3.

1 Financial Statement

A financial statement is a formal record of the financial activities and position of a

business or an individual. These statements provide a summary of an entity's financial
performance and financial position over a specific period of time. There are three
primary types of financial statements typically used in business:

A. Income Statement (Profit and Loss Statement):

1. The income statement shows the revenues earned and the expenses incurred
by a business over a specific period, usually a month, quarter, or year.
2. It calculates the net income or net loss by subtracting expenses from revenues.
3. Key components include revenue, cost of goods sold (COGS), gross profit,
operating expenses, and net income.

B. Balance Sheet (Statement of Financial Position):

1. The balance sheet provides a snapshot of a company's financial position at a
specific point in time (typically the end of a fiscal period).
2. It consists of assets (what the company owns), liabilities (what the company
owes), and shareholders' equity (the residual interest in assets after deducting
liabilities).
3. The balance sheet must always satisfy the accounting equation: Assets =
Liabilities + Equity.

C. Cash Flow Statement:

1. The cash flow statement shows how cash and cash equivalents move in and
out of a company during a specific period.
2. It is divided into three sections: operating activities (cash generated from day-
to-day operations), investing activities (cash spent on investments), and
financing activities (cash obtained or repaid to investors and creditors).
3. The statement helps assess a company's ability to generate cash and meet its
obligations.

Page | 22
These financial statements are essential tools for various stakeholders, including
business owners, investors, creditors, and regulators, as they provide insights into the
financial health and performance of an entity. They help in decision-making, financial
analysis, and compliance with accounting standards and regulations.

Preparing accurate financial statements is crucial for assessing a company's

profitability, solvency, and liquidity. Publicly traded companies are required to
publish their financial statements regularly to provide transparency to investors and
the public. Additionally, financial statements are used by individuals and families to
track their personal financial health and make informed financial decisions.

3.2 Financial Analysis

Financial analysis is the process of evaluating an organization's financial

performance, stability, and viability by examining its financial statements and other
relevant financial data. It involves assessing various financial metrics and ratios to
gain insights into the company's financial health and make informed decisions.
Financial analysis is essential for investors, creditors, management, and other
stakeholders to gauge the company's ability to generate profits, meet its financial
obligations, and create value.

Here are some key aspects and methods of financial analysis:

A. Ratio Analysis:

Ratio analysis involves calculating and interpreting financial ratios based on

information from a company's financial statements.

Common financial ratios include profitability ratios (e.g., profit margin, return on
assets, return on equity), liquidity ratios (e.g., current ratio, quick ratio), leverage
ratios (e.g., debt-to-equity ratio, interest coverage ratio), and efficiency ratios (e.g.,
inventory turnover, accounts receivable turnover).

These ratios provide a snapshot of different aspects of a company's financial

performance and help assess its strengths and weaknesses.

Page | 23
B. Trend Analysis:

Trend analysis involves comparing financial data over multiple periods to identify
trends and patterns.

It helps assess whether the company's financial performance is improving or

deteriorating over time.

Key financial statements, such as income statements and balance sheets, are analyzed
for trends in revenue, expenses, assets, liabilities, and equity.

C. Horizontal Analysis:

Horizontal analysis, also known as trend analysis, compares financial data for
different periods side by side.

It helps identify changes and variances in financial figures, such as revenue growth or
cost increases, over time.

D. Vertical Analysis:

Vertical analysis involves expressing each line item on a financial statement as a

percentage of a base item.

It helps assess the composition of various accounts on the financial statement, such as
the proportion of expenses to total revenue.

E. Comparative Analysis:

Comparative analysis involves comparing a company's financial performance to that

of its competitors or industry benchmarks.

It helps identify areas where the company outperforms or lags behind its peers.

F. Cash Flow Analysis:

Cash flow analysis focuses on a company's cash flows from operating, investing, and
financing activities.

It assesses the company's ability to generate and manage cash, which is crucial for its
operations and growth.

Page | 24
 G. Risk Assessment:

Financial analysis also includes evaluating the financial risks faced by a company,
such as liquidity risk, credit risk, and market risk.

This assessment helps stakeholders make decisions regarding investments, lending, or

business operations.

Financial analysis provides valuable insights into a company's financial health and
helps stakeholders make informed decisions. It is used for various purposes, including
investment decisions, credit assessments, strategic planning, and performance
evaluation. Effective financial analysis requires a deep understanding of accounting
principles, financial statements, and industry-specific factors.

