goldmen vs bank asia

7/31/2019 Goldmen vs Bank Asia

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EXECUTIVE SUMMARY

In this report we analyzed the reasons of bankruptcy of Goldman Sachs and analyzed performance of

Bank Asia. We tried to analyze major data and compared both institutions why one is successful and

another one is not.

Both banks are big institutions in their respective country. We collected annual reports of both financial

institutions and worked on it. We performed trend analysis and graphically presented each of the ratios

we calculated. We compared three years timeline

Both institutions had up and downs in the past. Based on our analysis, we came up with the findings that

why Goldman Sachs was bankrupted and the possibilities that in the future of BANK ASIA mightbecome bankrupted in the near future. The fact is that since BANK ASIA bank does not operate in a

globalized manner thus it is less vulnerable to such market problems and become an extinct

organization.


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Company Overview:

Bank Asia Ltd.

Bank Asia has been launched by a group of successful entrepreneurs with recognized standing in the

society. The management of the Bank consists of a team led by senior bankers with decades of

experience in national and international markets. The senior management team is ably supported by a

group of professionals many of whom have exposure in the international market.

It set milestone by acquiring the business operations of the Bank of Nova Scotia in Dhaka, first in the

banking history of Bangladesh. It again repeated the performance by acquiring the Bangladesh

operations of Muslim Commercial Bank Ltd. (MCB), a Pakistani bank.

In the year 2003 the Bank again came to the limelight with oversubscription of the Initial Public

Offering of the shares of the Bank, which was a record (55 times) in our capital market's history and its

shares commands respectable premium.

The asset and liability growth has been remarkable. Bank Asia has been actively participating in the

local money market as well as foreign currency market without exposing the Bank to vulnerable

positions. The Bank's investment in Treasury Bills and other securities went up noticeably opening up

opportunities for enhancing income in the context of a regime of gradual interest rate decline.

Bank Asia Limited started its service with a vision to serve people with modern and innovative banking

products and services at affordable charge. Being parallel to the cutting edge technology the Bank is

offering online banking with added delivery channels like ATM, Tele-banking, SMS and Net Banking.

And as part of the bank's commitment to provide all modern and value added banking service in keeping

with the very best standard in a globalize world.


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Stock Market Performance of Bank Asia (DSE, 2010-2011)

Market Capitalization:


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Performance of Bank Asia in last 5 yrsRATIO ANALYSIS

Ratio analysis is the most effective way to determine any companys financial position. Each numbers in

the ratio has some inherent meaning. For determining and comparing the financial condition of these

two banks we used some ratio. We tried our best to determine from our knowledge.

The ratios we used are:

Liquidity Ratio Debt Ratio Profitability

Market

We used these four types of ratio in order to determine the companys position. We didnt use

turnover ratios because as a bank doesnt hold inventories or sales. The calculated ratios for the two

banks Bank Asia & Gol dman Sachs are given in the following pages.

Liquidity Ratio:

Current Ratio :

The Current Ratio is one of the most commonly cited financial ratios. It measures the firms ability to

meet its short term obligations. Generally, the higher the Current Ratio, the more liquid the firm is

considered to be.

In the year 2007, Bank Asia had current assets 1.14 times higher than current liabilities. In the year

2008, Bank Asia had current assets 1.13 times higher than current liabilities.


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Again, from the year 2007 to 2008 the ratio had decreased i.e. the performance of Bank Asia had

declined.

From 2007 to 2008 the ratio had gone down because the relative increase in current liabilities was higher

than relative increase in current assets.

Bank Asia Bank Limited

Ratio Name/Year 2007 2008 2009

Current Ratio 1.14 times 1.13 times 1.15

Quick Ratio 1.14 times 1.13 times 1.15

Goldman Sachs:

Items/Year

2009 2008 2007

Current Ratio (CA/CL) 0.490405 0.521152 0.275622

Quick Ratio [(CA-Inventory)/CL] 0.490405 0.521152 0.275622


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Interpretations:

In the year 2007, Bank Asia had current assets 1.14 times higher than current liabilities while

Goldman Sachs had 0.27.

2007 2008 2009

Current Ratio 1.14 1.13 1.15

1.115

1.12

1.125

1.13

1.135

1.14

1.145

1.15

1.155 Current Ratio(BA)

2009 2008 2007

Current Ratio 0.490405 0.521152 0.275622

0

0.1

0.2

0.3

0.4

0.5

0.6

G o

l d m a n S a c h e s

Current Ratio(GS)


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In the year 2008, BANK ASIA had current assets 1.13 times higher than current liabilities and

Goldman Sachs had around 0.53. From the year 2007 to 2008 the ratio had decreased i.e. the

performance of BANK ASIA had declined but Goldmans ratio increased.

