Download - Goldmen vs Bank Asia
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EXECUTIVE SUMMARY
In this report we analyzed the reasons of bankruptcy of Goldman Sachs and analyzed performance of
Bank Asia. We tried to analyze major data and compared both institutions why one is successful and
another one is not.
Both banks are big institutions in their respective country. We collected annual reports of both financial
institutions and worked on it. We performed trend analysis and graphically presented each of the ratios
we calculated. We compared three years timeline
Both institutions had up and downs in the past. Based on our analysis, we came up with the findings that
why Goldman Sachs was bankrupted and the possibilities that in the future of BANK ASIA mightbecome bankrupted in the near future. The fact is that since BANK ASIA bank does not operate in a
globalized manner thus it is less vulnerable to such market problems and become an extinct
organization.
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Company Overview:
Bank Asia Ltd.
Bank Asia has been launched by a group of successful entrepreneurs with recognized standing in the
society. The management of the Bank consists of a team led by senior bankers with decades of
experience in national and international markets. The senior management team is ably supported by a
group of professionals many of whom have exposure in the international market.
It set milestone by acquiring the business operations of the Bank of Nova Scotia in Dhaka, first in the
banking history of Bangladesh. It again repeated the performance by acquiring the Bangladesh
operations of Muslim Commercial Bank Ltd. (MCB), a Pakistani bank.
In the year 2003 the Bank again came to the limelight with oversubscription of the Initial Public
Offering of the shares of the Bank, which was a record (55 times) in our capital market's history and its
shares commands respectable premium.
The asset and liability growth has been remarkable. Bank Asia has been actively participating in the
local money market as well as foreign currency market without exposing the Bank to vulnerable
positions. The Bank's investment in Treasury Bills and other securities went up noticeably opening up
opportunities for enhancing income in the context of a regime of gradual interest rate decline.
Bank Asia Limited started its service with a vision to serve people with modern and innovative banking
products and services at affordable charge. Being parallel to the cutting edge technology the Bank is
offering online banking with added delivery channels like ATM, Tele-banking, SMS and Net Banking.
And as part of the bank's commitment to provide all modern and value added banking service in keeping
with the very best standard in a globalize world.
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Stock Market Performance of Bank Asia (DSE, 2010-2011)
Market Capitalization:
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Performance of Bank Asia in last 5 yrsRATIO ANALYSIS
Ratio analysis is the most effective way to determine any companys financial position. Each numbers in
the ratio has some inherent meaning. For determining and comparing the financial condition of these
two banks we used some ratio. We tried our best to determine from our knowledge.
The ratios we used are:
Liquidity Ratio Debt Ratio Profitability
Market
We used these four types of ratio in order to determine the companys position. We didnt use
turnover ratios because as a bank doesnt hold inventories or sales. The calculated ratios for the two
banks Bank Asia & Gol dman Sachs are given in the following pages.
Liquidity Ratio:
Current Ratio :
The Current Ratio is one of the most commonly cited financial ratios. It measures the firms ability to
meet its short term obligations. Generally, the higher the Current Ratio, the more liquid the firm is
considered to be.
In the year 2007, Bank Asia had current assets 1.14 times higher than current liabilities. In the year
2008, Bank Asia had current assets 1.13 times higher than current liabilities.
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Again, from the year 2007 to 2008 the ratio had decreased i.e. the performance of Bank Asia had
declined.
From 2007 to 2008 the ratio had gone down because the relative increase in current liabilities was higher
than relative increase in current assets.
Bank Asia Bank Limited
Ratio Name/Year 2007 2008 2009
Current Ratio 1.14 times 1.13 times 1.15
Quick Ratio 1.14 times 1.13 times 1.15
Goldman Sachs:
Items/Year
2009 2008 2007
Current Ratio (CA/CL) 0.490405 0.521152 0.275622
Quick Ratio [(CA-Inventory)/CL] 0.490405 0.521152 0.275622
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Interpretations:
In the year 2007, Bank Asia had current assets 1.14 times higher than current liabilities while
Goldman Sachs had 0.27.
2007 2008 2009
Current Ratio 1.14 1.13 1.15
1.115
1.12
1.125
1.13
1.135
1.14
1.145
1.15
1.155 Current Ratio(BA)
2009 2008 2007
Current Ratio 0.490405 0.521152 0.275622
0
0.1
0.2
0.3
0.4
0.5
0.6
G o
l d m a n S a c h e s
Current Ratio(GS)
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In the year 2008, BANK ASIA had current assets 1.13 times higher than current liabilities and
Goldman Sachs had around 0.53. From the year 2007 to 2008 the ratio had decreased i.e. the
performance of BANK ASIA had declined but Goldmans ratio increased.
