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<ul><li><p>Come &amp; Join Us at VUSTUDENTS.net </p><p>For Assignment Solution, GDB, Online Quizzes, Helping Study material, Past Solved Papers, Solved MCQs, Current Papers, E-Books &amp; more. </p><p>Go to http://www.vustudents.net and click Sing up to register. </p><p> VUSTUENTS.NET is a community formed to overcome the disadvantages of distant learning and virtual environment, where pupils dont have any formal contact with their mentors, This community provides its members with the solution to current as well as the past Assignments, Quizzes, GDBs, and Papers. This community also facilitates its members in resolving the issues regarding subject and university matters, by providing text e-books, notes, and helpful conversations in chat room as well as study groups. Only members are privileged with the right to access all the material, so if you are not a member yet, kindly SIGN UP to get access to the resources of VUSTUDENTS.NET Regards VUSTUDENTS.NET TEAM. Virtual University of Pakistan </p><p>www.vustudents.netsomimalikvu</p></li><li><p>F i n a l P r o je c t F i n a n c e F I N 6 1 9 </p><p>Final Project FINANCIAL STATEMENT ANALYSIS OF </p><p>BANK AL FALAH </p><p>AND</p><p>HABIB BANK LIMITED</p><p>A REPORT </p><p>SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES, </p><p>VIRTUAL UNIVERSITY OF PAKISTAN </p><p>IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR </p><p>THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION </p><p>Submitted By Mc070400479 </p><p>Sheikh Waqas Ahmed </p><p>Department of Management Sciences, </p><p>Virtual University of Pakistan 1 </p><p>S h e i k h W a q a s A h m e d M c 0 7 0 4 0 0 4 7 9 </p></li><li><p>Fin a l Projec t Fin an ce FI N 619</p><p>Dedication</p><p>I would like to dedicate this project to my parents who have always encourage me </p><p>throughout in my academic career and make possible for me to stand where I am today. </p><p>2 S h e i k h W a q as A h m e d </p><p>M c 0 7 0 4 0 0 4 7 9 </p></li><li><p>Fin a l Projec t Fin an ce FI N 619</p><p>Acknowledgement</p><p>In the name of ALLAH, the most kind and most merciful. </p><p>First of all I m grateful to ALLAH ALMIGHTY, who bestowed me with health, abilities </p><p>and guidance to complete the project in a successful manner, and without HIS help I was </p><p>unable to perform this task. </p><p>More than anybody else, I would like to acknowledge my project advisor, Dr. </p><p>Muhammad Anwar for his never ending support and untiring efforts. He was always </p><p>there to guide me whenever I felt stuck off and his encouragement always worked as </p><p>moral booster for me. I have found him very helpful while discussing the tricky issues in </p><p>this dissertation work. I would also like to thank Mr. Majid Hassan principal JMCIT </p><p>Lahore. His critical comments on my work have certainly made me think of new ideas </p><p>and techniques. </p><p>I am thankful to all my class fellow specially Ambreen Fatima and all other friends who </p><p>help me during the project when problem arises, specially my seniors Muhammad Yasir, </p><p>Tanzila Riaz, Fatima and Saeed Mahmood for their kind help. </p><p>3 S h e i k h W a q as A h m e d </p><p>M c 0 7 0 4 0 0 4 7 9 </p></li><li><p>Fin a l Projec t Fin an ce FI N 619 </p><p>Executive Summary</p><p>Common Size Financial Statement discloses the internal structure of the firm. It indicates </p><p>the existing relationship between sales and each income statement account. It shows the </p><p>mix of assets that produce income and the mix of the sources of capital, whether by </p><p>current or long-term debt or by equity funding.</p><p> The primary objective of financial analysis is to forecast or determine the actual financial </p><p>status and performance of a project </p><p>4 S h e i k h W a q as A h m e d </p><p>M c 0 7 0 4 0 0 4 7 9 </p><p>http://www.answers.com/topic/common-size-financial-statementvustudents.netvu</p></li><li><p>F i n a l P r o je c t F i n a n c e F I N 6 1 9 </p><p>TABLE OF CONTENT </p><p>Section I</p><p>a) Introduction. 6</p><p>1.1 Background .. 6</p><p>1.2 Introduction of the organizations business sector 7</p><p>1.3 Companys Introduction ... 8</p><p>Introduction of Habib Bank. 8</p><p>Introduction of Bank AL Falah... 9</p><p>1.4 List of competitors 10</p><p>1.5 Objectives of Projects. 10</p><p>1.6 Significance of the Project. 11</p><p>b) Processing and Analysis.... 13</p><p>Data Collection Sources.. 13</p><p>Data Collection Tools. 14</p><p>Data Processing and Analysis. 14</p><p>Project proceedings. 14</p><p>1. Ratio Analysis.. 14</p><p>a) Liquid Ratio... 15</p><p>b) Leverage Ratio 18</p><p>c) Profitability Ratio 24</p><p>d) Activity Ratio.... 32</p><p>e) Market Ratios. 33</p><p>f) Statement of Cash Flow. 38</p><p>2. Common Size Analysis 39</p><p>a) Horizontal Analysis... 40</p><p>b) Vertical Analysis.. 49</p><p>5</p><p>S h e i k h W a q a s A h m e d</p><p>M c 0 7 0 4 0 0 4 7 9</p></li><li><p>F i n a l P r o je c t F i n a n c e F I N 6 1 9</p><p>3 Review of Descriptive Information.... 59 </p><p>4 Comparisons .. 60 </p><p>a) Trend Analysis 60 </p><p>b) Industry Averages and Comparisons with Competitors 65 </p><p>c) Summary... 65 </p><p>d) Conclusions / Findings. 66 </p><p>e) Recommendation . 