From 2008 to 2009 BANK ASIA s ratio had gone but again GOLDMAN SACHS ratio also went

down because of relative increase in liabilities.

Quick Ratio or Acid Test Ratio -

The Quick Ratio or Acid Test Ratio is similar to the current ratio except that it excludes inventory,

which is generally the least liquid current asset. The quick ratio provides a better measure of overall

liquidity only when a firms inventory cannot be easily converted into cash. If inventory is liquid, the

current ratio is an overall measure of overall liquidity.

2009 2008 2007

Current Ratio 0.490405 0.521152 0.275622

0

0.1

0.2

0.3

0.4

0.5

0.6

Quick Ratio(GS)


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Since banks do not have any inventory, so for BANK ASIA & GS the Current Ratio and Quick Ratio or

Acid Test Ratio is the same.

Interpretations:

In the year 2007, BANK ASIA had current assets excluding inventory 1.14 times higher than

current liabilities. In the year 2008, BANK ASIA had current assets excluding inventory 1.13

times higher than current liabilities well GS was struggling at 0.27

From the year 2007 to 2008 the ratio had decreased i.e. the performance of BANK ASIA had

declined but GS performance increased

From 2008 to 2009 the ratio had gone down because the relative increase in current liabilities

was higher than relative increase in current assets excluding inventory.

2007 2008 2009

Quick Ratio 1.14 1.13 1.15

1.115

1.12

1.125

1.13

1.135

1.14

1.145

1.15

1.155

Quick ratio(BA)


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Leverage RatiosGoldman Sachs

Items/Year 2009 2008 2007

Debt Ratio = Total Debt / Total Asset (x or %) 1.53636 1.501547 1.503582

Long Term Debt Ratio = Long Term Debt / Total Asset (x or %) 0.365391 0.30797 0.230758

Debt Equity Ratio = Total Liability / Total Equity (x or %) 11.00529 12.74182 24.99371

TIE Ratio = EBIT / Interest Charges (x or %) 3.050615 0.359385 2.708308

Bank Asia


Debt-To-Asset

Ratio

0.91 times 0.91 times 0.876

Total Debt-To-

Total Equity

10.47 times 10.45 times 7.10

Times Interest

Earned

1.13 times 1.01 times 1.14

Long term debt

ratio

0.68 0.72 0.78


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Debt-To-Asset Ratio:

The Debt-To-Asset Ratio measures the total debt of the company to total assets. In the year 2007 and

2008 the total debt of BANK ASIA was 0.91 times of their total assets. The ratio was constant from

2007 to 2008.The ratio was constant 2007 to 2008 because the relative increase in total debt was equal

to relative increase in total asset. In 2009 BANK ASIAS debt-asset drecreased which is actually a good

sign which means the company have enough money to pay it is debtholders.

If we look at Goldman Sachs the companys debt-asset increased this is a bad sign because the company

have much liability. It happened because of financial crisis they faced. The company will do better in

future we hope that.

2009 2008 2007

Debt Ratio = Total Debt /Total Asset (x or %)

1.53636 1.501547 1.503582

1.481.49

1.51.511.521.531.54

Debt Ratio = Total Debt / Total Asset

(Goldman Sachs)

2007 2008 2009

Debt-To-Asset Ratio 0.91 0.91 0.876

0.85

0.86

0.87

0.88

0.89

0.9

0.91

0.92

Debt-To-Asset Ratio


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Total Debt-To-Total Equity

The Total Debt-To-Total Equity Ratio measures the total debt of the company to total equity. In 2007

the total debt of BANK ASIA was 10.47 times of its total equity. In 2008 the total debt of BANK ASIA

was 10.45 times of its total equity.

So again BANK ASIAS 2009 debt to equity In 2009 was 7.1 and if we look at Goldman Sachs there is a

constant fall in a debt to equity which can be admired as a good sign for the company because higher

leverage is not good for a company

2007 2008 2009

Total Debt-To-Total Equity 10.47 10.45 7.1

0

2

4

6

8

10

12

Total Debt-To-Total Equity(BA)

2009 2008 2007

Debt Equity Ratio = Total

Liability / Total Equity (x or %)11.00529 12.74182 24.99371

0

5

10

15

20

25

30

Debt Equity Ratio = Total Liability / Total Equity(Goldman Sachs)


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Times Interest Earned (TIE) -

The Times Interest Earned (TIE) Ratio measures the firms ability to make contractual interest

payments. The higher its value, the better able the firm is to fulfill its interest obligation. In 2007, and

2008 the operating income was 1.13 times and 1.01 times of their interest expense respectively. The TIE

Ratio decreased from 2007 to 2008. The TIE ratio decreased from 2007 to 2008 because the relative

increase in EBIT was lower than relative increase in interest expense.

