Financial Accountant Journal-March-2014

Summarising Financial Data into Short Set of Key
Relationships Using Cash Flow Ratio Analysis
12
By : Zeeshan Hamid - ACFAc
3. Cash Dividend Coverage Ratio
Formula:
Operating Cash Flow
Dividend
Bank Name Fiscal Year 2008 Fiscal Year 2009 Fiscal Year 2010
United Bank Limited
MCB Bank Limited
Rs. In '000 Rs. In '000 Rs. In '000
1,025,033 /3,945,703 = 26,774,872 / 1,094,748 = 100,070,348 / 4,006,407
0.26
24.46
= 24.98
2,115,561 / 9,834,175 = 78,148,082 / 6,735,510 = 58,701,161 / 8,567,547 =
0.22
11.60
6.85
Soneri Bank Limited (4,500,148) / 0 = 0 13,892,687 / 0 = 0 5497142 / 0 = 0
United Bank Limited in 2008 has very low ratio. However, in 2009 it significantly increased as compared to 2008 and was
almost same in 2010 with a slightest increase from 24.46 to 24.98. In 2010 the change in Operating cash flow was not the only
change but there was a change in dividends as well, which was almost in the same proportion.
MCB Bank Limited improved their ratios in 2009 as compared to 2008. In 2009 the change came due to increased in
Operating cash flows of bank, which increased the ratios of the bank positively. However, we can see from analysis that in 2010
there was a downfall in bank’s cash flows due to decreased in operating cash flow of bank.
Soneri Bank Limited position was very weak as we can see bank could not manage to pay dividend to its shareholders
throughout 3 years. In 2008 its cash inflows had been superseded by cash outflows. In 2009 bank managed its cash flow and
was a slightest increase in share price, however, as compare to past two years in 2010 there was an increase in share price of
the bank, which was comparatively good.
4. Cash Flow Solvency Ratio
Formula:
Cash Flow from Operations
Total Liabilities
Bank Name Fiscal Year 2008 Fiscal Year 2009 Fiscal Year 2010
United Bank Limited
MCB Bank Limited
Soneri Bank Limited
Rs. In '000 Rs. In '000 Rs. In '000
1,025,033 / 571,311,725 26,774,872 / 573,131,166 100,070,348 /
= 0.002
= 0.047
630,369,914 = 0.159
2,115,561 / 385,153,625 78,148,082 / 439,483,714 58,701,161 / 488,348,404
= 0.005
= 0.178
= 0.120
(4,500,148) / 73,864,207 13,892,687 / 87,507,071 5,497,142 / 99,188,005 =
= (0.0609)
= 0.1588
0.0554
United Bank Limited in 2008 has very low ratio, which bank manage in 2009 and goes up with an increase from 0.002 to
0.047. However, in 2010 the ratio moved upwards, significant increased in the cash flow from operations was the reason of
increase in ratio.
MCB Bank Limited has very low ratio in 2008, which increased significantly in 2009. This year the change was in Cash flow
from operations and total liabilities of the bank as well, however, bank improved its ability to settle obligations. Thus, in 2010
we can see a decrease due to decline in Cash Flow from Operations and an increased in Total Liabilities.
Soneri Bank Limited ratio was negative in 2008 due to cash outflows more than cash inflows. However, in 2009 we can see
that the bank managed to maintain their cash flows, which shows a positive picture of bank. In 2009 bank shows its ability to
settle obligations. Unfortunately, the fiscal year 2010 was not in favour of bank and its cash flows goes down due to a decrease
in Cash Flow from Operations and an increase in Total Liabilities.