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INTRODUCTION:

AUDIT:
An examination and verification of companys financial and accounting record and supporting documents bay a professionals such as public certified accountant.
An audit is an evaluation of an organization, system, process, project or product. It is performed by a competent, independent, objective, and unbiased person or persons, known as auditors. The purpose is to verify that the subject of the audit was completed or operates according to approved and accepted standards, statutes, regulations, or practices. It also evaluates controls to determine if conformance will continue, and recommends necessary changes in policies, procedures or controls. Auditing is a part of some quality control certifications such as ISO 9000 IN ACCOUNTING AUDIT IS: Systematic examination and verification of a firms book of accountant, transaction record, other relevant documents, and physical inspection of inventory by qualified accountants (auditors). Quality control: Periodic (usually every six months) onsite-verification (by a certification authority) to ascertain whether or not a documented quality system is being effectively implemented.
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AUDIT REPORT:
An audit report is a codification of the process, findings and outcomes of the audit process, usually prepared by the auditors and project team.

The auditors report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an auditee). The report is subsequently provided to a user (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit

UNESCO definition refers to audits of institutions and also audits of agencies:


(I) the document prepared following a quality assessment peer review team site visit that is generally focused on institutional quality, academic standards, learning infrastructure, and staffing. The report about an institution describes the quality assurance (QA) arrangements of the institution and the effects of these

arrangements on the quality of its programmes. The audit report is made available to the institution, first in draft form for initial comments, and then in its final, official form. It contains, among other things, the description of the method of the audit, the findings, the conclusions of the auditors, and various appendices listing the questions asked. In Europe, the document is often called an evaluation report or an assessment report. (ii) Such a report may also be prepared about an accreditation agency, describing its quality assurance arrangements and the effect of these arrangements on the quality of the programmes in the institutions for which it is responsible. (Vlsceanu et al., 2007, p. 32)

CHEA (2002) refers to the UK situation


Audit Report: (U.K.) The document prepared following a quality assessment peer review team site visit. The report generally focuses on institutional quality, academic standards, learning infrastructure, and staffing. In Europe, the document is more likely to be called an "evaluation report" or "assessment report."

HEQC (2004) in South Africa define:


Audit report: Evaluation report from the HEQC to the audited institution. On the basis of the quantitative and qualitative evidence gathered during the audit, the report is developed by the HEQC on the basis of panel deliberations and finalised in consultation with the chairperson and other members of the audit panel. The report provides an assessment of the adequacy and effectiveness of the internal quality arrangements of the institution, as well as commendations and recommendations in the various target areas of the audit.

Audit Report Ratings


An audit report gives the company or person in question one of four ratings or categorizations based on the findings of the auditor. An "unqualified" audit signals a clean report, wherein no discrepancies were found with the financial statements or paperwork. A "qualified" report means a few problems were found but nothing that raises red flags or is

so egregious that they hurt the reputation of whoever is being audited. An "adverse opinion report" means there were too many errors and misrepresentations found in the financial statements that the person being audited cannot be considered to be in conformity of standard accounting principles and laws. Finally a "disclaimer of opinion" report means the auditor cannot give a rating at all, be it due to conflict of interest or lack of proper paperwork that makes a fair rating impossible or unethical to give.

Unqualified Opinion
The most frequent type of report is referred to as the Unqualified Opinion, and is regarded by many as the equivalent of a clean bill of health to a patient, which has led many to call it the Clean Opinion, but in reality it is not a clean bill of health. This type of report is issued by an auditor when the financial statements presented are free of material misstatements and are represented fairly in accordance with the Generally Accepted Accounting Principles (GAAP), which in other words means that the companys financial condition, position, and operations are fairly presented in the financial statements. It is the best type of report an auditee may receive from an external auditor. The first paragraph (commonly referred to as the introductory paragraph) states the audit work performed and identifies the responsibilities of the auditor and the auditee in relation to the financial statements. The second paragraph (commonly referred to as the scope paragraph) details the scope of audit work, provides a general description of the nature of the work, examples of procedures performed, and any limitations the audit faced based on the nature of the work. This paragraph also states that the audit was performed in accordance with the countrys prevailing generally accepted auditing standards and regulations. The third paragraph (commonly referred to as the opinion paragraph) simply states the auditors opinion on the financial statements and whether they are in accordance with generally accepted accounting principles.The following is an example of a standard unqualified auditors report on financial statements as it is used in most countries, using the name ABC Company as an auditees name:

INDEPENDENT AUDITORS REPORT

Board of Directors, Stockholders, Owners, and/or Management of ABC Company, Inc. 123 Main St. Any town, Any Country We have audited the accompanying balance sheet of ABC Company, Inc. (the Company) as of December 31, 20XX and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in (the country where the report is issued). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20XX, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in (the country where the report is issued). AUDITORS SIGNATURE Auditors name and address Date = Last day of any significant field work this date should not be dated earlier than when the auditor has sufficient audit evidence to support the opinion.

