Intenship Report on UBL
Chapter INTRODUCTION
ABOUT THE UNITIED BANK LIMITED
To properly fulfill the requirements of the commercial banking and exercise control over banking sector, State Bank of Pakistan was established in 1948. After the introduction of State bank different commercial banks came into progress amongst which one was United bank limited. Real turn took place in the banking section when we renowned banker Agha Hassan Abidi took initiate step of opening a bank. His dream true when the first branch of UBL was opened at Macloed Road (Now I.I Chundrigar Road) on 7th November 1959. This achievement was secured after passing through many problems and after completion of a lot of legal formalities. UBL was established on 24/07/1959 as a public limited company with registered office at I.I Chundrigar road Karachi. The Authorized capital was Rs.20,000,000/- issued, subscribed and paid up capital was Rs.10,000,000/- divided into shares of Rs.10/-
INTRODUCTION OF FINANCIAL STATEMENT.
The ACPA (American Institute of Certified Public Accountants) has said this about financial statements: Financial Statements are prepared for the purpose of presenting a periodical review or report on progress by the management and clear with the status of the investment in the business and results achieved during the period under review. Financial Statements are a major source of information about a firm the statements are accounting derived compilations of the firm activities as of a point in time or for a particular period of time these accounting transactions are based on the accrual concept, reflect primarily historical costs and are prepared according to generally accepted accounting principles. As firm financial statements typically are part of the annual rep that the firm sends its stockholders the financial statements are presented along with any footnotes needed to explain or elaborate upon items in the statement themselves. The footnotes contain considerable detail and often cover several pages. By analyzing the United Bank limited financial Statements and the foot notes as, necessary, we can obtain a useful assessment of the firm form an accounting standpoint, including its recent performance, its current financial] position and its general financial health.
MEANINGS OF FINANCIAL STATEMENTS.
1) “Financial Statements are the statements which show the financial position of a business at the end of an accounting year” 2) Financial Statements are those statements, which give information about the Economic resources and obligation of a business.
IMPORTANCE OF FINANCIAL STATEMENTS. The study of financial statement discloses the profitability and financial soundness of a company. Such study provides various accounting information. The following points disclose the importance of financial statement analysis.
1. Financial stability. 2. Profitability 3. Operational efficiency. 4. Firm solvency position. 5. Future growth of the business 6. Comparative study. 7. Evaluation tool. 8. Provide information to the taxation authorities. 9. Screening tool for investment. 10. Provide information’s about the sources and uses of the funds.
TYPES OF FINANCIAL. STATEMENT.
1) 2) 3) 4) Balance Sheet. Income Statement Statement of Changes in Financial position. Statement of Retained earnings.
1) BALANCE SHEET.
It has two sides one is called debit side" which shows assets and the other is credit side showing liabilities and owners equity at the date. 2) INCOME STATEMENT. Income statement is also known as profit and loss account. A statement showing the profit end loss of a company for a particular period, is known as income statement. In income Statement the positive result represent the net income and the negative result represent the net loss. 3) 1) 3) STATEMENT OF CHANGES IN FINANCIAL POSITION. Statement of changes is also known as such names. Funds flow statement. Sources and Application of funds statements. Statement of changes in financial position shows the flow of working capital during a stated period of time. 4) STATEMENT OF RETAINED EARNINGS. Retained Earnings represents the profit that has been kept by the company and not distributed the shareholders of the company. At the end of Fiscal period a statement of retained earnings is prepared statement
2) Working capital Statement.
of retained earnings prepared for sole proprietorship and partnership.
DIFFERENT STATEMENTS:
GROUPS
INTERESTED
IN
FINANCIAL
With Business Corporation numerous people are involved directly or indirectly. They all are interested in its financial statements to know the information from there own point of view making certain decisions. They may broadly be grouped into two major categories. • • Those with direct interest. Those with indirect interest in business enterprise.
Those with direct interest:
1. Owners: It consists of promoters, common stock holders and preferred stock holders. Their basic aim is to increase their wealth, which they have invested in the business enterprise. Therefore, they are interested in all those information in financial statements that reveal whether their capital and increasing or decreasing. On the basis of such information they make decision whether to make additional investment or to reduce their investment. 2. Creditors: Those who extend loans or provide goods or render services on credit are known as “creditors”. Bankers and other creditors who have loaned money to business concern or who are considering making such loans will be vitally interested in the balance sheet of the business by studying the amount and kinds of assets in relation to the amount and payment dates of the liabilities, they can form an opinion as to the ability of the business to pay the debits promptly. Another major groups making constant use of financial statements consist of the credit managers of manufacturing and whole sailing firms, who must decide whether prospective customers are to be allowed to buy merchandise on credit. By studying the information that highlight the debt paying ability , creditors
determine the extent to provide loans or goods or render services on credit, credit terms & discount policies.
3.Investors. They use the financial statement to know the growth and stability of the business enterprise. On the basis of such information they determine the extent of their investment in the business enterprise. The financial statement helps them to make a profitable use of their capital by providing important information. 4.Management: It is another group, which make extensive use of financial statements in order to analyze in depth the economic activities of the business enterprise. It studies both explicit and implicit factors that has affected the business favorably or unfavorably .the financial statements also help the management to decide the nature and extent of financing requirements and in preparing future plans for the expansion and progress of the business. 5. Government Agencies: It includes income tax department, excise and taxation and custom authorities. They are invested in financial statements in order to evaluate tax return, impose excise duties and penalties of deemed necessary. 6. Employees AND Labor unions: They use financial statements to know that financial stability profitability position of a company and positions of other necessary records such as employee’s participation and welfare fund and provision of gratuity etc. They use all these information in preparing charter of demand. The information obtained through financial statements help them in getting accepting their due rights.
Those with indirect interest:
1. Competitors: They use financial statements to have the information about the rival company’s product, prices, working capital --------, efficiency and capability of management, the nature of fixed and current assets to devise comparative polices and strategies and to capture wide share of market and earn greater profit. 2. Customers and Consumers: They use financial statements to know the per unit cost and per unit selling price of the company’s product in order to know the profit margin of the company for deciding the suitability of product price for making purchases. 3. Financial Analysts and Advisors: N.I..J, I.C.P And other experts needs financial statements to conduct analysis to advice not only existing but also potential investors, creditors and suppliers to retain, increase, decrease or abandon their investment in the organization and also highlight the future prospects of the company. 4. Trade Associations And Reporting Agencies: These are invested in financial statements to prepare description reports, select information to publish the reports, compute trends and ratios, industry statistics and analyze industry results. 5. Students: The students particularly of M.B.A, M.com in order to become successful future analyst, use financial statements to learn the way to analyse the financial statements and interpret the results and their findings.