From 2008 to 2009 BANK ASIA s ratio had gone but again GOLDMAN SACHS ratio also went
down because of relative increase in liabilities.
Quick Ratio or Acid Test Ratio -
The Quick Ratio or Acid Test Ratio is similar to the current ratio except that it excludes inventory,
which is generally the least liquid current asset. The quick ratio provides a better measure of overall
liquidity only when a firms inventory cannot be easily converted into cash. If inventory is liquid, the
current ratio is an overall measure of overall liquidity.
2009 2008 2007
Current Ratio 0.490405 0.521152 0.275622
0
0.1
0.2
0.3
0.4
0.5
0.6
Quick Ratio(GS)
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Since banks do not have any inventory, so for BANK ASIA & GS the Current Ratio and Quick Ratio or
Acid Test Ratio is the same.
Interpretations:
In the year 2007, BANK ASIA had current assets excluding inventory 1.14 times higher than
current liabilities. In the year 2008, BANK ASIA had current assets excluding inventory 1.13
times higher than current liabilities well GS was struggling at 0.27
From the year 2007 to 2008 the ratio had decreased i.e. the performance of BANK ASIA had
declined but GS performance increased
From 2008 to 2009 the ratio had gone down because the relative increase in current liabilities
was higher than relative increase in current assets excluding inventory.
2007 2008 2009
Quick Ratio 1.14 1.13 1.15
1.115
1.12
1.125
1.13
1.135
1.14
1.145
1.15
1.155
Quick ratio(BA)
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Leverage RatiosGoldman Sachs
Items/Year 2009 2008 2007
Debt Ratio = Total Debt / Total Asset (x or %) 1.53636 1.501547 1.503582
Long Term Debt Ratio = Long Term Debt / Total Asset (x or %) 0.365391 0.30797 0.230758
Debt Equity Ratio = Total Liability / Total Equity (x or %) 11.00529 12.74182 24.99371
TIE Ratio = EBIT / Interest Charges (x or %) 3.050615 0.359385 2.708308
Bank Asia
Ratio Name/Year 2007 2008 2009
Debt-To-Asset
Ratio
0.91 times 0.91 times 0.876
Total Debt-To-
Total Equity
10.47 times 10.45 times 7.10
Times Interest
Earned
1.13 times 1.01 times 1.14
Long term debt
ratio
0.68 0.72 0.78
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Debt-To-Asset Ratio:
The Debt-To-Asset Ratio measures the total debt of the company to total assets. In the year 2007 and
2008 the total debt of BANK ASIA was 0.91 times of their total assets. The ratio was constant from
2007 to 2008.The ratio was constant 2007 to 2008 because the relative increase in total debt was equal
to relative increase in total asset. In 2009 BANK ASIAS debt-asset drecreased which is actually a good
sign which means the company have enough money to pay it is debtholders.
If we look at Goldman Sachs the companys debt-asset increased this is a bad sign because the company
have much liability. It happened because of financial crisis they faced. The company will do better in
future we hope that.
2009 2008 2007
Debt Ratio = Total Debt /Total Asset (x or %)
1.53636 1.501547 1.503582
1.481.49
1.51.511.521.531.54
Debt Ratio = Total Debt / Total Asset
(Goldman Sachs)
2007 2008 2009
Debt-To-Asset Ratio 0.91 0.91 0.876
0.85
0.86
0.87
0.88
0.89
0.9
0.91
0.92
Debt-To-Asset Ratio
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Total Debt-To-Total Equity
The Total Debt-To-Total Equity Ratio measures the total debt of the company to total equity. In 2007
the total debt of BANK ASIA was 10.47 times of its total equity. In 2008 the total debt of BANK ASIA
was 10.45 times of its total equity.
So again BANK ASIAS 2009 debt to equity In 2009 was 7.1 and if we look at Goldman Sachs there is a
constant fall in a debt to equity which can be admired as a good sign for the company because higher
leverage is not good for a company
2007 2008 2009
Total Debt-To-Total Equity 10.47 10.45 7.1
0
2
4
6
8
10
12
Total Debt-To-Total Equity(BA)
2009 2008 2007
Debt Equity Ratio = Total
Liability / Total Equity (x or %)11.00529 12.74182 24.99371
0
5
10
15
20
25
30
Debt Equity Ratio = Total Liability / Total Equity(Goldman Sachs)
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Times Interest Earned (TIE) -
The Times Interest Earned (TIE) Ratio measures the firms ability to make contractual interest
payments. The higher its value, the better able the firm is to fulfill its interest obligation. In 2007, and
2008 the operating income was 1.13 times and 1.01 times of their interest expense respectively. The TIE
Ratio decreased from 2007 to 2008. The TIE ratio decreased from 2007 to 2008 because the relative
increase in EBIT was lower than relative increase in interest expense.