67 </p><p>Section II. 68 a) Introduction of the student. LXVIII </p><p>b) Appendix/Appendices....LXVIII </p><p>c) Bibliography...LXXXVII </p><p>Section I </p><p>a) Introduction </p><p>Financial statements for banks present a different analytical problem than manufacturing </p><p>and service companies. As a result, analysis of a bank's financial statements requires a </p><p>distinct approach that recognizes a bank's somewhat unique risks. </p><p>Banks take deposits from savers, paying interest on some of these accounts. They pass </p><p>these funds on to borrowers, receiving interest on the loans. Their profits are derived </p><p>from the spread between the rate they pay for funds and the rate they receive from </p><p>borrowers. By managing this flow of funds, banks generate profits, acting as the </p><p>intermediary of interest paid and interest received and taking on the risks of offering </p><p>credit. As one of the most highly regulated banking industries in the world, investors </p><p>have some level of assurance in the soundness of the banking system. As a result, </p><p>investors can focus most of their efforts on how a bank will perform in different </p><p>economic environments. In this project, I am trying to provide assistance to the investors, </p><p>by showing them the performance of two banks underlying the same functions. </p><p>1.1 Background of the project: </p><p>Financial Statement Analysis is a method used by interested parties such as investors, </p><p>creditors, and management to evaluate the past, current, and projected conditions and </p><p>performance of the firm. Ratio analysis is the most common form of financial analysis. It 6 </p><p>S h e i k h W a q a s A h m e d M c 0 7 0 4 0 0 4 7 9 </p><p>http://www.investopedia.com/terms/d/deposit.asphttp://www.investopedia.com/terms/f/fundamentalanalysis.asp</p></li><li><p>F i n a l P r o je c t F i n a n c e F I N 6 1 9 </p><p>provides relative measures of the firm's conditions and performance. Horizontal Analysis </p><p>and Vertical Analysis are also popular forms. Horizontal analysis is used to evaluate the </p><p>trend in the accounts over the years, while vertical analysis, also called a Common Size </p><p>Financial Statement discloses the internal structure of the firm. It indicates the existing </p><p>relationship between sales and each income statement account. It shows the mix of assets </p><p>that produce income and the mix of the sources of capital, whether by current or long-</p><p>term debt or by equity funding. When using the financial ratios, a financial analyst makes </p><p>two types of comparisons. </p><p>Financial ratio analysis is an important topic and is covered in all mainstream corporate </p><p>finance textbooks. It is also a popular agenda item in investment club meetings. It is </p><p>widely used to summarize the information in a company's financial statements in </p><p>assessing its financial health. In today's information technology world, real time financial </p><p>data are readily available via the Internet. Performing financial ratio analysis using </p><p>publications, such as Robert Morris Associates Annual Statement Studies, Dun &amp; </p><p>Bradstreets Key Business Ratios, Moodys Manuals, Standard &amp; Poors Corporation </p><p>Records, Value Line Investment Survey, etc., is no longer efficient. Since students and </p><p>investors now have easy access to on-line databases, the assignments on financial ratio </p><p>analysis can be modified accordingly to enhance learning. </p><p>In the current scenario where financial instability is rife and financial intuitions are </p><p>becoming popular, when it comes to investing, the sound analysis of financial statements </p><p>is one of the most important elements in the fundamental analysis process. At the same </p><p>time, the massive amount of numbers in a company's financial statements can be </p><p>bewildering and intimidating to many investors. However, through financial ratio </p><p>analysis, we shall be able to work with these numbers in an organized fashion and present </p><p>them in a concise form easily understandable to both the management and interested </p><p>investors. </p><p>1.2 Introduction of the organizations business sector: </p><p>The organizations is choose, are from the banking sector. Banking primarily the business </p><p>of dealing in money and instruments of credit. Banks were traditionally differentiated </p><p>from other financial institutions by their principal functions of accepting deposits, subject </p><p>7 S h e i k h W a q a s A h m e d </p><p>M c 0 7 0 4 0 0 4 7 9 </p><p>http://www.answers.com/topic/common-size-financial-statementhttp://www.answers.com/topic/common-size-financial-statementhttp://www.answers.com/topic/vertical-analysishttp://www.answers.com/topic/horizontal-analysis</p></li><li><p>F i n a l P r o je c t F i n a n c e F I N 6 1 9 </p><p>to withdrawal or transfer by check, and of making loans. A bank is a financial institution </p><p>licensed by a government. Its primary activity is to lend money. Many other financial </p><p>activities were allowed over time. For example banks are important players in financial </p><p>markets and offer financial services such as investment funds. In some countries such as </p><p>Germany, banks have historically owned major stakes in industrial corporations while in </p><p>other countries such as the United States banks are prohibited from