Internship Report On Financial Statements Analysis of FSIBL by Moez Ansary (LU)

Financial Statements Analysis of an
Islami Bank in Bangladesh

A Study on First Security Islami
Bank Limited, Bangladesh
Internship Report
on
Financial Statements Analysis of an Islami Bank in Bangladesh:
A Study on First Security Islami Bank Limited, Bangladesh
Supervised By:
Mr. Iehit Sharma
Senior Lecturer
Department of Business Administration
Leading University, Sylhet
Submitted By:
Moez Al Azim Ansary
ID: 1101010183
Major in Accounting & Information Systems
BBA Program
27th Batch
Submitted To:
For the partial fulfillment of the requirements for the
Degree of Bachelor of Business Administration (BBA)
Major in Accounting & Information Systems (AIS)
at
Leading University
Sylhet, Bangladesh
Date of Submission: February 28, 2015
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FSIBL/AMBI2O|5I25
Date 05.01 .2015
To whom it may Concern
This is to certify that Mr. Moez Al Azim Ansary S/o Abdul Hannan Ansary of 68 Payra
Jhamarpar, Dargah Moholla, Sylhet, an intern from Leading University, Sylhet has
completed his internship program at our Branch with adequate dedication sincerity &
responsibility. During the three months period Mr. Moez Al Azim Ansary rotated
himself to various working desk at the branch and has learned many primary level and
useful practical banking functions.
We wish him every success in life.
2-al{
Md. Sohrab Uddin Molla
Asstt Vice President & Manager
AMBARKHANABRANCH:
MWenCornplex,Holding#&f0,641,WalrebsBSS,WestAmbarkhana,Sylhet-3100
www.fsiblbd.com
iv
Letter of Transmittal
February 28, 2015
Mr. Iehit Sharma
Senior Lecturer
Subject: Submission of Internship Report
Dear Sir,
With the passage of time, I am now standing on the verge of Bachelors of
Business Administration program, hence am finalized with my Internship Report
named Financial Statements Analysis of an Islami Bank in Bangladesh: A
Study on First Security Islami Bank Limited, Bangladesh. Vividly enough, my
research comprises adequate endeavors. But no doubt, my contribution will be
best evaluated on your sharp scale of acceptance and remarks.
Consequently, I am transmitting my Internship Report to your very concern.
Hopefully you will discover my well-researched, informative and innovative
approach as a hallmark of exploration. Rather, in case of any further clarification
or elaboration as to my research work, I would welcome the opportunity to
consult with you to explore how my findings could best meet your needs.
Thanking you.
Yours Sincerely,
___________________________
Moez Al Azim Ansary
ID No: 1101010183
Major: Accounting & Information Systems
BBA Program (27th Batch)
Letter of Acceptance
February 28, 2015
This is to certify that Internship Report titled Financial Statements Analysis

of an Islami Bank in Bangladesh: A Study on First Security Islami Bank
Limited, Bangladesh is submitted in partial fulfillment of the requirements for
the award of the degree in Bachelor of Business Administration from Leading
University, Sylhet is a record of the analysis carried out by Moez Al Azim Ansary,
ID No-1101010183 under my active supervision and guidance as the partial
fulfillment for the award of BBA degree.
I wish his success in the future.
Supervisor
___________________________________
Mr. Iehit Sharma
Senior Lecturer
vi
Declaration
I, Moez Al Azim Ansary, a student of BBA program at Leading University, Sylhet,

solemnly affirm and hereby declare that the Internship report titled Financial
Statements Analysis of an Islami Bank in Bangladesh: A Study on First
Security Islami Bank Limited, Bangladesh submitted in partial fulfillment of
the requirements for completion of the degree in Bachelor of Business
Administration at Leading University, Sylhet.
I also declare that this report is prepared after completing my three months
Internship period in First Security Islami Bank Limited, Amborkhana Branch,
Sylhet. This is my original work and not submitted for the award of any other
Degree, Diploma Fellowship or other similar title or prizes. It is prepared under
the extensive supervision and guidance of Mr. Iehit Sharma, Senior Lecturer,
Department of Business Administration, Leading University, Sylhet.
Declared by
___________________________
Moez Al Azim Ansary
ID No: 1101010183
Major: Accounting & Information Systems
BBA Program (27th Batch)
vii
Acknowledgement
First, I would like to express my gratitude to almighty ALLAH to give me the
strength to complete the study within the stipulated time.
I deeply thank to my honorable internship supervisor Mr. Iehit Sharma, Senior
Lecturer, Department of Business Administration, Leading University for
assigning me the project and for all his kind support to accomplish it. His
valuable suggestions and guidance helped me a lot to prepare the report in a
well-organized manner. I would like to thank our whole Department of Business
Administration specially Head of the Department Dr. Tofayel Ahmed, for
facilitating me to do internship and preparing this report.
I also wish to thank and give the due respect to my family and friends for their
cordial support and help they offered throughout the process of performing the
whole report.
Finally, my heartfelt gratitude goes to Mr. Md. Sohrab Uddin Molla (Branch
Manager and AVP), Mr. Md. Maksud Ibn Mustafa (SPO and Operation Manager),
Mr. Salahuddin Shamim (Probationary Officer), Mr. Md. Ishtiaque Uddin
(Probationary Officer), Mr. Anwar Hossain Misba (Senior Cash Officer), Mr. Ariful
Islam Nayeem (Assistant Officer), Mrs. Rabea Binte Shiraj (Principal Officer) and
all the co-workers of First Security Islami Bank Limited, Amborkhana Branch,
Sylhet for their keenness in giving me training and valuable information, which
was very helpful to complete my internship report.
viii
Executive Summary
Banks are the most important financial institutions in modern economy. They
are an integral part of modern economic activities. In a developing country like
Bangladesh, the Islamic banking system as a whole has a vital role play in the
process of economic development. First Security Islami Bank Limited (FSIBL) has
started its journey on 29th August 1999 with the said principles in mind and
conduct banking system according to Shariah based policy. This report mainly
deals with the financial statements analysis of an Islami bank in Bangladesh: a
study on First Security Islami Bank Limited. The horizontal analysis, vertical
analysis and ratio analysis are essential technique for financial statements
analysis. Different users such as investors, management, bankers and creditors
use the financial statements analysis of a company for their decision making
purpose. In this report, the financial statements of First Security Islami Bank
Limited have been studied for five years from 2009 to 2013 and also different
types of financial ratios of the bank are calculated. The clear concept on bank,
Islamic banking and different types of financial analysis are given in the report.
The liquidity, profitability, financial position and the financial trend of First
Security Islami Bank Limited are the main focus of this report which have been
analyzed and used for comparing different years. By analyzing the financial
statements of the bank, it has been traced the financial strengths and weakness
of the bank. Finally some comments are shown regarding the changes of this
banks financial performance for the last five years. By analyzing the horizontal,
vertical and different ratios like liquidity ratios, efficiency ratios, profitability
ratios, solvency ratios and market prospect ratios, and cash flow analysis, it can
be said that FSIBL has been improving and doing well in the last five years except
in few years. So the bank should be concern about the types of financial analysis
especially the types of ratios. However, FSIBLs overall earnings performance
was satisfactory, but it should be improved.
ix
Table of Contents
Chapter
Title
One
Introduction
Page No.
1-6
1.1 Origin of the Report
1.2 Significance of the Study
1.3 Objective of the Study
1.4 Scope of the Study
1.5 Methodology of the Study
1.6 Sources of Data
1.7 Limitation of the Study
Two
Theoretical Overview
7-45
2.1 Bank
2.2 Functions of Bank
2.3 Islamic Banking
14
2.3.1: Principles of Islamic Banking
15
2.3.2: Riba or Interest
15
2.4 Difference between Riba and Profit
16
2.5 Difference between Conventional Banking and Islamic

Banking
17
2.6 Financial Statements
18
2.7 Components of Financial Statements
19
2.8 Components of Banks Financial Statements
19
2.9 Financial Statements Analysis
20
2.10 Techniques to Financial Statements Analysis
20
2.11 Literature Review
21
2.11.1: Classification of Assets and Liabilities
22
2.11.2: Limitations of Financial Statements
24
2.11.3: Building Blocks of Financial Statement

.................Analysis
25
2.11.4: Horizontal Analysis
25
2.11.5: Vertical Analysis
28
2.11.6: Ratio Analysis

2.12 Relationships between Financial Statements
Three
Four
Organizational Overview
44
46-63
3.1 Corporate Profile of FSIBL
47
3.2 Historical Background of FSIBL
49
3.3 Vision, Mission, Objective and Strategies of FSIBL
50
3.4 Organizational Structure of FSIBL
52
3.5 Branches of FSIBL
55
3.6 Functions of FSIBL
59
3.7 Features of FSIBL
60
3.8 Principal Products & Services of FSIBL
61
3.9 Society for Worldwide Interbank Financial
63
Core Part : Financial Statements Analysis of FSIBL
64-100
4.1 Introduction
65
4.2 Reconstruction of Financial Statements of FSIBL
65
4.3 Horizontal Analysis
68
4.3.1: Comparative Balance Sheet Analysis
68
4.3.2: Comparative Income Statement Analysis
70
4.3.3: Trend Analysis
73
4.4 Vertical Analysis
76
4.4.1: Common-size Balance Sheets Analysis
79
4.4.2: Common-size Income Statements Analysis
82
4.5 Ratio Analysis
83
4.5.1: Liquidity and Efficiency Ratio
83
4.5.2: Solvency Ratio
89
4.5.3: Profitability Ratio
93
4.5.4: Market Prospects Ratio
96
4.6 Analysis of Cash Flow Statement

Five
30
Findings, Recommendation and Conclusion
98
101-106
5.1 Findings
102
5.2 Recommendations
105
5.3 Conclusion
106
xi
References
107
Appendix
109
1
Chapter One
Introduction
Introduction
First Security Islami Bank Limited.
Financial Statements Analysis |2
Financial statement analysis is the process of reviewing and analyzing a
company's financial statements to make better economic decisions. These

statements include the income statement, balance sheet, statement of cash
flows, and statement of retained earnings. Financial statement analysis is
required for evaluating risks, performance, financial health, and future
prospects of an organization. In this report, the financial statements of First

Security Islami Bank Limited (FSIBL) are analyzed. FSIBL is one of the reputed
banks in Bangladesh. It conducts its banking activities according to Islami
Shariah.
1.1: Origin of the Report

This report on Financial Statements Analysis of an Islami Bank in
Bangladesh: A Study on First Security Islami Bank Limited, Bangladesh has

been prepared as a partial requirement for the completion of the internship
program for the Bachelor of Business Administration (BBA) program of

Leading University, Sylhet. For internship purpose, I chose First Security
Islami bank Ltd. (FSIBL), Ambarkhana Branch, Sylhet. The preparation of
this report was supervised by Mr. Iehit Sharma, Senior Lecturer, Leading
University, Sylhet.
1.2: Significance of the Study

First Security Islami Bank Ltd. is one of the leading private banks in
Bangladesh. It provides highest benefits to its clients among the Islami
Banks in Bangladesh. There are few private banks those provide profits or
interest to their clients as high as FSIBL. FSIBLs banking system is aiming to
attain the goal of Islamic Economy through setting well designed Islamic
Monitory System. Islam has clear-cut guidelines to avoid interest (Riba)
regarding use of money. So, Islamic Banking System strongly follows the
Islamic Shariah in its business. Islamic Shariah appreciates risk and profit
sharing. As an Islami bank FSIBL has to take risk when doing banking
business and share profit to its stakeholders and customers. So, to know
about the ability of the bank to take risk and making profits, its financial
strength and performance should be understood. Therefore, the financial
statements of the bank should be analyzed for understanding the financial
strength and performance of the bank.
1.3: Objective of the Study

General Objective:
To analyze the financial statements of First Security Islami Bank Ltd.
with the key focus of its overall financial performance.
Specific Objectives:
To know the current financial position of First Security Islami Bank

Ltd.
To know the five years financial performance of FSIBL by calculating

and analyzing different types of ratio.
To know the financial trend of FSIBL focusing the five years financial
performance.
To get the practical experience on banking activities.
To give some recommendation for the development of First Security

Islami Bank Ltd.
1.4: Scope of the Study

This report is based on my observation and studies during my internship
period in First Security Islami Bank Limited, at Amborkhana Branch. The

prime focus was on financial statement analysis of First Security Islami Bank
Limited for giving some concepts about the financial position and financial
performance of the bank over at least five years. The scope of my study is
limited to the First Security Islami Bank Limited. During the three months
internship program almost all sections I have been observed. However, in

this report the financial statements of FSIBL are analyzed from different
viewpoint including ratio analysis. This repost may help those people who
want to know about the financial performance of First Security Islami Bank
Limited.
1.5: Methodology of the Study

Several types of research methods are used in studies depending on the field
or research. As this research is on financial statement analysis, certain

methods were followed to fulfill the objectives of the report, making the
maximum utilization of the scopes and to avoid the limitations as much as
possible to prepare the final outcome of the report. There are four types of
research methods were used to complete this report. These methods are -
Qualitative Method: Qualitative method is concerned with the quality or

kind and describing meaning. In this report I have used qualitative
research method to provide a clear concept about my research topic and

to maintain the standards of my research I have analyzed the financial
statements from different viewpoint.
Quantitative Method: Quantitative research is based on the quantitative

measurements of some characters. It is applicable to phenomena that can
be expressed in terms of quantities. I have used the quantitative
approaches in this report for some statistical content analysis and to

determine the significance of findings.
Analytical Method: In analytical research, the researcher has to use facts

or information those already available, and analyze these to make a
critical evaluation of the material. In this report, I have used analytical

method for ratio analysis and to evaluate the financial performance of
FSIBL.
Descriptive Method: Descriptive research includes surveys and factfinding enquiries of different kinds. The major purpose of descriptive
research is description of the state of affairs as it exists at present. In this

repost, I have used the descriptive approach to explain the financial
statements, graphs, ratios, financial trend, financial performance and
current financial condition of FSIBL.
Financial statement analysis needs the combination of mathematical

equations, graphical presentation and explanation. So, I have used above
four types of research methods to get proper and successful outcome from
my research.
1.6: Sources of Data

Data have been collected from two sources such as primary sources of data
and secondary sources of data. Primary sources of data are those sources
from which the researcher collects data directly by field work. And
secondary sources of data are those sources which provide data that are
already collected by another researcher. From this point of view data are
two types among them one is primary data and another is secondary data.
The data directly collected by the researchers are called primary data. The
data that has been already collected by another researcher or person for
his/her work purpose are called secondary data. I have collected the both
types of data from primary and secondary sources.
Primary Sources of Data:
Face to face conversation with the employees,

senior officers, SPO and the Manager.
Studying different relevant files like register books,

statement of affairs, financial statements etc.
Practical work at FSIBL during my internship

program to increase my knowledge.
Secondary Sources of Data:

Annual Reports including financial reports of FSIBL.
Website of FSIBL.
Journals and prospectus of FSIBL.
Different books, magazines and journals related to

the finance and banking.
Different websites and blogs.
1.7: Limitation of the Study

I did my best and there has no dearth of sincerity on my part to make the
report. But there are some limitations which I have faced while reaching the
objectives of this report, because it is very difficult to analyze the financial

statements over five years of a Bank. Some of these following limitations are
apparent in this study:
The time limit of the internship is only 3 months which is very short
period of time to learn about whole banking activities.
As annual reports need 3-4 months to be published after end of the
period, I cannot collect the recent annual financial report (2014) of

FSIBL.
As final financial statements are prepared in head office, it becomes

difficult to understand the elements of the statements from branch
office.
When I have prepared the classified financial statement from

unclassified one then I faced problem to replacement of the items of
the statement, because the duration of all items are not properly
mentioned.
There were lack of proper secondary information about First
Security Islami Bank Limited and its products. Annual reports,

policy guidelines, website and other related documents do not cover
full and sufficient information.
As the bank officials are so much busy that it was difficult for them
to co-operate with me, which is also a constraint for this report.
2
Chapter Two
2.1: Bank
Bank is a financial institution that collects money from people as deposit
committing to pay interest or profit at a fixed or probable percentage rate
to the depositors for their deposited money and lends or invests it to the
businesses requiring interest or profit as return at a fixed or probable
percentage rate which is higher than the rate at which it pays interest or
profit to the depositors against the loan or investment and gains profit
from the difference between the interest or profit against loan or

investment and interest or profit against deposits. In broadly, any
financial institution that receives, collects, transfers, pays, exchanges,
lends, invests or safeguards money for its customers is called bank.
Generally we indicate the commercial bank when using the term Bank.
Commercial banks are those institutions which conduct the business
purely on profit motive. Commercial banks receive surplus money from

the people who are not using it and lend to those who need it for
productive purpose.
A commercial bank is a dealer in short and medium-term credit. It

borrows money from a group of people at a lower rate of interest and
lends to the other group of people at some higher rate of interest. The
difference between the two rates of interest is the profit of the bank.
2.2: Functions of Bank

In modern time, the functions of commercial banks are modified. The
functions of a bank may broadly be divided into two parts.
Functions of Bank
Primary Functions
Accepting Deposits
Current Account
Saving Account
Fixed Deposit Account

or Term Deposit
Account
Making Advance and Loan
Secondary Functions
Agency Functions
General Utility Functions

Miscellaneous Functions
Exhibit -2.1
2.2.1: Primary Functions

Basic or primary functions of a commercial bank are very important in nature.
These functions provide the base of the whole operation of the bank. The basic
functions of a commercial bank are as follows:
Accepting deposits: Accepting deposits is the most important function of

all commercial banks. Deposit is the basis of commercial banks' activities. In
order to attract The general public to deposit their surplus money in the
bank, the bank offers to deposit money in any of the following accounts:
First Security Islami Bank Limited .
F i n a n c i a l S t a t e m e n t s A n a l y s i s | 10
Current Account: Current or demand account is one where the

amount can be withdrawn at any time by the depositor. Such deposit
accounts are generally maintained by businessmen or organizations.
They can be drawn upon by a cheque without any restriction. Banks

do not pay any interest on these accounts. Rather, banks impose
service charges for running these accounts.
Saving Account: Saving account is suitable for non-trading and small

income earners. Saving account helps in mobilization of the saving of
low income people. The commercial banks pay interest on this type
of deposits. But, the interest rate is very poor.
Fixed Deposit Account or Term Deposit Account: Fixed deposit

account is the account in which amounts are deposited for a certain
fixed period of time. The deposits cannot be withdrawn before the
expiry of this fixed period. The longer the period of deposits, the
higher is the rate of profit or interest.
Deposit Scheme Account: These types of deposit accounts are newly

added by the commercial banks in the banking systems for
encouraging the fixed-income and low-income people to deposit. In

this system people have to pay monthly installment at a fixed amount
for a certain period of time to his/her deposit account, and after

maturity date he/she will get a large sum of money including the
principal and profit.
Making Advance and Loan: The deposits received by banks are not
allowed to remain idle. So, after keeping certain cash reserves, the
balance is given to needy borrowers and interest is charged from them,
which is the main source of income for the banks. Different types of
loans and advances made by Commercial banks are:
Overdraft: Overdraft is a short-term loan granted by commercial

banks to their account holders. Under this type of loan, the
customers are allowed to draw more than what they have in
their current account up to a certain limit. The excess amount

overdrawn is called overdraft.
Cash Credit: Cash credit refers to a loan given to the borrower

against his current assets like shares, stocks, bonds, etc. A credit
limit is sanctioned and the amount is credited in his account. The

borrower may withdraw any amount within his credit limit and
interest is charged on the amount actually withdrawn.
Demand Loans: Demand loans refer to those loans which can be
recalled on demand by the bank at any time. The entire sum of
demand loan is credited to the account and interest is payable on

the entire sum.
Loans: Commercial banks grant loans for short and mediumterm to individuals and traders against the security of movable
and immovable property. The amount of loan is credited to the

borrower's account. Interest is charged on the entire loan
sanctioned.
2.2.2: Secondary Functions