LIMITATIONS OF FINANCIAL STATEMENTS:
The financial statements published by the business concern are subject to certain limitations, which are as under 1. They reflect only those factors, which can be measured in monitory terms. They do not indicate non-monitory factors, whish definitely affect the financial conditions, operating results. Such factors include a. b. c. d. 2. General reputation of directors and managers Effects of favorable location. Cooperation between management and workers. Efficiency, loyalty and integrity of management and employees. They are essentially interim reports and therefore cannot be final because the actual gain or loss of a business can be determined only when it is used or liquidated. 3. 4. Most of the faces reflected by financial statements are mere estimation e.g., inventory valuation,. The financial statements report historical data and therefore they don’t give an accurate indication of the present “worth” of a business. The fixed assets are shown at original cost less depreciation. However, the market price of these assets keeps changing. The channel is more that if these assets were sold, the prices realized would be substantially different from their valuation on balance sheet. 5. Different methods for the valuation of stocks or raw materiel and depreciation are used by different business concerns. All these methods give varying results, which affect value of current assets in balance sheet and profit figure in the income statement. The profit results of one firm cannot therefore be accurately compared with the other.
STANDARD OF COMPARISON
The most commonly used Standard of comparison are as under:
1)
RULES OF THUMB MEASURES: Much financial analysis uses rules of thumb measures for key financial ratio
e.g. a current ratio 2:1 and quick ratio 1:1 is considered satisfactory. This Standard doesn’t provide complete proof and suggest that the analyst should make further investigation about the company. It is so because a company with a larger than 2:1 current ratio may have a poor credit policy resulting in too large A/R may have poor cash mgt. Another company may have a current ratio less than 2:1 resulting from excellent mgt.: in this area. Therefore standard of comparison should be used with great care.
2) PAST PERFORMANCE OF THE COMPANY: In this parameter financial ratios of the same company are compared over a p nod of time. This standard gives some basis of judging and the analyst can know that whether ratio is getting better result.
TECHNIQUES/TOOLS/METHODS OF ANALYSIS
Analytical tools are used to ascertain or measure the relationship among the financial statement of a single set of statements and the changes that have taken place in these items as reflected by successive financial statements. The objective of any analytical method is to simplify or reduces the data under review to more understandable
terms. The analyst first computes and organises his data, and then analysed and interprets them to make them more meaningful. Analytical methods are techniques used in analysing financial statements include the following:
1.
Comparative balance sheets, income statements, and statements of retained earnings, showing: a) b) c) d) e) Absolute data (Amount in Rupees) Increase and decrease in rupee amounts. Increase and decrease in percentages. Comparison expressed in ratios. Percentages of totals.
2. 3. 4. 5. 6.
Statement of changes in financial condition. Trend ratios of selected (related) financial and operating data. Common-size percentages - balance sheets, income statements, and individual sections of these statements. Ratios expressing the relationships of items selected from the balance sheet, the income statement, and both statements. Composite industry ratios.
Chapter 2
UNITED BANK LIMITED
COMPARITIVE BALANCE SHEET FOR THE PERIOD ENDED Dec: 31, 2002-2005 . Rupees in (000) 2002 2003 2004 2005 ASSETS Cash and bank balance Balance with other banks Lending to financial Institutions Investments Advances Other assets Operating fixed assets Taxation recoverable Deferred tax asset-net Total assets TOTAL LIAB. & OWNER EQUITY Bills payable Borrowing From Fin. Institutions Deposits & other A/c's Sub – ordinted loans Liabilities against assets subject to finance lese Other liabilities Deferred liabilities Share capital Reserves Unappropriated profit Surplus on revaluation of asset 15649561 17274461 23844435 258456450 9985788 11386434 17699334 17187250 3627557 19050791 16262504 17826109 69244328 56516760 54953 728 74425667 72808106 16017041 14624918 169560882 5 4 3636065 3001793 4393852 6041671 2710892 3754236 3969006 4170585 314712 283171 45728 74956 5026457 5486357 5194892 4129977 183003466 216924418 272612663 319262553 . 1832981 2975910 3811284 5446989 5347349 7710375 11975684 14124220 158263495 185071502 230256627 269130356 81548 544441 861935 5180000 4243352 797100 2445465 39995 5707204 1535059 518000 4678317 218900 3807066 288 3513569 2191180 518000 5915928 3274439 2993664 5923127 2257099 518000 6185214 4212342 2803590
Total liabilities and owner eqvity
183003466 216924418 272612663
31926553
UNITED BANK LIMITED
BALANCE SHEET SHOWING ABSOLUTE INCREASE / DECREASE IN AMOUNT FOR THE PERIOD ENDED Dec 31, 2002-2005 Taking 2002 as base year Rupees in (000) 2003 2004 2005 ASSETS Cash and bank balance Balance with other banks Lending to financial Institutions Investments Advances Other assets Operating fixed assets Taxation recoverable Deferred tax asset-net Total assets TOTAL LIAB. & OWNER EQUITY Bills payable Borrowing From Fin. Institutions Deposits & other A/c's Sub – ordinted loans Liabilities against assets subject to finance lese Other liabilities Deferred liabilities Share capital Reserves Unappropriated profit Surplus on revaluation of assets Total liabilities 1142929 2363026 26808007 41553 162763 673124 0 4324965 578110 1361601 30965151 1978303 6628335 1624900 1400646 15423234 8194874 7713546 12634947 10195889 7201462 1418552
