Chapter no # 4

Financial Analysis

4.1-Hortizontal/Trends Analysis

4.2-Vertical Analysis

4.3-Financial Ratio Analysis

INTRODUCTION
It is the responsibility of the Bank’s Board of Directors to establish and maintain a system of
internal control and prepare and present the financial statements in conformity BOP believe that
audit provides a reasonable basis for our opinion and after due verification, which in the case of
loans and advances covered more than 60% of the total loans and advances of the Bank, they report
that:

1. The consolidated statement of financial position and consolidated profit and loss account
together with the notes thereon have been drawn up in conformity with The Bank of Punjab Act,
1989, the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance,
1984 (XLVII of 1984), and are in agreement with the books of account and are further in
accordance with accounting policies:

2. The expenditure incurred during the year was for the purpose of the Bank’s business; and

3. The business conducted, investments made and the expenditure incurred during the year were
in accordance with the objects of the Bank and the transactions of the Bank which have come to
notice have been within the powers of the Bank.

Financial analysis involves the use of various financial statements. These statements do serval
things. First the balance sheet and the second is income statement. The balance sheet summarizes
the assets, liabilities and owner’s equality of a business at a point in time, while the income
statement summaries revenue and expenses of a firm over a particular period of time.

Balance Sheet
The accounting balance sheet is one of the major financial statements used by accountants and
business owners. (The other major financial statements are the income statement, statement of
cash flow, and statement of stockholder’s equity) The balance sheet so also referred to as the
statement of financial position.

The balance sheet presents a company’s financial position at the end of a specified date. Some
describe the balance sheet as “snap shot” of the company’s financial position at a point (a moment
or an instant) in time. For example, the amounts reported a balance sheet dated December 31,2017
reflects that instant when all the transaction through December 31 have been recorded.

Because the balance sheet informs the reader of a company’s financial positions as of one moment
in time, it allows someone---like creditor----to see what a company owns as well as what is owes
to other parties as of the date indicated in the heading. This is valuable information credit or loans.
Others who would be interested in the balance sheet included current investors, company
management, suppliers, some customers, competitor’s, government, agencies, and labor unions.

Balance Sheet
Statement of financial position for 5 years: As At
December31, 2013-14-15-16-17
Particulars 2017 2016 2015 2014 2013

ASSETS
Cash balances with 42,478,204 35,756,160 26,190,481 23,622,411 23,820,864
treasury banks
Balanced with other 6,115,297 3,765,870 4,512,033 2,234,170 4,265,296
banks
Lending to financial 24,170,850 11,262,133 6,113,262 32,748,623 11,407,448
institution
Investment -net 242,487,965 199,724,840 176,079,793 154,943,390 123,973,891
Advances-net 295,841,425 268,189,551 219,356,020 170,273,415 157,239,598
Operating fixed 8,533,033 7,702,711 6,484,312 5,990,121 3,514,801
assets
Deferred tax assets- 10,786,284 6,533,689 7,905,981 9,845,426 12,627,352
net
Other assets-net 19,295,379 18,511,830 25,641,447 21,237,382 15,825,007
Total assets 649,709,442 545,446,784 472,283,329 420,400,438 350,674,257
Liabilities
Bills payable 3,365,325 4,183,480 1,887,432 1,727,731 1,506,335
Borrowings 38,949,362 39,829,134 55,236,429 44,742,624 22,802,482
Deposits & other 556,191,873 453,219,740 374,960,986 343,290,693 306,560,694
A/C
Sub-ordinated loan 4,499,000 4,500,000 2,000,000 2,000,000 -
Liabilities against
assets subject to - - - 1,128 2,386
finance lease
Deferred for - - - - -
liabilities
Other liabilities 16,864,004 15,627,465 15,520,712 10,281,610 8,345,003
Total liabilities 619,869,564 517,359,819 443,605,566 401,043,786 339,217,100
Net assets 29,830,878 27,854,487 22,677,763 19,356,652 13,457,157
Equity
Share Capital 26,436,924 15,551,132 15,551,132 15,551,132 10,551,132
Discount on issue of - - (263,158) (263,158) (263,158)
shares
Reserves 3,296,781 1,117,439 2,329,001 2,081,243 1,539,659
Share deposit - 7,000,000 7,000,000 7,000,000 12,000,000
money
Accumulated (3,034,749) 541,108 (5220,853) (9,083,209) (11,275,026)
loss/unappropriated
profit
Non- controlling 254,320 151,395 - - -
interest
Total 26,953,276 24,361,074 19,396,122 15,286,008 12,552,607
Surplus on 2,886,602 3,606,913 3,281,641 4,070,644 904,550
revaluation of assets

