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Bank AlFlah vs Bank Al Habib
Citation preview
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomFinal Project
FINANCIAL STATEMENT ANALYSIS OF
BANK AL FALAH
AND
HABIB BANK LIMITED
A REPORT
SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES
VIRTUAL UNIVERSITY OF PAKISTAN
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION
Submitted By
Mc070400479
Sheikh Waqas Ahmed
Department of Management Sciences
Virtual University of Pakistan
1S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
DedicationI would like to dedicate this project to my parents who have always encourage me
throughout in my academic career and make possible for me to stand where I am today
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AcknowledgementIn the name of ALLAH the most kind and most merciful
First of all I m grateful to ALLAH ALMIGHTY who bestowed me with health abilities
and guidance to complete the project in a successful manner and without HIS help I was
unable to perform this task
More than anybody else I would like to acknowledge my project advisor Dr
Muhammad Anwar for his never ending support and untiring efforts He was always
there to guide me whenever I felt stuck off and his encouragement always worked as
moral booster for me I have found him very helpful while discussing the tricky issues in
this dissertation work I would also like to thank Mr Majid Hassan principal JMCIT
Lahore His critical comments on my work have certainly made me think of new ideas
and techniques
I am thankful to all my class fellow specially Ambreen Fatima and all other friends who
help me during the project when problem arises specially my seniors Muhammad Yasir
Tanzila Riaz Fatima and Saeed Mahmood for their kind help
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Fina l Pro jec t F inance FIN 619
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Executive SummaryCommon Size Financial Statement discloses the internal structure of the firm It indicates
the existing relationship between sales and each income statement account It shows the
mix of assets that produce income and the mix of the sources of capital whether by
current or long-term debt or by equity funding
The primary objective of financial analysis is to forecast or determine the actual financial
status and performance of a project
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TABLE OF CONTENT
Section I
a) Introductionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
11 Background helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
12 Introduction of the organizationrsquos business sector helliphelliphelliphelliphelliphelliphellip 7
13 Companyrsquos Introduction helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Habib Bankhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Bank AL Falahhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 9
14 List of competitors helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
15 Objectives of Projectshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
16 Significance of the Projecthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 11
b) Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Sourceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Toolshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Data Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Project proceedingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
1 Ratio Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
a) Liquid Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 15
b) Leverage Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 18
c) Profitability Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 24
d) Activity Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 32
e) Market Ratioshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 33
f) Statement of Cash Flowhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 38
2 Common Size Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 39
a) Horizontal Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 40
b) Vertical Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 49
5S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom3 Review of Descriptive Informationhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 59
4 Comparisons helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
a) Trend Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
b) Industry Averages and Comparisons with Competitorshelliphelliphellip 65
c) Summaryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 65
d) Conclusions Findingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 66
e) Recommendation helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 67
Section IIhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 68
a) Introduction of the studenthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
b) AppendixAppendiceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
c) BibliographyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXXXVII
Section I
a) Introduction
Financial statements for banks present a different analytical problem than manufacturing
and service companies As a result analysis of a banks financial statements requires a
distinct approach that recognizes a banks somewhat unique risks
Banks take deposits from savers paying interest on some 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 project I am trying to provide assistance to the investors
by showing them the performance of two banks underlying the same functions
11 Background of the project
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
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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DedicationI would like to dedicate this project to my parents who have always encourage me
throughout in my academic career and make possible for me to stand where I am today
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AcknowledgementIn the name of ALLAH the most kind and most merciful
First of all I m grateful to ALLAH ALMIGHTY who bestowed me with health abilities
and guidance to complete the project in a successful manner and without HIS help I was
unable to perform this task
More than anybody else I would like to acknowledge my project advisor Dr
Muhammad Anwar for his never ending support and untiring efforts He was always
there to guide me whenever I felt stuck off and his encouragement always worked as
moral booster for me I have found him very helpful while discussing the tricky issues in
this dissertation work I would also like to thank Mr Majid Hassan principal JMCIT
Lahore His critical comments on my work have certainly made me think of new ideas
and techniques
I am thankful to all my class fellow specially Ambreen Fatima and all other friends who
help me during the project when problem arises specially my seniors Muhammad Yasir
Tanzila Riaz Fatima and Saeed Mahmood for their kind help
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Executive SummaryCommon Size Financial Statement discloses the internal structure of the firm It indicates
the existing relationship between sales and each income statement account It shows the
mix of assets that produce income and the mix of the sources of capital whether by
current or long-term debt or by equity funding
The primary objective of financial analysis is to forecast or determine the actual financial
status and performance of a project
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TABLE OF CONTENT
Section I
a) Introductionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
11 Background helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
12 Introduction of the organizationrsquos business sector helliphelliphelliphelliphelliphelliphellip 7
13 Companyrsquos Introduction helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Habib Bankhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Bank AL Falahhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 9
14 List of competitors helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
15 Objectives of Projectshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
16 Significance of the Projecthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 11
b) Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Sourceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Toolshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Data Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Project proceedingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
1 Ratio Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
a) Liquid Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 15
b) Leverage Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 18
c) Profitability Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 24
d) Activity Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 32
e) Market Ratioshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 33
f) Statement of Cash Flowhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 38
2 Common Size Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 39
a) Horizontal Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 40
b) Vertical Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 49
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wwwvunewblogspotcom3 Review of Descriptive Informationhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 59
4 Comparisons helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
a) Trend Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
b) Industry Averages and Comparisons with Competitorshelliphelliphellip 65
c) Summaryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 65
d) Conclusions Findingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 66
e) Recommendation helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 67
Section IIhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 68
a) Introduction of the studenthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
b) AppendixAppendiceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
c) BibliographyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXXXVII
Section I
a) Introduction
Financial statements for banks present a different analytical problem than manufacturing
and service companies As a result analysis of a banks financial statements requires a
distinct approach that recognizes a banks somewhat unique risks
Banks take deposits from savers paying interest on some 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 project I am trying to provide assistance to the investors
by showing them the performance of two banks underlying the same functions
11 Background of the project
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
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
11S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
12S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
13S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
14S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
15S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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AcknowledgementIn the name of ALLAH the most kind and most merciful
First of all I m grateful to ALLAH ALMIGHTY who bestowed me with health abilities
and guidance to complete the project in a successful manner and without HIS help I was
unable to perform this task
More than anybody else I would like to acknowledge my project advisor Dr
Muhammad Anwar for his never ending support and untiring efforts He was always
there to guide me whenever I felt stuck off and his encouragement always worked as
moral booster for me I have found him very helpful while discussing the tricky issues in
this dissertation work I would also like to thank Mr Majid Hassan principal JMCIT
Lahore His critical comments on my work have certainly made me think of new ideas
and techniques
I am thankful to all my class fellow specially Ambreen Fatima and all other friends who
help me during the project when problem arises specially my seniors Muhammad Yasir
Tanzila Riaz Fatima and Saeed Mahmood for their kind help
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Executive SummaryCommon Size Financial Statement discloses the internal structure of the firm It indicates
the existing relationship between sales and each income statement account It shows the
mix of assets that produce income and the mix of the sources of capital whether by
current or long-term debt or by equity funding
The primary objective of financial analysis is to forecast or determine the actual financial
status and performance of a project
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TABLE OF CONTENT
Section I
a) Introductionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
11 Background helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
