Performance Appraisal

1.
1 Introduction
The process of economic development needs capital formation besides other structural
changes like improvement in skill and efficiency of manpower, better organization, health
and education system, etc. An efficient and well-organized financial system contributes to
the much-desired economic development through capital formation which can be divided into
three stages viz., savings, financing and investment. Banks constitute the most important
functionary in the whole network of the financial system for mobilization of savings,
intermediation between savers and investors and allocation of credit to productive sectors and
thus play a dynamic role in the economic development of a nation. The health of Bangladesh
Economy is closely related to the banking systems.
Banking is one of the highly leveraged businesses. Financial statements for banks present a
different analytical problem than statements for manufacturing and service companies. As a
result analysis of banks financial performance requires a distinct approach that recognizes a
banks unique risks.
Janata Bank Limited is a first generation bank in Bangladesh. It is playing an important role
in developing the business sector of the country. It has implemented well-structured online
banking systems that make it easier to provide prompt banking services to the customer.
Financial performance analysis is the process of identifying the financial strengths and
weaknesses of the Bank by properly establishing the relationship between the items of
balance sheet and profit and loss account. It also helps in short-term and long term
forecasting and growth can be identified with the help of financial performance analysis. It is
the structural and logical way to represent overall financial performance of a financial
institution.
1.2 Origin of the Report
Theoretical and practical knowledge both are important phases of learning. Perfect
combination of both practical and theoretical methods is necessary for holistic learning.
Theoretical knowledge has its own importance in the learning. It is the base of doing anything
practically. Practical knowledge assists us to attain the exact techniques that become the tools
of our job. Learning during internship is the best way of acquiring knowledge by using both
practical and theoretical aspects of a thing or situation.
To relate the theoretical knowledge with the practice Bachelor of Business Administration
(BBA) course requires 45 days of attachment with an organization followed by a report
assigned by the supervisor in the organization and endorsed by the faculty. Students are
placed in enterprises, organizations, research institutions as well as development projects.
Since practical orientation is an integral part of the BBA program requirement, I was deputed
by the Department of Management Studies, Jagannath University Dhaka to Janata Bank
Limited, Corporate Branch, Bongshal to take real life exposure of the activities of the
organization as a financial institution. After completion of the internship program report
1
submission is essential. I have assigned a topic Financial Performance Analysis/
Performance Appraisal of Janata Bank Limited. The topic was selected with able
guidance of the respective supervisor. The Janata Bank Ltd. authority gave me the
opportunity to work at the three months on the topic. My faculty supervisor Tahmina Rita,
Lecturer of department of Management Studies, Jagannath University, approved the
topic and authorized me to prepare this report as a part of the fulfillment of internship
requirement.
1.3 Rationale of the Report
Banking in Bangladesh has to keep pace with the global change. The economy of the country
has a lot left to be desired and there are lots of scopes for massive improvement. In an
economy like this, banking sector can play a vital role to improve the overall social-economic
condition of the country. Now, Banks must compete in the market place both with local
institution as well as foreign ones. The management of the bank is responsible for taking
decisions and formulating plans and policies for the future. They, therefore, always need to
evaluate its performance and effectiveness of their action to realize the companys goal in the
past. For the purpose financial performance analysis is important to the companys
management. Its very important to have an effective and sound credit risk management
system in place which will help the bank mitigate its risk factors and carry out successful
financing service or lending. Financial performance analysis helps to provide important
information to the management regarding extension of credit. Shareholders, who are the
owners of the bank, can also get meaningful information through the financial performance
analysis.
Thus, performance analysis helps to highlight the facts and relationships concerning
managerial performance, corporate efficiency, financial strength and weakness, credit
worthiness of the bank. With these issues in mind, the topic Financial Performance
Analysis/Performance Appraisal of Janata Bank Limited. has been undertaken as my topic
for internship report.
1.4 Objectives of the Report
The following report has two types of objectives which are described as follows:
1.4.1 Broad Objectives:
The general objective of this report is to partially fulfill the requirements of four years BBA
graduation program and gather practical knowledge and also to introduce myself with
corporate culture through preparing an internship report.
1.4.2 Specific Objectives:
To understand the theoretical aspect of financial performance.
To analyze the financial statements of Janata Bank Limited by using financial tools.
2
To know about different ratios applicable for measuring financial performance of a
bank.
To identify the strength and weakness of the bank based on the financial performance
in the last five years (2012-2016).
Finally, to make some recommendations and suitable conclusion regarding financial

performance of Janata Bank limited.
1.5 Methodology of the Report
1.5.1 Introduction:
This report is the reflection of three months internship program in Janata Bank Limited
corporate Branch, Bongshal. Banking sector is a fast going sector in Bangladesh. All banks
are facing tremendous competition from each other. So, the officers remain very busy to
provide a better customer service. As an intern, I had to collect data and information from
that busy corporate environment. Information collected to furnish this report is both from
primary and secondary sources.
1.5.2 Research type:
This is a Descriptive Research, which briefly reveals the overall activities of the bank. This
Internship report has been prepared based on the information extracted from different sources
collected by using a specific methodology.
1.5.3 Choice of the Year:
I have selected the last five years (2012-2016) for my analysis. I have collected data and
financial papers of these five years to prepare this report.
1.5.4 Method of Data Collection:
To make this report presentable and effective, the necessary information has been collected
from two sources:
3
The primary sources are:
Face to face conversation with the clients.

Taking initial lectures from Branch Manager and Senior Officers.
Consulting with the supervisor.
Practical work experience at different desk.
Close observation of the several tasks by the different departments officers.
The secondary sources are:
Annual Report of Janata Bank Limited (2012-2016).

Brochures of Janata Bank Limited.
Prospectus of Janata Bank Limited.
Relevant file study as provided by the officers concerned.
Working Papers.
Different circulars issued by the Head office of Janata Bank Limited.
Unpublished data received from the corporate Branch, Bongshal.
Different Financing and Accounting related text books.
1.5.5 Data Analysis & Reporting:
To analyze the gathered data I have used Ratio analysis, Vertical/Common size analysis,
Horizontal/Trend analysis, Economic value added analysis (EVA), Market value analysis.
Some necessary number of table, chart, and graph are also used to present the report. Ms-
Word, Excel or any required computer programs used to process the data.
1.6 Scope of the report
There is a certain boundary to cover this report. To achieve the objective of the report, i.e. to
get an overall idea about the financial performance of Janata Bank Limited, it is not possible
to cover each and every activity performed in the organization. The report has covered only
the data which are published in the annual reports. Moreover the company itself and financial
institutions have got some confidential information which is not possible to disclose publicly,
so those data and information had to be ignored for this report.
4
1.7 Limitations of the Report
To make a report various aspects and experiences are needed. But I have faced some barriers
for making a complete and perfect report. These barriers or limitations, which hinder my
work, are as follows:
Confidentiality: The banks policy of not disclosing some data and information for obvious
reasons, which would have been very much useful for the report.
Random changing system: As the bank is continuously changing its system is also changing
time to time, it will be difficult to ascertain the true performance of the bank each time.
Extreme workload: Few officers sometime felt disturbed, as they were busy with their job.
Sometime they didnt want to supervise me out of their official work. Sometimes it was
difficult to collect data important files are kept in volt for safety.
Lack of time: Time constraint was one of the major drawbacks in the report. The duration of
the Report was only three months which was very short. So, I could not go in depth analysis.
Other limitation: There was non-availability of some preceding and latest data. As I am a
newcomer, there is a lack of previous experience in this concern. And many practical matters
have been written from my own observation that may vary from person to person.
5
2.1 Background of Janata Bank Limited
Janata Bank Limited is one of the state owned commercial banks in Bangladesh, has an
authorized capital of Tk. 20000 million (approx. US$ 289.85 million), paid up capital of Tk.
5000.00 million, reserve of Tk.8202.00 million and retained surplus Tk. 2737.00 million. The
Bank has a total asset of Tk. 282423.00 million as on 30th November 2008. Immediately
after the emergence of Bangladesh in 1971, the erstwhile United Bank Limited and Union
Bank Limited were renamed as Janata Bank. On 15th November, 2007 the bank has been
Corporatized and renamed as Janata Bank Limited. Janata Bank Limited operates through
860 branches including 4 overseas branches at United Arab Emirates. It is linked with 1202
foreign correspondents all over the world. The Bank employs more than 13(Thirteen)
thousand persons. The mission of the bank is to actively participate in the socio- economic
development of the nation by operating a commercially sound banking organization,
providing credit to viable borrowers, efficiently delivered and competitively priced,
simultaneously protecting depositors funds and providing a satisfactory return on equity to
the owners. The Board of Directors is composed of 13 (Thirteen) members headed by a
Chairman. The Directors are representatives from both public and private sectors. The Bank
is headed by the Chief Executive Officer & Managing Director, who is a reputed banker. The
corporate head office is located at Dhaka with 10 (ten) Divisions comprising of 37 (thirty
seven) Departments. The Company started its banking operation and entitled to carry out the
following types of banking business:
All types of commercial banking activities including Money Market operation:
Investment in Merchant Banking activities.