INTERPRETATION:

Balance sheet includes assets, liabilities and owner’s equity. It indicates that total assets
are increase in every year and the total liabilities are also increase every year. The assets
and liabilities in 2017 show increasing results as compare to the previous years. It would
be the favorable sign.

Income Statement

The income statement is one of the major financial statement used by accountants and business
owners. (The other major financial statements are the balance sheet, statement of cash flows and
the statement of shareholder’s equity). The income statements are sometimes referred to as the
profit and loss statement throughout the explanation.
The income statement is important because it show the profitability of a company during the time
interval specified in its heading. The period of time that the statement covers is chosen the business
and will vary.
A. Revenues and Gains
1. Revenues from primary activities

2. Revenues or income from secondary activities

3. Gains (e.g., gain on the sale of long-term assets, gain on lawsuits)

B. Expenses and Losses

1. Expenses involved in primary activities

2. Expenses from secondary activities

3. Losses (e.g., loss on the sale of long-term assets, loss on lawsuits)

If the net amount of revenues and gains minus expenses and losses is positive, the bottom line of
the profit and loss statement is labeled as net income. If the net amount (or bottom line) is
negative, there is a net loss.

INCOME STATEMENT:
THE BANK OF PUNJAB
FOR THE YEAR

2017 2016 2015 2014 2013

Mark-up/return/interest 34,532,045 29,671,465 31,262,880 29,517,673 24,191,140
earned

Mark-up/return/interest 18,877,323 17,430,154 20,198,798 20,525,783 20,176,169

expensed

Net mark-up/interest 15,654,722 12,241,311 11,064,082 8,991,890 4,014,971

income
 Provision against non- 14,131,418 922,236 3,431,451 1,118,605 (673,081)
performing loans and
advances-net
Provision for diminution 91,645 97,016 97,202 59,404 21,940
in the value of
investments-net
Bad Debs written of - - - - 241
directly
Net mark-up /interest 14,223,123 1,019,252 3,528,653 1,178,099 (650,900)
income after provisions
Non mark-up/interest 1,431,599 11,222,059 7,535,429 7,813,791 466,587
income
Fee,commission and 1,227,035 976,419 828,229 909,596 775,622
brokerage income
Dividend income 91,361 68,434 57,581 39,918 137,512
Income from dealing in 109,173 75,248 109,280 183,830 147,417
foreign currencies
Gain on sale and 1,316,155 2,525,572 5,013,546 667,322 1,391,874
redemption of
securities-net
Unrealized loss on 80 (1,176) (8,522) (654) (4,296)
revaluation of
investments classified as
held for trading
Other income 1,859,912 1,658,284 1,635,064 1,000,173 1,148,797
Total non- mark- 4,603,716 5,302,781 7,635,178 2,800,185 3,596,926
up/interest expenses
6,035,315 16,524,840 15,170,607 10,613,976 8262,797

(5,220,853) (9,083,209) (11,275,026) (12,743,218)

Accumulated losses
brought forward
Total profit After Tax (3,317,076) (4,199,993) (9,938,652) (11,924,744) (13,189,746)

INTERPRETATON:

The total non-markup/interest expenses are increase in 2017 as compare to the last years. Same as
interest expense and interest earned also increase in 2017. And total profit after tax is low as
compare to the last four years which shows favorable results. Overall the result of each years is
better than last year.
 Financial Analysis
It is often useful to express balance sheet and income statement items as percentages. For this
common size analysis and index analysis are extremely helpful in comparing firms whose data
differ significantly in size because every item on the financial statements gets placed on a relative,
or standardized, basis. These two analyses are as follows:

Horizontal Analysis
Vertical Analysis

1-) HORIZONTAL ANALYSIS

Horizontal common size analysis is also called “Year to Year “analysis in which we compare each
amount with a base amount for a selected base year. An analysis of percentage financial statements
where all balance sheet or income statement figures for a base year equal 100.0 (percent) and
subsequent financial items are expressed as percentages of their values in Base year. This analysis
is also called Index Analysis.