The secondary functions of commercial bank can be classified in three
heads. They are described below:
Agency Functions: The banks render important services as agent on

behalf of their customers in return for a small commission. When banks
act as agent, law of agency applies. The agency functions or services of

bank are as follows:
Collection of Cheques: Commercial banks collect the cheques, bills

of exchange, etc. on behalf of their customers. Banks collect local and
outstation cheques and bills of exchange through clearing house
facilities provided by the central bank.
Collection of Income: The commercial banks collect dividends,

interest on investment, pension and rent of property due to the
customers. When any income is collected by the bank, a credit
voucher is sent to the customer for information.
Payment of Expenses: The banks make payment of insurance

premiums, rent, trade subscription, school fee and other obligation of
the customers. When any expense is paid by the bank, a debit voucher
is sent to the customer for information.
Dealer in Securities: The banks carry out purchase and sale of
securities on behalf of their customers. Banks do it well because they

are aware of the market conditions.
Acts as Trustee: The banks act as trustee to manage trust property
as per instructions of property owners. Banks are required to follow

the terms and conditions of trust deed.
Acts as Agent: Commercial bank sometimes acts as an agent on behalf

of its customers at home or abroad in dealing with other banks or
financial institutions.
Obeys Standing Instructions: Sometimes, customer may order his
bank to do something on his behalf regarding the conduct of his

account. This written order is called standing instruction. The bank
being the agent of its customer obeys the standing instructions.
Acts as Tax Consultant: Commercial bank acts as tax consultant to its

client. The commercial bank prepares general sales tax return, income
tax return, etc. Tiles the same with tax authorities.
Collection of Utility Bills: Commercial banks provide facilities for the

collection of utility bills from general public on behalf of government
bodies. This facilitates the public to pay utility bills in time.
General Utility Functions: Commercial bank performs different utility

functions for their customers. When bank performs utility functions, it
does not act as an agent of the customers. The general utility functions
are as follows:
Provides Lockers Facilities: Commercial banks provide lockers

facilities to its customers for safe custody of Jewelery, shares,
securities and other valuables. This has minimized the risk of losing
due to theft.
Issue of Travelers Cheque: Commercial banks preserve the wills of

their customers as trustees and execute them after their death as
executors.
ATM Facilities: An ATM is also known as cash point. The banks
nowadays provide ATM facilities through issuing debit card and credit
card. The customers can withdraw money easily and quickly 24 hours
a day.
Foreign Exchange: Commercial banks deal in foreign exchange. This

enables the individuals and businessmen to obtain foreign currency in
exchange of their home currency. For dealing in foreign exchange,

commercial banks have to obtain permission from the central bank.
Transfer of Money: Commercial banks provide facilities for the

transfer of money to any place within and outside the country. The
funds are transferred by means of draft, telephonic transfer,

electronic transfer etc.
Finance Foreign Trade: A commercial bank finances foreign trade by

accepting foreign bills of exchange. Bank also issues letter of credit on
behalf of its customers to facilitate foreign trade.
Trade Information: Commercial banks collect and provide trade

information and tender advice to its customers about financial
matters.
Issuing Credit Cards: Banks issue credit cards to their trustworthy

and valued customers. This facilitates the customers to pay for their
necessities of life.
Miscellaneous Functions: Commercial banks perform the following

miscellaneous functions:
Zakat Collection: Commercial banks collect Zakat from their account

holders and deposit the same into Central Zakat Fund, according to
Zakat and Usher ordinance - 1980.
Hajj Services: The commercial banks provide free Hajj sendees to the
intending pilgrims. Banks receive Hajj applications. Banks also
facilitate to form Hajj groups. Banks make necessary arrangements for

the training of intending pilgrims.
Qarz-e-Hasna: The commercial banks provide Qarz-e-Hasna to

deserving patients for medical treatment and to students for higher
studies within the country and abroad. The Qarz-e-Hasna is refund Ale
in easy installments.
2.3: Islamic Banking
Islamic banking has been defined in a number of ways. The definition of
Islamic bank, as approved by the General Secretariat of the OIC, is stated in

the following manner. "An Islamic bank is a financial institution whose
status, rules and procedures expressly state its commitment to the

principle of Islamic Shariah and to the banning of the receipt and payment
of interest on any of its operations"(Ali & Sarkar 1995, pp.20-25). Ajaz A.

Khan viewing the concept from the perspective of an Islamic economy and
the prospective role to be played by an Islamic bank therein opines:
Islamic banking is banking or banking activity that is consistent with the

principles of sharia and its practical application through the development
of Islamic economics. As such, a more correct term for 'Islamic banking' is

'Sharia compliant finance.
It appears from the above definitions that Islamic banking is systems of

financial intermediation that avoids receipt and payment of interest in its
transactions and conducts its operations in a way that helps achieve the
objectives of an Islamic economy. Alternatively, this is a banking system
whose operation is based on Islamic principles of transactions of which
profit and loss sharing (PLS) is a major feature, ensuring justice and equity
in the economy. That is why Islamic banks are often known as PLS-banks.
In single sentence Islamic Bank can be defined as a financial intermediary
that conducts its banking activities according to Islamic Shariah by

avoiding receipt and payment of interest/riba in its transactions and
conducts its activities based on profit or loss sharing motive for achieving
the objectives of Islamic economy.
2.3.1: Principles of Islamic Banking:

Islamic Banking has some exclusive principles by which it can be
distinguished from conventional banking. The core principles of Islamic
banking are stated below:
Prohibition of Interest: Interest is strictly prohibited in Islam. Because,

Interest is fixed and predetermined benefit accepted by the lender for
lending his money and given by the borrower for borrowing money.
Islamic Shariah prohibits all benefits in transactions. Interest is called

Riba in Islam.
Partnership Business: Islamic banks invest money to the business
organization as partner and they look after business for ensuring the
proper use of fund.
Profit and Loss Sharing: It is the basic principle of Islamic banking.
Islamic banking system conducts the business activities based on profit

and loss sharing. As bank works as partner it accepts the losses if any
loss occurred in business and participates in profits when profits gain.
Invest in Shariah approved Heads: Islamic Banking system is

concerned in use of fund. It only invests into Halal businesses that mean
Shariah approved business heads.
Shariah Board: In every Islamic bank, there have a special governing

committee that governing the whole activities of the bank is called
Shariah Board. This board ensures that the investment is made to the
Halal business and activities are conducted according to Islamic Shariah.
2.3.2: Riba or Interest:

The word used by the Quran concerning 'interest' is Riba. The literal
meanings of Riba are money increase, increase of anything or increment of
anything from its original amount. However, all increases are not
considered as Riba in Islam. Money may increase in business activities as
well. This increase is not at all considered as Riba. Islam prohibits only
those increases that are charged on the loan with a prefixed rate.
In the Shariah, Riba technically refers to the premium that must be paid by
the borrower to the lender along with the principal amount as a condition
for the loan or for an extension in its maturity. In other words, Riba is the
predetermined return on the use of money.
2.4: Difference between Riba and Profit

There are persons who try to equate Riba with profit. In effect, they are
fundamentally different from each other as can be seen from the following:
Riba
Profit
1. When money is "charged", its
1. When money is used in trading, its
imposed positive and define result
uncertain result is profit.
is Riba
2. By definition, Riba is the premium
2. By definition, profit is the difference
along with principal amount as a
the cost of production.
paid by the borrower to the lender
between the value of production and
condition for the loan.
3. Riba is prefixed and hence there is
3. Profit is post-determined and hence
the givers or the takers of loans.
activity is done.
no uncertainty on the part of either
its amount is not known until the
4. Riba cannot be negative, it can at

best be very low or zero.
4. Profit can be positive, zero or even
5. From Islamic Shariah point of view,

it is Haram.
negative.
5. From Islamic Shariah point of view,

it is Halal.
Exhibit -2.2
2.5: Difference between Conventional Banking and

Islamic Banking
The distinguishing features of the conventional banking and Islamic
banking are shown in terms of a box diagram as shown below:
Conventional Banks
Islamic Banks
1. The functions and operating modes
1. The functions and operating modes
manmade principles.
principles of Islamic Shariah.
of conventional banks are based on

2. The investor is assured of a
predetermined rate of interest.

3. It aims at maximizing profit without
any restriction.
4. It does not deal with Zakat.
of Islamic banks are based on the
2. In contrast, it promotes risk sharing

between provider of capital (investor)
and the user of funds (entrepreneur).
3. It also aims at maximizing profit but

subject to Shariah restrictions.
4. In the modern Islamic banking

system, it has become one of the
service-oriented functions of the

Islamic banks to collect and
5. Leading money and getting it back
with interest is the fundamental
function of the conventional banks.
6. Its scope of activities is narrower
when compared with an Islamic bank.

7. It can charge additional money
(compound rate of interest) in case of

defaulters.
8. In it very often, bank's own interest
distribute Zakat.
5. Participation in partnership
business is the fundamental function

of the Islamic banks.
6. Its scope of activities is wider when
compared with a conventional bank. It

is, in effect, a multi-purpose
institution.
7. The Islamic banks have no provision

to charge any extra money from the
defaulters.
8. It gives due importance to the public
becomes prominent. It makes no effort interest. Its ultimate aim is to ensure

to ensure growth with equity.
growth with equity.
9. For interest-based commercial
9. For the Islamic banks, it is
market is relatively easier.
money from the money market.
banks, borrowing from the money
comparatively difficult to borrow
10. Since income from the advances is

fixed, it gives little importance to
developing expertise in project
evaluations.
11. The conventional banks give
11. The Islamic banks, on the other
greater emphasis on credit-
hand, give greater emphasis on the
12. The status of a conventional bank,

in relation to its clients, is that of
creditor and debtors.
13. A conventional bank has to

guarantee all its deposits.
2.6: Financial Statements
Islamic banks pay greater attention to

developing project appraisal and
appraisal and evaluations.

worthiness of the clients.
10. Since it shares profit and loss, the
viability of the projects.
12. The status of Islamic bank in

relation to its clients is that of
partners, investors and trader.
13. Strictly speaking, and Islamic bank

cannot do that.
Exhibit -2.3
Financial Statements are the summary of the financial activities of a firm
or an organization. AIS Board define the financial statement, A financial

statement (or financial report) is a formal record of the financial activities
of a business, person, or other entity. Relevant financial information is
presented in a structured manner and in a form easy to understand.
It appears from the above definitions that financial statements are the
records that outline the financial activities of a business, an individual or
any other entity. Financial statements are intended to present the financial
information of the entity in question as clearly and concisely as possible

for both the entity and for readers. Financial statements for businesses
usually include: income statements, balance sheet, statements of changes

in equity and cash flows, as well as other possible statements.
2.7: Components of Financial Statements

According to International Accounting Standards (IAS) a complete set of
financial statements includes the flowing components.
Statement of Financial Position / Balance Sheet
Income Statement / Statement of Profit and Loss Account

Statement of Cash Flow
Statement of Changes in Equity

Notes to these statements
2.8: Components of Banks Financial Statements

Since a bank is a financial institution, its financial statements are different
from other organization. Banks Financial Statements include an additional

component which is called Liquidity Statement. The basic components of
banks financial statements are given below.
Balance Sheet
Statement of Profit and Loss Account / Income Statement

Cash Flow Statement
Statement of Changes in Equity

Liquidity Statement
Notes to these statements
2.8.1: Balance Sheet: Balance sheet is a financial statement that

summarizes a company's assets, liabilities and shareholders' equity
at a specific point in time of a business' calendar year. These three

balance sheet segments give investors an idea as to what the
company owns and owes, as well as the amount invested by the

shareholders.
2.8.2: Statement of Profit and Loss Account / Income Statement:

Income statement is a financial report that shows an entity's results
of financial performance over a specific time period. The time

period usually covers for a month, quarter, half year or year.
2.8.3: Cash Flow Statement: A cash flow statement is the financial

statement that measures the cash generated or used by a company
in a given period.
2.8.4: Statement of Changes in Equity: Statement of changes in equity
is a financial statement that presents a summary of the changes in

shareholders equity accounts in a company over an accounting
period. It reconciles the opening balances of equity accounts with

the closing balances.
2.8.5: Liquidity Statement: Liquidity Statement is a financial statement
that shows a companys remaining liquid assets to meet the short
term obligations over a certain period of time. Liquid assets

mainly cover cash and cash equivalent assets. Liquidity statement
is necessary for banking companies and other financial
institutions.
2.8.6: Notes: Notes are not core financial statement, but they are
necessary understand other financial statements. Notes are the

details of summary statements like balance sheet, income
statement. Notes present process of calculation and particulars

included of significant items in core financial statements.
2.9: Financial Statements Analysis
Financial Statements Analysis is the process of reviewing and evaluating a

company's financial statements (such as the balance sheet or profit and loss
account statement), thereby gaining an understanding of the financial health

of the company and enabling to make more effective policies.
2.10: Techniques to Financial Statements Analysis

Financial statement analysis is an evaluative method of determining the
past, current and projected performance of a company. Several techniques
are commonly used as part of financial statement analysis. Widely used are
sated below.
Horizontal Analysis: It compares the financial data of two or more

years in both money and percentage form.
Vertical Analysis: In vertical analysis each category of accounts on

the balance sheet is shown as a percentage of the total account.
Ratio Analysis: Ratio analysis is a fundamental means of examining
the health of a company by studying the relationships of key financial

variables. It calculates statistical relationships between data.
A banks financial statements are always different from general companies. So,
banks financial statements analysis is critical. Among the stated techniques the
ratio analysis is mostly used for analysis of any organizations financial
statements.
2.11: Literature Review

Financial statement analysis applies analytical tools to general-purpose
financial statements and related data for making business decisions. It
involves transforming accounting data into more useful information.
Financial statement analysis reduces our reliance on hunches, guesses, and

information as well as our uncertainty in decision making. It does not lessen
the need for expert judgment; instead, it provides us an effective and
systematic basis for making business decisions.
It is a standard practice for businesses to present financial statements that

adhere to generally accepted accounting principles (GAAP), to maintain
continuity of information and presentation across international borders. As

well, financial statements are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing or investing
purposes. Financial statements are integral to ensuring accurate and honest
accounting for businesses and individuals alike. So, some basic requirement
must be fulfilled by a person when he/she prepares financial statements.
Balance sheet, income statement, statement of cash flow, statement of
equity and liquidity statement are the core financial statements of a banking
company. When one goes to analysis the financial statements he/she first
concentrate to the balance sheet. Because balance sheet is required for

every type of financial analysis including ratio analysis. The balance sheet
depicts the assets and the liabilities at a stated point of time, for example
31st December. The figures of the assets and liabilities are given in the
balance sheet from the basis of financial appraisal and duration. In fact,
there are two stages in the evaluation of balance sheet:
The analysis of balance sheet, refers examination of individual items
of assets and liabilities and their classification into well-defined
categories, and
Interpretation of the balance sheet through the Ratio Analysis.
2.11.1: Classification of Assets and Liabilities

The first step in the analysis of balance sheet is the scrutiny and
examination of different items of assets and liabilities and they are classified
into various categories.
Assets:
In the Balance sheet the assets are divided into three major
categories in general when organizations prepare the balance sheets.
These are as follows:
Current Assets
Fixed/Long-Term Assets
Other Assets
Current Assets: Current assets are those assets, which changes
their form in a short period and are exchanged for cash. In other
words, current assets are meant to be liquidated for cash in the near
future. Generally the duration of these assets is within one year.
Fixed/Long-Term Assets: The assets which are not consumed or
sold during the normal course of business and they are used for
carrying on the business, such as land, building, machinery,
furniture and fixtures etc. are fixed assets.
Other Assets: Other assets are a grouping of accounts that are listed
as a separate line item in the assets section of the balance sheet and
which contain minor assets that do not naturally fit into any of the
main asset categories. These assets do not represent any property;

rather they represent certain deferred revenue expenses or losses
which are being written-off over the years (S. A. Ali & R. A.
Howlader, pp.345). But, some of the writers include the other assets
into fixed assets, some writers include them into current assets and
some of the writers include the other assets into both fixed assets
and current assets according to their duration and type.
It appears from the above definitions that other assets are the
miscellaneous assets that cannot be classified as current assets or
fixed assets. Examples of other assets include deferred tax assets,
bond issue costs, advances to officers, prepaid pension costs, and
long-term prepayments. But, other assets can be included into major

categories, if we have proper information or notes about their time
duration. Most of the case other assets include negligible accounts,
so it can be included in current assets. In the case of FSIBL, the

notes about other assets indicate that it should be included in
current assets when I have prepared the classified balance sheet

according maturity for the purpose of ratio analysis.
Liabilities:
In the Balance sheet the liabilities are broadly divided into two
categories when organizations prepare the balance sheets. These are
as follows:
Current Liabilities
Long-Term Liabilities
Current Liabilities: Current liabilities are the obligations those

are payable within one accounting year. Common examples are
accounts payable, wages payable, bank loan payable, interest
payable and tax payable. For a banking company placement from
Banks and other Financial Institutions, all deposit accounts, bills

payable, current portion of ling-term liabilities and other
liabilities are elements of current liabilities.
Long-Term Liabilities: Long-term liabilities are the obligations
that a company expects to pay after one accounting year.

Liabilities in this category include subordinated bonds, bonds
payable, and mortgages payable, loan payable, long-term notes
payable, lease liabilities, pension liabilities and other long-term

liabilities.
For the need of my research work I have prepared a comparative balance
sheet by classifying items of the balance sheets according to their duration

and character. Comparative Balance Sheets consist of balance sheet
amounts from two or more balance sheet dates arranged side by side. Its
usefulness is often improved by showing each items money amount
change and percentage change to highlight large changes.
Analysis of comparative financial statements begins by focusing on items
that shows large dollar and percent changes. We then try to identify the
reason for these changes and, if possible, determine whether they are
favorable or unfavorable. We also follow up on items with small changes
when we expected the changes to be large.
2.11.2: Limitations of Financial Statements

Though Balance Sheet and Profit and Loss Account of a company are
important sources for the analysis, the financial data contained therein have
certain limitations. The financial data depict the state of affairs or the
operating results in numerical terms. Sometimes wrong or illogical

conclusion may be derived from them if attention is not given to other
factors that are not evident from the financial statements. For example, the
production of a manufacturing company may fall due to labor strike or nonavailability of raw materials due to transport bottlenecks, but it should not
be interpreted as decline in the efficiency or profitability of the concern. It is,
therefore, essential that the investor should look beyond the financial data
and make future enquiries regarding the causes for any variation or
abnormal trend noted in analyzing the data. Besides, the financial
statements represent the performance of the business concern. Any
meaningful analysis of these statements will depend upon the projections of

the future trend. Past events are just guides as to what may reasonably be
expected to occur in future.
2.11.3: Building Blocks of Financial Statement Analysis

Financial statements analysis focuses on one or more elements of a
companys financial condition or performance. Our analysis emphasizes four

areas of inquiry with varying degrees of importance. These four areas are
described and illustrated in this chapter and considered the building blocks
of financial statements analysis:
Liquidity and Efficiency: It refers the ability of a company to meet

short-term obligations and to efficiently generate revenues.
Solvency: It refers the ability to generate future revenue and meet

long-term obligations by a company.
Profitability: It is the ability to provide financial rewards sufficient

to attract and retain financing.
Market prospects: It refers a companys ability to generate positive

market expectation.
2.11.4: Horizontal Analysis

Analysis of any single financial number is of limited value. Instead, much of
financial statement analysis involves identifying and describing relations
between numbers, groups of numbers and changes in those numbers.
Horizontal analysis refers to examination of financial statement data across
time. The term horizontal analyses arises from the left-to-right movement
of our eyes as we review comparative statements across time.
2.11.4.1: Comparative Statements
Comparing amounts for two of more successive periods often helps in
analyzing financial statements. Comparative financial statements facilitate

this comparison by showing financial amount in side-by-side columns on a
single statement, called comparative format. By using comparative financial

statements financial changes can be expressed in both dollar amount and
percentage.
Computation of Dollar Change and Percent Change: Computing
financial statements over time periods generally two-to-five years is often

done by analyzing changes in line items. A change analysis usually
includes analyzing absolute dollar amount changes and percent changes.
Both analyses are relevant because dollar changes can yield large
percentage changes inconsistent their importance. Dollar amount is

necessary to retain a proper perspective and to assess the importance of
changes. The computation of dollar change for a financial statement item

as follows:
Dollar change = Analysis period amount - Base period amount
Analysis period is the point or period of time for the financial statements
under analysis, and base period is the point or period of time for financial
statements used for comparison purposes. The prior year is commonly
used as a base period. We compute percent change by dividing the dollar
change by the base period amount and then multiplying this quantity by
100 as follows:
(%) =
We can always compute a dollar change, but we must be aware of a few

rules in working with percent changes. These rules are as follows:
When a negative amount appears in the base period and a positive

amount appears in the analysis period then we cannot compute a
meaningful percent change.
When a positive amount appears in the base period and a negative

amount appears in the analysis period then we cannot compute a
meaningful percent change.
When no value is in the base period then no percent is computable.
When an item has a value in the base period and zero in the
analysis period, the decrease is 100 percent.
Comparative Balance Sheets: Comparative balance sheets consist of

balance sheet amounts from two or more balance sheet dates arranged
side by side. Its usefulness is often improved by showing each items dollar
change and percent change to highlight large changes.
Analysis of comparative financial statements focusing on items that shows

large dollar or percent changes. Then we try to identify the reasons for
these changes and, if possible, determine whether they are favorable or
unfavorable. We also follow up items with small changes when we

expected the changes to be large. The format of comparative balance sheet
showing dollar and percent change, their calculation process is as follows:
Company Name
Comparative Balance sheet
Ending date of Analysis year and Base/previous year
1
2
3
4=(2-3)
5=(4/3)
Particulars
Analysis
Base/previous
Dollar
Percent
Year
Year
Change
Change (%)
Assets
Current Assets
$0.00
$0.00
$0.00
0.00%
Fixed Assets
$0.00
$0.00
$0.00
0.00%
0.00%
$0.00
$0.00
$0.00
Liabilities
Current Liabilities
$0.00
$0.00
$0.00
0.00%
Long-term Liabilities
$0.00
$0.00
$0.00
0.00%
$0.00
$0.00
$0.00
0.00%
Shareholders
Equity
$0.00
$0.00
$0.00
0.00%
0.00%
$0.00
$0.00
$0.00
Exhibit -2.4
Comparative Income Statements: Comparative income statements are
prepared similarly to comparative balance sheets. Amounts for two or

more periods are arranged side by side, with additional columns for dollar
and percent changes.
2.11.4.2: Trend Analysis

