2

Table of contents
Vision & mission logo 04

About Askari bank 05

Balance sheet 08

Profit & loss accounts 09

Report on vertical and horizontal

Analysis 10

Vertical analysis of profit & loss 11

Vertical analysis of balance sheet 12

Horizontal analysis of profit & loss 13

Horizontal analysis of balance sheet 14

Performa statements 15

Profit & loss 16

Balance sheet 17

Ratio analysis 18

Graphical ratio analysis 19

3
4
 Askari Commercial Bank

Type Private
Founded October 09, 1991
Headquarters Rawalpindi, Pakistan
Lt. Gen. Waseem Ahmed Ashraf, Chairman
Key people & CEO
Shaharyar Ahmad
Industry Money Center Banks
Products Banking
Revenue Rs 5.453 billion PKR (2005)
Net income Rs 2.022 billion PKR (2005)
Employees 2,754 (2005)
Slogan Inspiring Relations
Website http://www.askaribank.com.pk/

Askari Bank Ltd (formerly Askari Commercial Bank) was incorporated in Pakistan on
October 09, 1991, as a Public Limited Company. It started its operations during April 1,
1992. The bank principally deals with mainly banking, as defined in the Banking
Companies Ordinance, 1962. The Bank is listed on the Karachi, Lahore & Islamabad
Stock Exchanges and its shares are currently the highest quoted from among the new
private sector banks in Pakistan.

Askari Bank has expanded into a nation wide presence of 102 branches, and an offshore
banking Unit in Bahrain. A shared network of over 1,100 online ATMs covering all
major cities in Pakistan supports the delivery channels for customer service. As on
December 31, 2005, the bank had equity of PKR 8.6 billion and total assets of PKR 145.1
billion, with over 600,000 banking customers, serviced by our 2,754 employees.

Mission
To be the leading private sector bank in Pakistan with an international presence,
delivering quality service through innovative technology and effective human resource
management in a modern and progressive organizational culture of meritocracy,

5
maintaining high ethical and professional standards, while providing enhanced value to
all our stake-holders, and contributing to society.

Functions

Locations of Askari Commercial Bank Ltd branches in Pakistan

Services

Askari Bank offers a wide range of services to its customers and recognizes the
importance of efficient business delivery and providing timely solutions.

• Corporate & Investment Banking

• Personal Banking
• Mortgage Finance
• Business Finance
• ASKCAR - Car Finance
• ASKCARD
• Travellers Cheques
• AskPower
• AskSmart
• Value Plus
• Profit / Markup Rates on Retail Products

Internet Banking

Askari Bank has also introduced online banking. Customers are able to view their bank
information and use their accounts for money transfer and use other features.

6
Board of Directors
• Lt. Gen. Waseem Ahmed Ashraf - Chairman
• Lt. Gen. (R) Zarrar Azim - Chairman Executive Committee
• Mr. Shaharyar Ahmad - President & Chief Executive
• Brig (R) Muhammad Shiraz Baig - Director
• Brig (R) Asmat Ullah Khan Niazi - Director
• Brig (R) Muhammad Bashir Baz - Director
• Brig (R) Shaukat Mahmood Chaudhari - Director
• Mr. Zafar Alam Khan Sumbal - Director
• Mr. Kashif Mateen Ansari - Director
• Mr. Muhammad Najam Ali - Director
• Mr. Muhammad Afzal Munif - Director
• Mr. Tariq lqbal Khan - Director (NIT Nominee)

7
Balance Sheet:
(Rupee in Thousands)
2003 2004 2005 2006
Assets

Cash and Balances With Treasury Banks 6678026 8762866 11766925 14879230
Balances With Other Banks 2650166 4847899 5550148 7333002
Lending to Financial Institutions 5770842 2324839 10172242 8392950
Investments 22104425 17239157 25708194 28625915
Advances 44777538 69938041 85976895 99179372
Operating Fixed Assets 1979919 2595023 3192862 3810331
Deferred Tax Assets
Other Assets 1425986 1459716 2732641 3812788