12 Introduction of the organizationrsquos business sector helliphelliphelliphelliphelliphelliphellip 7
13 Companyrsquos Introduction helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Habib Bankhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Bank AL Falahhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 9
14 List of competitors helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
15 Objectives of Projectshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
16 Significance of the Projecthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 11
b) Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Sourceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Toolshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Data Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Project proceedingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
1 Ratio Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
a) Liquid Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 15
b) Leverage Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 18
c) Profitability Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 24
d) Activity Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 32
e) Market Ratioshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 33
f) Statement of Cash Flowhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 38
2 Common Size Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 39
a) Horizontal Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 40
b) Vertical Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 49
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wwwvunewblogspotcom3 Review of Descriptive Informationhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 59
4 Comparisons helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
a) Trend Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
b) Industry Averages and Comparisons with Competitorshelliphelliphellip 65
c) Summaryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 65
d) Conclusions Findingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 66
e) Recommendation helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 67
Section IIhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 68
a) Introduction of the studenthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
b) AppendixAppendiceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
c) BibliographyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXXXVII
Section I
a) Introduction
Financial statements for banks present a different analytical problem than manufacturing
and service companies As a result analysis of a banks financial statements requires a
distinct approach that recognizes a banks somewhat unique risks
Banks take deposits from savers paying interest on some 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 project I am trying to provide assistance to the investors
by showing them the performance of two banks underlying the same functions
11 Background of the project
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
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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Executive SummaryCommon Size Financial Statement discloses the internal structure of the firm It indicates
the existing relationship between sales and each income statement account It shows the
mix of assets that produce income and the mix of the sources of capital whether by
current or long-term debt or by equity funding
The primary objective of financial analysis is to forecast or determine the actual financial
status and performance of a project
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TABLE OF CONTENT
Section I
a) Introductionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
11 Background helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
12 Introduction of the organizationrsquos business sector helliphelliphelliphelliphelliphelliphellip 7
13 Companyrsquos Introduction helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Habib Bankhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Bank AL Falahhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 9
14 List of competitors helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
15 Objectives of Projectshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
16 Significance of the Projecthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 11
b) Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Sourceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Toolshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Data Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Project proceedingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
1 Ratio Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
a) Liquid Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 15
b) Leverage Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 18
c) Profitability Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 24
d) Activity Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 32
e) Market Ratioshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 33
f) Statement of Cash Flowhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 38
2 Common Size Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 39
a) Horizontal Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 40
b) Vertical Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 49
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wwwvunewblogspotcom3 Review of Descriptive Informationhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 59
4 Comparisons helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
a) Trend Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
b) Industry Averages and Comparisons with Competitorshelliphelliphellip 65
c) Summaryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 65
d) Conclusions Findingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 66
e) Recommendation helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 67
Section IIhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 68
a) Introduction of the studenthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
b) AppendixAppendiceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
c) BibliographyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXXXVII
Section I
a) Introduction
Financial statements for banks present a different analytical problem than manufacturing
and service companies As a result analysis of a banks financial statements requires a
distinct approach that recognizes a banks somewhat unique risks
Banks take deposits from savers paying interest on some 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 project I am trying to provide assistance to the investors
by showing them the performance of two banks underlying the same functions
11 Background of the project
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
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
15S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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TABLE OF CONTENT
Section I
a) Introductionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
11 Background helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 6
12 Introduction of the organizationrsquos business sector helliphelliphelliphelliphelliphelliphellip 7
13 Companyrsquos Introduction helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Habib Bankhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 8
Introduction of Bank AL Falahhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 9
14 List of competitors helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
15 Objectives of Projectshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 10
16 Significance of the Projecthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 11
b) Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Sourceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 13
Data Collection Toolshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Data Processing and Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
Project proceedingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
1 Ratio Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 14
a) Liquid Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 15
b) Leverage Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 18
c) Profitability Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 24
d) Activity Ratiohelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 32
e) Market Ratioshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 33
f) Statement of Cash Flowhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 38
2 Common Size Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 39
a) Horizontal Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 40
b) Vertical Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 49
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wwwvunewblogspotcom3 Review of Descriptive Informationhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 59
4 Comparisons helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
a) Trend Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
b) Industry Averages and Comparisons with Competitorshelliphelliphellip 65
c) Summaryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 65
d) Conclusions Findingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 66
e) Recommendation helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 67
Section IIhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 68
a) Introduction of the studenthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
b) AppendixAppendiceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
c) BibliographyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXXXVII
Section I
a) Introduction
Financial statements for banks present a different analytical problem than manufacturing
and service companies As a result analysis of a banks financial statements requires a
distinct approach that recognizes a banks somewhat unique risks
Banks take deposits from savers paying interest on some 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 project I am trying to provide assistance to the investors
by showing them the performance of two banks underlying the same functions
11 Background of the project
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
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
9S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
10S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
11S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
12S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
13S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
14S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
15S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom3 Review of Descriptive Informationhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 59
4 Comparisons helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
a) Trend Analysishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 60
b) Industry Averages and Comparisons with Competitorshelliphelliphellip 65
c) Summaryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 65
d) Conclusions Findingshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 66
e) Recommendation helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 67
Section IIhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip 68
a) Introduction of the studenthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
b) AppendixAppendiceshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXVIII
c) BibliographyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellipLXXXVII
Section I
a) Introduction
Financial statements for banks present a different analytical problem than manufacturing
and service companies As a result analysis of a banks financial statements requires a
distinct approach that recognizes a banks somewhat unique risks
Banks take deposits from savers paying interest on some 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 project I am trying to provide assistance to the investors
by showing them the performance of two banks underlying the same functions
11 Background of the project
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
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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wwwvunewblogspotcomperformance of the firm Ratio analysis is the most common form of financial analysis It
provides relative measures of the firms conditions and performance Horizontal Analysis
and Vertical Analysis are also popular forms Horizontal analysis is used to evaluate the
trend in the accounts over the years while vertical analysis also called a Common Size
Financial Statement discloses the internal structure of the firm It indicates the existing
relationship between sales and each income statement account It shows the mix of assets
