the Liquidity and Profitability of Private Banks in Bangladesh measure the adequacy of the liquidity and profit maximization.doc

Chapter – Ι

This Chapter covers the followings:

1. Introduction

2. Origin of the report

3. Purpose of the report

4. Scope of the report

5. Methodology of the report

6. Limitations of the report

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Introduction

The banking system at independence consisted of two branch offices of the former State Bank of Pakistan and seventeen large commercial banks, two of which were controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services were concentrated in urban areas. The newly independent government immediately designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking system and proceeded to reorganize and rename the various banks. Foreign-owned banks were permitted to continue doing business in Bangladesh.

Origin of the report

I am lucky to say that our honorable teacher Mr. Md. Mamunur Rashid, Lecturer, Department of Business Administration, Stamford University, Bangladesh, assigned me the report on “Liquidity and Profitability Analysis of Private Banks in Bangladesh”. The data required for preparing this report has been collected from the annual reports of most recent years.

Purpose of the Report

The main objective of the report is to measure the Liquidity and Profitability of Private Banks in Bangladesh measure the adequacy of the liquidity and profit maximization. The major objectives of this study are specified as follows:

● To fulfill academic requirement.

● To measure and evaluate the liquidity position of Private Banks in Bangladesh.

● To identify major strengths and weaknesses of the private banks in Bangladesh and

● To offer humble suggestions based on the above study.

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Scope of the report

This study has focused upon the liquidity and profitability of private banks in Bangladesh. I hope this study will help me to know more clearly about the liquidity and profitability of private banks in Bangladesh.

Methodology of the Report

The report is done based on secondary information. The major source of data for preparing the report is based on secondary information like annual reports, Journals.

Data processing and analysis:

The collect data from the secondary sources were analyzed to reveal the nature of

financial statement analysis. Ratio analysis technique is used in analysis. Computer

generated Word Processing programs, such as; MS Word was used to generate the

report. The main analysis of data was done with the following computer programs

1. The Powerful Spreadsheet Analyzer MS Excel

2. Word Processor MS Word.

Limitations of the Report

As a student Business Administration, this is my initiative for making the report on “Liquidity and Profitability Analysis of Private Banks in Bangladesh” through using the Annual Reports of the organizations. Beside this I have faced the following hindrances in preparing this report:

● The main limitation while preparing this report was time. So it was not possible to focus everything deeply.● Lack of Information’s source.● Lack of sufficient privileges.

This is my truthful declaration that the report is prepared only on secondary data. But in some cases, I found the problem of shortage of necessary data and in that cases I took hypothetical data, so there is a little chance of misappropriation.

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Chapter – ΙΙ


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1. History of Bank in Bangladesh

2. Various Banks in Bangladesh

3. Various Schemes and Banking Products of Formal Banking

History of Bank in Bangladesh

Bank:

Banks are the most financial institution of the economy. They are the principal source

of credit (loan able fund) for millions of households (individuals and families) and for

most local units of the government. Moreover, for small business ranging from grocery

stores to automobile dealers, banks are often the major source of credit to stock the

shelves with merchandise or to fill dealer’s showroom with new goods. When the

business and consumers need financial information and financial planning, it is the

bankers to whom they turn most frequently for advice and council.

Worldwide, banks grant more installments loans to consumers than any other financial

institution. Banks are among the most important source of short term working capital

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for business and have become increasingly active in recent years in making long term

business loans for new plant and equipment.

Bank is financial intermediaries that offers the widest range of financial services-

especially credit, savings and payment services and perform the widest range of

financial function of any business firm in the economy. The multiplicity of bank

services and function has led to banks being labeled “financial department stores”.

Origin of The Word The

name bank derives from the Italian word banco "desk/bench", used during the

Renaissance by Florentine bankers, who used to make their transactions above a desk

covered by a green tablecloth. However, traces of banking activity can found even in

ancient times.

In fact, the word traces its origins back to the Ancient Roman Empire, where

moneylenders would set up their stalls in the middle of enclosed courtyards called

macella on a long bench called a bancu, from which the words banco and bank are

derived.

What Is the Economic Function of a Bank?

Commercial banks play an important role in the financial system and the economy. As a

key component of the financial system, banks allocate funds from savers to borrowers

in an efficient manner. They provide specialized financial services, which reduce the

cost of obtaining information about both savings and borrowing opportunities. These

financial services help to make the overall economy more efficient.

How Banks Work

Banks operate by borrowing funds-usually by accepting deposits or by borrowing in

the money markets. Banks borrow from individuals, businesses, financial institutions,

and governments with surplus funds (savings). They then use those deposits and

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borrowed funds (liabilities of the bank) to make loans or to purchase securities (assets

of the bank). Banks make these loans to businesses, other financial institutions,

individuals, and governments (that need the funds for investments or other purposes).

Interest rates provide the price signals for borrowers, lenders, and banks.

Through the process of taking deposits, making loans, and responding to interest rate

signals, the banking system helps channel funds from savers to borrowers in an

efficient manner. Savers range from an individual with a $1,000 certificate of deposit to

a corporation with millions of dollars in temporary savings. Banks also service a wide

array of borrowers, from an individual who takes a loan of $100 on a credit card to a

major corporation financing a billion-dollar corporate merger.

The table below provides a June 2001 snapshot of the balance sheet for the entire U.S.

commercial banking industry. It shows that the bulk of banks' sources of funds comes

from deposits - checking, savings, money market deposit accounts, and time

certificates. The most common uses of these funds are to make real estate and

commercial and industrial loans. Individual banks' asset and liability composition may

vary widely from the industry figures, because some institutions provide specialized or

limited banking services.

Functions of a Bank

1. Recognition of Right to Credit:

The view thus given of bank credit in general furnishes the key to the view which

should be taken of the bank itself. It is, as we have already seen, a credit institution - an

institution for the investigation, discussion, and recording of credits. It is not, in this

aspect, what some have described it, an enterprise for "manufacturing" credit. The

"manufacture" of credit, as clearly appears from what has already been said, is

impossible. A basis of credit is automatically created whenever real buying' power or

value is in process of being brought into existence. Such power is created during the

expenditure of labor and capital, but the real worth or value is often intimately

associated with the other elements that appear in the general operations of his

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concern. The basis only appears when it is dissociated from the other elements in the

aggregate of goods and expert means are needed to recognize it. The first function of a

bank, then, is that of recognizing through scientific analysis the real nature and amount

of the values which are presented. Fundamentally, therefore, the credit department of a

bank is the basic element in its organization. It is true that in the past many banks have

been able to do without credit departments and that at the present time there are not a

few of them - chiefly the smaller and less advanced types of institution - which have no

credit departments, or only very rudimentary organizations of the sort. These,

however, usually accept the work of credit departments operated by their city

correspondents. The true work of a bank credit department is done whenever any loan

is made. It may be that the work of credit analysis is incidentally performed by the

president or a vice-president of the bank or by some other officer who happens to have

charge of the work of lending, but the function is there.