2-) VERTICAL COMMON SIZE ANALYSIS

It is the analysis of financial statements, where all balance sheet items are divided by total assets
and all income statement items are divided by net sales or revenues.

Balance Sheet (HORIZONTAL/Trend ANALYSIS)

 THE BANK OF PUNJAB
BALANCE SHEET
FOR THE YEAR

Assets 2017 2016 2015 2014

Amount Amount Amount Amount
Cash and 19% 36% 11% -1%
balances with
treasury and
other banks
Balances with 62% 16% 102% -48%
other banks
Lending to 115% 89% -8% 187%
financial
institutions
Investments – 21% 13% 14% 25%
net
Advances - net 13% 19% 29% 8%

Operating Fixed 11% 18% 18% 56%

assets
Deferred Tax 65% -18% -20% -22%
Assets - net

Other Assets 4% 29% 21% 34%

Total Assets 19% 15% 12% 19%

LIABILITES 2017 2016 2015 2014
Amount Amount Amount Amount
Bills payable -20% 122% 9% 15%
Borrowings -2% -27% 23% 96%
Deposits and 23% 21% 10% 12%
other accounts
Sub-ordinated -0% 125% 0% -53%
loans
Liabilities against - - - -53%
Assets subject to
Finance Lease
Other liabilities 8% 1% 51% 23%
Total Liabilities 20% 15% 12% 18%

Net Assets
REPRESENTED BY:
 INTERPRETATIONS OF
BALANCE SHEET-HORIZONTAL ANALYSIS

2017 2016 2015 2014

EQUITY Amount Amount Amount Amount

Share Capital 70% 0% 0% 47%

Discount on issue - 0% 0% 0%
of shares
Reserves 195% -44% 12% 35%

Share deposit - 0% 0% -42%

money
Accumulated 461% -87% 43% -19%
loss/unappropriated
profit
Non controlling 70% - - -
interest
Total 11% 25% 27% 44%

Surplus on -20% 10% -19% 350%

revaluation of asset
Horizontal Analysis financial statements encompasses comparison of financial ration or a line item
over a number of accounting periods. It shows relative changes in different items over a period of
time. It is useful to assess trends over a period.
Assets Side Analysis

Short-term assts, expected to be converted into cash within 1year or less. Resources that are not
expecting to be turned into cash or be expended inside one year of the adjust sheet date. Long-
term resources incorporate long-term ventures, property, plant, gear, intangible resources, etc.
Results of horizontal analysis shows that total assts in 2017 is 19% there is a slight change in assets
as compare to the previous years. Cash is the most liquid asset. It has increased to in the year in
every year (2013-17) and indicates a favorable trend.

Liability side Analysis

Deposits of the company are increasing. This indicates that company is developing rapidly and it
has a strong financial position.

The percentage of bills payable is increased in last years 122%but now in 2017 it decreased 9%.
This shows that the bank is efficiently controlling its payables.

In last 3years, there is an increasing trend in the borrowings by the bank which is not healthy
indication. This shows that bank’s borrowings that much from financial intuitions.

The deposit is increasing with a fast pace over the period of two years. The main reason is a lot
of exposure of BOP. Due to this factor the percentage is increased from 10% to 20%. In 2016 it
period of time. It increases by 21%.

The total equity includes the reserves, as well as the authorized capital, share capital & issued
capital. The total amount has increased in 2016,2017 as the share capital has increased which shows
the favorable results.

