2.

Gross Profit Margin Ratio:

“This ratio shows the profit margin in 2sales/ revenue”.

This is calculated as.

Gross profit/ interest earnTable 2

Year 2003 2004 2005 2006 2007 2008 2009

Gross profit margin% 24.8 27.7 28.9 29.59 39.67 46.6 51.9

Graph2

Gross profit margin%

60
Ratio Gross profit
40 Margin%

20
0
2003 2005 2007 2009
Year

G. profit margin relates profit of the organization to its sales (interest earned in case of
Bank).

From calculation it is very much clear that the gross profit margin ration have upward
trend which shows that how much they using their deposits to earn interest. This show the
profit of the firm relative to its revenue. It is a measure of the efficiency of the firm’s
operations too. As it is clear that the ratio gong high this is the indication of good
performance.
1. Net Profit Margin:
This ratio measure the firm’s profitability of sales/ interest earned after taking account of
all expenses and income taxes.

This ratio can be calculated as:

Net profit margin ration = Net Profit after taxes / interest earned

Table3

Year 2003 2004 2005 2006 2007 2008 2009

Net profit Margin

% 0.2 1.6 1.7 1.55 3.67 3.18 21.6

Graph3

Net profit Margin %

30
ratio

20 Net profit
10 Margin %
0
03

05

07

09
20

20

20

20

year

Explanation: from the calculation and graph it is very much clear that the performance of
NBP is very good. And the trend is upward. It tells us a firm’s net income per rupee of
revenue. As the trend is upward it shows the high profits in revenue per rupee in case of
NBP. It is because of high advances the NBP has given to the people.
4. Return on Equity:

Dividing profit after taxation by share holder’s equity. ROE compares net profit after
taxes to the Share holder’s Equity.

This ratio is calculated as:

ROE=Profit after taxes/Share holder’s Equity

Table4

Year 2003 2004 2005 2006 2007 2008 2009

Return on Equity 0.67 5.3 0.2 2.7 6.55 9.4 23.1

Graph4
Ratio

Return on Equity

30
20
Return on Equity
10
0
03

05

07

09
20

20

20

20

Year

Explanation: from the calculation it is clear that the ROE Ratio have an upward trend of
NBP. It is because of high net profit they have earned. It tells us the earning power on the
shareholder’s investments. It is because of high investments by NBP and effective
expense management.
5. Return On Assets:

This ratio shows the efficiency of organization that how efficiently utilizes their assets.
This ratio relates profits to assets.

It is calculated as:

Profit after Tax/Total Assets

Table5

Year 2003 2004 2005 2006 2007 2008 2009

Return on assets 0.01 0.16 0.008 0.124 0.225 0.52 0.9

Graph5

Return on assets
1

Ratio
Return on
0.5 Assets

0
2003 2005 2007 2009
Year

From calculation it is clear that this ration of NBP is going high and high. It shows that
NBP using it’s assets very efficiently. That is why they are earning very high profits. This

shows that how efficiently they investing the assets that’s why they are earning high
profits.
6.Investment deposit Ratio:
This ratio shows the comparison of investments and deposits. This is calculated as.

Investment deposit Ratio=Investment/deposits

Table6

Year 2003 2004 2005 2006 2007 2008 2009

Investment Deposit ratio 42.9 37.7 31.03 22.94 20.54 39.66 42.01

Graph6

Investment Deposit ratio

50
40
Ratio 30
20 Investment
10
0 Deposit ratio
2002 2005 2009
Year

Explanation: From above table and graph it is very much clear that NBP are using their
deposit very efficiently. And earning high profits. The ratio has an upward trend, which
shows the performance of NBP is very good. Now it is the retraction from top
management to invest 30% of its deposits. This may reduce its profits. But can be fruitful
in long term.
 7. Debit to Equity Ratio:

This ration shows the amount contributed by creditors and shareholders. It shows to what
extent the firm is using borrowed money. It is computed simply dividing the total debt of
the fire by its shareholders equity.

This calculated as.

Total debt/shareholder’s equity

Table7

Year 2003 2004 2005 2006 2007 2008 2009

Debt to equity ratio 32.42 31.4 30.4 20.9 22.7 28.6 24.5

Graph7

Debt to equity ratio

40
Ratio
Debt to equity
20 Ratio

0
2003 2005 2007 2009
Year

From the table and graph it is clear that this ratio is decreasing which show the high
efficiency of NBP. In 2002 it was high but in 2003 it decreases to 24.5 from 28.6 which
is a good sign. Here the creditors are interested in low ratio. The lower the ratio the high
the level of the fire’s financing that is being provided by the shareholders.
8 Debt to assets ratio:
This ratio shows that to which extent the organization assets are financed by debit. It is
calculated as.

