Section 3 provides a description of analytical tools and techniques. Old book but provides good introduction to bank finances balance sheets and financial statements plus some ratios that can be used in assessing the financial condition of banks. S subalakshmi et al financial ratio analysis of sbi 2009 2016 doi. Financial ratios are usually split into seven main categories. If the current ratio is significantly higher, it is a clear indication that. Fahad ahmed khan hassan ali khan university of karachi analysis of financial statements financial statement analysis is defined as the process of. Hence, the aim of the study is to analyze the financial performance of commercial banks in ethiopia for the period between 2009 and. Wall street investment firms, bank loan officers and knowledgeable business owners all use financial ratio analysis to learn more about a companys current financial health as well as its potential. Financial ratios for the commercial banking industry do. Ratio analysis enables the business ownermanager to spot trends in a business and to. Pdf project report on financial analysis of icici bank.
Ratio analysis, financial planning and financial analysis the financial statements discussed in chapter 4 provide valuable information about a firms financial and business health. Financial ratios top 28 financial ratios formulas, type. Pdf this paper uses dynamic panel data methods to examine the determinants of banks performance in the german banking sector. Ratio analysis enables the you to spot trends in a business and to compare its. Financial ratio analysis is one of the most popular financial analysis techniques for companies and particularly small companies. A to z in banking financial ratio analysis with case study. The objective of the study is to estimate important financial ratios of major commercial banks in oman and compare their financial management practices as indicated by. Therefore, for a description of the financial situation the ratio indicators are used. The objective of the study is to estimate important financial ratios of major commercial banks in oman and compare their financial management practices as indicated by the ratios. Nov 20, 2019 financial ratio analysis is one of the most popular financial analysis techniques for companies and particularly small companies. Analysisthe times interest ratio is stated in numbers as opposed. Financial ratios analysis in determination of bank performance in the german banking sector. The analysis of key financial performances of banks 3 loans. A shareholder ratio describes the companys financial condition in terms of amounts per.
These are the banks that dominate the sector with the top 7 banks. Ratio analysis 1 p a g e introduction a sustainable business and mission requires effective planning and financial management. Financial ratio analysis involves the calculation and comparison of ratios which are derived from the information given in the companys financial statements. In my report i had to study cbls financial statements for the last few years then had to analyze and give significant comments regarding the changes in the financial position.
Dividend yield on common stock annual dividends per share current market price per share a measure of the return to owners received in the form of dividends. An activity ratio relates information on a companys ability to manage its resources that is, its assets efficiently. The contribution of financial ratios analysis on effective decision making in commercial banks 35 also the balanced scorecard is more efficient than financial ratios analysis. The financial analysis for microfinance institutions course provides participants with an understanding of the different ratios used by microfinance institutions, what they mean, and how they can be used to keep track of an institutions financial performance over time. Pdf financial ratios analysis in determination of bank. Importances of ratio analysis top 8 uses of ratio analysis. Debttoequity ratio total debt total stockholders equity provides another measure of the fund provided by creditors versus the funds provided by owners. A financial leverage ratio provides information on the degree of a companys fixed financing obligations and its ability to satisfy these financing obligations. The historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and its investment attractiveness. Pdf ratio analysis banking financial statements fahad. Analysis of roe trends in the six omani commercial banks over the period 1997. A sustainable business and mission requires effective planning and financial management. Fahad ahmed khan hassan ali khan university of karachi analysis of financial statements financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly. The most popular tooltechnique for analyzing the financial statement of bank is ratio analysis.
The main objective for commercial bank is to maximize the value of profit. This type of ratio indicates the efficiency with which an enterprises resources are utilized. Hence, to interpret the ratios, the user should be aware of the rules followed in the preparation of financial statements and also their nature and limitations. Ten ratios for financial statement analysis dummies. Look at the 2 figures used to compute the ratio and criticise them. Manikandan3 1,2department of commerce, standard fireworks rajaratnam college for women, india 3department of commerce, ayya nadar janaki ammal college, india. Priceearnings ratio current market price per share after tax earnings per share. The above statements shows that some studies found that financial ratios analysis is good tool that support decision making while others said that there are other. Ratio analysis provides business owners with information on trends within their own company, often called trend or timeseries analysis, and trends within their industry, called industry or crosssectional analysis. The basics and use of this ratio are similar to the current ratio in that it gives users an idea of the ability of a company to meet its shortterm liabilities with its shortterm assets.
Jan 25, 2019 financial ratios are widely used to analyze a banks performance, specifically to gauge and benchmark the banks level of solvency and liquidity. Also look at other factors which may distort the information creative accounting, seasonal fluctuations etc. Table of contents liquidity ratios solvency ratios. Following are financial ratios commonly calculated. Financial performance analysis of selected commercial banks. Ratio analysis involves the construction of ratios using specific elements. For each asset type financial ratio can be calculated separately.
Financial ratio analysis a guide to useful ratios for understanding your. Banking profitability, financial crisis, financial market structure. Or financial statement analysis is the process of understanding the risk and profitability of the firm through analysis of reported financial information, by using. Ratio analysis enables the business ownermanager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry.