INCOME STATEMENT

(HORIZONTAL ANALYSIS)
INCOME STATEMENT
THE BANK OF PUNJAB
FOR THE YEAR

2017 2016 2015 2014

Mark- 16% -5% 6% 22%
up/return/interest
earned
Mark- 8% -14% -2% 2%
up/return/interest
expense
Total net mark- 28% 11% 23% 124%
up/interest income

Provision against non - -73% 207% 66%

manufacturing
advances and loans
Provision for -6% -0.1% 63% 171%
diminution in the
value of investment
Bad debts written off - - - -
Net mark-up/interest -87% 49% -4% -
income after
provision
Non mark-
up/interest income
Fees, commission 26% 18% -9% 17%
Dividend income 34% 19% 44% -71%
Income from dealing 45% -31% -41% 25%
in foreign currencies
Gain on sale & -48% -50% 651% -52%
redemption of
securities.
Unrealized loss on -95% -86% 1203% -85%
revaluation of
investment.
Other income 12% 1% 63% -13%
Total non mark-up -92% -31% 23% 28%
Non mark-up
/interest expenses
Administrative 22% 13% 19% 19%
expenses
Charge of provision -10% 154% 9187% -107%
Provision against off - 70% 81% 5400%
balance sheet
obligation
Other charges 28% 69% 2% -58%
Total non mark-up/ 27% 10% 23% 18%
interest expenses
Extraordinary/unusual - - - -
items
Profit before
taxation
Profit before taxation -57% 15% 83% 43%
Profit after taxation
Profit after taxation -2% -58% -17% -10%
 INTERPRETATIONS
HORIZONTAL ANALYSIS OF INCOME STATEMENT

There is an increased in net interest income in the year2016,2017 which is a good sign for
company. The interest expense is increasing in relation to inters earned. On -markup interest
income for the year 2017 is up to 30% which shows the favorable results for the company.

Profits have increased rapidly in 2016 which is very encouraging for the bank. It shows that
company is operating efficiently and is more concern about its income, try to curtailing its expenses
in order to increase its profit. The profit is decreased in last three years by 80% but it has increased
in 2016-17 by 105%. This is good indication from profitability point of view.

After paying higher taxes in 2017 comparatively in last years, it is still earning handsome amount
of profits after taxation which is a very good sign. Substantial increase in Income from dealing
in foreign currencies in year 2016.
 BALANCE SHEET
VERTICAL ANALYSIS
2017 2016 2015 2014 2013
ASSETS Amount Amount Amount Amount Amount
Cash and
balances with 7% 7% 6% 6% 7%
treasury and
other banks

Balances with
other banks 1% 1% 1% 1% 1%

Lending to
financial 4% 2% 1% 8% 3%
institutions

Investments –
net 37% 37% 37% 37% 35%
Advances –
net 46% 48% 46% 41% 45%
Operating
Fixed assets 1% 1% 1% 1% 1%
Deferred Tax
Assets – net 2% 1% 2% 2% 4%

Other Assets 3% 3% 5% 5% 4%

Total Assets 100% 100% 100% 100% 100%

 2017 2016 2015 2014 2013
LIABILITES Amount Amount Amount Amount Amount
Bills payable 1% 1% 0% 0% 0%
Borrowings 6% 8% 12% 11% 7%
Deposits and 90% 88% 83% 85% 90%
other accounts

Sub-ordinated 1% 1% 0% 0% -
loans

Liabilities - - - 3% 7%
against Assets
subject to
Finance Lease

Other liabilities 3% 3% 3% 3% 2%

Total 100% 100% 100% 100% 100%

Liabilities

REPRESENTED BY:
EQUITY 2017 2016 2015 2014 2013
Share Capital 89% 56% 69% 80% 78%

Discount on - - -1% -1% -2%

issue of shares
Reserves 11% 4% 10% 11% 11%

Share deposit - 25% 31% 36% 89%

money
Accumulated -10% 2% -23% -47% -84%
loss/
unappropriated
profit
 Non- 1% 4% - - -
controlling
interest
Surplus 10% 13% 14% 21% 7%