Investment in Company activities.
Financiers, Promoters, Capitalists etc.
Financial Intermediary Services.
Any related Financial Services
2.2 Vision of Janata Bank Limited
To become the effective largest commercial bank in Bangladesh to support socio- economic
development of the country and to be a leading bank in South Asia.
2.3 Mission of Janata Bank Limited
Janata Bank Limited will be an effective commercial bank by maintaining a stable growth
strategy, delivering high quality financial products, providing excellent customer service
through an experienced management team and ensuring good corporate governance in every
step of banking network.
6
2.4 Corporate Profile
2.5 Core Values of Janata Bank Limited
Professinalism Commitment Diversity
Accountability Transparency Dignity
Intrigity Quality Growth
Fig: Core values of Janata bank limited

2.6 Core strengths
Transparent and Quick Decision Making.

Efficient Team of Performer.
Satisfied Customers.
Internal Control.
Skilled Risk Management.
Diversification.
7
2.7 Core competencies
Knowledge.
Experience & Expertise.
Customer Orientation/ Focus.
Transparency.
Determination.
Zeal for Improvement.
2.8 Objectives of Janata Bank Limited
The objectives for which the bank is established are as follows:
To carry on, transact, undertake and conduct the business of banking in all branches.
To receive, borrow or to raise money on deposit, loan or otherwise upon such terms as
the company may approve.
To carry on the business of discounting and dealing in exchange of specie and
securities and all kinds of mercantile banking.
To provide for safe-deposit vaults and the safe custody of valuables of all kinds.
To carry on business as financiers, promoters, capitalists, financial and monitory
agents, concessionaires and brokers.
To act as agents for sale and purchase of any stock, shares or securities or for any
other momentary or mercantile transaction.
To establish and open offices and branches to carry on all or any of the business
abroad and within the country provided prior permission is obtained from Bangladesh
bank.
To ensure optimum utilization of all available resources.
To remain one of the best banks in Bangladesh in terms of profitability and asset
quality.
2.9 Business Prospects of Janata Bank Limited
Surplus Capital Adequacy after IPO subscription.

Business expansion in capital market.
Gradual expansion of branch network.
Progressive automation of the branches.
Real online banking software will be in function soon.
Expansion of ATM and Credit Card.
Consideration of prime customers.
2.10 International Award of Janata Bank Limited
Recently The Bank has been recognized internationally and domestically for its good
performance.
8
International Award -"World's Best Bank Award-2010 in Bangladesh.
Janata Bank Limited receives "Asian Banking Awards 2005" on Credit Scheme for
Handicapped People.
International Award -The Bank of the Year-2004 in Bangladesh.
2.11 Services of Janata Bank Ltd
Current Services Deposit Services Others
customer Savings A/C DD

Credit Scheme Curent Deposit TT
Secured A/C L/C
Overdraft Short Term PO
Cash Credit Deposit Credit Cards
Curent Deposit Fixed Deposit Online Banking
A/C Received
Deposit Monthly
Services Savings
Scheme
Fig: various services provide by Janata bank limited

2.12 Branches of Janata Bank Limited
Branches No. of Branches

Local Office 1
Corporate-1 Branch 10
Corporate-2 Branch 40
Overseas Branch 04
Grade-1 Branch 204
Grade-2 Branch 205
Grade-3 Branch 291
Grade-4 Branch 104
NRB Branch 01
Total Branches 860
9
2.13 New/ Special Products of Janata Bank Limited
Financing IT Sector.
Financing of Industries.
Ready Cash.
Windows for SMEs.
Loan to Travel Agencies.
Loan to Diagnostic Centers.
NRB Escrow Account.
NRB Gift Cheque.
2.14 Ethical Principles
Bank deals with public money where ethics, integrity and trust are the most essential. Janata
Bank protects and upholds these principle issues in every area of its management activities
and customer services. The basic characteristics of employees code of ethics and business
conduct are as follows:
Ensure customer service with utmost care, respect, dedication, integrity and
unwavering responsibility.
Protect privacy and confidentiality of customers information.
Prevent money laundering and fraud forgery.
Protects and upholds corporate value.
2.15 Strategic objectives of JBL
We Have:
Concern.
Commitment.
Competence.
Our Strengths:
Nationwide networks, 893 branches.

Foreign network, 4 branches and.
1239 foreign corospondence.
State-owned image.
Goodwill.
Received globally recognized awards.
Strong deposit base.
No capital shortfall.
No provision shortfall .
Skilled manpower.
Experienced higher level management.
Newly recruited talents.
10
Friendly board of directors.
Our Brand:
Quality and responsive staff.

Efficient service.
High and sustained growth (depositadvance, import, export, foreign remittance non
interest income and recovery).
Good quality loan.
Low classified loan.
Timely recovery.
Business diversification.
Attract low cost deposit.
Participate in capital market.
Improve agricultural loan(disbursement, recovery etc.).
High impact of CSR.
Aesthetic infrastructure.
We Need:
Sense of belonging (ownership).

Improve service mentality.
Human touch with clients.
Proactive, team spirit.
Loosing branches make profitable.
Chronic weak branches make strengthen.
Managerial efficiency (GIS of good customer/ borrowers; meeting each within 1 km
radius).
Strong cash recovery.
Strategic thinking.
More agricultural loan.
Broadening of deposit base; reaching all.
Automation, on-line banking.
Need based training.
More remittance.
Discipline, chain of command.
Hygienic bank premises.
Avoid intermediary between management and clients.
11
2.16 Organogram of JBL
Board of Director
Managing Director
Deputy Managing Director
General Managers
Deputy General Managers
Senior Principle Officer
Principle Officers
Senior Officers
Officers
Assistant Officer
Management Trainee
Officer
12
2.17 Corporate Governance
Culture
Risk
Corporate Business
Manage Governance Planning
ment
Compli
ance
2.18 Financial highlights of JBL
particulars 2016 2015 2014 2013 2012
13
3.1 Literature Review
Financial performance analysis is the process of determining the operating and financial
characteristics of a firm from accounting and financial statements. The goal of such analysis
is to determine the efficiency and performance of firms management, as reflected in the
financial records and reports.
Finance always being disregarded in financial decision making since it involves investment
and financing in short-term period. Further, also act as a restrain in financial performance,
since it does not contribute to return on equity (Rafuse, 1996). Dilemma in financial
management is to achieve desired tradeoff between liquidity, solvency and profitability
(Lazaridis et al., 2007). Management of working capital in terms of liquidity and profitability
management is essential for sound financial recital as it has a direct impact on profitability of
the company (Rajesh and Ramana Reddy, 2011). The crucial part in managing working
capital is required maintaining its liquidity in day-to-day operation to ensure its smooth
running and meets its obligation (Eljelly, 2004). Ultimate goal of profitability can be
achieved by efficient use of resources. It is concerned with maximization of shareholders or
owners wealth (Panwala, 2009). It can be attained through financial performance analysis.
Note that the terms performance and effectiveness are used interchangeably because
problems related to their definition, measurement and explanation are virtually identical
(March and Sutton 1997). Financial analysis offers a system of appraisal and evaluation of a
firms performance and operations; it is the analysis of the financial statement of an
enterprise. Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationship between the items of the balance
sheet and the profit and loss account (Pandey ,1979). The analysis of financial statement can
be best done by various yardsticks of which, the important is known as ratio or percentage
analysis. Financial Statements (income statement, cash flow statement, owners equity
statement and balance sheet) contain a wealth of information which, if properly analyzed and
interpreted, can provide valuable insights into a firms performance and position.
Performance measurement of public enterprises has been the subject matter of discussion for
planners, administrators, managers, economists and academics since long. But some lack of
clarity about performance and the existence of defensive attitude on the part of those who
have to take responsibility for inefficient operations have the effect of inhibiting both frame
discussion and decisive action in this regard Bunnett(1987). Trade creditors are interested in
the firms ability to meet their claims.The suppliers are concerned with the firms solvency
and survival. They analyze the firms profitability over time. Long term creditors place more
emphasis on the firms solvency and profitability. The investors are most concerned about the
firms earnings.
The concept of financial performance of the banks based on the financial ratio is applied by
different researcher and the following is the summary of past studies and their results about
the performance of the banks:
14
In his study, (Tarawneh, 2006) divided the commercial banks in Oman in cohesive categories
depending on their financial characteristics revealed by financial ratios. Financial ratios are
the simplest tools for evaluating the financial performance of the firm Wen-Cheng LIN ET.
Al (2005). One can employ financial ratios to determine a firms liquidity, profitability,
solvency, and capital structure and assets turnover.
Altman (1968) used financial ratios to predict corporate bankruptcy. He found that the
bankruptcy model has an accuracy rate of 93% and is very successful in predicting failed and
non-failed firms. Ohlson (1980) employed financial ratios to predict a firms crisis. He found
that there are four factors affecting a firms vulnerability. These factors are the firms scale,
financial structure, performance and liquidity.
The operational efficiency and asset management, in adding to the bank size, positively
influenced the financial performance of these banks Khizer et.al. (2011), in his study about
profitability indicators of banks in Pakistan for the period of 2006-2009 find that profitability
is directly and positively affected by operating efficiency, assets management ratios, and size
when using ROA as profitability indicator. The association between profitability and other
indicators is different, when using ROE as profitability indicator. ROE is positively related
with assets management and negative association is finding with size and operating
efficiency. Sidqui and Shoaib, (2011) concluded in their study Measuring performance
through capital structure in Pakistan that size of the bank plays an important role in
determining the profitability of the bank using ROE as profitability measure. The
comparative financial performance of banking sector conducted by using CAMELS rating
system (Nimalathasan, 2008). The performance of Malaysian Islamic bank carried out by
using financial ratios(Samad and Hassan).The south African commercial banks performance
measured by financial ratios analysis (kumbiari and Webb,2010). Performance of selected
Indian commercial banks has done by view growth in asset, profit, revenue, investment and
deposit (Jaladhar, Anchula and Achari, 2011).
15
4.1 Performance
Performance refers to both quantity & quality of work done. The accomplishment of a given
task measured against present standards of accuracy, completeness, cost and speed. In a
contract, performance is deemed to be the fulfillment of an obligation, in a manner that
releases the performer from all liabilities under the contract. Performance measures the total
return of an investment provides over a specific period. It can be positive, representing a gain
in value, or negative representing a loss.
4.2 Financial Performance
Financial Performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used as a general measure
of a firm's overall financial health over a given period of time, and can be used to compare
similar firms across the same industry or to compare industries or sectors in aggregation.
4.3 Financial Performance Analysis
Financial performance analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account. It also helps in short-term and long term forecasting and
growth can be identified with the help of financial performance analysis.
The dictionary meaning of analysis is to resolve or separate a thing in to its element or

