Guidelines for Internship Report

Prepared for

B. Com (Hons.) Students

Department of Commerce
Punjab University Gujranwala Campus
Gujranwala

Prepared by

M. Sarfraz Khan
Lecturer
Department of Commerce
Punjab University Gujranwala Campus
Gujranwala
 Disclaimer
These guidelines are suggestive in nature and represent opinion of an individual as to how an
internship report should be structured/ organized. Each student must comply with instructions
of his/her supervisor to write, structure, and format his/her internship report. Word of
supervisor and HoD will be final in all respects.

You may direct your quires/suggestions at sarfraz.khan@pugc.edu.pk

 General Guidelines
 Be clear and consistent in your structure and format. Do not unnecessarily highlight/
underline text.
 Do not do excessive copy pasting in the report. Try to write report on your own.
 Do not use a lot of pictures in the report. You may use some, but try to format them to
fit your general structure. Be consistent with the size of pictures you use.
 Total length of the internship report should be more than 60 pages (Suggestion).
 Consult your supervisor/mentor often to discuss your confusions and remain on track.
 Start early and finish early. It will give you time to consult supervisor and amend you
report.
 Remember, there is always room for improvement. Your supervisor may suggest a lot
of changes for the betterment of report.

Formatting Guidelines
 Use Times New Roman font for all of the report.
 Use 12pt text size for simple text and 14pt text size for main heading only.
 Use 1.5 Line spacing in throughout text.
 Justify your paragraphs.
 Only headings should be bold. Use following for heading formats:
Main Heading: Center aligned, 14pt size, Bold
Sub heading 1: Left aligned, 12pt size, Bold
Sub heading 2: Left aligned, indented, 12pt size, Bold
Sub heading 3: Left aligned, indented, 12pt size, Bold, Italic
Sub heading 4: Left aligned, indented, 12pt size, Italic
 Executive Summary
Executive summary of the report provides bird’s eye view on your report. It roughly have
four parts: First part provides you aspiration as to why you did internship and why you
choose this specific company. Second part relates to the introduction of the company and
activities. You can also relate to financial analysis & SWOT analysis of the company. Part
three provides an overview of your activities in the company and what you learnt during
internship. Last part of the executive summary will relate to your recommendations to the
company and to other students who will be doing internship next year. It should be of roughly
one-page.

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 Acknowledgements
Start with praise of God and Hazrat Muhammad (PBUH). Then acknowledge the efforts of
Director General-Gujranwala Campus. After that Acknowledge the efforts of your HoD.
After that your teachers and report supervisor.
You should also acknowledge your past teachers, elders, friends, siblings, or any other
personality that might have played an important role in your learning and brought up.

NAME OF STUDENT

ii
 Dedication
One or two lines to the dearest person, who have in life. Mostly students dedicate to their
parents.

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 Table of Contents
Executive Summary..................................................................................................................i

Acknowledgements..................................................................................................................ii

Dedication................................................................................................................................iii

1. Introduction to Report.......................................................................................................1

2. Organizational Profile........................................................................................................2
2.1 History of organization..................................................................................................2
2.2 Description of Associated companies...........................................................................2
2.3 Products/ Services of organization...............................................................................2
2.4 Corporate Information..................................................................................................2

3. Vision & Mission Statement..............................................................................................3

4. Management Hierarchy.....................................................................................................4

5. Departments.........................................................................................................................5
5.1 General banking department........................................................................................5
5.2 Cash department............................................................................................................5
5.3 Clearing department......................................................................................................5
5.4 Accounts department.....................................................................................................5
5.5 Marketing Department..................................................................................................5
5.6 Remittances / Foreign trade department.....................................................................5

6. Area of Internship................................................................................................................6
6.1 Accounts department.....................................................................................................6
6.2 Cash department............................................................................................................6

7. Work Done During Internship............................................................................................7

8. Financial Analysis................................................................................................................8
8.1 Horizontal (Trend) Analysis.........................................................................................8
8.2 Vertical (Common-Size) Analysis.................................................................................8
8.3 Ratio Analysis.................................................................................................................8
8.3.1 Ratio Analysis for Financial Sector..........................................................................9
8.3.2 Ratio Analysis for Non-Financial Sector................................................................13
9. Strategic Analysis...............................................................................................................18
9.1 PESTEL Analysis.........................................................................................................18
9.2 SWOT Analysis............................................................................................................18