12727568 14290600 5181339 87362309 73441078 96752776 634272 757787 2405612 1043344 1258114 1459693 31541 268984 239756 459900 168435 896480 93920952 78239197 123479087 . 5264008 8776871
71993132 110866861 350010000 81260 378686 2030872 1329245 0 1672576 2477339 548199 88014997 1395164 0 1941862 3415242 358125
UNITED BANK LIMITED
BALANCE SHEET SHOWING INCREASE / DECREASE IN % AGES FOR THE PERIOD ENDED Dec 31 2002-2005
Taking 2002as base year
2005 ASSETS Cash and bank balance Balance with other banks Lending to financial Institutions Investments Advances Other assets Operating fixed assets Taxation recoverable Deferred tax asset-net Total assets TOTAL LIAB. & OWNER EQUITY Bills payable Borrowing From Fin. Institutions Deposits & other A/c's Sub – ordinted loans Liabilities against assets subject to finance lese Other liabilities Deferred liabilities Share capital Reserves Unappropriated profit Surplus on revaluation of assets Total liabilities 287.2 164.1 70.1 50.9 6.8 161.9 0 45.8 428.5 14.6 65.15 % 72.12 391.4 7.48 132.4 66.16 53.85 76.18 17.84
2004 52.36 % 77.25 348.30 20.64 100.87 20.84 46.41 85.47 3.35 . 107.9 123.9 45.5 99.6 36.6 154.2 0 39.4 310.8 22.4
Rupees in (000) 2003 10.38% 14.03 425.17 17.48 119.99 17.44 38.48 10.02 9.15
62.4 44.2 16.9 2.94 78.1 0 10.3 72.5 55.7
UNITED BANK LIMITED
COMPARITIVE BALANCE SHEET SHOWING TREND % AGES FOR THE PERIOD ENDED Dec: 31, 2001-2004 Taking 2000 as base year
Rupees in (ooo)
2004 ASSETS Cash and bank balance Lending to financial Institutions Investments Financing Other assets TOTAL ASSETS LIABLITIES & OWNER EQUITY Share holder's equity Borrowing From Fin. Institutions Revaluation reserve Deposits & other A/c's Other liabilities TOTAL LIAB. & OWNER EQUITY 153.72 153.94 152.79 153.17 152.36 153.13
2003 174.96 174.96 174.96 174.96 174.96 174.96
2002 103.91 103.91 103.91 103.91 103.91 103.91
2001 81.61 81.61 81.61 81.61 81.61 81.61
153.61 152.85 154.10 153.04 153.69 153.13
174.96 174.96 174.96 174.96 174.96 174.96
103.91 103.91 103.91 103.91 103.91 103.91
81.61 81.61 81.61 81.61 81.61 81.61
UNITED BANK LIMITED
COMPARATIVE BALANCE SHEET SHOWING COMMON SIZE % AGES FOR THE PERIOD ENDED Dec: 31, 2000-2004 Rupees in (m) 2001 2000 5.8 8.1 18.7 59.8 7.6 100 % 5.8 8.1 18.7 59.8 7.6 100
2004 ASSETS Cash and bank balance Lending to financial Institutions Investments Financing Other assets TOTAL ASSETS LIABLITIES & OWNER EQUITY Share holder's equity Borrowing From Fin. Institutions Revaluation reserve Deposits & other A/c's Other liabilities TOTAL LIAB. & OWNER EQUITY 5.8 8.1 18.7 59.8 7.6 100 %
2003 5.8 8.1 18.7 59.8 7.6 100 %
2002 5.8 8.1 18.7 59.8 7.6 100 %
11.2 14.6 3.1 67.0 4.1 100
11.2 14.6 3.1 67 4.1 100
11.2 14.6 3.1 67 4.1 100
11.2 14.6 3.1 67 4.1 100
11.2 14.6 3.1 67 4.1 100
Chapter 3
UNITED BANK LIMITED
COMPARATIVE INCOME STATEMENT FOR THE PERIOD ENDED DEC,31, 2002-2005 Net markup/interest income after provision Non markup/interest income Total Income Non markup/interest expenses Administrative expenses Other provision/write offs Other charges Total Non markup/ interest expenses Extraordinary items Profit before tax Tax Profit-after Tax/net income 2005 5497554 1918244 74157958 2004 7162247 4406224 11568471 2003 6493858 4544112 11037970 2002 4901027 3272119 8173146
3610291 191405 2704 3804400 361138 1526612 2084786
6702709 6153913 5390233 34422 551840 27353 10456 5501 24252 6678743 6711254 5441838 4889728 1188184 3701544 4326716 1691098 2635618 2731308 1316992 1414316
UNITED BANK LIMITED
COMPARATIVE INCOME STATEMENT INCRESE/DECREASE IN AMOUNT FOR THE MPERIOD ENDED DEC,31, 2002-2005
Net markup/interest income after provision Non markup/interest income Total Income
2005 596.527 1353875 757348
2004 2261220 1134105 3395325
2003 6493858 1271993 2864824
Non markup/interest expenses Administrative expenses 1779942 Other provision/write offs 164052 2704 Other charges Total Non markup/ interest 1637438 expenses Extraordinary items Profit before tax 880090 Tax 209620 Profit-after Tax/net 670470 income
1312476 7069 10456 1236905 2158420 128808 2287228
5614890 524487 5501 1269416 1595408 374106 1221302
UNITED BANK LIMITED
INCOME STATEMENT SHOWING TREND % AGE FOR THE PERIOD ENDED Dec: 31, 2002-2005 Net markup/interest income after provision Non markup/interest income Total Income Non markup/interest expenses Administrative expenses Other provision/write offs Other charges Total Non markup/ interest expenses Extraordinary items Profit before tax Tax Profit-after Tax/net income 2005 112.17 % 58.6 90.73 2004 146.14 % 134.7 134.7 2003 132.5 % 138.9 138.9
66.9 % 699.8 11.15 3804400 132.2 % 115.9 147.4 %
124.3 % 125.8 43.12 6678743 179.0 % 90.2 261.7 %
114.2% 2017.4 22.68 6711254 158.4 % 128.4 186.9 %
UNITED BANK LIMITED
COMPARATIVE INCOME STATEMENT SHOWING COMMON SIZE % AGES FOR THE PERIOD ENDED Dec: 31, 2002-2005 2005 74.13 % 25.9 100 % 2004 61.9 % 38.1 100 % Rupees in (m) 2003 58.8 % 41.2 100 % 2002 60.0 % 40.0 100 %
Net markup/interest income after provision Non markup/interest income Total Income Non markup/interest expenses Administrative expenses Other provision/write offs Other charges Total Non markup/ interest expenses Extraordinary items Profit before tax Tax Profit-after Tax/net income
48.68 % 25.8 .036 5130 48.7 % 20.6 28.1 %
57.9 % .3 .09 57.7 42.3 % 10.3 31.9 %
55.8 % 4.99 .04 60.8 39.3 % 15.3 23.9 %
65.95 % .33 0.3 66.6 33.4 % 16.1 17.3%
Chapter 6
RATIO ANALYSIS
The term ratio means a numerical relationship between items or group of items and is determined simply by dividing one item in relationship by the other. In this chapter only such ratios will be taken into consideration, which help in analysing and interpreting the current financial position of the industry. The analysis of current financial are beneficial both for owners and creditors particularly short term creditors. A business has strong financial position if it is able: 1. 2. 3. 4. 5. To meet the claims of short-term creditors. To meet current interest and dividend requirements. To maintain sufficient working capital for effective normal position. To utilize working capital efficiently. To maintain favorable credit rating.