2. Guaranteeing of Values:

Secondly, the bank, after recognizing or analyzing credit, guarantees it. It does this by

substituting its own credit for that of the "borrower" or owner of wealth. If A, for

example, is producing steel from pig iron, the bank ascertains the value of the products

which he has in process, which, we may say, is $25 per ton. It undertakes to loan, say,

$10 per ton, and in order to carry out its part of the agreement it obligates itself to pay

$10 on demand to anyone who may be designated by the owner of the plant. The

owner leaves with the bank his own note, which may be secured or may be simply a

claim upon his general assets. In either case, however, the loan is made on the strength

of existing value. It represents that part of the value of the product which the bank is

willing to guarantee. The bank does not expect to be called upon to meet this obligation

for $10 per ton. On the contrary, it expects to offset the obligation against other claims,

and as a net result it believes that it will not be called upon to reduce its holding of

specie. That, however, is to be determined at a later time. The bargain which the bank

makes when it enters into relationships with the borrower involves the substitution of

its own obligation for that of the owner of the goods, and this is the essential point in

the whole operation.

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3. Transferring of Titles:

Thirdly, the bank not only undertakes to put its obligation in place of that of the

borrower, but it undertakes to keep this obligation steadily redeemable on demand in

money, or in lieu of such redemption, to shift the "credit" from A to B and from B to any

other that the latter may indicate, through a process of bookkeeping which involves the

receiving, recording, and paying of claims drawn against the total credit which has

been allowed. Closely connected with this function are the subordinate duties of

exchange and remittance, which, as will be seen at a later point, are variants of the

same general function.

Overview of Banking Environment in Bangladesh:

The banking industry in Bangladesh is more than 600 years old. In Bangladesh 1970’s

banking sector in Bangladesh entered into new era when the entire commercial banks

and financial institution were nationalized after the emergence of Bangladesh as an

independent nation in 1970’s (except foreign banks) with fixed landing and deposit

rates .

History of Banking Sector of Bangladesh:

The banking system at independence consisted of two branch offices of the former State

Bank of Pakistan and seventeen large commercial banks, two of which were controlled by

Bangladeshi interests and three by foreigners other than West Pakistanis. There were

fourteen smaller commercial banks. Virtually all banking services were concentrated in

urban areas. The newly independent government immediately designated the Dhaka

branch of the State Bank of Pakistan as the central bank and renamed it the Bangladesh

Bank. The bank was responsible for regulating currency, controlling credit and monetary

policy, and administering exchange control and the official foreign exchange reserves. The

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Bangladesh government initially nationalized the entire domestic banking system and

proceeded to reorganize and rename the various banks. Foreign-owned banks were

permitted to continue doing business in Bangladesh. The insurance business was also

nationalized and became a source of potential investment funds. Cooperative credit

systems and postal savings offices handled service to small individual and rural accounts.

The new banking system succeeded in establishing reasonably efficient procedures for

managing credit and foreign exchange. The primary function of the credit system

throughout the 1970s was to finance trade and the public sector, which together absorbed

75 percent of total advances.

The government's encouragement during the late 1970s and early 1980s of

agricultural development and private industry brought changes in lending

strategies. Managed by the Bangladesh Krishi Bank, a specialized agricultural

banking institution, lending to farmers and fishermen dramatically expanded. The

number of rural bank branches doubled between 1977 and 1985, to more than

3,330. Denationalization and private industrial growth led the Bangladesh Bank and

the World Bank to focus their lending on the emerging private manufacturing

sector. Scheduled bank advances to private agriculture, as a percentage of sectored

GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to

private manufacturing rose from 13 percent to 53 percent.

The transformation of finance priorities has brought with it problems in

administration. No sound project-appraisal system was in place to identify viable

borrowers and projects. Lending institutions did not have adequate autonomy to

choose borrowers and projects and were often instructed by the political

authorities. In addition, the incentive system for the banks stressed disbursements

rather than recoveries, and the accounting and debt collection systems were

inadequate to deal with the problems of loan recovery. It became more common for

borrowers to default on loans than to repay them; the lending system was simply

disbursing grant assistance to private individuals who qualified for loans more for

political than for economic reasons. The rate of recovery on agricultural loans was

only 27 percent in FY 1986, and the rate on industrial loans was even worse. As a

result of this poor showing, major donors applied pressure to induce the

government and banks to take firmer action to strengthen internal bank

management and credit discipline. As a consequence, recovery rates began to

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improve in 1987. The National Commission on Money, Credit, and Banking

recommended broad structural changes in Bangladesh's system of financial

intermediation early in 1987, many of which were built into a three-year

compensatory financing facility signed by Bangladesh with the IMF in February

1987.

One major exception to the management problems of Bangladeshi banks was the

Grameen Bank, begun as a government project in 1976 and established in 1983 as

an independent bank. In the late 1980s, the bank continued to provide financial

resources to the poor on reasonable terms and to generate productive self-

employment without external assistance. Its customers were landless persons who

took small loans for all types of economic activities, including housing. About 70

percent of the borrowers were women, who were otherwise not much represented

in institutional finance. Collective rural enterprises also could borrow from the

Grameen Bank for investments in tube wells, rice and oil mills, and power looms

and for leasing land for joint cultivation. The average loan by the Grameen Bank in

the mid-1980s was around Tk2,000 (US$65), and the maximum was just Tk18,000

(for construction of a tin-roof house). Repayment terms were 4 percent for rural

housing and 8.5 percent for normal lending operations.

The Grameen Bank extended collateral-free loans to 200,000 landless people in its

first 10 years. Most of its customers had never dealt with formal lending institutions

before. The most remarkable accomplishment was the phenomenal recovery rate;

amid the prevailing pattern of bad debts throughout the Bangladeshi banking

system, only 4 percent of Grameen Bank loans were overdue. The bank had from

the outset applied a specialized system of intensive credit supervision that set it

apart from others. Its success, though still on a rather small scale, provided hope

that it could continue to grow and that it could be replicated or adapted to other

development-related priorities. The Grameen Bank was expanding rapidly,

planning to have 500 branches throughout the country by the late 1980s.