10. Recommendations............................................................................................................19
10.1 Recommendations for the firm.................................................................................19
10.2 Recommendations for future interns.......................................................................19

11. Conclusion.........................................................................................................................20

Bibliography...........................................................................................................................21

Glossary...................................................................................................................................22

Annexures...............................................................................................................................23
 List of Tables and Figures

Figure 4.1: Sample Organogram................................................................................................4

Figure 6.1: Sample Flow Chart..................................................................................................6
 1. Introduction to Report
This part specifically relates to your aspirations as to what do you think about practical
internship as part of your degree program. Why internship is important and what you want to
elaborate in this report.
Provide an overview of your company specifically with reference to why you opt to do
internship with this specific organization and how would it contribute to your personal
growth. Lastly, elaborate structure of your report. What are the main chapters of the report
and what does each chapter elaborate? Provide details of each chapter in a way to high light
its sub contents and highlight why this chapter was important to be part of this report.

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 2. Organizational Profile
This chapter provides detailed introduction and scope of the organization, you have done
internship with. Start with the description of the organization, its name, its scope, its data of
incorporation, its growth profile, its industry profile, and the like.
You should include following sub headings in this chapter:

2.1 History of organization

Start with the date it came into being and then tell its story from the start to data. How
company evolved, what are its previous achievements, its growth over the time, significant
events that might have changed the organization, details and dreams of its founders and the
like.

2.2 Description of Associated companies

Sometimes big companies are part of a group. Like if you have done internship in MCB
Bank, it’s part of Nishat Group and other associated companies in Nishat Group are DG
Cement, Nishat Mills, Nishat Power, Lalpir Power, Golden Jubilee Insurance and others. In
such a case, you should provide description of the group and associated companies as to these
companies are and how are they related to each other, what does they do (their business) and
the like. You may also include small logos of the companies here.

2.3 Products/ Services of organization

Provide details of product and services of your company. You may include brief features of
the product/ services, when they were launched, which market segment they serve, they
variety, quality and the like. You may also include small pictures of the product here.

2.4 Corporate Information

Legal and official aspects of the corporations like its official name, names of its board of
directors, its secretary, its auditors, CEO, CFO, Legal advisors, registered office address,
factories and addresses, contact numbers, branch networks, number of employees etc.

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 3. Vision & Mission Statement
Provide vision statement, mission statement, core values, company objectives, strategies,
management philosophy, ethical standards and other policies in this chapter. You may locate
these at company website and also in annual statement of the company.

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 4. Management Hierarchy
Provide details on organisational structure of the company. Describe each level/ position.
Organogram is a must here. Sample organogram of a bank is as under:
Figure 4.1: Sample Organogram

Chairman &

Central Office /
Head Office

SEVP SEVP SEVP

PHQ Islamic Banking Admin & Human International

SINDH Division Resource Division Division

PHQ Credit Audit & Finance

Monitoring Inspection Division
NWFP/AK

PHQ Maintenance Engg. Customer Services Environmental

Protocol and Division Protection
PUNJAB

PHQ Agriculture & President’s Secretarial & Board Legal Affairs

BALOCHISTAN Small Finance Affairs Division

Computer & MIS 10 Credit Audit Overseas

Division Offices Located 4 Operation

Business Promotion, Research & Investment &

Marketing Planning Division Development Fund Management

Recovery Credit Processing Training Division Academies in Karachi,

Lahore, Islamabad &
Division Division

General Services Sports Division

Division H.O. H.O. Lahore

Credit &
Corporate
Shares Division

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 5. Departments
Provide a detailed description of the department, their functioning, and work flow. Like
considering a bank, departments will be as follows:

5.1 General banking department

What department do? Its scope in banking operations. How tasks are performed. Like if an
accounts is to be opened, what are requirements, who does what? Nature of forms documents
used.

5.2 Cash department

What department do? Its scope in banking operations. How tasks are performed. Like if an
accounts is to be opened, what are requirements, who does what? Nature of forms/ documents
used like deposits slip (Provide slips in appendices)

5.3 Clearing department

5.4 Accounts department

5.5 Marketing Department

5.6 Remittances / Foreign trade department

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 6. Area of Internship
In which department you worked. If you have worked in more than one departments, relate to
all.