that produce income and the mix of the sources of capital whether by current or long-
term debt or by equity funding When using the financial ratios a financial analyst makes
two types of comparisons
Financial ratio analysis is an important topic and is covered in all mainstream corporate
finance textbooks It is also a popular agenda item in investment club meetings It is
widely used to summarize the information in a companys financial statements in
assessing its financial health In todays information technology world real time financial
data are readily available via the Internet Performing financial ratio analysis using
publications such as Robert Morris Associatesrsquo Annual Statement Studies Dun amp
Bradstreetrsquos Key Business Ratios Moodyrsquos Manuals Standard amp Poorrsquos Corporation
Records Value Line Investment Survey etc is no longer efficient Since students and
investors now have easy access to on-line databases the assignments on financial ratio
analysis can be modified accordingly to enhance learning
In the current scenario where financial instability is rife 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 companys financial statements can be
bewildering and intimidating to many investors However through financial ratio
analysis we shall be able to work with these numbers in an organized fashion and present
them in a concise form easily understandable to both the management and interested
investors
12 Introduction of the organizationrsquos business sector
The organizations is choose are from the banking sector Banking primarily the business
of dealing in money and instruments of credit Banks were traditionally differentiated
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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wwwvunewblogspotcomfrom other financial institutions by their principal functions of accepting deposits subject
to withdrawal or transfer by check and of making loans A bank is a financial institution
licensed by a government Its primary activity is to lend money Many other financial
activities were allowed over time For example banks are important players in financial
markets and offer financial services such as investment funds In some countries such as
Germany banks have historically owned major stakes in industrial corporations while in
other countries such as the United States banks are prohibited from owning non-financial
companies In Japan banks are usually the nexus of a cross-share holding entity known
as the zaibatsu In France banc assurance is prevalent as most banks offer insurance
services (and now real estate services) to their clients The level of government regulation
of the banking industry varies widely with counties such as Iceland the United Kingdom
and the United States having relatively light regulation of the banking sector and
countries such as China having relatively heavier regulation
Banks have traditionally been distinguished according to their primary functions
Commercial banks which include national- and state-chartered banks trust companies
stock savings banks and industrial banks have traditionally rendered a wide range of
services in addition to their primary functions of making loans and investments and
handling demand as well as savings and other time deposits Mutual savings banks until
recently accepted only savings and other time deposits and offered limited types of
loans and services The fact that commercial banks were able to expand or contract their
loans and investments in accordance with changes in reserves and reserve requirements
further differentiated them from mutual savings banks where the volume of loans and
investments was governed by changes in customers deposits Membership in the Federal
Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but
optional for other banks
13 Companyrsquos introduction
Introduction of Habib Bank of Pakistan
Habib Bank Limited commonly referred to as HBL and head-quartered in Habib
Bank Plaza Karachi Pakistan is the largest bank in Pakistan HBL is a Banking
Company which is engaged in Commercial amp Retail Banking and related services
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
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XS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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wwwvunewblogspotcomdomestically and overseas HBL was incorporated on 25 th August 1941 and operated in
the private sector until its nationalization in 1974 HBL has been approved for
privatization and the privatization commission has selected a Financial Advisor to
prepare a comprehensive plan and assist in the sale process The government has
appointed a professional management team to restructure the bank and to recover and
clean its doubtful and classified portfolio HBL is one of the largest commercial bank of
Pakistan It accounts for a substantial share (20) of the total commercial banking
market in Pakistan with a network of 1705 domestic branches 55 overseas branches in
26 countries spread over Europe the Middle East Far East Asia Africa and the United
States 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT)
LTD Karachi Habib Finance International LTD (Hong Kong) and Habib Finance
Australia Ltd ndash Sydney 2 Joint Ventures namely Habib Nigeria Bank Ltd (40) and
Himalayan Bank Ltd (20) and 2 representative offices in Iran and Egypt It continues
to dominate the commercial banking sector with a major market share in inward foreign
remittances (55) and loans to small industries traders and farmers HBL is one of
Pakistans premier banks in terms of deposits and advances with a huge domestic and
international network HBL provides its customers a complete range of banking products
and services including retail banking corporate and institutional banking trade finance
consumer finance and credit cards HBL is currently rated AA (Long term) and A-1+
(Short term) and has a balance sheet size of over USD 11 billion It is the first Pakistani
bank to raise Tier II Capital from external sources
Vision
ldquoEnabling people to advance with confidence and successrdquo
Mission
ldquoTo make our customer prosper our staff excels and creates value for shareholdersrdquo
Introduction of Bank Al Falah
Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group
Bank Alfalah Limited was incorporated on June 21st 1992 as a public limited company
under the Companies Ordinance 1984 Its banking operations commenced from
November 1st 1997 The bank is engaged in commercial banking and related services as
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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wwwvunewblogspotcomdefined in the Banking companies ordinance 1962 The Bank is currently operating
through 195 branches in 74 cities with the registered office at BABuilding
IIChundrigar Karachi
This facilitates the commitment to a culture of innovation and seeks out synergies with
clients and service providers to ensure uninterrupted services to its customers Bank Al-
Falah is known to perceive the requirements of customers and match them with quality
products and service solutions During the past five years this bank has emerged as one
of the foremost financial institution in the region endeavoring to meet the needs of
tomorrow today With a vision to be the premier organization operating locally amp
internationality that provides the complete range of financial services to all segments
under one roof Bank Al-Falah is one of the most important entities in banking sector of
Pakistan with a strong credit rating of AA for long term and A one plus for the short
term Since its inception as the new identity of HCEB after the privatization in 1997
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place Since its inception as the new identity of
HCEB after the privatization in 1997 the management of the bank has implemented
strategies and policies to carve a distinct position for the bank in the market place
Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals
set out by its board of management the Bank has invested in revolutionary technology to
have an extensive range of products and services
Vision
ldquoTo be the premier organization operating locally amp internationality that provides the
complete range of financial services to all segments under one roofrdquo
Mission
ldquoTo develop amp deliver the most innovative products manage customer experience
deliver quality services that contributes to brand strength establishes a competitive
advantage and enhances profitability thus providing value to the stakeholders of the
bankrdquo
14 List of competitors
Standard Chartered Bank
National Banks
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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wwwvunewblogspotcom Allied Bank Limited
15 Objectives of the project
The objective of this project is to provide insight into how the banks work what are the
strengths and weakness of the banks which bank is financially more feasible than the
other The ratios will be compared of both the banks within the industry to see where the
banks stand Question such as lsquoWhat are the strengths and weaknesses of each bankrsquo
will be answered with the comparison of the ratios To give the stock holder a clear view
about the financial feasibility of both the banks 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 banks
The primary objective of financial analysis is to forecast andor determine the actual
financial status and performance of a project and where appropriate of the EAs This is
to enable ADB to combine that information with all other pertinent data (technical
economic social etc) to assess the feasibility viability and potential economic benefits
of a proposed or continuing lending operation Secondary objective is the provision of
Technical Assistance to a borrower and an EA to enable them to make similar
assessments for the project and to apply the techniques to other non-ADB investments A
tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of appropriate
data to support good financial analysis The objectives of financial analysis as set out
above are intended to measure the achievement of financial objectives of a borrower the
project to be (or being) financed The financial performance of a public and private sector
EA should normally be measured by the use of at least one indicator selected from the
range of the following groups of indicators derived from the financial analysis of a
project and its EA (i) operation (ii) capital structure and (iii) liquidity This means that
if only one indicator from one of the three categories of indicators above would be the
subject of a loan covenant the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting The
efficient allocation of resources is an important consideration in pricing policy
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wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomparticularly for REEA services Financial analysis is used to describe the impact of such a
policy
I worked on the financial statements of the bank ie Balance sheet of the bank and make
some essential calculations in order to give you an idea about the financial stability of the
bank
16 Significance of the project
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 companys activities such as the
ratio between the companys current assets current liabilities or between its accounts
receivable and its annual sales The basic source for these ratios is the companys
financial statements that contain figures on assets liabilities profits or losses Financial
ratios are only meaningful when compared with other information Since they are most
often compared with industry data ratios help an individual understand a companys
performance relative to that of competitors they are often used to trace performance over
time
Ratio analysis can reveal much about a company and its operations However there are
several points to keep in mind about ratios First financial statement ratios are flags
indicating areas of strength or weakness One or even several ratios might be misleading
but when combined with other knowledge of a companys management and economic
circumstances ratio analysis can tell much about a corporation Second there is no single
correct value for a ratio The observation that the value of a particular ratio is too high
too low or just right depends on the perspective of the analyst and on the companys
competitive strategy Third a ratio is meaningful only when it is compared with some
standard such as an industry trend ratio trend a ratio trend for the specific company
being analyzed or a stated management objective
12S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
13S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
14S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