Qualified Opinion report


A Qualified Opinion report is issued when the auditor encountered one of two types of situations which do not comply with generally accepted accounting principles,

however the rest of the financial statements are fairly presented. This type of opinion is very similar to an unqualified or clean opinion, but the report states that the financial statements are fairly presented with a certain exception which is otherwise misstated. The two types of situations which would cause an auditor to issue this opinion over the unqualified opinion are: Single deviation from GAAP this type of qualification occurs when one or more areas of the financial statements do not conform to GAAP (e.g. are misstated), but do not affect the rest of the financial statements from being fairly presented when taken as a whole. Examples of this include a company dedicated to a retail business that did not correctly calculate the depreciation expense of its building. Even if this expense is considered material, since the rest of the financial statements do conform with GAAP, then the auditor qualifies the opinion by describing the depreciation misstatement in the report and continues to issue a clean opinion on the rest of the financial statements. Limitation of scope - this type of qualification occurs when the auditor could not audit one or more areas of the financial statements, and although they could not be verified, the rest of the financial statements were audited and they conform GAAP. Examples of this include an auditor not being able to observe and test a companys inventory of goods. If the auditor audited the rest of the financial statements and is reasonably sure that they conform with GAAP, then the auditor simply states that the financial statements are fairly presented, with the exception of the inventory which could not be audited. The wording of the qualified report is very similar to the unqualified opinion, but an explanatory paragraph is added to explain the reasons for the qualification after the scope paragraph but before the opinion paragraph. The introductory paragraph is left exactly the same as in the unqualified opinion, while the scope and the opinion paragraphs receive a slight modification in line with the qualification in the explanatory paragraph. The scope paragraph is edited to include the following phrase in the first sentence, so that the user may be immediately aware of the qualification. This placement also

informs the user that, except for the qualification, the rest of the audit was performed without qualifications: Except as discussed in the following paragraph, we conducted our audit... The opinion paragraph is also edited to include an additional phrase in the first sentence, so that the user is reminded that the auditors opinion explicitly excludes the qualification expressed. Depending on the type of qualification, the phrase is edited to either state the qualification and the adjustments needed to correct it, or state the scope limitation and that adjustment could have but not necessarily been required in order to correct it. For a qualification arising from a deviation from GAAP, the following phrase is added to the opinion paragraph, using the depreciation example mentioned above: In our opinion, except for the effects of the Companys incorrect determination of depreciation expense, the financial statement referred to in the first paragraph presents fairly, in all material respects, the financial position of

Adverse Opinion report:


An Adverse Opinion is issued when the auditor determines that the financial statements of an auditee are materially misstated and, when considered as a whole, do not conform to GAAP. It is considered the opposite of an unqualified or clean opinion, essentially stating that the information contained is materially incorrect, unreliable, and inaccurate in order to assess the auditees financial position and results of operations. Investors, lending institutions, and governments very rarely accept an auditees financial statements if the auditor issued an adverse opinion, and usually request the auditee to correct the financial statements and obtain another audit report. The wording of the adverse report is similar to the qualified report. The scope paragraph is modified accordingly and an explanatory paragraph is added to explain the reason for the adverse opinion after the scope paragraph but before the opinion paragraph. However, the most significant change in the adverse report from the qualified report is in 7

the opinion paragraph, where the auditor clearly states that the financial statements are not in accordance with GAAP, which means that they, as a whole, are unreliable, inaccurate, and do not present a fair view of the auditees position and operations. In our opinion, because of the situations mentioned above (in the explanatory paragraph), the financial statements referred to in the first paragraph do not present fairly, in all material respects, the financial position of

Disclaimer of Opinion report:


A Disclaimer of Opinion, commonly referred to simply as a Disclaimer, is issued when the auditor could not form, and consequently refuses to present, an opinion on the financial statements. This type of report is issued when the auditor tried to audit an entity but could not complete the work due to various reasons and does not issue an opinion. The Disclaimer report is issued only when the auditors are unable to perform their work. When not enough time or information is available, a disclaimer of opinion report is issued. This is rare: An auditor will often only make this report if the company refuses to reveal specific information or if the auditing firm and the company break their contract. The following is a draft of the three main paragraphs of a disclaimer of opinion because of inadequate accounting records of an auditee, which is considered a significant scope of limitation: We were engaged to audit the accompanying balance sheet of ABC Company, Inc. (the Company) as of December 31, 20XX and the related statements of income and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. The Company does not maintain adequate accounting records to provide sufficient information for the preparation of the basic financial statements. The Companys accounting records do not constitute a double-entry system which can produce financial statements. 8

Because of the significance of the matters discussed in the preceding paragraphs, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion of the financial statements referred to in the first paragraph.

Uses
An audit report comes in handy in many financial situations. The report is essentially the same as a job reference. It takes the research and findings of a trained financial specialist and uses them to verify that your financial reputation and future is secure. The audit report then serves as a good word to creditors, banks and any other financial institution that may need to investigate your financial history and stability. A clean audit report can help when getting a loan or line of credit.

PRACTICAL STUDY SELECTED ORGANIZATION:


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INTRODUCTION:
Muslim Commercial Bank Limited. (MCB), the largest private sector bank in Pakistan. Incorporated in 1948 by the Adamjee group, MCB soon earned a reputation of solid and conservative financial institution. During the 1960s the bank grew rapidly with a concentration on trade finance products. In 1947, MCB was nationalizes along all other private sector banks. MCB was the first bank to be privatized in 1991 during the Nawaz Sharifs government financial sector deregulation policies. During the first five years, the private management concentrated on growth utilizing its extensive network of branches and developed a large and stable deposit base. Since privatization, the bank has made tremendous headway in improving the operational efficiency through human resource development and employment of technology. The bank today boasts the target online brand and ATM network in the country. MCBs main focus remains on consumer banking and its growing reputation as a full service provider gives the bank an edge in front of increased competition in the banking sector in Pakistan. With a network of over 1200 branches and a team of dedicated professionals, MCB with an international outlook and a regional focus ensures prompt customer service and innovative solutions to business and personal needs.

Organizational Structure of MCB:

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BALANCE SHEET OF MCB


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INCOME STATEMENT OF MCB


2007
Markup/return/interest earned Markup/return/interest expense Net Markup Interest Assets Cash & balance with treasury -provision fordimininution in the banks value of with other banks Balance investment -provisions financial institutions Lending to against loans and advances Investments -bad debt written off directly Advance Operating fix assets Net Markup/Interest income Deferred tax assets after provision Other assets Non Markup Interest income Fee, commission and brokerage income Liabilities Dividend income Bills payable Borrowings Income from dealing in foreign Deposits & other accounts currencies Sub ordinate loans Gain on investment Liabilities against asset subject to finance loss Unrealizedlease on revaluation of Deferred tax liabilities as held for investments classified Other liabilities trading Other income Total non markup interest Net assets income Represented by Income after interest income Share capital Non Markup Interest Expense Reserve -administrative expense Inappropriate profit -other provision/write off -other charges Total non markup /interest expense Surplus on revaluation of asset Extra ordinary/unusual items Profit before taxation Taxation current year 31,786,595 2007 7,865,533 23,921,062 393,683,883 105,269 3,807,519 2,959,583 1,051372 113,089,261 199 216,960,598 3,065,051 16,024,123 20,856,011 17,868,761 410,485,517 2,634,610 632,300 10,479,058 39,406,831 693,408 292,098,066 479,232 1,500,865 (13,105) 21,345,781 1,180,162 563,213 355,365,842 6,011,291 55,119,675 20,867,302 6,282,768 34,000,638 5,022,416 5,130,750 (3,743) 540,594 45,414,156 5,559,267 9,705,519 21,308,035 55,119,675 6,422,356 12