6.1 Accounts department

6.2 Cash department

Provide workflows like if someone wants to deposit cash:

1. Customer fills deposit slips
2. Customer gets token and wait
3. Customer appears at cash counter at his/her turn
4. Cashier counts cash and verifies slip
5. Cashier Enters the amount in online account
6. Cashier puts stamp and return one part of slip to customer

You can also make/ use flow charts to better elaborate things:

Step 1 Step 2 Step 3 Step 4 Step 5

Figure 6.1: Sample Flow Chart

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 7. Work Done During Internship
Provide detailed description of the work/ duties performed by you. Specifically reflect as to
what you learnt and work performed by you enhanced you understanding of business
organization and contributed towards your skills. Demonstrate your command on things you
have learnt. Relate to workflows as to where you fit in. Be detailed as much as possible. If
you have worked in more than one departments, separately relate to all. Provide your
understanding of the workflow, documentations that your used, and tasks that you performed.

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 8. Financial Analysis
In order to conduct financial analysis, you need to obtain latest published annual statements
for the corporation you have worked with. Annual statement of 2019 will provide you data
for 2018 and 2019 years. It is recommended that you use data of five years: from 2015 to
2019. Financial analysis with have two parts. In the first part, you need to conduct
Horizontal (Trend) and Vertical (Common Size) Analysis. In the second part you need to
do Ratio Analysis.

8.1 Horizontal (Trend) Analysis

It is also called trend analysis. In this analysis you start with a base year – (First year of your
analysis – 2015 if you are using data for five years) – and track percentage change in all items
of balance sheet and income. Base year takes value of 100% (Excel Sample will be provided
to you for understanding it). Interpretations are made on the bases of the trend as to what
expenses/ revenues are increasing and what is general trend in costs, sales, profits, assets, and
liabilities.

8.2 Vertical (Common-Size) Analysis

It is common size analysis, where we express each item in income statement and balance
sheet as percentage of a key figure (Total assets in Balance Sheet & Sales in Income
Statement. Total assets are 100% each year in balance sheet and total sales are also 100%
each year (Excel Sample will be provided to you for understanding it). Interpretations are
made on the bases of relative increase or decrease in expenses, profits, assets, and liabilities
as of year on year basis. Suppose if CGS was 60% of sales in year 2018 and it increase to
80% of sales in 2019. It should be a cause of concern.

8.3 Ratio Analysis

Mainly, we differentiate between financial sector and non-financial sector in this regard.
Financial sector is comprised of Banks, Insurance Companies, Leasing Companies, and
Modarba Companies. Non-financial sector is composed of Cement, Sugar, Textile, Food,
Chemical, Fertilizer and likewise companies. Ratios for both of these sector are different as
their balance sheets and income statement have distant items. Thus, ratio analysis for both of
these sector will be done differently – differet ratios for each sector.

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 8.3.1 Ratio Analysis for Financial Sector

Although financial sector also represents broad range of companies like Banks and insurance
companies, and there should be alight difference in state of affairs of both types of companies
and ultimately their ratio analysis. Most students do their internship in Banks. So, in would
only provide ratios that are used for ratio analysis of banks (Other students, who might have
done internship in insurance companies, learning companies, or other financial institutions
are encouraged to contact their supervisor for guidelines).
I recommend to use CAMEL system for banking sector ratio analysis. (Apart from CAMEL
Ratios, we also calculate cash flow and Market ratios) CAMEL has following composition:
C – Capital Adequacy measured appropriateness of capital invested by the bank in relation
to overall investment of the bank. Lower levels of capital investments by the banks induce
more risk for the banks.
A – Asset Quality measures quality of portfolio of investments of a bank. Assets of banks
are represented by its advances/ loans to clients and there is always probability of
default. Subprime lending could induce more risk for the banks.
M – Management Efficiency measures efficiency of a bank in terms of operations and
activities. More efficiency represents better management of a business organization.
E – Earning Ability/ Quality measures profitability of a bank in relation to revenues and
investments.
L – Liquidity Management measures ability of the bank to withstand liquidity crunch and
generate cash flows, if required in short term.
Following are ratio and their formulas under CAMEL system:

8.3.1.1 Capital Adequacy Ratios

The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as
a percentage of a bank's risk-weighted credit exposures. Following is the formula for CAR:

𝑇𝑖𝑒𝑟 1 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑇𝑖𝑒𝑟 2 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑥 100

𝐶𝐴𝑅 = 𝑅𝑖𝑠𝑘 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
Where
Tier 1 Capital = Bank's core capital, includes disclosed reserves—that appears on the bank's
financial statements—and equity capital.
Tier 2 Capital = Bank's supplementary capital, includes undisclosed reserves, subordinated
term debts, hybrid financial products, and other items make up these funds.