Total debt/total asset

Table1

Year 2003 2004 2005 2006 2007 2008 2009

Debt to asset
ratio 0.94 0.944 0.957 0.954 0.92 0.954 0.961

Graph8

Debt ratio

0.98
0.96
Ratio 0.94
0.92
0.9 Debt ratio
0.88
2003 2005 2007 2009
Year

This ration is directly related to risk high ratio means high risk and low ratio means low
risk. From calculation it is clear that the ratio is decreasing which show low risk. This
ratio serves the similar purpose to the debt to equity ratio. This ratio is high because of
more deposits in the bank, and deposits are the liability of customer on bank
9 Advances deposit Ratio:
This ratio show that how much efficiently the bank advances the deposits of their
customer to borrower.

It is calculated as.

Advances deposit ratio = Advances/ deposit

Table9

Year 2003 2004 2005 2006 2007 2008 2009

Advances deposits
ratio 0.414 0.399 0.416 0.443 0.487 0.387 0.406

Graph9

Advances Deposits ratio

0.5
0.4
Ratio 0.3
0.2 Advances
0.1
0 Deposits ratio
2003 2005 2009
Year

From above table and graph it is clear that the ratio is going high. Which means the
efficiency on NBP is good and they use their deposits efficiently in advancing to
borrowers. Here high ratio is required. The next side of the picture is that the people will
think that is risky to deposit the money in the bank.
10. Assets Turnover Ratio:

The relationship of net sales /revenue to total assets is known as the total asset turnover
ratio. It is calculated as.

Total revenue / total assets

Table10

Year 2003 2004 2005 2006 2007 2008 2009

Assets turnover ratio 0.099 0.097 0.093 0.079 0.075 0.079 1.07

Graph10

Assets turnover ratio

1.5
1
Ratio
Assets turnover
0.5 Ratio
0
2003 2005 2007 2009
Year

This ratio show the relation ship b/w face price Explanation: This ratio shows us the
relative efficiency with which a firm utilizes its total assets to generate revenue. We can
see that the ratio is going high and which is a good sign and shows that NBP is utilizing
its assets efficiently.
11. Price to earning Ratio:

per share and earning per share. This ratio is calculated as:

Price to earning ratio= face price of share/earning per share

Table11

Year 2003 2004 2005 2006 2007 2008 2009

Price to earning
Ratio 2.4 2.7 47.62 3.17 3.25 1.6 0.97

Graph11

Price to earning Ratio

60
Ratio

40
Price to earning
20 Ratio

0
2003 2005 2007 2009
Year

As from the above calculations it is clear that the ratio decreased tremendously in 2003, it
is because of the reason that earning per share increased resulting in decreasing price to
earning ratio.

From calculation it is clear that it have a downward slope. It is b/c of increase in earning
per share.
12 Dividend yield:
Anticipated annual dividend divided by the market price of the stock.

It is calculated as.

Dividend yield =Total dividend/ market price

Table12

Year 2003 2004 2005 2006 2007 2008 2009

Dividend
Yield 0.2 0.1 2.3 3.32 1.63 2.45 0.23

Graph12

Dividend Yield

4
3
ratio 2
1 Dividend Yield
0
1997 2000 2003
year

Year 2000 was best as far as dividend yield is concerned; it was mainly due to the
decreased amount of number of shares outstanding. In year 2001 increase in outstanding
shares decreased dividend yield, but due to increase in total dividend in 2002 it has
recovered to 2.45.

From the above table it is clear that the dividend is increasing but in 2003 it is low. It is
because of high market price and low dividend.
 Banks Special Ratios
Bank ratio analysis is little bit different from other organizations and if we want to see the
real picture of a bank we have to focus on given special ratios.
• Earning assets to total assets
• Return on earning assets
• Net margin to earning assets
• Loan loss coverage ratio
• Equity to total assets
• Deposit time equity
• Loan to deposit ratio
1. Earning Asset to Total Assets

Earning Assets to Total Assets

86.40%

86.30%

86.20% 86.40%

86.10%
86.10%
86.00%

85.90%
2008 2009

…: Interpretation:
The efficiency of the banking firm is measured by its ability to utilize its assets in a
manner that they could be profitable for the firm. Bank earning assets are increasing as
compare to last year but it is just a little bit increase. Advances of bank are increasing and
investment as compare to 2005 is also increased.
Lending to financial institutions is also very well. Balance with other banks is not de