15S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom The significance of my project stems from the very nature of the financial statements ie
they are usually lengthy bulky documents which have a huge array of numbers not
readily understandable Financial statement analysis is the process of examining
relationships among financial statement elements and making comparisons with relevant
information It is a valuable tool used by investors and creditors financial analysts and
others in their decision-making processes related to stocks bonds and other financial
instruments 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 companys profitability
and their prospects for earning a return on their investment by receiving dividends andor
increasing the market value of their stock holdings Creditors and investors who buy debt
securities such as bonds are more interested in liquidity and solvency the companys
short-and long-run ability to pay its debts Financial analysts who frequently specialize
in following certain industries routinely assess the profitability liquidity and solvency
of companies in order to make recommendations about the purchase or sale of securities
such as stocks and bonds Analysts can obtain useful information by comparing a
companys most recent financial statements with its results in previous years and with the
results of other companies in the same industry My aim is to summarize all that data into
a form which is easily understood by all the relevant parties
b) Processing and Analysis
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
Data Collection Sources
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 might also found a few people who will
disapprove its use for such or such reason
At the beginning of a research (Project) it can be important to look for documentary
sources It is what some will call ldquothe review of papers And here I use the term
13S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
15S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
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wwwvunewblogspotcomdocumentary sources in the widest meaning of this term Indeed the goal is not to find
only written sources These documentary sources I use are
Sites on the internet
Articles from scientific publications
Documents on various format (audio video or computer support)
Advisers with a particular expertise
The purpose of the gathering of documentary sources is to have a better idea of what have
been said or written about my subject It is not for the intellectual beauty of the matter
which I should do that The search for documentary sources allowed me to put a more
adequate glance at the data you will later gather
Also I use secondary sources for data collection for my work that include internet and
then I use stock exchange for data gathering as the banks are listed in Lahore stock
exchange So I got their annual reports from there
Data Collection Tools
According to the topic I have selected for my project the tool used for data collection is
direct observation of the financial statements of the banks
Company profile forms
Company comparison forms
Stock exchange
Internet past articles
Case Study
Data Processing and Analysis
We can use several tools to evaluate a company but I will use one of the most valuable
tool that is ldquofinancial ratiosldquo Ratios are an analystrsquos microscope they allow us get a
better view of the firmrsquos financial health than just looking at the raw financial statements
Ratios are useful both to internal and external analysts of the firm For internal
purposes ratios can be useful in planning for the future setting goals and evaluating the
performance of managers External analysts use ratios to decide whether to grant credit
to monitor financial performance to forecast financial performance and to decide
whether to invest in the company I will use Microsoft Word and Microsoft Excel work
sheets to compute the different ratios and analysis
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wwwvunewblogspotcomProject proceedings
1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
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Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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1 RATIO ANALYSIS
Financial ratios are useful indicators of a firms performance and financial situation
Financial ratios can be used to analyze trends and to compare the firms financials to
those of other firms Ratio analysis is the calculation and comparison of ratios which are
derived from the information in a companys financial statements Financial ratios are
usually expressed as a percent or as times per period Ratio analysis is a widely used tool
of financial analysis It is defined as the systematic use of ratio to interpret the financial
statements so that the strength and weaknesses of a firm as well as its historical
performance and current financial condition can be determined The term ratio refers to
the numerical or quantitative relationship between two variables With the help of ratio
analysis conclusion can be drawn regarding several aspects such as financial health
profitability and operational efficiency of the undertaking Ratio points out the operating
efficiency of the firm ie whether the management has utilized the firmrsquos assets correctly
to increase the investorrsquos wealth It ensures a fair return to its owners and secures
optimum utilization of firmrsquos assets Ratio analysis helps in inter-firm comparison by
providing necessary data An inter firm comparison indicates relative position It provides
the relevant data for the comparison of the performance of different departments If
comparison shows a variance the possible reasons of variations may be identified and if
results are negative the action may be initiated immediately to bring them in line Yet
another dimension of usefulness or ratio analysis relevant from the View point of
management is that it throws light on the degree efficiency in the various activity ratios
measures this kind of operational efficiency
a) Liquidity Ratios
b) Leverage Ratios
c) Profitability Ratios
d) Activity Ratios
e) Market Ratios
f) Statements of Cash Flow
15S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Ratio Analysis
a) Liquidity Ratios
Liquidity ratios measure a firmrsquos ability to meet its current obligations These include
Current Ratio
Current Ratio = Current Assets Current Liabilities
This ratio indicates the extent to which current liabilities are covered by those assets
expected to be converted to cash in the near future Current assets normally include cash
marketable securities accounts receivables and inventories Current liabilities consist of
accounts payable short-term notes payable current maturities of long-term debt accrued
taxes and other accrued expenses Current assets are important to businesses because
they are the assets that are used to fund day-to-day operations and pay ongoing expenses
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The current ratio for the year 2006 2007 amp 2008 is 120 119 amp 116 respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
16S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Current ratio 120 119 116
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Current ratio 106 110 106
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomSales to Working Capital
Sales to Working Capital = Sales Working Capital
Sales to working capital give an indication of the turnover in working capital per year A
low working capital indicates an unprofitable use of working capital
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
This liquidity ratio for the years 2006 2007 amp 2008 is 0505 amp 06 times respectively
compared to standard ratio 21 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
BANK AL FALAH
The ratios for the last 3 years are 106 110 amp 106 shows below standard of 21 which
means efficient use of funds but at the risk of low liquidity
Working Capital
Working Capital = Current Assets ndash Current Liabilities
A measure of both a companys efficiency and its short-term financial health Positive
working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its
17S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Sales 43685740 43685740 63305033
Working Capital 95155274 104938111 100006655
Sales to Working
Capital
05 times 05 times 06 times
Year 2006 2007 2008
Sales 21191470 25783871 31046583
Working Capital 15276529 30128884 19741302
Sales to Working 138 085 157
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshort-term liabilities with its current assets (cash accounts receivable and inventory)
Also known as net working capital or the working capital ratio
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
It is very clear from the above calculations that the working capital of the bank is
gradually increasing over the years which shows good short term liquidity efficiency
BANK AL FALAH
This ratio increased to a great extent in 2007 almost double of the year 2006 but later on
in the year 2008 it went down again
b) Leverage Ratios
By using a combination of assets debt equity and interest payments leverage ratios are
used to understand a companys 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 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
18S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Assets 575611106 671597594 731954693
Current Liabilities 480455832 566659483 631948038
Working Capital 95155274 104938111 100006655
Year 2006 2007 2008
Current Assets 265182551 316972828 335217471
Current Liabilities 249906022 286843944 315476169
Working Capital 15276529 30128884 19741302
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned
TIE Ratio = EBIT Interest Charges
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have The ratio is designed to understand the
amount of interest due as a function of companyrsquos earnings before interest and taxes
(EBIT) This ratio measures the extent to which operating income can decline before the
firm is unable to meet its annual interest cost
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from this ratio analysis that this company has covered their interest expenses
243 times in 2006 179 times in 2007 and 18 times in 2008 It means they have
performed pretty much same in 2007 and 2008 but has taken a different look in 2006
As in 2006 they issued a little high number of long-term loans and does not have good
liquidity position their EBIT became high thus making TIE a little high as well
BANK AL FALAH
We can see that this company has covered their interest expenses 116 times in 2006
127 times in 2007 and 108 times in 2008 It means they havenrsquot improved in the past
years
Debt Ratio
Debt Ratio = Total Debt Total Assets
19S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
EBIT 32044524 34298574 48559935
Interest Charges 13204037 19153957 19153957
TIE ratio 243 179 183
Year 2006 2007 2008
EBIT 17798831 21156515 22125914
Interest charges 15232886 16620963 20331194
TIE ratio 116 127 108
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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 debt ratio is calculated by dividing total
long-term and short-term liabilities by total assets The higher the ratio the more leverage
the company is using and the more risk it is assuming Assets and liabilities are found on
a companys balance sheet
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Calculating the debt ratio we came to see that this company is highly leveraged one
BANK AL FALAH
Calculating the debt ratio we came to see that this company is highly leveraged one
Debt to Equity Ratio
Debt to Equity Ratio = Total debt Total Equity
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 As you can see through the formula below the lower the
number the less leverage that a company is using The debt to equity ratio gives the
proportion of a company (or persons) assets that are financed by debt versus equity It is
a common measure of the long-term viability of a companys business and along with
current ratio a measure of its liquidity or its ability to cover its expenses As a result
20S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Assets 590291468 691991521 75792889
Debt Ratio 091 091 09
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Assets 275685541 328895152 348990764
Debt Ratio 095 095 095
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomdebt to equity calculations often only includes long-term debt rather than a companys
total liabilities 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
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years
BANK AL FALAH
Calculating this debt ratio we can see that it was 2491 2271 amp 2272 in the year 2006
2007 amp 2008 respectively This shows a decline in the ratio over the years