Trend analysis is also called trend percent analysis or index number trend
analysis. It is a form of horizontal analysis that can reveal patterns in data
across successive periods. It involves computing trend percent for a series
of financial numbers and is a variation on the use of percent changes. The

difference is that trend analysis does not subtract the base period amount in
the numerator. To compute trend percent, we do the following:
Select a base period and assign each item in the base period a weight of
100%.
Express financial numbers as a percent of their base period number.
Specially, a trend percent, also called an index number, is computed as

follows:
(%) =
It should be noted, that the percent change or index refers the comparison
of the analysis periods to the base period. Trend analysis expresses a

percent of base, not a percent of change.
2.11.5: Vertical Analysis

Vertical analysis is a tool to evaluate individual financial statement items or
a group of items in terms of a specific base amount. We usually define a key

aggregate figure as the base, which for an income statement is usually
revenue and for a balance sheet is usually total assets. The term vertical
analysis arises from the up-down or down-up movement of our eyes as we

review common-size financial statements. Vertical analysis is also called
common size analysis.
2.11.5.1: Common-Size Statements

Common-size statements express each item as a percent of a base amount.
We use common-size financial statements to reveal changes in the relative
importance of each financial statement item. All individual amounts in
common-size statements are redefined in terms of common-size percent. A

common-size percent is measured by dividing each individual financial
statement amount under analysis by its base amount. The formula of

common-size percent is as follows:
(%) =
Common-Size Balance Sheet: Common-size balance sheets express each
item of balance sheets as a percent of a base amount, which is a usually

total asset. The base amount is assigned a value of 100%. This implies
that the total amount of liabilities plus equity equals 100% since this
amount equals total asset. We compute a common-size percent for each
asset, liability and equity items using total asset as base amount. When
we present a companys successive balance sheets in this way, the

changes in the mixture of assets, liabilities and equity are apparent.
Common-Size Income Statements: Analysis also benefited from using a

common-size income statement. Revenue is usually the base amount,
which is assigned a value of 100%. Each common-size income statement
items appears as a percent of revenue. If we think of the 100% revenues

amount as representing one sales dollar, the remaining items show how
each revenue dollar is distributed among costs, expenses and income.
2.11.5.2: Common-Size Graphics
Two of the most common tools of common-size analysis are trend analysis
of common-size statements and graphical analysis. The trend analysis of

common-size statements is similar to that of comparative statements
discussed under horizontal analysis. It is not illustrated here because the
only difference is the substitution of common-size percent for trend percent.
Instead, this section discusses graphical analysis of common-size

statements. Pie charts and bars are commonly sued for common-size
graphics analysis of common-size statement analysis. For common-size
income statement analysis, the revenue is considered as the base of the pie
chart because revenue affects nearby every item of an income statement.
2.11.6: Ratio Analysis

Ratios are among the more widely used tools of financial statement analysis
because they provide clues to and symptoms of underlying conditions. A

ratio can help us uncover conditions and trends difficult to detect by
inspecting individual components making up the ratio. Ratios, like other
analysis tools, are usually future oriented. They are often adjusted for their
probable future trend and magnitude, and their usefulness depends on the
skillful interpretation. A ratio expresses a mathematical relation between
two quantities. It can be expressed as a percent, rate, or proportion.
Computation of ratio is a simple arithmetic operation, but its interpretation

is not. To be meaningful, a ratio must refer to an economically important
relation.
In this section an important set of financial ratios and its applications are
described. The selected ratios are organized into the four building blocks of
financial statement analysis. These are as follows:
(i) Liquidity and Efficiency Ratios
(ii) Solvency Ratios
(iii) Profitability Ratios
(iv) Market Prospects Ratios
2.11.6.1: Liquidity and Efficiency Ratios
Liquidity refers to the availability of resources of a company to meet shortterm cash requirements. It is affected by the timing of cash inflows and
outflows along with prospects for future performance. Analysis of liquidity

is aimed at a companys funding requirements.
Efficiency refers to how productive a company in using its assets. Efficiency

is usually measured relative to how much revenue is generated from a
certain level of assets.
Both liquidity and efficiency are important and complementary. If a

company fails to meet its current obligations, its continued existence is
doubtful. From this view point, all other measures of analysis are in
secondary importance. Although accounting measurements assume the
companys continued existence, our analysis must always assess the validity
of this assumption using liquidity measures. Moreover inefficient use of
assets can cause liquidity problems. A lack of liquidity often precedes lower
profitability and fewer opportunities. A companys customers and suppliers
are also affected by short-term liquidity problems, and it is keener, when it

is a banking company. This section describes the key ratios relevant to
assessing liquidity and efficiency.
Current Ratio: Current ratio is widely used to show the ability of a
company to meet its current liabilities with its current assets. This ratio
is computed by dividing current assets by current liabilities. Its formula

is given below:
A high current ratio suggests a strong liquidity position and an ability to
meet current obligations by current assets. An excessively high current
ratio means that a company has invested too much in current assets
compared to its current liabilities. An excessive investment in current
assets is not an efficient use of fund, because current assets normally

generate a low return on investment. On the other hand, lower current
ratio indicates that a company may be failed to meet current obligations
by its current assets. Many users apply a guideline about composition of
current assets and current liabilities of 2:1, which means the result of
current ratio is 2. But, such a guideline or any analysis of the current
ratio must recognize at some additional factors such as, type of business,
composition of current assets, and Turnover of current assets. A service
company like bank that having no inventory can probably operate on a
current ratio of 1:1 or less than 1:1. The composition of a companys
current assets is important to an evaluation of short-term liquidity. For

instance, cash, cash equivalents, and short-term investments are more
liquid then account and notes receivable. Cash, of course, can be used to
immediately pay current liabilities. But, for a banking company,
retaining excessive cash and cash equivalent as liquid assets decreases

profitability.
A banking company may maintain current ratio of less than 1:1

according to its banking principle for efficient investment of its collected
deposits.
Acid-Test (Quick) Ratio: The measurement used by business to

analysis their ability to pay their current liabilities with current assets
excluding less liquid assets is acid-test ratio. It is also called quick ratio.
Quick assets are cash, short-term investments and current receivables.
These are the most liquid types of assets. Acid-test ratio is differs from
current ratio by excluding less liquid assets such as inventory and

prepaid expenses, because they take longer time to be converted into
cash. The acid-test test or quick ratio is defined as quick assets (cash,
short-term investment and current receivable) divided by current
liabilities. Its formula is given below:
-
The common guideline for an acceptable acid-test ratio is 1:1. Similar to

analysis of current ratio, we need to consider other factors. For instance,
the frequency with which a company converts its current assets into
cash affects its working capital requirements. Acid-test ratio is the most
important measurement for banking companies as financial institutions.
Accounts Receivable Turnover: We can measure how frequently a

company converts its receivables into cash by computing account
receivable turnover. Account receivable turnover is a measure of both
the quality and liquidity of account receivables. Quality of receivables

refers to the likelihood of collection without loss. Liquidity of receivable
refers to the speed of collection. Accounts receivable turnover is

computed by dividing net sales by average account receivable. Its
formula is given below:
Average accounts receivable is computed as follows:

=
Accounts receivable turnover is more precise if net credit sales are used
for the numerator because net sales include cash sales, but external
users generally use net sales (or net revenue) because information about
net credit sales is typically not reported in financial reports. Some users
use net receivable as denominator when use net credit sales as
numerator, but using the average account receivable as denominator is
more perfect for computing accounts receivable turnover.
A high
turnover is favorable because it means a company need not commits
large amount of funds to account receivable. A high turnover indicates

that a company is too efficient to collect receivables.
Inventory Turnover: Inventory turnover shows how long a company
holds inventory before selling it affects working capital requirements.
Inventory turnover is also called merchandise turnover or merchandise

inventory turnover. It is computed as follows:
=
The average inventory is computed as follows:

=
If the beginning and ending inventory for the year do not represent the
usual inventory amount, an average of quarterly or monthly inventories
can be used. A generally agreed minimum value for inventory turnover

ratio is about 2:1 (from a secured creditor perspective), but the ratio
needs careful interpretation because it is based on the book value of
pledged assets. Inventory turnover is important for merchandisers, but

not for service providing company because service providing company
have a little or no inventory. So as service company banks and financial

institutions do not need analysis of the inventory turnover ratio for
their operations.
Days Sales Uncollected: Accounts receivable turnover provides insight
about how frequently a company converts its accounts receivable into

cash. This is important for evaluating a companys liquidity. One
measure of the receivables nearness to cash is the days sales

uncollected. It is computed as follows:
=
A rough guideline states that days sales uncollectable should not exceed
1
times the days in its credit period, if discounts are not offered; or
discount period, if favorable discounts are offered.
Days Sales in Inventory: Days sales in inventory, also called days
stock on hand, is a ratio that reveals how much inventory is available in

terms of the number of days sales. It can be interpreted as the number
of days one can sell from inventory if no new items are purchased. This
ratio is often viewed as a measure of the buffer against out-of-stock
inventory and is useful in evaluating liquidity of inventory.
computed as follows:
It is
Days sales in inventory focuses on ending inventory and it estimates
how many days it will take to convert at the end of a period into
accounts receivable of cash. Notice that, days sales in inventory focuses
on ending inventory whereas inventory turnover focuses on average

inventory.
Total Asset Turnover: Total asset turnover is a measure of a companys

ability to use its assets to generate sales and is an important indicator of
operating efficiency. A companys assets are important in determining
its ability to generate sales and earn income. Total asset turnover is
Average total assets is computed as follows:

=
Companies desire higher total asset turnover from their operations.

Interpreting the total asset turnover also requires an understanding of
the companys operations. Some operations are capital intensive,

meaning that a relatively large amount is invested in assets to generate
sales. This suggests a relatively lower total asset turnover. Other

companies having labor intensive operations, meaning that generate
sales more by the efforts of people than using assets.
2.11.6.2: Solvency Ratios
Solvency refers to a companys long-run financial viability and its ability to
cover long-term obligations. All of a companys business activities like

financing, investing and operating activities affect its solvency. Analysis of
solvency is long term and uses less precise but more encompassing
measures than liquidity. One of the most important components of solvency
analysis is the composition of a companys capital structure. Capital

structure refers to a companys financing sources. It ranges from relatively
permanent equity financing to riskier or more temporary short-term
financing. This analysis focuses on a companys ability to meet its

obligations and provide security to its creditors over long run. Indicators of
this ability include debt and equity ratios, the relation between pledged
assets and secured liabilities, and the companys capacity to earn sufficient
income to pay fixed interest charges.
Debt and Equity Ratios: One element of solvency analysis is to assess
the portion of a companys assets contributed by creditors and the

portion contributed by its owners is called debt and equity ratio. A
company that finances a relatively large portion of its assets with
liabilities is said to have a high degree of financial leverage. Higher

financial leverage involves greater risk because liabilities must be repaid
and often require regular interest payments. The risk that a company
might not be able to meet such required payments is higher if it has more
liabilities. One way to assess the risk associated with a companys use of
liabilities is to compute the debt ratio. Debt ratio is computed as follows:
=
The equity ratio provides complementary information by expressing total

equity as a percent of total assets. A company is considered less risky if its
capital structure contains more equity. Equity ratio is computed as

follows:
Pledged Assets to Secured Liabilities: A companys ability to borrow

money with or without collateral agreements depends on its credit rating.
In some cases, debt financing is unavailable unless the borrower can
provide security to creditors with a collateral agreement. To borrow

funds at a favorable rate, many bonds and notes are secured by collateral
agreements in the form of mortgages. Investors of a companys secured

debt obligations need to determine whether the debtors pledged assets
provide adequate security. One method to evaluate this is pledged assets

to secured liabilities ratio. This ratio also is relevant to unsecured
creditors because of what it implies about the remaining assets available.
This ratio is computed as follows:
A generally agreed minimum value for this ratio is about 2:1 (from a
secured creditor perspective), but the ratio needs careful interpretation
because it is based on the book value of pledged assets. Book values are
not necessarily intended to reflect amounts to be received from assets in
event of liquidation. Also, a companys long-run earning ability is equally

important.
Times Interest Earned: The amount of income before deductions for

interest expense and income taxes is the amount available to pay interest
expense. A company incurs expenses on many of its current and longterm liabilities. Interest expense is often viewed as a fixed expense
because the amount of these liabilities is likely to remain in one form or

another for a substantial period of time. This means that the amount of
interest is unlikely to vary due to change in sales or other operating
activities. While fixed expenses can be advantageous when a company is
growing, they create risk. This risk stems from the possibility that a
company might be unable to pay fixed expenses if sales decline. One
method that measures a companys ability to pay interest expenses is
times interest earned ratio. This ratio is computed as follows:
=
The larger this ratio, the less risky is the company for creditors. One
guideline says that the creditors are reasonably safe if the company earns
its fixed interest expense two or more times each year.
2.11.6.3: Profitability Ratios
We are especially interested in a companys ability to use its assets
efficiently to produce profits and positive cash flows. Profitability refers to a
companys ability to generate an adequate return on invested capital. Return
is judged by assessing earnings relative to the level and source of financing.
Profitability is also relevant to solvency. This section describes key

profitability measures and their importance to financial statement analysis.
Profit Margin: A useful measure of a companys operating results is the
ratio of its net income to net sales. This ratio is called profit margin. It
reflects a companys ability to earn net income from sales. Profit margin is
100
To evaluate profit margin, we should consider the industry median if
possible. For instance, companies including banks might require a profit

margin between 10% and 15%.
Return on Total Assets: Return on total assets is a profitability ratio that

measures the net income produced by total assets during a period by
comparing net income to the average total assets. In other words, the
return on assets ratio or ROA measures how efficiently a company can
manage its assets to produce profits during a period. Return on total

assets is computed as follows:
100
An average total asset is computed as follows:

=
Since companies assets' sole purpose is to generate revenues and produce
profits, this ratio helps both management and investors to see how well
the company can convert its investments in assets into profits. In short,
this ratio measures how profitable a company's assets are. Generally

companies expect higher return on total assets because that indicates a
companys assets provide more returns.
Return on Common Stockholders Equity: Perhaps the most important
goal in operating a company is to earn net income for its owner(s). The
return on common stockholders equity measures a companys success in
reaching this goal and is defined as follows:
=
Average common stockholders equity is computed as follows:

=
Beginning shareholders
+
2
shareholders
The denominator in this computation is the book value of common equity

including any minority interest. In the numerator, the dividends on
cumulative preferred stock are subtracted whether they are declared or
are in arrears. If preferred stock is noncumulative, its dividends are

subtracted only if declared.
2.11.6.4: Market Prospects Ratios

Market measures are useful for analyzing corporations with publicly traded
stock. These market measures use stock price, which reflects the markets
(publics) expectations for the company. This includes expectations of both
companys return and risk as market perceives it.
Price-Earnings Ratio: A stocks market value is determined by its

expected future cash flows. A comparison of a companys EPS and its
market value per share reveals information about market expectations.
This comparison is traditionally made using a price-earnings ratio. Priceearnings ratio can be viewed as an indicator of the markets expected
growth and risk for a stock. Some analysts interpret this ratio as what
price the market is willing to pay for a companys current earnings

stream.
Price-earnings ratios can differ across companies that have
similar earnings because of either higher or lower expectations of future
earnings. A high level of expected risk suggests a low PE ratio. A high

growth rate suggests a high PE ratio. The price-earnings ratio is defined
as follows:
This ratio is often computed using EPS from the most recent period.
However, many users compute this ratio using expected EPS for next
period. Some analysis view stocks with high PE ratios as more likely to be
overpriced and stocks with low PE ratios as more likely to be
underpriced. These investors prefer to sell or avoid buying stock with

high PE ratios and to buy or hold stocks with low PE ratios. However,
investment decision making is rarely so simple as to rely on a single ratio.
For instance, a stock with a high PE ratio can prove to be a good

investment if its earnings continue to increase beyond current
expectations. Similarly, a stock with a low PE ratio can prove to be a poor

investment if its earnings decline below expectations.
Dividend Yield: Investors buy shares of a companys stock in
anticipation of receiving a return from either or both cash dividends and

stock price increases. Stocks that pay large dividends on a regular basis
called income stock are attractive to investors who want recurring cash
flows from their investments. In contrast, some stocks pay little or no
dividends but are still attractive to investors because of their expected

stock price increases. The stocks of companies that distribute little or no
cash but use their cash to finance expansion are called growth stocks. One
way to help identify whether a stock is an income stock or a growth stock
is to analyze its dividend yield. It is used to compare the dividend-paying

performance of different investment alternatives. Dividend yield is
Dividend yield can be computed for current and prior periods using
actual dividends and stock prices and for future periods using expected
values.
2.11.6.5: Summary of Ratios

Exhibit -2.5 summarizes the major financial statement analysis ratios
described in this chapter. This summary includes each ratios title, its
formulas, and the purpose for which it is commonly used.
First Security Islami Bank Limited
. .
Financial Statement Analysis Ratios:

Ratio
Liquidity and
Efficiency
Current Assets
Current Ratio
=
Current Liabilities
Acid-Test Ratio
Accounts Receivable
Turnover
Inventory Turnover
Days Sales Uncollected

Days Sales in
Inventory
Total Asset Turnover
=
=
Short-term
ability
debt-paying
Net Sales
Average Accounts Receivable
Efficiency of collection
Account Receivable
365
Net Sales
Liquidity of receivables
Cost of Goods Sold

Average Inventory
Ending Inventory
365
Cost of Goods Sold
Measure of
Cash and equivalents + Short term investment + Current receivables (net)

Immediate short-term
Current Liabilities
debt-paying ability
=
=
Formula
Efficiency of inventory
management
Liquidity of inventory
Net Sales
Average Total Assets
Efficiency of assets in
producing sales
Exhibit -2.5
. .
Solvency
Total Liabilities
100
Total Assets
Debt Ratio
Equity Ratio
Pledged Assets to
Secured Liabilities
Times Interest Earned
Income before Interest Expense and Income Taxes

Interest Expense
Profit Margin Ratio
Net Income
100
Net Sales
Return on Total Assets
Profitability
Gross margin ratio

Return on Equity
=
=
Creditor financing and

leverage
Total Equity
100
Total Assets
Owner financing
Book Value of Pledged Assets

Book Value of Secured Liabilities
Protection to secured
creditors
Protection in meeting
interest payments
Net income in each sales
dollar
Net Sales Cost of Goods Sold

Net Sales
Net Income
100
Net Income
100
Total Shareholders Equity
Exhibit -2.5
Gross margin in each

sales dollar
Overall profitability of
assets
Overall profitability of
Equity
. .
Return on Common
Stockholders Equity
Book value Per

Common Share
Net Income Preferred Dividends

100
Average Common Stockholders Equity
Basic Earnings Per

Share
Shareholders Equity Applicable to Common Share

Number of Common Share Outstanding
Net Income Preffered Dividends

Weighted average Common Shares Outstanding
Price-Earnings Ratio
Dividend Yield
Market Value(price)Per Share

