Financial Statement Analysis

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Table of Contents
Introduction:.............................................................................................................................................2 Background of ACLEDA Bank:...........................................................................................................3 Objectives of study...............................................................................................................................4 Significance of study............................................................................................................................5 II. Methodology / Research Design:.........................................................................................................5 Source of data.......................................................................................................................................5 Data collection procedure.....................................................................................................................6 Sample design.......................................................................................................................................6 III. Financial Statement Analysis:............................................................................................................6 Comparative financial statement analysis:...........................................................................................6 Common-size financial statement Analysis (Horizontal and Vertical analysis):...............................10 Ratio Analysis.....................................................................................................................................15 Cash flow analysis..............................................................................................................................21 IV. Summary:.........................................................................................................................................22 V. Conclusion and Recommendation.....................................................................................................23 5.1. Conclusion / Finding....................................................................................................................23 5.2. Recommendation.........................................................................................................................24 REFERENCES.......................................................................................................................................25

Introduction:
Financial statements for banks present a different analytical problem than manufacturing and service companies. As a result, analysis of a bank's financial statements requires a distinct approach that recognizes a bank's somewhat unique risks. Banks take deposits from savers, paying interest on some
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of these accounts. They pass these funds on to borrowers, receiving interest on the loans. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. By managing this flow of funds, banks generate profits, acting as the intermediary of interest paid and interest received and taking on the risks of offering credit. As one of the most highly regulated banking industries in the world, investors have some level of assurance in the soundness of the banking system. As a result, investors can focus most of their efforts on how a bank will perform in different economic environments. In this assignment, we are trying to showing them the performance of ACLEDA Bank Plc. Background of ACLEDA Bank: ACLEDA (Association of Cambodian Local Economic Development Agencies) was established in January, 1993, by a group of friends as a Micro Finance Institution (MFI) for micro and small enterprises development and credit. For the first staff and the institution expended rapidly from 5 branch offices with 28 staff in 1993 to 27 offices with 330 staff in 1998.At the end of 1998, the value of the loan portfolio was more than USD 10million serving around 60,000 active loan customers. By the end of 2000, ACLEDA Bank had expended its branch network to 68 offices with 772 staff throughout 14 provinces. The value of the loan portfolio had grown to more than USD 16million serving more than 60,800 borrowing customers. In addition to micro finance, ACLEDA Bank was appointed as an agent of Western Union and now handles the largest number of family remittances from overseas. On 20th December 2004, ACLEDA Bank Plc. was assigned first-time ratings by Moodys Investors Services, the first bank in Cambodia to receive an international credit rating. On 16th January 2007, ACLEDA scored another first for Cambodia by arranging a comprehensive insurance package with Jardine Lloyd Thompson Asia (JLT), the largest UK insurance broker listed on the London Stock Exchange, and Asia Insurance (Cambodia) Plc. The policy provides for Bankers Blanket Bond, Electronic and Computer Crime, Directors & Officers Liability and Company Reimbursement Insurance covering such risks as theft of cash and other securities, fraud and embezzlement, forgeries and counterfeiting of valuable documents, computer fraud and malicious attack on the banks systems and third party liability of its directors and senior management.
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On December 31st, 2007, ACLEDA Bank was assigned first-time ratings by Standard and Poors Corporation (S&P), the first bank in Cambodia to receive an international credit rating. On June 22nd, 2009, the National Bank of Cambodia has officially approved ACLEDA Bank request to increase our capital to USD 68.15million. On June 22nd, 2009, The Ministry of Economy and Finance has announced today that it has signed a Memorandum of Understanding between Ministry of Economy and Finance and ACLEDA Bank Plc under a pilot scheme to use commercial banking services for its national revenue and expenditure transactions, presided over by H.E. Keat Chhon, Deputy Prime Minister, Minister of Ministry of Economy and Finance. Vision ACLEDA Banks vision is to be Cambodias leading commercial bank providing superior financial services to all segments of the community. Mission Our mission is to provide micro, small and medium entrepreneurs with the wherewithal to manage their financial resources efficiently and by doing so to improve the quality of their lives. By achieving these goals we will ensure a sustainable and growing benefit to our shareholders, our staff and the community at large. We will at all times observe the highest principles of ethical behavior, respect for society, the law and the environment. Objectives of study The objective of this assignment is to provide insight into how the bank works, what are the strengths and weakness of the bank? Will be answer with the comparison of the ratios, to give the stock holder a clear view about the financial feasibility of the bank so that they can take the appropriate decision. And most significantly it will provide a good understanding of the business cycle and the yield curve both of which have a major impact on the economic performance of bank. The objectives of financial analysis to set of five tools important in ACLEDA Bank Plc, in order to carry out the following objectives: Page 4

To find out comparative financial statement analysis To find out common-size financial statement analysis To find out ratio analysis

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Financial Statement Analysis