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Risk Weighted Assets = Bank's assets or off-balance-sheet exposures, weighted according to
risk.
According BASEL 3 Regulations a Capital Adequacy ratio of above 8% is preferred in banks.
Higher the ratio, better capital adequacy a bank will have.
Mostly these items are difficult to locate in annual reports. However, every bank is required
to provide this information in the annual report in notes. All the information, Tier 1 Capital,
Tier 2 Capital, and Risk Weighted Assets are provided in the notes. Just open the annual
report and press crtl+f and search capital adequacy, or tier 1, or tier 2, or risk weighted assets
and you may find each item.
Sometimes a somewhat simpler version of capital adequacy is calculated, formula for which
is as under:
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Both of these ratios exhibit capital investment of bank in relation to its total investment.
Capital adequacy ratio is fancy ratio that is risk adjusted version of simple capital ratio.
Capital adequacy is adopted and reported by each bank now days.
Note: You should use both of these ratios.

8.3.1.2 Asset Quality Ratios

Main assets of a bank are its advances/ loans to the customers. Bank face loan losses, that
impair quality of its loan portfolio. In essence asset quality measures credit risk of a bank.
Following ratios are used in this regard:
𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠
𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛𝑔 𝐿𝑜𝑎𝑛𝑠 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑐𝑎𝑛𝑐𝑒𝑠
𝐿𝑜𝑎𝑛 𝐿𝑜𝑠𝑠 𝑃𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛
𝐿𝑜𝑎𝑛 𝐿𝑜𝑠𝑠 𝑃𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠 =
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑐𝑎𝑛𝑐𝑒𝑠 𝑥 100
𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠
𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛𝑔 𝐿𝑜𝑎𝑛𝑠 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠
𝑁𝑜𝑛 𝑃𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛𝑔 𝐿𝑜𝑎𝑛𝑠 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

A lower value of these ratios depict better quality of the assets of a bank.
Again, it is not straight forward to locate Non performing loans and loan loss provision. You
need to look into notes. Specifically, look in the note of Loans/ Advances from balance sheet

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for details on Non-Performing loans and look in the note of provisions and write-offs in
income statement for loan loss provisions.

8.3.1.3 Management Efficiency Ratios

Management efficiency relates to the efficiency of the bank in terms of key activities and
investment. Following ratios are used to measure management efficiency of a bank:

𝑇𝑜𝑡𝑎𝑙 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠

𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒 𝑥 100
𝑁𝑜𝑛 𝑀𝑎𝑟𝑘 − 𝑢𝑝 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑜𝑛 𝑀𝑎𝑟𝑘𝑢𝑝 𝐼𝑛𝑐𝑜𝑚𝑒 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠
𝐿𝑜𝑎𝑛/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠 𝑡𝑜 𝐷𝑒𝑝𝑜𝑠𝑖𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑠
𝑁𝑒𝑡 𝑀𝑎𝑟𝑘𝑢𝑝 / 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑀𝑎𝑟𝑘𝑢𝑝/ 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

A lower efficiency ratio and higher loan to deposit ratio, net markup to total asset ratio,
advances to total asset ratio, and total deposit to total asset ratio are desired for better
management efficiency of the bank.
All of these items used in the ratios are easy to locate within income statement and balance
sheet of banks.