A. Current Position Analysis:
Following are the ratios, which are used in analyzing the current financial position such as:
1. WORKING CAPITAL.
Working capital is the excess of current assets over current liabilities. In other words working capital is the amount of current asset after deducting the current liabilities represent a margin of safety that is a claim of protection for the current creditors. Larger
the amount of working capital the position would be satisfactory to meet current debts, fixed investment and absorb operating loses while the inadequacy of working capital is harmful for the operation of business as well as the policy of the firm . It is computed by following formula: Net Working Capital = Current Assets - Current Liabilities. Rupees In (m) Year Current Assets (a) Current Liabilities (b) Working Capital (a-b) 2002 15649561 1600964760 (1585285199) 2003 17274461 188047412 (170772951) 2004 23844435 234067911 (210223476) 2005 25845450 274577345 (248731895)
2. CURRENT RATIO OR WORKING CAPITAL RATIO. Current Ratio is use to measure current liquidity position. It is computed by following formula. = Total current assets/Total current liabilities Rupees in (m) Year Current Assets (a) Current Liabilities (b) Current Ratio (a/b) 2002 15649561` 1600964760 .009 2003 17274461 188047412 0.092 2004 2384435 234067911 0.01 2005 25845450 274577345 0.09
3.
WORKING CAPITAL TURNOVER
It is computed to know the utilization of working capital during the period under analysis. It is calculated by following formula: Working Capital Turnover = Net Income Net Working Capital
Rupees in (m)
Year Net Income(a) Working Capital (b) W.C. Turnover (a/b) 4.
2003 2635618 (170772951) 1.54 I
2004 3701544 (210223476) 1.76
2005 2084786 (248731895) 0.08
RELATIONSHIP OF CURRENT LIABILITIES TO TOTAL LIABILITIES.
This relationship shows the current maturity of obligation. It enables the creditor to get information about three participation in the business. It is computed by dividing the current liability by total liabilities and multiplied by 100 as shown below: Year Current Liabilities (a) Total Liabilities (b) Relationship of C.L to T.L (a/b)*100 2003 2004 188047412 234067911 216924418 272612663 86.0 86.0 2005 274577345 319262553 86.0
5. RELATIONSHIP OF CURRENT ASSET TO TOTAL ASSETS.
This relationship will indicate the percentage of investment in current assets. it is computed by divisions current assets by total asserts. Rupees in (m) Year 2003 2004 2005 Current Assets (a) 17274461 23844435 25845450 Total Assets (b) 216924418 272612663 319262553 Relationship of C.A toT. A 7.96 8.75 8.09 (a/b)*100
B. Stability Analysis:
Generally short term creditor are interested in the current financial position of the business whereas long term creditors and stockholders are much concerned with the long term financial position of the company.
The long-term financial position is analysed to get the answer of the following question such as: 1. Whether the borrowed funds and owners equity is appropriate and profitable. 2. Whether there exist a proper balance of investment in each group of assets. 3. Is the investment in operating assets commensurate with current sales prospective sale volume and the net income. 4. Whether the long term financial strength is improving or not. In order to give answer to the questions above we pursue the following ratios.
1. RATIO OF OWNERS EQUITY TO TOTAL ASSETS.
This ratio expresses the amount of total investment in the assets that has been financed by shareholders. It is calculated by the following formulae. Ratio of Owners Equity to Total Assets = Owners Equity Total Assets Rupees in (m) Year Stockholder’s Equity (a) Total Assets (b) Ratio (a/b)*100 2003 13884373 216924418 6.40 2004 2005 17364031 18381146 272612633 319262553 6.40 5.76 X 100
2. RATIO OF OWNERS EQUITY TO FIXED ASSETS
This ratio indicates the percentage of fixed assets financial by owners. It is calculated by the following formulae. Ratio of Owners Equity to Fixed Assets = Owner equity . X 100 Fixed Assets.
The ratio of owner equity of fixed assets of universal leather is shows below; Rupees in (m) Year Stockholder’s Equity (a) 2003 13884373 2004 17364031 2005 18381146
Fixed Assets Net (b)
193880429
243527608
30050383
3. RATIO OF OWNER EQUITY TO TOTAL LIABILITIES
This ratio shows the owners interest in the business. It shows the position of the shareholders as well as creditors. It is calculated by the following formulae. Ratio of Owner Equity to Total Liabilities = Owner Equity X 100 Total Liabilities
Rupees in (m) Year Stockholder’s Equity (a) Total Liabilities (b) Ratio (a/b)*100 2003 13884373 203040045 6.8 2004 17364031 255248632 6.8 2005 18381146 300881407 6.1
4. RATIO OF FIXED ASSETS TO LONG TERM LIABILITIES.
This ratio measure the security of the fixed obligations, when the long term liabilities are secured by the fixed assets It is computed by the following formulae. Ratio fixed assets to long term liabilities = Fixed Assets _____.X 100 Long Term Liabilities. Rupees in (m) Year Fixed Assets Net (a) Long Term Liabilities (b) Ratio (a/b)*100 2003 2004 2005 193880429 243527608 30050383 14992633 21180721 26304062 1293.2 1149.8 114.2
5. RATIO OF TOTAL ASSETS TO TOTAL LIABILITIES
This ratio determine as to how much has been financed out of total assets and hove much have been provided for financing out of owners equity. This ratio is computed by following formulae.
Ratio of Total Assets to Total Liabilities =Total Assets . x 100
Total Liabilities Rupees in (m) Year Total Assets (a) Total Liabilities (b) Ratio (a/b)*100 2003 2004 2005 216924418 272612663 319262553 216924418 272612663 319262553 100 100 100
6. RATIO OF NET INCOME TO FIXED ASSETS.
This ratio measures the utilisation of fixed assets. It is computed by following formulae. Ratio of sale to Fixed Assets = Net Income x 100 Fixed Assets Rupees in (m) Year Net Income (a) 2002 1414316 2003 2635618 2004 3701544 2005 2084786
Fixed Assets Net (b) Ratio (a/b)*100
162012736 193880429 243527608 .872 1.36 1.52
30050383 6.93
7. RATIO OF Net INCOME TO OWNER'S EQUITY.
This ratio expresses the turnover of the owner’s equity. It is calculated by the following formulae. Ratio of Sales to Owners Equity = Net Income Owner Equity Rupees in (m) Year Net Income (a) Stockholder’s Equity (b) Ratio (a/b)*100 2003 2635618 2004 3701544 2005 2084786 X 100
ABOUT THE UNITIED BANK LIMITED
To properly fulfill the requirements of the commercial banking and exercise control over banking sector, State Bank of Pakistan was established in 1948. After the introduction of State bank different commercial banks came into progress amongst which one was United bank limited. Real turn took place in the banking section when we renowned banker Agha Hassan Abidi took initiate step of opening a bank. His dream true when the first branch of UBL was opened at Macloed Road (Now I.I Chundrigar Road) on 7th November 1959. This achievement was secured after passing through many problems and after completion of a lot of legal formalities. UBL was established on 24/07/1959 as a public limited company with registered office at I.I Chundrigar road Karachi. The Authorized capital was Rs.20,000,000/- issued, subscribed and paid up capital was Rs.10,000,000/- divided into shares of Rs.10/-
INTRODUCTION OF FINANCIAL STATEMENT.