Total Assets 85386902 107167541 145099907 166033588

Liabilities
Bills Payment 973703 1227093 1315680 1839077
Borrowings 15903055 13781555 10562338 14964087
Deposits and Other Accounts 61656607 83318795 118794690 131839283
Sub-ordinated Loans 1000000 2999700 2998500
Liabilities Against Assets Subject to Finance
Lease 37350 14159 1459
Deferred Tax Liabilities 806753 526865 567217 736298
Other Liabilities 962592 1282981 2045340 2603113

Total Liabilities 80340060 101151448 136286424 154980358

Net Assets 5046842 6016093 8813483 11053230

Shared Capital 1141680 1255848 1507018 2004333

Reserves 2759599 4317301 4470530 5814754
Unappropriated Profit 1617597 1799979
3901279 5573149 7595145 9619066
Surplus on Revaluation of Assets- Net of Tax 1145563 442944 1218338 1434164

Total Liabilities & Owner Equity 85386902 107167541 145099907 166033588

Income Statement

8
Profit & Loss Account
(Rupee in Thousands)
2003 2004 2005 2006

Mark UP Earnings & Expenses

Mark-up/Return/Interest Earned 4073715 4487206 8780698 12596921
Mark-up/Return/Interest Expensed 1379609 1117206 4278374 6977313

Net Mark-up/ Interest Income 2694106 3370000 4502324 5619608

Provisions Against Non-performing Loans & Advances 308528 277398 638547 1128137
Provisions/(reversal)for Impairment in the Value of
Investment 38066 -36555 376
Bad Debts Written Off Directly 7
308528 315471 601992 1128513
Net Mark-up/ Interest Income After Provision 2385578 3054529 3900332 4491095

Non Mark-up/Interest Income

Fee, Commission and Brokerage Income 524775 649988 838561 1013660
Dividend Income 37658 26318 51143 109326
Income from Dealing in Foreign Currencies 112808 180992 356218 584344
Gain on Sales of Securities-Net 278512 776230 100407 112474
Unrealized Loss on Revaluation of Investments Classified as
Held for Trading-Net -582 -2308
Other Income 206819 321758

Total Non-Markup/Interest Income 953753 1633528 1552566 2139254

3339331 4688057 5452898 6630349

Non Mark-up/Interest Expenses

Administrative Expenses 1436304 1845179 2591985 3277353
Other Provisions/Write Offs
Other Charges 1227 138 1832 6141

Total Non-Markup/Interest Expenses 1437531 1845317 2593817 3283494

1901800 2842740 2859081 3346855

Profit Before Taxation

Taxation- Current 873639 876089 828774 983875
- Prior Years -188247
- Deferred -74904 43611 196558 113006
Total Tax 798735 919700 837085 1096881
Profit After Taxation 1103065 1923040 2021996 2249974
Unappropriated Profit Brought Forward
Profit Available For Appropriation 1103065 1923040 2021996 2249974

9
Report on vertical and horizontal analysis of
financial statements of Askari bank of Pakistan

Let first discus the profit and loss accounts of askari bank. If we look at
horizontally there are 10%, 115% and 209% increase in interest earned
(sales) in 2004, 2005 and 2006, respectively as compare to 2003. But if we
look at there interest expense, so, it decreases almost 17% in 2004 while
there is increments in other years. Again there is just 28% in operating
expenses in 2004, quite lower then the increments in other years.
If we look the net income horizontally so, there is increase of 74%, 83% and
103% in 2004, 2005 and 2006 respectively as compare to 2003. But if we
look s vertically so net income is 43% in 2004, 23% in 2005 and just
17.85% in 2006.so we can see and can say easily that the performance of
askari bank in 2004 was very good while there is clear decrease in their
performance in 2005 & 2006.
Now come to balance sheet, if we look horizontally to investments activities
of Askari bank, it is more than double in 2006 as compare to 2003, which
means that they had a lot of investment opportunities and they availed it too.
As their debt to equity ratio is very much high, which is not a good sign, so
they are slowly and tenderly lowering their debt portion in financing
activities, which is showing in their vertical analysis.
While looking horizontally, the equity portion is gone more than double in
2006 as compare to that of 2003, while the debt portion is 92% increase in
just 4 years.

