FINANCIAL RATIO OF BOP BANKS

“A financial ratio is an index that relates two accounting numbers and is

obtained by dividing one number by the other”.

One may ponder that why there is a need to mingle with these ratios and
not take the actual figures straightforwardly. Among various reasons one cogent
reason can be put forward that ratios help in comparison. When ratio analysts are
to compare the internal performance of the organization in relation to time, only
ratios are the viable option for them. Similarly, comparison with the other
competitors in the same industry can only be carried out with the help of financial
ratios. The number of financial ratios the might be created is virtually limitless. But
there are certain basic ratios that are frequently used, these ratios are as:

3.6.1 DEBT RATIO

Debt Ratio shows that how much of the assets are financed by Debt. The
increase in Debt Ratio increases the level of Risk for the financial institutions as
well. Debt ratio= Total Liabilities/Total Assets

Debt Ratio 2016 2017

0.864 0.860

INTERPRETATION

In year 2017 debt ratio is 0.860 which shows that almost more than
80% of the assets of Bank are financed by Debt whereas in 2016 Debt Ratio is 0.864
which is greater than the debt ratio of 2017 so the analysis is that the level of risk
for MCB was greater in 2016 and the level of risk is decreased in 2017 as the debt
ratio of 2017 is less than the debt ratio of 2016.
 YEAR 2017 2016 2015

Assets Growth 19.14 15.44 12.35

Long Term Debt Inc / Dec 19.80 15.07 12.11

If company’s long term debts increased, there must be increment in fixed

assets, here BOP’s debts increased by 19.8 % in 2017, approximately the same assets are
also increased by 19.14 %.

3.6.2 RETURN ON ASSETS (ROA)

The Return on Assets (ROA) often called as Return on Investments

(ROI) measures the overall effectiveness of management in generating profits with
its available assets. The higher the firm’s return on total assets the better. The
return on Total Assets is calculated as follows:

ROA=Earnings available on common stockholders/Total assets

ROA 2016 2017
0.89% -0.51%

INTERPRETATION

As the total return on assets in Year 2017 is lesser than the return on
assets of Year 2016 it shows that overall effectiveness of BOP has been reduced
which is not Beneficial for the Bank.

3.6.3 RETURN OF EQUITY (ROE)

 The Return On common equity (ROE) measures the return earned on
the common stock-holders investment in the firm. Generally the owners are better
off the higher in this return. The Return ON Equity is calculated as follows:

ROE=Earnings Available for common stock-holders/Common stock equity

ROE 2016 2017
17.44% -11.17%

INTERPRETATION

As the return on equity was decreased in Year 2017 as compared to the

year 2016 so it is not good sign for BOP. ROE of 2017 i.e -11.17% indicates that BOP
Lost -11.17% on each rupee of common stockholder equity whereas in year 2016
ROE i.e 17.44% indicates that BOP has earned 17.44% on each rupee of common
stockholder equity.

3.6.4 BOOK VALUE PER SHARE

A measure used by owners of common shares in a firm to determine

the level of safety associated with each individual share after all debts are paid
accordingly.

In simple terms it would be the amount of money that a holder of

common share would get if a company were to liquidate.

Book Value per Share=Common Stock Equity/Number Of Common Share

Outstanding
Book Value per Share 2016 2017
17.91 11.25
 INTERPRETATION

Book value per share has decreased in 2017 which is not beneficial for
the common share-holders as compared to the Book Value Per Share of 2016.

YEAR 2017 2016 2015

Book Value 11.25 17.91 14.58

Book Value Growth -37.19 22.84 17.30

Equity To Assets Ratio 4.58 5.11 4.80

Price To Book Value Average 1.08 0.62 0.64

Return On Assets -0.51 0.89 1.01

Return On Capital Employed 0.00 0.00 0.00

Return On Equity -11.17 17.44 20.94

3.6.5 EARNINGS PER SHARE (EPS) (BEFORE TAX)

It is generally of interest to present or prospective stock-holders and management.

Formula for calculating EPS is as follows:

EPS=Earnings Available for Common Stock-holders/ Number of Common Shares

outstanding.
EPS 2016 2017
2.32 -1.26
 INTERPRETATION

EPS in 2017 is lesser than EPS of 2016 which shows amount of earnings
had decreased in 2017 which is very much alarming for the Bank.

YEAR 2017 2016 2015

Earning Growth -168.38 2.32 70.35

Earning Per Share EPS -1.26 3.12 3.05

Price To Earning Ratio P / E Average -9.70 3.55 3.07

3.6.6 TIMES INTEREST EARNED RATIO

This shows the ability of the firm to make interest payments. If the
value of this Ratio is more than this shows that financial firm have more ability to
pay the amount of interest but if its value is lower than this shows that financial
firm is unable to make the payments of interest.

INTERPRETATION

If Times Interest Earned Ratio is less than “1” this shows that firm is unable to
make payments of Interest whereas if Times Interest Earned Ratio is greater than
“1” this shows that firm has the ability to make payments of interest.
 If the value of Times Interest Earned Ratio is “2” this shows that firm
have double ability to make payments of Interest.

YEAR 2017 2016 2015

Net Interest To Assets 2.40 2.25 2.34

BOP has more the double ability to make the payments of interest in 2017.

Time interest earned ratio=Earnings before Interest and Taxes/Taxes

3.6.7 CASH DIVIDEND

It means that part of profit which is distributed among the shareholders

in the form of Cash.

Cash Dividend 2016 2017

0.00% 0.00%

3.6.8 DIVIDEND YIELD RATIO

It is a financial ratio that shows how much a company pays out in

dividends each year relative to its share price.

Dividend Yield Ratio=Dividend per Share/Market Price Per share

Dividend Yeild Ratio 2016 2017
0.00% 0.00%

Interpretation:

This shows that during 2017 BOP had paid Nothing to their
shareholders because of loss.
3.6.9 DIVIDEND PAYOUT RATIO

The percentage of earnings paid to shareholders in dividends. A

reduction in dividends paid is looked poorly upon by the investors, and the stock
price usually depreciates as investors seek other dividend-paying stocks.

A stable dividend pay-out ratio indicates a solid dividend policy by the

company’s board of directors.

Dividend Payout Ratio=Dividend Per share/EPS

Dividend Payout Ratio 2016 2017
0.00% 0.00%

INTERPRETATION

There was loss instead of earnings so BoP’s payout ratio is 00 in 2017

as well as in 2016.

YEAR 2017 2016 2015

Dividend 0.00 0.00 0.00

Dividend Cover 0.00 0.00 0.00

Dividend Growth -14.29 0.00 16.67

Dividend Yield Average 0.00 0.00 0.00

Payout Ratio 0.00 0.00 0.00

3.6.10 PRICE OF THE SHARE

 YEAR 2017 2016 2015

Price Average 12.19 11.09 9.38

Price High 18.25 20.37 11.01

Price Low 7.44 7.96 7.05