Chapter-01

Introduction

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1.1 Introduction
Now a day, the business world is considered to be a competitive world where a single
mistake can bring a great loss in the organization or it may shut down business
forever. Today world is based on globalization, where business is getting more and
more innovative through product and service and strategy development. To sustain
over competition, Business organizations are finding thousands of plans and strategy
for business innovation. As a student, I have no any practical knowledge about the
business world, but internship program, a program where both theoretical and
practical knowledge is possible to learn through real business situation. I really glad
that I had a great opportunity to learn some practical knowledge as an internee in
Janata Bank Limited at Banani Corporate Branch, Dhaka. This branch is specially
related to the regional development for business, industry, agriculture and
governments different sectors where as my report is based on “Financial Performance
Analysis of Janata bank Limited.” Where I tried to show financial performance
analysis over the last 5 years by different ratio analysis.

1.2 Rational 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 scope 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. Thus, performance analysis
helps to highlight the facts and relationships concerning managerial performance,
corporate efficiency, financial strength and weakness, the credit worthiness of the
bank. With these issues in mind, the topic “Financial Performance Analysis” has been
undertaken as my topic for internship report.

1.3 Objectives of the Report

The main objective of the report will be presenting the financial performance analysis
of Janata Bank Limited with fulfilling the requirement of the BBA program.
However, the objective behind this study is something broader. The Objectives of the
report are summarized in the following manner-

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Broad Objectives:
 To get an overall idea about the financial performance of Janata Bank Limited.
Specific Objectives:
 To analyze the financial statements of Janata Bank Limited by using financial
tools.
 To know about different ratios applicable for measuring financial performance
of the bank.
 To identify the strength and weakness of the bank based on the financial
performance in the last five years (2013-2017).
 Finally, to make some recommendations and suitable conclusion regarding
financial performance of Janata the Bank Limited.

1.4 Scope of the Report

The Janata bank tries to cover Banani Corporate areas and to understand the financial
performance of the Janata bank limited as well as to achieve the objective of my
report. The study gives a lot of knowledge about financial performances of Janata
Bank Limited. As I was working with the annual reports of Janata Bank Limited, I
analyzed financial statements of Janata Bank Limited and many things from this
report. It consists of my observations and on the job experiences during the internship
period. This report incorporates the financial status and different aspects of ratio
analysis of the company.

1.5 Limitations of the Report

It defines the time limit of financial analysis performance of Janata Bank Limited. I
have collected 5 years data from (2013-2017) of the Janata bank Limited for my
report. While making this report I faced some challenges and limitations have been
encountered which are given below:
Every study has some limitation. Analyzing the financial performance of a Bank is
not that easy. Moreover, due to obvious reasons of lack of my expertise I might not
make the report as like as it should be. But I have tried to make it as much better as
possible to me. The following main limitations are apparent in the report –
 Lack of practical knowledge.

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 The availability of information was limited. I could not collect all the
necessary information that was needed.
 Time was not sufficient to make an in-depth study on such issue. Only three
months is not enough to know all financial information about a Bank.
 In this report I have analyzed only five years of data which may not represent
or reflect actual results.

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1.1 Origin of the Report
To develop and make faster growth in the economy banks are the most common
financial institution in the economy of a nation, which plays a vital role. They are the
principal sources of credit for millions of individual and families and for many unit of
government. Moreover, for small local business ranging from grocery stores to
automobiles dealer, banks are often the major sources of credit. Worldwide, banks
grant more installment loan to consumers than any other financial institution.

The prime objectives of this report are to fulfill the partial requirement for the degree
of BBA. Since, it is compulsory for all students of BBA program at Northern College
Bangladesh to undergo two months ten days long internship program to explore real
life business situation Janata Bank Limited is a place where I could learn the business
dealings. This organization has created a positive image to the customer mind by
providing better service. This Bank has introduced some Modern Banking Scheme
that has high market demand. As it maintains the pace with the competitive business
world, its activities, culture, philosophy and style leads an intern student to be the best
at any field of working life. With this view, during my internship I was assigned
Amin Bazar Branch, Janata Bank Ltd., with other activities I specially tried to observe
the overall banking procedure and functions of this branch.

1.2 Background of the Report

Financial institution and banks play an important role in financial inter mediation and
thereby contribute to the overall growth in the economy. Presently the financial
system in Bangladesh consists of the Central Bank, Nationalized
Commercial/Specialized Banks, Private Banks, Foreign Banks and other Non-Bank
financial institution. This report is based on Janata Bank Ltd or JBL.
Banks can be identified by the functions they perform in the economy. They are
involved in transferring of funds from their savers to borrowers and in paying for
goods and services. Among all types of financial institutions banks are the most
common financial institution in the economy of a nation. Banks are one part of a vast
financial system of markets and institutions. Banks encourage individuals and
institutions to save and by which individual and institutions invest in different projects
which ultimately help the economy to grow, new jobs to be created and living
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standards to rise. In this assignment we are going to evaluate the performance of
reputed commercial banks-. We are going to evaluate the last five year performance
of the bank

1.3 Objectives of the Report

The primary objective of writing the report is fulfilling the partial requirements of the
BBA program. In this report, I have attempted to give an overview of Janata Bank
Limited in general. Also in the major part “Analysis of financial statement” I have
shown the practical approach of Financial Statement Analysis. Some following
objectives of the report are as shown:
i. To Discussed the financial ratio measurement and analysis
ii. To analyze Janata Bank Trading recent years
iii. To measure profitability, liquidity and Risk of Janata Bank Limited
iv. To show the Financial stability analysis consist of Profitability and Liquidity.
v. To analysis balance sheet and income statement.

1.5 Limitations of the Report

The report is accompanied with the following limitations-
i. Difficulty in gaining accesses to financial sector.
ii. Non-availability of the most recent statistical data.
iii. As I am student it is not possible for me to collect all the necessary
information.
iv. I had to complete this report within a very short span of time that was not
sufficient for investigation.
v. Lake of Experience.
vi. The report is mainly based on the secondary data which published by
different organization as annually, half-yearly, monthly, weekly and daily.
vii. Time constraints are additional limitations of this report.

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 Chapter-02
Methodology of the Study

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2.1 Methodology of the Report
To complete this report I have followed a systematic study which include working,
inspecting and talking to the executives at different levels of the organization to know
the present scenario of the banking practice. To facilitate make the report more
meaningful and presentable two sources of data and information have been used
widely-
The primary sources which are as follows head to head conversation with the
Executives and Officers of the Banks.
i. Unceremonious conversation with the client.
ii. Realistic work exposures from the different desks of the various departments
of the Branch covered.
iii. Relevant file study as provided by the officer’s concerned.

The Secondary Sources of data and information are as follows-

Annual Reports of Janata Bank Ltd

Periodicals published by Bangladesh Bank, various books, articles, compilations etc,

regarding general banking functions.

For preparing this assignment secondary data are mainly collected from the annual
report of the respective banks, banks website and different books. The various ratio
analysis that are used in the paper are collected form the banks annual reports and
financial statements and the ratios that are not found in the annual report directly are
calculated form the information provided in the annual reports.

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 Chapter-03
Literature Review

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2.1 Literature Review
The literature review is to help the reader to understand all the technical terms such
financial concepts that are used in this study so that any reader of the report can easily
understand all the critical concepts of the report as well as understand the financial
performance of the Janata bank of recent five years. As shared earlier, the analysis of
financial performance is a subjective measure of a company's ability to utilize the
resources of its primary mode of business and to generate revenue. This term is also
used as a general measure of the overall financial health of a business over a given
period of time and can be used to compare similar businesses in the same sector or to
compare industries or sectors.

The concept of financial statement analysis

According to Kaplan (2004), financial performance refers to the achievement of
financial objectives and is an important aspect of financial risk management. It is the
process of monetary measurement of the results of a company's policies and
operations. It is used to measure the overall financial health of the business over a
given period and can also be used to compare similar businesses in the same sector or
to compare industries or sectors. Businesses and interested groups, such as executives,
shareholders, creditors and tax authorities, try to answer important questions such as:

 What is the financial position of the company at any given time?

 What is the financial performance of the company over a given period?

These queries can be solved using a financial analysis of a company. Financial

analysis involves the use of financial statements. A financial statement is a collection
of data organized according to logical and consistent accounting procedures. Its
purpose is to understand certain financial aspects of a commercial enterprise. It is
possible to visualize a position during a given period, as in the case of a balance sheet,
or to reveal a series of activities for a certain period, as in the case of an income
statement. As a result, the term "balance sheet" generally refers to two fundamentals:
the balance sheet and the income statement.

