Financial ratio analysis hdfc bank new linkedin slideshare. Ratio analysis plays an important role in the corporate world. For a quick indication of a businesss financial health in key areas, ratio analysis comes handy. A return ratio is a measure of the net benefit, relative to the resources expended. Ratio analysis is a conceptual technique which dates back to the inception of accounting, as a.
Financial ratio analysis first national bank and trust. Pdf financial ratios analysis in determination of bank. Liquidity and asset turnover ratios are most applicable here, along with a few leverage ratios added to the mix. Ratio analysis in cost accounting free download as powerpoint presentation. Use ratio analysis in the working capital management. Although extremely valuable as analytical tools, financial ratios also have limitations. Financial statement and ratio analysis lo1 the financial statements 1. Standard chartered bank is a leading international banking group committed to building a sustainable business over the longterm. Npa ratio is used to measure the asset quality of the bank s loan books. They can serve as screening devices, indicate areas of. Ratio analysis and equity valuation 111 our focus on the residual income valuation model is not to suggest that this model is the only model, or even the best model, to value equities.
Analyzing financial statements, according to metcalf and titard, is a process of evaluating. The objectives of financial statement analysis is the basis for the selection of techniques of analysis. A coverage ratio is a measure of a companys ability to satisfy meet particular obligations. Internal managers of the company utilize current ratio to analyze its financial position and take corrective action if need be. An important point to note is since banks are highly leveraged, even a relatively low roa of 1 to 2% may represent. This paper investigates the performance of south africas commercial banking sector for the period 2005 2009. If the current ratio is significantly higher, it is a clear indication that. Market value per share book value per share 3 ratio analysis of habib bank limited. The objective of the study is to estimate important financial ratios of major commercial banks in oman and compare their financial management practices as indicated by. For example, maturity of debentures cannot be identified with ratio analysis. An analysis of the financial performance of national bank.
Hence, users of crisil s ratings, including investors in corporate debt, need to. If the npa ratio for the last 10 years stays below 1% then that is a sign of good management. Pdf financial ratio analysis of national bank of pakistan. Thus, the limitations of financial statements also form the limitations of the ratio analysis. How to calculate profitability ratios for banks the. Some of the information requires little or no analysis to understand.
Project report on financial analysis of icici bank by. Ratio analysis is relevant in assessing the performance of a firm in respect of liquidity position, longterm solvency, operating efficiency, overall profitability, interfirm comparison and trend analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio. It provides users with crucial financial information and points out the areas which require investigation. The roa ratio is a companys net, aftertax income divided by its total assets. Ratio analysis is an important tool that is used in interbusiness and intrabusiness comparison. Funders may use ratio analysis to measure your results against other organizations or make judgments concerning management effectiveness and mission impact. This work is licensed under a creative commons attribution. An analysis of profitability position of private sector banks.
These methods include calculations and comparisons of the results to historical company data, competitors, or industry averages to determine the relative strength and performance of the company being analyzed. Financial ratio analysis involves the calculation and comparison of ratios which are derived from the information given in the companys financial statements. Rbl bank fundamental analysis, financial performance. A to z in banking financial ratio analysis with case study. Npa are those assets for which interest is overdue for more than 3 months. Through ratio analysis, special events cannot be identified.
Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization. The analysis of a company s financial ratios is core to crisil s rating process. Washington, deal extensively with interpretation of financial statements. The historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and its investment attractiveness. Pdf on oct 15, 2016, waris khan and others published financial ratio analysis of national bank of pakistan. Ratio analysis is broadly classified into four types. To calculate the return to shareholders ratio, divide the dividends and capital gains of a stock by the price of the stock at the start of the period being analyzed, usually a calendar year. Hence, the organization should decide the purpose of financial statement analysis. Ratio analysis is defined as, the systemic use of ratio to interpret the financial statement so that the strength and weakness of the firm a well as its historical performance and current. To make an effective analysis and interpretation of financial statements, the following groundwork are required to be completed. This study evaluates bank performance for the period 200820 using financial ratio analysis hereafter fra. Also look at other factors which may distort the information creative accounting, seasonal fluctuations etc. A component percentage is the ratio of a component of an item to the item.
Study notes on ratio analysis your article library. Ratio analysis s only a tool and is helpful to spot out the symptoms. To help identify the short term liquidity of a firm, this ratio is used. Ratio analysis enables the business ownermanager to spot trends in a business and to. The discriminant model is tested using data for 2006, 2007 and 2008. The most common methods used for financial statement analysis are trend analysis, common. Look at the 2 figures used to compute the ratio and criticise them. Financial ratio analysis has wide range advantage to show the bank financial position compare to past year performance. Ratio analysis is a cornerstone of fundamental analysis investopedia. Npa ratio is used to measure the asset quality of the banks loan books.