components parts for tracing their relation to the things as whole and to each other. The
analysis of financial statement is a process of evaluating the relationship between the
component parts of financial statement to obtain a better understanding of the firms position
and performance. This analysis can be undertaken by management of the firm or by parties
outside the namely, owners, creditors, investors. Standards also require auditors to obtain an
understanding of the measurement and review of the entitys financial performance, including
both internal and external measures. Such measures might include:
Key ratios and operating statistics.

Key performance indicators.
Employee performance measures and incentive compensations plan.
Industry trends.
The use of forecast, budgets, and variance analysis.
Analyst reports and credit rating reports.
4.4 Major Steps of Financial Performance Analysis
Financial performance analysis is something of an art. Experienced managers, investors and

analysts develop a data bank of information over time, and after doing many such analyses,
that they bring to bear every time they review a company.
16
Step 1: Acquire the companys financial statements for several years. As a minimum, get the
following statements, for at least 3 to 5 years.
Statement of Financial Position.

Statement of Comprehensive Income.
Statement of Changes in Owners Equity.
Statement of Cash Flows.
Step 2: Quickly scan all of the statements to look for large movements in specific items from
one year to the next. For example, did revenues have a big jump, or a big fall, from one
particular year to the next? Did total or fixed assets grow or fall? If there is anything that
looks very suspicious, research the information about the company to find out why.
Step 3: Review the notes accompanying the financial statements for additional information
that may be significant to analysis.
Step 4: Examine the Statement of Financial Position. Look for large changes in the overall
components of the company's assets, liabilities or equity.
Step 5: Examine the Statement of Comprehensive Income. Look for trends over time.
Calculate and graph the growth of the following entries over the past several years.
Revenues (sales)
Net income (profit, earnings)
Step 6: Examine the Statement of Changes in Owners Equity. Has the company issued new
shares, or bought some back? Has the retained earnings account been growing or
shrinking? Why? Are there signals about the company's long-term strategy here?
Step 7: Examine the Statement of Cash Flows, which gives information about the cash
inflows and outflows from operations, financing, and investing.
Step 8: Calculate financial ratios in several categories, for each year.
Step 9: Obtain data for the companys key competitors, and data about the industry.
Step 10: Finally, the result obtained by means of application of financial tools is evaluated.
4.5 Financial Statements
Financial Statements refers to formal and original statements prepared by a business concern
to disclose its financial information. According to John.N.Meyer, The financial statement
provides summary of accounts of a business enterprise, the balance sheet reflecting assets,
liabilities and capital as on a certain date and the income statement showing the result of
operation during a certain period. The financial statements are prepared with a view to
depict the financial position of the concern. They are based on the recorded facts and are
17
usually expressed in monetary terms. The financial statement are prepared periodically that is
generally for the accounting period. The term financial statement has been widely used to
represent four statements prepared by accountants at the end of specific period. They are:
Statement of Financial Position.

Statement of Comprehensive Income.
Statement of Changes in Owners Equity.
Statement of Cash Flows.
4.6 Objectives of Financial Performance Analysis and Interpretation
The users of financial statement have definite objectives to analysis and interpret. Therefore;
there are variations in the objectives of interpretation by various classes of people. However,
there are certain specific and common objectives which are listed below:
To interpret the profitability and efficiency of various business activities with

the help of profit and loss account.
To measure managerial efficiency of the firm.
To ascertain earning capacity in future period.
To measure short-term and long -term solvency of the business.
To determine future positional of the concern.
To measure utilization of various assets during the period.
To compare operational efficiency of similar concerns engaged in the same
industry.
4.7 Financial Analysis Tools
Financial analysis tools are one of the most efficient ways that can be used for ensuring good
profit from investments. These financial analysis tools are highly helpful in evaluating the
market and investing in a way so as to maximize the profit from the investments made. These
financial analysis tools are useful for deciphering both internal and external information
related to a specific business organization. The analysis and interpretation of financial
statement is used to determine the financial position and result of operation as well. The
following are the tools that are used for analyzing the financial position of the company:
Horizontal Analysis
Vertical Analysis
Ratio Analysis
Economic value added (EVA) Analysis
Market value analysis
18
4.7.1 Horizontal Analysis:
Horizontal analysis involves calculating the percentage change of the categories of financial
statements over time. For example, one may be interested in the trend of a company's
operating expenses. By examining the percentage change from year one to year two in
operating expenses, he/she can determine whether costs are shrinking or growing. However,
horizontal analysis has its drawbacks. This technique does not take into account the changing
size of v business. Going back to the expense example, a manager may be concerned that the
company's expenses are growing every year, but if the business is growing, there is no cause
for concern.
4.7.2 Vertical Analysis:
Vertical analysis is the process of reporting each item on a set of financial statements as a
percentage of a larger item. On the income statement, items are usually reported as a
percentage of sales, and on the balance sheet items are usually reported as a percentage of
total assets. A single vertical analysis is not very useful to most managers, but using the
results of a vertical analysis to compare ratios across time or to see how a company measures
up to industry benchmarks can help a management team determine areas of strength and
weakness.
4.7.3 Ratio Analysis:
Ratio analysis is a family of techniques that involves computing common ratios of different
balance sheet and income statement categories and comparing these ratios to those of other
companies or widely established benchmarks. Some ratios, such as profit margin or return on
assets, are so common that they are part of the business vernacular. Others, such as days
sales outstanding or collection cycle, may be initially unfamiliar but quite useful. A ratio
exists for nearly every business metric, so learning these tools can be daunting; however, the
ability to precisely gauge performance is useful when investigating specific concerns about a
firm.
4.7.4 Economic value added (Eva) Analysis:

EVA (Economic Value Added) is modern financial measurement tool that determines if a
business is earning more than its true cost of capital (Gabriela et al, 2009). While analyzing
performance of AXIS bank in terms of capital adequacy ratios and correlation analysis is
used (Shrivastava et al, 2011). The analysis includes CAMELS rating and multivariate
regression analysis for comparing financial performance commercial banks (Jha and Hui,
2012). Using data for Taiwan Province of China, Lin, Penm, Garg, and Chang (2005) study
the direct effects of capital regulations and capital requirements.
19
4.7.5 Market Value Analysis:
Market value analysis (MVA) is simply the difference between the current total market value
of a company and the capital contributed by investors. As a wealth metric it measures the
level of value, the bank has accumulated over time.
4.8 Groups of Financial Ratios

Financial ratios can be divided into four basic groups or categories:
i. Liquidity ratios
ii. Activity ratios
iii. Debt ratios
iv. Profitability ratios
Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return.
In the near term, the important categories are liquidity, activity, and profitability; because
these provide the information that is critical to the short fully weather the short run.
4.8.1 Analyzing Liquidity:
The liquidity of a business firm is measured by its ability to satisfy its short term obligations
as they come due. Liquidity refers to the solvency of the firms overall financial position.
Importance of Liquidity Ratios:
1. Cash Flow: A company's cash flow is the money in profits that it is taking in at any one
time. This money is available for immediate spending by the company without any need to go
through a process of liquidation or selling. Any company's cash flow is subject to change as
demand rises and falls as part of the basic economic process. High cash flows allow
businesses to take on greater debt without lowering their liquidity ratios.
2. Assets: Private companies typically have a variety of assets that have different degrees of
liquidity. It is easier, for instance, to sell and make a profit off of land than it is to sell a
department. Assets can be counted as part of a typical liquidity ratio based on what they
would sell for on the immediate common market. Often, assets will be undervalued by the
market at any time, which makes them less certain.
3. Financing: It is a part of the basic functioning of the modern business. Without the ability
to take out debt, even large businesses would find it very difficult to operate. Debt is
necessary not only to finance new projects but often to manage the everyday expenses of a
business. Financing allows businesses to expand while also providing them with flexibility as
regards to shifts in demand. The higher a business' liquidity ratio, the more it can do.
20
4. Controversy: Controversy has followed in the wake of certain financial scandals over how
much liquidity private institutions such as banks should be required to maintain. Certain
major banks failed due to the lack of funds they had available to pay their debts. The failure
of financial institutions threatens not only their investors but the entire economy for which
they form an infrastructure. Various countries around the world have begun to require higher
liquidity in private banking.
The three basic measures of liquidity are:
Net working capital = Current Assets Current Liability