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(Source: Kaplan, Robert S, 2004, Book name: Strategy Maps: Converting Intangible
Assets Into Tangible Outcomes.) The financial balance sheet indicates the financial
condition (condition) of the company at a given time. Provides a snapshot that can be
considered a static image. "The financial statements are a summary of a company's
financial position at a given date, showing total assets = total liabilities + owner's
capital". The income statement (shown in India in the form of an income statement)
reflects the performance of the company over a given period. "The income statement
is a summary of the income and expenses of the business in a given period, which
ends with the net profit or loss of the period." Anyways, financial statements do not
reveal all the information about a company's financial transactions, but they provide
extremely useful information that highlights two important factors: profitability and
financial strength.

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 Chapter-04
Company Profile

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4.1 Background of Janata Bank Limited
Janata Bank Limited, 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 2014. 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, 2017 the bank has been corporatized and renamed as
Janata Bank Limited. Janata Bank Limited operates through 872 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 depositor’s 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:
i. All types of commercial banking activities including
Money Market operations.
ii. Investment in Merchant Banking activities.
iii. Investment in Company activities.
iv. Financiers, Promoters, Capitalists etc.
v. Financial Intermediary Services.
vi. Any related Financial Services

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4.2 Organizational Structure of Janata Bank Limited

Chairman

Managing Director

Deputy Managing Director

General Manager

Deputy General Manager

Assistant General Manager

First assistant General Manager

Senior Executive Officer

Assistant Executive Officer

Officer

Assistant Officer

4.3 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.

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4.4 Core Values of Janata Bank Limited

Professionalis
Professionalis
m
m

Growth
Diversity

JBL

Dignity Accountability
Accountability

Integrity

FIG – 1: CORE VALUES OF JANATA BANK LIMITED

4.5 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.

4.6 Objectives of Janata Bank Limited

The objectives for which the bank is established are as follows
i. To carry on, transact, undertake and conduct the business of banking in all
branches.

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 i. To receive, borrow or to raise money on deposit, loan or otherwise upon such
terms as the company may approve.
ii. To carry on the business of discounting and dealing in exchange of specie and
securities and all kinds of mercantile banking.
iii. To provide for safe-deposit vaults and the safe custody of valuables of all
kinds.
iv. To carry on business as financiers, promoters, capitalists, financial and
monitory agents, concessionaires and brokers.
v. To act as agents for sale and purchase of any stock, shares or securities or for
any other momentary or mercantile transaction.

4.7 Business Prospects of Janata Bank Limited

i. Surplus Capital Adequacy after IPO subscription
ii. Business expansion in capital market
iii. Gradual expansion of branch network
iv. Progressive automation of the branches
v. Real online banking software will be in function soon
vi. Expansion of ATM and Credit Card
vii. Consideration of prime customers

4.8 International Award of Janata Bank Limited

Recently The Bank has been recognized internationally and domestically for its good
performance.

i. International Award -"World's Best Bank Award-2017 in Bangladesh

ii. International Award -"World's Best Bank Award-2016 in Bangladesh 
iii. International Award -"World's Best Bank Award-2015 in Bangladesh
iv. International Award -"World's Best Bank Award-2014 in Bangladesh 
v. Janata Bank Limited receives "Asian Banking Awards 2005" on Credit
Scheme for Handicapped People                                                                  
vi. International Award -The Bank of the Year-2004 in Bangladesh

4.9 SWOT Analysis

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 Strengths Weaknesses

Opportunities Threats

Although the immediate outlook for the local operating environment is expected to be
turbulent, the bank intends to continue its growth momentum through the initiatives
and strategic priorities set out in the corporate plan. The Bank is well positioned to
mitigate the risks posed by the potential volatility of macroeconomic conditions in the
country. The corporate plan and the budget is a mid term plans, yet to being prepared
annually covering a period of five years on a rolling basis. This year the Bank
prepared the plan for the period covering the years 2013-2013. The strategic direction
of the Bank is critically reviewed by the Management as well as by the Board at the
time of preparing and approving the Corporate Plan and the Budget. In keeping with
the Vision and Mission statement of the Bank, the strategic direction has been clearly
identified and laid down in the Corporate Plan. It detailed out SWOT analysis of the
Corporate Banking, Personal Banking, Treasury, Information Technology, Human
Resources Management and Bangladesh operation of the Bank.

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The Corporate Plan and the Budget incorporates highly ambitious targets target for
the planned period. Undoubtedly, the Corporate Plan and the Budget has immensely
contributed in guiding the organization to its present level. Further, it has contributed
to building up the target driven culture across the Organization and leading to record
superlative performance and to maintain the preeminent position in the Banking
Industry.
Priorities identified in the Corporate Plan to be implemented in the medium
term:
i. Enhancing national and international presence as envisaged in the Vision of
the Bank.
ii. Consolidation of the Bangladesh Operations by opening more branches.
iii. Maintain the most preferred bank status for trade Finance.
iv. Increase the present credit card base.
v. Improve exchange turnover and market share.
vi. Improve the quality of advances and overall asset portfolio.

STRENGTH
i. Second Largest bank of the country.
ii. Wide network of 872 Branches across the countries.
iii. Holds a sound reputation in the banking industries.
iv. Sponsoring by the government.
v. Personalized services.
vi. Well connected distribution channel from Head office to all branches.
vii. Healthy correspondent relationships with foreign banks.
viii. Provide a record business in international trade and remittance.
ix. Majority of the branches run with computers under centralized network.
x. Sound and large capital base
xi. Sustainable growth.
xii. Strong Liquidity Position
xiii. Low Cost Fund
xiv. Satisfactory Profitability

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WEAKNESS
i. Marginal Capital Adequacy
ii. Lack of Strong Initiative to Explore Investment Opportunity Through
Research And Marketing
iii. IT & E-Banking Status Dose Not Match With Other Banks
iv. Employee are not much more expert
v. Rules & regulation are not strict
vi. At this moment they doing their banking manually.

OPPORTUNITY
i. Lot of Branches
ii. Increasing Awareness of Banking System
iii. Credit Card Business
iv. Consideration of prime customers
v. Progressive automation of the branches
vi. Real online banking software will be in function soon

THREATS
i. Relationship gap between banker & client.
ii. Supply Gap Of Foreign Currency
iii. Overall Liquidity Crisis In Money Market
iv. Increased Competition In The Market For Quality Assets
v. Manual System

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 Chapter-05
Theoretical Framework

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5.1 Financial Statement Analysis:
Financial statement analysis is the process of reviewing and analyzing a company's
financial position to make better economic decisions. By analyzing financial
statement investors decides whether to buy the companies share or not. Got to decide
whether to grant a loan to a company or not and if yes, then at what interest rate the
loan should be granted. In case of suppliers they got to decide whether to supply
goods to the company on credit or not. So prospective investors, prospective lenders,
prospective suppliers, they all got to make economic decisions. As economic decision
cannot be made without information. So financial statement involves providing
information about the company’s financial position, the financial performance and
chance in a financial position to varied users. These statements include the income
statement, balance sheet, statement of cash flows, and a statement of changes in
equity.

5.2 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 the balance sheet and profit and loss account. It is also helps in short-term
and long term forecasting and growth can be identified with the help of financial
performance analysis. 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 firm’s position and performance. This analysis can be
undertaken by management of the firm or by parties outside the namely, owners,
creditors, investors etc.
The financial statement is prepared periodically that is for the accounting period. The
term financial statement has been widely used to represent two statements prepared by
accountants at the end of specific period which are in the following way:

a. Balance sheet or statement of financial position.

b. Income statement or profit and loss accounting.

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5.3 Balance Sheet:
The Balance sheet is basically a "snapshot of a company's financial condition". The
balance sheet is the only statement which applies to a single point in time of a
business calendar year. Basically balance sheet refers, what does the company own
(Assets), what does the company owe (Liability) and what are the residual interest or
claim (Equity). The main categories of assets are usually listed first, and typically in
order of liquidity. Assets are followed by the liabilities. According to the accounting
equation, net assets must be equal to net liability and equity.

Assets = Liability + Equity

5.4 Income Statement:

An income statement (US English) or profit and loss account (UK English) are one of
the financial statements of a company and shows the company's revenues and
expenses during a particular period. It indicates how the revenues are transformed into
the net income. The purpose of the income statement is to show managers and
investors, whether the company made or lost money during the period being reported.
Note: Now the question comes that is, why am I looking at the financial statement?
Answer: I am looking at the financial statement to assist the past performance of the
company. Here I am not only interested that how did the company perform, but also
why did the company perform the way it perform. Which means, what are the sources
of that performance. Because, if the sources are sustainable, in that case the future
cash flow will be more sustainable in the near future. Moreover, I want to look at the
income statement or profit and loss account for the purpose of forecasting the future
cash flows and at the same time I am going to assess risk associated with the company
and most importantly this all are the indicator of the performance. So here I will try to
let the balance sheet and income statement into economic reality.

