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Risk Analysis of Goldman Sachs

Risk Analysis of Goldman Sachs

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Published by Shubro Barua
comparison of risk of bankruptcy between Goldman Sachs & Prime Bank Ltd
comparison of risk of bankruptcy between Goldman Sachs & Prime Bank Ltd

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Published by: Shubro Barua on Jul 13, 2011
Copyright:Attribution Non-commercial

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12/13/2013

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Executive Summary
 
This financial analysis of ‘The Goldman Sachs Group Inc’ is a term project for the courseWorking Capital Management. It’s a competitive in the financial industry’s
scene in
United States of America. We have analyzed the company’s performance over a 3 yearsperiod and compared it to another bank ‘Prime Bank Ltd’. Afterwards, we have figured
the intrinsic value of the stock of the bank and through valuation method and technicalanalysis provided recommendation for the investors.
We tried to gather information’s as much as we can. We checked annual reports of both
financial institutions. We tried our level best to compare the situations of both banks. Weperformed trend analysis and graphically presented each of the ratios we calculated. Wecompared three
years’
timeline.Based on our analysis, we came up with a conclusion whether Prime Bank is at a risk of getting bankrupt in future.
 
 
Literature Review
 
Time Series Analysis:
Time Series analysis evaluates the performance of the company overtime. In this methoddifferent ratios are used to make comparison of current to past performance.
Cross Sectional Analysis:
Cross sectional analysis involves the comparison
of different company’s financial ratios at
the same point in time. How well a company has performed in the relation to othercompany can be measured by comparing the ratio values to those companies.
Ratios:Profitability ratios:1.
 
ROE:
Return on equity is a measure of how efficiently the company is using itsequity to generate profit. The formula is-
 Net Income/Common Equity2.
 
ROA:
It is a good indicator of how efficiently the company is using its asset togenerate profit. The formula is-
 Net Income/Total Assets3.
 
Net profit margin:
It is an indicator of effectiveness of expense management (costcontrol) and service pricing policies. The formula is-
 
 
 
Net Income/Revenues4.
 
Net Interest Margin:
Net interest margin measures how large a spread betweeninterest income and interest costs management has been able to achieve by closecontrol over total assets. The formula is-
 (Int. Income-Int. Exp)/Total Assets5.
 
 
Net Non-interest margin:
Net non-interest margin measures how large a spreadbetween non-interest income and non-interest costs management has been ableto achieve by close control over total assets. The formula is-
 (Non Int. Income-Non Int. Exp)/Total Assets6.
 
Net Operating margin:
Its shows how much does the firm generate net worthagainst investing in assets. The formula is-
 (Total operating revenue-Total Operating Exp)/Total Assets7.
 
Asset Utilization:
Also known as asset
 
management efficiency. It is a goodindicator of portfolio management policies, especially the mix and yields on the
bank’s assets. The formul
a is-
 Total Op. Revenues/Total Assets8.
 
Tax Mgt. Efficiency:
It shows how efficiently the firm does manage its taxes withnet operating income. The formula is-
 Net Income/ Net Operating Income before tax9.
 
Expense Control Efficiency:
It shows how efficiently the firm does manage itsexpense with its revenues. The formula is-
Net operating income before taxes/total operating revenues10.
 
EPS:
EPS measures how much the firm earns against every common share. Theformula is-
Net Income after tax/ Common Equity Shares outstanding

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