Earnings Per Share
Market Prospects
Annual Cash Dividends Per Share

100
Market Price Per Share
Exhibit -2.5
Profitability of owner
investment
Net income per common
share
Net income per common
share
Market value relative to
earnings
Cash return per common

share
Above ratios are used for various purpose of financial analysis. These depend on the need of analyst. All ratios are not use for every type
of business. According to nature of business ratios are varying. For example, a service company generally has not any inventory, so it is
not required for it to compute the inventory turnover ratio. When I have analyzed the financial statements of First Security Islami Bank
Exhibit -2.5
Limited, I only use those ratios which are useful for a banking company. A
banking companys ratio analysis is different from the ratio analysis of a
merchandising company.
2.12: Relationships between Financial Statements
Previous Year
Balance Sheet
Changes
Current Year
Balance Sheet
Profit/Loss
Donations
Loan Loss
Depreciation
Current Year
Cash Flow
Profit/Loss
Non-Cash Items
Current Year
Income
Statement
Exhibit -2.6
From the exhibit -2.6, it is appeared that all financial statements are correlated
and all transactions are directly or indirectly affect the cash flow. Cash flow
represents the actual cash generation by a business over a period. Further, a
businesss main aim is to generate enough cash. So a cash flow statement is

useful to the investors to know the actual cash generating capacity of a
business, trend of cash flow and managements efficiency to increasing cash. In
my analysis, I analyze the FSIBLs cash flow statement and try to lay bare the
trend of cash flow of FSIBL, and trace reason of cash increase or decrease.
Understanding the purpose of financial statement analysis is crucial to the

usefulness of any analysis. This understanding leads to efficiency of effort,
effectiveness in application, and relevance in focus. The purpose of most
financial statement analysis is to reduce uncertainty in business decisions

through a rigorous and sound evaluation. A financial statement analysis report
helps by directly addressing the building blocks of analysis and by identifying
weakness in inference by requiring explanation. If forces us to organize our

reasoning and to verify its flow and logic. A report also serves as a
communication link with readers, and the writing process reinforces our
judgments and vice versa.
3
Chapter Three
Organizational Overview
Organizational
Overview
3.1: Corporate Profile of FSIBL

Registered Name of the
Company
Legal Form
A scheduled commercial bank incorporated on August

29, 1999 as a Public Limited Company under the
Companies Act 1994 and Bank Companies Act 1991.
Registered Office
23 Dilkhusha Commercial Area, Dhaka-1000,
Bangladesh.
Tel: 9560229, Fax: 9561637, E-mail: info@fsiblbd.com
Head Office
House No. SW(1) 1/A, Road No. 8, Gulshan-1, Dhaka1212, Bangladesh.
Tel: 88-02-9888446, Fax: 88-02-9891915
Authorized Capital
Tk.10,000 Million
Paid up Capital
Tk.4,114.38 Million (2014)
Incorporation Certificate C-38464(422)/99, Dated: August 29, 1999
Commencement of
Issue No. 3060, Dated August 29, 1999
Business Certificate
Bangladesh bank
BRPD(P) 744(73)/99-2931 Dated: 22/09/1999
Approval Certificate
Listing with Dhaka and September 22, 2008
Chittagong Stock
Exchange Limited
Commencement of
September 22, 2008
trading with DSE & CSE
VAT Registration
9011047423 Dated: 28/11/1999
TIN Certificate
003-201-1101/Co-3/Tax Zone-1/Dhaka
Auditors
Hoda Vasi Chowdhury & Co, Chartered Accountants
BTMC Bhaban (8th Floor), 7-9 Karwan Bazar C/A,
Dhaka-1215
Legal adviser
The Law Counsel, Barrister & Advocate City Heart
(7th Floor), Suit No. 8/8, 67 Naya Paltan, Dhaka-1000
Tax Consultants
K.M. Hasan & Co., Chartered Accountants Home Tower
Apartment, 87 New Eskaton Road, Dhaka-1000
Exhibit -3.1
3.1.1: Financial Performance at a Glance of FSIBL

Sl. No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Particulars
Authorized Capital
Paid-up Capital
Shareholders' Equity
Total Capital (Tier-1+Tire-2)
Statutory Reserve
Total Assets
Total Liabilities
Deposits
Total Investment and Advances
Total Contingent Liabilities
Total Risk Weight Asset
Total Fixed Assets
Operating Income
Operating Expenditure
Profit before Provision & Tax
Profit before Tax
Net Profit after Provision & Tax
Foreign Exchange Business:
a) Import Business
b) Export Business
c) Remittance
No. of Foreign Correspondent
Profit Earning Assets
Non Prifit Earning Assets
Investment as a % of Total Deposit
Capital Adequacy Ration
Divident
a) Cash
b) Bonus
c) Right Share
Cost of Fund
Net Asset Value Per Share
Earning Per Share (EPS)
Price Earning Ration (times)
Return on Assets (ROA)
No. of Shareholders
Number of Employees
Number of Branches
2009
4,600.00
2,300.00
2,865.41
3,379.03
263.44
47,978.55
45,113.14
42,423.09
38,725.87
5,971.67
31,113.43
376.47
1,327.63
576.79
750.83
646.83
326.83
20,208.92
16,101.17
3,549.00
558.75
240.00
41,371.52
6,607.02
91.28%
10.91%
Nil
10%
Nil
9.28%
12.45
1.42
15.39
1.56%
54,400
775
52
2010
4,600.00
2,036.00
3,920.01
4,582.21
460.16
63,619.79
59,699.78
56,344.95
52,123.90
8,859.66
50,423.90
573.61
2,085.20
881.60
1,203.60
983.60
548.60
35,103.57
28,391.20
5,868.90
843.47
240.00
56,040.95
7,578.84
92.51%
9.09%
Nil
12%
20%
8.90%
12.81
1.61
25.21
1.89%
82,230
929
66
Exhibit -3.2
2011
4,600.00
3,400.00
4,548.95
5,449.44
704.20
91,012.89
86,463.94
78,145.04
69,467.32
11,363.57
60,010.80
979.35
2,738.25
1,148.66
1,589.58
1,219.95
579.93
40,807.30
29,534.90
10,260.60
1,011.80
1,400.00
79,211.72
11,801.17
88.90%
9.07%
Nil
10%
Nil
10.01%
13.38
1.71
15.37
1.75%
90,954
1,342
84
(Amount in million Tk.)

2012
2013
10,000.00
10,000.00
3,740.35
4,114.38
5,664.48
6,433.60
8,145.33
9,261.24
1,004.57
1,310.40
129,733.17
161,822.98
124,068.69
155,389.38
109,905.57
139,520.95
96,304.23
114,601.80
9,248.23
11,865.56
79,817.20
91,434.10
1,997.72
2,476.43
3,734.68
4,409.60
1,792.72
2,383.88
1,941.96
2,025.72
1,501.86
1,529.12
761.86
769.12
36,067.20
2,580.48
24,056.20
1,217.70
7,279.40
650.00
4,731.60
712.78
1,400.00
1,400.00
112,003.37
135,976.09
17,729.80
25,846.88
87.62%
82.14%
10.20%
10.13%
Nil
10%
Nil
11.00%
15.28
1.85
9.99
0.69%
89,994
2,090
100
10%
Nil
Nil
11.64%
15.64
1.87
8.08
0.53%
90,985
2,367
117
3.2: Historical Background of FSIBL

First Security Islami Bank Limited (FSIBL) was formed in Bangladesh on
29th August 1999 under Companies Act 1994 to start banking business. It
obtained permission from Bangladesh Bank on 22 September 1999 to begin
its business. The Bank carries banking activities through its 136 branches in
the country. Their commercial banking activities include a wide range of
services including accepting deposits, discounting bills, conducting money
transfer and foreign exchange transactions, and performing other related
services such as safe keeping, collections and issuing guarantees,

acceptances and letter of credit. FSIBL started their business with
traditional commercial banking services as First Security Bank Ltd.
However, from January 01, 2009 they converted their business to Islamic
Banking with Islamic Shariah Act and the bank changed its name and mode
of business and incorporated as First Security Islami Bank Ltd. It started
with 14 branches in 1999 but now has 134 branches in Bangladesh which
shows the impact they have had in the economy. The bank maintains a
friendly relationship with the top ranking banks. They have online, SMS and
ATM banking facilities for their clients.
The company philosophy A step ahead in time has been exactly the spirit
for Asian success; the bank has been operating with talented and brilliant
personnel, equipment with modern technology so as to make it most
efficient to meet the challenges of 21st century and to fulfill the needs and
wants of its customers.
3.3: Vision, Mission, Objective and Strategies of FSIBL

3.3.1: Vision
To be the premier financial institution in the country by providing high quality
products and services backed by latest technology and a team of highly
motivated personnel to deliver excellence in Banking.
3.3.2: Mission
To be the most caring and customer friendly and service oriented bank.
To create a technology based most efficient banking environment for its

customers.
To contribute to the socio-economic development of the country.
To attain the highest level of satisfaction through the extension of

services by dedicated and motivated professionals.
To maintain continuous growth of market share by ensuring quality.

To ensure ethics and transparency in all levels.
To ensure sustainable growth and establish full value of the honorable

shareholders and
Above all, to contribute effectively to the national economy.
3.3.3: Objective
To conduct banking service according to Islamic Shariah
To provide efficient computerized banking system.
To ensure foreign exchange operations.
To accept deposit on profit-loss sharing basis.
To establish a welfare-oriented banking system.
To play a vital role in human development and employment generation.
To contribute toward balanced growth and development of the country

through investment operations particularly in the less developed areas.
3.3.4: Strategies
To achieve our customers best satisfaction & win their confidence.
To manage & operate the bank in the most effective manner.
To identify customers need & monitor their perception towards meeting

those requirements.
To review & update policies, procedures & practices to enhance the

ability to extend better customer services.
To train & develop all employees & provide them adequate resources so
that customers needs can reasonably addressed.
To promote organizational efficiency by disclosing companys plans,

policies & procedures openly to the employees in a timely fashion.
To ensure a congenial working environment.
To diversify portfolio in both retail & wholesale market.
3.4: Organizational Structure of FSIBL

3.4.1: Board of Director
Mohammed Saiful Alam

Chairman
Alhaj Mohammed Abdul Maleque

Vice-Chairman
Ms. Farzana
Parveen
Director
Shahidul Islam
Director
Mohammad Kutub
Uddowllah
Independent Director
Ms. Rahima
Khatun
Director
Ms. Atiqur Nesa

Director
Mohammad
Oheidul Alam
Director
Mohammad Ishaque
Ahsanul Alam
Director
Khurshid Jahan
Depositor Director
Exhibit -3.3
Md. Wahidul
Alam Seth
Director
Md. Sharif Hussain

Mr. Syed Waseque

Md. Ali
Managing Director
3.4.2: Management of FSIBL

Organogram
Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
First Vice President
Assistant Vice President
Senior Executive Officer
Executive Officer
Principal Officer
Senior Officer
Officer
Assistant Officer
Junior Officer
Trainee Officer
Exhibit -3.4
3.4.3: Shariah Board

Shariah Members
Name
Sheikh (Moulana)
Mohammad Qutubuddin
Mufti Sayeed Ahmed
Moulana M. Shamaun Ali

Moulana Abdus Shaheed
Naseem
Mr. Mohammad Azharul
Islam
Name
Alhaj Md. Abdul Maleque
Prof. Md. Sharif Hussain
Mr. Shahidul Islam
Position
Chairman
Vice Chairman
Member
Secretary
Member
Member
Address
Baitush Sharaf Complex, Shah
Abdul
Jabbar
(R)
Road
Dhanialapara, Chittagong-4100.
Markaz-e- Eshaete Islam 2/2 Darus
Salam, Mirpur, Dhaka
491, Wireless Railgate, Bara
Moghbazar, Dhaka-1217
2/C Green Valley Apartment 493,

Wireless Railgate, Bara Moghbazar,
Dhaka-1217
Lecturer Department of law,
University of Dhaka, Dhaka-1000
Observers Members
Position
Vice Chairman, Board of
Directors, FSIBL &
Observer Member,
Shariah Council
Board of Directors, FSIBL
&
Observer
Member,
Shariah Council
Board of Directors FSIBL
&
Observer
Member,
Shariah Council
Managing Director
Name
Position
Mr. Syed Waseque Md. Ali Managing Director
(Current Charge), FSIBL &
Observer Member,
Shariah Council
Exhibit -3.5
Address
8/A, OR Nizam Road
Panchlaish R/A Chittagong
57, East Hajipara (5 th
Floor) Rampura, Dhaka1219
House# 7, Road# 1,
Nasirabad Housing Society,
Post: Medical P.S:
Panchlaish, Dist.:
Chittagong
Address
House SW(I)1/A(4th Floor),
Road 8, Gulshan -1,
Dhaka-1212
3.5: Branches of FSIBL

Division
Serial No.
Branch Name
Branch Code
01
AZAMPUR
140
BISWAROAD
120
02
03
BANGSHAL
BHALUKA SME
05
CITY UNIVERSITY
07
DILKUSHA
04
06
08
09
DHAKA DIVISION
10
DAMODYA
FARIDPUR
BANANI
BASHUNDHARA
11
BHUAPUR BRANCH
13
COLLEGE GATE
15
DONIA
12
14
BONOSREE
DHANMONDI
16
GAZIPUR CHOWRASTA
18
KARWAN BAZAR
17
19
20
GULSHAN
KONAPARA
MALIBAG
21
MASTERBARI
23
MOTIJHEEL
22
MOHAKHALI
24
MYMENSINGH
26
KERANIGONJ BRANCH
25
ISLAMPUR
27
MADHABDI SME/KRISHI
29
MIRPUR
28
MANIKGANJ BRANCH
106
168
178
180
101
162
115
177
202
138
125
108
121
214
112
176
191
174
183
103
129
160
155
207
154
203
113
30
MOHAMMADPUR
186
32
NARAYANGANJ
170
34
POSTOGOLA BRANCH
36
SAVAR
31
DHAKA DIVISION
33
35
37
RING ROAD
SHAFIPUR
TONGI BARI BRANCH
40
PACCHOR BRANCH
39
UTTARA
41
RANABHOLA BRANCH
43
SENANIBASH
45
SYLHET DIVISION
NORIA
38
42
CHITTAGONG
MUKSUDPUR
RUPNAGAR BRANCH
SREEPUR
46
TOPKHANA
48
AMBORKHANA
50
MOULVIBAZAR
52
SYLHET
47
49
51
ZIRABO
BISWANATH
TALTOLA
53
GOBINDA GONJ
55
AGRABAD
54
BEANI BAZAR
56
BAHADDARHAT
58
CHAWK BAZAR
60
DOVASHI BAZAR
62
HATHAZARI
57
59
61
BANSKHALI
COURT BAZAR
FENI
127
181
225
133
149
117
199
158
210
228
223
126
143
118
148
128
105
122
153
111
132
175
104
123
187
166
135
124
165
137
63
ANDERKILLAH
000
65
CHAKARIA
121
64
66
COMILLA
67
COXS BAZAR
69
HALISHAHAR
71
JUBILEE ROAD
73
KHATUNGONJ
75
MOHRA SME/KRISHI BR.
77
PAHARTOLI RAOZAN BR.
79
KADAMTALI
81
KUMIRA
68
70
72
CHITTAGONG DIVISION
BANDAR TILA
74
76
78
80
82
83
84
85
EID GAON
HNILA
KATIRHAT
MIRZAKHIL
NAZU MEAH HAT

PATIYA
KERANIHAT
MOHILA
NAZIR HAT
PAHARTOLI
PATHER HAT
86
PATIYA MOHILA
88
RAMGONJ
87
PEKUA
148
150
139
151
185
221
107
206
102
218
161
112
196
127
212
110
193
167
138
159
145
182
192
131
89
RANIR HAT SME/KRISHI BR.
91
RAMU
200
BAGACHRA BRANCH
213
90
92
93
94
PROBORTAK MOR
TANTOR
BARGUNA
156
0
229
0
95
CHUADANGA
190
97
FULTOLA
222
KALIGANJ
224
96
98
99
KHULNA DIVISION
JESSORE
100
KESHABPUR
102
BAROBAZAR
104
FAKIRHAT
101
103
105
BAGERHAT
DINAJPUR
GALACHIPA
106
JHENAIDAHA
108
KHAJURA BAZAR
110
MAGURA
107
109
KAPILMUNI
KHULNA
111
MORRELGANJ
113
NARIA
112
NARAIL
141
188
172
211
171
215
194
197
208
220
116
173
216
204
0
114
SATKHIRA
146
116
MEHERPUR
219
118
NARAIL LOHAGARA SME
157
120
SHYAMNAGAR
205
115
117
119
RAJSHAHI
FAKIRHAT
121
KUSHTIA
NAOGAON
NAVARON BRANCH
BOGRA BRANCH
179
0
198
0
122
KANSAT BRANCH
227
124
DHUPOIL BAZAR BRANCH
217
126
RAJSHAHI BRANCH
123
125
PABNA
NATORE BRANCH
169
231
136
RANGPUR
BARISAL DIVISION
127
BARGUNA BRANCH
201
129
GALACHIPA BRANCH
128
BAUFOL BRANCH
230
130
SWARUPKATI BRANCH
195
132
BHOLA BRANCH
226
131
133
134
135
136
BARISAL BRANCH
PATUAKHALI
UZIRPUR BRANCH
DINAJPUR BRANCH
RANGPUR BRANCH
Exhibit -3.6
163
144
202
171
109
3.6: Functions of FSIBL

First Security Islami Bank is performing the following functions:
Collection of deposit
Maintaining all types of deposit accounts

To make investment
To handle foreign remittance
Collection of utility bills payment

To provides locker service
Providing Inland/Online Transaction Service
Handling Foreign Exchange Business Transaction

Smart Banking
To conduct social welfare activities
3.7: Features of FSIBL

The bank is committed to run all its activities as per Islami Shariah. FSIBL
achieves the customers satisfactions through its fast and excellent service.
The distinguishing features of FSIBL are as follows:
All its activities are conducted on interest-free banking system
according to Ialami Shariah.
debtor-creditor relationship.
Establishment of participatory banking system instead of banking on

Investment is made in different modes permitted by Islami Shariah.
Investment income of the Bank is shared to the Mudarabah
Depositors according to a ratio to ensure a fair rate of return on their
deposits.
The bank ensures life insurance of Tk.100000 to its clients against

their MMPS and MMDS accounts without taking additional
installment from the clients for the insurance.
to establish equity and justice in the field of all economic activities.
and low-income group of people.
Corporate Social Responsibility.
Its aims are to introduce a welfare-oriented banking system and also

It extends Socio-economic and financial services to the poor, helpless
The bank provides scholarship to the talent students as a part of
According to the needs and demands of society and the country as a
whole the Bank invests money to different Halal business. The bank
participates in different activities aiming at creating jobs,
implementing development projects taken by the Government and

developing infrastructure.
3.8: Principal Products & Services of FSIBL

3.8.1: Deposit Products
Al-Wadiah Current Deposit
Mudarabah Savings Deposit
Mudarabah Short Term Deposit

Mudarabah Term Deposit :
One Month
Three Months
Six Months
Twelve Months
Twenty Four Months

Thirty Six Months
Foreign Currency Deposit
Mudarabah Savings Scheme :
Monthly Savings Scheme

Monthly Profit Scheme
Mudaraba Double Benefit Deposits Scheme in 6 years

Mudaraba Triple Times Deposit Scheme in 10 years
Mudaraba Four Times Deposit Scheme in 12 years
3.8.2: Investment Products
Investment / Utilization of the funds:
Bai-Murabaha (Deferred Lump Sum/ Installment Sale)

Bai-Muajjal (Deferred Installment / Lump Sum Sale)
Ijara (Leasing)
Musharaka (Joint-Venture, Profit-Sharing)

Mudaraba (Trustee Profit-Sharing)
Bai-Salam (Advance Sale and Purchase)

Hire-Purchase
Direct Investments
Ijara (Leasing)
Post Import Investment
Purchase and Negotiation of Export Bills

Inland Bills Purchased
Murabaha Import Bills
Bai-Muajjal Import Bills
Pre-Shipment Investment
Quard-ul-Hasan (Benevolent Investment)
Letter of Guarantee
Tender Guarantee
Performance Guarantee
Guarantee for Sub-Contracts

Shipping Guarantee
Advance Payment Guarantee
Guarantee in lieu of Security Deposits
Guarantee for exemption of Customs Duties

Others
Letter of Credit (L/C) / Back to Back Letter of Credit (L/C)

Specialized Schemes
Tender Guarantee
Consumer Investment Scheme

SME Investment Scheme,
Lease Investment Scheme,

Hire Purchase,
Earnest Money Investment Scheme,

Mortgage Investment,
Employees House Building Scheme,
ATM, VISA Investment Card, EEF, etc.
3.8.3: Foreign Remittance