8.3.1.4 Earning Ability/ Quality Ratios

Earning ability ratios measure profitability of a bank. Following ratios are used to assess
profitability of a bank:

𝑁𝑒𝑡 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

𝑁𝑒𝑡 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 (𝑁𝐼𝑀) = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

𝑁𝑒𝑡 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

𝑆𝑝𝑟𝑒𝑎𝑑 𝑅𝑎𝑡𝑖𝑜 = 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑎𝑟𝑛𝑒𝑑
𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 (𝑅𝑂𝐸) =
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 𝑥 100

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 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡𝑠 (𝑅𝑂𝐴) =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑥 100
𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑎𝑟𝑛𝑒𝑑

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑

𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 𝐸𝑃𝑆 = 𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Higher earning/ profitability ratios are desired for the banks.

All of these items used in the ratios are easy to locate within income statement and balance
sheet of banks. You may find some difficulty findings number of outstanding shares, see
share capital (in shareholder’s equity) note in balance sheet. Always use paid in capital
number of shares.

8.3.1.5 Liquidity Management Ratios

Liquidity is one of the most important aspect of a bank. Liquidity refers to the ability of a
bank to generate cash in short term. Following ratios are used to assess liquidity of banks:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Where:
Liquid Assets = Cash and balances with treasury banks + Balances with Other Banks
𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠
𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑥 100

Investments = Investment in Liquid Securities (T-Bills, Govt. Securities, Stocks, Bonds etc.).
Amount is given in asset side of balance sheet
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠/ 𝐴𝑑𝑣𝑎𝑛𝑐𝑒𝑠 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
𝐿𝑖𝑞𝑢𝑖𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 𝑡𝑜 𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑅𝑎𝑡𝑖𝑜 =
𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑥 100
Short Term Liabilities = Bills Payable + Borrowings

8.3.1.6 Cash flow ratios

Apart from the CAMEL ratios, cash flow ratios are also calculated to measure cash generation
ability of banks. Following ratios are calculated in this regard:

1
 𝑁𝑒𝑡 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 𝑡𝑜 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Net cash flow from operating activities could be located from cash flow statement of the
bank. A higher cash flow ratio is desired for banks.

8.3.1.7 Market Ratios

Market ratios measures growth potential of a bank in terms of its market value. Following
ratios are calculated in this regard:
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑃𝑟𝑖𝑐𝑒/𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑅𝑎𝑡𝑖𝑜 = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
Most of the times, market Price of the company is not provided in annual report. You need to
go to dataportal of Pakistan Stock Exchange (PSX) to obtain stock price on closing (balance
sheet) date of the bank for the years concerned.
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝐵𝑎𝑛𝑘
𝑀𝑎𝑟𝑘𝑒𝑡 to Book Value Ratio =
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝐵𝑎𝑛𝑘
Where:
Market Value of the Bank = Stock Price at Closing date x Total Number of Shares
Outstanding Book Value of the Bank = Total Shareholder’s Equity
A higher value of market ratios is desired for the banks.

8.3.2 Ratio Analysis for Non-Financial Sector

Again, non-financial sector has wide range of firms, but we can differentiate in two
categories: manufacturing firms and services firms. The major difference between these two
is that services firm do not carry inventories in their balance sheet. Rest of the balance sheets
are almost same and also their ratios are also same. Mostly, we have six categories of ratios
for ratio analysis of non-financial sector: Liquidity Ratios, Debt (Solvency) Ratios,
Profitability Ratios, Operations Management (Efficiency/ Activity) Ratios, Cash Flow Ratios,
and Market Ratios.
Liquidity measures ability of a company to pay its short term obligations with ease. It relates
to cash generation ability of a firm.
Debt (Solvency) relates to leverage of a firm and measures prospects of risk of default on
long term obligations of the firm. It has two aspects: Debt Management and Debt Servicing.
Debt

1
management relates to extent to which a firm’s assets are financed by debt and debt servicing
relates to the ability of a firm to service (pay interest) its debt.
Profitability relates to the ability of a firm to generate profits in relation to its sales and its
investments.
Operations Management (Efficiency/ Activity) relates to the efficiency of operations/
activities of a company.
Cash flow exhibit ability of firm to generate cash from its operations in relation to sales and
assets.
Market represents growth prospects of a company in the eyes of its investors.
Following are ratios used under these categories:

8.3.2.1 Liquidity Ratios

Liquidity refers to ability of something to generate cash quickly. In context of corporations,

liquidity relates to ability of a firm to generate cash to pay its short term obligations.
Following ratios are used in this regard:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

𝑄𝑢𝑖𝑐𝑘 (𝐴𝑐𝑖𝑑 − 𝑇𝑒𝑠𝑡) 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠

𝐶𝑎𝑠ℎ 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Higher liquidity ratios are desired for non-financial companies. However, appropriateness of
ratios relates to nature of business of a firm, where a higher liquidity may be desired for retail
business and lower liquidity could suffice for general utility firms.

