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Project Proposal for MBA (Finance) FINANCIAL STATEMENTS ANALYSIS FOR THE YEARS 2008, 2009, 2010 Of 1. ASKARI BANK LIMITED 2. ALLIED BANK LIMITED 3. BANK ALFLAH LIMITED
A PROPOSAL FOR REPORT TO BE SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES, VIRTUAL UNIVERSITY OF PAKISTAN IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION (MBA)

Submitted By: Faisal MC-090404606 MBA (Finance) 4th Semester Submission Date: 6th May, 2011 Department of Management Sciences VIRTUAL UNIVERSITY OF PAKISTAN

Table of Contents
AKNOWLEGEMENT EXECTIVE SUMMARY CH # 1
1.1 1.2

CONTENTS INTRODUCTION
HISTORY PROJECT INTRODUCTION 1.2.1 Introduction 1.2.2 Financial Period 1.2.3 Description Background Objectives Significance

1.3 1.4 1.5

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2.1 2.2 2.3 2.4 2.5

PROJECT PROCEEDINGS
Companies Profiles Ratio Analysis Common Size Analysis Review of Descriptive Information Comparisons 2.5.1 Trend Analysis 2.5.3 Industry Average

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3.1 3.2 3.3

METHODOLOGY
Data Collection Sources Data Collection Tools Data Processing Tools

CONCLUSION & RECOMMENDATIONS


4.1 Conclusion 4.2 Recommendations

Page # 04 04 04 04 05 05 05 07 07 08 08 08 08 08 08 08 08 09 09 09 09 10 10 10 11

BIBLIOGRAPHY

Chapter 1
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Introduction
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1.1 History
Banking system and the Financial Institutions play very significant role in the economy. First and foremost is in the form of advances to the need of credit for all the sections of society. The modern economies in the world have developed primarily by making best use of the credit availability in their systems. Credit availability for infrastructure sector is also extremely important. The success of any financial system can be fathomed by finding out the availability of reliable and adequate credit for infrastructure projects. Fortunately, during the past about one decade there has been increased participation of the private sector in infrastructure projects. The banks and the financial institutions also advance to another important need of the society i.e. mopping up small savings at reasonable rates with several options. The common man has the option to park his savings under a few alternatives, including the small savings schemes introduced by the government from time to time and in bank deposits in the form of savings accounts, recurring deposits and time deposits. Another option is to invest in the stocks or mutual funds. In this way banking is playing a role in the development of country. The 1st Commercial bank that was formed in the history of Pakistan was HBL that was formed in 1947. It was the initiation of banking in Pakistan. Banking sector is playing a vital role in the development of economical condition of Pakistan. In 1948, the formation of State bank of Pakistan further strengthens the commercial banking and starts a professional banking in Pakistan. This evolution was continued till 1974 then Pakistan government declare the interest banking illegal that far away our banking from western banking. In 1991, MCB become the first privatized bank of Pakistan. In 2002, the Shariah Applet Bench issued an order that inters based banking is banned in Islam but this was challenged by a lawyer on the fact that when an action is appreciated by the public and also in the favour of public, that can not be banned and this issues is still facing conflicts and not resolved. Today, banking sector is the most important sector playing role in the growth of economy by savings, investments, advances and loans.

1.2 Project Introduction: 1.2.1 Introduction


The issue of comparison of the feasibility of one organization with other organization is very important for stakeholders. They are eager to know the operations of their organizations. They have craved to identify that how much they have to get in touch with the organizations for benefits. Comparison of financial statements of three different organizations in same industry always presents the important and helpful insights and hints for stakeholders. The stakeholders sort out the possibility of profit and loss by this comparison process. This process also provides help to the stakeholders to find out the way of improvement in performance, if the organization is in loss.

1.2.2 Financial Period


The Financial Years that is under consideration are 2008, 2009, 2010

1.2.3 Background
The background of this project goes back to the time when I elected Finance as a field of specialization. After studying different areas of Finance as a subject, I came to the conclusion that no doubt Advertising, Brand Management, Promotion etc are important areas but the need of time is to concentrate on Finance. Today, for any organization in this competitive world, the financial management is most important for any firm and is called a life blood. Focusing on the financial management is the aim of any business concern for it success. This was the main idea and thought which motivated me toward enhancing my knowledge and skills regarding Finance and I decide to make a project on this subject. I am confident that this project will highlight the specific areas of Finance in banking sector particularly the changes that have been introduced into the financial system of Pakistani Banks as a result of competition due to financial policies being followed by foreign banks operating in Pakistan. If we go back into the history, we find that before the foreign banks started their