.
Again in 2009 BANK ASIAS TIE increased which is a good sign for the company. If we look at
Goldman Sachs we can see that in the year 2008 its TIE was lowest which a bad sign was indeed. But in
the year 2009 the companys TIE increased which is a good sign for the company and it is supportable.
2009 2008 2007
TIE Ratio = EBIT /Interest Charges (x or
%)3.050615 0.359385 2.708308
01234
TIE Ratio = EBIT / Interest Charges (x
or %)
2007 2008 2009
Times Interest Earned 1.13 1.01 1.14
0.9
0.95
1
1.05
1.1
1.15Times Interest Earned(BA)
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Long-term Debt Ratio: Long-term debt ratio determines the long term debt to the long term asset
which means that I tries to determine the proportion if asset is related to long term debt of the company.
If we look at BANK ASIA s condition from the year 2007 to 2008 companies long -term debt ratio is
increasing which can be accounted as a bad sign. The company is holding too much debt as asset. If we
look at Goldman Sachs we can find that its long term debt is also increasing both the companies shouldtry to solve this problem because liability is a huge issue for any company.
2009 2008 2007
Long Term Debt Ratio =Long Term Debt / Total
Asset (x or %)0.365391 0.30797 0.230758
00.10.20.30.4
Long Term Debt Ratio = Long TermDebt / Total Asset (Goldman Sach)
2007 2008 2009
Long term debt ratio 0.68 0.72 0.78
0.6
0.65
0.7
0.75
0.8
Long term debt ratio(BA)
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Profitability Ratios
2007 2008 2009
Return On Equity 11.29% 16.86% 17.29
0.00%
500.00%
1000.00%
1500.00%
2000.00%
Return On Equity(BA)
man SachsYear 2009 2008 2
Earning Power (BEP) = EBIT / TA (x or %) 0.039146 0.004277 0.02on Asset = Net Income / Total Asset (x or %) 0.026424 0.004251 0.0163On Equity = Net Income / Total Equity (x or %) 0.189284 0.036073 0.2710
Bank Asia Ltd.
Ratio Name/Year 2007 2008 2009
Basic Earning power 0.066 0.067 0.067Return On Assets 0.98% 1.46% 2.1
Return On Equity 11.29% 16.86% 17.29
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Goldman Sachs
2009 2008 2007
Return On Equity = Net Income/ Total Equity (x or %)
0.189284 0.036073 0.271005
0
0.05
0.1
0.15
0.2
0.25
0.3
Return On Equity = Net Income / Total Equity(Goldman Sachs)
Interpretation:For Bank Asia we can see during the year of 2007, 2008, and 2009 that ROE has been increasing in a
decent manner which simply means that the company is managing its assets and utilizing it efficiently.
In 2007, it was 11.29% and in 2009 it was 17.29%. It is a good indication for both the bank authority
and the consumers. Besides, if we see the profitability ratio of Goldman Sachs, we will see that ROEhad been decreasing in those years which were quite alarming for them. Therefore, it means that some
effective measures were required to improve the condition which they were lacking.
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Interpretation:For Bank Asia we can see during the year of 2007, 2008, and 2009 that ROA has been increasing in a
decent manner. In 2007, it was 0.98% and in 2009 it was 2.1%. It is a good indication for both the
bank authority and the consumers. Besides, if we see the profitability ratio of Goldman Sachs, we will
see that ROA had not been constant in those years which were quite alarming for them. Therefore, it
2007 2008 2009
Return On Assets 0.98% 1.46% 2.1
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
Return On Assets
2009 2008 2007
Return on Asset = NetIncome / Total Asset (x or
%)0.026424 0.004251 0.016303
00.005
0.010.015
0.020.025
0.03
Return on Asset = Net Income / Total Asset(x or %)
BANK ASIA
Goldman Sachs
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means that some effective measures were required to improve the condition which they were lacking.