.

Again in 2009 BANK ASIAS TIE increased which is a good sign for the company. If we look at

Goldman Sachs we can see that in the year 2008 its TIE was lowest which a bad sign was indeed. But in

the year 2009 the companys TIE increased which is a good sign for the company and it is supportable.

2009 2008 2007

TIE Ratio = EBIT /Interest Charges (x or

%)3.050615 0.359385 2.708308

01234

TIE Ratio = EBIT / Interest Charges (x

or %)

2007 2008 2009

Times Interest Earned 1.13 1.01 1.14

0.9

0.95

1

1.05

1.1

1.15Times Interest Earned(BA)


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Long-term Debt Ratio: Long-term debt ratio determines the long term debt to the long term asset

which means that I tries to determine the proportion if asset is related to long term debt of the company.

If we look at BANK ASIA s condition from the year 2007 to 2008 companies long -term debt ratio is

increasing which can be accounted as a bad sign. The company is holding too much debt as asset. If we

look at Goldman Sachs we can find that its long term debt is also increasing both the companies shouldtry to solve this problem because liability is a huge issue for any company.

2009 2008 2007

Long Term Debt Ratio =Long Term Debt / Total

Asset (x or %)0.365391 0.30797 0.230758

00.10.20.30.4

Long Term Debt Ratio = Long TermDebt / Total Asset (Goldman Sach)

2007 2008 2009

Long term debt ratio 0.68 0.72 0.78

0.6

0.65

0.7

0.75

0.8

Long term debt ratio(BA)


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Profitability Ratios

2007 2008 2009

Return On Equity 11.29% 16.86% 17.29

0.00%

500.00%

1000.00%

1500.00%

2000.00%

Return On Equity(BA)

man SachsYear 2009 2008 2

Earning Power (BEP) = EBIT / TA (x or %) 0.039146 0.004277 0.02on Asset = Net Income / Total Asset (x or %) 0.026424 0.004251 0.0163On Equity = Net Income / Total Equity (x or %) 0.189284 0.036073 0.2710

Bank Asia Ltd.


Basic Earning power 0.066 0.067 0.067Return On Assets 0.98% 1.46% 2.1

Return On Equity 11.29% 16.86% 17.29


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Goldman Sachs

2009 2008 2007

Return On Equity = Net Income/ Total Equity (x or %)

0.189284 0.036073 0.271005

0

0.05

0.1

0.15

0.2

0.25

0.3

Return On Equity = Net Income / Total Equity(Goldman Sachs)

Interpretation:For Bank Asia we can see during the year of 2007, 2008, and 2009 that ROE has been increasing in a

decent manner which simply means that the company is managing its assets and utilizing it efficiently.

In 2007, it was 11.29% and in 2009 it was 17.29%. It is a good indication for both the bank authority

and the consumers. Besides, if we see the profitability ratio of Goldman Sachs, we will see that ROEhad been decreasing in those years which were quite alarming for them. Therefore, it means that some

effective measures were required to improve the condition which they were lacking.


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Interpretation:For Bank Asia we can see during the year of 2007, 2008, and 2009 that ROA has been increasing in a

decent manner. In 2007, it was 0.98% and in 2009 it was 2.1%. It is a good indication for both the

bank authority and the consumers. Besides, if we see the profitability ratio of Goldman Sachs, we will

see that ROA had not been constant in those years which were quite alarming for them. Therefore, it

2007 2008 2009

Return On Assets 0.98% 1.46% 2.1

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

Return On Assets

2009 2008 2007

Return on Asset = NetIncome / Total Asset (x or

%)0.026424 0.004251 0.016303

00.005

0.010.015

0.020.025

0.03

Return on Asset = Net Income / Total Asset(x or %)

BANK ASIA

Goldman Sachs


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means that some effective measures were required to improve the condition which they were lacking.