5.5 Theoretical Discussion of Financial Ratios:

In the view of the requirements of the various users of ratio, it is divided into the
following important categories which are in the following way-
 Liquidity Ratios
 Activity Ratio

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  Debt/ Leverage Ratios
 Profitability Ratios

5.6 Liquidity Ratios:

Liquidity ratios measure the firm’s ability to pay off short-term debt obligation. If a
company fail’s to pay its debts, it could face bankruptcy. Generally, cash is the basic
input to keep the business running on a continuous basis. A firm should ensure that it
does not suffer from lack of liquidity, and it does not have excess liquidity as well,
because excess cash will remain idle money which will be harmful for the company’s
profitability. On the other hand, cash shortage will disrupt the firm operation which
results in a poor creditworthiness. Therefore, it is necessary to manage a proper
balance between high liquidity and lack of liquidity.

5.7 Activity Ratios:

Generally, how quickly a business can turn assets into cash or sales is a good indicator
that how a business run. Activity Ratio highlights the activity and the operational
efficiency of the business concern. The activity ratio measures how efficiently a
business uses its assets. The Analyst can use several activity ratios to measure a
business efficiency level or performance. The most popular ratios are inventory
turnover and total asset turnover. But as I am measuring a banking business
performance so I consider the other ratios which are Cost Income Ratio and Total
Assets Turnover. Because banking business does not have sales and inventory, so I
cannot able to measure the inventory turnover.

5.8 Profitability Ratios:

Profitability reflects the final result of the business operations. In general, profitability
ratios measure the profit generating ability of a company relative to net income,
assets, debt and equity. There are two types of profitability ratios, profit margin ratio
and the rate of return ratios. The Profit margin ratio shows the relationship between
profit and revenue. In this case I considered Net Operating Profit Margin, Gross Profit
Margin, Net Interest Margin, Net Non Interest Margin, The Degree of Asset
Utilization, Total Equity Multiplier, ROA (Return on Assets), ROE (Return on
Equity), Earning Spread etc.
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3.9 Analyzing Liquidity Ratio:
As I mentioned above, Liquidity ratio refers a company's ability to repay short-term
creditors out of its total cash. In other words, it of time short term liability is
converted into cash. If the value is 1.00, it means fully covered. But in case of less
than 1.00, then it will be considered as liquidity crisis of the organization.
Liquidity ratios are in the following way-

3.10 Current Ratio:

Current ratio refers the relationship between current assets and current liabilities.
Formula of current ratio is in the following way:
Current Assests
Current Ratio= Current Liabilities

The current ratio is a financial ratio that measures whether or not a firm has enough
resources to pay off its debts over the next 12 months or 1 years. It compares a firm's
current assets to its current liabilities. Acceptable current ratios vary from industry to
industry, but the ideal current ratio is 2:1. It indicates that current assets double the
current liability is considered to be satisfactory. The higher value of current ratio
indicates more liquid of the firm's ability to pay its current obligation. This may refers
the problem of working capital management as excess money will remain as idle
money. On the other hand, a low value (current ratio is below 1) of current ratio
indicates that the company may have problems meeting its short term obligations.

3.10.1 Net Working Capital:

Net working capital is the difference between aggregate amount of all current assets
and total amount of current liabilities. It is used to measure the short-term liquidity
position of a business. If current assets are less than current liabilities, an entity has a
working capital deficiency, whereas if current assets are more than a current liability
then an entity has a working capital surplus. The formula for net working capital are
in the following way-

Net Working Capital = Current Assets - Current Liabilities

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5.10.2 Cash Ratio:
Cash ratio also measures the liquidity position of a company by calculating the ratio
between all cash and cash equivalent assets and all current liabilities. It excludes both
inventory and accounts receivable in comparison to the Current Ratio.

Cash Cash Equivalent

Cash Ratio= Current Liabilities

3.10.3 Analyzing Activity Ratio:

Activity ratio refers how efficiently a company is able to generate revenue in the form
of cash that means how well a company generates revenue and also it indicates how
well the company is being managed.

3.10.4 Cost Income Ratio:

Cost income ratio refers the relationship between operating expense and operating
income. Cost income ratio basically shows a company’s costs in relation to its
income. The ratio gives a clear view of how efficiently the bank is being run, whereas
a lower value indicates more profitability of the company. The formula of cost income
ratio is in the following way:
Total Operating Expense
Cost Income Ratio= Total Operating Income

3.10.5 Total Asset Turnover:

The asset turnover ratio is an efficiency ratio that measures a company's ability to
generate revenue or income from its assets by comparing net sales with average total
assets. In this case I considered operating income with the total assets. The formula is
in the following way-
Total Operating Income
Total Assets Turnover= Total Assest

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3.10.6 Analyzing Leverage or Debt Ratio:
The debt or leverage position of a firm indicates the amount of other people’s money
being used in attempting to generate profits. Generally, the more debt a firm uses in
relation to its total assets, the greater its financial leverage.

Debt to Total Asset or Debt Ratio:

The debt ratio is a financial ratio that indicates the percentage of a company's total
assets that are provided via debt, which means it tells the percentage of total assets
that were defined by total debts. The lower the result of the ratio the better of the
company. In other word lower the ratio less the risk. The formula is in the following
way:
Total Debt
Debt Ratio= Total Asseset

3.10.7 Debt to Equity or Capital Ratio:

Debt to equity ratio is a debt ratio used to measure a company's financial leverage
calculated by dividing a company's total debt or liabilities by its stockholders' equity.
The D/E ratio indicates how much debt a company is using relative to the amount of
value represented in shareholders' equity. The formula is in the following way:

Total Debt
Debt to Equity or Capital Ratio= Total Asseset

3.10.8 Equity Capital Ratio:

The equity capital ratio is a computation that indicates the financial strength of a
company. The ratio is equal to the total owner’s equity of a company divided by its
equity capital. Equity capital is the amount of money invested in a company by its
shareholders. The formula is in the following way:
Total Debt
Debt to Equity or Capital Ratio= Total Asseset

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 Chapter-06
Financial Statement Analysis

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3.1 Liquidity Ratio
The liquidity ratios measure the ability of a firm to satisfy its short-term obligations as
they become due for payment. In fact, liquidity is a pre-requisite for the very survival
of a firm. The short – term creditors of the firm are interested in the short- term
solvency or liquidity of a firm. But liquidity implies, from the view point of utilization
of the funds of the firm that funds are idle or they earn very little. A proper balance
between the two contradictory requirements, that is, liquidity and profitability, is
required for efficient financial management. The liquidity ratios measure the ability of
a firm to meet its short- term obligations and reflect the short – term financial strength
/ solvency of a firm. The ratios which indicate the liquidity of a firm are current ratios,
quick ratios, cash ratio and net working capital to total assets ratio.

3.1.1 Current Ratio

The current ratio is the ratio of total current assets to total current liabilities. It is
calculated by dividing the current assets by current liabilities. The current ratio of a
firm measures its short -term solvency, that is, its ability to meet short - term
obligations. The higher the current ratio, the more is the firm’s ability to meet current
obligations and greater is the safety of funds of short – term creditors.

Year 2013 2014 2015 2016 2017

Current Ratio 1.00 : 1 1.00: 1 1.00: 1 1.00: 1 1.01: 1

1.015

1.01
Current Ratio

1.005

0.995 2013 2014 2015 2016 2017

2007 2008 2009 2010 2011

Year

Figure
3.1 Current Ratio

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Interpretation
The graph shows that from 2013 to 2017, current ratio of Janata Bank Limited is
constant. In the year 2017, current ratio becomes a little bit higher than the preceding
years. Although it increases liabilities, but it is relatively lower than the increase in
current assets.

Comment
Since, the current ratio of Janata Bank Limited is higher in 2017 it indicates the bank
is able to meet its current obligations from its current assets. Therefore, it can be said
that the financial position of the bank is satisfactory.

3.1.2 Quick Ratio

The quick ratio is the ratio between quick current assets and current liabilities and is
calculated by dividing the quick assets by the current liabilities. It is a measurement of
a firm’s liability to convert its current assets quickly into cash in order to meet the
current liabilities. Generally, quick ratio of 1:1 is considered satisfactory as a firm can
easily meet all current claims.
Year 2013 2014 2015 2016 2017
Quick Ratio 1: 1 .99: 1 .99: 1 .98: 1 .99:1

1:1
.99:1 2013
2014
2015
.98:1 ..99:1
2016
.99:1 2017

Figure 3.2 Quick Ratio

Page | 30
Interpretation
It is seen from the graph that the ratio Janata Bank of Limited is lower in 2014 and
2015 and than in 2017 because of an increase in total current liabilities and prepaid
expenses as well. In 2016 the ratio of the bank again becomes lower in a significance
of increase total current liabilities and prepaid expenses more than total current assets.
In 2017 there is an increase in the ratio because of an increase in total current assets
more than the increase in total current liabilities.