2008
40,043,824 2008 11,560,740 28,483,084 39,631,172 2,083,994 4,043,100 1,335,127 4,100,079 96,631,874 262,135,470 4,019,121 17,263,733 24,463,963 19,810,476 443,615,904 2,953,394 617,554 10,551,468 22,663,840 727,564 330,181,624 740,429 (103,198) 437,137 21,345,781 855,697 385,179,850 5,791,440 58,436,054 30,255,403 6,282,768 36,768,765 7,546,878 9,193,332 23,135 817,824 25,244,865 8,387,837 6,191,189 21,867,566 58,436,054 7,341,357

2009
51,616,007 2009 15,814,463 35,774,544 38,774,871 1,484,218 6,009,993 5,796,527 3,000,000 167,134,465 41,576 253,249,407 7,322,321 18,014,896 28,452,223 23,040,095 509,223,727 3,331,856 459,741 8,201,090 44,662,088 341,402 367,604,711 773,768 3,196,743 15,819,082 736,118 439,483,714 5,642,88 69,740,013 34,095,108 6,911,045 38,385,760 10,107,189 15,779,127 142,824 690,150 61,075,932 10,940,163 218,664,081 23,154,945 69,740,013 7,703,305

-prior years -deferred Profit after taxation Unappropriate profit brought forward Transfer from surplus on revaluation of fixed assets Profit available for appropriation Basic /diluted earning per share

894,590 6,042,473 6,042,473 15,265,562 5,530,973 11,855 20,808,390 24.30

16,533 6,492,966 6,492,966 15,374,600 5,130,750 21,319 20,526,669 22.25

2,188,569 7,659,648 7,659,648 15,495,297 9,193,332 22,324 24,710,953 22.42

Financial ratios Analysis: Current Ratio:


The current ratio measures the number of items of the firm s current assets cover it s current liabilities. The current ratio should be part of your business' basic financial planning, meaning it should be tracked monthly or quarterly. By keeping a close eye on this figure, you will recognize if it begins to get out of line. This will allow you to take early action to prevent your business from ending up in a difficult position Current ratio=current asset/ current liabilities 2007 376,592,633 342,463,187 2008 406,541,695 363,396,932 2009 468,168,736 420,467,889

Current asset Current liabilities Current ratio

Quick ratios:
Quick ratio shows a firms ability to meets it current liabilities with its current assets excluding inventories and prepaid expenses, which are least liquid portion of the current assets. Since banks dont have any sorts of inventories, therefore only prepaid expenses are subtracted from the current assets of the bank. Quick Ratio = Cash + Account Receivable + Marketable Securities/Current Liabilities

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Cash + A/R+MAS Current liabilities Quick Ratio

2007 263,503,372 342,463,187 .77

2008 309,909,821 363,396,932 .85

2009 301,034,271 420,467,889 .72

Working Capital:
Working capital is the difference between current assets and current liabilities. Working capital is often considered a measure of liquidity by it self. This ratio shows the amount of liquidity. Working capital is used to check liquidity of the organization. Working Capital= Current Assets Current Liabilities

Current asset Current liabilities


Working capital

2007 376,592,633 342,463,187


34,129,446

2008 406,541,695 363,396,932


43,144,763

2009 468,168,736 420,467,889


47,700,847

Cash Ratio:
Cash and equilent are the most liquid assets. The cash ratio shows the proportion of the assets held in the most liquid possible form. It is used to check the liquidity of the organization Cash Ratio= Cash Equivalents + Marketable Securities/Current Liabilities 2007 43,491,402 342,463,187 0.13 2008 43,491,402 363,396,932 0.12 2009 44,784,864 420,467,889 0.11

CE+MS Current Liabilities Cash ratio

Debt to Equity Ratio:


Debt-to-Equity ratio shows the extent to which debt financing is used relative to equity financing. Debt equity is calculated by dividing total liabilities of the bank by the total owner equity. Debt to equity ratio=Total Liabilities / shareholders equity 14

Total Liabilities shareholders equity Debt to equity ratio

2007 355,365,842 6,282,768 56.56%

2008 385,179,850 6,282,768 61.30%

2009 439,483,714 6,911,045 64%

Debt Ratio:
It shows that how much assets have been financed by liabilities and it also shows the Margin of protection available for the creditors. Debt Ratio: Total Liabilities / Total Assets 2007 355,365,842 410.485.517 87% 2008 385,179,850 443,615,904 87% 2009 439,483,714 509,223,727 86%

Total Liabilities Total Assets Debt Ratio

Return on Investment:
Return on investment measure the ratio of profit generated in relation to the total assets employed. Net profit after tax divided by total assets gives the return on investment. ROI= Net Profit after Tax/Average (Long-term Liabilities + Equity

Net Profit after Tax Average ROI

2007 15,265,562 52,572,491 29%

2008 15,374,600 66,172,297 23.23%

2009 15,495,297 77,059,770 20%

Interest Coverage Ratio


Interest coverage ratio shows the ability of a firm to cover up its interest charges on the income before interest and taxes. The ratio is obtained through dividing earning before interest and taxes (EBIT) of the bank by its interest expenses.