The ACPA (American Institute of Certified Public Accountants) has said this about financial statements: Financial Statements are prepared for the purpose of presenting a periodical review or report on progress by the management and clear with the status of the investment in the business and results achieved during the period under review. Financial Statements are a major source of information about a firm the statements are accounting derived compilations of the firm activities as of a point in time or for a particular period of time these accounting transactions are based on the accrual concept, reflect primarily historical costs and are prepared according to generally accepted accounting principles. As firm financial statements typically are part of the annual rep that the firm sends its stockholders the financial statements are presented along with any footnotes needed to explain or elaborate upon items in the statement themselves. The footnotes contain considerable detail and often cover several pages. By analyzing the United Bank limited financial Statements and the foot notes as, necessary, we can obtain a useful assessment of the firm form an accounting standpoint, including its recent performance, its current financial] position and its general financial health.
MEANINGS OF FINANCIAL STATEMENTS.
1) “Financial Statements are the statements which show the financial position of a business at the end of an accounting year” 2) Financial Statements are those statements, which give information about the Economic resources and obligation of a business.
IMPORTANCE OF FINANCIAL STATEMENTS. The study of financial statement discloses the profitability and financial soundness of a company. Such study provides various accounting information. The following points disclose the importance of financial statement analysis.
1. Financial stability. 2. Profitability 3. Operational efficiency. 4. Firm solvency position. 5. Future growth of the business 6. Comparative study. 7. Evaluation tool. 8. Provide information to the taxation authorities. 9. Screening tool for investment. 10. Provide information’s about the sources and uses of the funds.
TYPES OF FINANCIAL. STATEMENT.
1) 2) 3) 4) Balance Sheet. Income Statement Statement of Changes in Financial position. Statement of Retained earnings.
1) BALANCE SHEET.
It has two sides one is called debit side" which shows assets and the other is credit side showing liabilities and owners equity at the date. 2) INCOME STATEMENT. Income statement is also known as profit and loss account. A statement showing the profit end loss of a company for a particular period, is known as income statement. In income Statement the positive result represent the net income and the negative result represent the net loss. 3) 1) 3) STATEMENT OF CHANGES IN FINANCIAL POSITION. Statement of changes is also known as such names. Funds flow statement. Sources and Application of funds statements. Statement of changes in financial position shows the flow of working capital during a stated period of time. 4) STATEMENT OF RETAINED EARNINGS. Retained Earnings represents the profit that has been kept by the company and not distributed the shareholders of the company. At the end of Fiscal period a statement of retained earnings is prepared statement
2) Working capital Statement.
of retained earnings prepared for sole proprietorship and partnership.
DIFFERENT STATEMENTS:
GROUPS
INTERESTED
IN
FINANCIAL
With Business Corporation numerous people are involved directly or indirectly. They all are interested in its financial statements to know the information from there own point of view making certain decisions. They may broadly be grouped into two major categories. • • Those with direct interest. Those with indirect interest in business enterprise.
Those with direct interest:
1. Owners: It consists of promoters, common stock holders and preferred stock holders. Their basic aim is to increase their wealth, which they have invested in the business enterprise. Therefore, they are interested in all those information in financial statements that reveal whether their capital and increasing or decreasing. On the basis of such information they make decision whether to make additional investment or to reduce their investment. 2. Creditors: Those who extend loans or provide goods or render services on credit are known as “creditors”. Bankers and other creditors who have loaned money to business concern or who are considering making such loans will be vitally interested in the balance sheet of the business by studying the amount and kinds of assets in relation to the amount and payment dates of the liabilities, they can form an opinion as to the ability of the business to pay the debits promptly. Another major groups making constant use of financial statements consist of the credit managers of manufacturing and whole sailing firms, who must decide whether prospective customers are to be allowed to buy merchandise on credit. By studying the information that highlight the debt paying ability , creditors
determine the extent to provide loans or goods or render services on credit, credit terms & discount policies.
3.Investors. They use the financial statement to know the growth and stability of the business enterprise. On the basis of such information they determine the extent of their investment in the business enterprise. The financial statement helps them to make a profitable use of their capital by providing important information. 4.Management: It is another group, which make extensive use of financial statements in order to analyze in depth the economic activities of the business enterprise. It studies both explicit and implicit factors that has affected the business favorably or unfavorably .the financial statements also help the management to decide the nature and extent of financing requirements and in preparing future plans for the expansion and progress of the business. 5. Government Agencies: It includes income tax department, excise and taxation and custom authorities. They are invested in financial statements in order to evaluate tax return, impose excise duties and penalties of deemed necessary. 6. Employees AND Labor unions: They use financial statements to know that financial stability profitability position of a company and positions of other necessary records such as employee’s participation and welfare fund and provision of gratuity etc. They use all these information in preparing charter of demand. The information obtained through financial statements help them in getting accepting their due rights.
Those with indirect interest:
1. Competitors: They use financial statements to have the information about the rival company’s product, prices, working capital --------, efficiency and capability of management, the nature of fixed and current assets to devise comparative polices and strategies and to capture wide share of market and earn greater profit. 2. Customers and Consumers: They use financial statements to know the per unit cost and per unit selling price of the company’s product in order to know the profit margin of the company for deciding the suitability of product price for making purchases. 3. Financial Analysts and Advisors: N.I..J, I.C.P And other experts needs financial statements to conduct analysis to advice not only existing but also potential investors, creditors and suppliers to retain, increase, decrease or abandon their investment in the organization and also highlight the future prospects of the company. 4. Trade Associations And Reporting Agencies: These are invested in financial statements to prepare description reports, select information to publish the reports, compute trends and ratios, industry statistics and analyze industry results. 5. Students: The students particularly of M.B.A, M.com in order to become successful future analyst, use financial statements to learn the way to analyse the financial statements and interpret the results and their findings.