Current Worth Net worth Ratio
Current Worth to Net worth Ratio= Current Worth Net worth Ratio
We can calculate current worth and net worth by using following formulas
Current Worth = Total Current Assets ndash Total Current Liabilities
Net Worth = Total Assets - Total Liabilities
HABIB BANK
21S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total debt 536848102 628754092 682747953
Total Equity 45177664 55063125 71280902
Debt To Equity Ratio 1188 1142 958
Year 2006 2007 2008
Total debt 263443596 312675308 331946025
Total Equity 10572605 13766673 14608523
Debt To Equity Ratio 2491 2271 2272
Year 2006 2007 2008
Current Worth 95155274 104938111 100006655
Net Worth 53443366 63237429 75180436
Current Worth to Net
worth Ratio
178 166 133
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Interpretation
HABIB BANK
We can see from the above calculations that this ratios continuously decreasing in the last
three years In 2006 it was 178 in 2007 it was 166 and in 2008 it was 133
BANK AL FALAH
Analysis shows that this ratio was as high as 12 among three years However it declined
to 115 in the year 2008 In 2007 the ratio somewhat increased to 185
Total Capitalization Ratio
Total Capitalization Ratio = Long-term debt long-term debt + shareholders equity
The capitalization ratio measures the debt component of a companys capital structure or
capitalization (ie the sum of long-term debt liabilities and shareholders equity) to
support a companys operations and growth Long-term debt is divided by the sum of
long-term debt and shareholders equity This ratio is considered to be one of the more
meaningful of the debt ratios - it delivers the key insight into a companys use of
leverage
HABIB BANK
BANK AL FALAH
22S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Current Worth 15276529 30128884 19741302
Net Worth 12241945 16219844 17044739
Current Worth to Net
worth Ratio
1247 185 115
Year 2006 2007 2008
Long Term debt 56392270 62094609 50799915
Long term debt + Equity 101569934 117157734 122080817
Capitalization Ratio
worth Ratio
056 053 042
Year 2006 2007 2008
Long Term debt 13537574 25831364 16469856Long term debt + Equity 24110179 39598037 31078379Capitalization Ratio
worth Ratio
056 065 052
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomInterpretation
HABIB BANK
It is obvious from the above calculations that there is a gradual fall in this ratio over the
years
BANK AL FALAH
The ratios for the last 3 years are 056 065 and 052 Shows below standard of 21
Long term Assets versus Long term Debt
Long term Assets versus Long term Debt= Long Term Assets Long Term Debts
HABIB BANK
BANK AL FALAH
Debt Coverage Ratio
Debt Coverage Ratio = Net Operating Income Total Debt
HABIB BANK
BANK AL FALAH
23S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Long Term Assets 14680362 20393927 25973696
Long term debt 56392270 62094609 50799915
LT Assets LT Debts
Debtworth Ratio
026 033 051
Year 2006 2007 2008
Long Term Assets 13773293 11922324 10502990
Long term debt 13537574 25831364 16469856
LT Assets LT Debts
worth Ratio
101 046 063
Year 2006 2007 2008
Net Operating Income 12074762 5121453 5655568
Total Debt 536848102 628754092 682747953
Debt Coverage Ratio
Debtworth Ratio
002 0008 00083
Year 2006 2007 2008
Net Operating Income 14574192 15118049 16880487
Total Debt 263443596 312675308 331946025
Debt Coverage Ratio
worth Ratio
0055321869 0048350633 00508531
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomc) Profitability Ratios
Profitability is the net result of a number of policies and decisions This section of the
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
Net Profit Margin
Net Profit margin = Net Profit Sales x 100
Net Profit Margin gives us the net profit that the business is earning per dollar of sales
This margin indicates the profit after all the costs have been incurred it shows that what
of turnover is represented by the net profit An increase in the ratios indicates that a
firm is producing higher net profit of sales than before
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
24S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Sales 43685740 50481021 63305033
Net Profit Margin 2907 1997 2466
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Sales 21191470 25783871 31046583
Net Profit Margin 831 121 4
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTherefore the Net Profit Margin was 831 in 2006 increase to 121 in 2007 and then
decrease to 4 in 2008
BANK AL FALAH
Therefore the Net Profit Margin was 2907 in 2006 decrease to 1997 in 2007 and
then again increased to 2466 in 2008
Operating Income Margin
Operating Income Margin = Operating Income x 100
Net Sales
Operating Income Margin =
Net mark-up interest income after provisions + Mark-up return interest expensed -
Total non mark-up interest expenses
HABIB BANK
BANK AL FALAH
Return on Assets
Return on Assets (ROA) = Profit after Taxation Average Total assets x 100
ROA A measure of a companys profitability equal to a fiscal years earnings divided by
its total assets expressed as a percentage This is an important ratio for companies
deciding whether or not to initiate a new project The basis of this ratio is that if a
company is going to start a project they expect to earn a return on it ROA is the return
25S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Income 25278799 24275410 37738818
Net Sales 43685740 50481021 63305033
Operating Income
Margin
579 48 596
Year 2006 2007 2008
Operating Income 14574192 15118049 16880487
Net Sales 21191470 25783871 31046583Operating Income
Margin
0687738604 0586337443 05437148
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomthey would receive Simply put if ROA is above the rate that the company borrows at
then the project should be accepted if not then it is rejected
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
Return on assets decreased in 2007 and 2008 and it was maximum in year 2006 This
may have occurred because Square used more debt financing in 2006 compared to 2007
and 2008 which resulted in more interest cost and brought the Net income down
BANK AL FALAH
Return on assets decreased gradually throughout the years
Return on Equity (ROE)
Return on Total Equity = Profit after taxation x 10
Total Equity
Return on Equity measures the amount of Net Income earned by utilizing each dollar of
Total common equity It is the most important of the ldquoBottom linerdquo ratio By this we can
find out how much the shareholders are going to get for their shares This ratio indicates
how profitable a company is by comparing its net income to its average shareholders
equity The return on equity ratio (ROE) measures how much the shareholders earned for
their investment in the company The higher the ratio percentage the more efficient
management is in utilizing its equity base and the better return is to investors
26S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Average assets 5595926865 6411414945 724959955
ROA 227 157 215
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Average assets 1379669275 3022903465 338942958ROA 127 101 0038
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have happened due to the issue of more long-term
debt in 2007 and 2008
DuPont Return on Assets
DuPont Return on Assets = Profit after taxation x 100
Total Assets
HABIB BANK
27S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net income 12700315 10084037 15614020
Total Equity 45177664 55063125 71280902ROE 2811 1831 219
Year 2006 2007 2008
Net income 1762691 3130229 1301301
Total Equity 10572605 13766673 14608523ROE 166 225 89
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Total assets 590291468 691991521 757928389
DuPont ROA 215 146 206
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBANK AL FALAH
Operating Assets Turnover
Operating Assets Turnover = Operating Assets x 100
Net Sales
HABIB BANK
BANK AL FALAH
Detail of Operating Assets of Habib Bank Limited
2008
Operating Assets
Cash and balances with treasury banks 56533134
Balances with other banks 39307321
Operating fixed assets 14751252
110591707
2007
Operating Assets
Cash and balances with treasury banks 55487664
Balances with other banks 27020704
Operating fixed assets 13780555
28S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Total assets 275685541 328895152 348990764
DuPont ROA 0006 0009 0003
Year 2006 2007 2008
Operating Assets 94230402 97259620 110591707
Net Sales 43685740 50481021 63305033
Operating Assets Turnover
Margin
1927 1927 17470
Year 2006 2007 2008
Operating Assets 51094302 59739440 68041671
Net Sales 21191470 25783871 31046583Operating Assets Turnover
Margin
241 231 219
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom 97259620
2006
Operating Assets
Cash and balances with treasury banks 46310478
Balances with other banks 35965048
Operating fixed assets 11954876
94230402
Detail of Operating Assets of Bank Al Falah Limited
2008
Operating Assets
Cash and balances with treasury banks 27859360
Balances with other banks 12731952
Operating fixed assets 10502990
51094302
2007
Operating Assets
Cash and balances with treasury banks 29436378
Balances with other banks 18380738
Operating fixed assets 11922324
59739440
2006
Operating Assets
Cash and balances with treasury banks 32687335
Balances with other banks 21581043
Operating fixed assets 13773293
68041671
29S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcomReturn on Operating Assets
Return on Operating Assets = Profit after Taxation x 100
Operating assets
Habib Bank
Year 2006 2007 2008
Net Profit 12700315 10084037 15614020
Operating Assets 94230402 97259620 110591707
Return on Operating Assets 1348 1037 1119
BANK AL FALAH
Sales to Fixed Assets
This ratio is indicates that how much sales are contributed by investment in fixed Assets
Sales to Fixed Assets = Net Sales Fixed Assets
HABIB BANK
BANK AL FALAH
d)
Activity Ratios
30S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Net Profit 1762691 3130229 1301301
Operating Assets 51094302 59739440 68041671
Return on Operating Assets 0034 0052 0019
Year 2006 2007 2008
Net Sales 43685740 50481021 63305033
Fixed Assets 11954876 13780555 14751252
Sales to Fixed Assets 365 times 366 times 366 times
Year 2006 2007 2008
Net Sales 21191470 25783871 31046583
Fixed Assets 10502990 11922324 13773293
Sales to Fixed Assets 2017 times 216 times 225 times
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcomActivity 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
Total Asset Turnover
Total Asset Turnover = Total Sales Total Assets
The amount of sales generated for every dollars worth of assets It is calculated by
dividing sales in dollars by assets in dollars 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 companies with low profit margins tend to have high asset
turnover while those with high profit margins have low asset turnover
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The Return on Equity was maximum in 2006 but decreased in 2007 and went down more
in 2008 This again may have happened due to the issue of more long-term debt in 2007
and 2008
BANK AL FALAH
The Return on Equity was maximum in 2007 but decreased to an extent in the following
years 2007 and 2008 This again may have
31S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Total Sales 43685740 50481021 63305033
Total Assets 590291468 691991521 757928389
Total Asset Turnover 007 007 008
Year 2006 2007 2008
Total Sales 21191470 25783871 31046583
Total Assets 275685541 328895152 348990764
Total Asset Turnover 007 007 008
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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e) Market Ratio
Market Value Ratios relate an observable market value the stock price to book values
obtained from the firms financial statements
Dividend per Share ndash DPS
Dividend per Share = Total amount of Dividend
Number of outstanding shares
Per share capital = 10 per share
Or
No of shares outstanding = share capital 10
Habib Bank
Year 2006 2007 2008
Total amount of
Dividend
691350 1381000 2730251
Number of Shares 690000 690000 759000
Dividend per Share 10019 20014 3597
Bank al falah
Year 2006 2007 2008
Total amount of
Dividend
00 00 975000
Number of Shares 500000 650000 799500
Dividend per Share 00 00 121
Note There is no dividend paid by the bank in the year 2006 and 2007
Earning Per Share- EPS
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a companys profit allocated to each outstanding share of common
stock Earnings per share serve as an indicator of a companys profitability Earnings per
share are generally considered to be the single most important variable in determining a
32S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
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Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
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Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