3.3 Financial Performance

Financial Performance is a complete evaluation of a company’s overall standing in

categories such as assets, liabilities, equity, expenses, revenue & overall profitability.
It measured through various business-related formulas that allows users to calculate
exact details regarding a company’s potential effectiveness.

Financial performance is a subjective measure of how well a firm can use assets form
its primary mode of business & generate revenues. The term is also used as a general
measure of a firm’s overall financial health over a given period.

3.3.1 Tools of Financial Performance Analysis

i. Vertical Analysis

In this type of analysis study is made of quantitative relationship of the various items
of financial statements on a particular date.

This analysis is useful in comparing the performance of several companies in the

same groups, divisions or departments in the same company. This analysis is not
much helpful in proper analysis of firm’s financial position because it depends on the

Page | 25
 data for one period. This analysis is also called static analysis as it based on data from
one date or for one accounting period.

ii. Horizontal Analysis

In this type of analysis financial statements for a number of year are reviewed and
analyzed. The current year’s figures are compared with the standard or base year and
changes are shown usually in the form of percentages. This analysis helps the
management to have an insight into levels and areas of strengths and weakness. This
analysis also called Dynamic Analysis as it based on data from various years.

iii. Ratio Analysis

The first step in executing analysis of financial statement is to carefully read the
statement and their accompanying note. The use of ratio analysis has become wide
spread to the extent that computerized financial statement analysis program prepared
financial ratio as part of their overall analysis.

Ratio analysis is a powerful tool of financial performance analysis. Ratio is defined as

“the indicated quotient of two mathematical expressions” and “the relationship
between two or more things”.

In financial analysis a ratio is used as an index or yardstick for evaluating the

financial position and performance of the firm. Ratio Analysis plays and important
role in determining the financial strength & weakness of a company relative to that of
other companies in the same industry.

3.3.2 Basic Financial Ratios

Financial Ratio can be defined to measure almost any aspect of a company

performance. In general analysts use ratio as tool in identifying areas of strength or
weakness in a company. Ratio however tend to identify symptoms rather than
problem.

A ratio whose value is judged to be different or unusually high or low may help
identify significant event but will seldom provide enough information in end of it to
identify the reasons for an events occurrence.

1. Liquidity Ratio
2. Operating Efficiency Ratio

Page | 26
 3. Leverage (debt) Ratio
4. Profitability Ratio
5. Market Ratio
3.4 Liquidity Ratio

Liquidity is a measure of short run ability to meet obligation as they become due.
Liquidity is a pre-requisite for the very survival of firm. If a firm falls to meet its
current obligations, it continued existence is doubtful.

1. Short run Solvency Ratio

A. Current Ratio

Current ratio indicates how the firm management has been able to meet current
liability i.e. Accounts payable with the current asset. The current ratio is computed by
dividing current asset divided by current liability. Current asset normally include
cash, marketable securities and inventory; current liability consists of accounts
payable, short term notes payable, current maturity of a long term debt and accrued
expense. This proportion is a proportion of the association’s transient dissolvability of
the company’s liquidity. It shows the capacity of the organization to meet its present
commitments. On the off chance that the present proportion is excessively as they
measure. On the off chance that the proportion is too high the firm may have an over
the top interest in current resources or be underutilizing monetary credit. A few
creators think about 2:1 as standard for current proportion. This proportion is figured
by separating the present resources by the present liabilities. It is communicated as
pursues.

Current Ratio = Current Assets/Current Liabilities

year 2018 2019 2020 2021 2022

Current Asset 616,709 710,153 926,893 1,051,688 1,294,963
Current Liabilities 568,212 656,086 855,671 1,001,706 1,181,750
Table 01: list of current assets and liabilities
Source: Annual Report of IBBL 2022

year 2018 2019 2020 2021 2022

Page | 27
 Current Ratio 1.08:1 1.082:1 1.083:1 1.05:1 1.09:1
Table 02: Current Ratio
Source: Annual Report of IBBL 2022

1.1
1.09
1.09 1.083
1.08 1.082
1.08
1.07
1.06
1.05
1.05
1.04
1.03
2018 2019 2020 2021 2022

Current ratio

Figure 01: Current Ratio

Interpretation: A current ratio of 2:1 is considered as ideal. If the ratio is less than 2,
it may be difficult for a firm to pay current liabilities. If the ratio is more two it is an
indicator of idle funds. Current ratio of figure 01 indicates that IBBL is in bad
position.