Comment
Quick ratio of Janata Bank of Limited is higher in 2013 and it is almost equal to
standard which indicates that the bank is financially sound and able to meet short term
obligations from its most liquid assets.
3.1.3 Cash Ratio
The cash ratio is the most rigid liquidity ratio used to measure a company's ability to
cover liabilities in the short term. Since cash is the most liquid, and can be utilized by
the company almost immediately, it can be used to pay liabilities at a moments notice.
The cash ratio should be at least 1.0 for any company, showing they can at least pay
their liabilities if they had to.  An increasing cash ratio is a positive sign, showing that
the company is better able to cover its obligations to creditors.

Year 2013 2014 2015 2016 2017

Cash Ratio .09 .07 .12 .12 .11

.11 .09
2013
.07
2014
.12
.12 2015
2016
2017

Figure 3.3 Cash Ratio

Page | 31
Interpretation
The graph exhibits that the ratio Janata Bank of Limited is lower in 2014 than in 2016
because of an increase in total current liabilities and decrease in cash. In 2015 and
2016 the ratio of the bank becomes higher in a consequence of increase in cash more
than total current liabilities. In 2017 there is a little bit decrease in the ratio because of
an increase in total current liabilities more than the increase in cash.

Comment
Cash ratio of Janata Bank of Limited is lower than the standard in 2017. It is showing
that the bank is not better able to cover its obligations to creditors.

Page | 32
3.1.4 Net Working Capital to Total Assets
The net working capital to total assets ratio measures the adequacy and ability of
net working capital to cover the total assets. There is no standard for this ratio.
The higher the ratio, the more is the firm’s ability and adequacy of net working
capital to cover the total assets.
Year 2013 2014 2015 2016 2017
Net Working (.0025) (.0063) (.0072) (.0006) .0065
Capital to Total
Assets

Figure 3.4 Net Working Capital to Total Assets

Interpretation
From the graph it is seen that the ratio of Janata Bank of Limited is negative for the
year 2013 to 2016 as the net working capital is negative. In 2017 the graph shows a
positive and higher ratio than the previous years as a result of an increase in current
assets more than current liabilities.

Comment
In 2017, the ratio of Janata Bank of Limited indicates the ability and adequacy of net
working capital to cover the total assets and better performance.

Page | 33
3.2 Profitability Ratio
Profitability ratio is a measure of operating efficiency. The operating efficiency of a
firm and its ability to ensure adequate returns of its shareholders/ owners depends
ultimately on the profit earned by it.

3.2.1 Gross Profit Ratio

The gross profit margin measures the percentage of each sales taka remaining
after the firm has paid for its services. The higher is the gross profit margin, the
better (that is, the lower the relative cost of services provided).

Year 2013 2014 2015 2016 2017

Gross Profit Ratio 25.11% 25.89% 26.79% 33.47% 35.63%

35.63% 25.11%
2013
25.89%
2014
33.47%
26.79 2015
2016
2017

Figure 3.5 Gross Profit Ratio

Interpretation
The graph of Janata Bank of limited shows an increasing trend for the year 2013 to
2017. The ratio gradually becomes higher in 2013 and 2017 because of an increase in
revenue more than an increase in costs.

Comment
The gross profit margin of Janata Bank of limited is higher during the study period
which indicates favorable cost of services provided and markup policies and the
ability of management to develop total revenue.

3.2.2 Net Profit Margin

Page | 34
Net profit margin reflects the effectiveness of expense management and service
pricing policies. It is indicative of management ability to operate the business with
sufficient success not only to recover from revenues of the period, the cost of services, the
expenses of operating the business, but also to leave a margin of reasonable compensation
to the owner for providing their capital at risk. A high net profit margin would ensure
adequate return to the owner’s as well as enable a firm to withstand adverse economic
conditions when selling price is declining, cost of services is rising and demand for the
services is falling. A low net profit margin has the opposite implications.

Year 2013 2014 2015 2016 2017

Net Profit Margin 0% (61.26) % .87% 15.03% 12.39%

Figure 3.6 Net Profit Margins

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is zero as the net
income after tax is not given or nil. The ratio is negative for the year 2013 because of
the failure of the company to incur profit after tax. In 2015 the ratio becomes able to
earn profit after tax. Again, in 2016 the ratio becomes higher due to an increased net
profit after tax. In 2017 the ratio becomes lower to decrease in net profit after tax
since other deductions after sales are higher in compared to revenue.
Comment
From the calculated ratio of Janata Bank Limited it can say that management is
inefficient to earn profit and administrating and providing services. That’s why
performance of the bank is worse.

Page | 35
3.2.3 Net Interest Margin
Net interest margin (NIM) is a measure of the difference between the interest income
generated by banks or other financial institutions and the amount of interest paid out
to their lenders (for example, deposits), relative to the amount of their assets. The
higher is the firm’s net interest margin, the better

Year 2013 2014 2015 2016 2017

Net Interest
1.45% 1.37% .57% 1.36% 1.52%
Margin

Figure 3.7 Net Interest Margin

Interpretation
From the graph it is seen that the ratio of Janata Bank Limited bank was a little bit
lower in 2014 than in 2013 because of an increase in total assets and interest expense
more than an increase in interest income. In 2015 the ratio decreases extremely as the
net interest income decreases. The ratio gradually becomes higher in 2016 to 2017
due to an increase in net interest income.

Comment
The higher net interest margin ratio of Janata Bank Limited indicates that the bank
management and staff well enough and able to keept the growth of revenues ahead of
rising costs.

Page | 36
3.2.4 Net Non Interest Margin
The net non interest margin measures the amount of non interest revenues stemming
from service fees the financial firm has been able to collect relative to the amount of
non interest cost incurred (including salaries and wages, repair and maintenance of
facilities, loan loss expense). The lower is the ratio the better.

Year 2013 2014 2015 2016 2017

.51
Net Non Interest Margin .39 % .23 % .28 % .19 %
%

Figure 3.8 Net Non Interest Margin

Interpretation
From the graph it is seen that the ratio of Janata Bank Limited bank is lower in 2014
than in 2013 because of an increase in total assets more than an increase in non
interest expenses. In 2015 the ratio once again decreases extremely as the net non
interest expenses decreases and total assets increases. The ratio becomes higher in
2016 due to an increase in net non interest expenses more than an increase in total
assets. In 2017 the ratio becomes lower as an increase in total assets more than an
increase in non interest expenses.
Comment
The ratio of Janata Bank Limited is lower in 2017 which is favorable for the bank and
indicates the ability of the bank to earn non interest revenue and now its performance
is better.

Page | 37
3.2.5 Net Operating Margin
Net operating margin measures of how profitably the firm is operating. The higher firm’s net
profit net margin, the better.
Year 2013 2014 2015 2016 2017
Net Operating
1.75% 1.98% 0.98% 2.62% 2.92%
Margin

1.75%
2.92% 2013
1.98% 2014
2.62% 0.98% 2015
2016
2017

Figure 3.9 Net Operating Margin

Interpretation
From the graph it is seen that the ratio of Janata Bank Limited becomes higher in
2014 than in 2013 because of an increase in net operating income. In 2015 the ratio
decreases extremely as the net operating income decreases and total assets increases.
The ratio gradually becomes higher in 2016 and 2017 due to an increase in net
operating income.

Comment
The higher net operating margin ratio of Janata Bank Limited indicates that the bank
is operating profitably and now in better position.

3.2.6 Operating Ratio

Page | 38
 The operating ratio is used as a yard stick of profitability. As a working proposition
lower ratio is favorable while a higher ratio is unfavorable.
Year 2013 2014 2015 2016 2017
Janata Bank
102.78% 99.47% 85.34% 88.57% 85.63%
Ltd.

Figure 3.10 Operating Ratio Analysis

Interpretation
The graph of Janata Bank Limited shows a lower ratio in 2014 and 2015 than in 2013
due to an increase in revenue more than an increase in cost and operating expenses.
As the cost and operating expenses increases more than increase in revenue the ratio
becomes higher. In 2016 to 2017 the ratio becomes lower because of an increase in
revenue more than an increase in cost and operating expenses.

Comment
As in 2017, operating ratio of Janata Bank Limited is lower than previous year so the
bank is in better position.

