FINANCIAL RATIOS

ANALYSIS
What is Ratio Analysis?

 Ratio analysis involves the comparison of financial data to gain insights into
business performance.
Ratio Analysis Helps Answer Questions
Such As..
 Why is one business more profitable than another?
 Is a business able to stay solvent?
 How effectively is a business using its assets?
 What returns are being earned in investment in a business?
Where Does the Information for Ratio
Analysis Come From?
Income Statement Balance Sheet
Revenues  Current Assets
Cost of Sales  Current Liabilities
Gross Profit  Inventories
Operating Profit  Long-term liabilities
Net Profit  Capital & reserves
Financial Performance

 Preceding couple of ages were not pleasing for the NBFC segment mainly for
the investment banks due to hostile market and financial circumstances,
political uncertainty and overall law and order condition in the state.
Previously, the security and law & order matters were also aching Dawood
Investment bank salvage drive from lease/ loan portfolio, but a progressive
change in law & order condition is predictable to reap profits in forthcoming
years.
Cont…

 Regardless of these socio-political challenges since 2008, the company is

creating progress in the true way to keep FDIB floating. Therefore, the
company has been capable to accomplish its business activities only through
its internal resources during all these 5-10 years without any external
economic support or a bail-out package, which really is a big accomplishment
on its own account.
Cont…

2018 2014
Rupess Rupees
Lease and financing (loss)/ 121,149,441 (32,928,227)
income
Return on deposits and 13,153,459 14,963,879
investments
Other gain/ (loss) 688,682 8,738,031
Total loss/ income 134,991,582 (9,226,317)
Administrative and (37,462,739) 66,022,591
operating expenses
Finance cost (3,347) 49,475,853
Total expenditure 97,525,496 115,498,444
Share of (loss)/ profit of 5,949,473 (16,183,968)
associates
(loss) before taxation 103,474,969 (140,908,729)
taxation (1,849,1460 (36,326)
(Loss) / profit after tax 101,625,823 (140,945,055)
(Loss) / Earnings per share - 0.68 (2.71)
Basic
(Loss) / Earnings per share - 0.68 (0.97)
diluted
STATEMENT OF FINANCIAL POSITION

ASSETS 2018 2014

Rupees Rupees
Non-current Assets
Property and equipment 338,835 5,524,976
Intangible Assets 883,528 -
Investment properties 62,805,000 71,525,000
Net investment in finance lease 17,389,608 440,602
Long term investments 151,914,281 188,083,010
Long term finances - 331,867
Long term deposits 2,500,000 3,704,000
Deferred tax asset-net 397,338,572 198,893,526
633,169,824 468,502,981
Current Assets
Current & overdue portion of non-current assets 198,784,579 261,604,026
Short term investments 19,341,003 57,799,032
Placement and finances 39,025,413 68,255,109
Assets classified as held for sale - 95,108,166
Investment held with Nazir SHC 42,377,778 -
Advance against lease commitments - -
Loans and advances 1,320,036 25,430,782
Tax refund due from government - -
Deposits and Prepayments 26,673 -
Mark-up accrued 46,856 212,033
Other receivables 6,000,000 -
Cash and bank balances 90,515,101 25,979,252
397,437,439 534,388,400
1,030,607,263 1,002,891,3
81
EQUITY AND LIABILITIES
Share Capital Reserves
Ordinary shares 1,483,900,230 626,492,900
Preference shares - 715,833,540
1,342,326,4
40
Capital reserves 455,425,501 333,744,789
Accumulated loss (1,436,744,76 (1,613,488,4
5) 45)
502,580,966 62,582,784
Share of unrealized gain on remeasurement of 6,994,953 650,190
investments in associates
Unrealized loss on remeasurement of available for (11,596,693) (7,632,669)
sale investments
497,979,226 55,600,305
Non-Current Liabilities
Long term loans 59,140,000 -
Long term deposits 10,000,000 18,905
69,140,000 18,905
Current Liabilities
Current and overdue portion of long term liabilities 360,991,536 538,510,565
Mark-up accrued 33,028,644 108,233,414
Short term borrowings 56,266,346 81,418,223
Certificates of investment - 88,500,000
Accrued and other liabilities 5,349,014 129,807,951
Taxation 7,852,497 802,018
Contingencies and commitments 463,488,037 947,272,171
1,030,607,263 1,002,891,3
81
Financial Ratios

 Liquidity ratios
 Profitability ratios
 Leverage ratios
Liquidity ratios

 Liquidity ratios show how easily a company can pay its debts

 Current Ratio= Current assets

Current liabilities
 Higher = less risk = better
Profitability Ratios

 Profitability ratios can tell us how good a company is at making money.