B. Quick Ratio

The quick ratio sometimes called the acid test ratio, serve the same general purpose as
the current ratio but excludes inventory from current assets.

This is done because inventories are typically a firm’s least liquid current asset and
hence the assets on which losses are most likely to occur in the event of liquidation.
Thus the quick ratio measures a firm ability to pay its current liability by converting
its most liquid assets in to cash.

Quick Ratio = (Current Asset-inventory)/Current liability

year 2018 2019 2020 2021 2022

Quick Ratio 1.08:1 1.082:1 1.083:1 1.05:1 1.09:1

Page | 28
 Table 03: Quick Ratio

Source: Annual Report of IBBL 2022

1.085

1.075

1.065

1.055

1.045

1.035

2018 2019 2020 2020 2021

Quick Ratio 1.08 1.082 1.08 1.05 1.08

Quick Ratio

Figure 02: Quick Ratios of IBBL

Interpretation: A quick ratio of 2:1 is considered as ideal. If the ratio is less than 2, it
may be difficult for a firm to pay current liabilities. If the ratio is more two it is an
indicator of idle funds. Quick ratio of figure 02 indicates that IBBL is in bad position.

C. Cash Ratio

The ratio of cash and cash equivalents of its current liabilities. The cash ratio is most
commonly used as a measure of company liquidity. It can therefore determine if, and
how quickly, the company can repay its short term debt. A strong cash ratio is useful
to creditors when deciding how much debt, if any they would be willing to extend to
the asking party.

Cash ratio is calculated using the following formula:

Cash Ratio= Cash + Cash Equivalents/ Current liabilities

Page | 29
2. Liquidity of current assets

A. Inventory Turnover Ratio (ITOR) and Days of Inventory Holding (DIH)

Inventory turnover ratio: shows how rapidly the inventory is turning over in to
receivable or cash through sales, it is used to measure the inventory management
efficiency of a business.

ITOR= Cost of goods sold/inventory

Days of inventory holding: measuring the average number of days it take the
company to sell its inventory of finished goods, it is the number of days the inventory
remains in the stock until it is sold.

DIH= 360/ITOR

B. Accounts Receivable Turnover Ratio (ARTO) and Average Collection

Period (ACP)

Average Collection Period: Measures the average number of days it takes for the
company to collect it account receivable or number of day’s sales tied up in
receivables.

ACP = Accounts Receivable / Average Sales per year

C. Total Asset Turnover (TATO): It is the ratio of a company’s sales to its

assets. It is an efficiency ratio which tells how successfully the company is
using its assets to generate revenue.

TATO = Net Sales / Total Asset

D. Fixed Asset Turnover (FATO): the fixed asset turnover measure how well
the firm was its long term (fixed) asset and shows how many dollars of sales is
supported one dollar of fixed asset.

Page | 30
 FATO = Net Sales / Fixed Asset

3.5 Leverage Ratios

The short term creditors, bankers and suppliers of raw material, are more concerned
with the firm’s current debt paying liability. On the other hand, long term creditors,
like debenture holders financial institution are more concerned with the firm long
term financial strength. In Fact, a firm should have a stronger shorter as well as long
term financial position.

Leverage ratio may be calculated from the balance sheet items to determine the extent
to which operating profit are sufficient to cover the fixed changed.

A. Debt Equity Ratio

Several debt ratios maybe used to analyze the long term solvency of a firm. The firm
may be interested in knowing the proportion of the interest-bearing debt (also called
funded debt) in capital structure. It may be therefore, compute debt ratio by dividing
total debt (TD) by capital employed (CE) or total net asset (NA).

Because of the equity of capital employed and net asset, debt ratio can be defined a
total debt divided by net asset.

Debt-Equity Ratio = Total liabilities / Total Equity

B. Earning Coverage Ratio

The earning coverage ratio is a financial ratio that provides a quick picture of a
company’s ability to pay the interest charges on its debt. The “coverage” aspect of the
ratio indicates how many times the interest could be paid from available earnings well
above its interest requirements is in an excellent position to weather possible financial
Page | 31
storms. By contrast, a company that barely manages to cover its interest costs may
easily fall into bankruptcy if its earnings suffer for even a single month.