LIMITATIONS OF FINANCIAL STATEMENTS:
The financial statements published by the business concern are subject to certain limitations, which are as under 1. They reflect only those factors, which can be measured in monitory terms. They do not indicate non-monitory factors, whish definitely affect the financial conditions, operating results. Such factors include a. b. c. d. 2. General reputation of directors and managers Effects of favorable location. Cooperation between management and workers. Efficiency, loyalty and integrity of management and employees. They are essentially interim reports and therefore cannot be final because the actual gain or loss of a business can be determined only when it is used or liquidated. 3. 4. Most of the faces reflected by financial statements are mere estimation e.g., inventory valuation,. The financial statements report historical data and therefore they don’t give an accurate indication of the present “worth” of a business. The fixed assets are shown at original cost less depreciation. However, the market price of these assets keeps changing. The channel is more that if these assets were sold, the prices realized would be substantially different from their valuation on balance sheet. 5. Different methods for the valuation of stocks or raw materiel and depreciation are used by different business concerns. All these methods give varying results, which affect value of current assets in balance sheet and profit figure in the income statement. The profit results of one firm cannot therefore be accurately compared with the other.
STANDARD OF COMPARISON
The most commonly used Standard of comparison are as under:
1)
RULES OF THUMB MEASURES: Much financial analysis uses rules of thumb measures for key financial ratio
e.g. a current ratio 2:1 and quick ratio 1:1 is considered satisfactory. This Standard doesn’t provide complete proof and suggest that the analyst should make further investigation about the company. It is so because a company with a larger than 2:1 current ratio may have a poor credit policy resulting in too large A/R may have poor cash mgt. Another company may have a current ratio less than 2:1 resulting from excellent mgt.: in this area. Therefore standard of comparison should be used with great care.
2) PAST PERFORMANCE OF THE COMPANY: In this parameter financial ratios of the same company are compared over a p nod of time. This standard gives some basis of judging and the analyst can know that whether ratio is getting better result.
TECHNIQUES/TOOLS/METHODS OF ANALYSIS
Analytical tools are used to ascertain or measure the relationship among the financial statement of a single set of statements and the changes that have taken place in these items as reflected by successive financial statements. The objective of any analytical method is to simplify or reduces the data under review to more understandable
terms. The analyst first computes and organises his data, and then analysed and interprets them to make them more meaningful. Analytical methods are techniques used in analysing financial statements include the following:
1.
Comparative balance sheets, income statements, and statements of retained earnings, showing: a) b) c) d) e) Absolute data (Amount in Rupees) Increase and decrease in rupee amounts. Increase and decrease in percentages. Comparison expressed in ratios. Percentages of totals.
2. 3. 4. 5. 6.
Statement of changes in financial condition. Trend ratios of selected (related) financial and operating data. Common-size percentages - balance sheets, income statements, and individual sections of these statements. Ratios expressing the relationships of items selected from the balance sheet, the income statement, and both statements. Composite industry ratios.
Chapter 2
UNITED BANK LIMITED
COMPARITIVE BALANCE SHEET FOR THE PERIOD ENDED Dec: 31, 2002-2005 . Rupees in (000) 2002 2003 2004 2005 ASSETS Cash and bank balance Balance with other banks Lending to financial Institutions Investments Advances Other assets Operating fixed assets Taxation recoverable Deferred tax asset-net Total assets TOTAL LIAB. & OWNER EQUITY Bills payable Borrowing From Fin. Institutions Deposits & other A/c's Sub – ordinted loans Liabilities against assets subject to finance lese Other liabilities Deferred liabilities Share capital Reserves Unappropriated profit Surplus on revaluation of asset 15649561 17274461 23844435 258456450 9985788 11386434 17699334 17187250 3627557 19050791 16262504 17826109 69244328 56516760 54953 728 74425667 72808106 16017041 14624918 169560882 5 4 3636065 3001793 4393852 6041671 2710892 3754236 3969006 4170585 314712 283171 45728 74956 5026457 5486357 5194892 4129977 183003466 216924418 272612663 319262553 . 1832981 2975910 3811284 5446989 5347349 7710375 11975684 14124220 158263495 185071502 230256627 269130356 81548 544441 861935 5180000 4243352 797100 2445465 39995 5707204 1535059 518000 4678317 218900 3807066 288 3513569 2191180 518000 5915928 3274439 2993664 5923127 2257099 518000 6185214 4212342 2803590
Total liabilities and owner eqvity
183003466 216924418 272612663
31926553
UNITED BANK LIMITED
BALANCE SHEET SHOWING ABSOLUTE INCREASE / DECREASE IN AMOUNT FOR THE PERIOD ENDED Dec 31, 2002-2005 Taking 2002 as base year Rupees in (000) 2003 2004 2005 ASSETS Cash and bank balance Balance with other banks Lending to financial Institutions Investments Advances Other assets Operating fixed assets Taxation recoverable Deferred tax asset-net Total assets TOTAL LIAB. & OWNER EQUITY Bills payable Borrowing From Fin. Institutions Deposits & other A/c's Sub – ordinted loans Liabilities against assets subject to finance lese Other liabilities Deferred liabilities Share capital Reserves Unappropriated profit Surplus on revaluation of assets Total liabilities 1142929 2363026 26808007 41553 162763 673124 0 4324965 578110 1361601 30965151 1978303 6628335 1624900 1400646 15423234 8194874 7713546 12634947 10195889 7201462 1418552