Current ratio = Current Assets / Current Liability
Quick Ratio = Cash + Government Securities + Receivable / Total Current
Liabilities
4.8.1. 1 Net Working Capital:
Net Working Capital, although not actually a ratio is a common measure of a firms overall
liquidity. A measure of liquidity is calculated by subtracting total current liabilities from total
current assets.
Net Working Capital =Total Current Assets Total Current Liabilities.
4.8.1. 2 Current Ratio:
One of the most general and frequently used of these liquidity ratios is the current ratio.
Organizations use current ratio to measure the firms ability to meet short-term obligations. It
shows the banks ability to cover its current liabilities with its current assets. The current ratio
is equal to (current assets) / (current liabilities). Current assets are assets that should be
convertible to cash within a year. Current liabilities are debt obligations that are due within a
year. The current ratio is current assets divided by current liabilities, and measures the
liquidity of a company over a short time period. Even if a company has a great business, no
long-term debt, tons of cash flow, and a great brand, it can still fall into a lot of trouble if it
doesnt keep enough short-term cash available to cover its immediate needs. The higher the
current ratio, the safer and more liquid the company is in terms of short-term needs.
Current Ratio = Current Asset/Current Liabilities

Standard ratio: 2:1
4.8.1.3 Quick Ratio:
The quick ratio is a much more exacting measure than current ratio. This ratio shows a firms
ability to meet current liabilities with its most liquid assets. The quick ratio is equal to
(current assets inventories) / current liabilities. Its the same as the current ratio except that
it doesnt count inventories in the asset category. This means that the quick ratio is a more
conservative estimate of liquidity than the current ratio. The reason inventories are excluded
is because depending on the company and its products, inventories may not be readily
21
convertible into cash. The higher the quick ratio, the safer and more liquid the company is in
terms of short-term needs.
Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Standard ratio: 1:1
4.8.1.4 Operating Cost to Income Ratio:
It measures a particular Banks operating efficiency by measuring the percent of the total
operating income that the Bank spends to operate its daily activities. It is calculated as
follows:
Cost Income Ratio = Total Operating Expenses / Total Operating Income
4.8.2 Analyzing Activity:
Activity ratios measure the speed with which accounts are converted into sale or cash. With
regard to current accounts measures of liquidity are generally inadequate because differences
in the composition of a firms current accounts can significantly affects its true liquidity.
A number of ratios are available for measuring the activity of the important current accounts,
which includes inventory, accounts receivable, and account payable. The activity (efficiency
of utilization) of total assets can also be assessed.
4.8.2.1 Total Asset Turnover:
The total asset turnover indicates the efficiency with which the firm is able to use all its assets
to generate sales.
Total Asset Turnover = Sales/ Total Asset
4.8.2.2 Investment to Deposit Ratio:
Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting
its investment product by measuring the percentage of the total deposit disbursed by the Bank
as long and advance or as investment. The ratio is calculated as follows:
Investment to Deposit Ratio = Total Investments / Total Deposits
4.8.2.3 Inventory Turnover:
A ratio showing how many times a company's inventory is sold and replaced over a period.
Inventory Turnover= Cost of goods sold/ Average Inventory
22
The days in the period can then be divided by the inventory turnover formula to calculate the
days it takes to sell the inventory on hand or "inventory turnover days". This ratio should be
compared against industry averages. A low turnover implies poor sales and, therefore, excess
inventory. A high ratio implies either strong sales or ineffective buying. High inventory
levels are unhealthy because they represent an investment with a rate of return of zero. It also
opens the company up to trouble should prices begin to fall.
4.8.2.4 Average Collection Period:
Average collection period is useful in evaluating credit and collection policies. This ratio also
measures the quality of debtors. It is arrived at by dividing the average daily sales into the
accounts receivable balance: Average Collection Period=Accounts receivable/ (Credit
sales/365)
A short collection period implies prompt payment by debtors. It reduces the chances of bad
debts. Similarly, a longer collection period implies too liberal and inefficient credit collection
performance. It is difficult to provide a standard collection period of debtors.
4.8.2.5 Average Payment Period:
Average payment period ratio gives the average credit period enjoyed from the creditors that
means it represents the number of days by the firm to pay its creditors. A high creditors
turnover ratio or a lower credit period ratio signifies that the creditors are being paid
promptly. This situation enhances the credit worthiness of the company. However a very
favorable ratio to this effect also shows that the business is not taking the full advantage of
credit facilities allowed by the creditors. It can be calculated using the following formula:
Average Payment Period=Accounts payable/ Average purchase per day
4.8.2.6 Fixed Asset Turnover:
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a
company's ability to generate net sales from fixed-asset investments - specifically property,
plant and equipment (Paande) - net of depreciation. A higher fixed-asset turnover ratio shows
that the company has been more effective in using the investment in fixed assets to generate
revenues. The fixed-asset turnover ratio is calculated as:
Fixed Asset Turnover=Gross Turnover/ Net fixed assets
Importance of Activity Ratios:

Credit to Deposit Ratio: A commonly used statistic for assessing a bank's liquidity by
dividing the banks total loans by its total deposits. This number, also known as the LTD ratio,
is expressed as a percentage. If the ratio is too high, it means that banks might not have
23
enough liquidity to cover any unforeseen fund requirements; if the ratio is too low, banks
may not be earning as much as they could be.
Cost Income Ratio: Cost/Income ratio is the ratio between operating expenses and operating
income. It is a measure of how costs are changing compared to income. It is one of the main
key performance indicators of a bank's efficiency: the lower the ratio the more efficient the
bank.
Calculation of Average Collection Period: Also termed as Accounts receivable turnover,

Average Collection Period is used to determine the duration of the average sales that a
particular customer holds. A company can hope for larger investment in assets if the duration
of collection period is longer. To measure the Average Collection period, net sales for each
day or average daily sales should be calculated for a year. Now the average collection period
will be calculated by diving each Average Daily sales into the account receivable.
Definition for Inventory Turnover: Inventory turnover also falls under Activity Ratio
which is used to calculate how many times investments or a firm in inventory turns over
during a particular year. This ratio can be used to calculate the industry average. Companies
prefer to choose High turnover ratios as it requires smaller investments in inventory. A firm
must divide its cost of goods sold by inventory to calculate the inventory turnover.
Definition for Fixed Asset Turnover: This is also termed as Total Asset Turnover which is
basically used to calculate how a companys fixed asset generates sales. Fixed assets can
include buildings and land. An organization will have much investment in fixed sales if they
opt for a low fixed asset turnover. A company should divide its sales by fixed assets in order
to calculate its Fixed Asset Turnover.
Usage in Activity Ratios in Business: Activity ratios help investors and managers to
understand the current performance of their company. It also provides them necessary
comparisons with competitors in the industry to understand where they are standing right
now. Activity Ratio also provides a firm with successful historical trends followed in order to
execute any change for business improvement. Activity Ratios also reduce the job of Fixed
Asset management, which in turn helps the auditors to perform audits faster.
4.8.3 Analyzing Debt:
The debt position indicates the amount of other peoples money being used in attempting to
generate profits. In general, the more debt a firm uses in relation to its total assets, the greater
its financial leverage, a term use to describe the magnification of risk and return introduced
through the use of fixed-cost financing such as debt and preferred stock.
4.8.3.1 Debt Ratio:
The debt ratio measures the proportion of total assets provided by the firms creditors.
Debt Ratio = Total Liabilities / Total Assets
24
4.8.3.2 Equity Capital Ratio:
The ratio shows the position of the Banks owners equity by measuring the portion of total
asset financed by the shareholders invested funds and it is calculated as follows:
Equity Capital Ratio = Total Shareholders Equity / Total Assets
The Ability to Service Debt:
It refers the ability of a firm to meet the contractual payments required on a scheduled basis
over the life of a debt. The firms ability to meet certain fixed charges is measured using
coverage ratios.
4.8.3.3 Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the
company able to pay interest from their income.
Time Interest Earned Ratio=EBIT/ Interest
The Importance of Debt in an Investment:
When it comes to investing in dividend stocks, most people focus on things like growth
levels, valuation (P/E), and stock dividends. A wise investor, however, also considers the
debt levels of the company that he or she invests in. Debt levels in an organization are not
emphasized enough in my opinion so this article shows a few things on the subject.
4.8.4 Analyzing Profitability:

These measures evaluate the banks earnings with respect to a given level of sales, a certain
level of assets, the owners investment, or share value. Without profits, a firm could not
attract outside capital. Moreover, present owners and creditors would become concerned
about the companys future and attempt to recover their funds. Owners, creditors, and
management pay close attention to boosting profits due to the great importance placed on
earnings in the marketplace.
4.8.4.1 Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each
sales dollar. A high operating profit margin is preferred. The operating profit margin is
calculated as follows:
Operating Profit Margin = Operating Profit / Sales
4.8.4.2 Net Profit Margin:
The net profit margin measures the percentage of each sales dollar remaining after all
expenses, including taxes, have deducted. The higher the net profit margin is better. The net
profit margin is calculated as follows:
Net profit Margin = Net profit after Taxes / Sales
25
4.8.4.3 Return on Asset (ROA):
Return on asset (ROA), which is often called the firms return on total assets, measures the
overall effectiveness of management in generating profits with its available assets. The higher
ratio is better. An indicator of how profitable a company is relative to its total assets. ROA
gives an idea as to how efficient management is at using its assets to generate earnings.
Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a
percentage. Sometimes this is referred to as "return on investment".
Return on Asset (ROA) = Net profit after Taxes / Total Assets
4.8.4.4 Return on Equity (ROE):
The Return on Equity (ROE) measures the return earned on the owners (both preferred and
common stockholders) investment. Generally, the higher this return, the better off the owners.
The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates
with the money shareholders have invested.
Return on Equity (ROE) =Net profit after Taxes / Stockholders Equity
4.8.4.5 Price/ Earnings Ratio (P-E ratio):
The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for
a share relative to the income or profit earned by the firm per share.
P/E ratio - Price per share / Earnings per share
4.8.4.6 Earnings per Share (EPS):
Earnings per share (EPS) are the earnings returned on the initial investment amount.
EPS= Net income/No. of shares outstanding
Importance of Profitability Ratio:
Simple to use and understand.