owning non-financial </p><p>companies. In Japan, banks are usually the nexus of a cross-share holding entity known </p><p>as the zaibatsu. In France, banc assurance is prevalent, as most banks offer insurance </p><p>services (and now real estate services) to their clients. The level of government regulation </p><p>of the banking industry varies widely, with counties such as Iceland, the United Kingdom </p><p>and the United States having relatively light regulation of the banking sector, and </p><p>countries such as China having relatively heavier regulation. </p><p>Banks have traditionally been distinguished according to their primary functions. </p><p>Commercial banks, which include national- and state-chartered banks, trust companies, </p><p>stock savings banks, and industrial banks, have traditionally rendered a wide range of </p><p>services in addition to their primary functions of making loans and investments and </p><p>handling demand as well as savings and other time deposits. Mutual savings banks, until </p><p>recently, accepted only savings and other time deposits, and offered limited types of </p><p>loans and services. The fact that commercial banks were able to expand or contract their </p><p>loans and investments in accordance with changes in reserves and reserve requirements </p><p>further differentiated them from mutual savings banks, where the volume of loans and </p><p>investments was governed by changes in customers' deposits. Membership in the Federal </p><p>Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but </p><p>optional for other banks. </p><p>1.3 Companys introduction: </p><p>Introduction of Habib Bank of Pakistan: </p><p>Habib Bank Limited commonly referred to as "HBL" and head-quartered in Habib </p><p>Bank Plaza, Karachi, Pakistan, is the largest bank in Pakistan. HBL is a Banking </p><p>Company, which is engaged in Commercial &amp; Retail Banking and related services </p><p>domestically and overseas. HBL was incorporated on 25th August 1941 and operated in </p><p>8 S h e i k h W a q a s A h m e d </p><p>M c 0 7 0 4 0 0 4 7 9 </p><p>http://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Habib_Bank_Plazahttp://en.wikipedia.org/wiki/Habib_Bank_Plazahttp://www.answers.com/topic/savings-bankhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Icelandhttp://en.wikipedia.org/wiki/Regulationhttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Zaibatsuhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Government</p></li><li><p>F i n a l P r o je c t F i n a n c e F I N 6 1 9</p><p>the private sector until its nationalization in 1974. HBL has been approved for </p><p>privatization and the privatization commission has selected a Financial Advisor to </p><p>prepare a comprehensive plan and assist in the sale process. The government has </p><p>appointed a professional management team to restructure the bank and to recover and </p><p>clean its doubtful and classified portfolio. HBL is one of the largest commercial bank of </p><p>Pakistan. It accounts for a substantial share (20%) of the total commercial banking </p><p>market in Pakistan with a network of 1,705 domestic branches; 55 overseas branches in </p><p>26 countries spread over Europe, the Middle East, Far East, Asia, Africa and the United </p><p>States; 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT) </p><p>LTD. Karachi, Habib Finance International LTD (Hong Kong) and Habib Finance </p><p>Australia Ltd. Sydney; 2 Joint Ventures namely Habib Nigeria Bank Ltd. (40%) and </p><p>Himalayan Bank Ltd. (20%) and 2 representative offices in Iran and Egypt. It continues </p><p>to dominate the commercial banking sector with a major market share in inward foreign </p><p>remittances (55%) and loans to small industries, traders and farmers. HBL is one of </p><p>Pakistan's premier banks in terms of deposits and advances with a huge domestic and </p><p>international network. HBL provides its customers a complete range of banking products </p><p>and services including retail banking, corporate and institutional banking, trade finance, </p><p>consumer finance and credit cards. HBL is currently rated AA (Long term) and A-1+ </p><p>(Short term) and has a balance sheet size of over USD 11 billion. It is the first Pakistani </p><p>bank to raise Tier II Capital from external sources. </p><p>Vision: </p><p>Enabling people to advance with confidence and success </p><p>Mission: </p><p>To make our customer prosper, our staff excels and creates value for shareholders </p><p>Introduction of Bank Al Falah: </p><p>Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group. </p><p>Bank Alfalah Limited was incorporated on June 21st, 1992 as a public limited company </p><p>under the Companies Ordinance 1984. Its banking operations commenced from </p><p>November 1st ,1997. The bank is engaged in commercial banking and related services as </p><p>defined in the Banking companies ordinance, 1962. The Bank is currently operating </p><p>9 S h e i k h W a q a s A h m e d </p><p>M c 0 7 0 4 0 0 4 7 9 </p><p>http://en.wikipedia.org/w/index.php?title=Abu_Dhabi_Group&amp;action=edit&amp;redlink=1http://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/Small</p></li><li><p>Fin a l Projec t Fin an ce FI N 619</p><p>through 195 branches in 74 cities, with the...</p></li></ul>

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