3.8.4: Utility Bill Payment
3.8.5: Locker Service
Personalized service
Facilities to access outside scheduled time

Parcel handling
Safe custody of goods and bonds/shares
Lockers available in various sizes. For example: Small, Medium and

Large.
3.8.6: Inland and Online Transaction Services

3.8.7: Foreign Exchange Business Transaction / Service
3.9: Society for Worldwide Interbank Financial

Telecommunication (SWIFT)
FSIBL SWIFT BIC
Head Office
FSEBBDDH
Dilkusha Branch
FSEBBDDHDIL
Motijheel Branch
FSEBBDDHMOT
Bangshal Branch
FSEBBDDHBNG
Dhanmondi Branch
FSEBBDDHDHA
Gulshan Branch
FSEBBDDHGUL
Mohakhali Branch
FSEBBDDHMKH
Banani Branch
FSEBBDDHBAN
Agrabad Branch
FSEBBDDHAGR
Khatungonj Branch
FSEBBDDHKTG
Jubilee Road Branch
FSEBBDDHJUB
Sylhet Branch
FSEBBDDHSYL
Exhibit -3.7
4
Chapter Four
Core Part
Financial Statements Analysis of First
Security Islami Bank Limited (FSIBL)
Core Part
Financial Statements
Analysis of First Security
Islami Bank Limited (FSIBL)
4.1: Introduction
A bank is a financial institution whose main job is to collect fund from
surplus units and invest in deficit units and making profits. Owners,
depositors and shareholders of a bank invest to a bank to get profit or
interest as a reward in return. But their profit is depends on the banks
financial performance. It depends on how a bank operates itself, how
efficiently management operates the operations of a bank. To understand
the financial performance of a bank, the investor should analyze the

financial statements of that bank. They may use different financial ratios to
analyze the financial performance of a bank. By analyzing the financial
performance of a bank investors and management can know the strengths
and weakness of the bank, and can take proper policy making decisions for
future. To analyze the financial performance of First Security Islami Bank

Limited (FSIBL), different financial ratios are used to determine the
strengths and weakness of FSIBL. Actually, to understand the overall

financial position and performance of FSIBL is the main aim of this chapter.
4.2: Reconstruction of Financial Statements of FSIBL
The all core financial statements of FSIBL are obtained. These statements
include Balance Sheet, Income Statement, Statement of Cash Flows,
Statement of Equity, Statement of Liquidity and their notes for five years.
But, these are not in the format which is required for different financial ratio
analysis. So, some of these financial statements are reconstructed in various
format for the interest of the analysis. The renovated statements are mainly
concerned based on the duration of the accounts which is very important for
ratio analysis. For preparing these financial statements no fictional data are
used, only the real financial data from notes of statements are used
according their duration and types.
FIRST SECURITY ISLAMI BANK LIMITED

COMPARATIVE BALANCE SHEET
FOR THE YEARS- 2013, 2012, 2011, 2010, 2009 and 2008
Particulars
PROPERTY AND ASSETS
Current Assets
Cash
Balance With Bank and Financial Institutions
Investments in Shares & Securities
Other Assets
Fixed Assets
2013
BDT
40,473,177,156
11,549,381,969
14,379,093,084
2,723,632,786
11,821,069,317
2012
BDT
2011
BDT
29,705,058,836
10,528,144,967
10,785,716,061
3,187,223,270
5,203,974,538
18,151,650,528
7145564652
5699804595
1630019092
3676262189
121,349,799,689
4,271,569,450
114,601,798,177
2,476,432,062
161,822,976,845
100,028,114,252
1,726,169,450
96,304,228,588
1,997,716,214
Placement from Banks & Other Financial Institutions

Deposits and Other Accounts
Other Liabilities
2010
BDT
2009
BDT
8,587,867,603
4857542203
1036199077
524937861
2169188462
2008
BDT
7,202,722,793
5033532439
731150321
241026032
1197014001
2013
BDT
5,364,366,909
1394671407
2101436244
736969100
1131290158
10,768,118,320
1,021,237,002
3,593,377,023
(463,590,484)
6,617,094,779
-
11,553,408,308
3,382,580,315
5,085,911,466
1,557,204,178
1,527,712,349
38,720,273,999
129,733,173,088
72,861,248,561
2414569450
69467328284
979350827
91,012,899,089
55,031,930,196
2334416700
52123903164
573610332
63,619,797,799
40,775,830,159
1673477998
38725874774
376477387
47,978,552,952
25,875,026,509
596000000
25094658077
184368432
31,239,393,418
21,321,685,437
2,545,400,000
18,297,569,589
478,715,848
152,709,588,439
3,950,000,000
139,520,955,783
9,238,632,656
121,650,118,339
4,400,000,000
109,905,568,871
7,344,549,468
86,432,834,521
3200000000
78145045008
5087789513
59,699,786,313
56344959167
3354827146
45,113,142,197
42423092722
2690049475
Total Liabilities
155,389,377,281
124,068,693,306
86,463,948,521
59,699,786,313
45,113,142,197
4,114,387,200
1,310,398,870
114,061,074
392,381,876
502,370,544
6,433,599,564
3,740,352,000
1,004,574,914
84,000,000
402,442,950
433,109,918
5,664,479,782
3400320000
704202214
24000000
371537509
48890845
4,548,950,568
3036000000
460169845
24000000
399841641
3,920,011,486
2300000000
263449699
24000000
277961056
2,865,410,755

Investments
Fixed Assets Including Premises, Furniture & Fixtures
Total Assets
LIABILITIES AND CAPITAL

Liabilities:
Current Liabilities

Mudaraba Subordinated Bond
Capital/ Shareholders' Equity
Paid-up Capital
Statutory Reserve
Other Reserve
Assets Revaluation Reserves
Retained Earnings
Total Shareholders' Equity

Total Liabilities and Equity
2,679,788,842
179,788,842
2,500,000,000
161,822,976,845
2,418,574,967
198,574,967
2,220,000,000
129,733,173,088
31,114,000
31114000
-
91,012,899,089
63,619,797,799
Exhibit -4.1
47,978,552,952
2012
BDT
Changes in BDT
2011
BDT
9,563,782,925
2,288,022,449
4,663,605,518
1,105,081,231
1,507,073,727
-
2010
BDT
2009
BDT
1,385,144,810
(175,990,236)
305,048,756
283,911,829
972,174,461
2013
%
1,838,355,884
3,638,861,032
(1,370,285,923)
(495,943,068)
65,723,843
36%
10%
33%
-15%
127%
32,089,803,757
27,166,865,691
(688,400,000)
26,836,900,304
1,018,365,387
17,829,318,365
80,152,750
17,343,425,120
405,740,495
27,393,101,290
14,256,100,037
660,938,702
13,398,028,390
197,132,945
15,641,244,847
14,900,803,650
1,077,477,998
13,631,216,697
192,108,955
28,700,820,412
630000000
25854541500
2216278912
31,059,470,100
(450,000,000)
29,615,386,912
1,894,083,188
-
35,217,283,818
1,200,000,000
31,760,523,863
2,256,759,955
26,733,048,208
3,200,000,000
21,800,085,841
1,732,962,367
-
28,700,820,412
31,320,683,975
37,604,744,785
374,035,200
305,823,956
30,061,074
(10,061,074)
69,260,626
769,119,782
-
340,032,000
300,372,700
60,000,000
30,905,441
384,219,073
1,115,529,214
26,764,162,208
364,320,000
244,032,369
371,537,509
(350,950,796)
628,939,082
-
2300000000
134082149
24000000
80490857
2,538,573,006
31,239,393,418
261,213,875
(18,786,125)
280,000,000
-
32,089,803,757
2,387,460,967
167,460,967
2220000000
38,720,273,999
31,114,000
31,114,000
- -
27,393,101,290
Changes in Percentage
2012
%
2011
%
2010
%
2009
%
64%
47%
89%
96%
42%
111%
47%
450%
211%
69%
19%
-3%
42%
118%
81%
34%
261%
-65%
-67%
6%
54%
16,739,159,534
21%
147%
19%
24%
25%
37%
-29%
39%
104%
43%
32%
3%
33%
71%
43%
35%
39%
35%
52%
33%
58%
181%
54%
104%
14,586,644,116
13,921,866,445
664,777,671
16,412,321,785
(630,000,000)
16,568,551,222
473,770,563
26%
-10%
27%
26%
41%
38%
41%
44%
45%
39%
52%
32%
33%
25%
57%
64%
21%
14,586,644,116
16,412,321,785
736,000,000
196,720,146
121,880,585
1,054,600,731
129,367,550
197,470,199
326,837,749
-
15,641,244,847
16,739,159,534
11%
-9%
13%
25%
7673%
538%
43%
45%
32%
57%
10%
30%
36%
-3%
16%
14%
10%
43%
250%
8%
786%
25%
12%
53%
0%
-88%
16%
32%
75%
0%
44%
37%
0%
96%
0%
245%
13%
25%
43%
43%
33%
54%

COMPARATIVE INCOME STATEMENT
FOR THE YEARS- 2013, 2012, 2011, 2010, 2009 and 2008
Particulars
Investments Income
Prefit Paid on deposits
Net Investment Income
Income from Investment in shares and securities
Commussion, Exchange and Brokerage
Other Operating Income
Total Operating Income

Less: Total Operating Expenses
Profit before Provision and Tax
Less: Total Provisions
Profit before Tax
Less: Total Tax
Net Profit after Tax
Retained Earning Brought Forward from Previous Year
Appropriations:
Statutory Reserve
Other Reserve
Bonus Share Issued
Total Appropriations
Retained Earnings Carried Forward
Earnings Per Share (EPS)
2013
BDT
2012
BDT
18,277,686,531
(14,597,553,390)
3,680,133,141
235,670,968
326,776,987
167,015,629
729,463,584
4,409,596,725
(2,383,876,943)
2,025,719,782
(496,600,000)
1,529,119,782
(760,000,000)
769,119,782
433,109,918
1,202,229,700
2011
BDT
13,339,668,730
(10,309,755,493)
3,029,913,237
98,997,129
404,240,245
201,533,344
704,770,718
3,734,683,955
(1,792,725,352)
1,941,958,603
(440,095,104)
1,501,863,499
(740,000,000)
761,863,499
371,651,119
1,133,514,618
305,823,956
20,000,000
374,035,200
699,859,156
502,370,544
300,372,700
60,000,000
340,032,000
700,404,700
433,109,918
1.87
1.85
2010
BDT
2009
BDT
2008
BDT
2013
BDT
8,747,763,443
(6,670,951,220)
2,076,812,223
81,967,646
403,310,160
173,662,888
658,940,694
2,735,752,917
(1,146,191,070)
1,589,561,847
(369,400,000)
1,220,161,847
(640,000,000)
580,161,847
399,840,641
980,002,488
5,547,047,795
(4,125,826,500)
1,421,221,295
264,208,027
282,561,956
117,216,660
663,986,643
2,085,207,938
(881,607,207)
1,203,600,731
(220,000,000)
983,600,731
(435,000,000)
548,600,731
277,961,056
826,561,787
4,348,674,553
(3,333,800,367)
1,014,874,186
53,510,527
194,631,419
64,617,576
312,759,522
1,327,633,708
(576,795,959)
750,837,749
(104,000,000)
646,837,749
(320,000,000)
326,837,749
80,490,857
407,328,606
244,032,369
364,320,000
608,352,369
371,650,119
196,720,146
230,000,000
426,720,146
399,841,641
129,367,550
129,367,550
277,961,056
37,920,751
37,920,751
80,490,857
1.42
7.35
1.71
Exhibit -4.2
2.33
3,141,799,470
(2,939,155,779)
202,643,691
202,345,834
133,384,184
34,409,250
370,139,268
572,782,959
(383,179,206)
189,603,753
189,603,753
(85,321,689)
104,282,064
14,129,544
118,411,608
Changes in BDT
2011
BDT
2012
BDT
4,938,017,801
(4,287,797,897)
650,219,904
136,673,839
(77,463,258)
(34,517,715)
24,692,866
674,912,770
(591,151,591)
83,761,179
(56,504,896)
27,256,283
(20,000,000)
7,256,283
61,458,799
68,715,082
4,591,905,287
(3,638,804,273)
953,101,014
17,029,483
930,085
27,870,456
45,830,024
998,931,038
(646,534,282)
352,396,756
(70,695,104)
281,701,652
(100,000,000)
181,701,652
(28,189,522)
153,512,130
3,200,715,648
(2,545,124,720)
655,590,928
(182,240,381)
120,748,204
56,446,228
(5,045,949)
650,544,979
(264,583,863)
385,961,116
(149,400,000)
236,561,116
(205,000,000)
31,561,116
121,879,585
153,440,701
5,451,256
(40,000,000)
34,003,200
(545,544)
69,260,626
56,340,331
60,000,000
(24,288,000)
92,052,331
61,459,799
0.02
0.15
2010
BDT
2009
BDT
2013
%
Changes in Percentage
2012
2011
2010
%
%
%
2009
%
1,198,373,242
(792,026,133)
406,347,109
210,697,500
87,930,537
52,599,084
351,227,121
757,574,230
(304,811,248)
452,762,982
(116,000,000)
336,762,982
(115,000,000)
221,762,982
197,470,199
419,233,181
1,206,875,083
(394,644,588)
812,230,495
(148,835,307)
61,247,235
30,208,326
(57,379,746)
754,850,749
(193,616,753)
561,233,996
(104,000,000)
457,233,996
(234,678,311)
222,555,685
66,361,313
288,916,998
37.02%
41.59%
21.46%
138.06%
-19.16%
-17.13%
3.50%
18.07%
32.98%
4.31%
12.84%
1.81%
2.70%
0.95%
16.54%
6.06%
52.49%
54.55%
45.89%
20.78%
0.23%
16.05%
6.96%
36.51%
56.41%
22.17%
19.14%
23.09%
15.63%
31.32%
-7.05%
15.66%
57.70%
61.69%
46.13%
-68.98%
42.73%
48.16%
-0.76%
31.20%
30.01%
32.07%
67.91%
24.05%
47.13%
5.75%
43.85%
18.56%
27.56%
23.76%
40.04%
393.75%
45.18%
81.40%
112.30%
57.06%
52.85%
60.30%
111.54%
52.06%
35.94%
67.85%
245.3%
102.9%
38.41%
13.43%
400.8%
-73.55%
45.92%
87.79%
-15.50%
131.8%
50.53%
296.0%
241.2%
275.05%
213.4%
469.7%
244.0%
47,312,223
134,320,000
181,632,223
(28,191,522)
67,352,596
230,000,000
297,352,596
121,880,585
91,446,799
91,446,799
197,470,199
1.81%
-66.67%
10.00%
-0.08%
15.99%
23.09%
-6.67%
15.13%
16.54%
24.05%
58.40%
42.56%
-7.05%
52.06%
229.9%
43.85%
241.2%
241.2%
245.3%
(0.62)
0.90
0.95%
8.53%
-26.64%
63.66%
-80.67%
(5.93)
4.3: Horizontal Analysis

In horizontal analysis, we analyze the financial statement data across time
period. For that we use comparative financial statements and observe the
changes in both money amount and percentage of data across the years.
Following two formulas are used in comparative financial statements
analysis:
Taka amount change = Analysis period amount - Base period amount
(%) =
These statements generally include comparative balance sheet and
comparative income statement for horizontal analysis. Here base period
amount refers the previous periods amount. For example year 2012 is the
base period for year 2013 and 2011 is for 2012.
4.3.1: Comparative Balance Sheet Analysis

Exhibit -4.1 shows the comparative balance sheet of FSIBL and it also
represents the changes in both taka amount and percentage of items of the
statement over year 2009-2013. I have just used the major lines or bold
lines of the comparative balance sheet of FSIBL for analysis.
40,000,000,000
35,000,000,000
30,000,000,000
All amount in BDT
25,000,000,000
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
Current Assets
Fixed Assets
Current Liabilities
2009
2010
2011
2012
2013
1,838,355, 1,385,144, 9,563,782, 11,553,408 10,768,118
14,900,803 14,256,100 17,829,318 27,166,865 21,321,685

16,412,321 14,586,644 26,733,048 35,217,283 31,059,470
31,114,000 2,387,460, 261,213,87
Exhibit -4.3: BDT Changes over the Years Percentage Changes over the
Years in Balance Sheet items
Interpretation: From Exhibit -4.3, it is appeared that all assets and
liabilities were decreased from year 2009 to 2010, because at that period
great economic recession were arrived in the world. For that reason the
investments and deposits of FSIBL were decreased. But in 2011 both assets
and liabilities were increasing and that trend was stable to 2012 and in
2013 the indexes were dropped again. That refers the bank is being matured
from growing position. On the other hand, current liability is higher than
current asset which refers FSIBLs deposit collection is increasing
significantly than loan sanctioning. Fixed asset is higher than a current asset
which means the bank has invested for its expansion and invested more for
long term loans. From 2011 the bank starts to take long-term liabilities.
Percentage Changes in Comparative Balance Sheet
2013 2012 2011 2010 2009
Particulars
%
%
%
%
%
Current Assets
36%
64% 111% 19% 34%
Fixed Assets
21%
37%
32% 35% 58%
Total Assets
25%
43%
43% 33% 54%
Current Liabilities
26%
41%
45% 32% 57%
11% 7673%
Total Liabilities
25%
43%
45% 32% 57%
14%
25%
16% 37% 13%
25%
43%
43% 33% 54%
Exhibit -4.4: Percentage Changes over the Years of Balance Sheet items
Interpretation: Both assets and liabilities were higher at percentage of
54% in 2009 but it dropped to 33% in 2010. From year 2011 the percentage
was increased to 43% than previous year and in 2011 current asset is
significantly increased to 111%. It indicates FSIBL has efficiently recovered
the losses of the year 2010 and made a sustainable and positive flow in asset
generating. In year 2012 FSIBLs long-term liability was greatly increased by
issuing subordinated bond and placement from financial institutions. In
2013 FSIBL could not grip its sustainability and the percentage was fell
down to 25% in total asset and liability.
From the comparative balance sheet discussion it seems that FSIBLs

operations staying on an unstable position.
4.3.2: Comparative Income Statement Analysis

Exhibit -4.2 shows the comparative income statement of FSIBL and it also
shows the changes in both taka amount and percentage of particulars of the
statement over year 2009-2013. So, one can easily understand the changes
of every element of the statement. Here I have illustrated only the total
operating income and net profit after tax. Identifying the changes in
operating income and net profit is the main objective for a banks income
statement analysis. Based on operating income and net profit the

management makes policy and investors make investment decisions.
1,200,000,000
1,000,000,000
All amount in BDT
800,000,000 754,850,749 757,574,230

600,000,000
400,000,000
200,000,000
-
998,931,038
222,555,685 221,762,982
2009
2010
674,912,770
650,544,979
31,561,116
2011
181,701,652
2012
7,256,283
2013
Exhibit -4.5: BDT Changes over the Years in CIS
Interpretation: From exhibit -4.5, it is seemed that in years 2009 and 2010
both total operating income and net profit were increased compare to the
previous years operating income and net profit, and the trend of these
increments were almost same. But, in 2011 FSIBL couldnt hold the speed of
increment comparing the previous years. In 2011 increment is poor than

previous year and the different between total operating income and net
profit is high than previous year. The increment of total operating income in
2012 is significant which has broken all the previous years records, but the
net profit was not increased by balancing with the operating income. In
2013 the increment has become slow again. The high to low increment
indicates FSIBL is going to mature stage from growth stage. This lower
increment in 2012 and 203 not means that the banks income and profit is
decreased, because it shows the changes from one year to another year in
operating income and net profit.
Now, I illustrate the percentage changes of total operating income and net
profit over the years.
Percentage changes
250.0%
200.0%
150.0%
100.0%
50.0%
0.0%

2009
131.8%
213.4%
2010
57.06%
67.85%
2011
31.20%
5.75%
2012
36.51%
31.32%
Exhibit -4.6: Percentage Changes over the Years of CIS Items
2013
18.07%
0.95%
Interpretation: In exhibit -4.6, it is appeared that the indexes are
downward from 2009 to 2011. It refers the net increment from one year to
another year is reducing but not in total. Net increment or changes in total
operating income from 2008 to 2009 is 131.8%, from 2009 to 2010 is
57.06%, from 2010 to 2011 is 31.20%, from 2011 to 2012 is 36.51% and
from 2012 to 2013 is 18.07%. On the other hand, the net profit changes
from 2008 to 2009 is 213.4%, from 2009 to 2010 is 67.85%, from 2010 to
2011 is 5.75%, from 2011 to 2012 is 31.32% and 2012 to 2013 is 0.95%. In
2010 net profit was increased 67.85% on total operating income of 57.06%;
it indicates FSIBLs non-operating expenses were less at that period but in
2011 net profit was increased only 5.75% on total operating income of
31.20%, it indicates in the period FSIBLs non-operating expenses were
increased more compare to previous year. In 2012 the increment in both

total operating income and net profit were increased compare to previous
year, the index dropped again in 2013. The fluctuation of the growth of net
increment is was high from 2009 to 2011 and the fluctuation rate was slow
from 2011 to 203, it means the bank is going to a mature stage.
To make clearer about total operating income and net profit of FSIBL I have
used actual data from the income statement, and illustrate them again.
5,000,000,000
4,500,000,000
4,000,000,000
3,500,000,000
2,500,000,000
2,085,207,938
2,000,000,000
1,500,000,000 1,327,633,708
500,000,000
-
3,734,683,955
2,735,752,917
3,000,000,000
1,000,000,000
4,409,596,725
All amount in BDT
326,837,749
2009
548,600,731 580,161,847
2010
2011
761,863,499 769,119,782
2012
2013
Exhibit -4.7: Total Operating Income and Net Profit over the Years
Interpretation: Exhibit -4.7 presents the total operating income and net
profit from FSIBLs income statements. It does not show the net changes in
operating income and net profit. In the graph is has seemed that both
operating income and net profit are increase year by year. So, it indicates
FSIBL is progressing in its operation and profit generation.
So, we cannot tell FSIBL is doing bad or good in operation by seeing the net
changes of total operating income and net profit over the years. Net changes
may be increased or decreased but it cannot be said that a bank is not in

stable or growing position at any year until a negative figure is arise.
4.3.3: Trend Analysis

Trend analysis is a form of horizontal analysis. In involves computing trend
percent for a series of financial numbers and is a variation on the use of
percentage changes. In trend analysis, base period refers only one
successive period, not the previous period of analysis period. Trend analysis
is generally used for income statements analysis. Following formula is used
for trend analysis:
(%) =
Here I have analyzed the trend of FSIBLs income and expenses. So I have
used the banks income statements. I have used 2008 as base period (year)
for the following five years. Exhibit -4.8 is used for trend analysis.