The element of NPV in the venture will indicate which venture is more powerful as
the most profitable venture will have the highest P.I. as the difference or net P.I. will
continue to the companys profitability.
It acknowledges time value for money and at the same time the NPV of a venture at
its present value which is consistent with investment appraisal requirements.
26
Ratio Analysis
5.1. Current Ratio:
The current ratio, one of the most commonly cited financial ratios, measures the firms ability
to meet its short term obligations. The higher the current ratio, the better the liquidity position
of the firm. It is expressed as:
(Current Assets/Current Liabilities)
Year Ratio
2015 1.05
2014 1.01
2014 1.04
2013 1.03
2012 1.07
Table: Current Ratio of JBL
Graphical Presentation:
Current Ratio
1.1
1.05
1.07 1.05
1 1.03 1.04
1.01
0.95
2012 2013 2014 2015 2016
Year
Figure: Current Ratio of JBL
Interpretation:
The higher the current ratio; the more liquid the firm is considered to be. But JBL, Current
ratio is good because it maintains 1.05tk current assets against 1tk current liabilities whereas
normally banking industry maintains 2:1 current ratio. This graph shows that, the current
ratio is increased in year 2012 and decreased the following year.
5.2 Net Working Capital
Net working capital, although not actually a ratio is a common measure of a firms overall
Liquidity a measure of liquidity ratio calculated by.
Net Working capital=Current Asset-Current Liabilities
27
Year Net working Capital
(taka in Millions)
2016 3147.34
2015 2604.31
2014 3365.65
2013 3423.33
2012 3238.93
Table: Net Working Capital of JBL
4000 Net working capital
2000
3238.93 3423.33 3365.65 3147.34
2604.31
0
2012 2013 2014 2015 2016
Years
Figure: Net Working Capital of JBL
Interpretation:
Net working capital of JBL is slightly decreased during the last two years. However, the bank
faced problems to meet up its current obligations. So the Bank should increase its Current
asset.
5.3 Acid Test Ratio:
A stringent indicator that determines whether a firm has enough short-term assets to cover its
immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than
the working capital ratio, primarily because the working capital ratio allows for the inclusion
of inventory assets. It is expressed as:
Acid Test Ratio :( Cash, Short-term Investments & Receivable / Current Liabilities)
Year Ratio
2016 0.34
2015 0.36
2014 0.35
2013 0.29
2012 0.33
Table: Acid Test Ratio of JBL
28
Graphical Presentation
Acid Test Ratio

0.4 Year
0.3
0.2
0.33 0.35 0.36 0.34
0.29
0.1
0
2012 2013 2014 2015 2016
Figure: Acid Test Ratio of JBL
Interpretation:
Companies with ratios of less than 1 cannot pay their current liabilities and should be looked
at with extreme caution. Furthermore, if the acid-test ratio is much lower than the working
capital ratio, it means current assets are highly dependent on inventory
The standard ratio is 1:1. But the Acid test ratio of JBL is poor than standard. To improve this
ratio, the JBL has to increase the cash, short-term investments & receivable and reduce the
current liability.
5.3.1 Analyzing Activity Ratio:
5.3.1.1 Operating Expenses to Revenue (OER):
A ratio that shows the efficiency of a company's management by comparing operating

expense to net sales. Calculated as:
Operating Expenses to Revenue =Total Operating Expenses/ Operating Income

(revenue)
Year Ratio
2016 57.16%
2015 62.94%
2014 57.81%
2013 44.00%
2012 36.04%
Table: Operating Expenses to Revenue
29
Operating expense to revenue

80.00%
62.94%
57.81% 57.16%
60.00%
44.00%
36.04%
40.00%
20.00%
0.00%
2012 2013 2014 2015 2016
Years
Figure: Operating expense to revenue
Interpretation:
We know that this ratio measures the operating efficiency of the bank by measuring the
portion if the total operating costs relative to the total operating income of that bank and the
higher the ratio, the lower the operating efficiency. In 2012 the operating cost of JBL is low
but after that it increasing. So it can be said that the operating efficiency of the JBL is not in
good position compared to the past years that is they are not in good position to minimize
their operating cost.
5.3.1.2 Total Asset Turnover Ratios:
The total asset turnover indicates the efficiency with which the firm is able to use all its assets
to generate sales. Calculated as:
Total Asset Turnover= Operating Income/Total Asset
Year Ratio
2016 4.23%
2015 3.48%
2014 3.95%
2013 5.34%
2012 4.48%
Table: Total Asset Turnover of JBL
30
Total asset turnover
6.00% 5.34%
4.48%
5.00% 4.23%
3.95%
3.48%
4.00%
3.00%
2.00%
1.00%
0.00%
2012 2013 2014 2015 2016
Years
Figure: Total Asset Turnover of JBL
Interpretation:
The banks total asset turnover ratio in 20012 - 2016 that is 4.5 to 4.2 times. We know the
greater the total asset turnover, it is more efficient and 4 to 6 times is standard position but
also depends on industry. JBLs total asset turnover ratio is fluctuating year by year but in
2016 its increasing which is good sign for the bank.
5.3.1.3 Operating Expenses to Assets Ratio:
The expense ratio of an asset fund is the total percentage of fund assets used for
administrative, management, advertising and all other expenses. An expense ratio of 1% per
annum means that each year 1% of the fund's total assets will be used to cover
expenses. Calculated as:
Operating Expense to Assets (OEA) =Total operating Expenses/ Total Assets
Year Ratio
2016 2.42%
2015 2.19%
2014 2.28%
2013 2.35%
2012 1.74%
Table: Operating Expense to Assets of JBL
31
Operating expense to assets ratio

3.00%
2.35% 2.42%
2.50% 2.28% 2.19%
2.00% 1.74%
1.50%
1.00%
0.50%
0.00%
2012 2013 2014 2015 2016
Years
Figure: Operating Expense to Assets of JBL
Interpretation:
Expense ratios are important to consider when choosing a fund, as they can significantly
affect returns. From the chart we see that there is an increase trend of operating expense to
assets ratio. In 2012 the ratio is only 1.74% but It increased to 2.42% in the year 2016. That
means operating expenses are increasing compared to previous years.
5.4.1 Analyzing Debt Ratio:
5.4.1.1 Debt Ratio:
The debt ratio measures the preparation of total assets provided by the firms creditors.
Debt ratio= Total Liabilities/Total Assets
Year Ratio
2016 0.945
2015 0.947
2014 0.936
2013 0.927
2012 0.930
Table: Debt Ratio of JBL
32
Debt ratio
Years
0.95 0.947
0.945
0.945
0.94
0.936
0.935
0.93
0.93 0.927
0.925
0.92
0.915
2012 2013 2014 2015 2016
Figure: Debt Ratio of JBL
Interpretation:
The higher the ratio, the greater risk will be associated with the firms operations. In addition,
high debt to asset ratio indicates low borrowing capacity of a firm, which in turn will lower
the firms financial flexibility. This graph shows that, the debt ratio was increasing year by
year. The Debt ratio measures the proportion of total assets provides by the firms creditors.
Their debt ratio was increasing trend that indicates negative sign.
5.4.1.2 Times Interest Earned Ratio:
The times interest earned ratio, sometimes called the interest coverage ratio, measures the
firms ability to make contractual interest payments.
Times Interest Earned Ratio =Earnings before Interest and Taxes/Interest Expense
Year Ratio
2016 1.16
2015 1.10
2014 1.20
2013 1.37
2012 1.40
Table: Times Interest Earned Ratio of JBL
33
Times interest earned ratio