10
Vertical Analysis of Financial Statement
Profit & Loss Account
(Rupee in Thousands)
2003 2004 2005 2006

Mark-up/Return/Interest Earned 1 1 1 1
Mark-up/Return/Interest Expensed 0.338661 0.248975866 0.487248 0.55389

Net Mark-up/ Interest Income 0.338661 0.248975866 0.487248 0.55389

Provisions Against Non-performing Loans & Advances 0.075736 0.06181976 0.072722 0.089557
Provisions/(reversal)for Impairment in the Value of Investment 0 0.00848323 -0.00416 2.98E-05
Bad Debts Written Off Directly
0.075736 0.07030455 0.068559 0.089586
Net Mark-up/ Interest Income After Provision 0.262925 0.178671316 0.418689 0.464304

Non Mark-up/Interest Income

Fee, Commission and Brokerage Income 0.12882 0.144853613 0.0955 0.080469
Dividend Income 0.009244 0.00586512 0.005824 0.008679
Income from Dealing in Foreign Currencies 0.027692 0.040335122 0.040568 0.046388
Gain on Sales of Securities-Net 0.068368 0.172987378 0.011435 0.008929
Unrealized Loss on Revaluation of Investments Classified as
Held for Trading-Net 0 0 -6.6E-05 -0.00018
Other Income 0 0 0.023554 0.025543

Total Non-Markup/Interest Income 0.234124 0.364041232 0.176816 0.169824

Non Mark-up/Interest Expenses

Administrative Expenses 0.352578 0.41120889 0.295191 0.260171
Other Provisions/Write Offs
Other Charges 0.000301 0.000031 0.000209 0.000488

Total Non-Markup/Interest Expenses 0.35288 0.41123989 0.2954 0.260658

Profit Before Taxation 0.4668 0.6335 0.3256 0.2656

Taxation- Current 0.214458 0.195241538 0.094386 0.078104
- Prior Years 0 0 -0.02144 0
- Deferred -0.01839 0.009718965 0.022385 0.008971
Total tax 0.19607 0.204960503 0.095332 0.087075
Profit after taxation 0.2707 0.4285 0.2303 0.1785

Balance Sheet

11
(Rupee in Thousands) 2003 2004 2005 2006

Assets
0.078209 0.081768 0.081095 0.089616
Cash and Balances With Treasury Banks 0.031037 0.045237 0.038251 0.044166
Balances With Other Banks 0.067585 0.021693 0.070105 0.05055
Lending to Financial Institutions 0.258874 0.160862 0.177176 0.17241
Investments 0.524408 0.652605 0.592536 0.597345
Advances 0.023188 0.024215 0.022005 0.022949
Deferred Tax Assets
Operating Fixed Assets 0.0167 0.013621 0.018833 0.022964
Other Assets

Total Assets 1 1 1 1

Liabilities
0.01212 0.012131 0.009654 0.011867
Bills Payment 0.197947 0.136247 0.077501 0.096555
Borrowings 0.767445 0.823703 0.871655 0.850684
Deposits and Other Accounts 0 0.009886 0.02201 0.019348
Sub-ordinated Loans 0.000465 0.00014 1.07E-05 0
Liabilities Against Assets Subject to Finance Lease 0.010042 0.005209 0.004162 0.004751
Deferred Tax Liabilities 0.011981 0.012684 0.015008 0.016796
Other Liabilities

Total Liabilities 1 1 1 1

Horizontal Analysis of Financial Statement

12
Profit & Loss Account

(Rupee in Thousands)
2004-2003 2005-2003 2006-2003

Mark-up/Return/Interest Earned 110.150219 215.545221 309.224406

Mark-up/Return/Interest Expensed 80.9799008 310.114967 505.745686

Net Mark-up/ Interest Income 191.13012 525.660188 814.970092

Provisions Against Non-performing Loans & Advances 89.910154 206.965656 365.651416

Provisions/(reversal)for Impairment in the Value of
Investment
Bad Debts Written Off Directly
89.910154 206.965656 365.651416
Net Mark-up/ Interest Income After Provision 101.219966 318.694532 449.318676