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To find out cash flow analysis To find out trend of statement

Significance of study Financial statements provide an overview of a business' financial condition in both short and long term. All the relevant financial information of a business enterprise presented in a structured manner and in a form easy to understand, is called the financial statements. Therefore these financial statements are very useful for the stake holder, as they obtain all insight information. In assessing the significance of various financial data, experts engage in ratio analyses, the process of determining and evaluating financial ratios. A financial ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets, current liabilities. The basic source for these ratios is the company's financial statements that contain figures on assets, liabilities, profits, or losses. Financial ratios are only meaningful when compared with other information. Ratio analysis can reveal much about a company and its operations. However, there are several points to keep in mind about ratios. The goal in analyzing financial statements is to assess past performance and current financial position and to make predictions about the future performance of a company. Investors who buy stock are primarily interested in a company's profitability and their prospects for earning a return on their investment. Analysts can obtain useful information by comparing a company's most recent financial statements with its results in previous years and with the results of bank. Our aim is to summarize all that data into a form which is easily understood by all the relevant parties.

II. Methodology / Research Design:

This section should provide solid or concrete foundations to the study. Quality and value of the research report depends upon how precisely and accurately the data is collected, processed, interpreted and analyzed so that fruitful conclusions may be drawn out of it. It includes:

Source of data To think about the issue of data collection means you are wondering about the characteristics of the methods used. Each method has its own advantages and inconveniences. With each technique you
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might also found a few people who will disapprove its use for such or such reason. These documentary sources we take from: Annual report of ACLEDA Bank Plc. Website of National Bank in Cambodia.

Data collection procedure In this assignment we use secondary sources for data collection for our works, which include internet and document from this bank. Sample design Because of bank have 24 banks and we have many groups in our class, so our group to decided choice one of 24 banks is ACLEDA Bank Plc., to analysis because we will be compare of financial statement in 2008 and 2009.

III. Financial Statement Analysis:

Comparative financial statement analysis: The comparative financial statement analysis is reviewing consecutive balance sheets, income statements, or statements of cash flows from period to period. This usually involves a review of changes in individual account balances on a year-to-year or multiyear basis. Two techniques of comparative analysis are especially popular: year-to-year change analysis and index-number trend analysis that we comparative analysis ACLEDA Banks balance sheet, income statement and cash flow on 2008 and 2009. Comparative Analysis ACLEDA Bank Plc., Balance Sheet December 31, 2008 and 2009 2008 Assets Cash and bank balances Deposits and placements with banks Loans and advances-net Others assets 90,828,008 52,450,345 456,309,252 10,813,149 2009 102,239,397 152,270,606 528,034,076 10,393,477 Change1 ($) 11,411,389 99,820,261 71,724,824 (419,672) Change1 (%) 12.56 190.31 15.72 (3.88)

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BUILD BRIGHT UNIVERSITY 30,496,958 (876,385) 397,182 3,081,301 837,731 ....................... 216,473,589 58.06 (16.00) 19.99 18.13 697.64 .................... 31.49

Statutory deposits Investment in subsidiary Intangible assets Property and equipment Deferred tax assets Total assets Liabilities and shareholders' funds Deposits from customers Deposits by banks Borrowings Senior debt Subordinated debt Other liabilities Provision for provident fund Provision for income tax Total liabilities Shareholders' funds Share capital General reserves Retained earnings Total shareholders' funds Total liabilities and shareholders' funds Interpretation

52,525,490 5,477,399 1,986,770 16,996,917 120,081 ......................... 687,507,411

83,022,448 4,601,014 2,383,952 20,078,218 957,812 ........................ 903,981,000

457,572,432 29,459,806 42,136,638 6,047,190 45,074,971 13,059,282 2,558,940 4,655,948 ........................ 600,565,207

670,260,217 17,438,579 33,556,069 5,006,718 45,074,485 16,272,070 7,465,044 2,253,070 ........................ 797,326,252

212,687,785 (12,021,227) (8,580,569) (1,040,472) (486) 3,212,788 4,906,104 (2,402,878) ...................... 196,761,045

46.48 (40.81) (20.36) (17.21) (0.00) 24.60 191.72 (51.61) .................... 32.76

50,000,000 15,755,379 21,186,825 ...................... 86,942,204 ....................... 687,507,411

68,150,000 28,792,204 9,712,544 ....................... 106,654,748 ........................ 903,981,000

18,150,000 13,036,825 (11,474,281) ..................... 19,712,544 ..................... 216,473,589

36.30 82.75 (54.16) .................... 22.67 ................... 31.49

This analysis reveals several items of note. First, cash and bank balances increased 12.56% between 2008 and 2009 because the bank increased balance in National Bank of Cambodia and bank outside Cambodia in 2009. However, deposits and placements with banks increased until 190.31% because of in Cambodia: Fixed deposits in 2009 = $131,565,129 that in 2008 have only $40,036,550 and Outside Cambodia: Overnight placements between this two years also more different amount (Overnight placement: 2009 = $20,525,477 and 2008 = $10,521,228).

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For loans and advances-net increased 15.72% this percentage is not good for loans because if we look at detail of ACLEDA annual report 2009 we see commercial loans (long-term loans) and personal loans increased in this year. Other assets (interest receivable, prepayments and deposits, receivables from Western Union and other) decreased 3.88% because of reduced receivable from Western Union and other in 2009. The statutory deposits are maintained with the NBC and Bank of Laos (BOL) in compliance with the Cambodian Law on Banking and Financial institutions and law and regulation of BOL; in which the reserve amounts are determined by the percentages of the Banks minimum capital and customers deposits. The statutory deposits increased 58.06% because the level of the Banks customers deposits. Its maintained in compliance with the NBCs Prakas No. B7-09-020 dated 26-01-2009 at the rates of 8% of customers deposits in KHR and 12% in currency other than KHR. On 29-01-2009, the reserve requirement was maintained according to the NBCs Prakas No. B7-08-063 dated 25-04-2008, in which the reserve requirement in customers deposits in currencies other than KHR was increased from 8% to 16% effective from the date of the base period starting from 27 June 2008. On 13 December 2007, a new commercial bank, ACLEDA Bank Lao Ltd was established in the Lao Peoples Democratic Republic with registered and paid-up capital of 100billon Kip equivalent (US$11,531,365). So, Investment in subsidiary decreased 16% of 2009, because of on 24 March 2008, the bank initially invested a 47.5% equity interest in ACLEDA Bank Lao. For 8 July 2009, the bank disposed of 7.6% of the shares of ACLEDA Bank Lao to the International Finance Corporation. As at date of this report, the bank holds 39.9% of the shares in ACLEDA Lao. Intangible assets and property & equipment increased similar percentage. So, total asset increased 31.49% of 2009. For liabilities analysis: the deposit from customer is increased 46.48% because saving and fixed deposit increased higher then 2008. But deposit by banks is decreased because in 2008 fixed deposit by bank $15,060,304 and 2009 have $150,000 for different big amount that make deposit by banks decreased like this. Fortunately, the borrowing from related parties (IFC and KIW) and non-related parties (Blue Orchard, Micro finance securities, National bank of Cambodia, Foreign trade bank) cut down in 2009 and for other debt decreased also. But other liabilities are increased in this year because of interest payable and interest in suspense increased.

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Provision for provident fund increased because of during the year additions banks contribution, employees and other contribution and interest so at the end of the year provision increased more than last year. Provision for income tax decreased 51.61% of 2009 because profit before income tax in 2008 more than 2009, so, tax expense in 2008 also bigger than 2009 too. However, some element of liabilities decreased but total liability still increased in 2009. For share capital increase 36.30% because of the bank paid up capital from $50,000,000 to $68,150,000 through issue of 10,000,000 shares at $1 each on 24 February 2009 and bonus issue of 8,150,000 shares at $1 each on 29 June 2009. Comparative Analysis ACLEDA Bank Plc., Income Statement December 31, 2008 and 2009 2008 88,660,338 20,199,965 ...................... 68,460,373 10,971,459 444,332 51,154,064 ...................... 28,722,100 2,180,464 ...................... 26,541,636 5,434,811 2009 96,748,267 28,723,907 ..................... 68,024,360 13,066,386 166,626 66,371,804 ..................... 14,885,568 2,769,215 ..................... 12,116,353 2,403,809 Change ($) 8,087,929 8,523,942 .................... (436,013) 2,094,927 (277,706) 15,217,740 .................... (13,836,532) 588,751 .................... (14,425,283) (3,031,002)
1

Interest income Interest expense Net interest income Net fee and commission income Other income General and administrative expenses

Change1 (%) 9.12 42.20 .................. (0.64) 19.09 (62.50) 29.75 .................. . (48.17) 27.00 .................. (54.35) (55.77) .................. . (53.98)

Operating income Provision for bad and doubtful loans and advances Profit before income tax Income tax expense

Net profit for the year Interpretation

..................... ...................... ..................... 21,106,825 9,712,544 (11,394,281)

This income statement both interest income and interest expense increased by the different percentage because of interest expense include saving and fixed interest expense, so that, net interest income
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decreased 0.64% in 2009 because of interest income lower than interest expense. Net fee and commission income increased 19.09% that fee & commission income (loan processing fees, commission received, commitment fees, net foreign exchange gain, and early loan redemption fees, other...) increased than last year. General and administrative expense increased 29.75% in 2009 that operating income decreased 48.17% because of net fee and commission and other income lower than general and administrative expense. Provision for bad and doubtful loans and advances increased 27% ,so profit before income tax decreased 54.35% and income tax expense decreased 55.77% in 2009 because in 2008 income tax expense paid current income tax higher than 2009. However, net profit for the year still decreased 53.98%. Common-size financial statement Analysis (Horizontal and Vertical analysis): The term "trend analysis" refers to the concept of collecting information and attempting to spot a pattern, or trend, in the information. In some fields of study, the term "trend analysis" has more formally-defined meanings. Although trend analysis is often used to predict future events, it could be used to estimate uncertain events in the past. Financial statement information is used by both external and internal users, including investors, creditors, managers, and executives. These users must analyze the information in order to make business decisions, so understanding financial statements is of great importance. Several methods of performing financial statement analysis exist. I will discuss two of these methods: horizontal analysis and vertical analysis. 3.2.1 Horizontal analysis: The horizontal analysis compares specific items over a number of accounting periods. For example, accounts payable may be compared over a period of months within a fiscal year, or revenue may be compared over a period of several years. It is a procedure in fundamental analysis in which an analyst compares ratios or line items in a company's financial statements over a certain period of time. The analyst will use his or her discretion when choosing a particular timeline; however, the decision is often based on the investing time horizon under consideration. Common-size comparative (Horizontal) ACLEDA Bank Plc., Balance sheet December 31, 2007, 2008 and 2009 Horizontal percentage
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BUILD BRIGHT UNIVERSITY 2009 102,239,397 152,270,606 528,034,076 10,393,477 83,022,448 4,601,014 2,383,952 20,078,218 957,812 ..................... . 903,981,000 2007 100 100 100 100 100 100 100 100 0 ........ . 100 2008 187.2 466.6 146.9 174.5 522.2 7.6 117.5 139.1 0.0 ......... 145.3 2009 210.7 1354.5 170.0 167.7 825.4 6.4 141.0 164.3 0.0 ......... 191.1

2007 Assets Cash and bank balances Deposits and placements with banks Loans and advances-net Others assets Statutory deposits Investment in subsidiary Intangible assets Property and equipment Deferred tax assets 48,526,160 11,241,690 310,681,263 6,198,293 10,058,643 72,437,822 1,691,255 12,218,219 0 .................... 473,053,345

2008 90,828,008 52,450,345 456,309,252 10,813,149 52,525,490 5,477,399 1,986,770 16,996,917 120,081 ..................... . 687,507,411

Total assets Liabilities and shareholders' funds Deposits from customers Deposits by banks Borrowings Senior debt Subordinated debt Other liabilities Provision for provident fund Provision for income tax

342,776,564 1,756,751 44,830,937 6,242,359 13,241,055 12,500,016 225,935 1,827,349 .................... 423,400,966

457,572,432 29,459,806 42,136,638 6,047,190 45,074,971 13,059,282 2,558,940 4,655,948 ..................... . 600,565,207

670,260,217 17,438,579 33,556,069 5,006,718 45,074,485 16,272,070 7,465,044 2,253,070 ..................... . 797,326,252

100 100 100 100 100 100 100 100 ........ . 100

133.5 1676. 9 94.0 96.9 340.4 104.5 1132. 6 254.8 ......... 141.8

195.5 992.7 74.9 80.2 340.4 130.2 3304.1 123.3 ......... 188.3

Total liabilities Shareholders' funds Share capital General reserves Retained earnings Total shareholders' funds Total liabilities and shareholders' funds

30,000,000 9,913,461 9,738,918 .................... 49,652,379 .................... 473,053,345

50,000,000 15,755,379 21,186,825 ..................... . 86,942,204 ..................... . 687,507,411

68,150,000 28,792,204 9,712,544 ..................... . 106,654,748 ..................... . 903,981,000

100 100 100 ........ . 100 ........ . 100

166.7 158.9 217.5 ......... 175.1 ......... 145.3

227.2 290.4 99.7 ......... 214.8 ......... 191.1

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*Each year the common size statement is expressed in terms of the 2007, for cash and bank balance in
2009 is computed as follows: ($102,239,397 / $48,526,160) x 100 = 210.70%

Common-size comparative (Horizontal) ACLEDA Bank Plc., Income Statement December 31, 2007, 2008 and 2009 Horizontal percentage 2007 2008 2009 100.0 168.2 183.5 100.0 175.7 249.8 ......... ......... ......... 100.0 166.1 165.0 100.0 100.0 253.9 22.3 302.4 8.4 196.2 ......... 108.5

Interest income Interest expense Net interest income Net fee and commission income Other income General and administrative expenses Operating income Provision for bad and doubtful loans and advances Profit before income tax Income tax expense

2007 52,724,561 11,496,954 .................. 41,227,607 4,320,929 1,992,335 33,822,003 .................. 13,718,868

2008 88,660,338 20,199,965 ................. 68,460,373 10,971,459 444,332 51,154,064 .................. 28,722,100

2009 96,748,267 28,723,907 .................. 68,024,360 13,066,386 166,626 66,371,804 ................. 14,885,568

100.0 151.2 ......... ......... 100.0 209.4

1,441,106 .................. 12,277,762 2,538,844 .................. 9,738,918

2,180,464 .................. 26,541,636 5,434,811 .................. 21,106,825

2,769,215 .................. 12,116,353 2,403,809 .................. 9,712,544

100.0 151.3 ......... ......... 100.0 216.2 100.0 214.1 ......... ......... 100.0 216.7

192.2 ......... 98.7 94.7 ......... 99.7

Net profit for the year *Note that the percentage figures for each year are expressed in terms of the year. For interest income in 2009
is computed as follows:

($96,748,267 / $52,724,561) x 100 = 183.50%

3.2.2 Vertical Analysis:

When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically
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on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies. Common-size comparative (Vertical) ACLEDA Bank Plc., Balance sheet December 31, 2008 and 2009 Vertical percentages 2008 2009 13.2 7.6 66.4 1.6 7.6 0.8 0.3 2.5 0.0 ............... 100.0 11.3 16.8 58.4 1.1 9.2 0.5 0.3 2.2 0.1 .............. 100.0

2008 Assets Cash and bank balances Deposits and placements with banks Loans and advances-net Others assets Statutory deposits Investment in subsidiary Intangible assets Property and equipment Deferred tax assets Total assets Liabilities and shareholders' funds Deposits from customers Deposits by banks Borrowings Senior debt Subordinated debt Other liabilities Provision for provident fund Provision for income tax Total liabilities Shareholders' funds Share capital General reserves Retained earnings
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2009 102,239,397 152,270,606 528,034,076 10,393,477 83,022,448 4,601,014 2,383,952 20,078,218 957,812 ..................... 903,981,000

90,828,008 52,450,345 456,309,252 10,813,149 52,525,490 5,477,399 1,986,770 16,996,917 120,081 ....................... 687,507,411

457,572,432 29,459,806 42,136,638 6,047,190 45,074,971 13,059,282 2,558,940 4,655,948 ...................... 600,565,207

670,260,217 17,438,579 33,556,069 5,006,718 45,074,485 16,272,070 7,465,044 2,253,070 ..................... 797,326,252

66.6 4.3 6.1 0.9 6.6 1.9 0.4 0.7 ................. 87.4

74.1 1.9 3.7 0.6 5.0 1.8 0.8 0.2 ............... 88.2

50,000,000 15,755,379 21,186,825

68,150,000 28,792,204 9,712,544

7.3 2.3 3.1

7.5 3.2 1.1

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....................... ..................... ................. ............... Total shareholders' funds 86,942,204 106,654,748 12.6 11.8 ...................... ..................... ................. ............... Total liabilities and shareholders' funds 687,507,411 903,981,000 100.0 100.0 *Each asset in common size statement is expressed in terms of total assets, and each liability and equity account is expressed in terms of total liabilities and stockholders equity, For cash and bank balance in 2009 is computed as follows:

($102,239,397 / $903,981,000) x 100 = 11.30%

For this statement that placing all assets in common size form clearly shows the relative importance of the deposits as compared to the loans. Notice, which the deposits have increased in relative importance and that both cash and loans have increased bit than deposits mean that ACLEDA Bank Plc., customer and other banks trust so deposit increased more than loans and also show that this bank inability to issued loan to customer because if deposit increased the bank will be paid interest to customer. Common-size comparative (Vertical) ACLEDA Bank Plc., Income Statement December 31, 2008 and 2009 Vertical percentages 2008 2009 100.0 100.0 22.8 29.7 ................ 77.2 12.4 0.5 57.7 ................ 32.4 2.5 ................ 29.9 6.1 ................ 23.8 ............... 70.3 13.5 0.2 68.6 ................. 15.4 2.9 ................. 12.5 2.5 ................. 10.0

Interest income Interest expense

Net interest income Net fee and commission income Other income General and administrative expenses Operating income Provision for bad and doubtful loans and advances Profit before income tax Income tax expense Net profit for the year
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2008 88,660,338 20,199,965 .......................... . 68,460,373 10,971,459 444,332 51,154,064 .......................... 28,722,100 2,180,464 .......................... 26,541,636 5,434,811 .......................... 21,106,825

2009 96,748,267 28,723,907 ....................... 68,024,360 13,066,386 166,626 66,371,804 ...................... 14,885,568 2,769,215 ...................... 12,116,353 2,403,809 ....................... 9,712,544

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*Note that the percentage figures for each year are expressed in terms of interest income for the year. For
interest expense in 2009 is computed as follows:

($28,723,907 / $68,024,360) x 100 = 29.70% By placing all items on the income statement in common size in terms of interest income, it is possible to see at a glance how each dollar of interest income is distributed among the various expense and income. Interest expense as a percentage of interest income increased from 22.80% in 2008 to 29.70% in 2009. Or looking at this form a different view point, the net interest income percentage declined from 77.20% in 2008 to 70.30% in 2009. Managers and investment analysis often pay close attention to the net interest income percentage since it is considered a broad gauge of profitability. The net interest income percentage is computed by the following formula: Net interest income percentage = Net interest income / interest income Net interest income percentage tends to increase or decrease with interest income volume. While a higher net interest income percentage is considered to be better than a lower net interest income percentage, there are exceptions. Some banks purposely choose a strategy emphasizing low interest and hence low net interest income. ACLEDA Bank choose a strategy low interest that show in this figure low net interest income in 2009 and net interest income percentage also decreased than last year. Common size income statement shows, however, that on a relative to net fee and commission income have increased 13.50% of interest incomes. Ratio Analysis Financial ratio analysis is the calculation and comparison of ratio which are derived from the information in a banks financial statements. The level and historical trends of these ratios can be used to make inferences about a banks financial condition, its operations and attractiveness as an investment. For this assignment select ACLEDA Bank to calculate and compare between 2008 and 2009 financial year performance. For Different ratios are used for different purposes; these ratios can be grouped into various classes according to the financial activity. Ratios are classified categories. a) Liquidity Ratios b) Leverage Ratios c) Profitability Ratios d) Activity Ratios
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a). Liquidity Ratio: Liquidity ratios measure a firms ability to meet its current obligations. These include: Current Ratio Years Current Assets Current Liabilities Current Ratio 2008 670,390,413 593,350,319 1.13 2009 882,944,970 787,608,138 1.12

Interpretation: The current ratio for the year 2008 and 2009 is 1.13 & 1.12 respectively, compared to standard ratio 2:1 this ratio is lower which shows low short term liquidity efficiency at the same time holding less than sufficient current assets mean inefficient use of resources. Working Capital Years Current Assets Current Liabilities Working Capital 2008 712,088,578 620,839,377 91,249,201 2009 932,001,996 823,316,436 108,685,560

Interpretation: It is very clear from the above calculations that the working capital of the bank is gradually increasing between 2008 & 2009 shows good short term liquidity efficiency. Sales to Working Capital 2008 88,660,338 91,249,201 0.97times

Years Sales (Interest Income) Working Capital Sales to Working Capital

2009 96,748,267 108,685,560 0.89times

Interpretation: This liquidity ratio for the years 2008 & 2009 is 0.97 & 0.89 times respectively, compared to standard ratio 2:1 this ratio is lower which shows low short term liquidity efficiency at the same time holding less than sufficient current assets mean inefficient use of resources. b). Leverage Ratios: By using a combination of assets, debt, equity, and interest payments, leverage ratios are used to understand a company's ability to meet it long term financial obligations. Leverage ratios measure the degree of protection of suppliers of long term funds. The level of leverage
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depends on a lot of factors such as availability of collateral, strength of operating cash flow and tax treatments. Thus, investors should be careful about comparing financial leverage between companies from different industries. For example companies in the banking industry naturally operates with a high leverage as collateral their assets are easily collateralized. These include: Debt ratio Years Total liability Total Assets Total debt ratio 2008 600,565,207 687,507,411 0.87 2009 797,326,252 903,981,000 0.88

Interpretation: The ratio of total debt to total assets, generally called the debt ratio, measures the percentage of funds provided by the creditors. The proportion of a firms total assets that are being financed with borrowed funds. The higher the ratio, the more leverage the company is using and the more risk it is assuming. Calculating the debt ratio, we came to see that this bank is highly leveraged one. Debt to equity ratio Years Total liability Total shareholders' equity Total debt to equity 2008 600,565,207 86,942,204 6.91 2009 797,326,252 106,654,748 7.48

Interpretation: The debt to equity ratio is the most popular leverage ratio and it provides detail around the amount of leverage (liabilities assumed) that a company has in relation to the monies provided by shareholders. A high debt to equity ratio implies that the company has been aggressively financing its activities through debt and therefore must pay interest on this financing. We see this bank have increased 6.91% to 7.48% in the year 2008 and 2009. Current Worth / Net worth Ratio Current Worth Net Worth Years Current Worth Net Worth
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= Total Current Assets Total Current Liabilities = Total Assets - Total Liabilities 2008 91,249,201 86,942,204 2009 108,685,560 106,654,748

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Financial Statement Analysis

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Current Worth to Net

Interpretation: We can see from the above calculations that this ratio continuously decreasing in 2008 is 1.05 and 2009 is 1.02. Total Capitalization Ratio Years Long term debt Long term debt + Equity Capitalization Ratio 2008 7,214,888 94,157,092 0.08 2009 9,718,114 116,372,862 0.08

Interpretation: This ratio 2008 & 2009 are equal, but it still below standard 2:1. Debt Coverage Ratio Years Net Operating Income Total liability Debt coverage ratio 2008 28,722,100 600,565,207 0.05 2009 14,885,568 797,326,252 0.02