1.4 1.37
1.4 1.2 1.16
1.1
1.2
0.8
0.6
0.4
0.2
0
2012 2013 2014 2015 2016
Years
Table: Times Interest Earned Ratio of JBL
Interpretation:
Time Interest earned ratio on JBLs is satisfying but in last three years it was slightly
decreasing. So JBL should maintain high ratio by minimizing its operating costs in order to
get adequate earnings to satisfying interest obligations. A high ratio can indicate that a
company has an unwanted lack of debt or is paying down too much debt with earnings that
could be used for other projects. It measures the ability to meet interest payments as they
come due.
5.5.1 Analyzing Profitability Ratio:
5.5.1.1 Investment to Deposit Ratio: It is expressed as:
Investment to Deposit Ratio=Total Investment/Total Deposit
Year Ratio
2016 0.303
2015 0.306
2014 0.328
2013 0.198
2012 0.225
Table: Investment to Deposit Ratio of JBL
34
Investment to deposit ratio

0.35 0.324
0.306 0.303
0.3
0.25 0.225
0.198
0.2
0.15
0.1
0.05
0
2012 2013 2014 2015 2016
Years
Figure: Investment to Deposit Ratio of JBL
Interpretation:
Investment to Deposit Ratio shows that the amount of deposit which is used to as investment.
JBLs investment to deposit ratio is increasing year by year. That means, Bank is properly
utilizing their deposit.
5.5.1.2 Net Profit Margin:
The net profit margin measures the percentage of each sales dollar remaining after all
expenses, including taxes, have deducted. The higher the firms net profit margin is better.
The net profit margin is a commonly cited measure of the companys success with respect to
earnings on sales
Net Profit Margin=Net Profit After Tax/Operating Income
Year Ratio
2016 0.165811
2015 0.147800
2014 0.200434
2013 0.267133
2012 0.352562
Table: Profit Margin Ratio of JBL
35
Profit margin Ratio

0.4
0.352562
0.35
0.3 0.267133
0.25
0.200434
0.2
0.165811
0.1478
0.15
0.1
0.05
0
2012 2013 2014 2015 2016
Years
Figure: Profit Margin Ratio of JBL
Interprtation:
The Bank net profit margin in 2012-2016 that is (0.35-0.16) which indicates that profit
margin is decreasing day by day and its not good situation. JBLs net profit margin is
decreasing which indicates that the banks profit is decreasing. The standard of profit margin
ratio is 0.075, from the above graph we see that the JBL profit margin ratio is higher than the
standard but it is decreasing in nature.
5.5.1.3 Return on Asset (ROA):
The return on asset (ROA), which is often called the firms return on total assets, measures
the overall effectiveness of management in generating profits with its available assets. The
higher the ratio is better
Return on Asset (ROA) =Net Profit after Tax/Total Asset
Year Ratio
2016 0.60%
2015 0.30%
2014 0.75%
2013 1.31%
2012 1.50%
Table: Rate of Return on Assets of JBL
36
Return on assets
1.50%
1.60%
1.31%
1.40%
1.20%
1.00%
0.75%
0.80% 0.60%
0.60%
0.30%
0.40%
0.20%
0.00%
2012 2013 2014 2015 2016
Years
Interpretation:
Return on Asset (ROA) as an indicator of managerial efficiency, indicates the capability of

management in converting the institutions assets into net earnings. The banks return on asset
decreasing from 1.50% to 0.60% in the preceding 5years. So the JBL earn less profit from the
assets. This is not good for the bank. But in 2016 ROA is goes up than in 2015, its a good
condition for the bank. To improve the ratio, the JBL has to increase the net income and
control average total asset.
5.5.1.4 Return on Equity (ROE):

The return on equity measures the return earned on the owners (both preferred and common
stockholders) investment. Generally higher the return indicates the better condition of the
owners.
Return on Equity=Net Profit after Tax/ Shareholders Equity
Year Ratio
2016 10.61%
2015 7.00%
2014 13.14%
2013 18.57%
2012 22.27%
Table: Return on Equity of JBL
37
RETURN ON EQUITY
Years
25.00% 22.27%
20.00% 18.57%
15.00% 13.14%
10.61%
10.00% 7.00%
5.00%
0.00%
2012 2013 2014 2015 2016
Figure: Return on Equity of JBL
Interpretation:
ROE is the measurement of rate of return flowing to the banks shareholders. It measures the
net benefit that the stockholders have received from investing their capital in the bank.
Higher ROE indicates the favorable position that the company is efficient in generating
income on new investment. The banks return on equity deviates from 7% to 22.27%. In the
preceding 5 years and the highest value can be observed in 2012 and the lowest value can be
observed during the 2015, which is not desirable. The positive side is the ratio is increased by
3.61% from the preceding year. So the management should work hard to increase the return
associated with equity.
5.5.1.5 Earnings per Share:
The firms Earning per share (EPS) are generally of interest to present or prospective
stockholders and management. The Earning per share represent the number of dollars earned
on behalf of each outstanding share of common stock. The earnings per share is calculated as
follows
Earnings per Share =Earnings Available for Common stock Holder/No of shares of
Common Stock Outstanding
Year EPS
2016 2.15
2015 1.34
2014 2.75
2013 3.14
2012 3.5
38
Table: EPS of JBL
Earning per share

3.5
3.5 3.14
2.75
3
2.5 2.15
2
1.34
1.5
1
0.5
0
2012 2013 2014 2015 2016
Years
Figure: EPS of the JBL
Interpretation:
EPS represents that it is earned on behalf of each outstanding shares of common stock equity.
EPS is closely watched by investors because it is an important indicator of corporate success.
The graph shows that, in 2012 earnings per share of JBLs are higher than 2013 and 2014.
EPS is decreasing that means banks operating result is also decreasing. But the year 2016
was the desirable year for the JBL. The year 2016 shows the increasing nature of EPS that is
a good sign for the company.
5.5.1.5 Price Earnings Ratio:

The price or earning (P/E) ratio is commonly used to assess the owners appraisal of share
value. The P/E represents the amount investors are willing to pay for each dollar of the firms
earnings. The higher the P/E ratio, the greater the investors confidence in the firms future.
The price Earning (P/E) ratio is calculated as follows:
Price Earnings Ratio=Market Price per Share/Earnings per Share
Year Ratio
2016 8.50
2015 14.55
2014 7.04
2013 5.79
Table: Price Earnings Ratio of JBL
39
Price earnings ratio

16
14.55
14
12
10
8.5
8 7.04
5.79
6
0
2013 2014 2015 2016
Years
Figure: Price Earnings Ratio of JBL
Interpretation:
The graph shows that, the price earnings ratio of JBL was good in year 2015 which represents
the 14.55%. In the last year 2016 price earnings ratio was decreased to only 8.5% which is
not satisfactory. To improve the ratio, the JBL has to increase market price per share and
reduce earnings per share. This graph shows price earnings ratio that is increasing F.Y 2014 to
2015 and slight decreasing from 2015 to 2016.
5.2 Vertical/ Common Size Analysis

Vertical/Common size statements came from the problems in comparing the financial
statements of firms that differ in size. In the balance sheet, for example, the assets as well as
the liabilities and equity are each expressed as a 100% and each item in these categories is
expressed as a percentage of the respective totals. In the common size income statement,
turnover is expressed as 100% and every item in the income statement is expressed as a
percentage of turnover (sales). Here bank has no sales so that I have considered the
operating income as 100%.
40
Balance sheet Common size Balance
As on December 31, 2016 & 2015 sheet
Particulars 2016(In million) 2015(In million) 2016 2015
Property and
Assets
Cash:
Cash in hand 6171.51 5840.11 1.05% 1.14%
Balance with 27346.37 25974.24 4.66% 5.08%
Bangladesh
bank& agent
bank
33517.80 31814.35 5.71% 6.22%
Balance with other

banks and Financial
Institution 13011.20 12776.74 2.22% 2.49%
Money at call and 1528.57 6581.96 0.26% 1.28%

short notice
Investments 193269.67 108342.04 32.97% 21.19%
Loans and Advances 285747.65 305339.58 48.75% 59.73%
Fixed Assets 9724.84 9462.69 1.65% 1.85%

Other Assets 49283.17 36812.05 8.40% 7.20%
Non-banking Assets
Total Property 586082.98 511129.41 100% 100%
and Assets
Liabilities and
shareholders equity
Capital
Borrowing from 8659.23 11310.47 1.47% 2.21%
other banks
Deposit and other 478535.57 409767.01 81.64% 80.16%
Accounts
Other Liabilities 61771.99 72575.25 10.53% 14.19%

Total Liabilities 548966.78 493652.74 92.17% 94.35%
Capital/Shareholders 37116.20 17476.66 6.33% 3.41%
Equity
41
Total liabilities and 586082.98 511129.41 100% 100%
shareholders equity
From the vertical analysis above, we can compare the percentage mark-up of asset items
and how they have been financed. The strategies may include increase/decrease the holding
of certain assets. The analyst may as well observe the trend of the increase in the assets and
liabilities over several years. It can be observed that there is an increase in the holding of the
current assets of the company. The management can seek the reasons of why the holding of
these assets is continuously increasing. Though both the assets and liabilities are increasing
but proportionately liabilities were a little higher than the assets, which may make some
ratio lower. The above analysis also shows that total liabilities has increased so as stock
holders equity , which indicates that JBL has more debt financing than equity.
Profit and Loss Account Common size Profit and

For the year ended December 31, 2016 & 2015 Loss Account
Particulars 2016 2015 2016 2015
Total Operating 20859.03 22016.47 100% 100%
Income
Less: Total 8731.92 7482.67 72% 51.48%
Operating
Expenditure
Profit Before 12127.11 14533.8 28% 48.52%