INTERPRETATIONS OF
BALANCE SHEET-VERTICAL ANALYSIS
Vertical analysis is the method in which percentage of various items in terms of total assts which
is considering as a base is shown. The overall performance of 2017 is shown better than last
years. All percentages were increases in positive manner.
Assets Side Analysis

Cash balance with treasury shows an increasing contribution in2017 as compare to 2016.This
shows that bank is having a more amount of idle cash with it after commencing its operations. The
balance with other bank remains same in both the years which is referred as 1%. There is an upward
flow in advance. In 2017 it is increase by 2%.Net investments in both the years are even same as
38%. It has no changing effect. Neither increase nor decrease. It shows how much loans the bank
has provided. Acceding to the analysis bank has provided more loan in 2017 by increase of 5%.
Operating fixed assts has increase in this year 2017 but a decrease operating fixed assts is due to
its non-expansion in network of branches. It shows that the bank has slightly increase the efficiency
of operating assets.

Liability side Analysis:-

Deposits of the company are increasing. This indicates that company is developing rapidly and it
has a strong financial position. The percentage of bills payable is increased 2%but now in 2017 it
decreased 9%. This shows that the bank is efficiently controlling its payables. There is decrease in
the percentage is favorable as it shows stability in the bank.2016 refers to 8%which shows
4%decrese. In 2017 has 80% and 2016 has 75% and increase of 5% shows survival is now easy
comparatively. Deposit are as the one of the main sources for bank. The ratios show that there is
an increase in the assts taken financing by BOP.
 INCOME STATEMENT (VERTICAL ANLAYSIS)
THE BANK OF PUNJAB

2017 2016 2015 2014 2013

Mark-up/return/interest earned 100% 100% 100% 100% 100%

Mark-up/return/interest 55% 59% 65% 70% 83%
expensed

Provision against non 99% 90% 97% -4% -103%

performing loans and advances
Provision for diminution in the 1% 10% 3% 0% -3%
value of investments
Bad debts written off directly - - - - 0%

Non mark-up /interest

income
Fees , commission and 27% 18% 11% 3% 22%
brokerage income
Dividend income 2% 1% 1% 0% 4%
Income from dealing in foreign 2% 1% 1% 1% 4%
currencies
Gain on sale and redemption of 29% 48% 66% 2% 39%
securities-net
Unrealized loss on revaluation 2% 0% 0% - 0%
of investments
Other income 40% 31.27% 21% 3% 32%

Total non mark-up/interest 100% 100% 100% 100% 100%

income
Non mark-up/
interest expenses

Administrative 95% 99% 96% 21% 98%

expenses
Provision against 5% 7% 3.4% 0% 1%
other assets

Provision against - -6% 0.4% 0% 6%

off balance sheet
obligations

Other charges 0% 0% 0% 0% 1%

Total non mak- 100% 100% 100% 100% 100%

up/interest
expenses

Extraordinary / - - - - -
unusual items

Profit before
taxation

Taxation -165% 30% 14% 1% 3%

Current year
Prior year 16% 11% 15% - -
Deferred -281% 58% 51% 4% 74%
Profit after
taxation
Accumulated - 124% 11% 38% 97%
losses
Transfer from - -1% 1% 0% 1%
surplus on
revaluation of
fixed assets
Transfer from - -0% - - -
surplus on
revaluation of
non-banking
assets
Transfer from - - 0% -8% 6%
surplus on
disposal
Transfer from - 48% 0% - -
statutory reserves
to accumulated
loss

Transfer to - 2% 21% -2% -3%

statutory reserve
Actuarial gains - 120% -100% 0% 0%
on
remeasurement
recognized
Right shares - - - 1% 1%
issue at cost
Total 100% 100% 100% 100% 100%

INTERPRETATIONS OF
 INCOME STATMENTS-VERTICAL ANALYSIS

Vertical Analysis of income statement shows that a percentage of various items in term of total
mark-up return which is considering as a base. Vertical analysis is a method in which the
relationship between the items in the financial statement is identified by expressing all accounts
as a proportion of total account.