COMPARATIVE INCOME STATEMENT
FOR THE YEARS- 2013, 2012, 2011, 2010, 2009 and 2008
Particulars
Investments Income
Net Investment Income

Less: Total Operating Expenses
Profit before Provision and Tax
Less: Total Provisions
Profit before Tax
Less: Total Tax
Retained Earning Brought Forward from Previous Year
Appropriations:
Statutory Reserve
Other Reserve
Bonus Share Issued
Total Appropriations
Retained Earnings Carried Forward
Earnings Per Share (EPS)
2013
BDT
2012
BDT
18,277,686,531
(14,597,553,390)
3,680,133,141
235,670,968
326,776,987
167,015,629
729,463,584
4,409,596,725
(2,383,876,943)
2,025,719,782
(496,600,000)
1,529,119,782
(760,000,000)
769,119,782
433,109,918
1,202,229,700
2011
BDT
13,339,668,730
(10,309,755,493)
3,029,913,237
98,997,129
404,240,245
201,533,344
704,770,718
3,734,683,955
(1,792,725,352)
1,941,958,603
(440,095,104)
1,501,863,499
(740,000,000)
761,863,499
371,651,119
1,133,514,618
305,823,956
20,000,000
374,035,200
699,859,156
502,370,544
300,372,700
60,000,000
340,032,000
700,404,700
433,109,918
1.87
1.85
2010
BDT
2009
BDT
2008
BDT
2013
%
8,747,763,443
(6,670,951,220)
2,076,812,223
81,967,646
403,310,160
173,662,888
658,940,694
2,735,752,917
(1,146,191,070)
1,589,561,847
(369,400,000)
1,220,161,847
(640,000,000)
580,161,847
399,840,641
980,002,488
5,547,047,795
(4,125,826,500)
1,421,221,295
264,208,027
282,561,956
117,216,660
663,986,643
2,085,207,938
(881,607,207)
1,203,600,731
(220,000,000)
983,600,731
(435,000,000)
548,600,731
277,961,056
826,561,787
4,348,674,553
(3,333,800,367)
1,014,874,186
53,510,527
194,631,419
64,617,576
312,759,522
1,327,633,708
(576,795,959)
750,837,749
(104,000,000)
646,837,749
(320,000,000)
326,837,749
80,490,857
407,328,606
244,032,369
364,320,000
608,352,369
371,650,119
196,720,146
230,000,000
426,720,146
399,841,641
129,367,550
129,367,550
277,961,056
37,920,751
37,920,751
80,490,857
806.48%
1845.58%
624.13%
792.11%
1847.02%
538.09%
1.71
1.61
14.21
7.35
25.43%
25.19%
Exhibit -4.8
3,141,799,470
(2,939,155,779)
202,643,691
202,345,834
133,384,184
34,409,250
370,139,268
572,782,959
(383,179,206)
189,603,753
189,603,753
(85,321,689)
104,282,064
14,129,544
118,411,608
Percentage Changes
2012
2011
2010
%
%
%
581.76%
424.59%
278.43%
176.56%
496.66%
350.77%
226.97%
140.37%
1816.06% 1495.19% 1024.86% 701.34%
116.47%
48.92%
40.51%
130.57%
244.99%
303.06%
302.37%
211.84%
485.38%
585.70%
504.70%
340.65%
197.08% 190.41% 178.03% 179.39%
769.85% 652.02% 477.62% 364.05%
622.13%
467.86%
299.13%
230.08%
1068.40% 1024.22% 838.36% 634.80%
806.48% 792.11% 643.53% 518.77%
890.75%
867.31%
750.10%
509.84%
737.54% 730.58% 556.34% 526.07%
3065.28% 2630.31% 2829.82% 1967.23%
1015.30% 957.27% 827.62% 698.04%
643.53%
518.77%
1604.27% 1125.29%
461.73% 496.75%
23.21%
21.95%
2009
%
138.41%
113.43%
500.82%
26.45%
145.92%
187.79%
84.50%
231.79%
150.53%
396.00%
341.15%
375.05%
313.42%
569.66%
343.99%
341.15%
341.15%
345.33%
193.34%
From exhibit -4.8, I have used the data of total operating income, total
operating expenses and net profit. I have took the percent changes from
exhibit -4.8 and put them in a line graph to show the trend of total operating
income, total operating expenses and net profit of FSIBL.
900.00%
800.00%
700.00%
600.00%
500.00%
400.00%
300.00%
200.00%
100.00%
0.00%
2009
231.79%
Total Operating Expenses 150.53%
Net Profit
313.42%
2010
364.05%
230.08%
526.07%
2011
477.62%
299.13%
556.34%
2012
652.02%
467.86%
730.58%
Exhibit -4.9: Trend Analysis of Income and Expenses
2013
769.85%
622.13%
737.54%
Interpretation: Exhibit -4.9 shows the trend percent of total operating
income, total expenses and net profit from exhibit -4.8 in line graph. It
reveals that the trend line for total operating income consistently exceeds
the total operating expenses. Moreover that magnitude of the difference has
consistently grown. This result bodes well for FSIBL because its operating
expenses are not much increased than its operating income. The bank shows
an ability to control its expenses as expands. On the other hand, the trend
line for net profit exceeds the total operating income in all years except
2013 because net profit is increased more rapidly than total operating
income. That indicates FSIBL has expertly minimized its non-operating
expenses and increased the revenues. The line graph also reveals a
consistent increase in each of these accounts over the years, which is a
typical of high growth company. So, it is clear that FSIBL is in growing

position.
4.4: Vertical Analysis

Vertical analysis is a tool to evaluate individual financial statement items or
a group of items on term of specific based amount. We usually define a key

aggregate figure as the base, which for a banks income statement is total
income or revenue income and for a balance sheet is usually total assets.
Vertical analysis is required common-size statements. So, for vertical
analysis of FSIBLs financial statements I have prepared its common-size
income statements and common-size balance sheets for five years. The
common-size statements of FSIBL are prepared by using the following
formula.
(%) =
I use common-size statements of FSIBL to reveal the changes in the relative
importance of each financial statement items. All individual amounts in

common-size statements are redefined in terms of common-size
percentages. The common-size balance sheets and income statements are
shown comparatively from 2009 to 2013 in exhibit -4.10 and exhibit -4.11
accordingly.
COMMON-SIZE COMPARATIVE BALANCE SHEET

FOR THE YEARS- 2013, 2012, 2011, 2010 and 2009
Particulars
PROPERTY AND ASSETS
Current Assets
Cash
Balance With Bank and Financial Institutions
Other Assets
Fixed Assets
2013
BDT
40,473,177,156
11,549,381,969
14,379,093,084
2,723,632,786
11,821,069,317
2012
BDT
29,705,058,836
10,528,144,967
10,785,716,061
3,187,223,270
5,203,974,538
18,151,650,528
7145564652
5699804595
1630019092
3676262189

Investments
Fixed Assets Including Premises, Furniture & Fixtures
121,349,799,689
4,271,569,450
114,601,798,177
2,476,432,062
161,822,976,845
100,028,114,252
1,726,169,450
96,304,228,588
1,997,716,214

Other Liabilities
Total Assets
LIABILITIES AND CAPITAL
Liabilities:
Current Liabilities

Total Liabilities
Capital/ Shareholders' Equity
Paid-up Capital
Statutory Reserve
Other Reserve
Assets Revaluation Reserves
Retained Earnings

2011
BDT
2010
BDT
2009
BDT
8,587,867,603
4857542203
1036199077
524937861
2169188462
2013
%
7,202,722,793
5033532439
731150321
241026032
1197014001
Common-size Percent
2012
%
2011
%
2010
%
2009
%
25.01%
7.14%
8.89%
1.68%
7.30%
22.90%
8.12%
8.31%
2.46%
4.01%
19.94%
7.85%
6.26%
1.79%
4.04%
13.50%
7.64%
1.63%
0.83%
3.41%
15.01%
10.49%
1.52%
0.50%
2.49%
129,733,173,088
72,861,248,561
2414569450
69467328284
979350827
91,012,899,089
55,031,930,196
2334416700
52123903164
573610332
63,619,797,799
40,775,830,159
1673477998
38725874774
376477387
47,978,552,952
74.99%
2.64%
70.82%
1.53%
100.00%
77.10%
1.33%
74.23%
1.54%
100.00%
80.06%
2.65%
76.33%
1.08%
100.00%
86.50%
3.67%
81.93%
0.90%
100.00%
100.00%
152,709,588,439
3,950,000,000
139,520,955,783
9,238,632,656
121,650,118,339
4,400,000,000
109,905,568,871
7,344,549,468
86,432,834,521
3200000000
78145045008
5087789513
59,699,786,313
56344959167
3354827146
45,113,142,197
42423092722
2690049475
94.37%
2.44%
86.22%
5.71%
93.77%
3.39%
84.72%
5.66%
94.97%
3.52%
85.86%
5.59%
93.84%
0.00%
88.57%
5.27%
94.03%
0.00%
88.42%
5.61%
155,389,377,281
124,068,693,306
86,463,948,521
59,699,786,313
45,113,142,197
96.02%
95.63%
95.00%
93.84%
94.03%
4,114,387,200
1,310,398,870
114,061,074
392,381,876
502,370,544
6,433,599,564
3,740,352,000
1,004,574,914
84,000,000
402,442,950
433,109,918
5,664,479,782
2.54%
0.81%
0.07%
0.24%
0.31%
3.98%
2.88%
0.77%
0.06%
0.31%
0.33%
4.37%
3.74%
0.77%
0.03%
0.41%
0.05%
5.00%
4.77%
0.72%
0.04%
0.00%
0.63%
6.16%
4.79%
0.55%
0.05%
0.00%
0.58%
5.97%
2,679,788,842
179,788,842
2,500,000,000
161,822,976,845
2,418,574,967
198,574,967
2,220,000,000
129,733,173,088
31,114,000
31114000
-
3400320000
704202214
24000000
371537509
48890845
4,548,950,568
3036000000
460169845
24000000
399841641
3,920,011,486
91,012,899,089
63,619,797,799
Exhibit -4.10
2300000000
263449699
24000000
277961056
2,865,410,755
47,978,552,952
1.66%
0.11%
1.54%
100.00%
1.86%
0.15%
1.71%
100.00%
0.03%
0.03%
0.00%
100.00%
0.00%
0.00%
0.00%
100.00%
84.99%
3.49%
80.71%
0.78%
0.00%
0.00%
0.00%
100.00%

COMMON-SIZE COMPARATIVE INCOME STATEMENT
FOR THE YEARS- 2013, 2012, 2011, 2010 and 2009
Common-size Percent
Particulars
Revenues
2013
BDT
2012
BDT
2011
BDT
2010
BDT
2009
BDT
2013
%
2012
%
2011
%
2010
%
2009
%
Investments Income
18,277,686,531
235,670,968
326,776,987
167,015,629
19,007,150,115
13,339,668,730
98,997,129
404,240,245
201,533,344
14,044,439,448
8,747,763,443
81,967,646
403,310,160
173,662,888
9,406,704,137
5,547,047,795
264,208,027
282,561,956
117,216,660
6,211,034,438
4,348,674,553
53,510,527
194,631,419
64,617,576
4,661,434,075
96.16%
1.24%
1.72%
0.88%
100.00%
94.98%
0.70%
2.88%
1.43%
100.00%
92.99%
0.87%
4.29%
1.85%
100.00%
89.31%
4.25%
4.55%
1.89%
100.00%
93.29%
1.15%
4.18%
1.39%
100.00%
Other Operating Expenses
14,597,553,390
2,383,876,943
16,981,430,333
10,309,755,493
1,792,725,352
12,102,480,845
6,670,951,220
1,146,191,070
7,817,142,290
4,125,826,500
881,607,207
5,007,433,707
3,333,800,367
576,795,959
3,910,596,326
76.80%
12.54%
89.34%
73.41%
12.76%
86.17%
70.92%
12.18%
83.10%
66.43%
14.19%
80.62%
71.52%
12.37%
83.89%
Income from Operation
2,025,719,782
1,941,958,603
1,589,561,847
1,203,600,731
750,837,749
10.66%
13.83%
16.90%
19.38%
16.11%
Less: Non-operating Expenses

Provisions
Total Tax
Total Non-operating Expenses
496,600,000
760,000,000
1,256,600,000
440,095,104
740,000,000
1,180,095,104
369,400,000
640,000,000
1,009,400,000
220,000,000
435,000,000
655,000,000
104,000,000
320,000,000
424,000,000
2.61%
4.00%
6.61%
3.13%
5.27%
8.40%
3.93%
6.80%
10.73%
3.54%
7.00%
10.55%
2.23%
6.86%
9.10%
Total Revenue
Less: Operating Expenses

Total Operating Expenses
Net Profit
769,119,782
761,863,499
580,161,847
Exhibit -4.11
548,600,731
326,837,749
4.05%
5.42%
6.17%
8.83%
7.01%
4.4.1: Common-size Balance Sheets Analysis

Exhibit -4.10 shows common-size comparative balance sheets for FSIBL. Some
relations that stand out on both a magnitude and percent are shown in column
graph.
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Investments in Businesses
Fixed Assets
Cash
2009
80.71%
88.42%
0.00%
0.78%
10.49%
2010
81.93%
88.57%
0.00%
0.90%
7.64%
2011
76.33%
85.86%
0.03%
1.08%
7.85%
2012
74.23%
84.72%
1.86%
1.54%
8.12%
Exhibit -4.12: Common-size Comparative Balance Sheets Analysis
2013
70.82%
86.22%
1.66%
1.53%
7.14%
Interpretation: Exhibit -4.12 shows investment in businesses is increased from
80.71% to 81.93% in the period of 2019-2010, decreased from 81.93% to
76.33% within 2010-2011, decreased from 76.33% to 74.23% within 2011-
2012 and decreased from 74.23% to 70.82% in the period of 2012-2013. This
trend indicates the bank efficiently recovering its invested money. Deposits are
fluctuating from 84.72% to 88.57%, it refers the bank is able to collect enough
deposit from customers and more than 84% of its investment are financed by
deposit accounts. The banks fixed assets and long-term liabilities are remained
less than 2% across 2009-2013 that means the FSIBL does not keep idle asset.
Cash is decreased from 10.49% to 7.64%, increased from 7.64% to 7.85%,
increased from 7.85% to 8.12% and decreased from 8.12% to 7.14% across the
years 2009-2013 consequently, that states FSIBL maintain adequate cash to
meet immediate needs according to requirement of Bangladesh Bank. Thus,

FSIBL is efficiently maintaining its assets and liabilities and largest part of its
asset is covered by investment in businesses which is main purpose of a bank,
and largest portion of its liabilities is covered by deposit from customers which
is the most important source of fund for a bank.
It is the matter to discuss how much portion is covered by a particular asset

from total asset. To understand the share of each particular asset, the percent
from Exhibit -4.10 are shown in the following column graph.
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
Cash
Balance With Bank and
Financial Institutions
Investments in Shares &
Securities2
Other Assets (Current)
Investments in Shares &
Securities (Fixed)
Investments in Businesses
Fixed Assets (Premises,
Furniture & Fixtures)
2009
10.49%
2010
7.64%
2011
7.85%
2012
8.12%
2013
7.14%
0.50%
0.83%
1.79%
2.46%
1.68%
1.52%
2.49%
3.49%
80.71%
0.78%
1.63%
3.41%
3.67%
81.93%
0.90%
6.26%
4.04%
2.65%
76.33%
1.08%
8.31%
4.01%
1.33%
74.23%
1.54%
Exhibit -4.13: Portion of a Particular Asset on Total Asset
8.89%
7.30%
2.64%
70.82%
1.53%
Interpretation: It is apparent from exhibit -4.13; the largest portion of total

asset of FSIBL is covered by investment in businesses which is the key source of
income for a bank. Second large area is covered by cash from 7.14% to 10.49%
for maintaining adequate liquidity to meet instant needs and to operate regular
activities. Fixed assets including premises, furniture and Fixtures are covering
the smallest portion covering 0.78% to 1.54% of total assets.
Long-term
investment provides high profit. From this view point FSIBL has well form to
generate profits.
Here, I have discussed about the proportion of particular liabilities and equity
in the perspective of total liabilities and equity. So, by using the percent related
to liabilities and equity from Exhibit -4.10 following column graph is drawn.
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2009
Placement from Banks &
0.00%
Financial Institutions (Current)
88.42%
Other Liabilities (Current)
5.61%
Placement from Banks &
0.00%
Financial Institutions (Fxied)
0.00%
Shareholders' Equity
5.97%
2010
0.00%
2011
3.52%
2012
3.39%
2013
2.44%
88.57%
5.27%
85.86%
5.59%
84.72%
5.66%
86.22%
5.71%
0.00%
6.16%
0.00%
5.00%
1.71%
4.37%
1.54%
3.98%
0.00%
0.03%
0.15%
0.11%
Exhibit -4.14: Portion of Particular Liability and Equity on Total Liabilities and
Equity
Interpretation: Exhibit -4.14 shows that FSIBLs short-term liabilities are more
than long-term liabilities where the largest portion is covered by deposit
accounts. Deposits accounts fluctuate from 84.72% to 88.57% on total liabilities
and equity across the five years from 2009 to 2013. It indicates FSIBL collets
enough deposits from customers and successfully holds its customers or
depositors. FSIBL maintains a little amount of long-term liabilities. It borrowed
from bank and other financial institutions at 0.03% on total liabilities and
equity in 2011, 0.15% in 2012 and 0.11% in 2013 as long-term liabilities, and
borrowed 3.52% in 2011, 3.39% in 2012 and 2.44% in 2013 as short-term
liabilities. FSIBL collects fund by issuing subordinated bond in 2012 at 1.71%
and in 2013 at 1.54%. It refers FSIBL try to maintain low long-term liabilities
and meet the debt from other banks and financial institutions.
4.4.2: Common-size Income Statements Analysis
In common-size income statement, total revenue is usually the based amount
which is assigned a value of 100%. Each common-size income statement item
appears as a percent of total revenue. Exhibit -4.11 shows common-size

comparative income statements for each taka of FSIBLs revenues. By using the
data from the statement, following column graph is drawn.
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Net Profit
Tax
Provisions
Operating Expenses
2009
7.01%
6.86%
2.23%
83.89%
2010
8.83%
7.00%
3.54%
80.62%
2011
6.17%
6.80%
3.93%
83.10%
2012
5.42%
5.27%
3.13%
86.17%
2013
4.05%
4.00%
2.61%
89.34%
Exhibit -4.15: Vertical Analysis of Common-size Comparative Income