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wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomshares price It is also a major component used to calculate the price-to-earnings
valuation ratio
HABIB BANK
BANK AL FALAH
Price Earning Ratio
Price Earning Ratio = Stock Price Per Share
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS) (Earnings per share are calculated by dividing net
income by the number of shares outstanding)
The PE Ratio indicates how much investors are willing to pay per dollar of current
earnings As such high PE Ratios are associated with growth stocks (Investors who are
willing to pay a high price for a dollar of current earnings obviously expect high earnings
in the future) In this manner the PE Ratio also indicates how expensive a particular
stock is This ratio is not meaningful however if the firm has very little or negative
earnings The Price-Earnings Ratio is calculated by dividing the current market price per
share of the stock by earnings per share (EPS) (Earnings per share are calculated by
dividing net income by the number of shares outstanding) The PE Ratio indicates how
much investors are willing to pay per dollar of current earnings As such high PE Ratios
are associated with growth stocks (Investors who are willing to pay a high price for a
dollar of current earnings obviously expect high earnings in the future) In this manner
the PE Ratio also indicates how expensive a particular stock is This ratio is not
meaningful however if the firm has very little or negative earnings
33S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Profit after Taxation 12700315 10084037 15614020
Number of Shares 690000 690000 759000
Earning Per Share 1841 1461 2057
Year 2006 2007 2008
Profit after Taxation 1762691 3130229 1301301
Number of Shares 500000 650000 799500
Earning Per Share 3525 4815 1627
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HABIB BANK
BANK AL FALAH
Interpretation
HABIB BANK
The PE ratio was 054 times in 2006 and increased further to as high as 068 times in the
following year However in 2008 it declined to 049 times which is an alarming signal
for the potential investors
BANK AL FALAH
The PE ratio was 283 times in 2006 and decreased a little bit in 2007 However in 2008 it
increased as much higher than before to 614 times
Dividend Payout Ratio
Dividend Payout Ratio = Dividend per Share
Earning per Share
The percentage of earnings paid to shareholders in dividends The payout ratio provides
an idea of how well earnings support the dividend payments More mature
companies tend to have a higher payout ratio This ratio identifies the percentage of
earnings (net income) per common share allocated to paying cash dividends to
shareholders The dividend payout ratio is an indicator of how well earnings support the
dividend payment
34S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 1841 1461 2057
Price Earning Ratio 054 068 049
Year 2006 2007 2008
Stock price per share 10 10 10
EPS 3525 4815 1627
Price Earning Ratio 283 207 614
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomHABIB BANK
BANK AL FALAH
Dividend Yield
Dividend Yield = Dividend per Share
Share Price
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price In the absence of any capital gains the dividend yield is the return on
investment for a stock A stocks dividend yield is expressed as an annual percentage and
is calculated as the companys annual cash dividend per share divided by the current price
of the stock The dividend yield is found in the stock quotes of dividend-paying
companies Investors should note that stock quotes record the per share dollar amount of
a companys latest quarterly declared dividend This quarterly dollar amount is annualized
and compared to the current stock price to generate the per annum dividend yield which
represents an expected return
HABIB BANK
BANK AL FALAH
35S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
DPS 10019 20014 3597
EPS 1841 1461 2057
Dividend Payout Ratio 00544 0137 0175
Year 2006 2007 2008
DPS 00 00 121
EPS 3525 4815 1627
Dividend Payout Ratio 00 00 074
Year 2006 2007 2008
DPS 10019 20014 3597
Share Price 10 10 10
Dividend Yield 010019 020014 03597
Year 2006 2007 2008
DPS 00 00 121
Share Price 10 10 10
Dividend Yield 00 00 0121
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
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Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
Book Value per Share = Shareholdersrsquo Equity
Share Capital
This is defined as the Common Shareholders Equity divided by the Shares Outstanding
at the end of the most recent fiscal quarter It is the Indication of the net worth of the
corporation Somewhat similar to the earnings per share but it relates the stockholders
equity to the number of shares outstanding giving the shares a raw value Comparing the
market value to the book value can indicate whether or not the stock in overvalued or
undervalued
HABIB BANK
BANK AL FALAH
f)
Statement of cash flow
Cash flow ratios indicate liquidity borrowing capacity or profitability This section of the
financial ratio looks at cash flow indicators which focus on the cash being generated in
terms of how much is being generated and the safety net that it provides to the company
These ratios can give users another look at the financial health and performance of a
company
Operating Cash Flow to Total Debt
Operating Cash Flow to Total Debt = Operating Cash FlowTotal Debt
This coverage ratio compares a companys operating cash flow to its total debt which for
purposes of this ratio is defined as the sum of short-term borrowings the current portion
36S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Equity 45177664 55063125 71280902
Share Capital 6900000 6900000 7590000
Book Value per Share 65 798 939
Year 2006 2007 2008
Equity 10572605 13766673 14608523
Share Capital 5000000 6500000 7995000
Book Value per Share 211 211 182
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcomof long-term debt and long-term debt This ratio provides an indication of a companys
ability to cover total debt with its yearly cash flow from operations The higher the
percentage ratio the better the companys ability to carry its total debt
HABIB BANK
BANK AL FALAH
Operating Cash Flow per Share
Operating Cash Flow per Share = Operating cash flow Total Shares
HABIB BANK
BANK AL FALAH
2 Common Size Analysis (Vertical and Horizontal)
37S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Debts 536848102 628754092 682747953
Operating Cash Flow to TDebt 0033 0089 0027
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Debts 263443596 312675308 331946025
Operating Cash Flow to TDebt 0029 0126 0007
Year 2006 2007 2008
Operating Cash flow 17851517 56224065 18231677
Total Shares 690000 690000 759000
Operating Cash Flow per Share 2587 8148 2402
Year 2006 2007 2008
Operating Cash flow 7852362 39645325 2499606
Total Shares 500000 650000 799500
Operating Cash Flow per Share 1570 6099 312
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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M c 0 7 0 4 0 0 4 7 9
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomThe 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
a) Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information
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 companys
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
HORIZONTAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo) Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury banks56533134 55487664 46310478 12207 1198 100
Balances with
other banks39307321 27020704 35965048 10929 7513 100
38S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomLending to
financial
institutions
6193787 1628130 6550128 9456 2486 100
Investments 13814592 177942251 119587476 11552 1488 100
Advances 456355507 382172734 349432685 1306 1094 100
Other assets 35419252 27346111 17765291 19937 1539 100
Operating fixed
assets14751252 13780555 11954876 12339 1153 100
Deferred tax asset 11222444 6613372 2725486 41176 2426 100
TOTAL ASSETS 757928389 691991521 590291468 1284 1172 100
LIABILITIES
Bills payable 9944257 15418230 5737457 17332 2687 100
Borrowings from
financial
institutions
46844890 58994609 56392270 8307 1046 100
Deposits and other
accounts597090545 531298127 459140198 13005 1157 100
Sub-ordinate loans 3954925 3100000 0 0 0 0
Liabilities against
assets subject to
finance lease
Other liabilities 24913236 19943126 15578177 15992 128 100
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 12718 1171 100
NET ASSETS 75180436 63237429 53443366 14067 1183 100
REPRESENTED BY
Shareholders Equity
39S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomShare capital 7590000 6900000 6900000 110 100 100
Reserves 24243254 19821455 17802584 13618 1113 100
Unappropriated
profit39447648 28341670 20 475080 15992 128 100
Total equity
attributable to the
equity holders of
the Bank
71280902 55063125 45177664 15778 1219 100
Minority interest 890099 965642 913317 97458 1057 100
Surplus on
revaluation of
assets - net of tax
3009435 7208662 7352385 40931 9805 100
TOTAL EQUITY 75180436 63237429 53443366 14067 1183 100
HORIZONTAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 14491 1156 100
Mark-up return
interest expensed26525556 19153957 13204037 20089 1451 100
Net mark-up
interest income36779477 31327064 30481703 12066 1028 100
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 24116 2877 100
40S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) -82001 1202 100
Charge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) -13944 6155 100
Bad debts written
off directly---------- ---------- -------------
9187404 8099291 2804072
Net mark-up
interest income
after provisions
27592073 23227773 27677631 99691 8392 100
Fee commission
and brokerage
income
4518408 3420051 3931710 11492 8699 100
Income gain on
investments 2369233 2472663 1219623 19426 2027 100
Income from
dealing in foreign
currencies
2374318 1487374 1102358 21539 1349 100
Gain on
investments in
associate
4000330 ------- 0 0 0 0
Other income 3116522 2643076 2235805 13939 1182 100
Total non-mark-up
interest income 16378811 10023164 8489496 19293 1181 100
43970884 33250937 36167127 12158 9194 100
Non mark-up
41S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
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HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcominterest expense
Administrative
expenses21348016 18297279 15425461 13839 1186 100
Other provisions
write offs - net200163 276111 122510 16339 2254 100
Other charges 64751 85152 54898 11795 1551 100
Workers welfare
fund323575
Total non mark-up
interest expenses21936505 1810632 15602869 14059 0 100
Profit before
taxation22034379 15144617 18840487 11695 8038 100
Taxation
- Current 866115 7220717 7144846 0 1011 100
- Prior years 233100 1668562 (39067) -59667 -4271 100
- Deferred (2473891) (3828699) (965607) 2562 3965 100
6420359 10084037 12700315 50553 794 100
Profit after
taxation15614020 10084037 12700315 12294 794 100
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 123 7918 100
Minority interest 79009 83806 70056 11278 1196 100
15614020 10084037 12700315 12294 794 100
Basic and diluted
earnings per share2047 1318 1830 11186 7202 100
42S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Horizontal Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and balances
with treasury
banks
11841 29436378 27859360 11841 1057 100
Balances with
other banks1695 18380738 12731952 1695 1444 100
Lending to
financial
institutions
26616 3452059 12456653 26616 2771 100
Investments 13446 88491564 56502210 13446 1566 100
Advances 13288 171198992 144999325 13288 1181 100
Operating fixed
assets13114 11922324 10502990 13114 1135 100
Deferred tax asset 0 0 0 0
Other assets 15958 6013097 5633051 15958 1067 100
TOTAL 12659 328895152 275685541 12659 1193 100
43S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
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wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES 0
Bills payable 11168 4138243 3091135 11168 1339 100
Borrowings
from financial
institutions
16309 21230697 8394130 16309 2529 100
Deposits and
other accounts12556 273173841 239509391 12556 1141 100
Sub-ordinate
loans79798 3220858 3222106 79798 9996 100
Liabilities
against assets
subject to
finance lease
0 0 0 0
Deferred tax
liability1085 1379809 1921338 1085 7182 100
Other liabilities 15456 9531860 7305496 15456 1305 100
TOTAL
LIABILITIES126 312675308 263443596 126 1187 100
NET ASSETS 13923 16219844 12241945 13923 1325 100
REPRESENTED BY
SHAREHOLDERS EQUITY
Share capital 1599 6500000 5000000 1599 130 100
Reserves 11515 2414833 2749533 11515 8783 100
Unappropriated
profit12212 4851840 2823072 12212 1719 100
13817 13766673 10572605 13817 1302 100
Surplus on
revaluation of
14594 2453171 1669340 14594 147 100
44S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcomassets - net of tax