Non-Markup Interest Income There is increasing contribution of interest income in year 2017 by
9% of total sales as compared to 2016 respectively. Total mark-up expenses show a decreasing
20% in 2017 as all expenses have decreased and other charges also shows decreasing
contribution of total sales. The profit taxation shows increasing contribution in 2017 by 15% of
total sales greater than 2015.The increase is a good indication from profitability point of view.
The profit after taxation contribution is increased in 2017.Total sales is greater than 2015
respectively.
 FINANCIAL ANALYSIS RATIOS
Ratio analysis involves the method of calculating and interpreting financial ratios to assess the
organization’s performance. Financial ratios can be divided into these basic categories.

Liquidity
Activity
Debt
Profitability

LIQUIDITY RATIOS

“Liquidity ratios measure the ability of a company to meet its short-term financial
obligations in a timely manner.”

Liquidity of a firm is measured by its ability to satisfy its short-term obligations as they come due.
Liquidity refers to the solvency of firm’s overall financial position-the ease with which it can pay
off its bills.

Because a common precursor to financial distress and bankruptcy is low or declining liquidity,
these ratios can provide early signs of cash flow problems and business failure. The firms creditors
are particularly interested in short term liquidity of firm. The basic measure of liquidity ratios are:

Current ratio
Quick (acid test) ratio

CURRENT RATIO
It Measure the firm’s ability to meet its short-term obligations: A measure of liquidity is calculated
by dividing the firm’s current assets by current liabilities. It is expressed as follows:

Formula:
Current Ratio= Current assets / Current Liabilities
Calculation:

2013 = 320735349 / 3308695854 = 0.9693%

2014 = 3837979554 / 38876118 = 0.98%
2015 = 432257453 / 432084957 = 1.01%
2016 = 512893956 / 497232352 = 1.03%
2017 = 611384356 / 598595843 = 1.02%
Graphical
analysis

CURRENT RATIOS
1.04
1.02
1
0.98
0.96
0.94
0.92
2013 2014 2015 2016 2017

Interpretation:
For BOP the current ratio is increasing every year at the end of 2017 current ratio is 1.021. The
upward movement in the current ratio is shows the decrease in current liabilities. This shows that
the company have current assets to cover current liabilities as they come due. When current
liabilities are increasing current ratio is low. This indicates a negative trend considering liquidity.
But there is slightly difference but 2016 and 2017 current ratio.

QUICK ACID TEST RATIO

Quick ratio provides a better measure of firm’s overall liquidity. It relates the most liquid assets to
current liabilities. It is a measure of liquidity calculated by dividing the firm’s current assets minus
inventory by its current liabilities. Higher the ratio more liquid the firm considered to be. It is
calculated as follows:

Formula:
Quick Ratio = Current assets – Inventory
Current liabilities

Calculation:

2013 = 320735349-157285598/330869584 = 0.49

2014 = 383797554-170312593/388761118 = 0.54
2015 = 432257453-21939863/432084957 = 0.949
2016 = 512893956-262067924 / 497,232,354 = 0.59
2017 = 611384356-295751721/598595843 =0.527

QUCIK ACID TEST RATIOS RATIOS

1

0.8

0.6

0.4

0.2

0
2013 2014 2015 2016 2017

Interpretation:
Quick ratio of 1 or greater is recommended it means that even after deducting the less liquid assets
the firm has enough of assets to cover the liabilities. The analysis shows decrease in quick ratio in
2016 or 2017 as compare to the previous years. Increase in quick ratio is favorable for the
company. According to this graph 2015 shows best results as compare to the 2016 or 2017.

WORKING CAPITAL
Working capital compares current assets to current liabilities, and serves as the liquid reserve
available to satisfy contingencies and uncertainties.