Non Mark-up/Interest Income

Fee, Commission and Brokerage Income 123.860321 159.794388 193.160878
Dividend Income 69.8868766 135.809124 290.312815
Income from Dealing in Foreign Currencies 160.442522 315.773704 517.998723
Gain on Sales of Securities-Net 278.706124 36.0512294 40.3838973
Unrealized Loss on Revaluation of Investments Classified
as Held for Trading-Net
Other Income

Total Non-Markup/Interest Income 632.895843 647.428446 1041.85631

734.115809 966.122978 1491.17499

Non Mark-up/Interest Expenses

Administrative Expenses 128.467163 180.462145 228.179619
Other Provisions/Write Offs
Other Charges 11.2469438 149.307253 500.488998

Total Non-Markup/Interest Expenses 139.714107 329.769398 728.668617

594.401703 636.35358 762.506374

Profit Before Taxation

Taxation- Current 100.280436 94.8645837 112.618026
- Prior Years
-
- Deferred 58.2225248 -262.41322 -150.86778
42.0579114 -167.54864 -38.249751
Profit After Taxation 552.343791 803.902218 800.756125

Balance Sheet
(Rupee in Thousands) 2003 2004-2003 2005-2003 2006-

13
 2003

Assets

Cash and Balances With Treasury Banks 100% 131.2194053 176.203642 222.80881
Balances With Other Banks 100% 182.928126 209.426428 276.69972
Lending to Financial Institutions 100% 40.28595827 176.269633 145.43718
Investments 100% 77.98961973 116.303383 129.5031
Advances 100% 156.1900098 192.008982 221.49358
Operating Fixed Assets 100% 131.0671295 161.262254 192.44883
Deferred Tax Assets
Other Assets 100% 102.3653809 191.631685 267.37906

Liabilities
Bills Payment 100% 126.0233357 135.121284 188.87453
Borrowings 100% 86.65979587 66.4170375 94.095675
Deposits and Other Accounts 100% 135.1336038 192.671468 213.82831
Sub-ordinate Loans
Liabilities Against Assets Subject to Finance
Lease 100% 37.90896921 3.90629183 0
Deferred Tax Liabilities 100% 65.30685352 70.3086323 91.266844
Other Liabilities 100% 133.2839874 212.482547 270.42745

Shared Capital 100% 110 132.000035 175.55996

Reserves 100% 156.4466794 161.999261 210.71011
Unappropriated Profit 100%
266.4466794 293.999297 386.27007
Surplus on Revaluation of Assets- Net of Tax 100% 38.66605329 106.352772 125.19294

Performa Statements

14
 Financial planning formulates the way financial goal are to be achieved. A
financial is thus a statement of what is to be done in the future. Most
decisions have a long lead time, which means they take a long time to
implement. In an uncertain world, this requires that decisions to be made far
in advance of their implementation. If a firm wants to build a company in
2010, for example, it might have to began lining up contractors and
financing in 2008, or even earlier.
There are two approaches to make the Performa statements, one, the balance
sheet approach and 2nd the percentage of sales approach.
To make the forecasted financial statements of Askari bank, I use the
percentage of sales approach. I increase the sales as well as the expenses and
other income by 10%, which is the inflation rate of Pakistan.

Profit & Loss Account

(Rupee in Thousands)
2006 2007 2008 2009 2010 2011

15
Mark-up/Return/Interest Earned 12596921 13856613 15242274 16766502 18443152 20287467
Mark-up/Return/Interest Expensed 6977313 7675044.3 8442548.7 9286803.6 10215484 11237032

Net Mark-up/ Interest Income 5619608 6181568.8 6799725.7 7479698.2 8227668.1 9050434.9

Provisions Against Non-performing Loans

& Advances 1128137 1240950.7 1365045.8 1501550.3 1651705.4 1816875.9
Provisions/(reversal)for Impairment in the
Value of Investment 376 413.6 454.96 500.456 550.5016 605.55176
Bad Debts Written Off Directly
1128513 1241364.3 1365500.7 1502050.8 1652255.9 1817481.5
Net Mark-up/ Interest Income After
Provision 4491095 4940204.5 5434225 5977647.4 6575412.2 7232953.4