Provision
Less: Provision 1501.78 27368.70 7.19% (124.31%)
Profit Before Tax 10625.33 (12834.9) 20.81% (75.79%)
Less: Provision for 1073.92 2445.43 5.14% 11.10%
Tax
Net Profit After Tax 9551.41 (15280.33) 15.67% (86.89%)
Add: Retained 1967.20 7.57 9.43% 0.03%
Surplus Brought
Forward
11518.61 (15272.76) 25.10% (86.86)
A second method of common size analysis is a means of comparing figures within a single
P & L. A common size profit and loss statement, for example, compares all components of
the P & L to total operating income. In other words, Total operating income is defined as
100% and all other figures on the statement are expressed as a percentage of that. In this
way, we not only get an automatic indication of approximate profit margin, we also can see
the importance of all of your costs and expenses relative to operating income. Vertical
analysis can also be done on these common size percentages in order to identify trends in
the relative sizes of categories like costs, expenses, or margins. The above analysis shows
that JBL has higher net operating income in 2015 than 2016 and after tax net profit has
increased in 2016 compared to 2015s negative figure. On the other hand they paid higher
42
tax in 2016. In the year 2016 JBL has comparatively higher expenditure, but marginally
lower percentage, which is good sign for the bank.
5.3 Horizontal/ Trend Analysis

It is conducted by setting consecutive balance sheet, income statement or statement of cash
flow side-by-side and reviewing changes in individual categories on a year-to-year or multi
year basis. The most important item revealed by comparative financial statement analysis is
trend.
Percentage change= (recent year-previous year)/previous year
Items (Figure in 2016 % 2015 % 2014
million)
Paid up Capital 19140.00 .74% 11000 0.35% 8125
Shareholders' 37116.60 1.12 17476.66 (.48%) 34069.20
Equity
Total assets 586082.98 .14% 511129.41 .14% 446111.42
Total deposits 478,535.57 .16% 409,767.01 .13% 361702.03

Total loans 285,747.65 (.06%) 305,339.57 0.18% 258202.07
&Advances
Total 193269.67 .78% 108342.04 .16% 92826.25
Investment
Operating 20859.03 (.05%) 22016.47 (.04%) 23084.21
Income
Operating 8731.92 .16% 7482.67 .03% 7224.55
expenditure
Profit Before 12127.11 (.16%) 14533.8 (.02%) 14859.65
Provision
Profit Before 10625.33 (1.82%) (12834.9) (2.47%) 8684.89
Tax
Total Provision 1501.78 (.94%) 27368.70 3.43% 6174.76
Net Profit After 9551.41 (1.62%) (15280.33) (4.62%) 4214.53
Tax
A comparison of statements over several years reveals direction, speed and extent of a
trend(s). The horizontal financial statements analysis is done by restating amount of each
item or group of items as a percentage. Such percentages are calculated by selecting a base
year and assign a weight of 100 to the amount of each item in the base year statement.
Thereafter, the amounts of similar items or groups of items in prior or subsequent financial
statements are expressed as a percentage of the base year amount. The resulting figures are
called index numbers or trend ratios. The above analysis shows that JBL performance trend
is quite better in 2016. Their capital was higher in 2016 as well as stockholders equity has
also increased compared to 2015.
43
5.4 Eva Analysis
Statement of Value Added and Distribution Analysis of it:
This shows that how the wealth is distributed among the stakeholders of JBL as well as how
JBL has generated wealth by providing banking services, by taking into account the amount
retained and re-invested for replacement and improvement of assets operations consequently.
The comparative presentation of value added statement of the bank for the year 2016 and
2015 is illustrated below:
Value added statement
Particulars 2016 2015

(In million) (In million)
Income from banking 55,071 49,516
services
Less: Cost of services (36,455) (29,334)
Value added from 18,616 20,182

banking services
Add: Non-banking
income
Less: Provisions made (1,502) (27,369)
for the year
Total Value Added 17,114 (7,187)
Distribution of Value
Addition:
To employees
(Salary, allowances 6,104 (7,187)
and others)
To government 1,074 5,320
(Income Tax)
To statutory reserve 1,967 2,445
To expansion & growth

i) Depreciation 385 328
ii) Retained Profit 7,584 (15,288)
Total distribution 17,114 (7,187)
44
Distribution of value addition in 2016
36%
44%
6%
12%
2%
Salaries allowance and others Income tax Statutory reserve Depreciation Retained profit
Fig: Distribution of value addition in 2016
Economic Value Added Analysis:
Economic value added (EVA) is a performance tool developed to measure the true economic
profit produced by a company. It also frequently refers to as "economic profit", and provides
a measurement of a Bank's economic success (or failure) over period of time. Such a metric is
useful for shareholders who wish to determine how well the bank has produced value forts
investors, and it can be compared against the Banks peers for a quick analysis of how well
the bank is operating.
Economic Value Added Statement
Particulars 2016 2015 2014

Shareholders Equity 37,116.20 17,476.66 34,069.20
Add: Cumulative provision
for loans, investment and off-
balance sheet exposures 23,539.82 35,260.09 12,797.45
Total Invested Fund 60,656.02 52,736.75 46,866.65

Average shareholders equity 25,121.93 32,745.73 25,368.09
Earnings :
Profit after tax 9,551.39 (15,280,34) 4,444.91
Add: Provision for loans and
others during the year 1,501.77 27,368,70 5,846.65
Less: Written-off loan
recovered during the year (42.62) (883.10) (918.77)
45
Earning for the year : 11,010,54 11,205.26 9,372.79
Average cost of equity

(based on weighted average
rate of 10 years treasury bond
issued by Bangladesh 13.00% 12.75%
14.00%
Government + 2% risk
premium)
Cost of average equity 3,265.85 4,584.40 3234.43
Economic value added 7,744.69 6,620.86 6,138.36
Growth over last year 16.97% 7.29% 5.21%
Economic value added

(In million)
8000
7000
6000
5000
4000 7745
6138 6621
3000
2000
1000
0
2014 2015 2016
Fig: Economic Value Added
5.5 Market Value Analysis

Market value added (MVA) is simply the difference between the current total market value of
a company and the capital contributed by investors. As a wealth metric it measures the level
of value, the bank has accumulated over time. The formula used to find market value added
is:
Market Value Added = Market Value - Capital Invested
Since JBL is not enlisted in share market, so it is not possible to calculate MVA in a regular
method.
46
Calculation of Market Value Added:
Particulars Number of share Value per share Amount

(Tk.) (BDT in million)
Intensive value per 1,91,400,000 193.92 37,116,202,498
share
Book value 1,91,400,000 100 19,140,000,000
Market value added 1,91,400,000 93.92 17,976,202,498
5.6 SWOT Analysis

5.6.1 Introduction of SWOT Analysis:
SWOT Analysis is an important tool for evaluating the companys Strengths, Weaknesses,
Opportunities and Threats. It helps the organization to identify how to evaluate its
performance and can scan the macro environment, which is turn would help the organization
to navigate in the Turbulence Ocean of competition. SWOT analysis is commonly used in
marketing and business in general as a method of identifying opposition for a new venture or
strategy. Short for Strengths, Weaknesses, Opportunities and Threats, this allows
professionals to identify all of the positive and negative elements that may affect any new
proposed actions. SWOT analysis of Janata Bank Ltd is given below:
47
5.6.2 Strengths:
Large customer base.

Strong capital and asset quality.
The bank is financially safe.
Community involvement.
Speedy foreign remittance payment system with Western Union Money Transfer.
The Image/Goodwill of the bank is very good.
The bank has huge amount of deposit and market potentiality.
Regulatory performance is strong and positive.
5.6.3 Weaknesses:
Lack of technological resources such as computerized banking as well as Internet

banking.
Because of manual service, it is more costly and time consuming.
Lack of promotional activities.
Poor information based website.
There is no specific training institute for JBL employees.
The bank has more non-performing assets.
Incentive system is very weak than private bank.
Credit providing procedures are very lengthy. So most of the people fell boring to
take loan.
5.6.4 Opportunities:
Opportunity to increase retail banking due to available customer.