Beginning in late 1985, the government pursued a tight monetary policy aimed at

limiting the growth of domestic private credit and government borrowing from the

banking system. The policy was largely successful in reducing the growth of the

money supply and total domestic credit. Net credit to the government actually

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declined in FY 1986. The problem of credit recovery remained a threat to monetary

stability, responsible for serious resource misallocation and harsh inequities.

Although the government had begun effective measures to improve financial

discipline, the draconian contraction of credit availability contained the risk of

inadvertently discouraging new economic activity.

Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent

to slightly more than 2 months worth of imports. This represented a 20-percent

increase of reserves over the previous year, largely the result of higher remittances

by Bangladeshi workers abroad. The country also reduced imports by about 10

percent to US$2.4 billion. Because of Bangladesh's status as a least developed

country receiving concessional loans, private creditors accounted for only about 6

percent of outstanding public debt. The external public debt was US$6.4 billion, and

annual debt service payments were US$467 million at the end of FY 1986.

Various Banks in BangladeshThe commercial banking system dominates Bangladesh's financial sector. Bangladesh Bank is

the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking

system is composed of four state-owned commercial banks, five specialized development banks,

thirty private commercial Banks and nine foreign commercial banks. The Nobel-prize winning

Grameen Bank is a specialized micro-finance institution, which revolutionized the concept of

micro-credit and contributed greatly towards poverty reduction and the empowerment of women

in Bangladesh. There are basically four types of Banks:-

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Bangladesh Bank

Bangladesh Bank

Bangladesh Bank Monogram

Headquarters Dhaka, Bangladesh

Established 16 December 1971

Governor Dr. Atiur Rahman

Central Bank of Bangladesh

Currency Taka

ISO 4217 Code BDT

Reserves 10 Billion US $

Website http://www.bangladeshbank.org.bd

Bangladesh Bank is the Central bank of Bangladesh. It is the monetary authority of the

country. It came into existence under the Bangladesh Bank Order 1972 (Presidential Order

No. 127 of 1972) which took effect on 16 December 1971. Through this order, the entire

operation of the former State Bank of Pakistan in the eastern wing was transferred to

Bangladesh Bank.

Bangladesh Bank has 9 branch offices, two in Dhaka city (sadarghat and Motijheel), and one

each in Chittagong, Khulna, Rajshahi, Sylhet, Bogra, Rangpur and Barisal. The head office

discharges its duties with 28 departments.

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http://www.bangladeshbank.org.bd/

http://en.wikipedia.org/wiki/File:BBK-LOGO.png

History

After the liberation war, and the eventual independence of Bangladesh, the Government of

Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank

of the country, and named it Bangladesh Bank. This reorganization was done pursuant to

Bangladesh Bank Order, 1972, and the Bangladesh Bank came into existence with

retrospective effect from 16 December 1971.

Objectives

As the central Bank of Bangladesh, the broad objectives of the Bank are :

To regulate currency issuance and to keep foreign exchange reserves.

To manage the monetary and credit system of Bangladesh with a view to stabilizing

domestic monetary value.

To preserve the par value of the Bangladeshi Taka.

To promote and maintain a high level of production, employment and real income in

Bangladesh; and to foster growth and development of the country's productive resources.

To reserve all the rights of the bank.

Functions

Bangladesh Bank performs all the functions that a central bank of any country is expected

to perform, and such functions include maintaining the price stability through economic

and monetary policy measures, managing the country’s foreign exchange and the gold

reserve and regulating the banking sector of the country. Like all other central banks

across the globe, Bangladesh Bank is both the Government’s banker and the banker’s bank,

a “Lender of the Last Resort”. Bangladesh Bank, like most of the central banks of different

countries, exercises monopoly over the issue of currency and the banknotes. Except for the

1 and 2 taka notes, it issues all other denominations of Bangladeshi Taka.

Bangladesh Bank is empowered to act as the watchdog of the country's banking system,

and all scheduled banks are accountable to Bangladesh Bank, which has extensive powers

to ensure soundness of the banking system. No bank can commence banking business in

Bangladesh and no existing bank can open a new branch in or outside the country or shift

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any branch from one place to another without obtaining a license/permission from the

Bangladesh Bank.

Organization

The highest official in the bank is the Governor (currently Dr. Atiur Rahman). The Governor chairs the Board of Director. The Executive Staff, also headed by the Governor, are responsible for the day to day affairs.

Current Board of Directors

Chairman

Dr. Atiur Rahman

Director

Md. Nazrul Huda

Dr. Wahid Uddin Mahmud

Dr.Momtaz Uddin Ahmed

Dr.Sufia Ahmed

Dr. Hossain Zillur Rahman

Dr.Mohammad Tareque

Mr.Jafar Ahmad Chowdhury

Mr. Muhammad Abdul Mazid

Current Executive Staff

Governor

Dr. Atiur Rahman

Deputy Governor

Md. Nazrul Huda

Ziaul Hasan Siddiqui

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Md. Murshid Kuli Khan

Economic Advisor

Habib Ullah Bahar

Executive Director

Khandakar Muzharul Haque

Md. Abul Quasem

A.T.M. Nasiruddin

Chowdhury Mohidul Haque

Mir Abdur Rahim

Md. Harunur Rashid Chowdhury

Md. Mofiz Uddin Chowdhury

Nazneen Sultana

Md. Mofizuddin Chowdhury

Devaki Kumar Saha

A. H. M. Kai Khasru

Former Governors

A.N.M. Hamidullah 1972-1974

A.K.N. Ahmed 1974-1976

M. Nurul Islam 1976-1987

Shegufta Bakht Chaudhuri 1987-1992

Khorshed Alam 1992-1996

Lutfar Rahman Sarkar 1996-1998

Dr. Mohammed Farashuddin 1998-2001

Dr. Fakhruddin Ahmed 2001-2005

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Dr. Salehuddin Ahmed 2005-2009

Dr. Atiur Rahman 2009-Present

The new governor of Bangladesh Bank will be Kamrul Hasan Zoardar.

Commercial Banks

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State-owned Commercial Banks

The banking system of Bangladesh is dominated by the 4 Nationalized Commercial Banks,

which together controlled more than 54% of deposits and operated 3388 branches (54%

of the total) as of December 31, 2004 The nationalized commercial banks are:

Sonali Bank

Janata Bank

Agrani Bank

Rupali Bank

Private Commercial Banks

Private Banks are the highest growth sector due to the dismal performances of government banks

(above). They tend to offer better service and products.

AB Bank Ltd

BRAC Bank Limited

Eastern Bank Limited

Dutch Bangla Bank Limited

Dhaka Bank Limited

Islami Bank Bangladesh Ltd

Pubali Bank Limited

Uttara Bank Limited

IFIC Bank Limited

National Bank Limited

The City Bank Limited

United Commercial Bank Limited

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NCC Bank Limited

Prime Bank Limited

SouthEast Bank Limited

Al-Arafah Islami Bank Limited

Social Islami Bank Limited

Standard Bank Limited

One Bank Limited

Exim Bank Limited

Mercantile Bank Limited

Bangladesh Commerce Bank Limited

Mutual Trust Bank Limited

First Security Islami Bank Limited

The Premier Bank Limited

Bank Asia Limited

Trust Bank Limited

Shahjalal Islami Bank Limited

Jamuna Bank Limited

ICB Islami Bank

Moon Bank Limited

United Bank Limited

Foreign Commercial Banks

Citibank

HSBC

Standard Chartered Bank

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Commercial Bank of Ceylon

State Bank of India

Habib Bank

National Bank of Pakistan

Wori Bank

Bank Alfalah

Specialized Banks and Credit Agencies

Out of the specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan

Bank) were created to meet the credit needs of the agricultural sector while the other two

( Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Sangtha (BSRS) are for extending

term loans to the industrial sector. The Specialized banks are:

Grameen Bank

Bangladesh Krishi Bank

Bangladesh Development Bank Ltd

Rajshahi Krishi Unnayan Bank

Basic Bank Ltd (Bank of Small Industries and Commerce)

Ansar VDP Unnyan Bank

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Various Schemes and Banking Products of Formal Banking

Product & Services:

Deposit Products:

1. Current A/C

2. Savings Bank Deposit A/C

3. Short Term Deposit A/C

4. Term Deposit A/C

5. Premium Term Deposit A/C

6. Instant Earnings Term Deposit A/C

7. Special Savings Scheme

8. Special Fixed Deposit Scheme

9. NFCD

10. RFCD

11. Money Double Program

Loans and Advance Products

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Working Capital Financing

Commercial and Trade Financing

Long Term (Capital) Financing

House Building Financing

Retail and Consumer Financing

SME Financing

Agricultural Financing

Import and Export Financing

Cards

ATM Card

Credit Card (Local, International and Dual)

Remittance Products

Special Interest rate on Savings and Term Deposits

Wage Earners Welfare Deposit Pension Scheme

Loans for Real Estate (Land purchase and House construction/renovation)

Advance against Regular Remittance

Services

Brokerage House

Member, Dhaka Stock Exchange Ltd.

Full Service Depository Participant

Treasury Service

Primary Dealer of Govt. Approved Securities

Remittance Service

Correspondence arrangement with more than 330 Financial Institutions all over the World

For Wage Earners Remittance we have Agency arrangement with 12 reputed Exchange

Houses covering major Locations of our Expatriate

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Categories of Overall Banking Activities:

Banks activities can be divided into three categories. These are as follows:-

General Banking Activities

Credit or loan activities

Foreign exchange activities

What is General banking Activities:

General Banking (GB): It is the starting point of all the banking operation. It does the most

important and basic works of the bank. It also plays a vital role in deposit mobilization. A bank

starts its operation providing services to the customers by its general banking activities. The

efficiency of general banking activity that provided by each bank reflects the whole service given

by that bank. With the increasing competition customers are mostly impressed by the efficiency of

this department. The whole general banking activity is consisted of receiving deposit, remitting

fund, and meeting the demand of customers.

General Banking Section:

1. To maintain different types of deposit account

2. Local Remittance

3. To operate clearing house activities

4. To maintains safety deposit lockers

5. Cash Section

6. Capital Market operation

7. Online Banking

8. ATM and Credit Card Services

Account Opening Section:

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The relationship between banker and customer begins with the opening of an account by the

customer. Opening of an account binds the customer into a contractual relationship under a legal

framework of the “Contract Act -1872”. But selection of a customer for opening an account is very

crucial for a bank. So Banks takes the highest caution in this regard.

Banks opens the following accounts for its customers

Current Account:

A current deposit account may be operated in several times during a working day. There is no

restriction on the number and the amount of withdraws from a current account and the banker

does not allow any interest on the current account. There are two facilities for the people who open

a current account. They are:-

Over draft facility

Collection of check transfer of money rendering agency, general utility service.

A person can open a current a/c or any entity. The entity can be a partnership firm, limited

company, proprietorship firm, association, clubs etc. For opening a current account of the above,

the requirements and steps, which are followed by this branch, are like: -

For a person: There is an individual application form for opening personal current a/c. The person, who wants to

open this type of a/c, is said to fulfill the following requirement:

a) Name/ Father’s Name/ Husband’s Name:

b) Present and Permanent Address:

c) Occupation:

d) Mandate in Writing:

e) Declaration of Nominee:

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f) Letter of Introduction:

g) Specimen Signature:

h) Passport Size Photograph:

i) Initial deposit.

FOR JOIN STOCK COMPANIES, ASSOCIATION, CLUBS ETC:

In case of opening a current a/c of join stock companies, association, clubs etc. the following

requirements are said to fulfill:

a) True copies of certificate of incorporation or registration (in case of companies and registered

bodies).

b) True copies of certificate of commencement of business (in case of limited company).

c) True copies of memorandum and articles of association (in case of limited company). The rules

of regulation by laws (in case of associations, clubs etc.)

d) True copy of resolution of the Board of Directors of Managing committee / Governing Body,

regarding conduct of account.

e) Certificate list containing names and signature of the Board of Directors/ Officer Bearers.

FOR PARTNERSHIP / PROPRIETORSHIP COMPANY:

To open a current a/c on the name of any partnership or proprietorship company, the following

document are required:

a) Filled up application form stating about the name and address of the firm.

b) Partnership deed.

c) Trade License.

d) Two copies of photographs.

e) Endorsement of an a/c holder of the same branch. (for partnership companies).

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f) Undertaking / declaration about the partnership is taken by the bank in a white paper (for

proprietorship firm)

FOR PRIVATE & PUBLIC LIMITED COMPANY:

The document are required by the bank to open a current a/c be:

a) Copy of the certificate of incorporation or registration.

b) Copy of the certificate of business.

c) True copy of memorandum of association and articles of association abide by laws.

d) True copy of resolution of the Board of Directors / Managing Committee /Governing Body

regarding conduct of the account.

In order to open an account, the customer is first of all asked to fill up the application form given

from the bank. The bank requires few documents of the client due to the producers, such as

proposal for opening an a/c, name and full address (both present and permanent).

Savings Account:

A saving a/c is meant for the person of the lower and middle classes who wishes to save

a part of their income to meet their future needs and intend to earn an income from their

saving.

All the feature are like CD a/c except some restrictions imposed by the bank.

The bank offers a reasonable rate of interest.

The number of withdrawals over period of times is limited. Only two withdrawals are

permitted per week. But more than that no interest will be paid on rest of the amount for

that month.

The total amount of one or more withdrawals on any date should not exceed 25% of the

balance in the a/c unless 7 days advance notice is given.

Short-term Deposit Account:

Etries PassedA deposit slip shall be prepared crediting the STD a/c with the amount of the deposit.

Cash-------------Dr.

STD a/c (Party)---------Cr.

If the amount shall be deposited by check or transfer of a/c, the following entries shall be

passed—

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Party C/D, S/D a/c----------Dr.

STD a/c--------------------------------Cr.

The a/c opening form shall be pasted in the passing file in numerical order. The credit

voucher shall be passed in the STD a/c of the party. In case of letter of authority to debit

the STD a/c of the customer, voucher will be prepared and the following entries shall be

passed:-

STD a/c (Party)---------------Dr.

C/D (Party)------------------------Cr.

Minimum 7 days notice period is required for withdrawal of any sum of money from STD

a/c. Banker is not legally liable to the customer, if the check is dishonored under the

following conditions, although the check is properly drawn:

If the fund is insufficient.

If the payment is stopped by the drawer.

If payment is stopped by the court by issuing garnishee order.

Any competent authority issues Attached order.

Check is presented after the death of the customer.

Notice of assignment.

Check presented after the business/banking hour as declared earlier.

Letter of IntroductionThis is a letter of certification, from a person, who is a valid customer of that particular

branch and maintaining any kind of a/c. usually a customer from other branch is not

allowed to be the introducer, but it is permitted. The process of introducing a new client

can be done on the form itself. There is a space in the application where the introducer will

write his/her a/c no. and sign his/her specimen signature. It always advisable on the part

of the banker to allow the prospective customer to open an a/c only with a proper

introduction from a responsible person, known to both the parties.

A letter of introduction always protects a banker in the following ways Protection against fraud

Protection against invariant overdraft

Page 27

Protection against undiscouraged bankrupt

Protection against negligence under sec. 131 of NI Act

Protection against giving incorrect information follow the banker

Declaration of NomineeThe person who wants to open an a/c can mention one or two nominee. The application

will give a declaration in the space given on the a/c opening form, stating the name and

father’s name, age address, relation and percentage of share (if more than one). The a/c

holder can change the nominee any time and it will be valid, only after the of the a/c

holder.

Specimen SignatureThe applicant will sign on the application and he will be provided with an extra paper

where he will sign three or more signatures, which he has to maintain all through the

duration of the account.

InterviewAt the time of the opening of a new a/c, this concerned branched always takes an interview

with prospective customer so as to obviate the chances of preparation of any fraud at the

letter stage.

Initial DepositIt is always a common practice among the bankers to allow a new customer to open an a/c

only in cash.

Operation InstructionIf any party wants his/her a/c to be operated by some body else, s/he will provide the

banker in writing statement about the operator.

Verification of Document

The banker should verify some of the important documents, like the Memorandum of

Association, Article Association by laws Copy etc. In verification of certain other

Page 28

documents like, trust Deed Probate, Letter of Administration etc. may be needed.

Conversant with the provision of special acts, since a banker is to deal with different

classes of customers, s/he has to be thoroughly conversant with certain laws.

Pay in Slip, Check Book and Pass Book

The customer is supplied with a pay in slip book to use for depositing cash or check of bill

into a/c. The customer is also supplied with a checkbook for drawing money as and when

the customer wishes, which normally contains 10 to 50 bank forms. If the customer does

not like to have a checkbook, then s/he can make use of withdrawal form for withdrawing

money. But there is no use of such kind of form in this branch. In addition to the above, a

customer is given a passbook, which reflects the customer’s a/c in the banker’s ledger. It

usually contains the rules and regulations of the bank and terms and conditions of

deposits.

Fixed Deposit Account

A fixed deposit a/c is repayable after the expiry of a predetermined period fixed by the

customer himself. The period varies from three months to five years. The customer may

open his/her a/c for different time periods, which may be for three months, six months,

one year, two years, three years, four years, five years.

Though FDR is an a/c, it is something different from other a/c. FDR is a long-term deposit.

Usually customers are allowed to open this a/c for a certain period. The rate of interest

varies in accordance with the terms of deposit.

The amount of FDR is payable once at a time. After the term for which the a/c was opened,

the FDR gets its maturity. Paying the principle amount plus interest less income tax then

fulfills the claim.

MONTHLY SAVING DEPOSIT ACCOUNT

Page 29

It is a new project, which is a scheme like DPS. The installment payment is to be made to

the bank within the first 10 days of each month. It can be opened for 5years and 10 years

maturity for Tk. 500 and 10000.

Special Fixed Deposit Scheme:

Any amount of TK. 1,00,000/= or multiple may be deposited under this scheme.

Duration of the scheme is 3 (Three) years.

Monthly interest will be given to the depositor against the deposited amount.

Like ‘Deposit Pension Scheme’ this scheme includes the following features for the

convenience of clients.

The monthly installments of TK. 500.00 to 2,500.00 may be deposited every month during

the entire period of scheme.

The duration of the scheme is 5 years or 10 years.

Local Remittance:

Cash handling from one place to another is risky. So, bank remits funds on behalf of the customers

to save them from any mishaps through the network of their branches. There are four modes of

remitting money from one place to another. These are –

Pay order (PO)

Demand Draft (DD)

Telegraphic Transfer (TT)

Mail Transfer (MT)

Clearing Activities:

Outward Bill for Collection:

The instrument of the Bank includes checks; pay order, demand draft etc. The Bank

collects its own instrument from other banks through Clearing House as the clients with no

Page 30

charges or commissions required to perform this service submit them in different

locations.

Inward Bill for Collection:

The Bank provides the instruments to other banks through Clearing House, which have

been collected from different clients. It performs this kind of service for its clients without

requiring any charges or commission.

Locker Service:

Locker services are available for the clients in exchange of fees. In this context the client

gets a locker in Bank with a key and the permission to keep goods or documents with the

consent of the Bank.

Online Banking:

Coputerization of the Branches and Head Office as well is underway with a view to

providing guality and prompt service to the customers. Now the Bank starts, On Line

Banking.

ATM Service & Credit Card:

The Bank to extend modern banking faciliy to the customers allowing 24 hrs accesses to

any ATM dispenser situated . The network will be expanded phase by phase in other parts

of the country. Recently they also established alots of ATM BOOTH as well.

Page 31

Types of loans granted by commercial banks:

1. Secured loan

A secured loan is a loan in which the borrower pledges some asset (e.g., a car or property)

as collateral (i.e., security) for the loan.