Earning Coverage Ratio = EBIT/ Interest Expense

3.6 Operating Efficiency Ratio

1. Asset Management

A. Accounts Receivable turnover

Accounts Receivable Turnover is a financial ratio that measures how efficiently a

company manages its accounts receivable. Accounts receivable represent the amounts
owed to a company by its customers for goods or services sold on credit. This ratio
helps assess how quickly a company is able to collect payments from its customers.

A higher accounts receivable turnover ratio generally indicates that a company is

collecting payments from its customers more quickly, which is a positive sign of
efficient cash flow management. Conversely, a lower ratio may indicate that a
company is having difficulty collecting payments, which could be a cause for
concern.

The formula for calculating the accounts receivable turnover is:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

B. Inventory Turnover

Inventory turnover is a financial ratio that measures how efficiently a company

manages its inventory. It indicates how many times a company's inventory is sold and
replaced during a specific period, typically a year. A higher inventory turnover ratio
generally indicates that a company is managing its inventory efficiently.

A higher inventory turnover ratio indicates that a company is selling its inventory
more quickly, which can free up working capital and reduce carrying costs. However,
a very high ratio may suggest that a company is struggling to maintain sufficient
inventory levels to meet customer demand.

The formula for calculating inventory turnover is:

Page | 32
Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory

C. Accounts Payable Turnover

Accounts Payable Turnover is a financial ratio that measures how efficiently a

company manages its accounts payable, which represents the amount of money a
company owes to its suppliers or creditors for goods and services purchased on credit.
This ratio helps assess how quickly a company is paying off its suppliers or how
efficiently it manages its trade credit.

A higher accounts payable turnover ratio generally indicates that a company is paying
off its suppliers more quickly, which can be seen as a positive sign of efficient cash
management. However, an extremely high ratio might suggest that a company is
taking advantage of extended credit terms at the expense of supplier relationships.

The formula for calculating the accounts payable turnover ratio is:

Accounts Payable Turnover = Total Purchases / Average Accounts Payable

D. Fixed Asset Turnover

Fixed Asset Turnover is a financial ratio that measures a company's efficiency in

using its fixed assets, such as property, plant, and equipment, to generate sales or
revenue. This ratio helps assess how effectively a company is utilizing its investment
in fixed assets to generate income.

A higher fixed asset turnover ratio generally indicates that a company is using its
fixed assets efficiently to generate revenue. It suggests that the company is making
effective use of its investments in property, plant, and equipment. Conversely, a lower
ratio may indicate that a company is not using its fixed assets as efficiently, which
could be a sign of underutilized assets or inefficiencies in operations.

Page | 33
The formula for calculating the fixed asset turnover ratio is:

Fixed Asset Turnover = Net Sales / Average Fixed Assets

E. Total Asset Turnover

Total Asset Turnover is a financial ratio that measures a company's efficiency in using
its total assets to generate revenue or sales. It provides insights into how effectively a
company is utilizing its assets to generate income. This ratio is important for assessing
a company's overall asset management and operational efficiency.

A higher Total Asset Turnover ratio generally indicates that a company is using its
assets efficiently to generate revenue. It suggests that the company is effectively
leveraging its investments in both fixed and current assets to drive sales. On the other
hand, a lower ratio may suggest that the company is not making optimal use of its
assets, which could indicate operational inefficiencies or underutilized resources.

The formula for calculating the Total Asset Turnover ratio is:

Total Asset Turnover = Net Sales (or Revenue) / Average Total Assets

3.7 Profitability Ratio

It describes the firms past profitability. Even if there is little evidence that past
profitability will indicate the future prospect. Profitability ratio measure the success of
the firm’s management in earning a net return from the resources entrusted to them
specifically, profitability ratio can be used to answer such question as how much of
each sale was management able to convert in to profit? And did the company
shareholders receive an adequate return on their investment. For discussion purpose it
is better to divide profitability in to two groups.

i. Margin
ii. Returns

Page | 34
 i. Margin

It is important from a profit stand point that the firm be able to generate adequate
profit on each unit of sales. It sales lack of sufficient margin of profit; it is
different for the firm to convert its fixed cost, fixed cost changes on debt and to
earn profit for shareholders.