 Profit margin = Profit
sales
Higher = better
Leverage Ratios

 These can tell us how much debt the company is using to make the company
run and stay alive.
 Debt ratio = Asset – Equity
Assets
 This tells us how much % of a company’s assets are paid for by debt.
Ratios Includes

 Financial Ratio Analysis of Dawood Investment Bank including the following

ratios:
 Total Assets Turnover
 ROA
 ROE
 Current ratio
 Debt to equity
 Debt to asset
 EPS etc.
Total Asset Turnover

 TATO (In times) = 0.0003 (2018)

= 0.07 (2014)
 Analysis:
This ratio is used to measure the efficiency of a firm in utilizing its assets to generate
sales
 Position:
weak
Current Ratio

 Latest ratio (2018) = 0.86

Compare with (2014) = 0.56
 Analysis:
This ratio directly measures the ability of the company to pay back short-term debts
and payables with its liquid assets
 Position:
Strong
Return on Asset

 ROA % (2018) = 9.73

 (2014) = 4.34
 Analysis:
This ratio measures how effectively a company can earn a return on its investment in
assets.
 Position:
Strong
Return on Equity

 ROE % (2018) = 22.40

 (2014) = 23.32
 Analysis:
ROE most relevant ratio in context of investment bank as it measures the efficiency of
a firm to use the money from shareholders to generate profits.
 Position:
Weak
Earnings per Share

 EPS (2018) = 0.69

(2014) = 0.340
 Analysis:
Higher EPS means higher profitability of company as they have more profit to give to
their shareholders.
 Position:
Strong
Debt to Equity Ratio

 Debt to equity (2018) = 1.0695

(2014) = 17.037
 Analysis:
Although it has decreased but its higher value is not a problem as highly leveraged
investment firm can also perform efficiently until it has stable cash flows.
 Position:
Getting better
Debt to Asset Ratio

 Debt to asset (2018) = 0.517

(2014) = 0.945

 Analysis:
This ratio is used to evaluate the risk associated to the investment in a company a
higher value shows the higher risk vice versa. lower values show the risk level
decreased in investing Dawood.
 Position:
Improving
Market Value Per Share

 MVPS (2018) = 3.62

(2014) = 1.82
 Analysis:
Increasing market value per share shows the increased market worth
of the company.
 Position:
Improving
CONCLUSION AND RECOMMENDATIONS
CONCLUSION
 It is very different and tricky to evaluate investment bank unlike other
firms and companies. As explained in analysis portion different ratios
provide a mix view about how Dawood investment bank is performing.
 Every ratio tends to improve its effect means if higher values are required
they have gone up and where lower values are required Dawood has
managed to lower it down to a certain level showing improvement.
 Only decline was in current ratio but as investment bank they can
perform well with lower current ratio as they acquire investment and
then invest in other placing without considerably increasing their asset,
so an investment bank can work efficiently until and unless their cash
flows are regular and steady.
CONT.

 Going through the notes of annual report it reveals that according to

them the company was about to liquidate in the crisis time of 2008-2009
but not only they have pass the time safely but now is slowly moving
towards stable financial position as they short down their loses every
year.
 Annual report of 2018 shows that they achieved their required or set level
of debt to equity ratio and was also able to payback much of its
liabilities.
 Moreover, their financial statements are prepared on going concern which
shows their intention of keep working and going to closing intention
RECOMMENDATIONS

 Dawood as an investment bank should focus to enhance its capability

and improve its performance it should work in efficiency in acquire
assets, make investments, manage risk and subsequently turn a profit
for shareholders.
 Legal structure and legal regulations seems to be a problem in their
proceedings, so they should improve their legal advisors beforehand
rather than correcting the things after they are questioned which
increase the cost of the work/project considerably.