Interpretation: This ratio the investor want to know if net operating income compares to liability how many percentage of debt ratio of operating income. For ACLEDA Bank liability in 2008 low than 2009 so debt coverage ratio in 2008 have decreased from 5% to 2% in 2009. These results show that the bank has debt more than operating income in 2009. c). Profitability analysis: Profitability is the net result of a number of policies and decisions. This section is discusses the different measures of corporate profitability and financial performance. These ratios, much like the operational performance ratios, give users a good understanding of how well the company utilized its resources in generating profit and shareholder value. The long-term profitability of a company is vital for both the survivability of the company as well as the benefit received by shareholders. It is these ratios that can give insight into the all important "profit". Profitability ratios show the combined effects of liquidity, asset management and debt on operating results. These ratios examine the profit made by the firm and compare these figures with the size of the firm, the assets employed by the firm or its level of sales. There are four important profitability ratios that I am going to analyze: Return on Asset Years
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2008

2009

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Financial Statement Analysis

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Net Income Total assets Return on Assets(ROA)

21,186,825 687,507,411 0.03

Interpretation: The ROA gives investors an idea of how effectively the bank is converting the money it has to invest into net income. From here we can say that the bank has more ROA in 2008 than the 2009. So, the bank is earning more money by investing less money in 2008. Return on Equity Years Net Income Total shareholders' equity Return on equity(ROE) 2008 21,186,825 86,942,204 0.24 2009 9,712,544 106,654,748 0.09

Interpretation: Usually ratios over 20% are considered attractive. If a company can return its shareholders 20% or more for every year as good for investors because they can be reassured that the company is returning wealth to its shareholders. In 2008 this bank is doing well they earn more in this year, but in 2009 ROE has decreased 9.00% because of the bank increased capital $68,150,000 and low income. Gross profit margin Years Net interest income Sales (interest income) Gross profit margin 2008 68,460,373 88,660,338 0.77 2009 68,024,360 96,748,267 0.70

Interpretation: A high gross profit margin indicates that a firm can make a reasonable profit on sales. For the bank gross profit margin 77% in 2008 and 70% in 2009 both gross profit margin is high. This figure we see that sales in 2009 more than 2008 but net interest income 2009 lower than 2008 that mean this bank in 2009 more expense on sales. Operating profit margin: Years Income from operations Sales (interest income) Operating profit margin 2008 28,722,100 88,660,338 0.32 2009 14,885,568 96,748,267 0.15

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Interpretation: A high operating profit margin indicates that a bank can make income from sale more than operation. The operating profit margin ratio 32% in 2008 decreased 15% in 2009 show that this bank sale in 2009 more than 2008 and operation in 2008 more than 2009.
d). Activity Ratios:

Activity ratio are sometimes are called efficiency ratios. Activity ratios are concerned with how efficiency the assets of the firm are managed. These ratios express relationship between level of sales and the investment in various assets inventories, receivables, fixed assets etc. Asset Turnover Ratio: Years Sale Total assets Asset turnover ratio 2008 88,660,338 580,280,378 0.15 2009 96,748,267 795,744,206 0.12

Interpretation: Asset turnover measures a firms efficiency at using its assets in generating sales or revenue- the higher the number the better. It also indicates pricing strategy. The companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. The return on equity was maximum in 2008 but decreased 12% in 2009 this again may have happened due to the issue of more long-term debt in 2009. I.1 Trend Analysis: 2006 100.0 100.0 2007 160.3 155.0 2008 269.5 234.4 2009 294.1 304.1

Interest income General and administrative expenses

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Using year to year change analysis to compare financial statements that cover more than two or three periods is sometimes cumbersome. A useful tool for long-term trend comparisons is index-number trend analysis. For index-number trend analysis, we need not analyze every item in financial statements. Results of index-number trend analysis on selected financial statement items for ACLEDA Bank we choose interest income and general and administrative expenses to compare on those trend. Loans have been increasing more than expense since 2007 to 2008, but in 2009 is general and administrative expenses have increased bit more than interest income. This result showed this bank income from loan in 2009 cant support to expenses. Cash flow analysis The statement of cash flows, required by the Accounting Standard-3, is a major development in accounting measurement and disclosure because of its relevance to financial statement users. Cash Flow Statement is reasonably simple and easy to understand. It is also difficult to fudge or manipulate the cash flow numbers and hence often used as a way to test the real profitability of the firm. Cash Flow Statement will be useful to examine whether the profits are realized and if so, to what percentage of profit a firm has realized. In other words, a company that shows high level of profit need not be liquid in cash. Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds, Cash flow analysis provides insights into how a company is obtaining its financing and deploying its resources. It also is used in cash flow forecasting and as part of liquidity analysis. ACLEDA Bank Plc., Cash flow statement December 31, 2009 2009 Cash flow from operating activities Cash generated from operations Income tax paid 126,613,254 (5,644,418) ............................... . 120,968,83 6

Net cash generated from operating activities

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Cash flows from investing activities Fixed deposit with other banks Purchases of intangible assets Proceeds from disposals of subsidiary shares Purchases of property and equipment Proceeds from sales of property and equipment

7,515,000 (1,176,703) 985,953 (8,305,890) 74,603 ............................... . (907,037)

Net cash used in investing activities Cash flows from financing activities Repayment of borrowings Repayment of senior debt Proceeds from borrowings Proceeds from issuance of shares Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year 118,746,650 135,583,353 .............................