2. Mortgage loan

A mortgage loan is a very common type of debt instrument, used to purchase real estate.

Under this arrangement, the money is used to purchase the property. Commercial banks,

however, are given security - a lien on the title to the house - until the mortgage is paid off

in full. If the borrower defaults on the loan, the bank would have the legal right to

repossess the house and sell it, to recover sums owing to it.

In the past, commercial banks have not been greatly interested in real estate loans and

have placed only a relatively small percentage of their assets in mortgages. As their name

implies, such financial institutions secured their earning primarily from commercial and

consumer loans and left the major task of home financing to others. However, due to

changes in banking laws and policies, commercial banks are increasingly active in home

financing.

Changes in banking laws now allow commercial banks to make home mortgage loans on a

more liberal basis than ever before. In acquiring mortgages on real estate, these

institutions follow two main practices. First, some of the banks maintain active and well-

organized departments whose primary function is to compete actively for real estate loans.

In areas lacking specialized real estate financial institutions, these banks become the

source for residential and farm mortgage loans. Second, the banks acquire mortgages by

simply purchasing them from mortgage bankers or dealers.

In addition, dealer service companies, which were originally used to obtain car loans for

permanent lenders such as commercial banks, wanted to broaden their activity beyond

their local area. In recent years, however, such companies have concentrated on acquiring

mobile home loans in volume for both commercial banks and savings and loan

Page 32

associations. Service companies obtain these loans from retail dealers, usually on a no

recourse basis. Almost all bank/service company agreements contain a credit insurance

policy that protects the lender if the consumer defaults.

3. Unsecured loan

Unsecured loans are monetary loans that are not secured against the borrowers assets (i.e.,

no collateral is involved). These may be available from financial institutions under many

different guises or marketing packages:

Bank Overdrafts

Corporate Bonds

Credit card Debt

Credit Facilities or Lines of Credit

Personal loans

Chapter – ΙΙΙ


1. Theoretical Aspect of Financial Statement Analysis

Page 33

2. Calculation of Financial Ratios and Graphically Presentation of The Ratios of Private Banks in Bangladesh

Theoretical Aspect of Financial Statement Analysis

Liquidity Ratio:

Liquidity ratio measures the ability of a firm to meet the current obligation .A firm

should ensure that it does not suffer from lack of liquidity and also does not have

execs liquidity, will result in a poor creditworthiness, loss of creditors confidence.

Page 34

The most common ratios which indicate the extent of liquidity or lack of it are as

follows:

Current Ratio It is the relationship between the current assets and current liabilities and shows the proportion of current assets available per unit of current liability. It is worked out using the following formula-

A worthwhile target for the current ratio is 2:1. Firms with inventories which are easily realized, such as food retailers can manage with significantly lower ratios, but there is no excuse of going mush below unless, a firm sees liquid investments as a sound home for its resources. The current ratio cannot be judge except in relation to the needs of a particular commercial situation. Anything between 1:1 and 4:1 could be acceptable. Comparison must be made with industry norms and those competitors whom one respects. In the absence of other data, 2:1 is not unreasonable.

acid-Test Ratio

The Acid-Test or quick ratio establishes the relationship between quick or liquid assets and current liabilities. Quick assets mean current assets excluding inventory. The exclusion of inventory is for the reason that it is not easily and readily convertible into cash. A high quick ratio is an indication that the firm has liquidity and easiness to meet the current obligations. On the other hand, if the quick ratio is low, it is a clear indicator of illiquidity. The quick ratio is a more rigorous and penetrating test of the liquidity position when compared to the current ratio. It is calculated as follows—

Quick Assets Refers to Cash, Short-term investments, Net receivables etc. Normally a quick ratio of 1:1 is considered satisfactory.

current Cash Debt Coverage Ratio

Current cash debt coverage ratio is calculated by dividing Net cash provided by operating

activities by Average current liabilities.

Page 35

So we can ratio these: Net cash provided by operating activities

Average current liabilities

Activity Ratio

Activity ratios are employed to evaluate the efficiency with which the firm managers

and utilizes its assets. This ratio indicates the speed with which assets are being

converted or turned over into sales thus activity ratio involve a relationship between

sales and assets.

assets Turnover Ratio

Assets are used to generate sales. A firm can compute net asset turnover by dividing

sales by average total assets. So assets turnover will be:

Assets Turnover = Net Sales

Average total assets

receivable turnover

Receivable turnover ratio is calculated by dividing Net sales by Average trade

receivable.

So we can ratio these: Net sales

Average trade receivable

Profitability Ratio

A company should earn and grow over a period of time profit is the difference between

revenue and expenses over a period of time. It is the ultimate outcome of a company

Page 36

and the company will have no future if fails to make sufficient profit. The profitability

ratios are calculated to measures the operating efficiency of a company.

profit Margin on Sales

Profitability ratio in relation to sales is the profit margin or gross margin. It is calculate

in the following way:

Profit margin on sales = Net Income

Net sales

return On Assets (ROA)

An overall measure of profitability is Return on Assets. An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's net income by its average assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".

Rate of return on assets = Net Income

Average total assets

return On Common Stockholders Equity

Another widely used profitability ratio is return on common stockholders equity. It measures profitability from the common stockholders viewpoint. This ratio shows how many dollars of net income the company earned for each dollar invested by the owners. We compute it by dividing net income by average common stockholders equity.

Rate of return on common Stockholders equity = Net Income

Average common stockholders equity

earnings Per Share (EPS)

Earnings Per Share (EPS) is a measure of the net

Page 37

income earned on each share of common stock. It is computed by dividing net income by the number of weighted average common shares outstanding during the year. A measure of net income earned on a per share basis provides a useful perspective for determining profitability. Earnings per share is computed by

EPS = Net Income

Weighted average common shares outstanding

price Earnings Ratio

The Price earnings (PE) ratio is an oft-quoted measure of the ratio of the market price of each share of common stock to the earning per share. The price earnings (PE) ratio reflects investor’s assessments of a company’s future earnings. We compute it by dividing the market price per share of the stock by earning per share.The formula is Market price per share of stock Price earnings ratio = Earning per share

payout Ratio

The Payout ratio measures the percentage of earnings distributed in the form of cash dividends. We compute it by dividing cash dividends by net income. Companies that have high growth rates generally have low payout ratios because they reinvest most of their net income into the business.The formula is

Cash DividendsPayout ratio = Net Income

Coverage Ratio

Page 38

The ratio helps to cover the interest obligation. This ratio is used to get the firms debt

servicing capacity. This ratio can be explained in the following:

debt to Total Assets

Debt to total assets calculated by dividing total debt by total assets. So we can calculate

this by:

Total Debt

Total Assets

cash debt Coverage Ratio

These ratios calculate by dividing net cash provided by operating activities by Average

total liabilities.