8.3.2.2 Debt (Leverage) Ratios

Debt ratio represent proportion of debt in total investment of a business. It has two aspects:
Debt Management Ratios represent proportion of debt in capital structure of a firm.
Following ratios are used to measure it:
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 (𝐷𝑒𝑏𝑡)
𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑥 100

𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 (𝐷𝑒𝑏𝑡)

𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 𝑥 100

1
Sometimes only Long Term (Non-Current) Liabilities are used instead of total liabilities. You
may use any of these.
A lower debt ratio is desired for most of the companies.
Debt Servicing Ratios measure ability of a firm to meet its debt related obligations like
interest etc. Following ratios are used to calculate this.
𝐸𝐵𝐼𝑇 / 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 / 𝐹𝑖𝑛𝑎𝑛𝑐𝑒 𝐶𝑜𝑠𝑡

A higher interest coverage ratio is desired for non-financial firms.

8.3.2.3 Operations Management/ Efficiency/ Activity Ratios

Efficiency ratios represent efficiency of operations and activities of a company. Following

ratios are used in this category:
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Sometimes Fixed Asset Turnover ratio is calculated, where total assets are replaced with fixed
assets.
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠

𝐶𝐺𝑆
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛 𝑂𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

𝐼𝑛𝑣e𝑛𝑡𝑜𝑟𝑦 𝑡ji𝑠 𝑦e𝑎𝑟n𝐼𝑛𝑣e𝑛𝑡𝑜𝑟𝑦 𝑝𝑟e𝑣i𝑜𝑢𝑠 𝑦e𝑎𝑟

Average Inventory = q

* This ratio could not be calculated for services firms.

365
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑔𝑒 𝑜𝑓 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 =
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟
𝑇𝑜𝑡𝑎𝑙 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑅𝑒𝑐𝑖𝑒𝑣𝑒𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛 𝑂𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴/𝑅

𝐴/𝑅 𝑡ji𝑠 𝑦e𝑎𝑟n𝐴/𝑅 𝑝𝑟e𝑣i𝑜𝑢𝑠 𝑦e𝑎𝑟

Average A/R = q

In case there are no credit sales, use total sales.

365
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑 =
𝐴/𝑅 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

1
 𝑇𝑜𝑡𝑎𝑙 𝐶𝑟𝑒𝑑𝑖𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝑇𝑢𝑟𝑛 𝑂𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴/𝑃

𝐴/𝑃 𝑡ji𝑠 𝑦e𝑎𝑟n𝐴/𝑃 𝑝𝑟e𝑣i𝑜𝑢𝑠 𝑦e𝑎𝑟

Average A/P = q

It is hard to locate credit purchases, you need to go to note of Cost of Sales to locate this.
* Further, there are no purchases for services firms, this ratio should not be calculated for services firms.
365
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑎𝑦𝑚𝑒𝑛𝑡 𝑃𝑒𝑟𝑖𝑜𝑑 =
𝐴/𝑃 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Operating Cycle = Average Age of Inventory + Average Collection Period

Cash Conversion Cycle = Operating Cycle – Average Payment Period

A higher total asset turn over, inventory turnover, A/R turnover and average payment period
are desirable, while a lower A/P turnover, average age of inventory, average collection
period, operating cycle, and cash conversion cycle are desirable.

8.3.2.4 Profitability Ratios

Profitability ratios help us to assess profitability of firm in relation to sales and investments.
Following ratios are used in this regard:
𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐼𝑛𝑐𝑜𝑚𝑒 / 𝐸𝐵𝐼𝑇
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠 𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠 𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑂𝐴 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑂𝐸 =
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 𝑥 100

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 𝐸𝑃𝑆 = 𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

You may find some difficulty findings number of outstanding shares, see share capital (in
shareholder’s equity) note in balance sheet. Always use paid in capital number of shares.
Higher profitability ratios are desired for the firms.