Interest coverage ratio=EBIT/Interest expense 15

EBIT Interest expense Interest coverage ratio

2007 21,308,035 7,865,533 270%

2008 21,867,566 11,560,740 189%

2009 23,154,945 15,841,463 146%

ROA:
ROA=Net Profit After tax / Average Total Asset 2007 15,265,562 376,296,880 4.1% 2008 15,374,600 427,050,710 3.6% 2009 15,495,297 476,419,815 3.3%

Net Profit After tax Average Total Asset ROA

Income/Expense Ratio
Income/Expense Ratio= Total Income/Operating Expense

Total Income Operating Expense Expense Ratio

2007 29,932,353 5,563,010 5.3 Times

2008 34,274,524 8,364,252 4.10 Times

2009 41,417,429 10,797,339 3.83 Times

Earning Per Share


Earning Per Share=Net Income after Tax/Weighted Average Number of Common Share Outstanding Net Income AT WANCSOS EPS 2007 15,265,562,000 628,276,843 Rs. 24.30 2008 15,374,600,000 628,276,843 Rs. 24.47 2009 15,495,297,000 691,104,527 Rs. 22.42

Price/Earning Ratio:
Price/Earning Ratio=Market Price per Share/Diluted Earning Per share 16

Market Price per Share Diluted Earning Per share P/E

2007 399.95 24.30 16.5 Times

2008 125.81 22.25 5.65 Times

2009 219.68 22.42 9.8 Times

Dividend Payout Ratio


Dividend Payout Ratio= Dividend per Common Share/ Diluted Earning Per Share Dividend per Common Share Diluted Earning Per Share Dividend Payout Ratio 2007 12.50 24.30 51.44% 2008 11.50 22.25 51.68% 2009 11.00 22.42 49.06%

Dividend Yield
Dividend Yield= Dividend per Common Share / Market Price per Common Share Dividend per Common Share Market Price per Common Share Dividend Yield 2007 12.50 399.95 3.13% 2008 11.50 125.81 9.14% 2009 11.00 219.68 5%

Ratio Analysis Showing In Graph as Year of 2007, 2008 & 2009


2007
Current ratio Quick ratio Working capital Cash ratio Debt to equity ratio Debt ratio ROI Interest coverage ROA Income expense EPS Dividend pay out Dividend yield 1.10 .77 34,129,446 0.13 56.56% 87% 29% 270% 4.1% 5.3 Times Rs. 24.30 51.44% 3.13%

2008
1.12 .85 43,144,763 0.12 61.30% 86% 23.23% 189% 3.6% 4.10 Times Rs. 24.47 51.68% 9.14%

2009
1.11 .72 47,700.847 0.11 64% 86% 20% 146% 3.3% 3.83 times Rs. 22.42 49.06% 5%

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GRAPHICAL REPRESENTATION: Current Ratio:


current ratio

1.12 1.115 1.11 ratio 1.105 1.1 1.095 1.09 2007 2008 years 2009 current ratio

Quick Ratio:
Quick ratio

0.85 0.8 quick ratio 0.75 quick ratio 0.7 0.65 2007 2008 years 2009

Working Capital Ratio:

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w rkin ca ita o g p l

am u t on

5 ,0 0 0 0 0 ,0 0 4 ,0 0 0 5 0 ,0 0 4 ,0 0 0 0 0 ,0 0 3 ,0 0 0 5 0 ,0 0 3 ,0 0 0 0 0 ,0 0 2 ,0 0 0 5 0 ,0 0 2 ,0 0 0 0 0 ,0 0 1 ,0 0 0 5 0 ,0 0 1 ,0 0 0 0 0 ,0 0 5 0 ,0 0 ,0 0 0

w rkin ca ita o g p l

20 07

20 08 y ears

20 09

Cash Ratio:
cash ratio

0.13 0.125 0.12 ratio 0.115 0.11 0.105 0.1 2007 2008 years 2009 cash ratio

Debt to equity Ratio:


debt to equit rati

64.00% 62.00% 60.00% percnetage 58.00% 56.00% 54.00% 52.00% 2007 2008 Debt Ratio years 2009 debt to equit rati