operations in Pakistan, financial management has been not an important area in the banking sector. It was only when the foreign banks were allowed to establish themselves in Pakistan, they brought a culture of financial management and this forced local banks to give attention to the financial management. As a result of this phenomenal change in banking sector, today almost all banks have well established finance department and success of this department ensures the success of the organization. Today investors get due attention when they visit bank and banking websites. They are provided with firsthand information on the very first counter of the bank branch. Still in certain branches Bank manager or Finance manager facilitates the investors by providing them the up to date financial data of the bank. This project will make a comparison of Financial Statements of Three leading banks of the country. I have closely observed this because of competition in banking sector during last decade; the importance of financial management has increased manifold. There was a time when not much importance was paid to it in banks but now because of competition and presence of foreign banks, a separate department of Finance has been established in almost every bank. This project will analyse all aspects related to financial statements of banks. It is also interesting that both Allied and Askari are local banks and one of them i.e. Allied was among the pioneers of banking industry in Pakistan and its roots can be traced back even before the inception of our Homeland. This is in contrast to Askari Bank which was established in 1991. Whereas Bank Alfalah Limited was incorporated on June 21st, 1992 as a public limited company under the Companies Ordinance 1984. Its banking operations commenced from November 1st ,1997. The bank is engaged in commercial banking and related services as defined in the Banking companies ordinance, 1962. The Bank is currently operating through various branches in Pakistan, Bahrain, Bangladesh & Afghanistan, with the registered office at B.A.Building, I.I.Chundrigar, Karachi. So this will be an interesting comparison of three Pakistani Banks established with a big time difference.

1.4Objectives
The objective of this study is to discuss and apply the knowledge of financial statements analysis on both said major listed companies. Further, to analyze and compare the financial performance of the both said companies. This research work shall help us to understand and write down the notions/concepts of financial statements analysis. Analysis of various financial ratios and comparison of using the different techniques for the period of three years also incorporated. Further aims of the project are as under: 1. To analyze the performance through compare and assess the consistent financial information within and between both firms and with industry averages. 2. To examine the proficiency & competency of operations by identifying the major changes in trends amounts and relationships. 3. To find out and investigate the causes behind major changes.

1.5 Significance
The study will improve, modify or broaden the financial facts of the firms. The process of comparison & analysis the financial statements of the listed companies are very important for the stakeholders. Most of the stakeholders are keen to know that their lending to firm is beneficial for them or not? The project is relevant to short term lenders, long term lender, suppliers and investors. The study describes the importance of analyzing financial statements and comparison of three listed companies and with industry averages. This research work also identifies the importance of financial information and their significance for different stakeholders of the firms. The project provides help to understand the importance of comparison and analysis the financial statements of three listed companies. It also facilitates to know that how we can improve the performance of a firm while comparing with other firm and industry averages. The outcomes of the project shall be disseminated among the stakeholders. The results of this

study shall be provided so that the research work contributes to the solutions or developments.

Chapter 2
_______________________________ PROJECT PROCEEDINGS ________________________________
2.1 COMPANIES PROFILES: 2.2 RATIO ANALYSIS: 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 Liquidity Ratios Leverage Ratios Profitability Ratios Market Ratios Cash Flow Ratios

2.3 COMMON SIZE ANALYSIS: 2.3.1 Horizontal Analysis: 2.3.1.1.1 2.3.1.1.2 2.3.2 Balance Sheet Statement for the year 2008 to 2010 Profit & Loss Account for the year 2008 to 2010

Vertical Analysis: 2.3.2.1.1 2.3.2.1.2 Balance Sheet Statement for the year 2009 & 2010 Profit & Loss Account for the year 2009 & 2010

2.4

REVIEW OF DESCRIPTIVE INFORMATION: The review of descriptive information shall be made and writ thoroughly.

2.5

COMPARISONS: A comparison of the financial statements of both listed companies shall be made and writ downs the conclusions of these comparisons. The following tools shall also be utilized to analyze these statements:

2.5.1 Trend Analysis: 2.5.2 Industry Average

Chapter 3
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3. Methodology: Data Collection Sources: Data shall be collected from various published financial reports, articles, magazines and etc. The financial Data of both listed companies shall be attained from their websites using online resource. Their online links are as under: ALLIED BANK LIMITED: The following link of the firm contains all required information related to the project: Link: http://www.abl.com.pk/thebank/financials.asp ASKARI BANK LIMITED: The following link of the firm contains all required information related to the project: Link: http://www.askaribank.com.pk/financial_report.php Date Collection Tools/Instruments: Requisite Data shall be collected using following tools/instruments, according to the need of the project. Structured Interview (if required and possible) Observations Data Processing & Analysis: Data processing shall be made using the following facilities:

Methodology

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MS. Excel Calculator and other requisite source

Chapter 4
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4.1 4.2 Conclusion
A comprehensive conclusion will be given for the project

Conclusion & Recommendations

Recommendations
Recommendations will be given based upon the above finding and trend analysis of ratios to improve the deficiencies (if any)

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Bibliography
Website of Allied Bank Ltd. http://www.abl.com Website of Askari Bank Ltd http://www.askaribank.com.pk Website of Alflah Bank Limited: http://www.bankalfalah.com Meigs, M. & Whittington, B. (2002). Accounting the basis for business decisions. U.S.A: McGraw-Hill Publishing. Brigham, E.F., & Gapenski, L.C. (1997). Financial Management theory and Practice. U.S.A: Dryden Press Series. Sekaran, U. (1998). Research Methods for Business. U.S.A: John Wiley & Sons, Inc.

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