To do so, banks concentrate on their financial performance analysis and attempt to structure their portfolios in order to maximize their return. Roa, roe, tobins q ratio, operational efficiency, credit risk. The paper shows how financial ratios can be used to explore the sources of a firms profitability and evaluate the quality of its earnings in a systematic fashion. Ratio analysis involves the construction of ratios using specific elements from the financial statements in ways that help identify the strengths and weaknesses of the firm. Financial analysis of afghanistan international bank munich. Guide to financial ratios analysis a step by step guide to balance sheet and profit and loss statement analysis. Bank financial ratio analysis arose in response to this need. Hence, the aim of the study is to analyze the financial performance of commercial banks in ethiopia for the period between 2009 and 2012. The current ratio is used extensively in financial reporting. Accounting data are useful in assessing the economic prospects of a firm. Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of.
We created financial analysis report samples from six companies in six different industries to show you what this powerful monthly analysis tool can do. Ratio analysis is a useful management tool that will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance. Ratio analysis involves calculation and interpretation of financial numbers by relating them in. The current ratio is a popular financial ratio used to test a companys liquidity. Financial ratios are widely used to analyze a banks performance, specifically to gauge and benchmark the banks level of solvency and liquidity. This is a quick financial ratio cheatsheet with short explanations, formulas, and analyzes of some of the most common financial. Section 4 explains how to compute, analyze, and interpret common financial ratios. Ratio analysis is the most popular trend to evaluate a banks performance over years or with other companies in an industry. A summary of key financial ratios how they are calculated and.
Financial statements are therefore the starting point of bank financial appraisal. Project report on financial analysis of icici bank. Introduction among the various financial institutions, banks are the fundamental component and the most active players in the financial system especially financial markets guisse. A ratio is 2 figures compared to each other, and can either be in % terms or in absolute. Financial ratio analysis compares relationships between financial statement accounts to identify the strengths and weaknesses of a company. Traditionally, financial analysis, for a long time, depended on accounting performance.
These financial analysis reports can be created for any publicly traded company or any private company if the financial data is supplied. The use of financial ratios is a timetested method of analyzing a business. The ratio indicators enable a comparative analysis. A financial ratio analysis of commercial bank performance in south. Financial analysis is also critical in evaluating the relative stability of revenues and earnings, the levels of operating and financial risk, and the performance of management. A summary of key financial ratios how they are calculated. If the income statement show an operating loss, the seriousness of that problem is fairly self evident. A financial ratio is a comparison between one bit of financial information and another. Since all assets have their sources, it is logical that banks balance sheet assets and liabilities must always be balanced. Apply ratio analysis to financial statements to analyze the success, failure, and progress of your business. The second type of financial ratio analysis is the turnover ratio. They include twoyear and fiveyear comparisons, industry and group comparisons, and detailed ratio analysis reports for all standard ratios or for selected ratio types. The balance sheet and the statement of income are essential, but they are only the starting point for successful financial management.
However, while easy to understand, it can be misleading in both a positive and negative sense i. Guide to financial ratios analysis a step by step guide to. Financial performance analysis of selected commercial. Results indicate that all the selected ratios have impact on financial performance of private commercial banks. Banks are interested in the performance and liquidity of organisations for lending purposes. Some of the information requires little or no analysis to understand. Sections 5 through 8 explain the use of ratios and other analytical data in equity. Financial ratios for the commercial banking industry loyola. We show how to incorporate market data and economic data in the analysis and interpretation of financial ratios. The ratio of apples to oranges is 200 100, which we can more conveniently express as 2. Pdf financial ratios of major commercial banks researchgate. Ratio analysis enables the management of banks to identify the causes. A ratio is a mathematical relation between one quantity and another.
The business ferret analysis is more than just a report. A financial ratio is a relative magnitude of two financial variables taken from a businesss financial statements, such as sales, assets, investments and share. Debttoassets ratio total debt total assets measures the extent to which borrowed funds have been used to finance the firms operations. Financial ratios play a central role in the quantitative analysis of commercial banks.
The detailed ratio analysis reports include charts depicting several key ratios that. This paper investigates the performance of south africas commercial banking sector for the period 2005 2009. Financial ratios for the commercial banking industry. Bank is a business enterprise that sells certain types of products. Another beneficial use is to compare the quick ratio with the current ratio. Financial ratios for ratio analysis examples formulas. Financial analysis of banking institutions food and agriculture. A sample of the top seven commercial banks was selected based on the value of their total assets at the end of the 2009 financial year. Financial statement analysis is one of the most important steps in gaining an understanding of the historical, current and potential profitability of a company. Thus, the limitations of financial statements also form the limitations of the ratio analysis. A financial ratio is a relative magnitude of two financial variables taken from a businesss financial statements, such as sales, assets, investments and share price.
1131 591 1398 1131 881 1339 1342 513 1140 1355 129 401 605 260 1231 496 334 1115 998 1137 1151 899 681 1092 1491 687 1396 1513 1238 701 1193 1121 695 405 83 424 1328 1142