Page | 39
3.2.7 Administrative Expenses Ratio
Administrative expenses ratio computed by dividing administrative expenses by
sales. A low ratio is favorable, while a high one is unfavorable. A higher ratio
implies that only a relatively small percentage share of sales is available for
meeting financial liabilities like interest, tax and dividend, and so on.
Year 2013 2014 2015 2016 2017
Administrative
27.90% 25.36% 12.14% 22.05% 21.26%
Expenses Ratio

21.26% 27.90% 2013

2014
22.05%
2015
25.36% 2016
2017
12.14%

Figure 3.11 Administrative Expenses Ratio

Interpretation
The graph showing that the ratio of Janata Bank Limited is lower in 2014 than in 2013
as the sales increases more than increase in administrative expenses. The ratio again
becomes lower in 2015 due to decrease in administrative expenses and increase in
sales. In 2016 the ratio becomes higher because of an increase in administrative
expenses more than an increase in sales. In 2017, since the sales increases relatively
than decrease in administrative expenses, ratio becomes lower.

Comment
Since, the administrative expenses ratio is lower in 2017 so now Janata Bank Limited
is in better position.

3.2.8 Expense Control Efficiency Ratio

Page | 40
Expense control efficiency ratio is the indicator of how many taka of revenue survive
after operating expenses. The higher is expense control efficiency ratio, the better.

Year 2013 2014 2015 2016 2017

Expense Control
0% (99.71) % 9.07% 22.70% 23.94%
Efficiency Ratio

Figure 3.12 Expense Control Efficiency Ratio Analysis

Interpretation
The graph exhibits that the ratio of Janata Bank Limited is zero for the year 2013
since there is no pre tax net operating income. The ratio of the bank is negative for the
year 2014 as the pretax net operating income is negative. From 2015 to 2017
gradually the ratio becomes higher due to increase in pretax net operating income
more than increase in revenue.

Comment
Expense control efficiency ratio of Janata Bank Limited is higher which indicates the
bank is earning profit after meeting all expenses and the performance is better.

3.2.9 Tax Management Efficiency Ratio

Page | 41
 Tax management efficiency ratio measures the use of security gains or losses and other tax
management tools maximize tax exposure. The higher is the tax management efficiency the
better.
Year 2013 2014 2015 2016 2017
Tax Management
0% (61.44) % 9.58% 66.23% 51.73%
Efficiency Ratio

Figure 3.13 Tax Management Efficiency Ratio Analysis

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is zero for the year
2013 since there is no net profit after tax and pretax net operating income. The ratio of
the bank is negative for the year 2014 as both the pretax net operating income and net
profit after tax are negative. In 2015, the ratio becomes higher due to increase in net
profit after tax more than increase in pretax net operating income. The ratio once
again becomes higher in 2016 as an increase in net profit after tax more than increase
in pretax net operating income. In 2017, the ratio becomes lower because of decrease
in net profit after tax and increase in pretax net operating income.

Comment
Since the tax management efficiency ratio of Janata Bank Limited is lower so its
performance is poor incase of tax management.

3.2.10 Return on Assets

Page | 42
 The return on assets ratio measures the overall effectiveness of management in
generating profit with its available assets. The higher is the firm’s return on total
asset the better.
Year 2013 2014 2015 2016 2017
Return on Assets
0% (4.69) % .07% 1.18% 1.02%

2
1
0
-1 2013 2014 2015 2016 2017

-2
-3
-4
-5

Figure 3.14 Return on Assets

Interpretation
The graph exhibits that the ratio of Janata Bank Limited is zero for the year 2013
since there is no profit or loss. The ratio of the bank is negative for the year 2014
because of the failure of the company to earn profit after tax. In 2015 the ratio
becomes a little bit higher as the company becomes able to earn profit after tax. The
ratio once again becomes higher in 2016 as the net profit after tax increased
extremely. In 2017 due to a decrease in net profit after tax the ratio of the bank
becomes lower.

Comment
Return on total assets ratio of Janata Bank Limited is lower which indicates the assets
are not being utilized properly and profit is not earning satisfactorily. So, the
performance of Janata Bank Limited is not better.

3.2.11 Return on Capital Employed

The term capital employed refers to long term funds supplied by the lenders and
owners of the firm. It is the most independent ratio for assessment of profitability is
Page | 43
the return on capital employed. It reflects the overall efficiency with which capital is
used. The higher the ratio the more efficient is the use of capital employed.

Year 2013 2014 2015 2016 2017

Return on Capital (.12)
0% 2.53% 2.08% 1.25%
Employed %

Figure 3.15 Return on Capital Employed

Interpretation
The graph exhibits that the ratio of Janata Bank Limited is zero for the year 2013
since there is no profit or loss. It is seen from the graph that the ratio of Janata Bank
Limited is negative for the year 2014 because of the failure of the company to earn
profit after tax. In 2015 the graph shows a higher ratio as the company becomes able
to earn profit after tax. The graph of shows a decreasing trend for the year 2016 and
2017 because of an increase in total capital employed more than an increase in net
profit after tax.
Comment
The return on capital employed ratio of the Janata Bank Limited is lower which is
indicative of poor earning in terms of capital employed. So, Janata Bank Limited is
not in better position.
3.2.12 Return on Equity
The return on equity measures the return earned on the common stockholder’s investment
in the firm. Generally, the higher this return, the better off is the owners.
Year 2013 2014 2015 2016 2017
Return on Equity
0% (1.76) % 2.85% 34.70% 21.51%

Page | 44
 Figure 3.16 Return on Equity Analysis
Interpretation
The graph exhibits that the ratio of Janata Bank Limited is zero for the year 2013
since there is no profit or loss. In 2014 the graph shows a negative ratio because the
bank incurs loss after tax. The ratio becomes higher in 2015 as the company becomes
able to make profit after tax. In 2016, the ratio relatively becomes higher than 2015
due to increase in net profit after tax. The ratio becomes again lower in 2017 as the
net profit decreases and shareholders equity increases.

Comment
The lower ratio indicates the performance of the bank also decline and not in good
position.

Page | 45
 3.2.13 Fund Management Efficiency Ratio
It is the leverage or financial policies the sources chosen to fund the financial
institution (debt or equity). It is the direct measure of financial leverage. The larger
the fund management ratio, the greater the potential of high return for the
stockholders.

Year 2013 2014 2015 2016 2017

Fund Management
48.37 (37.65) 43.19 29.47 21.18
Efficiency Ratio

Figure 3.17 Fund Management Efficiency Ratio

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is negative in 2014 and
lower than 2013 as shareholder’s equity represents a negative balance. In 2015 the
ratio of Janata Bank Limited becomes higher. In 2016 and 2017 the ratio becomes
lower because of an increase in shareholder’s equity more than an increase in total
assets.

Comment
The lower ratio of Janata Bank Limited indicates that the potential for high return for
the stockholders is low and the performance is poor.

3.3.14 Assets Utilization Ratio

Page | 46
Asset utilization refers the portfolio management policy especially the mix and yield
on assets. This ratio measures how efficiently a firm is managing its assets and
utilizing to generate profit. Generally, the higher is the ratio the better.

Year 2013 2014 2015 2016 2017

Assets Utilization
Ratio 6.98% 7.65% 7.58% 7.83% 8.19%

8.19% 6.98%
2013
7.65% 2014
7.83%
7.58% 2015
2016
2017

Figure 3.18 Assets Utilization Ratio

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is higher in 2014 than
in 2013 as the total revenues increase. In 2015, the ratio decreases as the bank fails to
earn more profit by utilizing its increased assets. The ratio becomes higher in 2016
and 2017 as the bank efficiently utilizes its assets and earns higher revenues.

Comment
The Janata Bank Limited is efficiently managing and utilizing its assets and
improving its performance.

3.2.15 Earning Per Share (EPS)

Page | 47
Earning per share represents the dollar amount earned on behalf of each share not the
amount of earning actually distributed to shareholders. The higher the EPS ratio, the
more efficient the company has.

Year 2013 2014 2015 2016 2017

Earning Per
Tk. 0 Tk. 0 Tk. 6 Tk. 83.88 Tk. 78.02
Share (EPS)

90
80
70
60
50
40
30
20
10
0
2013 2014 2015 2016 2017

Figure 3.19 Earning Per Share(EPS)

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is zero in 2013 as the
weighted average number of share is not given for the year 2014. In 2016 the ratio
becomes excessively higher because of an increased net profit after tax. But in 2017
the ratio becomes lower due to decrease in net profit after tax and increase in
weighted average number of share.

Comment
It can state from the ratio that profitability of Janata Bank Limited decreases as a
result performance also decreases.