The profit ratio discussed here is commonly referred to as profit margin and
include the gross profit margin, operating profit margin and net profit margin.

A. Gross Profit Margin

Gross Profit Margin ratio shows the profit relating to sales after the direct
production costs are deducted. It may be used as an indicator of the efficiency of
the production operating and the relation between production cost and selling
price.

Gross Profit Margin = (Sales – COGS)/Net sales

A high gross profit margin ratio is a sign of good management. A gross margin ratio
may increase due to any of the following factors. Higher sales prices cost of goods
sold remaining constant. Lower cost of goods sold, sales, sales prices remaining
constant. A combination of variations in sales price and cost the margin widening. An
increase in the proportionate volume of higher margin items.

year 2018 2019 2020 2021 2022

% of ratio 51% 49% 47% 49% 49%
Table 04: Gross profit Margin

Page | 35
 Source: Annual Report of IBBL 2022

Figure 03: Gross profit margin

Interpretation: Gross profit margin in figure 03 indicates that IBBL is in a stable

position for from 2021 year to 2022 year.

B. Operating Profit Margin

Moving down the income the next statements the next profit figure in countered is net
operating income.

The Operating Profit Margin reflects the firms operating expenses as well as its cost
of goods sold. Therefore, this ratio serves as on overall measure of operating
effectiveness.

Working profit alludes to the benefit of an undertaking, which is gotten subsequent to

deducting every single working cost from gross benefit. This proportion sets up the
connecting between working benefit and deals. This proportion demonstrates the
segment staying out of each taka worth of offers after all working expense and costs
have 52%
51%
51%
been
50%
met. 49% 49% 49%
49%
The 48%
47%
47%
46%
45%
44%
2018 2019 2020 2021 2022

Gross Margin Ratio

higher the proportion, the better is the general productivity of the undertaking.
Working benefit proportion is going 4%-6% is views as standard with the end goral of
correlation and control by a few creators.

Page | 36
Operating profit Ratio = (Operating profit/Net interest income) x 100

year 2018 2019 2020 2021 2022

% of ratio 25% 24% 16% 18% 19%
Table 05: Operating Profit Margin
Source: Annual Report of IBBL 2022

30%

25%
25% 24%

20% 19%
18%
16%
15%

10%

5%

0%
2018 2019 2020 2021 2022

Operating Profit Margin

Figure 04: Operating profit margin

C. Net Profit Margin

The final profit margin considered involves the net after that profit of the firm as a
percent of sales.

Net profit margin is one of the most closely followed numbers in finance.
Shareholders look at net profit margin closely because it shows how good a company
is at converting revenue into profits available for shareholders.

The proportion uncovers the general gainfulness of the worry that is the reason it is
extremely helpful to the proprietors and forthcoming financial specialists. It
additionally demonstrates the board effectiveness in assembling, administrating and
moving the items. Net benefit is acquired while working costs, intrigue & measures
by isolating benefit after assessment by deals.

Net Profit Ratio = (Net profit/Net interest income) x 100

Page | 37
 ii. Returns

This category of profitability ratio attempts to measure firm profit in relation to the
capital invested by owners and creditors. If the firm cannot produce a satisfactory
profit on its assets base, it may be misusing the assets.

A. Rate of Return on Asset (ROA)

The relationship of the earnings of a business to its total income is a important

indicators of the effectiveness of management in influencing a return to suppliers of
capitals as well as methods of predicting future earnings.

Profit for assets proportion of a bank gives a thought of how productivity a bank is
utilizing its resources for creates benefit. It demonstrates the capacity of the board to
secure stores at a sensible expense and put them in productive ventures. This
proportion is determined to gauge the benefit after the expenses against the sum put
resources into aggregate advantages for discover whether resources are being used
appropriately or not. A few creators consider 10% to 12% rate profit for aggregate
resources as sensible standard for a beneficial firm and this might be considered as
sensible standard for the chose endeavors. Profit for Assets (ROA) is determined by
isolating the yearly income of a bank but the aggregate resources.

So it tends to be said that the equation of ROA is –

ROA = (Earnings Available for common stockholders / Total Assets) x 100

year 2018 2019 2020 2021 2022

% of ratio .64% .50% .35% .30% .36%
Table 06: ROA
Source: Annual Report of IBBL 2022

Page | 38
 0.70%

0.60%

0.50%

0.40%

0.64%
0.30%
0.50%
0.20%
0.35% 0.36%
0.30%
0.10%

0.00%
2018 2019 2020 2021 2022

ROA

Figure 05: ROA

Interpretation: From the above figure 05, Return on asset for past 5 years are in
declining trend which is not good for the organization.

