Ratio Analysis

SILK BANK – YES

WE CAN!
FINANCIAL REPORTING ANANLYSIS

SHEHNEEZ SAEED
Introduction:
On September 15, 2001, under the supervision of the State Bank of Pakistan (SBP), the
institution then known as the Prudential Bank was acquired by the management and associates
of the Saudi Pak Industrial and Agricultural Investment Company (Pvt) Ltd (SAPICO).
On March 31, 2008, a Consortium comprising of IFC, Bank Muscat, Nomura International and
Sinthos Capital led by senior bankers Mr. Shaukat Tarin and Mr. Sadeq Sayeed acquired 86.55%
stake in Silkbank for around $213 million or $0.47 per share (PKR 29.3 equivalent per share).
Under the new leadership, the Bank will continue to focus on SME & Consumer financing
resulting in efforts of increased profitability.
 Ratio Analysis

S.no. Ratio Formula Working Result Comments

1. Current Ratio Current Assets /Current 72967910/120979169 0.60 times Weak
Liabilities current
ratio
2. Quick Ratio Current Assets – 8165282/120979169 0.06 times Very weak
Inventories – Prepaid / quick ratio
Current Liabilities
3. Avg. Receivables*365/Annual 706572*365/9959053 25.8 = 26 Good
Collection Credit Sales days
Period
4. Receivable Annual Credit Sales/ 9959053/706527 14.09 times Receivable
Turnover Receivables Turnover is
Ratio good
5. Inventory Cost of Goods Sold/ Avg. Not Applicable _____ ________
Turnover Inventory
6. Fixed Asset Sales/ Net Fixed Assets 9959053/4101219 2.42 times Fixed Asset
Turnover Turnover is
good
7. Debt to Net Total Debt/ Net Worth 122979234/12054588 10.2 times The Bank
Worth is Heavily
in Debt
8. Interest Income before interest 6610821/5325689 1.24 Weak
Coverage and Taxes/ interest interest
charges coverage
9. Gross Profit Sales – Cost of Goods 4349362/9959053*10 43 % Very good
Margin Sold /Sales*100 0
10. Net Profit Net Income after taxes/ 738553/9959053*100 7.41% NP margin
Margin Sales *100 is very less
11. Return on Stock Dividend/Net Not Applicable as no __ _______
Common worth- Par value of dividend was paid in
Stock preferred stock 2016
12. Return on Net Income after 738553/135033822 0.54% Weak
Asset taxes/Total Tangible *100 Return on
Assets Assets
13. Return on E.A.T/Total 738553/77998099*10 0.94 % Bad Return
Total Stockholder’s Equity 0
Stockholder’s
Equity
14. Return on EBIT/Total liabilities and 6610821/135033822 4.8% Weak
Total Equity Stockholder’s Equity Return
& Liability
15. Total Asset Sales /Total Tangible 9959053/135033822 0.07 times Very Weak
Turnover Asset
16. Cash Ratio Cash Equivalents + 7458710/120979169 0.06 times Very weak
Marketable Securities/
Current Liabilities

17. Days Sales in Ending Inventory * Not Applicable _____ ______

Inventory 365/COGS
18. Operating Accounts Receivable NOT Applicable ______ ________
Cycle Turnover in Days+
Inventory turnover in
days
19. Working Current Assets – Current 72967910 - 120979169 (48011259) Working
Capital Liabilities Capital is
Negative
20. Sales to Sales/ Working Capital 9959053/(48011259) (0.20) Sales to
Working times working
Capital capital is
very weak
 Conclusion

By calculating all the ratios it is concluded that Silk Bank is earning good with a low net profit margin but
its return on Stock holders equity is very low and the bank is highly in debt. Even though Silk Bank has
weak Current and Quick Ratios but its evident that banks usually work on lending and borrowings so
such ratios are weak but it is not a preferable choice for investors to invest in it’s shares.