Statements
From exhibit -4.15, it is appeared that the largest portion of revenues is used
for operating expenses. Operating expenses include the profit paid to the
depositors. FSIBLs operating expenses are decreased from 83.89% to 80.62%
within 2009-2010, increased from 80.62% to 83.10% within 2010-2011,
increased from 83.10% to 86.17% within 2011-2012 and increased from
86.17% to 89.34% within 2012-2013. It is revealed that from 2010 FSIBLs

operating expenses are increasing year by year. On the other hand, its net
profit starts to decrease from 2010. So, FSIBL should control the operating
costs excluding the depositors profits. Thus, the bank should properly apply
the green banking and make maximum utilization of technology and
resources to control the operating cost and for increase the net profit.
4.5: Ratio Analysis

Ratio analysis is a study of the relationships between financial variables. It is
used to evaluate various aspects of a companys operating and financial
performance such as its efficiency, liquidity, profitability and solvency. The

trend of these ratios over time is studied to check whether they are improving
or deteriorating. Ratios can be expressed as a percent, rate or proportion. The

ratio analysis is an essential technique for financial statements analysis.
Different users such as investors, management, bankers and creditors use the
ratio to analyze the financial situation of a company for their decision making
purpose. Here, this report contains the most common ratios and analyze to
evaluate the operating and financial performance of First Security Islami Bank
Limited (FSIBL) over the years 2009, 2010, 2011, 2012 and 2013.
4.5.1: Liquidity and Efficiency Ratio

As First Security Islami Bank Limited is a financial institution the liquidity
ratios and the efficiency ratios are the most important ratios to evaluate its
liquidity to pay its short-term debt and deposits, and efficiency of the bank to
use its assets and manage its operations to quickly convert its assets into cash.
These ratios show how quick FSIBL is able to convert its assets into cash.
Here, the current ratio, acid-test ratio, accounts receivable turnover ratio and
days sales uncollectable ratio are shown below respectively for knowing the
liquidity and efficiency of First Security Islami Bank Limited.
4.5.1.1: Current Ratio:

The current ratio is computed by dividing current assets by current liabilities.
Current ratio is measure here to know how FSIBL meets its current liabilities
through its current assets.
Current Ratio =
Years
2009
2010
2011
2012
2013
Current
7,202,722,793
8,587,867,603 18,151,650,528
29,705,058,836
40,473,177,156
Assets
Current
45,113,142,197 59,699,786,313 86,432,834,521 121,650,118,339 152,709,588,439
Liabilities
Results
0.16
0.14
0.21
0.24
0.27
Exhibit -4.16: Current Ratio
0.30
0.25
0.20
0.15
0.16
0.10
0.05
-
2009
0.14
2010
0.21
2011
Current Ratio
0.24
2012
0.27
2013
Exhibit -4.17: Current Ratio

Interpretation: According to the result, the current ratio of FSIBL was 0.16
in 2009, 0.14 in 2010, 0.21 in 2011, 0.24 in 2012 and 0.27 in 2013. In 2012
current ratio was 0.24 means FSIBL had current assets of 0.24 taka against
short-term debt or liabilities of 1taka. In 2013 current ratio was 0.27 means
FSIBL had current assets of 0.27 taka current liabilities of 1 taka. It indicates
FSIBL has not enough ability to pay off its all current liabilities by its current
assets. But, the trend tells that FSIBL will be able to achieve enough current
assets to pay off current liabilities in future. On the other hand, maintaining
low current asset is better for a bank or financial institution to earn
maximum profit, because current asset earns low profit. In fact, higher
current ratio is better for the institution because its higher ratio helps to
prevent default. This ratio should be at least 1:1.
4.5.1.2: Acid-test (Quick) Ratio
The acid-test ratio measures a companys ability to meet its short-term
obligations with its most liquid assets. This ratio is computed by dividing
the sum of cash, short-term investment and net receivables by current
liabilities.
Acid Test Ratio =
Years
Cash and
equivalents +
Short-term
investment +
Current
receivables
(net)
Current
Liabilities
Results
2009
Cash and equivalents + Short term investment + Current receivables (net)

Current Liabilities
6,005,708,792
45,113,142,197
0.13
2010
2011
2012
2013
6,418,679,141
14,475,388,339
24,501,084,298
28,652,107,839
0.11
0.17
59,699,786,313
86,432,834,521
121,650,118,339
0.20
Exhibit -4.18: Acid-test Ratio
152,709,588,439
0.2
0.15
0.1
0.05
0.13
2009
0.11
2010
0.20
0.17
2011
2012
Acid-test Ratio
0.19
2013
Exhibit -4.19: Acid-test Ratio

Interpretation: According to the result, the acid-test ratio of FSIBL was 0.13 in
2009, 0.11 in 2010, 0.17 in 2011, 0.20 in 2012 and 0.19 in 2013. It is seen that
the trend of acid-test ratio of FSIBL was fluctuating over the years. The
0.19
common guideline for applicable acid-test ratio is 1:1, but FSIBLs acid-test
ratio is very poor than the guided ratio. So, FSIBL has not enough ability to
meet immediate current obligations by its most liquid assets. But, other factors
should be considered such as FSIBL includes the deposits in current liabilities
and all investment in businesses in long-term assets, that reasons affect the
ratio greatly. An organizations acid-test ratio depends on the system of its
maintaining assets and liability according to the duration.
4.5.1.3: Accounts Receivable Turnover
It indicates how frequently a company collects its receivable during an
accounting period. Here, accounts receivable turnover is measured to see how
successfully FSIBL collects its receivables. It is calculated by dividing net sales

by the average receivable.
Years
Net Sales
Average
Accounts
Receivable
Results
Accounts Receivable Turnover =
2009
2010
2011
2012
2013
4,661,434,075 6,211,034,438 9,406,704,137 14,044,439,448 19,007,150,115
370,873,467
12.57 times
503,660,842
12.33 times
651,235,583
14.44 times
641,202,006
21.90 times
Exhibit -4.20: Accounts Receivable Turnover
25
20
15
10
5
0
12.57
2009
12.33
2010
14.44
2011
21.90
2012
Accounts Receivable Turnover
21.67
2013
Exhibit -4.21: Accounts Receivable Turnover
876,957,172
21.67 times
Interpretation: FSIBLs accounts receivable turnover was 12.57 times in

2009, 12.33 times in 2010, 14.44 times in 2011, 21.90 times in 2012 and 21.67
times in 2013. FSIBLs accounts receivable turnover over the years are enough
high. A high turnover is favorable because it minimizes the time length

between Sales and cash collection. High turnover of FSIBL indicates the bank
collects the receivables rapidly and need not commit large amounts of funds to
accounts receivable. After all FSIBL has a strong position in receivable

turnover.
4.5.1.4: Days Sales Uncollected

Days sales uncollected are measured to know how quickly a company converts
its receivables into cash. Here FSIBLs days sales uncollected are measured.
365
Days Sales Uncollected =
Years
2009
2010
2011
2012
2013
Account
225,150,258
782,171,425
520,299,740
762,104,271
991,810,073
Receivables
4,661,434,075 6,211,034,438 9,406,704,137 14,044,439,448 19,007,150,115
Net Sales
365
365
365
365
365
() Days
Results
18 days
46 days
20 days
20 days
Exhibit -4.22: Days Sales Uncollected
46
50
40
30
20
10
20
18
2009
2010
Days
2011
20
2012
19
2013
Exhibit -4.23: Days Sales Uncollected
19 days
Interpretation: Days sales uncollected for FSIBL in 2009 were 18 days. This
means that it will take about 18 days to collect cash after creating accounts
receivable. Days sales uncollected in 2010 were 46 days which is higher than
2009. The low value of days sales uncollected is expected and low value means
a company is strong in receivable collection. In 2011 and 2012 the value has
reduced to 20 days and in 2013 it has come about 19 days. The trend indicates
FSIBL is becoming stronger gradually in collecting receivables.
4.5.1.5: Total Asset Turnover
Total asset turnover reflects a companys ability to use its assets to generate
sales and is an important indication of operating efficiency. The total asset

turnover ratio of FSIBL is measured to know its operating efficiency.
Total Asset Turnover =
Years
Net Sales
Average
Total Assets
Results
2009
4,661,434,075
2010
6,211,034,438
2011
9,406,704,137
2012
14,044,439,448
2013
19,007,150,115
0.12 times
0.11 times
0.12 times
0.13 times
0.13 times
39,608,973,185 55,799,175,376 77,316,348,444 110,373,036,089 145,778,074,967
Exhibit -4.24: Total Asset Turnover
0.13
0.125
0.12
0.115
0.11
0.105
0.1
0.12
2009
0.11
2010
0.12
2011
0.13
2012
Exhibit -4.25: Total Asset Turnover
0.13
2013
Interpretation: FSIBLs total asset turnover express that it turned its assets
over 0.13 times during the year 2013. This means that each Tk. 1.00 of
assets earns Tk. 0.13 of revenues. Is a total asset turnover of 0.13 is good or
bad? It is safe to say that all companies desire a high total asset turnover.
Like many ratio analyses, however a companys total asset turnover must be
interpreted in comparison with that of prior years. Comparing with prior

years FSIBLs total asset turnover of 2013 is higher than prior years and
FSIBLs total asset turnover is increasing year by year. It indicates FSIBL is
being more efficient in operation and earns revenues by using its total asset.
Interpreting the total asset turnover also requires an understanding of
companys operations. As FSIBL is a banking company its total asset
turnover is depending on its deposit collection and investment in

businesses, and profit get and paid on them.
4.5.2: Solvency Ratio

Solvency refers to a companys long-run financial viability and its ability to
cover long-term obligations. Here FSIBLs solvency ratios are analyzed to

evaluate its long-run viability and its ability to cover long-term obligations.
4.5.2.1: Debt and Equity Ratios
One element of solvency analysis is to assess the portion of a companys

assets contributed by its owners and the portion contributed by creditors.
This relation is reflected in debt and equity ratios. Here FSIBLs debt ratio is
measured to assess its total liability as a percent of total assets, and equity
ratio is measured to assess its total equity as a percent of total assets. These
ratios are calculated by using two different formulas.
Debt Ratio =
100
Years
Total
Liabilities
Total
Assets
Results
2009
45,113,142,197
2010
2011
2013
59,699,786,313 86,463,948,521 124,068,693,306 155,389,377,281
47,978,552,952 63,619,797,799 91,012,899,089 129,733,173,088 161,822,976,845

94.03%
93.84%
95.00%
95.63%
96.02%
Exhibit -4.26: Debt Ratio
Equity Ratio =
Years
Total
Equity
Total
Assets
Results
2012
2009
2,865,410,755
47,978,552,952
5.97%
2010
2011
3,920,011,486
63,619,797,799
6.16%
100
4,548,950,568
2012
5,664,479,782
2013
6,433,599,564
91,012,899,089 129,733,173,088 161,822,976,845

5.00%
4.37%
3.98%
Exhibit -4.27: Equity Ratio
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
Equity Ratio
Debt Ratio
2009
5.97%
94.03%
2010
6.16%
93.84%
2011
5.00%
95.00%
2012
4.37%
95.63%
Exhibit -4.28: Debt and Equity Ratio
2013
3.98%
96.02%
Interpretation: In exhibit -4.28, the red color area indicates the portion of
total asset contributed by owners and blue color area indicates the portion
of total asset contributed by creditors. From the graph it is appeared that
maximum area is covered by debt ration that means FSIBLs lion share of
total asset is contributed by creditors. FSIBLs debt ratio was 94.03% and
equity ratio was 50.97% in 2009 and 2013 FSIBLs debt ratio came to
96.02% and equity ratio came to 3.98%. The trend of debt and equity ratios
tells that the debt ratio is in increasing trend and equity ratio is in
decreasing trend which is not a good sign for any general business or
company. But, for a banking company that trend is not a bad sign. Because
as a financial institution a bank collects deposit from customers as debt or
liability and invests or lends that money in businesses as asset. So, as a bank
FSIBLs investment is largely depended on liability and profit is depended in
investments. Further, a banks maximum portion of asset is covered by

financial assets which are created by deposits and investments. So, FSIBLs
debt ratios increasing trend indicates its deposits are increasing as well as
investments are increasing which is a good sign for the bank.
4.5.2.2: Times Interest Earned
The amount of income before deductions for interest expenses and income
taxes is the amount available to pay interest expense. It is measured for
assess the protection in meeting interest payments by a company. Here

FSIBLs time interest earned is measure to assess its protection in meeting
interest payments.
Times Interest Earned =
Years
Income before
Interest
Expense and
Income Taxes
Interest
Expense
Results
2009
2010
2011
2012
2013
4,084,638,116
5,329,427,231
8,260,513,067
12,251,714,096
16,623,273,172
3,333,800,367
1.23 times
4,125,826,500 6,670,951,220 10,309,755,493 14,597,553,390

1.29 times
1.24 times
1.19 times
1.14 times
Exhibit -4.29: Times Interest Earned
1.3
1.2
1.1
1
1.29
1.23
2009
2010
1.24
2011
1.19
2012
1.14
2013
Exhibit -4.30: Times Interest Earned

Interpretation: Times interest earned ratio reflects the creditors risk of
loan or debt repayment with the interest. The larger this ratio, the less risky
is the company for creditors. Though one guideline says that creditors are
reasonably safe if the company earns its fixed interest expense two or more
times, FSIBL earns 1.23 times in 2009, 1.29 times in 2010, 1.24 times in
2011, 1.19 times in 2012 and 1.14 times in 2013. But, these ratios are not
too bad, because is always earns more than 1 times each year which is
necessary for safety. The trend time interest earned of FSIBL has started
downward from the year 2010. It indicates FSIBL is in danger line to pay
interest expenses.
4.5.3: Profitability Ratio

Profitability ratios are measured to assess the ability of a company to use its
assets efficiently to produce profits. Here, the profitability ratios of FSIBL are
measured to recognize its ability to generate an adequate return on its invested

capital.
4.5.3.1: Profit Margin Ratio

Profit Margin shows a companys operating efficiency and profitability. Profit
margin reflects a companys ability to earn net income from sales. It is

measured by expressing net income as a percent of sales. Here, FSIBLs Profit
Margin is measured as following.
Profit Margin Ratio =

Years
Net
Income
Net Sales
Results
2009
2010
326,837,749
4,348,674,553
7.52%
2011
548,600,731
5,547,047,795
9.89%
100
580,161,847
8,747,763,443
6.63%
Exhibit -4.31: Profit Margin Ratio
2012
761,863,499
13,339,668,730
5.71%
2013
769,119,782
18,277,686,531
4.21%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2009
Profit Margin Ratio 7.52%
2010
9.89%
2011
6.63%
2012
5.71%
Exhibit -4.32: Profit Margin Ratio
2013
4.21%
Interpretation: In year 2009 the result was 7.52% that means in Tk. 100 of
net income FSIBL earns net profit of Tk. 7.52. In the year 2010 FSIBLs profit
margin was increased to 9.89% and from the following year it started to
decline. This profit margin is declined to 4.21% in 2013. It is seem that

FSIBLs profit margin is in decline trend. So, FSIBL should improve its
operating policy to make the profit margin index upward.
4.5.3.2: Return on Total Assets
The return on total assets of a company determines its ability to utilize the
assets employed in that company efficiently and effectively to earn a good

return. This ratio measured the amount of profit that FSIBL has generated as
a percentage of the value of its total assets. It shows how profitable the bank
is related to its total assets. This ratio is calculated by dividing net income by
average total assets.
100
Return on Total Assets =
Years
2009
Net Income
Average Total
Assets
Results
2010
326,837,749
2011
548,600,731
2012
580,161,847
761,863,499
2013
769,119,782
39,608,973,185 55,799,175,376 77,316,348,444 110,373,036,089 145,778,074,967

1%
1%
0.75%
0.69%
0.53%
Exhibit -4.33: Return on Total Assets
1%
1%
1%
0%
1%
1%
0%
0%
2009
2010
0.75%
2011
0.69%
2012
0.53%
2013
Exhibit -4.34: Return on Total Assets

Interpretation: Return on Total Assets is the most used profitability ratio.
As FSIBL was a part of banking industry and its most of the assets come
from the debt which was the reasons for its low net profit as well as poor
Return on Assets (ROA). As per result, exhibit 4.34 shows that FSIBL had
ROA of 1% in the years 2009 and 2010 which was a low ROA. From 2011
ROA of FSIBL started decreasing gradually and in 2013 it came down to
0.53%. It means the management of the bank cannot efficiently used its
assets to generate profit.
4.5.3.3: Return on Equity

Return on equity (ROE) is a measure of profitability ratio that calculates the
amount of profit that FSIBL has generated as a percentage of the value of its
total shareholders equity. It is computed by dividing net income by total

shareholders equity.
100
Return on Equity =
Years
2009
Net Income
Total Shareholders'
Equity
Results
2010
326,837,749
2,865,410,755
11%
2011
548,600,731
580,161,847
2012
761,863,499
2013
769,119,782
3,920,011,486 4,548,950,568 5,664,479,782 6,433,599,564

14%
13%
13%
12%
Exhibit -4.35: Return on Equity
14%
12%
10%
8%
6%
4%
2%
0%
11%
2009
14%
2010
13%
2011
13%
2012
Return on Equity
12%
2013
Exhibit -4.36: Return on Equity

Interpretation: Return on Equity is very popular ratio toward the
shareholders of any bank. Analyzing the financial statements of FSIBL its
appeared that FSIBL earns in the years 2009, 2010, 2011, 2012 and 2013
returns from Tk. 100 invested by the shareholders was respectively 11%,
14%, 13%, 13% and 12%. In 2010 the banks ROE was high and higher
percentage is better for the bank as well as for shareholders. So, the
management of the bank had the ability to generate adequate returns from
the capital invested by the owners in 2010 than any other years which are
analyzed.
4.5.4: Market Prospects Ratio

Market measures are useful for analyzing corporations with publicly traded
stock. This market measures use stock price, which reflects the markets or
publics expectations toward the company. This includes expectations of
both company return and risk as the market perceives it. Market prospects
ratios relate the market price of the companys common stock and the
financial statement figures.
4.5.4.1: Price-Earnings Ratio

The price earning (PE) ratio compares a companys EPS and its market
value per share and reveals information about market expectations. The
price-earnings ratio is computed by dividing marked value (price) per share
by earning per share (EPS).
Price-Earnings Ratio =
Years
Market Value(price)Per
Share
Earnings Per Share
Results
2009
2010
2011
2012
2013
21.85
1.42
15.38 times
40.59
2.33
17.45 times
26.28
1.71
15.40 times
18.48
1.85
9.98 times
15.11
1.87
8.08 times
Exhibit -4.37: Price-Earnings Ratio
20
15
10
5
0
17.45
15.38
2009
2010
15.40
2011
Times
9.98
2012
8.08
2013
Exhibit -4.38: Price-Earnings Ratio

Interpretation: In the years 2009, 2010, 2011, 2012 and 2013 the PriceEarnings Ratio of FSIBL was respectively 15.38 times, 17.45 times, 15.40
times, 9.98 times and 8.08 times. FSIBLs price-earnings ratio was very high
in 2010 and also low in 2013. The ratio was decreased from 2011 to 2013.
The high profit-earnings ratio indicates confidence for this bank, because it
suggests that its earnings are expected to grow in the future years. On the
other hand, the low profit-earnings ratio indicates that FSIBLs future
prospects for EPS growth are expected to be poor, so that investors do not
put a high value on the shares.
4.5.4.2: Earnings per Share (EPS)

Earnings per share (EPS) are a measure of the net income earned on share
of common stock. It is computed by dividing net income by the number of

weighted-average common shares out standings during the year.
Earnings per Share =
As EPS is computed in income statement, it not need to re-computation.