Non Mark-up/Interest Income

Fee, Commission and Brokerage Income 1013660 1115026 1226528.6 1349181.5 1484099.6 1632509.6
Dividend Income 109326 120258.6 132284.46 145512.91 160064.2 176070.62
Income from Dealing in Foreign
Currencies 584344 642778.4 707056.24 777761.86 855538.05 941091.86
Gain on Sales of Securities-Net 112474 123721.4 136093.54 149702.89 164673.18 181140.5
Unrealized Loss on Revaluation of
Investments Classified as Held for
Trading-Net -2308 -2538.8 -2792.68 -3071.948 -3379.143 -3717.057
Other Income 321758 353933.8 389327.18 428259.9 471085.89 518194.48

Total Non-Markup/Interest Income 2139254 2353179.4 2588497.3 2847347.1 3132081.8 3445290

6630349 7293383.9 8022722.3 8824994.5 9707494 10678243

Non Mark-up/Interest Expenses

Administrative Expenses 3277353 3605088.3 3965597.1 4362156.8 4798372.5 5278209.8
Other Provisions/Write Offs
Other Charges 6141 6755.1 7430.61 8173.671 8991.0381 9890.1419

Total Non-Markup/Interest Expenses 3283494 3611843.4 3973027.7 4370330.5 4807363.6 5288099.9

3346855 3681540.5 4049694.6 4454664 4900130.4 5390143.4
Extra Ordinary/Unusual Items

Profit Before Taxation

Taxation- Current 983875 1082262.5 1190488.8 1309537.6 1440491.4 1584540.5
- Prior Years
- Deferred 113006 124306.6 136737.26 150410.99 165452.08 181997.29
1096881 1206569.1 1327226 1459948.6 1605943.5 1766537.8
Profit After Taxation 2249974 2474971.4 2722468.5 2994715.4 3294186.9 3623605.6
Balance Sheet

Balance Sheet
(Rupee in Thousands)
2006 2007 2008 2009 2010 2011
Assets

16
 Cash and Balances With Treasury
Banks 14879230 16367153 18003868 19804255 21784681 23963149
Balances With Other Banks 7333002 8066302.2 8872932.4 9760225.7 10736248 11809873
Lending to Financial Institutions 8392950 9232245 10155470 11171016 12288118 13516930
Investments 28625915 31488507 34637357 38101093 41911202 46102322
Advances 99179372 109097309 120007040 132007744 145208519 159729370
Operating Fixed Assets 3810331 4191364.1 4610500.5 5071550.6 5578705.6 6136576.2
Deferred Tax Assets
Other Assets 3812788 4194066.8 4613473.5 5074820.8 5582302.9 6140533.2

Total Assets 166033588 182636947 200900641 220990706 243089776 267398754

Liabilities
Bills Payment 1839077 2022984.7 2225283.2 2447811.5 2692592.6 2961851.9
Borrowings 14964087 16460496 18106545 19917200 21908920 24099812
Deposits and Other Accounts 131839283 145023211 159525532 175478086 193025894 212328484
Sub-ordinate Loans 2998500 3298350 3628185 3991003.5 4390103.9 4829114.2
Liabilities Against Assets Subject to
Finance Lease
Deferred Tax Liabilities 736298 809927.8 890920.58 980012.64 1078013.9 1185815.3
Other Liabilities 2603113 2863424.3 3149766.7 3464743.4 3811217.7 4192339.5

Total Liabilities 154980358 170478394 187526233 206278856 226906742 249597416

Net Assets 11053230 12158553 13374408 14711849 16183034 17801337

Shared Capital 2004333 2204766.3 2425242.9 2667767.2 2934543.9 3227998.3

Reserves 5814754 6396229.4 7035852.3 7739437.6 8513381.3 9364719.5
Unappropriated Profit 1799979 1979976.9 2177974.6 2395772 2635349.3 2898884.2
9619066 10580973 11639070 12802977 14083275 15491602
Surplus on Revaluation of Assets-
Net of Tax 1434164 1577580.4 1735338.4 1908872.3 2099759.5 2309735.5