Interpretation:For Bank Asia we can see during the year of 2007, 2008, and 2009 that the Basic Earning Power has

been increasing in a decent manner. In 2007, it was 0.066 and in 2009 it was 0.067. It is a good

indication for both the bank authority and the consumers. If the basic earning power is enhancing it

2007 2008 2009Basic Earning power 0.066 0.067 0.067

0.0654

0.0656

0.0658

0.066

0.0662

0.0664

0.0666

0.0668

0.067

0.0672

Basic Earning power

2009 2008 2007

Basic Earning Power(BEP) = EBIT / TA (x or

%)0.039146 0.004277 0.024744

00.005

0.010.015

0.020.025

0.030.035

0.040.045

Basic Earning Power (BEP) = EBIT / TA (xor %)

Goldman Sachs

BANK ASIA


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Market Ratios

Goldman Sachs:

2009 2008 2007

Items/Year

Earning Per Share = Net Income / Shares Outstanding

(Tk/share) 25.99029 5.025974 29.66496

Book Value per Share (BVPS) = Total Equity / SOS

(TK/share) 137.3087 139.3268 109.4629

P/E 0.012626 0.072782 0.01457

Bank Asia:


Earnings Per Share(EPS)

Tk.40.50/share Tk.57.52/share 58.53

simply means that the bank is doing good and making their customer well satisfied. Besides, if we see

the profitability ratio of Goldman Sachs, we will see that the Basic Earning Power had not been

constant in those years which were quite alarming for them. It simply means that their business was

going out of the track and they were losing customers. Therefore, it means that some effective

measures were required to improve the condition which they were lacking.


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P/E Ratio 26.44 10.24 11.01

Book Value Per share 358 341 337.65

Earnings per Share: Earnings Per Share (EPS) is generally of interest to present or prospective

stockholders and management. EPS represents the number of dollars earned during the period on behalf

of each outstanding share of common stock.

2007 2008 2009

Earnings Per Share (EPS) 40.5 57.52 58.53

Earnings Per Share BA)


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Interpretations:

In 2007 GS had high EPS and BANK ASIA had low EPS

Due to financial crisis in 2008 Goldmans EPS went down but BANK ASIA experienced moreprofit

In 2009 both BANK ASIA and Goldman Sachs had experienced growth in profit. Mainly

GOLDMAN SACHES improved a lot.

P/E Ratio:

The P/E ratio is commonly used to assess the owners appraisal of share value. The P/E ratio measures

the amount that investors are willing to pay for each dollar of a firms earning. The higher the ratio the

better it is.

2009 2008 2007

Earning Per Share = Net Income /Shares Outstanding (Tk/share)

25.99029 5.025974 29.66496

05

101520

253035

Earning Per Share (Goldman Sachs)

2009 2008 2007

P/E 0.012626 0.072782 0.01457

0

0.02

0.04

0.06

0.08

P/E(GOlDMAN SACHES)


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Interpretations:

In 2007 and 2008 the shareholders of BANK ASIA were willing to pay Tk.26.44, Tk.10.24respectively per each dollar of reported earning but Goldman Sachs was not impressive

The P/E ratio decreased from 2007 to 2008 for both the companies

The P/E Ratio decreased from 2008 to 2009 because the price per share decreased and EPS

increased.

Book value per Share: BVPS estimates the total value of the par share currently holding and declared bythe company.

2007 2008 2009

P/E Ratio 26.44 10.24 11.01

P/E Ratio(BA)

2009 2008 2007Book Value per Share(BVPS) = Total Equity /

SOS (TK/share)137.3087 139.3268 109.4629

Book Value per Share (BVPS) = TotalEquity / SOS (TK/share)


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Interpretations:

Book value per share of the Goldman Sachs increased from the year 2007 to 2009 this because of

trying to hold shares more tightly

If we try to interpret the book value per share of BANK ASIA it went down because of some

unknown reasons.

Both the company should have tight control over these stuffs.

Comparison between Bank Asia & Goldman Sachs

Factor BANK ASIA Goldman Sachs

Market Price BANK ASIA s market price

is increasing or experiencing

a constant growth which is agood sign for the company

Due to financial crisis the

share price of GS collapsed

which result into thevolatility of market price

Earning Price BANK ASIA s eps is sound Although Goldman Sachs

faced problem in 2008 but the

company in doing well now

2007 2008 2009

Book Value Per share 358 341 337.65

325330335340345

350355360

Book Value Per share


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Price earning BANK ASIA s price earning

is decreasing

Goldman Sachs price earning

is in a stable way

Liquidity BANK ASIA s liquidity

sounds good

Goldmans liquidity is below

1 which is not good

Debt Bank Asia s debt figure

looks healthy

Goldman Sachs has excess

debt

Capitalization BANK ASIA s capitalizationsounds good

From the ratios we find thecondition is not satisfactory

Findings: It can be said that BANK ASIA is in a much better condition Although there are some problems with BANK ASIA but we hope that these problem will be

solved pretty soon

BANK ASIA comprises of tight control in finance BANK ASIA has already implemented Basel2 BANK ASIA has sufficient capital to support its business

Conclusion:

Under these circumstances we can say that BANK ASIA is not in a condition of bankruptcy that

Goldman Sachs faced 2years back in financial crisis all over the world.

goldmen vs bank asia

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