Debt Ratio:
percentage

87% 87% 87% 86% 86% 86% 86% 86% 85%

Debt Ratio

2007

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2008

2009

years

ROI:
R I O

30% 25% 20% percentage 15% 10% 5% 0% 2007 2008 years 2009 R OI

Interest Coverage Ratio:


Interes t c ov erage ratio

300% 250% 200% IC V 150% 100% 50% 0% 2007 2008 ye ar s 2009

Interes t c ov erage ratio

ROA:

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R A O

4.50% 4.00% 3.50% 3.00% 2.50% RO A 2.00% 1.50% 1.00% 0.50% 0.00%

R A O

2007

2008 years

2009

Income Expense Ration:


Income/Expense Ratio 6 5 4 time 3 2 1 0 2007 2008 years 2009 Income/Expense Ratio

Earning Per Share:


EPS

24.5 24 23.5 23 22.5 22 21.5 21 2007 2008 years 2009 EPS

Rs.

Dividend Payout Ratio:


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div idenr pay out Ratio

precent age

52.00% 51.50% 51.00% 50.50% 50.00% 49.50% 49.00% 48.50% 48.00% 47.50%

Ratio

2007

2008 years

2009

Dividend yield:
d ide d ye iv n ild

div iden d y eild

1 .0 % 0 0 9 0 .0 % 8 0 .0 % 7 0 .0 % 6 0 .0 % 5 0 .0 % 4 0 .0 % 3 0 .0 % 2 0 .0 % 1 0 .0 % 0 0 .0 %

d id n ye iv e d ild

20 07

20 08 y ears

20 09

Comment on Ratio Analysis: Current Ratio:


In MCB bank limited 2008s current ratio is strong than other two years. It shows that this years liabilities could be recovered with its assets. After 2008, a bank has maintained good current ratio in 2009 Current ratio does not show the true picture of the organization. Sometimes it shows that organization has ability to pay its obligations but its profitability ratio tells that it has not ability to pay its obligation. But still it is very useful for the analysts especially for the creditors. 22

Quick Ratio:
Prepaid expenses are considered as current assets so they are included in current ratio calculation. Prepaid expenses are less liquid. Normally it is not easily converted into cash on short notice. In 2008 quick ratio is better than other years it show that bank can easily recover its liabilities on short notice.

Working Capital
Working capital is better in 2009, which is 47,700,847. It means that are Assets utilized more economically in 2009 as compared to 2007, 2008.

Cash Ratio:
Higher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. Cash ratio is more important liquidity ratio. Cash ratio is higher in 2007 as compared to 2008 & 2009.

Debt Ratio:
Financial leverage is the extent to which a firm is financed with debt. In Muslim Commercial bank, years 2007 & 2008 were financed with debt as compare to year 2009.

Debt to Equity Ratio:


The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio shows how the firms stockholder bears the risk of the firm. Greater the debt greater risk for the firm s shareholders .In 2007 risk for the share holders was very low as compared to the year 2009.

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Return on Investment:
This ratio is more meaningful for share holders who are interested to know the profit earned by the company because the dividend paid from available profit higher ratio means factor of production fully utilized and good position. Here return on Investment is higher in 2007 as compare to year 2008 & 2009.

Interest Coverage Ratio:


Coverage ratio shows the number of the times a firm can recover or meet particular financial obligations. The interest coverage ratio, which is also called the time interest earned ratio, measure the coverage of the firm s interest expense. Year 2007 is better in interest coverage ratio as compare to the other years.

Return on Assets:
This ratio has a decreasing trend. It means the assets of the business are not fully utilized in more and efficient way and also shows an unfavorable trend of the business. This ratio of the bank was too low in the year 2009, as compare to other two years.

Interest to Expense Ratio:


The interest to expense ratio is the profitability ratio. The more the good ratio means that the business is running well. The Interest to expense ratio of the MCB is not good as compare the year 2007, 2008.

Earning per Share:


This ratio got really improved as it has gone with the increase in profit. Earning per share is a good measure of profitability when compared with similar other business. Here 24

decreasing EPS, which will surely decrease share price. This ratio has the same trend as the return on the assets.