Ratio analysis involves a comparison of the relationships between financial statement accounts so as to analyze the financial position and strength of a firm. Financial statement ratio analysis financial statements as prepared by the accountant are documents containing much valuable information. This basic approach is analysed through the financial statements of. A project report on financial performance based on. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. The current ratio is a popular financial ratio used to test a companys liquidity also referred to as its current or working capital position by deriving the proportion of current assets available to cover current liabilities. This ratio assumes that 25 per cent of the incremental net working capital will be funded through cash accruals prior to meeting debt obligations. Jan 25, 2019 to calculate the return to shareholders ratio, divide the dividends and capital gains of a stock by the price of the stock at the start of the period being analyzed, usually a calendar year. A turnover ratio is a measure of the gross benefit, relative to the resources expended.
Suppose there are two accounting figures of aconcern are sales rs 00 and profits rs 15000. Rbl bank fundamental analysis, financial performance, ratio. Tanbir ahmed chowdhury professor department of business administration east west university prepared by. As a result, analysis of a banks financial statements requires a distinct approach that recognizes a banks unique risks. Financial ratios analysis of punjab national bank company. Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. If the income statement show an operating loss, the seriousness of that problem is fairly self evident. Another beneficial use is to compare the quick ratio with the current ratio. More important provide a profile of firms economic characteristics and competitive strategies. Ratio analysis of a bank involves the application of mathematical formulas to specific information from the institution. Using monthly instead of yearly or at best quarterly data, we can apply the tools of time series analysis, especially those of stationarity analysis. An analysis of profitability position of private sector banks in india priya. Nov 06, 2012 pricetoearnings ratio it is a valuation ratio of a companys current share price compared to its per share earnings pe ratio average stock priceearning per share the pe ratio for hdfc. Ratio analysis in cost accounting revenue working capital.
Ratio analysis refers to a method of analyzing a companys liquidity, operational efficiency, and profitability by comparing line items on its financial statements. Comparison of two or more years financial data is known as horizontal analysis, or trend analysis. For the present study a brief treatment of the ratiowill suffice to summarize the net effect of the individual variations of. Cdfi liquidity and cash management opportunity finance. Mommy janet darling caresses herself and masturbates. Ratio analysis was applied to analyze and to compare the trends in banking business and financial performance. Ratio analysis is a technique which involves regrouping of data by application of arithmetical relationships.
Financial analysis of banking institutions food and agriculture. The current ratio occupies a timehonored position in the literature of financial structure, primarily becauseof its use as a guide in the analysis and prognosis of corporate solvency or financial strength. An analysis of profitability position of private sector. Pdf this paper uses dynamic panel data methods to examine the determinants of banks performance in the german banking sector. Hence, to interpret the ratios, the user should be aware of the rules followed in the preparation of financial statements and also their nature and limitations. Financial statement and ratio analysis introduction. S assistant professor of commerce, mgr college, hosur periyar university, india abstract. The researcher has mentioned the importance of the banking sector in the economic development of the country. The current ratio and inventory turnover ratio measure the liquidity of a firm. They operate in some of the worlds most dynamic markets and have been working for over 150 years. For effective ratio analysis, practical experience and knowledge about particular industry is essential. The objective of the study is to estimate important financial ratios of major commercial banks in oman and compare their financial management practices as indicated by the ratios. The analyst has to carry out further investigations and exercise his judgement in arriving at a correct diagnosis. Fundamental analysis does not limit itself only to ratio analysis of historical figures and future projections of earnings.
This pdf is a selection from an outofprint volume from the. Ratio analysis formula list ratio analysis formula with. Financial ratios analysis of punjab national bank the key ratio of punjab national bank company, including debt equity ratio, turnover ratio etc. Ratio analysis is a form of financial statement analysis that is used to obtain a quick indication of a firms financial performance in several key areas. Profit is a measure of success of business and the means of its survival and growth. Company analysis is the current market price shows that it is more than intrinsic value then according to the theory the share should be sold. The banks financial statements are typically the primary source for the requisite data. In terms of roa and roe, 1% and 10%, respectively are generally considered to be good performance numbers. Financial analysis is designed for students in order to improve their skills at analyzing companies and to advance their knowledge of finance theory and application. Aug 20, 2014 the interpretations of financial results of a particular period of operations, derived with the help of ratio.
This pdf is a selection from an outofprint volume from. Ratio analysis is indispensable part of interpretation of results revealed by the financial statements. A financial ratio analysis of commercial bank performance in south. Financial ratio analysis select rating give it 15 give it 25 give it 35 give it 45 give it 55 while numerous measures exist, the most popular measure the overall health of your business analyzing income, liquidity, assets, debt and profitability. Financial statement analysis and performance evaluation of the. The basics and use of this ratio are similar to the current ratio in that it gives users an idea of the ability of a company to meet its shortterm liabilities with its shortterm assets. Project report on financial analysis of icici bank. The framework divides the analysis into five different but interrelated aspects of the health of the institution, and uses a timeseries to analyse any positive or negative trends. Ratio analysis is a useful tool only in the hands of an expert. Profitability is the ability of a business to earn profit for its owners. Topicratio analyses the balance sheet and the statement of income are essential, but they are only the starting point for successful financial management. Manish mittal and arunna dhademade 2 005 they found that higher profitability is the only major parameter for evaluating banking sector performance from the shareholders point of. Ratio analysis is used to determine the financial soundness of a business concern.
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