 1.74 % 0.76% 1.36

RETURN ON ASSET

2,00%
1,74%%
1,50%
1,36%
1,00%
0,76%
0,50%

0,00% 0
2011 2012 2013

ROA is the most used profitability ratio. As UCBL was a part of banking industry and its most of
the assets come from the debt which was the reasons for its low net profit as well as poor ROA.
As a result the UCBL had low ROA in the year of 2013, 2012, and 2011 which were.1.36%,
0.76%, and 17.4% respectively.
EFFICIENCY RATIOS

Efficiency Ratios determine the efficiently of using its assets and managing its operations. Assets
turnover ratio measures the turnover of the firm’s total assets. It is calculated by dividing net
interest income by total assets.

ASSETS TURNOVER
Assets Turnover = Net interest Income / Total Assets
Particulars 2011 2012 2013
𝐍𝐞𝐭 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐈𝐧𝐜𝐨𝐦𝐞 5148417337 6613710010 7082363593
Total Asset 168688543506 207244365339 225620285172
Assets Turnover ratio .03 times .03 times .03 times

Assets Turnover ratio

0,03 0,03 0,03

2011 2012 2013

UCBL’s asset turnover ratio was same and too low from the year 2013 to 2011. The ratios were
0.03 times from year 2013 to 2011. These ratios indicate that UCBL was not generating a
sufficient volume of revenue given to its total asset investment. To increase this ratio UCBL had
to utilize its sources of fund on those assets which may bring more revenue to the bank.
FIXED ASSETS TURNOVER
Fixed Asset Turnover = Net interest Income / Fixed Assets

Particulars 2011 2012 2013

𝐍𝐞𝐭 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐈𝐧𝐜𝐨𝐦𝐞 5148417337 6613710010 7082363593
Fixed asset 3288087277 5222782016 7958214036
Fixed-asset 1.56 times 1.26 times 0.89 times
turnover

Assets Turnover ratio

1,8

1,6 1,56
1,4
1,26
1,2

1
0,89
0,8

0,6

0,4

0,2

0
2011 2012 2013

The analysis of this ratio shows the downward slope of UCBL. Form the year 2008 to 2013 the
ratios were 1.56, 1.26, 0.89 Times consequently which is falling down over years. This lower
fixed-asset turnover ratio shows that UCBL had less effectiveness in using the investment in
fixed assets to generate its revenues and it is falling year after year.
UCBL Common-Size Balance Sheet: Common-size analysis means an analysis of percentage
financial statement where all balance sheet items are divided by total asset and all income
statement items are divided by net sales or revenue.
Regular ( Lacs of Tk.) Common-size (%)
2011 2012 2013 2011 2012 2013
Property & asset
a)Cash 13034 16211 15275 7.72 7.82 5.97

b)Balance with 3740 4713 7027 2.21 2.27 2.74

other bank

c)Money at call 5070 7160 1570 3 3.45 6.14

on short notice

d) Investment 19506 26604 36091 11.56 12.83 15.29

e)Loan & 115506 136071 148677 68.47 65.65 58.86

advance

f) Fixed asset 3288 5222 7958 1.94 2.51 3.11

g)Other asset 8543 11260 9020 5.06 5.43 3.52

h)Non-banking - -
asset

Total Asset 168687 207244 255620 100 100 100

Liabilities &
Capital

a) Liabilities
- 1200 3617
b) Deposit &
139284 170330 183996 .57 1.60
other account

c) Other liabilities 13440 17546 17501 82.56 82.18 81.55

Total Liabilities 152724 189077 205115 7.90 8.46 7.76

Capital &
Shareholder 15963 18167 20504 9.46 8.72 9.08
Equity

Liability & Equity 168687 207244 225620 100 100 100

UCBL Indexed Balance Sheet: Index analysis is the analysis of percentage financial statement
where all balance sheet or income statement figures for a base year equal 100 percentage and the
subsequent financial statement items are expressed as percentage of their values in the base year.
2011 2012 2013 2011 2012 2013
Property & asset
a)Cash 13034 16211 15275 100 124.37 117.91

b)Balance with other 3740 4713 7027 100 126.01 187.70

bank

c)Money at call on 5070 7160 1570 100 141.22 30.96

short notice

d) Investment 19506 26604 36091 100 136.38 185.02

e)Loan & advance 115506 136071 148677 100 117.80 128.71

f) Fixed asset 3288 5222 7958 100 158.81 242.03

g)Other asset 8543 11260 9020 100 131.80 105.58

h)Non-banking asset ---- ----

Total Asset 168687 207244 255620 100 122.85 151.53

Liabilities & Capital

a) Liabilities - 1200 3617

b) Deposit & other 139284 170330 183996 100 122.28 131.10

account

c) Other liabilities 13440 17546 17501 100 296.1 130.21

Total Liabilities 152724 189077 205115 100 123.80 134.30

Capital & 15963 18167 20504 100 113.80 128.44

Shareholder Equity

Liabilities and 168687 207244 225620 100 122.85 133.75

Equity