B. Return on Investment (ROI)

Return on investment (ROI) is the concept of an investment of some resource yielding

a benefit to the investor. A high ROI means the investment gains compare favorably
to investment cost. As a performance measure, ROI is used to evaluate the efficiency
of an investment or to compare the efficiency of a number of different investments. In
purely economic terms, it is one way of considering profits in relation to capital
invested.

ROI = ROA = EBIT (1-T)

year 2018 2019 2020 2021 2022

% of ratio .64% .50% .35% .30% .36%
Table 07: ROI
Source: Annual Report of IBBL 2022

Page | 39
 0.70%

0.60%

0.50%

0.40%

0.64%
0.30%
0.50%
0.20% 0.36%
0.35%
0.30%
0.10%

0.00%
2018 2019 2020 2021 2022

ROI

Figure 06: ROI

Interpretation: From the above figure 06, Return on Investment for past 5 years are
in declining trend which is not good for the organization.

C. Rate of return on Equity

To measure how effectively the resource provide by company shareholders are being
utilized, analysis calculate the rate of return on equity shares for potential investors as
a rough indication of the long term return which they may anticipate the ratio is
calculated by dividing net income reduced by divide on preference share by average
equity share capital.

Profit for Equity is a proportion that estimates an enterprise’s productivity by

uncovering how much benefit an organization creates with the cash investors have
contributed. ROE is communicated as a rate. By & large, the higher this arrival the
happier is the proprietors. A rising ROE recommends that an organization is
expanding its capacity to create benefit without requiring as much capital. It likewise
shows how well an organization’s administration is ending the investors’ capital.

Falling ROE is typically an issue.

Page | 40
ROE = Earnings available for common stockholders / Common Stock equity x
100

year 2018 2019 2020 2021 2022

% of ratio 11.07% 9.08% 7.38% 7.19% 8.67%
Table 08: ROE
Source: Annual Report of IBBL 2022

12.00% 11.07%
10.00% 9.08% 8.67%
8.00% 7.38% 7.19%

6.00%

4.00%

2.00%

0.00%
2018 2019 2020 2021 2018

ROE

Figure 07: ROE

Interpretation: From the above figure 07, Return on Equity for past 5 years are in
declining trend from year 2018 to year 2022. Which shows the bad condition of
IBBL.

3.8 Market Measures Ratio

Four market ratios of particular interest to the investor are earning per common share,
the price-to-earnings ratios, and the dividend payout ratio and dividend yield. Despite
the accounting scandals, including Enron and World.com, which illustrated the flaws
in the earnings numbers presented to the public, investors continue to accept and rely
on the earnings per share and price-to-earnings ratios. A discussion of these ratios is
included because the reporting of these numbers does, in fact, have a significant
impact on stock price changes in the marketplace. The authors hope, however, that
readers of this book understand that a thorough analysis of the company, its
environment and its financial information offers a much better gauge of the future
prospects of the company than looking exclusively at EPS and P/E ratio. These two

Page | 41
ratios based on an earnings number that can be misleading at times given the many
accounting choices and techniques used to calculate it. Earnings per share are net
income for the period divided by the weighted average number of common share
outstanding.

The topics to be covered here are:

 Earnings per share

 Dividend Yield
 Price-Earnings Ratio

A. Earnings Per Share

Year 2018 2019 2020 2021 2022
EPS in TK. 3.77 3.31 2.81 2.88 3.68
Table 09: EPS
Source: Annual Report of IBBL 2022
4 3.77 3.67
3.5 3.31
3 2.81 2.88
2.5
2
1.5
1
0.5
0
2018 2019 2020 2021 2022

EPS in TK.

Figure 08: EPS

Interpretation: From the above figure 08, Earning per share of IBBL is increasing
from 2020-2022 which is a good sign.

B. Dividend Yield
Year 2018 2019 2020 2021 2022
Result 10% 10% 10% 10% 10%
Table 10: Dividend Yield
Source: Annual Report of IBBL 2022

Page | 42
 12%
10% 10% 10% 10% 10%
10%

8%

6%

4%

2%

0%
2018 2019 2020 2021 2022

DY

Figure 09: DY
Interpretation: Dividend yield is constant for the years shows in figure 09.