Calculated by = Net cash provided by operating activities

Total Liabilities

Calculation of Financial Ratios and Graphically Presentation

This chapter contains the calculation of main financial ratios for evaluating

performance of various private Banks in Bangladesh.

Dhaka Bank Ltd.

Current Ratio: (Current assets/Current liabilities)

Page 39

Year Calculations Ratio

2008 1713207622 / 1863290529 0.91%

2009 1908509664 / 1658260845 1.15%

So Current ratio is

Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2008 2009

Ratio

Fig: Current Ratio

Acid Test Ratio: (Cash, Short-term Investments & Receivable / Current Liabilities)


2008 991157752 / 1863290529 0.53 %

2009 1109515637 / 1658260845 0.66%

So Acid test ratio is

Year Ratio

2008 0.91

2009 1.15

Year Ratio

2008 0.53

2009 0.66

Page 40

Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2008 2009

Ratio

Fig: Acid Test Ratio

Return on Assets (ROA): (Net Income/Average Assets)

Year Ratio

2008 1.18

2009 1.29

Page 41

Ratio

1.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

2008 2009

Ratio

Fig: Return on Assets

Return on Investment (ROI): (Gain from investment – Cost of investment / Cost of

Investment)

Year Ratio

2008 9.18

2009 11.58

Page 42

Ratio

0

2

4

6

8

10

12

14

2008 2009

Ratio

Fig: Return on Investment

Return on Common Stockholders Equity: (Net Income/Average common stockholders

equity)


2008 465985098 / 356250000 1.30

2009 532284207 / 448300000 1.18

Page 43

So the ratio is:

Ratio

1.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

1.32

2008 2009

Ratio

Fig: Return on Common Stock Holders Equity

Earning Per Share (EPS): (Net income/ Weighted average common shares outstanding)

Year Ratio

2008 1.30

2009 1.18

Year Ratio

2008 39.42

2009 45.09

Page 44

Ratio

36

37

38

39

40

41

42

43

44

45

46

2008 2009

Ratio

Fig: Earning per Share

Price Earning (P-E) Ratio: (Market price per share/ Earning per share EPS)

Year Ratio

2008 9.15

2009 10.72

Page 45

Ratio

8

8.5

9

9.5

10

10.5

11

2008 2009

Ratio

Fig: Price Earning Ratio

Payout Ratio: (Cash dividends/Net income)


2008 1500000 / 465985098 0.03

2009 0 / 532284207 0

So the ratio is:

Year Ratio

2008 0.03

2009 0

Page 46

Ratio

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

2008 2009

Ratio

Fig: Payout Ratio

Exim Bank Ltd.



2008 11674760381 / 7864522314 1.48%

2009 12935569186 / 9077534456 1.42%

So Current ratio is

Year Ratio

2008 1.48%

2009 1.42%

Page 47

Ratio

1.39%

1.40%

1.41%

1.42%

1.43%

1.44%

1.45%

1.46%

1.47%

1.48%

1.49%

2008 2009

Ratio

Fig: Current Ratio



2008 6587914223 / 7864522314 0.83%

2009 9216163321 / 9077534456 1.01%


Year Ratio

2008 0.83%

2009 1.01%Page 48

Ratio

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

2008 2009

Ratio



Year Ratio

2008 1.83%

2009 2.19%

Page 49

Ratio

1.60%

1.70%

1.80%

1.90%

2.00%

2.10%

2.20%

2.30%

2008 2009

Ratio



Investment)

Year Ratio

2008 2.03%

2009 9.38%

Page 50

Ratio

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

2008 2009

Ratio



equity)


2008 930843607 / 479582457 1.9

2009 11096627046 / 5853206814 1.8

So the ratio is:

Year Ratio

2008 1.9

2009 1.8Page 51

Ratio

1.74

1.76

1.78

1.8

1.82

1.84

1.86

1.88

1.9

1.92

2008 2009

Ratio

Fig: Return on Common Stockholdres Equity


Year Ratio

2008 32.50

2009 50.21

Page 52

Ratio

0

10

20

30

40

50

60

2008 2009

Ratio

Fig: Earing per Share


Year Ratio

2008 12.06

2009 7.52

Page 53

Ratio

0

2

4

6

8

10

12

14

2008 2009

Ratio

Fig: Price Eraning Ratio



2008 0 / 930843607 0

2009 0 / 11096627046 0

So the ratio is:

Page 54

One Bank Ltd.



2008 26238721229 / 8767809844 2.99%

2009 4674839087 / 4012831533 1.16 %

So Current ratio is

Year Ratio

2008 0

2009 0

Year Ratio

2008 2.99%

2009 1.16 %

Page 55

Ratio

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2008 2009

Ratio

Fig: Current Ratio



2008 3738020432 / 8767809844 0.42%

2009 2590016049 / 4012831533 0.64%


Year Ratio

2008 0.42%

2009 0.64%Page 56

Ratio

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

2008 2009

Ratio



Year Ratio

2008 3.74%

2009 4.37%

Page 57

Ratio

3.40%3.50%3.60%3.70%3.80%3.90%4.00%4.10%4.20%4.30%4.40%4.50%

2008 2009

Ratio



Investment)

Year Ratio

2008 13.46%

2009 12.63%

Page 58

Ratio

12.20%

12.40%

12.60%

12.80%

13.00%

13.20%

13.40%

13.60%

2008 2009

Ratio



equity)


2008 421962412 / 2314881865 0.18

2009 726700936 / 4698139314 0.15

So the ratio is:

Year Ratio

2008 0.18

2009 0.15Page 59

Ratio

0.135

0.14

0.145

0.15

0.155

0.16

0.165

0.17

0.175

0.18

0.185

2008 2009

Ratio

Fig: Return on Common Stockholdres Equity


Year Ratio

2008 27.08

2009 46.63

Page 60

Ratio

0

5

10

15

20

25

30

35

40

45

50

2008 2009

Ratio

Fig: Earnig per Share


Year Ratio

2008 12.09

2009 9.82

Page 61

Ratio

0

2

4

6

8

10

12

14

2008 2009

Ratio




2008 259748700 / 421962412 0.61

2009 498717600 / 726700936 0.68

So the ratio is:

Year Ratio

2008 0.61

2009 0.68 Page 62

Fig: Payout Ratio

Prime Bank Ltd.