12727568 14290600 5181339 87362309 73441078 96752776 634272 757787 2405612 1043344 1258114 1459693 31541 268984 239756 459900 168435 896480 93920952 78239197 123479087 . 5264008 8776871
71993132 110866861 350010000 81260 378686 2030872 1329245 0 1672576 2477339 548199 88014997 1395164 0 1941862 3415242 358125
UNITED BANK LIMITED
BALANCE SHEET SHOWING INCREASE / DECREASE IN % AGES FOR THE PERIOD ENDED Dec 31 2002-2005
Taking 2002as base year
2005 ASSETS Cash and bank balance Balance with other banks Lending to financial Institutions Investments Advances Other assets Operating fixed assets Taxation recoverable Deferred tax asset-net Total assets TOTAL LIAB. & OWNER EQUITY Bills payable Borrowing From Fin. Institutions Deposits & other A/c's Sub – ordinted loans Liabilities against assets subject to finance lese Other liabilities Deferred liabilities Share capital Reserves Unappropriated profit Surplus on revaluation of assets Total liabilities 287.2 164.1 70.1 50.9 6.8 161.9 0 45.8 428.5 14.6 65.15 % 72.12 391.4 7.48 132.4 66.16 53.85 76.18 17.84
2004 52.36 % 77.25 348.30 20.64 100.87 20.84 46.41 85.47 3.35 . 107.9 123.9 45.5 99.6 36.6 154.2 0 39.4 310.8 22.4
Rupees in (000) 2003 10.38% 14.03 425.17 17.48 119.99 17.44 38.48 10.02 9.15
62.4 44.2 16.9 2.94 78.1 0 10.3 72.5 55.7
UNITED BANK LIMITED
COMPARITIVE BALANCE SHEET SHOWING TREND % AGES FOR THE PERIOD ENDED Dec: 31, 2001-2004 Taking 2000 as base year
Rupees in (ooo)
2004 ASSETS Cash and bank balance Lending to financial Institutions Investments Financing Other assets TOTAL ASSETS LIABLITIES & OWNER EQUITY Share holder's equity Borrowing From Fin. Institutions Revaluation reserve Deposits & other A/c's Other liabilities TOTAL LIAB. & OWNER EQUITY 153.72 153.94 152.79 153.17 152.36 153.13
2003 174.96 174.96 174.96 174.96 174.96 174.96
2002 103.91 103.91 103.91 103.91 103.91 103.91
2001 81.61 81.61 81.61 81.61 81.61 81.61
153.61 152.85 154.10 153.04 153.69 153.13
174.96 174.96 174.96 174.96 174.96 174.96
103.91 103.91 103.91 103.91 103.91 103.91
81.61 81.61 81.61 81.61 81.61 81.61
UNITED BANK LIMITED
COMPARATIVE BALANCE SHEET SHOWING COMMON SIZE % AGES FOR THE PERIOD ENDED Dec: 31, 2000-2004 Rupees in (m) 2001 2000 5.8 8.1 18.7 59.8 7.6 100 % 5.8 8.1 18.7 59.8 7.6 100
2004 ASSETS Cash and bank balance Lending to financial Institutions Investments Financing Other assets TOTAL ASSETS LIABLITIES & OWNER EQUITY Share holder's equity Borrowing From Fin. Institutions Revaluation reserve Deposits & other A/c's Other liabilities TOTAL LIAB. & OWNER EQUITY 5.8 8.1 18.7 59.8 7.6 100 %
2003 5.8 8.1 18.7 59.8 7.6 100 %
2002 5.8 8.1 18.7 59.8 7.6 100 %
11.2 14.6 3.1 67.0 4.1 100
11.2 14.6 3.1 67 4.1 100
11.2 14.6 3.1 67 4.1 100
11.2 14.6 3.1 67 4.1 100
11.2 14.6 3.1 67 4.1 100
Chapter 3
UNITED BANK LIMITED
COMPARATIVE INCOME STATEMENT FOR THE PERIOD ENDED DEC,31, 2002-2005 Net markup/interest income after provision Non markup/interest income Total Income Non markup/interest expenses Administrative expenses Other provision/write offs Other charges Total Non markup/ interest expenses Extraordinary items Profit before tax Tax Profit-after Tax/net income 2005 5497554 1918244 74157958 2004 7162247 4406224 11568471 2003 6493858 4544112 11037970 2002 4901027 3272119 8173146
3610291 191405 2704 3804400 361138 1526612 2084786
6702709 6153913 5390233 34422 551840 27353 10456 5501 24252 6678743 6711254 5441838 4889728 1188184 3701544 4326716 1691098 2635618 2731308 1316992 1414316
UNITED BANK LIMITED
COMPARATIVE INCOME STATEMENT INCRESE/DECREASE IN AMOUNT FOR THE MPERIOD ENDED DEC,31, 2002-2005
Net markup/interest income after provision Non markup/interest income Total Income
2005 596.527 1353875 757348
2004 2261220 1134105 3395325
2003 6493858 1271993 2864824
Non markup/interest expenses Administrative expenses 1779942 Other provision/write offs 164052 2704 Other charges Total Non markup/ interest 1637438 expenses Extraordinary items Profit before tax 880090 Tax 209620 Profit-after Tax/net 670470 income
1312476 7069 10456 1236905 2158420 128808 2287228
5614890 524487 5501 1269416 1595408 374106 1221302
UNITED BANK LIMITED
INCOME STATEMENT SHOWING TREND % AGE FOR THE PERIOD ENDED Dec: 31, 2002-2005 Net markup/interest income after provision Non markup/interest income Total Income Non markup/interest expenses Administrative expenses Other provision/write offs Other charges Total Non markup/ interest expenses Extraordinary items Profit before tax Tax Profit-after Tax/net income 2005 112.17 % 58.6 90.73 2004 146.14 % 134.7 134.7 2003 132.5 % 138.9 138.9
66.9 % 699.8 11.15 3804400 132.2 % 115.9 147.4 %
124.3 % 125.8 43.12 6678743 179.0 % 90.2 261.7 %
114.2% 2017.4 22.68 6711254 158.4 % 128.4 186.9 %
UNITED BANK LIMITED
COMPARATIVE INCOME STATEMENT SHOWING COMMON SIZE % AGES FOR THE PERIOD ENDED Dec: 31, 2002-2005 2005 74.13 % 25.9 100 % 2004 61.9 % 38.1 100 % Rupees in (m) 2003 58.8 % 41.2 100 % 2002 60.0 % 40.0 100 %
Net markup/interest income after provision Non markup/interest income Total Income Non markup/interest expenses Administrative expenses Other provision/write offs Other charges Total Non markup/ interest expenses Extraordinary items Profit before tax Tax Profit-after Tax/net income
48.68 % 25.8 .036 5130 48.7 % 20.6 28.1 %
57.9 % .3 .09 57.7 42.3 % 10.3 31.9 %
55.8 % 4.99 .04 60.8 39.3 % 15.3 23.9 %
65.95 % .33 0.3 66.6 33.4 % 16.1 17.3%
Chapter 6
RATIO ANALYSIS
The term ratio means a numerical relationship between items or group of items and is determined simply by dividing one item in relationship by the other. In this chapter only such ratios will be taken into consideration, which help in analysing and interpreting the current financial position of the industry. The analysis of current financial are beneficial both for owners and creditors particularly short term creditors. A business has strong financial position if it is able: 1. 2. 3. 4. 5. To meet the claims of short-term creditors. To meet current interest and dividend requirements. To maintain sufficient working capital for effective normal position. To utilize working capital efficiently. To maintain favorable credit rating.