Total Liabilities & Owner Equity 11053230 182636947 200900641 220990706 243089776 267398754

Ratios Analysis as of December (2003-2006)

Ratio 2003 2004 2005 2006

1 Current Ratio 2.77 2.85 3.7 3.6
52,452,248.0 66,972,064.0 101,578,893.0
2 Working Capital 0 0 0 114,459,945.00

17
3 Quick Ratio 1.26 0.917 1.41 1.34
4 Debt Ratio 0.94 0.94 0.93 0.93
5 Long Term Debt To Total Asset 0.6 0.6 0.68 0.66
Long Term Debt To Long term
6 Asset 14.92 16.03 16.42 14.56
7 Debt Equity 15.92 16.81 15.46 14.02
8 Equity Multiplier 16.92 17.81 16.46 15.02
9 Gross Profit Margin 58.6 68.07 44.42 35.65
10 Net Profit Margin 27.07 42.85 23.002 17.86
11 Return on Total Asset 1.29 1.81 1.39 1.35
12 Return on Short Term Asset 1.34 1.86 1.45 1.42
13 Return on Long term Asset 32.38 47.42 33.61 29.51
14 Return on Equity 21.85 32.8 22.94 20.35

1. current ratio:

18
 Current Ratio

4
3.7 3.6
3 2.77 2.85
Ratio

0
2003 2004 2005 2006
Year

The most common liquidity ratio is the current ratio, which

is also the ratio of current asset to current liabilities. It is also expressed as how many
times the assets can cover the liabilities.
Here is increase in current ratio of Askari bank but slightly decrease in year 2006 which
not be a good sign.

2. working capital:

Working Capital Ratio

140,000,000.00
120,000,000.00 114,459,945.0
101,578,893.0
100,000,000.00 0
0
80,000,000.00
Ratio

66,972,064.00
60,000,000.00 52,452,248.00
40,000,000.00
20,000,000.00
-
2003 2004 2005 2006
Year

Working capital compares current assets to current liabilities, and serves as the liquid
reserves available to satisfy contingencies and uncertainties .A high working capital
balance is mandated entity is unable to borrow on short notice. The ratio indicates the
short term solvency of a business and in determining if a firm can pay its current
liabilities when due. Here is a regular increasing trend each year in Askari bank.

3. quick ratio:

19
 Quickt Ratio

1.5
1.41 1.34
1.26
1 0.917
Ratio

0.5

0
2003 2004 2005 2006
Year

Quick ratio focuses on immediate liquidity but specifically ignores inventory. It

indicates the extent to which you could pay current liabilities without relying on the
sale of inventory. We can see ups and downs in the quick ratio of the bank which is
still more then 1.00 but u can see that it goes down from 1.00 in 2004.

4. debt ratio:

Debt Ratio

0.945

0.94 0.94 0.94

Ratio

0.935

0.93 0.93 0.93

0.925
2003 2004 2005 2006
Year

This ratio shows what percentage of total funds is provided by creditors. Although
creditors tend to prefer a lower ratio, management may prefer to lever operations,
producing a higher ratio. If we look at debt ratios of Askari bank, we can see that it is
very much high and has decrease of 1% in year 2005.

5. long-term debt to total asset ratio:

20
 Long Term Debt To Total Asset

0.7
0.68 0.68
0.66 0.66
0.64
Ratio

0.62
0.6 0.6 0.6
0.58
0.56
2003 2004 2005 2006
Year

This ratios shows what percentage of total assets are the company’s long term debt
and will the company will be able to pay their long term debt? As this value will be,
the company will be in strong position for long term financing. In 2003 & 2004 the
bank was in comparatively good position but 60% value, but in 2005 it boom up to
68%, which is not a good sign for financial stability.