(15,625,129) (959,463) 7,000,000 8,269,443 ............................. (1,315,149)

254,330,00 3

ACLEDA Banks statement of cash flows is a useful starting point for cash flow analysis. It shows this bank generated $ 120,968,836 from operating activities. It then used $ 907,037 for investing activities, and net cash outflows related to financing activities of $ 1,315,149. Netting cash inflows and outflows the results in a net increase in cash and cash equivalents of $ 118,746,650. This preliminary analysis shows ACLEDA had considerable cash inflows from operating activities. While this analysis of the statement of cash flows conveys much information about the sources and uses of funds, it is important to analyze cash flows in more detail, in operating activities from cash flows paid to income tax of $ 5,644,418. For cash outflows the bank invested $1,176,703 on the purchase of intangible assets and $ 8,305,890 on the purchase of property and equipment to the increased asset in balance sheet of the bank.

IV. Summary:

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Financial Statement Analysis is a method used by interested parties such as investors, creditors, and management to evaluate the past, current, and projected conditions and performance of the firm. This report mainly deals with the insight information of the ACLEDA Bank Plc. In the current picture where financial volatility is endemic and financial intuitions are becoming popular, when it comes to investing, the sound analysis of financial statements is one of the most important elements in the fundamental analysis process. At the same time, the massive amount of numbers in a company's financial statements can be bewildering and intimidating to many investors. However, through financial ratio analysis, we tried to work with these numbers in an organized fashion and presented them in a summarizing form easily understandable to both the management and interested investors. It is required by law that all private and public limited companies must prepare the financial statements like, income statement, balance sheet and cash flow statement of the particular accounting period. The management and financial analyst of the company analyze the financial statements for making any further financial and administrative decisions for the betterment of the company.

V. Conclusion and Recommendation

5.1. Conclusion / Finding After compare and analysis the financial statement our group finding the result of the ACLEDA Bank Plc such as: Comparative analysis both the years we show that between 2008 and 2009 is current year to capital and deposits from customer have increased than last year. Common-size analysis of horizontal most of elements in 2008 low than 2009, but for vertical analysis of two years in 2009 better than. Liquidity position of the bank is not up to standard, but the liquidity position of current ratio in 2008 better than 2009. Working capital of this bank in 2009 better than 2008. Leverage ratios indicate the high risk associated with the bank. Generally leverage ratios, measures the percentage of funds provided by the creditors. The proportion of a firms total assets is being financed with high percentage of borrowed funds. Profitability ratios of the bank in 2008 still better than 2009 because of in 2008 this bank have income from operating more than 2009, but income from sale small than 2009.
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Activities ratio in the bank low operating profit margin in 2009 that mean this bank have high asset turnover. Trend analyses in 2009 expense have increased more than income. Cash flow analysis showed that this bank have cash inflow better than cash outflow. This is good statement for bank to show to investor or competitor.

5.2. Recommendation Actually, the overall operating system if ACLEDA more advantage for this business and just few comment to find effectiveness in the future business as: a. The liquidity position of a bank may be affected by external as well as savings, investment situations, strategic planning and fund flow situation, so the management need to thinking about the good ways to improve the strategic of investment. b. Referred to finding above ACLEDA Bank is high percentage of borrowed funds and to continue to get the success in competitive banking environment, depositors money must be utilized as loan. The largest item of the bank in the assets side is loan. c. Inflation in economic activities gives chances to increase the bank liquidity. This causes low interest on deposits. ACLEDA has high fund position and rate of interest on deposits in low due to high liquidity. In normal situation, banks should maintain attractive interest rates on the deposits and must find new investment sector and entrepreneurs.

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REFERENCES
A- Book

1. Annual Report of ACLEDA Bank 2006, 2007, 2008 and 2009 2. John J. Wild, K.R. Subramanyam, Robert F. Halsey, McGRAW-Hill International Edition
2007, Financial Statement Analysis.

3. Presentation, Prof. Dr. Yean Rithy PhD, DBA, MBA, MNIA, CPA
C- WEBSITES: 1- Annual Report of ACLEDA Bank, http://www.acledabnak.com.kh 2- Accounting Management, http://www.accountingformanagment.com 3- http://www.scribd.com

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