TOTAL
EQUITY13923 16219844 12241945 13923 1325 100
HORIZONTAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Horizontal Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned31046583 25783871 21191470 14651 1217 100
Mark-up return
interest expensed20331194 16620963 15232886 13347 1091 100
Net mark-up interest
income10715389 9162908 5958584 17983 1538 100
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 29182 3398 100
Provision for
diminution in value of
investment
1479062 0 0 0
Bad debts written off
directly28298 5844 1537 18411 3802 100
3543357 2376711 699227 50675 3399 100
Net mark-up interest
income after
7172032 6786197 5259357 13637 129 100
45S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomprovisions
Non mark-up
interest income
Fee commission and
brokerage income 2539321 2429599 1804998 14068 1346 100
Dividend income 300943 64722 37393 80481 1731 100
Income from dealing in
foreign currencies 914845 474510 386997 2364 1226 100
Gain on sale of
securities424220 2053192 180751 2347 1136 100
Unrealized loss on
revaluation of
investments classifies
as held for trading
181571 21530 27599 65789 7801 100
Other income 1247669 1031372 842099 14816 1225 100
Total non-mark-up
interest income 5245427 6038466 3224639 16267 1873 100
12417459 12824663 8483996 14636 1512 100
Non mark-up
interest expense
Administrative
expenses10741399 8272587 5874745 18284 1408 100
Provisions against off-
balance sheet
obligations
28582 6959 0 0 0 0
Other charges 122758 9565 43306 28347 2209 100
Total non mark-up
interest expenses10622739 8289111 5918051 1795 0 100
Profit before taxation 1794720 4535552 2565945 69944 1768 100
Taxation 0 0 0
46S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcom- Current 1730051 1726810 476226
- Prior years 221797 0 100874 21988 0 100
- Deferred 1014835 321487 427902 23717 7513 100
493419 1405323 803254 61428 175 100
Profit after taxation 1301301 3130229 1962691 66302 1595 100
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from
surplus on revaluation
of fixed assets - net of
tax
24586 24585 26074 94293 9429 100
Profit available for
appropriation6177727 5977886 3675610 16807 1626 100
b) Vertical Analysis
It is a method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets liabilities and equities) in a balance sheet is
represented as a proportion of the total account The main advantages of analyzing a
balance sheet in this manner are that the balance sheets of businesses of all sizes can
easily be compared It also makes it easy to see relative annual changes in one business
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 years
figures are listed vertically 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
47S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
HABIB BANK
BALANCE SHEET
AS ON AS ON DEC 31 2008 2007 amp 2006
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
56533134 55487664 46310478 74589 8019 78454
Balances with
other banks39307321 27020704 35965048 51862 3905 60928
Lending to
financial
institutions
6193787 1628130 6550128 08172 0235 11096
Investments 13814592 177942251 119587476 18227 2571 20259
Advances 456355507 382172734 349432685 60211 5523 59197
Other assets 35419252 27346111 17765291 46732 3952 30096
Operating
fixed assets14751252 13780555 11954876 19463 1991 20252
Deferred tax
asset11222444 6613372 2725486 14807 0956 04617
TOTAL 757928389 691991521 590291468 100 100 100
48S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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wwwvunewblogspotcomASSETS
LIABILITIES
Bills payable 9944257 15418230 5737457 1312 2228 0972
Borrowings
from financial
institutions
46844890 58994609 56392270 61806 8525 95533
Deposits and
other accounts597090545 531298127 459140198 78779 7678 77782
Sub-ordinate
loans 3954925 3100000 0 05218 0448
Liabilities
against assets
subject to
finance lease
Other liabilities 24913236 19943126 15578177 3287 2882 26391
Deferred tax
liability------- ----------- ---------
TOTAL
LIABILITIES682747953 628754092 536848102 90081 9086 90946
NET ASSETS 75180436 63237429 53443366 9919 914 9054
REPRESENTED BY
Shareholders Equity
Share capital 7590000 6900000 6900000 1001 1 1169
Reserves 24243254 19821455 17802584 3199 286 3016
Unappropriate
d profit39447648 28341670 20 475080 5205 41 3287
Total equity
attributable to
the equity
holders of the
71280902 55063125 45177664 9405 796 7653
49S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank
Minority
interest 890099 965642 913317 0117 014 0155
Surplus on
revaluation of
assets - net of
tax
3009435 7208662 7352385 0397 104 1246
TOTAL
EQUITY75180436 63237429 53443366 9919 914 9054
VERTICAL ANALYSIS
HABIB BANK
CONSOLIDATED PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return
interest earned63305033 50481021 43685740 100 100 100
Mark-up return
interest expensed26525556 19153957 13204037 41901 3794 30225
Net mark-up
interest income36779477 31327064 30481703 58099 6206 69775
Provision against
non-performing
loans and
advances - net
6904919 8238227 2863207 10907 1632 65541
Charge (reversal)
against off-
balance sheet
obligations
372598 (54626) (45438) 05886 -0108 -0104
50S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomCharge (reversal)
of provision
against diminution
in the value of
investments
1909887 (84310) (13697) 3017 -0167 -0031
Bad debts written
off directly---------- ---------- ------------- 0 0 0
9187404 8099291 2804072 14513 1604 64187
Net mark-up
interest income
after provisions
27592073 23227773 27677631 43586 4601 63356
Fee commission
and brokerage
income
4518408 3420051 3931710 71375 6775 9
Income gain on
investments 2369233 2472663 1219623 37426 4898 27918
Income from
dealing in foreign
currencies
2374318 1487374 1102358 37506 2946 25234
Gain on
investments in
associate
4000330 ------- 0 63191 03162 0
Other income 3116522 2643076 2235805 4923 5236 51179
Total non-mark-
up interest
income
16378811 10023164 8489496 25873 1986 19433
43970884 33250937 36167127 69459 6587 82789
Non mark-up
interest expense
Administrative
expenses21348016 18297279 15425461 33722 3625 3531
51S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomOther provisions
write offs - net200163 276111 122510 03162 0547 02804
Other charges 64751 85152 54898 01023 0169 01257
Workers welfare
fund323575 05111 0 0
Total non mark-up
interest expenses21936505 1810632 15602869 34652 0 35716
Profit before
taxation22034379 15144617 18840487 34807 30 43127
Taxation
- Current 866115 7220717 7144846 0 143 16355
- Prior years 233100 1668562 (39067) 03682 3305 -0089
- Deferred (2473891) (3828699) (965607) -3908 -7584 -221
6420359 10084037 12700315 10142 1998 29072
Profit after
taxation15614020 10084037 12700315 24665 1998 29072
Attributable to
Equity holders of
the Bank15535011 10000231 12630259 2454 1981 28912
Minority interest 79009 83806 70056 0125 017 016
15614020 10084037 12700315 2466 20 2907
Basic and diluted
earnings per share2047 1318 1830 323 261 4189
52S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
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b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
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IVS h e i k h W a q a s A h m e d
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VS h e i k h W a q a s A h m e d
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VIS h e i k h W a q a s A h m e d
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VIIS h e i k h W a q a s A h m e d
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VIIIS h e i k h W a q a s A h m e d
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IXS h e i k h W a q a s A h m e d
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XS h e i k h W a q a s A h m e d
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XIS h e i k h W a q a s A h m e d
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XIIS h e i k h W a q a s A h m e d
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XIIIS h e i k h W a q a s A h m e d
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XIVS h e i k h W a q a s A h m e d
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XVS h e i k h W a q a s A h m e d
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XVIS h e i k h W a q a s A h m e d
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XVIIS h e i k h W a q a s A h m e d
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XVIIIS h e i k h W a q a s A h m e d
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XIXS h e i k h W a q a s A h m e d
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c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
BALANCE SHEET
AS ON DEC 31 2008 2007 amp 2006
Years
(Rupees in lsquo000rsquo)Vertical Analysis
2008 2007 2006
ASSETS 2008 2007 2006
Cash and
balances with
treasury banks
32987335 29436378 27859360 94522 895 10105
Balances with
other banks21581043 18380738 12731952 61838 5589 46183
Lending to
financial
institutions
3315500 3452059 12456653 095 105 45184
Investments 75973238 88491564 56502210 21769 2691 20495
Advances 192671169 171198992 144999325 55208 5205 52596
Operating
fixed assets13773293 11922324 10502990 39466 3625 38098
Other assets 8989186 6013097 5633051 25758 1828 20433
TOTAL
ASSETS348990764 328895152 275685541 100 100 100
LIABILITIES
Bills payable 3452031 4138243 3091135 09891 1258 11213
Borrowings
from financial
institutions
13690222 21230697 8394130 39228 6455 30448
53S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
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VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDeposits and
other accounts300732858 273173841 239509391 86172 8306 86878
Sub-ordinate
loans2571169 3220858 3222106 07367 0979 11688
Liabilities
against assets
subject to
finance lease
Deferred tax
liability208465 1379809 1921338 00597 042 06969
Other liabilities 11291280 9531860 7305496 32354 2898 26499
TOTAL
LIABILITIES331946025 312675308 263443596 95116 9507 95559
NET ASSETS 17044739 16219844 12241945 4884 493 4441
REPRESENTED BY
Shareholders Equity
Share capital 7995000 6500000 5000000 2291 198 1814
Reserves 3166056 2414833 2749533 0907 073 0997
Unappropriated
profit3447467 4851840 2823072 0988 148 1024
14608523 13766673 10572605 4186 419 3835
Surplus on
revaluation of
assets - net of tax
2436216 2453171 1669340 0698 075 0606
TOTAL
EQUITY17044739 16219844 12241945 4884 493 4441
54S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VERTICAL ANALYSIS
BANK AL FALAH LIMITED
PROFIT amp LOSS ACCOUNT
AS ON DEC 31 2008 2007 amp 2006
2008 2007 2006 Vertical Analysis
(Rupees in lsquo000rsquo) 2008 2007 2006
Mark-up return interest
earned31046583 25783871 21191470 100 100 100
Mark-up return interest
expensed20331194 16620963 15232886 65486 6446 71882
Net mark-up interest
income10715389 9162908 5958584 34514 3554 4123
Provision against non-
performing loans and
advances - net
2035997 2370867 697690 655 9195 32923
Provision for diminution
in value of investment1479062 476 0 0
Bad debts written off
directly28298 5844 1537 0091 0023 00073
3543357 2376711 699227 11413 9218 32996
Net mark-up interest
income after provisions7172032 6786197 5259357 23101 2632 24818
Non mark-up interest
income
Fee commission and
brokerage income 2539321 2429599 1804998 81791 9423 85176
Dividend income 300943 64722 37393 09693 0251 01765
Income from dealing in
foreign currencies 914845 474510 386997 29467 184 18262
55S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
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wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
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wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
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IIS h e i k h W a q a s A h m e d
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IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
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XIXS h e i k h W a q a s A h m e d
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Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomGain on sale of securities 424220 2053192 180751 13664 7963 08529
Unrealized loss on
revaluation of investments
classifies as held for
trading
181571 21530 27599 05848 0084 01302
Other income 1247669 1031372 842099 40187 4 39738
Total non-mark-up
interest income 5245427 6038466 3224639 16895 2342 15217
12417459 12824663 8483996 13573 2703 21923
Non mark-up interest
expense
Administrative expenses 10741399 8272587 5874745 59158 38424 21286
Provisions against off-
balance sheet obligations28582 6959 0 22908 0042 0
Other charges 122758 9565 43306 23403 0058 1343
Total non mark-up
interest expenses10622739 8289111 5918051 85547 4987 69755
Profit before taxation 1794720 4535552 2565945 57807 2729 12108
Taxation 0 0 0
- Current 1730051 1726810 476226 55724 6697
- Prior years 221797 0 100874 07144 0 0476
- Deferred 1014835 321487 427902 32687 1247 20192