C. Price Earnings Ratio

Year 2018 2019 2020 2021 2022
Result 11.62 6.42 5.77 9.54 8.70
(in times)
Table 11: P/E Ratio
Source: Annual Report of IBBL 2022

P/E ratio
14
12 11.62

10 9.54
8.7
8
6.42
5.77
6
4
2
0
2018 2019 2020 2021 2022

Figure 10: P/E ratio

Interpretation: From the above figure 10, Price earnings ratio in 2018 was in good
but from 2019 to year 2022, it is in bad condition.

3.9 Horizontal Analysis

Islami Bank Bangladesh Limited (Balance Sheet)

Particulars 2022 Δ% 2021
Property and Assets

Page | 43
 Cash 123,504,792,624 -50% 246,163,386,116
Balance with other banks and 110,787,004,358 45% 76,156,107,566
financial institutions
Placement with banks & other - - -
financial institutions
Investments in shares & 90,454,663,436 -5% 94,819,400,466
securities
Investments 1,461,365,497,513 23% 1,191,173,000,246
Fixed assets including premises, 18,437,320,088 .32% 18,378,446,533
furniture and fixtures
Other assets 33,530,927,106 260% 9,302,458,646
Non-banking assets - - -
Total property and assets 1,838,080,205,126 12% 1,635,992,799,574
Liabilities and Capital
Liabilities
Placement from banks & other 187,438,369,400 4% 36,765,300,000
financial institutions
Deposits & other accounts 1,410,445,429,339 2% 1,381,979,529,497
Mudaraba bond 31,000,000,000 .73% 30,775,840,000
Other liabilities 139,575,739,102 16% 120,327,845,671
Deferred tax liabilities 1,458,513,201 7% 1,582,990,129
Total liabilities 1,769,918,051,042 13% 1,571,431,505,297
Capital/ shareholders' equity 68,162,154,084 6% 64,561,294,277
Total liabilities & 1,838,080,205,126 12% 1,635,992,799,574
shareholders' equity
For the year June 2022
Table 12: Horizontal Analysis of Balance Sheet
Particulars 2022 Δ% 2021
Investment income 87,984,257,253 20% 73,410,087,847
Profit paid on mudaraba (54,077,050,268) 20% (44,930,228,823)
deposits
Net investment income 33,907,206,985 19% 28,479,859,024
Income from investments in 2,701,469,616 17% 2,304,788,376

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 shares & securities
Commission, exchange & 9,397,462,838 29% 7,273,391,872
brokerage income
Other operating income 6,522,977,186 24% 5,268,738,480
Operating income 18,621,909,640 25% 14,846,918,728
Total operating income 52,529,116,625 21% 43,326,777,752

Operating expenses
Salary & allowances 20,253,126,623 17% 17,298,912,375
Rent, taxes, insurances, 2,135,157,124 28% 1,662,516,208
electricity etc.
Legal expenses 8,480,848 28% 6,606,709
Postage, stamps and 130,172,344 27% 102,411,364
telecommunication etc.
Stationery, printing and 298,775,659 23% 243,750,534
advertisement etc.
Chief executive's salary & 18,069,000 4% 17,380,000
fees
Directors' fees & expenses 3,587,978 3,723,142
Shari'ah supervisory 1,713,265 (4%) 1,311,930
committee's fees & expenses
Auditors' fees 3,450,000 (14%) 4,025,000
Depreciation and repair to 1,680,741,446 3% 1,634,257,492
bank's assets
Zakat expenses 970,999,128 8% 894,913,964
Other expenses 5,777,435,198 18% 4,902,559,344
Total operating expenses 31,281,708,613 17% 26,772,368,061
Profit/ (loss) before 21,247,408,011 28% 16,554,409,690
provision
Provision for investments & 6,364,930,031 25% 5,072,923,726
off- balance sheet exposures
Total profit/(loss) before 14,592,921,537 27% 11,441,284,869
taxes

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Provision for taxation for the 8,669,475,910 27% 6,802,081,988
period
Net profit/(loss) after tax 5,923,445,627 28% 4,639,202,881

Islami Bank Bangladesh Limited (Profit & Loss Statement)

For the year June 2022

Table 13: Horizontal Analysis of Profit-loss Statement

Source: Annual Report of IBBL 2022

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 Total Assets

Cash

Balance with other banks and financial institutions

Investments in shares & securities

Investments

Fixed assets including premises, furniture and fixtures

Other assets

Interpretation:
In 2022, IBBL spend more money on other assets around 80% of income are invested
in other assets. The other 20% of income are fixed and other assets.