Government has taken some steps against illegal remittances.
The bank has many branches in the local areas of the country. So it can easily expand
its activities
It has a good government patronization. So it is trustworthy to the people.
Janata Bank can attract the people by offering new schemes of deposits to the local
area.
Government has banned some Jatiya Sanchoy Patras.
5.6.5 Threats:
Loan defaulter.
Political instability of the country.
The continuing increase in non-bank competitors offering similar services.
A large number of private banks are increasing in Bangladesh day by day by taking
huge capital and skilled human resources.
Private Banks provide handsome salary to the employees.
48
Government facilities may be insufficient when the economic condition of the country
becomes unfavorable.
Private Banks provide loan very quickly to the customers but JBL takes long time to
do it. But at present, most of the people are very punctual.
49
6.1 Findings
Every study belongs some specific findings, my report is not exception to this. Throughout
my internship period I had an opportunity to observe some unnoticed things of Janata Bank
Limited (JBL). Those are given below:
The Liquidity Condition of Janata Bank Limited is quite Satisfactory. Its Liquidity
Ratios are around its standard level and it has amount of loans as compared to total
assets is average which resulted in an average risk.
The banks ROA has increased to 0.60% in 2013 than the year 2015 which is within
moderate satisfactory level because it was much better in the year 2012 and 2013.
The banks return on equity is in decreasing trend. In the previous year 2012 and 2013
the ratio was very satisfactory. It decreased in 2015 but in 2016 it increased to
10.61%.
Its operating expenses have increased to 8731.92 million from 7482.67 million in
2013 due to increase of branches and employees. And for this its net interest margin,
net operating margin are also decreasing.
The debt ratio has increased year by year. The Debt ratio measures, the proportion of
total assets provides by the firms creditors. Their debt ratio was increasing to 0.945
in 2013 that indicates negative sign for the bank.
EPS is closely watched by investors because it is an important indicator of corporate

success. Analysis shows that, in 2012 earnings per share of JBLs were higher than
2014 and 2015. Net profit margin decreasing that means banks operating result is
decreasing. The year 2016 shows that EPS increased to 2.15 that is a good sign for the
company.
The banks earning assets to total assets are quite satisfactory and its fixed assets
turnover is 4.23% in 2013 which indicates a good asset management of JBL.
From the vertical analysis we see that both the assets and liabilities have increased to
586082.98 million in 2016 but proportionately liabilities were a little higher than the
assets, which may make some ratio lower. The analysis also shows that total liabilities
and stock holders equity have increased to 548966.78 million and 37116.60 million
which indicates that JBL has more debt financing than equity. Profit and loss account
shows that JBL After tax net profit has increased to 9551.41 million in 2013 by
recovering the negative income of 2012. On the other hand they paid higher tax in
2013. In the year 2013 JBL has comparatively higher expenditure which is 8731.92
million, but ultimately it reaches its positive income figure.
50
The horizontal analysis shows that JBL performance trend is quite better in 2013.
Their capital and stockholders equity has increased to 19140 million and 37116.60
million in 2013.
Economic value added (EVA) analysis confirm us the sound operation of Janata bank
limited as its economic profit is increasing throughout last three years from 6138.36
million to 7744.69 million in 2013 which is very satisfactory for any bank.
The market value analysis shows that the banks market performance is increasing
which is indicated by increasing market value per share of Tk 193.92 from Tk 100.
Overall the financial position of JBL is quite satisfactory compare to other

government commercial bank. Despite of severe unfavorable economic condition of
last few years, JBL achieved worthy performance in all core areas of banking
operation.
51
6.2 Recommendations
This report is prepared on the basis of financial performance analysis. The report has
attempted to give details of financial performance. In preparing the report it is understood
that financial performance is not a simple matter, rather it is the parents of all analysis of a
bank. During my internship period it has become easy to understand each and every part of
this section.
Nevertheless it will again recommend some issues that will be useful for the operation of
financial performance.
Operational efficiency should be increased by reducing cost and wastage and

improving operating and management performance. Supply of working capital should
be adequate.
Changing in deposit showing lower trend it should be taken under consideration.
To concentrate more to increase return on asset and return on equity ratios by
ensuring maximum utilization of its assets.
To ensure the continuous upward movement of net interest income by raising
efficiency and proper utilization of deposit.
In the branch, most of the employees are working so many extra times, so
management should provide some extra incentives to motivate the employee.
The training evaluation process and form is to be more modernized.
Number of branches can be increased to create employment opportunity.
The Banks should regularly make use of ratio analysis and measure should be taken to
improve undesirable ratios.
Qualified, trained and experienced management personnel should be appointed.
Government regulations should be flexible and policy should be realistic.
Liquidity position of the Bank should be improved by reducing current liabilities.
A reasonable credit policy should be implemented, so that the main portion of profit
does not spend in payment of fixed charges.
Accountability and motivation for achievement of performance should be fixed up.
52
6.3 Conclusion
Janata Bank Limited (JBL), setting new standards in the banking arena in the time of
turbulent economic conditions. As part of the long-term financial reform and modernization
plan of the government, the bank had been converted into a public limited company. JBL
helps to mobilize the resources to stay strong in the key areas of operation. In the areas of
treasury operation, JBL remains the key player in the countrys foreign exchange and money
market enhancing profitability through careful pricing and assessment of risk and return on
investment, the treasury dealing is being strengthened to facilitate transactions requiring more
sophisticated products and services for larger institutional and corporate clients. Though it
has a wide range of network and confidence from the customers but it has some problems
those problems reduce it income. The authority is not that flexible and it takes time to make
decision.
Janata Bank Limited always tried its level best to perform financially well. Their Financial
Performance against Banking Industry is quite satisfactory. In spite of trying to do well in
some aspects Janata Bank Limited faced some financial problems from time to time. Some of
the problems were decreasing trend of profitability and solvency, shortage of employees,
scarcity of modern technological facilities etc. These problems arouse time to time due to
economic slowdown, interest rate fluctuation, emerging capital market, inflation in the money
market and so on. Fighting with all these problems and competing with other banks every
moment the bank is trying to do better to best. If this thing continues we hope that Janata
Bank Limited will develop even more in the future.
From the practical point of view I can declare boldly that I really have enjoyed my Internship
at this bank from the very first day. Moreover, this internship program that is mandatory for
my B.B.A program obviously has helped my farther thinking about my career. I have tried
my soul to incorporate the research report with necessary relevant information.
53
References
Annual Reports & Articles:

1. Annual reports of Janata Bank Limited (2012-2016).
2. Annual Reports of Bangladesh Bank, 2015.
3. A.H.M. Bunnet. (1987). Performance Evaluation of Public Enterprises in Bangladesh,
Journal of BusinessAdministration, Vol.13, No.1, p. 1
4. Circulars issued by the Head Office of the Janata Bank Ltd.
5. Different types of Brochures of JBL
6. I.M. Pandey. (1979). Financial Management, Vikas Publishing House Pvt. Ltd, New Delhi,
pp. 109-116.
7. Shrivastava U,Pandey B.B,Wadhwa D,S (2011):Evaluating the performance of Axis Bank in
terms of Capital Adequacy using financial indicators ;International Journal of Management
& Business Studies,Vol.1,Issue.3.
Books:
1. C.R.Kothari (2011) Research Methodology 2nd edition fair corporation, Bangsladesh
2. Jerry j. Weygandt, Donald E Kieso & Warfield Kimmel, (2005), Accounting Principles, 8 th
edition, pp.781-798.
3. Lawrence J. Gitman (2009-2010) Principles of Managerial Finance, 12th edition, pp.58-71.
4. Khan, A. R. Bank Management
5. Reading Materials on Theory & Practice of Banking (B- 101), Bangladesh Institute of Bank
Management (BIBM)
6. Zikmund, William G (1997) Research Management 16th edition
Websites:
1. http://bangladesh-bank.org
2. www.janatabank-bd.com
3. www.en.wikipedia.com
4. www.investopedia.com
54

Performance Appraisal

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Performance Appraisal

Uploaded by

Copyright:

Available Formats

1.

1.2 Origin of the Report

1.3 Rationale of the Report

1.4 Objectives of the Report

1.4.1 Broad Objectives:

1.4.2 Specific Objectives:

To understand the theoretical aspect of financial performance.

Finally, to make some recommendations and suitable conclusion regarding financial

1.5 Methodology of the Report

1.5.2 Research type:

1.5.3 Choice of the Year:

1.5.4 Method of Data Collection:

Face to face conversation with the clients.

Annual Report of Janata Bank Limited (2012-2016).

1.6 Scope of the report

All types of commercial banking activities including Money Market operation:

Investment in Merchant Banking activities.

2.2 Vision of Janata Bank Limited

2.3 Mission of Janata Bank Limited

2.5 Core Values of Janata Bank Limited

Professinalism Commitment Diversity

Accountability Transparency Dignity

Intrigity Quality Growth

Fig: Core values of Janata bank limited

Transparent and Quick Decision Making.

2.8 Objectives of Janata Bank Limited

The objectives for which the bank is established are as follows:

2.9 Business Prospects of Janata Bank Limited

Surplus Capital Adequacy after IPO subscription.

2.10 International Award of Janata Bank Limited

2.11 Services of Janata Bank Ltd

Current Services Deposit Services Others

customer Savings A/C DD

Fig: various services provide by Janata bank limited

Branches No. of Branches

2.14 Ethical Principles

2.15 Strategic objectives of JBL

Nationwide networks, 893 branches.

Quality and responsive staff.

Sense of belonging (ownership).

Deputy Managing Director

Deputy General Managers

Senior Principle Officer

2.18 Financial highlights of JBL

particulars 2016 2015 2014 2013 2012

4.2 Financial Performance

4.3 Financial Performance Analysis

The dictionary meaning of analysis is to resolve or separate a thing in to its element or

Key ratios and operating statistics.

4.4 Major Steps of Financial Performance Analysis

Financial performance analysis is something of an art. Experienced managers, investors and

Statement of Financial Position.

Step 8: Calculate financial ratios in several categories, for each year.

4.5 Financial Statements

Statement of Financial Position.

4.6 Objectives of Financial Performance Analysis and Interpretation

To interpret the profitability and efficiency of various business activities with

4.7 Financial Analysis Tools

4.7.2 Vertical Analysis:

4.7.3 Ratio Analysis:

4.7.4 Economic value added (Eva) Analysis:

4.8 Groups of Financial Ratios

4.8.1 Analyzing Liquidity: