CHAPTER 03

FINANCIAL ANALYSIS

3.1. Consolidated Statement of Financial Position:

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3.2. Consolidated PLS:

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3.3. Consolidated Cash Flow Statement:

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3.1. Current ratios:

This ratio shows organization ability to cover short-term debt through short-term assets.

The 2-year comparison of Askari Bank Limited is as follows.

Current asset /Current debt Current ratio

2018 53,281,047/21,178,476 2.51

2017 47,433,160/17,098,223 2.77

Table#3.1

Analysis:

 The current ratio for the financial year 2018 is in decline from the financial year 2017.
It tells that for every Rupee 1 current liability it has 2.51 rupees, which covers through
current assets.

 The current ratio for 2018 is declining from the 2017 fiscal year. It means that current
liability of Rupee 1, it has 2.51 rupees of current assets.

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 3.4. Cash ratios:

Sometimes we need to consider the liquidity of the company from a very conservative point
of view. For example, a company may have committed its receivables and inventory. In such
situations, the best indicator of short-term liquidity is the cash ratio.

Cash/Current debts CR

2018 49,187,645/21,178,476 2.32

2017 44,239,325/17,098,223 2.58

Table#3.2

Analysis:

 The cash ratio is decreasing in fiscal 2018, so the current ratio is decreasing rapidly.
The current ratio in fiscal 2018 is 2.32 rupees.

 In 2018 the value is 2.32 decrease 2.58 in 2017

 This is not a good sign for Investors of NBP

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 3.5. Operating cashflows to current debt ratio:

The ratio of operating cash flow to current liabilities represents the cash flow per unit of our
current liabilities.

Operating cashflow/current Operating cashflow to current

Liabilities Liabilities

2018 (43,574,473)/21,178,476 2.05

2017 26,339,803/17,098,223 1.54

Table#3.3

Analysis:

 Askari Bank limited has increased its operating cash flow to current debt ratio. The
increase was due to cash flow operations, which increase more than six times.

 In 2018 the ratio was 2.05 and its increases from 1.54 in 2017.

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 3.6. Turnover of receivables:

Turnover of receivables provides insight into the quality of receivables or advances of the
company and the extent of its success in the collection.

Interest earned/Advances Turnover of receivables

2018 43,669,883/343,107,147 0.12

2017 36,367,220/258,693,086 0.14

Table#3.4

Analysis:

 Bank receivables turnover in 2018 are slightly down side from previous year.

 In 2018 the number of receivables turnover is better than 2017

 In 2018 is 0.12 then it decrease to 0.16 in 0.14

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 3.7. Assets turnover:

Total asset turnover measures the ability of a business to generate profit / sales using assets
by using if its assets.

Revenue earned/ total TAT

assets×100

2018 43,669,883/706,666,079 6.17%

2017 36,367,220/662,938,624 5.85%

Table#3.5

Analysis:

AKBL's asset management results grow to 6.17% in 2018 compared with 2017 is 5.85%. In
other words, it can be said that a Rs 1 investment in total assets yields 6 as a return. The main
factor in the decline is the decrease in total profit / earnings earned in 2017.

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 3.8. Fixed assets turnover:

In order to generate sales and profits, it may be necessary to find out the impact of fixed
assets. Fixed asset turnover is a tool to examine the effectiveness of a company's fixed assets
to generate interest income.

Revenue/ Fixed assets×100 FAT

2018 43,669,883/12,791,827 341%

2017 36,367,220/9,885,958 367%

Table#3.6

Analysis:

A two-year comparison of fixed asset sales to the AKBL shows that this ratio has risen in the
year 2018. The increase in the total amount of markup income and decrease in fixed assets
has raised this ratio.

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 3.9. Net profit margins:

This is conservative way for sales profitability.

Net profit/ revenue earned NPM

2018 4,428,619/43,669,883 10.14%

2017 5,128,297/36,367,220 14.10%

Table#3.7

Analysis:

 The value of profit margin decreases from 10.14% to 14.10%

 Table represent the amount of net profit margin i.e. base year profit 10.14% whereas
in 2017 it was 14.10%

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 3.10. Return on investment:

ROI measures the ability to use an asset to make a profit by comparing the profit to an asset
that benefits from the DuPont approach.

N.P/Total investment ROI

2018 4,428,619/33,557,083 0.13

2017 5,128,297/32,500,883 0.15

Table#3.8

Analysis:

Askari bank showed a low ROI in 2018 compared to 2017. Its ROI decreased from 2018 to
0.15 to 0.13 in 2017. Asset Turnover, though declining, is still improving. NBP will bring the
ratio up.

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 3.11. Return on equity:

This ratio compares net income with the capital that shareholders have invested in the
company. Return on equity is high, reflecting strong investment opportunities and the ability
to accept cost-effective management. The high return on equity reflects strong investment
opportunities and effective cost control accepted by the business.

N.P/equity ROE

2018 4,428,619/12,602,602 0.35

2017 5,128,297/12,602,602 0.40

Table#3.9

Analysis:

In the above ratio comparison, the ROE ratio in 2018 decreased from 0.35 to 0.40 in 2017.
While the share dividend and asset turnover rates have fallen, the improvement of the net
profit ratio in 2017 is favorable to the ROE ratio.

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 3.12. Advances to deposits ratios:

The bank compares advances with deposits and see comparisons of 2 years.

Advances /Deposits Advances to deposits

2018 343,107,147/573,596,926 0.59

2017 258,693,086/525,805,051 0.49

Table#3.10

Analysis:

There is an increase in both advances and deposits in 2018. This shows a good signal to the
bank. But it declined compared to 2017.

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 3.13. Investment to deposits ratios:

The banks compares its investments to deposits and sees comparisons of 2 years.

Investment /deposits ITOR

2018 260,233,987/573,596,926 0.45

2017 314,956,748/525,805,051 0.59

Table#3.11

Analysis:

It shows that the bank made a good investment to decrease its total in 2018, compared to
2017.

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