3.2.16 Dividend Per Share

Dividend per share is the dividends paid to the equity shareholders on a per share
basis. The higher the ratio,the better.
Page | 48
Year 2013 2014 2015 2016 2017
Dividend Per
Tk. 0 Tk. 0 Tk. 6 Tk. 30.82 Tk. .26
Share

35
30
25
20
15
10
5
0
2013 2014 2015 2016 2017

Figure 3.20 Dividend per Share

Interpretation
From the graph it is shown that Janata Bank Limited does not provide any dividend
for the year 2013 and 2014. The ratio of the bank relatively becomes higher in 2015
than in 2014 due to increase in total dividend. In 2016 the ratio becomes higher than
2017 the ratio of an increase in total share outstanding and decrease in total dividend.

Comment
The ratio of the bank indicates that the performance declines extreamly and not in
good position.

3.3 Leverage Ratio

The long-run solvency of a company can be measured by the use of leverage ratios
named debt-equity ratio, debt to total assets, the time interest earned ratio and
proprietary ratio.
3.3.1 Debt-Equity Ratio
Page | 49
The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets. A lower ratio is
desirable.

Year 2013 2014 2015 2016 2017

Leverage Ratio 30.91:1 (22.67):1 20.85:1 14.87:1 10.68:1

40
30
Debt eaquty Ratio

20
10
0
-10 2013 2014 2015 2016 2017
-20
-30
Year

Figure 3.21 Debts – Equity Ratio

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is higher in 2013 and
lower than 2014 as shareholder’s equity represents a negative balance. In 2015 the
ratio of Janata Bank Limited becomes higher in a consequence of an increase in
shareholder’s equity more than an increase in long term debt. The graph shows a
higher ratio in 2015 than 2014. In 2016 and 2017, gradually the ratio becomes lower
due to increase in shareholder’s equity more than an increase in long term debt.
Comment
The lower ratio of Janata Bank Limited indicates that a relatively sufficient safety
margin for the creditor, substantial protection against shrinkage in assets and smaller
claim of creditor.

3.3.2 Debt to Total Assets

Debt to total assets measure of a firm's assets financed by debt and therefore a
measure of its financial risk. The lower is this ratio, generally the better of the firm.
Year 2013 2014 2015 2016 2017
Debt to Total
97.93% 102.65% 97.68% 96.60% 95.28%
Assets

Page | 50
 95.28% 97.93%
2013
96.60% 102.65% 2014
97.68% 2015
2016
2017

Figure 3.22 Debts to Total Assets

Interpretation
The graph of Janata Bank Limited exhibits relatively a higher ratio in 2014 than in
2013 because of an increase in total debt more than an increase in total assets. After
the year 2015, from 2016 to 2017 the ratio becomes lower as an increase in total
assets more than an increase in total liabilities.

Comment
The lower debt to total assets ratio of Janata Bank Limited is an indicator of better
performance which reveals less dependency on debt rather than their own capital for
financing their project and is sufficient margin of safety available to them.

Page | 51
3.3.3 Time Interest Earned Ratio
The time interest earned ratio measures the firm’s ability to make contractual payment. The
higher the ratio, the better able the firm is to fulfill its interest obligations.
Year 2013 2014 2015 2016 2017
Time Interest
0 (8.40) .36 .51 .56
Earned Ratio

Figure 3.23 Time Interest Earned Ratio

Interpretation
From the graph it is seen the ratio of Janata Bank Limited is zero in 2013 as there is
no net profit or loss mentioned in the annual report. In 2014, the graph shows a
negative ratio as the bank incurred loss. It is also seen from the graph in 2015, 2016
2017 the ratio gradually becomes higher because of an increase in net profit before
interest and taxes more than an increase in interest expenses.

Comment
The ratio of Janata Bank Limited is higher which indicates the ability of to fulfill its
interest obligations and better performance.

Page | 52
3.3.4 Proprietary Ratio
Proprietary ratio indicates the proportion of total assets financed by owner. The higher is the
ratio, the better.
Year 2013 2014 2015 2016 2017
Proprietary
2.07% (2.66) % 2.31% 3.39% 4.72%
Ratio

Figure 3.24 Proprietary Ratio Analysis

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is lower in 2014 than in
2013due to decrease in shareholder’s equity. From 2015 to 2017 the graph shows an
increasing trend and the ratio gradually becomes higher because of an increase in
shareholders equity.

Comment
Since, the higher ratio of Janata Bank Limited indicates the ability of the owners in
financing the assets. So, it can say that Janata Bank Limited is in better position.

3.4 Efficiency Ratio

Page | 53
Efficiency ratios are concerned with measuring the efficiency in asset management. It
measures the speed with which various accounts are converted into cash – inflows and
outflows. The greater is the rate of return over or conversion, the more efficient is the
utilization of assets.
3.4.1 Total Assets Turnover
The total assets turnover indicates the efficiency with which the firm uses its assets to
generate sales. Generally, the higher firms total assets turnover the higher a firms total
assets turnover the more efficiently its assets have been used. This measures probably of
greatest interest to management because it indicates whether the firms operations have
been financially efficient.
Year 2013 2014 2015 2016 2017
Efficiency Ratio 0.06 0.07 0.07 0.07 0.08

Figure 3.25 Total Assets Turnover

Interpretation
The graph exhibits that the ratio of Janata Bank Limited is higher in 2017 due to an
increase in revenue more than an increase in total assets. From 2014 to 2016 the ratio
remains constant as the revenue and total assets increase at a same rate. In 2017, the
ratio again increases due to an increase in revenue than an increase in total assets.
Comment
After studying the ratio for five years it can say that Janata Bank Limited has the
efficiency with which the bank uses its total assets to generate revenue or the bank’s
operations have been financially efficient.

3.4.2 Current Assets Turnover

The ratio indicates how efficiently a firm is using its current assets to generate
revenue. The higher the ratio, the more efficient is the management and utilization of
Page | 54
the assets while low turnover ratios are inductive of under utilization of available
resources and presence of idle capacity.
Year 2013 2014 2015 2016 2017
Current Assets
0.11 .12 .15 .14 .15
Turnover

Figure 3.26 Current Assets Turnover

Interpretation
The graph of Janata Bank Limited shows a higher ratio in 2014 than 2013 as an
increase in revenue than an increase in current assets. In 2015, again the ratio
becomes higher due to an increase in revenue and decrease in current assets. In 2016
the ratio decreases because of an increase in current assets more than an increase in
revenue. The ratio of the bank increases in 2017 because of an increase in total assets
more than an increase in current assets.

Comment
From the study it can say that the Janata Bank Limited is efficiently using its current
assets to generate revenue and performing better.
3.4.3 Net Fixed Assets Turnover
The ratio indicates the amount of generating sales volume in terms of net fixed assets. Net
fixed assets turnover ratio for a firm should be higher.
Year 2013 2014 2015 2016 2017
Net Fixed Assets 9.81× 12.64× 7.64× 8.55× 8.96×
Page | 55
Turnover

Figure 3.27 Net Fixed Assets Turnover

Interpretation
It is seen from the graph that the ratio of Janata Bank Limited is higher in 2014 than
in 2013 because of an increase in revenue and decrease in net fixed assets. In 2015,
the ratio becomes lower due to decrease in net fixed assets more than increase in
revenue. The ratio gradually becomes higher in 2016 and 2017 since revenue increase
more than an increase in net fixed assets.

Comment
Net fixed assets turnover ratio shows the bank’s efficiency of the management and
utilization of its assets which is a sign of better performance.

Page | 56
 Chapter-04
Findings, Recommendations & Conclusion

Page | 57
4.1 Findings
As a tool of financial management, ratios are of crucial significance. The importance
of ratio analysis lies in the fact that it presents facts on a comparative basis and
enables the drawing of inferences regarding the performance of a firm. Ratio analysis
is relevant in assessing the performance of a firm in respect of the liquidity position,
long – term solvency, operating efficiency and overall profitability.

i) Liquidity Position
The liquidity ratios measure the ability of a firm to meet its short- term obligations
and reflect the short – term financial strength / solvency. Current ratios, quick ratios,
cash ratio and net working capital to total assets ratio are indicator of the liquidity
position.
Current ratio, quick ratio and net working capital to total assets ratio of Janata Bank
Limited are satisfactory except cash ratio.
Since, the quick ratio is widely accepted as the best available test of the liquidity
position of a firm, therefore it can say from the point of view of quick ratio that
overall liquidity position is satisfactory. So, Janata Bank Limited has sufficient liquid
funds to meet its short term obligations and financially the bank is in better position.

ii) Profitability Position

Unlike the outside parties which are interested in one aspect of the financial position
of a firm, the management is constantly concerned about the overall profitability of
the enterprise. The profitability of a firm can be measured by the profitability ratios.
Profitability ratios based on sales are profit margin and expenses ratio. Gross profit,
net interest margin, net non interest margin, net operating margin, operating profit
margin and operating ratio of Janata Bank Limited are higher. It indicates favorable
purchasing and markup policies, the ability of management to develop sales volume,
the bank management and staff well enough and able to keept the growth of revenues
ahead of rising costs, the ability of the bank to earn non interest revenue and operating
profitably.
Since the tax management efficiency ratio of Janata Bank Limited is lower so its
performance is poor incase of tax management.