From the income statement the values of EPS are putted on the following
graph.
2.50
2.00
1.50
1.00
0.50
0.00
1.42
2009
2.33
2010
2011
Taka
1.87
1.85
1.71
2012
2013
Exhibit -4.39: Earnings per Share (EPS)

Interpretation: From the above information, it is found that FSIBLs EPS
was lowest in the year 2009 which was Tk. 1.42 and highest in the year
2010 which was Tk. 2.33. In year 2011 EPS was decreased to Tk. 1.71. But,
from the year 2012 EPS was started to increase and that was Tk. 1.85, and in
year 2013 EPS was Tk. 1.87. The trend indicates EPS of FSIBL has started
increasing. So, it is a good point for FSIBL for attracting large investors in
this competitive era by earning profit on each share of stock.
4.6: Analysis of Cash Flow Statement

An easy way of financial analysis of a business is cash flow statements
analysis. From cash flow statement we can easily trace the real cash
generating capacity of a business. To understand the trend of FSIBLs cash
flow I have analyzed the five years cash flow statements of the bank. First I
have scratched the net and total cash flows generated by FSIBL over five
years.
30,000,000,000
25,928,833,653
25,000,000,000
21,314,515,328
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
-
12,815,496,581
8,499,018,747
7,036,299,306
5,765,356,760 5,894,875,380
4,614,318,325
2,267,781,609
2009
129,518,620
2010
Net Cash Increase(Decrease)
2011
2012
Total Cash Increase(Decrease)
2013
Exhibit -4.40: Trend of Cash Flow
Interpretation: In Exhibit -4.40, it has been seen that the total cash is
increased over five years but the net cash flow is fluctuating over the five
years. In 2010 and 2013 the net cash flow is dropped. In 2010 the bank has
generated enough cash from the profit and loss account related operating
activities, but in other operating activities related to balance sheet such as

investment to customers, assets, the bank invest more than collection
deposits and liabilities compare to previous year which has decreased the
net cash flow. In this year the bank has spent much cash for investing
activities which were investment in share and securities, purchase of
property, plant and equipment. In year 2011 and 2012 both total cash and
net cash are increased. In year 2013 total cash has increased than previous
year but net cash has slowly increased than previous years.
4.6.1: Cash Flow Analysis according to Head

Particulars
Net cash inflow (outflow)
from operating activities
from investing activities

from financing activities
Net Increase (Decrease)
of Cash & Cash
Equivalent
2009
2010
3,709,020,558
659,907,586
2011
2012
5,401,509,804
2013
6,798,328,792
7,575,992,726
(811,238,949)
(1,266,388,966)
(1,596,324,498)
(1,886,771,012)
(2,772,888,276)
2,267,781,609
129,518,620
7,036,299,306
8,499,018,747
4,614,318,325
(630,000,000)
736,000,000
3,231,114,000
3,587,460,967
(188,786,125)
Exhibit -4.41: Summary of Cash Flow Statement
From exhibit -4.41, it is appeared that FSIBL has generated enough cash
from operating activities over five years, but the trend of cash inflow was
fluctuating. Net cash inflow was high in year 2013 which is higher than
previous year. Investing activities cannot provide cash at any year; this head
had only used cash over the years. Financing activities provides cash in the
years 2010, 2011 and 2012.
4.6.2: Cash Flow on Total Assets

This ratio reflects actual cash flow and is not affected by accounting income
recognition and measurement. It can help business decision makers to

estimate the amount and timing of cash flows when planning and analyzing
operating activities. Cash flow on total assets ratio is computed as follows:
Cash Flow on Total Assets =
Particulars
Cash Flow from

Operation
Results
2009
100
2010
3,709,020,558
39,608,973,185
9%
2011
659,907,586
55,799,175,376
1%
2012
5,401,509,804
77,316,348,444
7%
2013
6,798,328,792
110,373,036,089
Exhibit -4.42: Cash Flow on Total Assets
6%
7,575,992,726
145,778,074,967
FSIBLs cash flow on total assets ratio for several prior years in exhibit -4.42.
Results show that its 5% return is lowest in year 2013 than all but one of the
prior years returns. Its cash flow on total assets was highest of 9% in 2009.
FSIBLs cash flow on total assets has started to decrease from the year 2011.
5%
Chapter Five
Findings, Recommendation
and Conclusion
Findings,
Recommendation
and Conclusion
5.1: Findings Regarding First Security Islami Bank

Limiteds Financial Position by Analyzing Financial
Statements and Ratios
First Security Islami Bank Limiteds maximum assets are covered by
investment in businesses and the lowest percentage of the banks total

assets is covered by fixed assets. On the other hand, the lion share of its
liabilities is covered by deposits collected from public. In total of
liabilities and equity, the banks liability was very high comparing with
equity. In the aspect of income statement, FSIBLs net profit was

decreasing and operating expenses were increasing over the years
2009, 2010, 2011, 2012 and 2013 consequently. This indicates the bank
was fail to control the cost in its operation or could not make adequate
investment of its liabilities, thus the liability was expertly higher than
the investment in years 2012 and 2013 where the most liquid assetcash was lower than previous years.
Liquidity ratios are the most important ratios to evaluate companys
liquidity to pay its short-term debt and deposits. These ratios show
how quick First Security Islami Bank Ltd. is able to pay debt or convert
its assets into cash. I have discussed about current ratio, acid-test ratio,
accounts receivable turnover ratio and days sales uncollected ratio.
From the analysis of liquidity ratios I have found that the current ratio
of FSIBL was 0.16 in year 2009 but it was slightly decreased to 0.14 in
the year 2010. This ratio again increased in years of 2011, 2012 and
2013. The higher current ratio is better for the institution because the
higher ratio helps to prevent getting default. On the other hand FSIBL
was highly liquid in the year 2012 because its acid-test ratio or quick
ratio was 0.20 which was higher than the years of 2009, 2010, 2011 and
2013. FSIBLs acid-test ratio was higher in 2012 and 2013. It means
FSIBLs acid-test ratio is increasing. The higher acid-test ratio enables

the bank to pay short-term debt quickly. FSIBLs accounts receivable
turnover of 21.90 times and 21.67 times were substantially higher in
the years of 2012 and 2013 than years- 2009, 2010 and 2011. FSIBL
took highest time of 46 days to collect account receivable in year 2010,
but the days sales uncollected was decreased to 19 days in year 2013.
From these above information, it is cleared that FSIBLs liquidity
position is improving, but it was not enough good comparing with
industry.
Efficiency ratios determine the efficiency of using the banks assets and
managing its operations. I have discussed about total asset turnover

ratio. FSIBLs total asset turnover was lowest in year 2010 and high in
year 2012 and year 2013 which was 0.13 times in both years. That
means FSIBL invested more on those assets which bring more revenues.
Solvency ratios measure the ability of a company to survive over a long

period of time and to meet its financial obligations. There I have
discussed about debt and equity ratio, and times interest earned ratio.
From the years 2009 to 2013 the debt to total assets ratio was high and
the equity to total assets was low. The higher debt to total assets bears
high risk for the company. So, FSIBL bears high risk to survive over a
long period of time and to meet its financial obligations. On the other
hand, the higher debt to total assets not only creates higher risk but also
increase profitability.
FSIBLs times interest earned ratio was high in year 2010 which was
1.29 times and that decreased to 1.14 times in year 2013. This means
FSIBLs interest expense have increased more than the increment of
revenues.
Profitability ratios measure the income or operating success of a

company for a given period of time. The profitability ratios that I have
discussed are profit margin ratio, return on total assets and return on
equity. The profit margin ratio of FSIBL was high in year 2010 and it
was started to decrease from year 2011. FSIBLs lowest profit margin
was 4.21% in year 2013. FSIBLs return on total assets was high in the
years 2009 and 2010 which was 1%. The banks return on total assets
low in year 2013 which was 0.53%. FSIBLs return on equity was high
in year 2010 and low in year 2013. From the above discussion it is
appeared that FSIBLs profitability was decreasing because the bank
could not operate properly its activities comparing the previous years.
So, it was failing to increase the profitability.
Market prospects ratios relate the observable market values like the
stock price with the book values obtained from the firms financial
statements. The market value ratios that I have used to analyzed are
Price Earnings Ratio
(P-E) and Earning per Share (EPS). FSIBLs P-E
ratio was high in year 2010 comparatively than the last three years. The
ratio was decreased from 2011 to 2013. The P-E ratio was lowest in the
year 2013 which only 8.08 times. The high P-E ratio indicates a sign of
confidence for the bank, because it suggests that its earnings are
expected to grow in the future years. On the other hand, the low P-E
ratio indicates that the banks future prospects for EPS growth are
expected to be poor, so that investors do not put a high value on the
share. The EPS of FSIBL was taka 2.33 was high in year 2010 and it
decreased in year 2011 and increased from years 2012 to 2013 which
are taka 1.85 and taka 1.87 accordingly. So, it was a good point for
FSIBL for attracting large investors in the new competitive era by
earning profit on each share of stock.
During my three months internship period in First Security Islami Bank
Limited, Amborkhana Branch, Sylhet, I have found the borrowers were not
paying the installment timely, even the bank could not recover its money yet
from some powerful clients. These make losses for the bank and decrease the
profit. On the other hand, some depositors deposit their money for very short
period of time; even some of the depositors withdraw their money before the
maturity date. Thus, the bank cannot use the money for long-term investment
projects which earn high profits. For these reasons, the banks profitability is
decreasing.
5.2: Recommendations
First Security Islami Bank Limited has to concentrate to adequate
investment. It should minimize the operating expenses and follow the
green banking system. The bank should be strict to recovery of invested

money and time to time collecting profits.
FSIBLs liquidity position was not enough strong comparing to industry.

So the bank should be concerned about increase its liquidity.
The efficiency ratios of FSIBL were good and remaining in increasing

trend.
FSIBLs had fair solvency ratios in where it uses the debt most to
increase revenue rather than the equity. It may increase the risk for the
bank. So, it would be better for FSIBL to finance more equity to minimize
the risk.
Though there were higher profitability ratios in year 2010, FSIBL was
not successful in increasing its overall earnings performance because
Profit Margin, Return on Assets and Return on Equity had been

decreasing during the years 2011 to 2013. So for getting more benefit of
earnings, FSIBL should concern about its profitability and improve its
operating polices for minimizing costs and increasing profits.
Though the EPS was increased in years 2012 and 2013 comparing to
year 2011, the overall market prospects ratios of FSIBL was decreasing
during the years 2011 to 2013. If it decreases over the years, investors
will not put high value on the shares issued by the bank. So the bank
should concern about this.
FSIBL should capture and hold those depositors who will agree to
deposit their money for long period of time. Then the bank can make
long-term investments and earn higher profits. FSIBL also should lend
the money to reliable clients and invest in profitable businesses.
5.3: Conclusion
By analyzing the financial statements as well as the ratios, it can be said that
First Security Islami Bank Limited gas been doing well in few sectors. If we see
the comparative analysis of balance sheet items, it is seemed that the current
liabilities are higher than assets. And all the assets and liabilities were in
increasing trend from year 2010 to 2012 and decreased from year 2012 to
2013. In the case of comparative income statement, most of time the net profit
was decreased ant it was fluctuating over the period. But, when compare overall
total operating income and net profit they were simply increased over the
years. In case of common-size comparative analysis of balance sheet items, it is

appeared that the investment was in decreasing trend and the liabilities were in
increasing trend. Over the five years period of 2009 to 2013, the investments
were lower than the liabilities created by deposits and other debt accounts. The
most liquid asset cash was decreasing and fixed assets were increasing over the
periods. In common-size income statement, the operating expenses were too

high and they were increasing over the years and net profit was decreasing year
by year. The liquidity ratios of FSIBL were increased most of the times which is
good for the bank. If we see the profitability position of the bank, it can easily
be said the Profit Margin, Return on Assets and Return on Equity were not so
good and its trend was downward. We can see the EPS ratio of FSIBL was
fluctuating and the P-E ratio was decreasing, so it is better to give more
concentration when maintaining these types of ratios and increasing such a
market price of the share. Also when we have a look on the solvency ratios, we
can say that FSIBL should do their best to maintain their leverage ratios as all
these ratios shows that they have very high leverage and thus they also have a
higher risk. Besides this, they need to increase the amount of equity capital as
too much leverage may be associated with more risk and also it indicates the
banks financial weakness. Finally, it can be said that FSIBLs overall

performance was good enough.
References:
While preparing this report, I had to collect data from the annual reports of
FSIBL, different books related to Accounting and Finance, the website of FSIBL
and other websites and blogs. The references are given below:
Accounting Info (n. d.) U.S. GAAP Codification of Accounting

Standards
[Internet
blog].
Available
<http://accountinginfo.com/financial-accounting-standards/asc-
from:
200/210-balance-sheet.htm> [Accessed 1st December 2014].
Ajaz A. Khan (2013) Sharia Compliant Finance. Halal Monk [Internet

blog]. Available from: <http://www.halalmonk.com/ajaz-ahmed-khansharia-compliant-finance> [Accessed 23rd November 2014].
Annual report of First Security Islami Bank Limited -2009, 2010, 2011,
2012 and 2013.
Business Science Articles (n. d.) Articles, Functions of Banks [Internet],

Business.
Available
from:
<http://www.business-science-
articles.com/articles/business/76-functions-of-banks-i-primary-andsecondary> [Accessed 12th November 2014].
First Security Islami Bank Limited (n. d.) Home Page [Internet], Home,
Products & Services, Smart Banking, Financial Information, Meet Us, CSR
and News, First Security Islami Bank Limited. Available from:
< http://www.fsiblbd.com> [Accessed 10th November, 31st December

2014].
Helen Mongan (2014) Guidelines for Writing a Literature Review.

Duluth
[Internet
blog].
Available
from:
<http://www.duluth.umn.edu/~hrallis/guides/researching/litreview.ht
ml> [Accessed 13th November 2014].
Investopedia (n. d.) Dictionary [Internet], Islami Banking. Available

from:
<http://www.investopedia.com/terms/i/islamicbanking.asp>
[Accessed 20th November 2014].
Jemes C. Van Horne, John M. Wachowicz and Jr. (2009) Fundamentals of

Financial Management. 13th edition. Pearson Education Limited.
K. D. Larson, J. Wild and B. Chiappetta (2005) Fundamental Accounting

Principles. 17th edition. McGraw-Hill, Irwin.
S. A. Ali and R. A. Howlader (2009) Banking Law and Practice. Revised

edition. New S R Printing Press, Dhaka.
Smriti Chand (n. d.) Commercial Banks [Internet Blog]. Available from:
<http://www.yourarticlelibrary.com/banking/commercial-banks/
commercial-banks-primary-and-secondary-functions-of-commercialbanks/30321/> [Accessed 12 November 2014].
Weygandt, Kieso and Kimmel (2008) Accounting Principles. 8th edition.

John Wiley & Sons, Inc.
Appendix
Acronyms
CIS: Comparative Income Statement

FSIBL: First Security Islami Bank Limited
GAAP: Generally Accepted Accounting Principles
OIC: Organization of Islamic Countries
PLS: Profit & Loss Sharing
AIS: International Accounting Standards
AAR: Average Accounts Receivable
AR: Accounts Receivable
PE: Price-Earnings
EPS: Earnings Per Share
List of Exhibits
Exhibit No.
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.2
3.3
3.4
3.5
3.6
Particulars
Functions of Bank
Page No.
9
Difference between Riba and Profit
16
Comparative Balance Sheets Sample
27
Difference between Conventional Banking and Islamic Banking

Summary of Ratios
Relationships between Financial Statements

Corporate Profile of FSIBL
Financial Performance at a Glance of FSIBL

Board of Director
Organogram
Shariah Board
17
41
44
47
48
52
53
54
3.7
Branches of FSIBL
4.1
(SWIFT)
63
4.3
Comparative Income Statement
67
4.4
in Balance Sheet items
68
BDT Changes over the Years in CIS
70
4.2
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Society for Worldwide Interbank Financial Telecommunication

Comparative Balance Sheet
BDT Changes over the Years Percentage Changes over the Years
Percentage Changes over the Years of Balance Sheet items
Percentage Changes over the Years of CIS Items
Total Operating Income and Net Profit over the Years

Comparative Income Statement for Trend Analysis
Trend Analysis of Income and Expenses
Common-Size Comparative Balance Sheet
Common-Size Comparative Income Statement
Common-size Comparative Balance Sheets Analysis

Portion of a Particular Asset on Total Asset
55
66
69
71
72
74
75
77
78
79
80
4.14
Portion of Particular Liability and Equity on Total Liabilities
4.15
and Equity
4.16
Statements
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
Vertical
Analysis
of Common-size
Comparative
Income
81
82
Current Ratio
84
Acid-test Ratio
85
Current Ratio
Acid-test Ratio

Debt Ratio
Exhibit
Debt and Equity Ratio

Profit Margin Ratio
Profit Margin Ratio

Return on Equity
Return on Equity
Earnings per Share (EPS)

Trend of Cash Flow
Summary of Cash Flow Statement

Cash Flow on Total Assets
84
85
86
86
87
87
88
88
90
90
90
91
91
93
93
94
94
95
95
96
97
98
99
100
100
Click to get Excel Sheets
Click to get Financial Statements of FSIBL
Financial Year 2013

Financial Year 2012
Financial Year 2011
Financial Year 2010
Financial Year 2009
Financial Statements Analysis

JANUARY
S
MAY
W
T
1
F
2
S
3
2015
SEPTEMBER
F
1
S
2
T
1
W
2
T
3
F
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10
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24
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30
27
28
29
30
T
2
W
3
T
4
F
5
S
6
T
1
F
2
S
3
31
FEBRUARY
S
1
JUNE
M
2
T
3
W
4
T
5
F
6
S
7
OCTOBER
M
1
10
11
12
13
14
10
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12
13
10
15
16
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18
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21
14
15
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20
11
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13
14
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27
28
21
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24
25
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27
18
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20
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24
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29
30
25
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27
28
29
30
31
MARCH
S
1
JULY
M
2
T
3
W
4
T
5
F
6
S
7
NOVEMBER
W
1
T
2
F
3
S
4
S
1
M
2
T
3
W
4
T
5
F
6
S
7
10
11
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13
14
10
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31
26
27
28
29
30
31
29
30
W
2
T
3
F
4
S
5
APRIL
S
AUGUST
T
W
1
T
2
F
3
S
4
DECEMBER
T
S
1
T
1
10
11
10
11
12
12
13
14
15
16
17
18
10
11
12
13
14
15
13
14
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17
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19
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21
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23
24
25
16
17
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19
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21
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25
26
26
27
28
29
30
23
24
25
26
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29
27
28
29
30
31
30
31
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Financial Statements Analysis of an

Islami Bank in Bangladesh

ulllr$y,. r[i rt nst sEcu RlrY ts LAM I BAN K trD.

To whom it may Concern

We wish him every success in life.

February 28, 2015

This is to certify that Internship Report titled Financial Statements Analysis

I, Moez Al Azim Ansary, a student of BBA program at Leading University, Sylhet,

1.1 Origin of the Report

1.2 Significance of the Study

1.3 Objective of the Study

1.4 Scope of the Study

1.5 Methodology of the Study

1.6 Sources of Data

1.7 Limitation of the Study

2.2 Functions of Bank

2.3 Islamic Banking

2.3.1: Principles of Islamic Banking

2.3.2: Riba or Interest

2.4 Difference between Riba and Profit

2.5 Difference between Conventional Banking and Islamic

2.6 Financial Statements

2.7 Components of Financial Statements

2.8 Components of Banks Financial Statements

2.9 Financial Statements Analysis

2.10 Techniques to Financial Statements Analysis

2.11 Literature Review

2.11.1: Classification of Assets and Liabilities

2.11.2: Limitations of Financial Statements

2.11.3: Building Blocks of Financial Statement

2.11.4: Horizontal Analysis

2.11.5: Vertical Analysis

2.11.6: Ratio Analysis

3.1 Corporate Profile of FSIBL

3.2 Historical Background of FSIBL

3.3 Vision, Mission, Objective and Strategies of FSIBL

3.4 Organizational Structure of FSIBL

3.5 Branches of FSIBL

3.6 Functions of FSIBL

3.7 Features of FSIBL

3.8 Principal Products & Services of FSIBL

3.9 Society for Worldwide Interbank Financial

Core Part : Financial Statements Analysis of FSIBL

4.2 Reconstruction of Financial Statements of FSIBL

4.3 Horizontal Analysis

4.3.1: Comparative Balance Sheet Analysis

4.3.2: Comparative Income Statement Analysis

4.3.3: Trend Analysis

4.4 Vertical Analysis

4.4.1: Common-size Balance Sheets Analysis

4.4.2: Common-size Income Statements Analysis

4.5 Ratio Analysis

4.5.1: Liquidity and Efficiency Ratio

4.5.2: Solvency Ratio

4.5.3: Profitability Ratio

4.5.4: Market Prospects Ratio

4.6 Analysis of Cash Flow Statement

Findings, Recommendation and Conclusion

First Security Islami Bank Limited.

Financial Statements Analysis |2

Financial statement analysis is the process of reviewing and analyzing a

company's financial statements to make better economic decisions. These