Interpretation:For Bank Asia we can see during the year of 2007, 2008, and 2009 that the Basic Earning Power has
been increasing in a decent manner. In 2007, it was 0.066 and in 2009 it was 0.067. It is a good
indication for both the bank authority and the consumers. If the basic earning power is enhancing it
2007 2008 2009Basic Earning power 0.066 0.067 0.067
0.0654
0.0656
0.0658
0.066
0.0662
0.0664
0.0666
0.0668
0.067
0.0672
Basic Earning power
2009 2008 2007
Basic Earning Power(BEP) = EBIT / TA (x or
%)0.039146 0.004277 0.024744
00.005
0.010.015
0.020.025
0.030.035
0.040.045
Basic Earning Power (BEP) = EBIT / TA (xor %)
Goldman Sachs
BANK ASIA
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Market Ratios
Goldman Sachs:
2009 2008 2007
Items/Year
Earning Per Share = Net Income / Shares Outstanding
(Tk/share) 25.99029 5.025974 29.66496
Book Value per Share (BVPS) = Total Equity / SOS
(TK/share) 137.3087 139.3268 109.4629
P/E 0.012626 0.072782 0.01457
Bank Asia:
Ratio Name/Year 2007 2008 2009
Earnings Per Share(EPS)
Tk.40.50/share Tk.57.52/share 58.53
simply means that the bank is doing good and making their customer well satisfied. Besides, if we see
the profitability ratio of Goldman Sachs, we will see that the Basic Earning Power had not been
constant in those years which were quite alarming for them. It simply means that their business was
going out of the track and they were losing customers. Therefore, it means that some effective
measures were required to improve the condition which they were lacking.
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P/E Ratio 26.44 10.24 11.01
Book Value Per share 358 341 337.65
Earnings per Share: Earnings Per Share (EPS) is generally of interest to present or prospective
stockholders and management. EPS represents the number of dollars earned during the period on behalf
of each outstanding share of common stock.
2007 2008 2009
Earnings Per Share (EPS) 40.5 57.52 58.53
Earnings Per Share BA)
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Interpretations:
In 2007 GS had high EPS and BANK ASIA had low EPS
Due to financial crisis in 2008 Goldmans EPS went down but BANK ASIA experienced moreprofit
In 2009 both BANK ASIA and Goldman Sachs had experienced growth in profit. Mainly
GOLDMAN SACHES improved a lot.
P/E Ratio:
The P/E ratio is commonly used to assess the owners appraisal of share value. The P/E ratio measures
the amount that investors are willing to pay for each dollar of a firms earning. The higher the ratio the
better it is.
2009 2008 2007
Earning Per Share = Net Income /Shares Outstanding (Tk/share)
25.99029 5.025974 29.66496
05
101520
253035
Earning Per Share (Goldman Sachs)
2009 2008 2007
P/E 0.012626 0.072782 0.01457
0
0.02
0.04
0.06
0.08
P/E(GOlDMAN SACHES)
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Interpretations:
In 2007 and 2008 the shareholders of BANK ASIA were willing to pay Tk.26.44, Tk.10.24respectively per each dollar of reported earning but Goldman Sachs was not impressive
The P/E ratio decreased from 2007 to 2008 for both the companies
The P/E Ratio decreased from 2008 to 2009 because the price per share decreased and EPS
increased.
Book value per Share: BVPS estimates the total value of the par share currently holding and declared bythe company.
2007 2008 2009
P/E Ratio 26.44 10.24 11.01
P/E Ratio(BA)
2009 2008 2007Book Value per Share(BVPS) = Total Equity /
SOS (TK/share)137.3087 139.3268 109.4629
Book Value per Share (BVPS) = TotalEquity / SOS (TK/share)
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Interpretations:
Book value per share of the Goldman Sachs increased from the year 2007 to 2009 this because of
trying to hold shares more tightly
If we try to interpret the book value per share of BANK ASIA it went down because of some
unknown reasons.
Both the company should have tight control over these stuffs.
Comparison between Bank Asia & Goldman Sachs
Factor BANK ASIA Goldman Sachs
Market Price BANK ASIA s market price
is increasing or experiencing
a constant growth which is agood sign for the company
Due to financial crisis the
share price of GS collapsed
which result into thevolatility of market price
Earning Price BANK ASIA s eps is sound Although Goldman Sachs
faced problem in 2008 but the
company in doing well now
2007 2008 2009
Book Value Per share 358 341 337.65
325330335340345
350355360
Book Value Per share
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Price earning BANK ASIA s price earning
is decreasing
Goldman Sachs price earning
is in a stable way
Liquidity BANK ASIA s liquidity
sounds good
Goldmans liquidity is below
1 which is not good
Debt Bank Asia s debt figure
looks healthy
Goldman Sachs has excess
debt
Capitalization BANK ASIA s capitalizationsounds good
From the ratios we find thecondition is not satisfactory
Findings: It can be said that BANK ASIA is in a much better condition Although there are some problems with BANK ASIA but we hope that these problem will be
solved pretty soon
BANK ASIA comprises of tight control in finance BANK ASIA has already implemented Basel2 BANK ASIA has sufficient capital to support its business
Conclusion:
Under these circumstances we can say that BANK ASIA is not in a condition of bankruptcy that
Goldman Sachs faced 2years back in financial crisis all over the world.