A. Current Position Analysis:
Following are the ratios, which are used in analyzing the current financial position such as:
1. WORKING CAPITAL.
Working capital is the excess of current assets over current liabilities. In other words working capital is the amount of current asset after deducting the current liabilities represent a margin of safety that is a claim of protection for the current creditors. Larger
the amount of working capital the position would be satisfactory to meet current debts, fixed investment and absorb operating loses while the inadequacy of working capital is harmful for the operation of business as well as the policy of the firm . It is computed by following formula: Net Working Capital = Current Assets - Current Liabilities. Rupees In (m) Year Current Assets (a) Current Liabilities (b) Working Capital (a-b) 2002 15649561 1600964760 (1585285199) 2003 17274461 188047412 (170772951) 2004 23844435 234067911 (210223476) 2005 25845450 274577345 (248731895)
2. CURRENT RATIO OR WORKING CAPITAL RATIO. Current Ratio is use to measure current liquidity position. It is computed by following formula. = Total current assets/Total current liabilities Rupees in (m) Year Current Assets (a) Current Liabilities (b) Current Ratio (a/b) 2002 15649561` 1600964760 .009 2003 17274461 188047412 0.092 2004 2384435 234067911 0.01 2005 25845450 274577345 0.09
3.
WORKING CAPITAL TURNOVER
It is computed to know the utilization of working capital during the period under analysis. It is calculated by following formula: Working Capital Turnover = Net Income Net Working Capital
Rupees in (m)
Year Net Income(a) Working Capital (b) W.C. Turnover (a/b) 4.
2003 2635618 (170772951) 1.54 I
2004 3701544 (210223476) 1.76
2005 2084786 (248731895) 0.08
RELATIONSHIP OF CURRENT LIABILITIES TO TOTAL LIABILITIES.
This relationship shows the current maturity of obligation. It enables the creditor to get information about three participation in the business. It is computed by dividing the current liability by total liabilities and multiplied by 100 as shown below: Year Current Liabilities (a) Total Liabilities (b) Relationship of C.L to T.L (a/b)*100 2003 2004 188047412 234067911 216924418 272612663 86.0 86.0 2005 274577345 319262553 86.0
5. RELATIONSHIP OF CURRENT ASSET TO TOTAL ASSETS.
This relationship will indicate the percentage of investment in current assets. it is computed by divisions current assets by total asserts. Rupees in (m) Year 2003 2004 2005 Current Assets (a) 17274461 23844435 25845450 Total Assets (b) 216924418 272612663 319262553 Relationship of C.A toT. A 7.96 8.75 8.09 (a/b)*100
B. Stability Analysis:
Generally short term creditor are interested in the current financial position of the business whereas long term creditors and stockholders are much concerned with the long term financial position of the company.
The long-term financial position is analysed to get the answer of the following question such as: 1. Whether the borrowed funds and owners equity is appropriate and profitable. 2. Whether there exist a proper balance of investment in each group of assets. 3. Is the investment in operating assets commensurate with current sales prospective sale volume and the net income. 4. Whether the long term financial strength is improving or not. In order to give answer to the questions above we pursue the following ratios.
1. RATIO OF OWNERS EQUITY TO TOTAL ASSETS.
This ratio expresses the amount of total investment in the assets that has been financed by shareholders. It is calculated by the following formulae. Ratio of Owners Equity to Total Assets = Owners Equity Total Assets Rupees in (m) Year Stockholder’s Equity (a) Total Assets (b) Ratio (a/b)*100 2003 13884373 216924418 6.40 2004 2005 17364031 18381146 272612633 319262553 6.40 5.76 X 100
2. RATIO OF OWNERS EQUITY TO FIXED ASSETS
This ratio indicates the percentage of fixed assets financial by owners. It is calculated by the following formulae. Ratio of Owners Equity to Fixed Assets = Owner equity . X 100 Fixed Assets.
The ratio of owner equity of fixed assets of universal leather is shows below; Rupees in (m) Year Stockholder’s Equity (a) 2003 13884373 2004 17364031 2005 18381146
Fixed Assets Net (b)
193880429
243527608
30050383
3. RATIO OF OWNER EQUITY TO TOTAL LIABILITIES
This ratio shows the owners interest in the business. It shows the position of the shareholders as well as creditors. It is calculated by the following formulae. Ratio of Owner Equity to Total Liabilities = Owner Equity X 100 Total Liabilities
Rupees in (m) Year Stockholder’s Equity (a) Total Liabilities (b) Ratio (a/b)*100 2003 13884373 203040045 6.8 2004 17364031 255248632 6.8 2005 18381146 300881407 6.1
4. RATIO OF FIXED ASSETS TO LONG TERM LIABILITIES.
This ratio measure the security of the fixed obligations, when the long term liabilities are secured by the fixed assets It is computed by the following formulae. Ratio fixed assets to long term liabilities = Fixed Assets _____.X 100 Long Term Liabilities. Rupees in (m) Year Fixed Assets Net (a) Long Term Liabilities (b) Ratio (a/b)*100 2003 2004 2005 193880429 243527608 30050383 14992633 21180721 26304062 1293.2 1149.8 114.2
5. RATIO OF TOTAL ASSETS TO TOTAL LIABILITIES
This ratio determine as to how much has been financed out of total assets and hove much have been provided for financing out of owners equity. This ratio is computed by following formulae.
Ratio of Total Assets to Total Liabilities =Total Assets . x 100
Total Liabilities Rupees in (m) Year Total Assets (a) Total Liabilities (b) Ratio (a/b)*100 2003 2004 2005 216924418 272612663 319262553 216924418 272612663 319262553 100 100 100
6. RATIO OF NET INCOME TO FIXED ASSETS.
This ratio measures the utilisation of fixed assets. It is computed by following formulae. Ratio of sale to Fixed Assets = Net Income x 100 Fixed Assets Rupees in (m) Year Net Income (a) 2002 1414316 2003 2635618 2004 3701544 2005 2084786
Fixed Assets Net (b) Ratio (a/b)*100
162012736 193880429 243527608 .872 1.36 1.52
30050383 6.93
7. RATIO OF Net INCOME TO OWNER'S EQUITY.
This ratio expresses the turnover of the owner’s equity. It is calculated by the following formulae. Ratio of Sales to Owners Equity = Net Income Owner Equity Rupees in (m) Year Net Income (a) Stockholder’s Equity (b) Ratio (a/b)*100 2003 2635618 2004 3701544 2005 2084786 X 100
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