Price earning Ratio:


Price earning ratio of MCB bank is high in 2007 as compared to the other years. Because the market price per share is high in 2007. Because in this year MCB generate an excellent profit. 2009 is also good but 2008 is worst all of them.

Dividend Payout Ratio:


The dividend payout ratio of the MCB is almost constant for the years 2007, 2008, 2009.

Dividend Yield Ratio:


The dividend yield ratio of the MCB is higher in 2007 because the share price was higher in 2007. Dividend yield Ratio is good in 2009 and worst at all in year 2008

SWOT ANALYSIS: STRENGTHS:


The largest private sector bank in Pakistan with a network of 941 domestic and 5 foreign branches. MCB has long-term vision, which plays a very important role in organizations success. First bank to privatize, which has, now become the leader in market with largest on line ATM network in the country. Banks emphasis on consumer banking by providing them with innovative saving schemes, products and services suiting best to their life style. Extension and improvement in services to domestic as well as foreign customer.

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Best and optional policies and attractive compensation packages, for employees, which has really improved their commitment, dedication and hard work, towards the accomplishment of banks objectives. MCB instant financing products for customer wanting instant loan facility at MCB branches. Attention and sensitivity to competition prevailing in the country. Easy access to the customers at their residential localities through a large number of branches. Recognition of critical condition and need for Drastic immediate change. It is well aware of the Market and adopts strategy according to the competitors strategy.

Weaknesses:
. Less job satisfaction of employees. Customer facing problem of NADRA verification while opening their accounts because its process is time consuming To give everyone equal protocol is lacking among employees Customers having account with small amount are not given same services like dealing to others who have high account. Lack of decentralization. Banks is planning to restructure its departments and is going to be centralized very soon. Lack of organizational loyalty among employees. Promotions generally on seniority basis. Attitude of senior managers at head office has to change towards junior staff Competent staff unwilling to serve in the audit due to an absence of firm rotation policy. As most of the employees are young they have more tendencies to switch the organization and to seek more opportunities.

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Opportunities:
To go global fully. Low exposure to consumer banking providing opportunity to explore the segment. Emergence of Islamic banking in the country and MCB is increasing its Islamic Banking operations. SBP policy to allow Islamic banking business separately. Bank has earned a good name by introducing innovative products like car financing home financing credit cards these products can easily enhance the market share. Bank introduces Islamic banking in country that attracts large number of people. Free staff training facilities offered. Greater profitability can be achieved through strong internal control Profit and deposit of banking industry have shown an increasing trend because of better marketing environment. Elimination of risk of fraud through professional training Opportunity to open branch in ruler area to increase its branch network and gain more profit. The bank can earn more profit by advancing to farmers and industrialists at low rates. New schemes for deposits and finances should be introduced regularly

Threats:
Current economic crunch. Political instability. Strong competition. Rising deposit rates. Foreign banks in market having more marketing budgets. People losing trust in banks.

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Decline in private and public sector credit due to tight monetary policy Participation of foreign banks local market that can hurt the market share Growing NPLs of the industry which may hurt MCB Mergers and acquisition activities, consolidating the banking sector of MCB is also vulnerable it Changes in government policies

Data collection method:


I took data from internet, books, reports, etc.i have collected secondary data which I use as my primary data

Recommendations:
The bank should finance its loans in those projects that are meeting the required standard and should avoid the political pressure. The bank should bring forward the new talent as fresh knowledge and education is considered very important to increase the efficiency and production. There is needed to make the outlook situations of branches in those manners that can complete the other modern banks in the banking market. Keeping in view the hard work by the staff members at all levels of management, staff should be given bonus and increment every year. Nepotism should be avoided in this connection There are some employees untrained which decreases the efficiency of the bank branch. All the employees should well train.

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Most of the bank employees are sticking to one seat only, with the result that they become master of one particular job and loose their grip on other banking operation. In my opinion each employee should have regular job change. People have to wait for re-cashing their cheques and for paying their School Fees, which is not good for reputation of bank, it should be improved.

REFERENCES:
www.forum4finance.com www.qualityresearchinternational.com www.en.wikipedia.org www.ehow.com www.mcb.com Annual report of MCB 2009 www.fool.com www.accountingformanagement.com www.multpl.com www.wikinvest.com

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