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 8.3.2.5 Cash Flow Ratios

Cash flow ratios assess ability of a firm to generate cash flow from its operations in relation
to net income and total investment. Following ratios are used in this regard:
𝑁𝑒𝑡 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 𝑡𝑜 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑓𝑟𝑜𝑚 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 𝑡𝑜 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 𝑅𝑎𝑡𝑖𝑜 = 𝑥 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Net cash flow from operating activities could be located from cash flow statement of the firm.
A higher cash flow ratio is desired for banks.

8.3.2.6 Market Ratios

Market ratios measures growth potential of a firm in terms of its market value. Following
ratios are calculated in this regard:
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
𝑃𝑟𝑖𝑐𝑒/𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑅𝑎𝑡𝑖𝑜 = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑃𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
Most of the times, market Price of the company is not provided in annual report. You need to
go to dataportal of Pakistan Stock Exchange (PSX) to obtain stock price on closing (balance
sheet) date of the firm for the years concerned.
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝐹𝑖𝑟𝑚
𝑀𝑎𝑟𝑘𝑒𝑡 to Book Value Ratio =
𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡ℎ𝑒 𝐹𝑖𝑟𝑚
Where:
Market Value of the Firm = Stock Price at Closing date x Total Number of Shares Outstanding
Book Value of the Firm = Total Shareholder’s Equity
A higher value of market ratios is desired for the firm.

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 9. Strategic Analysis
This part of report provides analysis of the strategic position of your company. Mostly, two
types of analysis are provided in this section.

9.1 PESTEL Analysis

PESTEL Connotes to:

P – Political factors include political environment of a country that could affect your
organization.
E – Economic factors include economic growth, inflation, fuel prices and likewise factors that
could have an impact on your firm.
S – Social factors include culture, behaviors, trends, tastes, habits of society that could
influence your firm.
T- Technological factors include state of technology in the industry and its changing nature
that could influence your firm.
E – Environmental factors include pollution, heat and other environmental factors that may
have an influence on your firm.
L – Legal factors include laws and regulatory aspects of a country/ industry that could affect
your firm.
PESTEL are external factors that could pose opportunities or threats for your firm.

9.2 SWOT Analysis

SWOT connotes to:

S – Strengths relate to your inner strengths that could become your competitive advantage.
Things you do better than others.
W – Weaknesses relate to your inner weakness that might erode your competitive position in
the industry. Things you suck at.
O – Opportunities relate to external environmental opportunities, which might enable you to
expand your business.
T – Threats relate to external environmental threats, which might cause serious difficulties
for your position and growth.
We use strengths to capitalize on opportunities and avoid threats. We try to improve on our
weaknesses so that we could effectively grasp opportunities and deal with threats. A detailed
description of each aspect of strategic analysis is required in the report.

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 10. Recommendations
Recommendations are suggestions that demonstrate that you have analysed and worked with
an organization and have developed a critical position in this regard. Recommendations have
two parts:

10.1 Recommendations for the firm

You need to provide specific recommendations as to how business of the firm you have
worked with could be improved. Integrate your learning, financial analysis, and strategic
analysis to provide recommendations to the firm. What needs to be done to improve
businesses processes of firm? What needs to be done to improve financial position of the
firm? What needs to be done to improve strategic position of the firm?

10.2 Recommendations for future interns

Relate to the difficulties you faced during internship and recommend that how future interns
could deal with these issues.

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 11. Conclusion
Conclude your report. Start with your aspirations, briefly relate to the company and its
operations and departments, reflect where you worked and what you learnt, relate to key
points in financial and strategic analysis, highlight main recommendations and conclude with
a positive note.

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 Bibliography
Provide list of references in Alphabetic arrangements. Provide reference of annual
statements, websites and other internet material your sought. Always provide reference to
your finance book, management book, strategic management book from where you have used
concepts in the report.
If possible, use APA style of referencing.

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 Glossary
Provide glossary of technical words/ concepts that you have used in your report. Provide
definition and explanation of these technical terms. Arrange words in alphabetic order.

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 Annexures
Provide supplemental details/ documents. Following documents should accompany your
report:
 Financial statements of firm for the years that are used for financial analysis (only
provide income statement, balance sheet, and cash flow statement)
 Vouchers/ slips/ forms and any other documents or formats related to the company
you have worked in. Like if you have worked in a bank, you could attach deposit
slip, accounts opening form etc.