493419 1405323 803254 15893 545 37905
Profit after taxation 1301301 3130229 1962691 41914 1214 92617
Attributable to
Unappropriated profit
brought forward4851840 2823072 1886845
Transferred from surplus
on revaluation of fixed
assets - net of tax
24586 24585 26074 00792 0095 0123
56S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomProfit available for
appropriation6177727 5977886 3675610 19898 2318 17345
3 Review of Descriptive Information
Habib Bank Limited
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan Approved accounting standards comprise of such
International Financial Reporting Standards issued by the International Accounting
Standards Board as are notified under the Companies Ordinance 1984 provisions of and
directives issued under the Companies Ordinance 1984 and Banking Companies
Ordinance 1962 and the directives issued by State Bank of Pakistan (SBP) In case the
requirements of provisions and directives issued under the Companies Ordinance 1984
and Banking Companies Ordinance 1962 and the directives issued by SBP differ the
provisions of and directives issued under the Companies Ordinance 1984 and Banking
Companies Ordinance 1962 and the directives issued by SBP shall prevail
Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual
periods beginning on or after 1 July 2009) requires accounting for changes in ownership
interest by the group in a subsidiary while maintaining control to be recognized as an
equity transaction When the group loses control of subsidiary any interest retained in the
former subsidiary will be measured at fair value with the gain or loss recognized in the
profit or loss The application of the standard is not likely to have an effect on the
Groups financial statements The auditors conducted their audit in accordance with the
auditing standards as applicable in Pakistan These standards require that they plan and
perform the audit to obtain reasonable assurance about whether the above said statements
are free of any material misstatement And in their opinion the consolidated financial
statements present fairly the financial position of Habib Bank Limited as at December 31
2006 2007 amp 2008 and the results of its operations its cash flows and changes in equity
for the year then ended in accordance with the approved accounting standards as
applicable in Pakistan
57S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBank Al Falah Limited
The financial statements prepared by the management present fairly its state of affairs
the results of its operating cash flow and changes in equity All directors of the company
are registered as tax payers and none of them has default in payments of any loan to a
banking company The auditors perform their audit in accordance with the auditing
standards as applicable in Pakistan These standards require that they plan and perform
the audit to obtain reasonable assurance about whether the above said statements are free
of any material misstatement And in their opinion the consolidated financial statements
present fairly the financial position of Habib Bank Limited as at December 31 2006
2007 amp 2008 and the results of its operations its cash flows and changes in equity for the
year then ended in accordance with the approved accounting standards as applicable in
Pakistan
The board of directors through its sub committee called Board Risk Management
Committee (BRMC) oversees the overall risk of the bank RMD is the organizational arm
performing the functions of identifying measuring monitoring and controlling the
various risks and assists the Apex level committee and the various sub- committees in
conversion of policies into action
Credit risk Management processes encompasses identification assessment measurement
monitoring and control of the credit exposures The bank as per State Bank of Pakistan
Guidelines has migrated to baseII as on January with the standardized approach
4 Comparisons
Financial trend analysis is an applied practical approach for monitoring the financial
condition of any company through the use of financial indicators I shall use technique to
compare previous three-year period data and observes how they change This would
permit an assessment of the current financial condition
a) Trend Analysis
A firms present ratio is compared with its past and expected future ratios to determine
whether the companys financial condition is improving or deteriorating over time Trend
58S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomanalysis studies the financial history of a firm for comparison By looking at the trend of
a particular ratio one sees whether the ratio is falling rising or remaining relatively
constant This helps to detect problems or observe good management
TREND ANALYSIS
HABIB BANK LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio120 119 116
Lower liquidity in
2008
Sales to Working Capital 05 times 05 times 06 times Increase in 2008
Working Capital95155274 104938111 100006655
Lower liquidity in
2008
b) Leverage Ratios
Time Interest Earned 243 179 183 Lower since 2008
Debt Ratio091 091 09
Leverage remain
same
Debt to Equity Ratio1188 1142 958
Drops in leverage in
2008
Current Worth Net worth
Ratio178 166 133
Higher in 2006
Total Capitalization Ratio 056 053 042 Lower during 2008
Long term Assets versus Long
term Debt026 033 051
Drops in leverage in
2006
59S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomDebt Coverage Ratio
002 0008 00083Lower coverage in
2006
c) Profitability Ratios
Net Profit Margin2907 1997 2466
Lower profitability
during 2007
Operating Income Margin579 48 596
Increased Profitability
since 2008
Return on Assets227 157 215
Lower ROA during
2007
Operating Assets Turnover1927 1927 17470
Lower efficiency
since 2008
Return on Operating Assets1348 1037 1119
Lower efficiency in
2007
Sales to Fixed Assets365 times 366 times 366 times
No change in last 3
years
d) Activity Ratios
Total Asset Turnover007 007 008
Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS10019 20014 3597
Good market
perceptions
Earning Per Share- EPS 1841 1461 2057 Higher In 2008
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00544 0137 0175
Good market
perceptions
Dividend Yield 010019 020014 03597 Lower in 2006
60S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomBook Value per Share
65 798 939Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0033 0089 0027
Lower in 2006
Operating Cash Flow per
Share2587 8148 2402
Increased during
2007
TREND ANALYSIS
BANK AL FALAH LIMITED
for the years 2006 2007 amp 2008
Performance Area 2006 2007 2008 Trend
a) Liquidity Ratios
Current Ratio106 110 106
Higher liquidity in
2007
Sales to Working Capital 138 085 157 Increase in 2008
Working Capital 15276529 30128884 19741302 Lower liquidity in
2006
b) Leverage Ratios
61S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTime Interest Earned 116 127 108
Lower since 2008
Debt Ratio095 095 095
Leverage remain
same
Debt to Equity Ratio 2491 2271 2272 Drops in leverage in
2008
Current Worth Net worth
Ratio
1247185 115 Higher during 2007
Total Capitalization Ratio 0561487909 0652339509 05299458 Increased during
2007
Long term Assets versus
Long term Debt
101 046 063 Higher during
leverage in 2006
Debt Coverage Ratio 0055321869 0048350633 00508531 Lower coverage in
2007
c) Profitability Ratios
Net Profit Margin 008012 004
Lower profitability
during 2006
Operating Income Margin0687738604 0586337443 05437148
Increased
Profitability since
2006
Return on Assets 0012776185 0010355041 00038393 Lower ROA during
2007
Operating Assets Turnover241 231 219
Lower efficiency
since 2008
Return on Operating Assets0034 0052 0019
Lower efficiency in
2008
Sales to Fixed Assets 2017 times 216 times 225 times Lower in 2006
d) Activity Ratios
62S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomTotal Asset Turnover
007 007 008Higher efficiency
since 2008
e) Market Ratios
Dividend per Share ndash DPS00 00
121 Dividend announced
just in 2008
Earning Per Share- EPS 3525 4815 1627 Higher In 2007
Price Earning Ratio 054 068 049 Lower in 2008
Dividend Payout Ratio00 00 074
Good market
perceptions
Dividend Yield00 00 0121
No Dividend in 2006
amp 2007
Book Value per Share211 211 182
Good market
perceptions
f) Statement of cash flow
Operating Cash Flow to Total
Debt0029 0126 0007 Lower in 2008
Operating Cash Flow per
Share1570 6099 312
Increased during
2007
b) Industry Averages and Comparisons with Competitors
The entire ratio has been compared through above mentioned comparisons and analysis
Which include horizontal analysis vertical analysis and trend analysis
c) Summary
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 two
mentioned companies In the current picture where financial volatility is endemic and
63S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomfinancial 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 companys financial
statements can be bewildering and intimidating to many investors However through
financial ratio analysis I 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 Therefore I select this topic so that I have
done some solid financial analysis that will certainly help the management of review their
performance and also assist the interested people like investors and creditors That as a
financial analyst how can I make any important financial decision by analyzing the
financial statements of the company Because it is the primary responsibility of the
financial managers or financial analyst to manage the financial matters of the company
by evaluating the financial statements I am also providing some important suggestions
and opinions about the financial matters of the business
d) Conclusion Findings
I compare and analysis the financial statements of Habib Bank Limited and Bank Al
Falah Limited
Liquidity position of both companies is not up to standard both are below
industry average but the liquidity position of Habib Bank is better from Bank
AL Falah Limited Working capital of Habib Bank is better than Bank La
Falah but both companies must improve their liquidity position
Leverage ratios indicate the high risk associated with both the companies
Generally leverage ratios measures the percentage of funds provided by the
64S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcomcreditors The proportion of a firmrsquos total assets is being financed with high
percentage of borrowed funds
Profitability ratios of Habib Bank Limited are better than Bank AL Falah
Limited Net profit of Bank Al falah Limited is low due to heavy financial
charges
Habib Bank has a good market perception due to continuous declaration of
dividends but on the other hand Bank LA Falah limited has not announced in
dividend in the year 2006 and 2007
Book value per share of Habib Bank Limited is much higher than the Al
Falah Bank It is the Indication of the net worth of the corporation Somewhat
similar to the earnings per share but it relates the stockholders equity to the
number of shares outstanding giving the shares a raw value So the net worth
of Habib Bank is better than Al Falah Bank
Earning per Share and Operating cash flow of Habib Bank Limited is also
better than Bank AL Falah Limited
e) Recommendation
This section deals with your proposed solutions or plans to cover and remove all the ills
and deficiencies that you think (in light of data processing and analysis) needs to be removed
or improved Recommendations should be vivid lucid and based on your findings They
must be logical and applicable
65S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
Section II
a) Introduction of the student
1048707 Bcom (2 Years)
1048707 Warsan Homoeopathic Laboratories
1048707 Assistant Accounts Officer
1048707 2 Years Experience
66S h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
b) AppendixAppendices
IS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
VIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
IXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XVIIIS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
XIXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9
Fina l Pro jec t F inance FIN 619
wwwvunewblogspotcom
c) Bibliography
Vu hand Outs
Internet sources
wwwinvestopediacom
wwwbankalhabibcom
wwwhabibbankltdcom
httpwwwcanadaonecomtoolsratiosdebt_equityhtml
Financial Statement Analysis A Practitioners Guide 3rd Edition
Ross SA RW Westerfield and BD Jordan Essentials of Corporate Finance
(1999) 2nd Edition IrwinMcGraw-Hill
Ross SA RW Westerfield and J Jaffe Corporate Finance (1999) 5th Edition
IrwinMcGraw-Hill
Scott DF JD Martin JW Petty and A Keown Basic Financial Management
(1999) 8th Edition Prentice-Hall Inc
d) Index
An index is an alphabetical list of names places and subjects mentioned in the report
along with the page on which they occur They are rarely included in unpublished
reports
XXS h e i k h W a q a s A h m e d
M c 0 7 0 4 0 0 4 7 9