2008 10980130 / 8488570 1.2%

2009 18069415 / 9388190 1.9%

So Current ratio is Year Ratio

2008 1.2%

2009 1.9%

Page 63

Ratio

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2008 2009

Ratio

Fig: Current Ratio



2008 10980130 / 8488570 1.29%

2009 18069415 / 9388190 1.92%


Year Ratio

2008 1.29%

2009 1.92%

Page 64

Ratio

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2008 2009

Ratio


Retune on Assets (ROA): (Net Income/Average Assets)

Year Ratio

2008 1.30%

2009 2.37%

Page 65

Ratio

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2008 2009

Ratio



Investment)

Year Ratio

2008 9.74%

2009 15.67%

Page 66

Ratio

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

2008 2009

Ratio



equity)


2008 1,232000000 / 6806290500 0.18

2009 2,784000000 / 9648474000 0.28

So the ratio is:

Year Ratio

2008 0.18

2009 0.28

Page 67

Ratio

0

0.05

0.1

0.15

0.2

0.25

0.3

2008 2009

Ratio

Fig: Return on Common Stockholders Equity


Year Ratio

2008 34.65

2009 78.33

Page 68

Ratio

0

10

20

30

40

50

60

70

80

90

2008 2009

Ratio



Year Ratio

2008 12.46

2009 8.34

Page 69

Ratio

0

2

4

6

8

10

12

14

2008 2009

Ratio




2008 25000000 / 1,232000000 0.02

2009 40000000 / 2,784000000 0.01

So the ratio is:

Year Ratio

2008 0.02

2009 0.01

Page 70

Ratio

0

0.005

0.01

0.015

0.02

0.025

2008 2009

Ratio

Fig: Payout Ratio

Islami Bank Bangladesh Ltd.



2008 36953501596 / 100536611990 0.36%

2009 45164041819 / 121421636487 0.37%

So Current ratio is

Year Ratio

2008 0.36%

2009 0.37%Page 71

Ratio

0.35%

0.36%

0.36%

0.36%

0.36%

0.36%

0.37%

0.37%

0.37%

0.37%

2008 2009

Ratio

Fig: Current Ratio



2008 43161296147 / 100536611990 0.42%

2009 74865512827 / 121421636487 0.61%


Year Ratio

2008 0.42%

2009 0.61%

Page 72

Ratio

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

2008 2009

Ratio



Year Ratio

2008 1.27%

2009 1.34%

Page 73

Ratio

1.22%

1.24%

1.26%

1.28%

1.30%

1.32%

1.34%

1.36%

2008 2009

Ratio



Investment)

Year Ratio

2008 11.31%

2009 10.40%

Page 74

Ratio

9.80%

10.00%

10.20%

10.40%

10.60%

10.80%

11.00%

11.20%

11.40%

2008 2009

Ratio



equity)


2008 2674796768 / 119376000000 0.02

2009 3403551874 / 150169650000 0.02

So the ratio is:

Year Ratio

2008 0.02

2009 0.02

Page 75

Ratio

0

0.005

0.01

0.015

0.02

0.025

2008 2009

Ratio



Year Ratio

2008 43.30

2009 55.10

Page 76

Ratio

0

10

20

30

40

50

60

2008 2009

Ratio



Year Ratio

2008 10.78

2009 10.73

Page 77

Ratio

10.7

10.71

10.72

10.73

10.74

10.75

10.76

10.77

10.78

10.79

2008 2009

Ratio




2008 1425600000 / 2674796768 0.53

2009 1853280000 / 3403551874 0.54

So the ratio is:

Year Ratio

2008 0.53

2009 0.54 Page 78

Ratio

0.524

0.526

0.528

0.53

0.532

0.534

0.536

0.538

0.54

0.542

2008 2009

Ratio

Fig: Payout Ratio

Brac Bank Ltd.



2008 7510859113 / 14984145195 0.50%

2009 13512935603 / 40497163804 0.33%

So Current ratio is

Year Ratio

2008 0.50%

2009 0.33%

Page 79

Ratio

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

2008 2009

Ratio

Fig: Current Ratio



2008 12561261273 / 14984145195 0.83%

2009 17663206149 / 40497163804 0.43%


Year Ratio

2008 0.83%

2009 0.43%

Page 80

Ratio

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

2008 2009

Ratio



Year Ratio

2008 1.64%

2009 1.56%

Page 81

Ratio

1.52%

1.54%

1.56%

1.58%

1.60%

1.62%

1.64%

1.66%

2008 2009

Ratio



Investment)

Year Ratio

2008 12.61%

2009 12.30%

Page 82

Ratio

12.10%12.15%12.20%12.25%12.30%12.35%12.40%12.45%12.50%12.55%12.60%12.65%

2008 2009

Ratio



equity)


2008 973450830 / 5061944316 0.52

2009 1303588940 / 8734045898 0.67

So the ratio is:

Year Ratio

2008 0.52

2009 0.67 Page 83

Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2008 2009

Ratio



Year Ratio

2008 58.50

2009 60.98

Page 84

Ratio

57

57.5

58

58.5

59

59.5

60

60.5

61

61.5

2008 2009

Ratio



Year Ratio

2008 17.52

2009 13.88

Page 85

Ratio

0

2

4

6

8

10

12

14

16

18

20

2008 2009

Ratio




2008 0 / 973450830 0

2009 0 / 1303588940 0

So the ratio is:

Year Ratio

2008 0

2009 0

Page 86

Chapter – IV

Findings, Recommendations, and Conclusions

Page 87

Conclusion

Liquidity and profitability is an attribute that signifies the capacity to meet financial obligations as and when required. The importance of liquidity to meet the current obligations as and when they become due for payment can hardly be over emphasized.

A firm should maintain adequate level of working capital to meet the current obligations and maintain business operations. The effective management of working capital requires both medium-term planning and immediate reactions to the fast changes taking in the present business environment.

Working capital management is the functional area of finance that covers all the current accounts of the firm. It is concerned with the adequacy of current assets as well the level of risk posed by current liabilities.

Efficient handling of company liquidity and profitability provides goodwill about the company as well as success of the company.

Page 88

Bibliography

Financial Decision Making Concepts, Problems and Cases, 4th edition

- John J Hampton

An introduction to effective working capital (liquidity) management,

-Michael Lembach.

Financial Statement Analysis

Theory Application and Interpretation

- By Leopard A Bernstrein

Fundamental of Financial Management

Page 89

- By E.F. Brigham

Financial Management

- By I M. Pandey

Intermediate Accounting

- By Donald E. Kieso

Jerry J. Weygandt

Internet Annual Reports.

Page 90

Documents

the Liquidity and Profitability of Private Banks in Bangladesh measure the adequacy of the liquidity and profit maximization.doc