The Case Study - Seylan Bank

244Seylan Bank PLC Annual Report 2009GlossaryCapital Adequacy RatioThe percentage of risk-adjustedassets supported by capital asdefined under the frameworkof risk-based capital standardsdeveloped by the Bank forInternational Settlements (BIS)and as modified to suit localrequirements by the Central Bankof Sri Lanka.Cash EquivalentsCash equivalents are short term,highly liquid investments thatare readily convertible to knownamounts of cash and which aresubjected to an insignificant risk ofchanges in value.Contingent LiabilitiesConditions or situations at theBalance Sheet date, the financialeffect of which are to be determinedby the future events which may ormay not occur.Cost to Income RatioOperating expenses as a percentageof net income.Deferred TaxSum set aside in the FinancialStatements for taxation that maybecome payable/receivable ina financial year other than thecurrent financial year.Dividend YieldDividend earned per share as apercentage of its market value.Dividend CoverProfit after tax divided by grossdividends. This ratio measuresthe number of times dividendis covered by the current year’sdistributable profits.Equity Growth RateThe percentage increase in totalequity over the year under review.EquityTotal of shareholders’ funds; sharecapital + statutory reserves + otherreserves.ImpairmentThis occurs when recoverableamount of an asset is less than itscarrying amount.Interest Earning AssetsAssets, which earn interest - thetotal of Advances, Bills, Leases,Government Bills & Bonds, CallMoney and Placements with otherinstitutions.Interest in SuspenseInterest Income of non-performingloans; these are accrued but notconsidered as profits.Interest Rate SpreadThe difference between theeffective interest yield and theeffective interest cost of the Bank.Liquid AssetsCash, Bills, Short-Term Funds,Balance with Central Bank andDealing Securities.Non-Performing LoansLoans which are not activated for90 days (3 months), or more.NPA RatioTotal non-performing advances(net of interest in suspense)divided by total advances portfolio(net of interest in suspense).Price Earning RatioMarket price of the Bank’sshare as number of times of theearnings per share.Profit HandoutDividends as a percentage of profitafter tax.Provision for Bad andDoubtful DebtsProvisions made for possible loanlosses, according to the periodof non-performance and theexposure over the collateral.REPOsRepurchase agreements; thesecurities sold to creditors (wholend money for funding purposes);with the intention of buying themback at a set price.Return on Average Assets (Roaa)Profit after tax as a percentage ofaverage assets.Return on Equity (ROE)Profit after tax as a percentage ofaverage equity.Risk Weighted AssetsThe assets and off Balance Sheetitems weighted according to therisk involved as stipulated by theCentral Bank.Statutory Reserve FundCapital reserve created as per theprovisions of Banking ActNo. 30 of 1988.Tier 1 CapitalConsists of the sum total of paid upordinary shares, non-cumulative,non-redeemable preference shares,share premium, statutory reservefund, published retained profits,general and other reserves, lessgoodwill.Tier 2 CapitalConsists of the sum totalof revaluation reserves, generalprovisions, hybrid capitalinstruments and approvedsubordinated debentures.Total CapitalTotal Capital is the sum of Tier 1Capital and Tier 2 Capital.Value AddedValue added is the wealth createdby providing banking services lessthe cost of providing such services.The value added is allocated amongthe employees, the providers ofcapital, to Government by way oftaxes and retained for expansionand growth.