6. long-term debt to long-term asset ratio:

Long Term Debt To Long term Asset

17
16.5 16.42
16 16.03
15.5
Ratio

15 14.92
14.5 14.56
14
13.5
2003 2004 2005 2006
Year

Here we compare long term debt to long term asset to whether the company will be
able to pay their long term debt from their long term assets, as low this value will be
low the company will be in strong financing position for long term. From 2003 to
2005 this value tends higher as there is a 2% decrease in 2006, but after all if we
look at ratio so the bank is not financially strong here.

21
 7. debt to equity:

Debt Eqiuty

18
17 16.81
16 15.92
15.46
Ratio

15
14 14.02
13
12
2003 2004 2005 2006
Year

Debt to equity is also called debt to net worth. It quantities the relationship between
the capital invested by owners and investors and the fund provided by the creditors. A
lower ratio means the company is more financially stable and is probably in a better
position to borrow now and in the future. But an extremely low ratio may indicate
that the company too conservative and is not letting the business realize its potential.
Just like PTC is debt free organization. The debt to equity ratio of Askari bank is
quite high but we can see the downward turn in the graph which is a good impact.

8. equity multiplier:

22
 Eqiuty Multiplier

19
18 17.81
17 16.92
16.46
Ratio

16
15 15.02
14
13
2003 2004 2005 2006
Year

Shows the amount of assets owned by the firm for each equivalent monetary unit owner
claims held by stockholders, i.e., the equity multiplier measures how many dollars of
assets an institution supports with each dollar of capital. If a firm is totally financed by
equity, the equity multiplier will equal 1.00, while the larger the number the more highly
leveraged is the firm. EM compares assets with equity: large values indicate a large
amount of debt financing relative to equity. EM, thus, measures financial leverage and
represents both profit and risk measurement. EM affects a firm’s profit because it has a
multiplier impact on Return on Assets (ROA) to determine the firm’s Return on Equity
(ROE). EM is also a risk measure because it reflects how many assets can go into default
before a company becomes insolvent. The EM ratio is best compared to industry
averages.

9. gross profit margin:

23
 Gross Profit Margin

80
68.07
60 58.6
Ratio

44.42
40 35.65
20

0
2003 2004 2005 2006
Year

Gross profit margin indicates how well the company can generate a return at the gross
profit level. It addresses three areas-inventory control, pricing and production efficiency.
A reducing percentage may show company is not increases its prices in relation to cost.
This value is highest in 2004 but the bank shows a downward turn as you see in the
graph, which is a bad sign.

10. net profit margin:

Net Profit Margin

50
42.85
40
30
Ratio

27.07
23.002
20 17.86
10
0
2003 2004 2005 2006
Year

Net profit margins shows how much net profit margin is derived from every $ of total
sales. It indicates how well the business has managed its operating expenses. It also can
indicate whether the business is generating enough sales volume to cover minimum fixed
cost and still leave and acceptable profit. The situation of net profit margin is as same as
in there in the gross profit margin, higher in 2004 and then a downward turn.

11. return on total asset:

24
 Return on Total Asset

2
1.81
1.5 1.39
1.29 1.35
Ratio

0.5

0
2003 2004 2005 2006
Year

RETURN ON ASSETS (ROA) shows the after tax earnings of assets. Return on assets is
an indicator of how profitable a company is. Use this ratio annually to compare a
business' performance to the industry norms: The higher the ratio the greater the return on
assets. However this has to be balanced against such factors as risk, sustainability and
reinvestment in the business through development costs. Due to the downward trend in
gross profit margin and net profit margin we are watching its impact on our returns.

12. return on short-term asset:

Return on Short Term Asset

2
1.86
1.5 1.45 1.42
1.34
Ratio

0.5

0
2003 2004 2005 2006
Year

13. return on long-term asset:

25
 Return on Long term Asset

50 47.42
40
32.38 33.61
30 29.51
Ratio

20
10
0
2003 2004 2005 2006
Year

14. return on equity:

Return on Equity

35
32.8
30
25
21.85 22.94
20 20.35
Ratio

15
10
5
0
2003 2004 2005 2006
Year

Return on equity is the bottom line measure for the shareholder measuring the profit
earned for each $ invested in the firm’s stock. we can see the decrease here also.

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