Page | 58
As operating ratio is widely accepted as the best available test of the expenses ratio,
therefore it can say from the light of operating ratio that position of Janata Bank
Limited is better. So, form the view point of Profitability related to sales it can say
Janata Bank Limited is in better position.
In the view of administrative expenses ratio, expense control efficiency ratio, Janata
Bank Limited is in better position.
Profitability ratios based on investment are profitability related to equity shares and
profitability related to investment. The ROA, ROCE, ROI, Fund Management
Efficiency Ratio, Earning Per Share (EPS) and Dividend per Share shows a lower
ratio for Janata Bank Limited which indicates assets are not being utilized properly
and the inefficiency of the company to use of the capital employed overall efficiency
with which capital is used. Asset utilization ratio of the bank is higher which indicates
that the bank is efficiently managing and utilizing its assets and improving its
performance.
So, from the view of overall profitability the performance and position of Janata Bank
Limited is better.

iii) Long term Solvency Position

Ratio analysis is equally useful for assessing the long- term financial viability of a
firm. This aspect of the financial position of a borrower is of concern to the long –
term creditors, security analysts and the preset and potential owner of a business. The
long-run solvency is measured by the leverage/capital structure and profitability ratios
which focus on earning power and operating efficiency. Ratio analysis reveals the
strengths and weakness of a firm in this aspect. The long-run solvency of a company
can be measured by the use of leverage/solvency ratios named debt – equity, debt to
total assets, time interest earned ratio and proprietary ratio. Since, debt – equity, debt
to total assets, time interest earned ratio and proprietary ratio of the Janata Bank
Limited is higher, it indicates sufficient safety margin for the creditor, substantial
protection against shrinkage in assets, smaller claim of creditor, ability of to fulfill its
interest obligations and the ability of the owners in financing the assets. So, the
performance of Janata Bank Limited is better.

Page | 59
iv) Operating Efficiency Position
Yet another dimension of the usefulness of the ratio analysis, relevant from the view
point of management, is that it throws light on the degree of efficiency in the
management and utilization of its assets. Total assets turnover, current assets turnover
and net fixed assets turnover of Janata Bank Limited are higher which indicates that
Janata Bank Limited is more efficient in the utilization of assets. So, Janata Bank
Limited is financially in better position of and performing superior.
.

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4.2 Recommendations

Though Janata Bank Limited tries to give the best customer support, the have some
lake and linkage compare to other bank of the same generation. The recommendations
for this report are:
i. Janata Bank Limited should increase its cash and decrease its current liabilities
to increase its liquid funds to meet its short term obligations. Then the bank’s
position will improve more than its current position.
ii. The bank should introduce more products based on the market demand.
iii. Janata Bank Limited should offer international credit card, because in modern
world the use of increasing paper currencies is decreasing.
iv. The bank can open branches or foreign booth because many people send
money from abroad every year to Bangladesh.
v. The bank should finance to the consumer goods, because many people in the
country wants to buy consumer goods from bank loan.

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4.3 Conclusion
As an organization Janata Bank Limited has earned the reputation of top banking
operation in Bangladesh. The organization is much more structured compared to any
other public commercial bank in Bangladesh. It is relentless in pursuit of business
innovation and improvement. It has a reputation as a partner of consumer growth.
With a bulk of qualified and experienced human resource, Janata Bank Limited can
exploit any opportunity in the banking sector. It is pioneer in introducing many new
products and services in the banking sector of the country. Moreover, in the overall-
banking sector, it is unmatched with any other banks because of its wide spread
branch networking thought the country.

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 Bibliography
A. From Books
i. Rose Peter S., Hudgins Sylvia C. , 2013, Bank Management & Financial
Services, 7th Edition, McGraw –Hill: India
Measuring and Evaluating Performance of Banks and Their Principal
Competitors, Chapter 6, Page 163 to 175.
ii. Khan M Y & Jain P K, 2013 - 2013, McGraw – Hill: New Delhi
“Financial Statement Analysis”, Chapter 7, Page 7.1 – 7.37.
iii. Kevin S., 2013, Portfolio Management, 2nd Edition, Prentice- Hall: India
“Industry and Company Analysis”, Chapter 5, Page 51 to 63.
iv. Gitman Lawrence J., 2013-2014, Principles of Managerial Finance, 11th
Edition, Pearson Education: India
“Financial Statements and Analysis”, Chapter 2, Page 44 to 77.

B. From Web Site

i. http://www.google.com
ii. http://www.wikipedia.com
iii. http://www.janatabank-bd.com/list_ComBr.htm
iv. http://www.janatabank-bd.com/jb3.htm
v. http://www.janatabank-bd.com/jb5.htm
vi. http://www.janatabank-bd.com/
vii. http://www.janatabank-bd.com/jbmap2.htm
viii. http://www.janatabank-bd.com/jbmap5.htm
ix. http://www.janatabank-bd.com/loan_tta.htm
x. http://www.janatabank-bd.com/loan_tdc.htm
xi. http://www.janatabank-bd.com/jb15.htm
xii. http://www.janatabank-bd.com/jb4.htm
xiii. http://www.janatabank-bd.com/finance2014.htm
xiv. http://www.janatabank-bd.com/Janata%20Bank%20Q-Cash
%20Web/Janata%20Bank_Q-cash.htm

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 C. Journals
i. Annual report of Janata Bank Limited-2013
ii. Annual report of Janata Bank Limited -2014
iii. Annual report of Janata Bank Limited -2015
iv. Annual report of Janata Bank Limited -2016
v. Annual report of Janata Bank Limited – 2017

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 1. APPENDICES
Financial Statements of Janata Bank
Consolidated Balance Sheet of Janata Bank
As of 31 December, 2013, 2014 & 2015

2015 (Taka) 2016 (Taka) 2017 (Taka)

PROPERTY AND ASSETS

Cash 10,758,201,577 9,749,023,636 15,579,764,948
Cash in Hand (including foreign currency 2,420,194,910 2,410,912,091 4,238,274,687
Balance with Bangladesh Bank & it’s agent
8,338,006,667 7,338,111,545 11,341,490,261
bank(s)
Balances With Other Banks
4,379,254,726 4,295,778,407 8,301,313,776
& Financial Institutions
In Bangladesh 2,002,358,451 1,801,800,027 4,880,254,938
Outside Bangladesh 2,376,896,275 2,493,978,380 3,421,058,838
Money at Call and Short Notice 6,659,111,800 7,988,357,211 8,567,349,333
Investments: 29,130,028,339 24,785,386,038 55,862,930,391
Government 28,528,322,241 24,253,044,620 55,341,083,318
Others 601,706,098 532,341418 521,847,073
Loans & Advances 124,467,442,655 138,492,512,749 121,204,454,973
Loans, cash credit & over draft etc. 123,444,336,206 129,618,690,178 112,857,503,942
Bills purchased & discounted 1,023,106,449 8,873,822,571 8,346,951,031
Fixed Assets including Premises, furniture
1,339,077,619 1,287,323,038 2,424,177,100
and fixtures
Other Assets 11,433,059,409 26,065,548,257 32,121,123,227
Non- Banking Assets - - -

TOTAL PROPERTY AND ASSETS 188,166,176,125 212,663,929,336 244,061,113,748

LIABILITIES AND CAPITAL

Liabilities:
Borrowings from other banks,
1,523,783,291 3,481,408,924 3,504,298,538
financial Institutions and agents
Deposits and Other Accounts 168,896,952,055 182,946,535,961 198,635,892,054
Current accounts & other accounts 26,194,359,568 28,388,268,805 35,510,834,780
Bills payable 1,247,980,977 1,558,986,159 1,880,796,480
Savings bank deposits 53,106,162,164 59,817,089,793 62,723,703,936
Fixed deposits 88,348,449,346 93,182,191,204 98,520,556,858
Bearer certificates of deposits - - -
Other deposits - - -
Other Liabilities 13,855,452,082 31,883,735,217 36,271,297,007
Total Liabilities 184,276,187,428 218,311,680,102 238,411,487,599
Capital/ Shareholders' Equity
Paid- up Capital 2,593,900,000 2,593,900,000 2,593,900,000
Statutory Reserve
206,390,709 206,390,709 238,158,192
Legal Resrve
Other Reserve 1,089,697,988 1,520,141,141 2,688,600,459
Surplus in Profit and Loss Account - (9,968,182,616) 128,967,498
Total Shareholders’ Equity 3,889,988,697 (5,647,750,766) 5,649,626,149