Formula:

Net working capital = Current assets – Current liabilities

Calculation:

2013 = 320735349 -330869584 = (10143235)

2014 = 383797554 -388761118 = (4963564)
2015 = 432257453 - 432084957 = 172496
2016 = 51289395 6-497232354 = 15661602
2017 = 611384356 -598595843 = 12788513

Interpretation:
The working capital of BOP has decreased in the year 2017 as compare to the 2016 which shows
that its assets are less than its liabilities. It is not a good indicator of company’s liquidity

ACTIVITY RATIOS
It measures the effectiveness of a company’s management of its assets. Activity ratio measures the
speed with which various accounts are converted into sales or cash-inflows or outflows. If a
business does not use its assets effectively, investors in the business would rather take their money
and place it somewhere else. In order for the assets to be used effectively, the business needs a
high turnover. Unless the business continues to generate high turnover, assets will be idle as it is
impossible to buy and sell fixed assets continuously as turnover changes. Activity ratios are
therefore used to assess how active various assets are in the business. Activity ratios include:

Inventory Turnover Ratio

Fixed Asset Turnover Ratio
Total Asset Turnover Ratio

INVENTORY TURNOVER
“It Measures the activity or liquidity of a firm’s inventory.”

Formula:

Inventory Turnover = Cost of goods sold / Inventory

Calculation:

2013 = 20176169/157285598 = 0.128

2014 = 20525783/170312593 = 0.120
2015 = 20198798/219398631 = 0.092
2016 = 17430154/262067924 = 0.065
2017 = 18877316/295751721 = 0.069

INVENTORY TURNOVER RATIOS

0.15

0.1

0.05

0
2013 2014 2015 2016 2017
Interpretation
The ratios seem to be decreasing in both 2016 and 2017 showing the fact that the inventory takes
more time to be converted into sales.

TOTAL ASSET TURNOVER

“Indicates the efficiency with which the firm uses its assets to generate sales”.

Formula:

Total Asset Turnover = Sale/ Total Assets

Calculation:
2013 = 24195203 / 352698142 = 0.06
2014 = 29521719 / 420370188 = 0.07
2015 = 31,262,880/472,283,329 = 0.066
2016 = 296714488/545,21413 = 0.054
2017 = 34450944 / 649457051=0.059

TOTAL ASSET TURNOVER RATIOS

0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2013 2014 2015 2016 2017

Interpretation
Total asset turnover has decreased in 2016 or 2017 showing that efficiency is decreased as compare
to last 3years.
 DEBT EQUITY RATIO
It is another computation that determines the entity’s long-term debt paying ability. This ratio
compares the total liabilities with total shareholder’s equity. From the perspective of long-term
debt paying ability, low the ratio is, better the firm’s debt position.

Formula:

Debt/Equity Ratio = Total Liabilities

Shareholder’s Equity

Calculation:

2013 = 339216847 / 13481298 =25.16%

2014 = 401043481 / 19326707=20.75%
2015 = 449605314 / 22678340 =19.8%
2016 = 517359633/ 27854498 = 18.6 %
2017 = 619815291/29731760 =20.84%

DEBT EQUITY RATIO RATIOS

30
25
20
15
10
5
0
2013 2014 2015 2016 2017
Interpretation

This is a very critical ratio that shows the long-term solvency position of an organization. BOP
debt/equity ratio is less in 2016 as compared to 2015. Lower the ratio better for the lenders. But in
2017 debt/equity ratio is greater as compare to last years.

RETURN ON INVESTMENT (ASSETS)

The return on investment shows the average return earned by all the investors and stakeholders of
the business. The net profit available to the shareholders whereas markup is paid to the creditor’s
.Return on investment is a type of return on capital. It is a measure of firm’s ability to reward
those who provide long-term funds and to attract the providers. It is computed as follows

Formula:
Return on investment = Profit after Tax
Total Assets

Calculation:

2013 = 1938007 / 352698145 = 0.005

2014 = 2787449 / 420370188 = 0.006
2015 = 4748321 / 472283654 = 0.010
2016 = 4858354 / 545214131 = 0.008
2017 = (3322055) / 649547051 = 0.005
 GRAPHICAL ANATSIS

Investment RATIOS
0.12

0.1

0.08

0.06

0.04

0.02

0
2013 2014 2015 2016 2017

Interpretation
This ratio indicates the profit earned on the resources employed. The ratio has slightly change in
2017as compare to the last three years. It is not a bad indicator.