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 Total Liabilities

13%

6%

Payable Retained Earnings

Interpretation:
The chart shows the total liabilities, the liabilities are divided into two entities
Retained Earnings and Payable. The retained earnings is half of the liabilities.

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3.11 Vertical Analysis

Islami Bank Bangladesh Limited (Balance Sheet)

Particulars 2022 Δ% 2021
Property and Assets
Cash 123,504,792,624 7% 246,163,386,116
Balance with other banks and 110,787,004,358 6% 76,156,107,566
financial institutions
Placement with banks & other - - -
financial institutions
Investments in shares & 90,454,663,436 5% 94,819,400,466
securities
Investments 1,461,365,497,513 8% 1,191,173,000,246
Fixed assets including 18,437,320,088 1% 18,378,446,533
premises, furniture and
fixtures
Other assets 33,530,927,106 2% 9,302,458,646
Non-banking assets - - -
Total property and assets 1,838,080,205,126 100% 1,635,992,799,574
Liabilities and Capital
Liabilities
Placement from banks & other 187,438,369,400 10% 36,765,300,000
financial institutions
Deposits & other accounts 1,410,445,429,339 8% 1,381,979,529,497
Mudaraba bond 31,000,000,000 2% 30,775,840,000
Other liabilities 139,575,739,102 7% 120,327,845,671
Deferred tax liabilities 1,458,513,201 1% 1,582,990,129
Total liabilities 1,769,918,051,042 10% 1,571,431,505,297
Capital/ shareholders' equity 68,162,154,084 4% 64,561,294,277
Total liabilities & 1,838,080,205,126 100% 1,635,992,799,574
shareholders' equity
For the year June 2022
Table 14: Vertical Analysis of Balance Sheet
Islami Bank Bangladesh Limited (Profit & Loss Statement)
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 Particulars 2022 Δ% 2021
Investment income 87,984,257,253 148% 73,410,087,847
Profit paid on mudaraba (54,077,050,268) 91% (44,930,228,823)
deposits
Net investment income 33,907,206,985 57% 28,479,859,024
Income from investments in 2,701,469,616 5% 2,304,788,376
shares & securities
Commission, exchange & 9,397,462,838 16% 7,273,391,872
brokerage income
Other operating income 6,522,977,186 110% 5,268,738,480
Operating income 18,621,909,640 314% 14,846,918,728
Total operating income 52,529,116,625 21% 43,326,777,752

Operating expenses
Salary & allowances 20,253,126,623 17% 17,298,912,375
Rent, taxes, insurances, 2,135,157,124 28% 1,662,516,208
electricity etc.
Legal expenses 8,480,848 28% 6,606,709
Postage, stamps and 130,172,344 27% 102,411,364
telecommunication etc.
Stationery, printing and 298,775,659 23% 243,750,534
advertisement etc.
Chief executive's salary & 18,069,000 4% 17,380,000
fees
Directors' fees & expenses 3,587,978 3,723,142
Shari'ah supervisory 1,713,265 (4%) 1,311,930
committee's fees & expenses
Auditors' fees 3,450,000 (14%) 4,025,000
Depreciation and repair to 1,680,741,446 3% 1,634,257,492
bank's assets
Zakat expenses 970,999,128 8% 894,913,964
Other expenses 5,777,435,198 18% 4,902,559,344
Total operating expenses 31,281,708,613 17% 26,772,368,061

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 Profit/ (loss) before 21,247,408,011 28% 16,554,409,690
provision
Provision for investments & 6,364,930,031 25% 5,072,923,726
off- balance sheet exposures
Total profit/(loss) before 14,592,921,537 27% 11,441,284,869
taxes
Provision for taxation for the 8,669,475,910 27% 6,802,081,988
period
Net profit/(loss) after tax 5,923,445,627 28% 4,639,202,881
For the year June 2022

Table 15: Vertical Analysis of Profit-loss Statement

Source: Annual Report of IBBL 2022

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