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TOTAL LIABILITES AND SHARE
188,166,176125 212,663,929,336 244,061,113,748
HOLDERS’ EQUITY

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 Consolidated Balance Sheet of Janata Bank
As of 31 December, 2016 & 2017
2017 (Taka) 2016 (Taka)

PROPERTY AND ASSETS    

Cash 16,527,172,701 16,531,848,663
Cash in Hand (including foreign currency 4,036,224,616 3,611,730,895
Balance with Bangladesh Bank & it’s agent bank(s) 12,490,948,085 12,920,117,768
Balances With Other Banks
5,979,793,315 4,123,427,486
& Financial Institutions
In Bangladesh 3,523,399,750 2,215,123,115
Outside Bangladesh 2,456,393,565 1,908,304,371
Money at Call and Short Notice 7,088,744,458 5,533,529,807
Investments: 57,823,525,987 72,533,203,682
Government 57,255,466,440 70,617,630,895
Others 568,059,547 1,915,572,787
Loans & Advances 144,678,183,388 166,359,485,619
Loans, cash credit & over draft etc. 137,184,639,985 157,540,717,889
Bills purchased & discounted 7,493,543,403 8,818,767,730
Fixed Assets including Premises, furniture and fixtures 2,446,425,915 2,685,195,290
Other Assets 32,613,451,158 25,896,092,822
Non- Banking Assets - -

TOTAL PROPERTY AND ASSETS 267,157,296,922 293,662,783,369

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 LIABILITIES AND CAPITAL
Liabilities:
Borrowings from other banks,
587,633 31,565,952
financial Institutions and agents
Deposits and Other Accounts 221,335,750,734 246,175,046,479
Current accounts & other accounts 42,563,114,833 49,424,716,702
Bills payable 2,433,587,338 2,604,256,004
Savings bank deposits 68,045,122,155 72,351,530,297
Fixed deposits 108,293,926,408 121,794,543,476
Bearer certificates of deposits - -
Other deposits - -
Other Liabilities 36,758,590,982 33,595,800,525
Total Liabilities 258,094,929,349 279,802,412,956
Capital/ Shareholders' Equity
Paid- up Capital 2,593,900,000 5,000,000,000
Statutory Reserve 1,491,956,374 2,644,948,976
Legal Resrve 44,946,031 52,892,954
Other Reserve 2,645,620,801 6,141,468,825
Surplus in Profit and Loss Account 2,285,944,367 21,059,658
Total Shareholders’ Equity 9,062,367,573 13,860,370,413

TOTAL LIABILITES AND SHARE HOLDERS’

267,157,296,922 293,662,783,369
EQUITY

Consolidated Profit & Loss Accounts of Janata Bank Limited

for the year ended 31 December 2014,2013 & 2015

2017 (Taka) 2016 (Taka) 2015(Taka)

Operating Income
     

Interest income 14,867,965,209 12,953,199,215 6,017,323,687

Interest paid on deposits and borrowings etc 10,376,982,626 9,306,491,598 (4,617,377,131)

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Net Interest Income 4,490,982,583 3,646,707,617 1,399,946,556

Investment Income 5,602,314,548 4,157,161,357 1,574,424,013

Commission, Exchange & Brokerage 2,870,042,705 3,115,680,661 1,365,728,105

Other Operating Income 733,788,146 696,002,901 315,905,604

TOTAL OPERATING INCOME ( A) 13,697,127,982 11,615,552,536 4,656,004,278

Operating Expenses

Salary & Allowances 3,996,581,522 3,614,838,109 1778,857,649

Rent., Taxes, Insurance, electricity etc. 415,175,431 364,630,527 180,934,433

Legal Expenses 5,370,963 5,575,795 (1,603,763)

Postage, Stamp, Telecommunication etc. 1,865,896 1,149,396 (51,557)

Stationary, Printing, Advertisement etc. 106,649,043 89,716,011 39,709,012

Chief Executive's salary & allowances 8,400,000 7,093,000 252,219

Director's Fees 1,062,000 918,000 438,500

Auditor”s Fee 2,166,608 1,739,541 2,767,189

Depreciation of Bank's Assets 183,171,745 166,179,887 84,497,899

Other Expenses 398,560,520 360,647,772 163,381,550

TOTAL OPERATING EXPENSES (B) 5,119,004,128 4,612,488,038 2,249,183,131

Profit / (Loss) Before Provision (C) = (A - B) 8,578,123,854 7,003,064,498 2,406,821,147

Provision for loan and advances 688,063,124 485,000,000 566,943,530

Provision for Off Balance Sheet items 35,200,000 468,591,131 232,652,000

Provision for other assets (Fraud forgery) 100,000,000 - (193,807,562)

Provision for valuation adjustment 890,000,000 889,000,000 -

Provision for SAF & Gratuity 650,000,000 - -

Other provisions 450,000,000 411,149,592 120,000,000

Total Provision (D) 2,813,263,124 2,253,740,729 725,787,968

Total Profit / (Loss) before income taxes (C - D) 5,764,860,730 4,749,323,769 1,681,033,179

Provision for taxation - - -

Prior Year 793,305,697 2,396,370,517 34,707,124

Current Year 1,006,603,730 1,143,690,508 1,083,069,516

Net Profit / ( Loss) after Taxation 2,981,874,480 3,145,682,406 15,476,452

Add : Transfer from other reserve 37,547,378 41,774,131 145,732,920

Less : Last year adjustment (15,099,020) - -

Net Profit / ( Loss) after adjustment 3,004,322,838 3,187,156,537 161,209,372

Appropriations

Statutory Reserve 1,152,972,146 949,864,754 32,241,874

Previous Year Adjustment - 303,964,762 -

General Reserve - - -

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Legal Reserve 7,916,798 15,435,205 -

Surplus transferred to Retained Earnings 1,843,433,894 1,917,891,816 128,967,498

Earning per Share ( EPS) 78.02 83.88 6

Consolidated Profit & Loss Accounts of Janata Bank Limited

for the year ended 31 December 2016 & 2017

2016 (Taka) 2017 (Taka)

Operating Income
   

Interest income 10,845,776,719 8,903,790,279

Interest paid on deposits and borrowings etc (7,931,369,879) (6,174,949,307)

Net Interest Income 2,914,406,840 2,728,840,972

Investment Income 2,153,480,404 1,574,926,103

Commission, Exchange & Brokerage 2,718,842,941 2,202,604,806

Other Operating Income 554,068,233 462,182,320

TOTAL OPERATING INCOME ( A) 8,340,798,418 6,968,554,201

Operating Expenses

Salary & Allowances 3,218,629,623 2,819,406,561

Rent., Taxes, Insurance, electricity etc. 323,709,508 308,136,471

Legal Expenses 16,166,093 16,572,531

Postage, Stamp, Telecommunication etc. 9,028,341 8,118,979

Stationary, Printing, Advertisement etc. 85,009,348 83,051,231

Chief Executive's salary & allowances 438,425 395,880

Auditor”s Fee 2,232,844 1,682,083

Depreciation of Bank's Assets 158,792,344 160,601,342

Other Expenses 312,898,985 268,926,305

TOTAL OPERATING EXPENSES (B) 4,127,274,512 3,667,266,383

Profit / (Loss) Before Provision (C) = (A - B) 4,213,523,906 3,301,287,818

Provision for loan and advances 8,708,011,098 2,623,000,000

Provision for Off Balance Sheet items - -

Provision for other assets (Fraud forgery) 1,999,230,365 500,000,000

Provision for valuation adjustment - -

Provision for SAF & Gratuity 9,599,256,932 -

Other provisions 132,000,000 178,287,818

Total Provision (D)

Total Profit / (Loss) before income taxes (C - D) (16,224,974,489) -

Provision for taxation

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Prior Year - -

Current Year - -

Net Profit / ( Loss) after Taxation (9,968,182,616) -

Add : Transfer from other reserve

Less : Last year adjustment

Net Profit / ( Loss) after adjustment

Appropriations

Statutory Reserve - -

Previous Year Adjustment - -

General Reserve - -

Legal Reserve - -

Surplus transferred to Retained Earnings (9,968,182,616) -

Earning per Share ( EPS) - -

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