FINANCIAL STATEMENT ANALYSIS: A TOOL FOR PERFORMANCE EVALUATION

FINANCIAL STATEMENT ANALYSIS:
A TOOL FOR PERFORMANCE EVALUATION
A Case Study of Oceanic Bank
By
IBRAHIM UMAR
PGA/09/07766
M.Sc. Assignment
Submitted to
Dr. M.I. Kida CNA
Department of Accountancy
University of Maiduguri
2
Financial Statement Analysis: A Tool for Performance Evaluation
Jan. 2010
3
Financial Statement Analysis: A Tool for Performance Evaluation
ABSTRACT
Financial statements are prepared to meet external reporting obligations and
also for decision making purposes. They play a dominant role in setting the
framework of managerial decisions. But the information provided in the financial
statements is not an end in itself as no meaningful conclusions can be drawn
from these statements alone. However, the information provided in the financial
statements is of immense use in making decisions through analysis and
interpretation of financial statements.
There are various methods or techniques that are used in analyzing financial
statements, such as comparative statements, schedule of changes in working
capital, common size percentages, trend analysis and ratios analysis.
This study intends to analyze financial statement of Oceanic bank in Nigeria in
order to come up with an in-depth fact finding on its performance and to see if
there is any connection between the recent global economic crisis and its overall
performance.

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Financial Statement Analysis: A Tool for Performance Evaluation
INTRODUCTION
1.1 Background
Financial statement represents crucial information to various users who have
interest in a diverse field. All financial statements are essentially historically
historical documents. They tell what has happened during a particular period of
time. However most users of financial statements are concerned about what will
happen in the future. Stockholders are concerned with future earnings and
dividends. Creditors are concerned with the company's future ability to repay its
debts. Managers are concerned with the company's ability to finance future
expansion.
Financial statement analysis involves careful selection of data from financial
statements for the primary purpose of forecasting the financial health of the
company. This is accomplished by examining trends in key financial data,
comparing financial data across companies, and analyzing key financial ratios.
Financial statement analysis is defined as the process of identifying financial
strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account (Pandy,
2003).
Although financial statement analysis is a highly useful tool, it has two limitations.
These two limitations involve the comparability of financial data between
companies and the need to look beyond ratios.
Comparison of one company with another can provide valuable clues about the
financial health of an organization (Remi, 2006). Unfortunately, differences in
accounting methods between companies sometime make it difficult to compare
the companies' financial data. For example if one company values its inventories
by the LIFO method and another firm by average cost method, then direct
5
Financial Statement Analysis: A Tool for Performance Evaluation

comparisons of financial data such as inventory valuations and cost of goods
sold between the two firms may be misleading. Some times enough data are
presented in foot notes to the financial statements to restate data to a
comparable basis. Otherwise, the analyst should keep in mind the lack of
comparability of the data before drawing any definite conclusion. Nevertheless,
even with this limitation in mind, comparisons of key ratios with other companies
and with industry averages often suggest avenues for further investigation.
1.2 RESEARCH PROBLEM
Financial statement represents crucial information to various users who have
interest in a diverse field. Comparison of one company with another can provide
valuable clues about the financial health of an organization but unfortunately,
differences in accounting methods between companies sometime make it difficult
to compare the companies' financial data.
The needs of financial accounting information users are diverse that they find it
difficult to understand the information contained in the statement so presented
by the organization and as such there is need to analyze the statement into
meaningful form for decision making and performance evaluation.
1.3 OBJECTIVES OF THE STUDY
Analysis of banks through financial statements is more difficult than other type of
companies due to the innovation of new and complex financial instruments. One
of the indicators of bank`s performance is the behavior of their stock prices
because it reflects the market’s evaluation of the bank’s performance which is
also used as part of performance evaluation. Moreover, financial management
theories provide many indicators for assessing a bank’s performance.
The main purpose of this research is to analyze the financial statements of the
bank and its development over time as reflected in its reports during three years
from 2004 to 2008.
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Financial Statement Analysis: A Tool for Performance Evaluation
The study, in addition, has the following specific objectives:

I. the study intends to analyze financial statement to measure performance
over time,
II. link any relationship between the bank’s performance and the recent
economic crisis,
III. predict future prospects of the bank.
1.4 RESEARCH QUESTIONS
The recent economic crisis and non performing loans cases in the Nigerian
commercial banks have raised question which necessitated this research
undertaking. The study intends to answer the following questions:
1. Are the Nigerian commercial banks performing well?
2. What are the overall performance indices of the Nigerian commercial
banks?
3. Are the financial reports understandable to the external users?
4. What are the limitations attributable to financial statement analysis of the
banks?
1.4 SIGNIFICANCE OF THE STUDY
The study will provide investors with enough ideas to decide about the
investment of their funds in specific banks in Nigeria. Regulatory authorities (e.g.
IASB) can assess whether banks are following the accounting standard or not,
government agencies will gain from the research to analyze taxation due from
banks. It will also aid the selected bank in evaluating its performance over time
and it will be a guide for future research.
1.5 SCOPE AND LIMITATION
This study will analyze only Oceanic banks` performance from 2004 to 2008.
However, there are some reasons for choice of only one bank for the study; the
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Financial Statement Analysis: A Tool for Performance Evaluation
time frame for the research work is too short to obtain data from more banks. The
purpose is neither to investigate how the banks evaluate financial instruments to
report in their financial statements nor to review the banking regulations and the

governance systems. Author will focus only on the financial data available in
financial reports. Another delimiting factor is that the researcher has to only rely
on the financial reports provided by the banks on their websites because insight
information is not accessible. Financial constraints are also obstacle to a wider
study.
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Financial Statement Analysis: A Tool for Performance Evaluation
LITERATURE REVIEW
2.1 INTRODUCTION
Financial statement analysis is defined as the process of identifying financial
strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account (Pandy,
2003).
Financial statements are prepared to meet external reporting obligations and also
for decision making purposes. They play a dominant role in setting the framework
of managerial decisions. But the information provided in the financial statements
is not an end in itself as no meaningful conclusions can be drawn from these
statements alone. However, the information provided in the financial statements
is of immense use in making decisions through analysis and interpretation of
financial statements (James C. 2002)
Financial statement analysis involves careful selection of data from financial
statements for the primary purpose of forecasting the financial health of the
company. This is accomplished by examining trends in key financial data,
comparing financial data across companies, and analyzing key financial ratios.
2.2 TOOLS AND TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS
Following are the most important tools and techniques of financial statement
analysis (Remi A. 2006):
1. Horizontal and Vertical Analysis
2. Ratios Analysis
2.3 HORIZONTAL ANALYSIS OR TREND ANALYSIS

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Financial Statement Analysis: A Tool for Performance Evaluation
Comparison of two or more year's financial data is known as horizontal analysis,
or trend analysis. Horizontal analysis is facilitated by showing changes between
years in both Naira and percentage form (Pandy 2003). Showing changes in
Naira form helps the analyst focus on key factors that have affected profitability
or financial position. Showing changes between years in percentage form helps
the analyst to gain perspective and to gain a feel for the significance of the
changes that are taking place. For example a N1 million increase in sales is
much more significant if the prior year's sales were N 2 million than if the prior
year's sales were N 20 million. In the first situation, the increase would be 50%
that is undoubtedly a significant increase for any firm. In the second situation, the
increase would be 5% that is just a reflection of normal progress.
2.3.1 Trend Percentage
Horizontal analysis of financial statements can also be carried out by computing
trend percentages. Trend percentage states several years' financial data in terms
of a base year. The base year equals 100%, with all other years stated in some
percentage of this base (Remi O. 2006). The trend analysis is particularly striking
when the data are plotted.
2.3.2 Vertical Analysis
Vertical analysis is the procedure of preparing and presenting common size
statements. According Pandy (2004), common size statement is one that shows
the items appearing on it in percentage form as well as in monetary form. Each
item is stated as a percentage of some total of which that item is a part. Key
financial changes and trends can be highlighted by the use of common size
statements. Common size statements are particularly useful when comparing
data from different companies.
One application of the vertical analysis idea is to state the separate assets of a
company as percentages of total sales.
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Financial Statement Analysis: A Tool for Performance Evaluation
The main advantages of analyzing a balance sheet in this manner are that the
balance sheets of businesses of all sizes can easily be compared. It also makes
it easy to see relative annual changes in one business (Helfert E. 1997)
Another application of the vertical analysis idea is to place all items on the
income statement in percentage form in terms of sales.
By placing all items on the income statement in common size in terms of sales, it
is possible to see at a glance how each Naira of sales is distributed among the
various costs, expenses, and profits. And by placing successive years'
statements side by side, it is easy to spot interesting trends. Managers and
investment analysis often pay close attention to the gross margin percentage
since it is considered a broad gauge of profitability. The gross margin percentage
is computed by the following formula (Oye A. 2005):
[Gross margin percentage = Gross margin / Sales]
The gross margin percentage tends to be more stable for retailing companies
than for other service companies and for manufacturers. Since the cost of goods
sold in retailing exclude fixed costs. When fixed costs are included in the cost of
goods sold figure, the gross margin percentage tends to increase or decrease
with sales volume. The fixed costs are spread across more units and the gross
margin percentage improves.
While a higher gross margin percentage is considered to be better than a lower
gross margin percentage, there are exceptions. Some companies purposely
choose a strategy emphasizing low prices and (hence low gross margin). An
increasing gross margin in such a company might be a sign that the company's
strategy is not being effectively implemented.
Common size statements are also very helpful in pointing out efficiencies and
inefficiencies that might other wise go unnoticed.
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Financial Statement Analysis: A Tool for Performance Evaluation
2.4 RATIOS ANALYSIS

A ratio simply means one number expressed in terms of another. A ratio is a
statistical yardstick by means of which relationship between two or various
figures can be compared or measured (Pandy 2003).
The term "accounting ratios" is used to describe significant relationship between
figures shown on a balance sheet, in a profit and loss account, in a budgetary
control system or in any other part of accounting organization. Accounting ratios
thus shows the relationship between accounting data (Helfert E. 1997).
Ratios can be found out by dividing one number by another number. Ratios show
how one number is related to another. It may be expressed in the form of co-
efficient, percentage, proportion, or rate (Oye A. 2005). For example the current
assets and current liabilities of a business on a particular date are N200, 000 and
N100, 000 respectively. The ratio of current assets and current liabilities could be
expressed as 2 (i.e. 200,000 / 100,000) or 200 percent or it can be expressed as
2:1 i.e., the current assets are two times the current liabilities. Ratio sometimes is
expressed in the form of rate. For instance, the ratio between two numerical
facts, usually over a period of time, e.g. stock turnover is three times a year
(Remi A. 2006)
The ratios analysis is the most powerful tool of financial statement analysis. Ratio
simply means one number expressed in terms of another. A ratio is a statistical
yardstick by means of which relationship between two or various figures can be
compared or measured. Ratios can be found out by dividing one number by
another number. Ratios show how one number is related to another.
Ratio is an indicated quotient of two mathematical expressions. According to
Pandy (2004), it is a benchmark for evaluating the financial position and
performance of a firm. Financial or accounting ration is the formula for analyzing
financial data used to measure solvency, efficiency or profitability of a company
on the basis of its published financial data. (Encarta, 2007)
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Financial Statement Analysis: A Tool for Performance Evaluation
2.4.1 CLASSIFICATION OF ACCOUNTING RATIOS

Ratios may be classified in a number of ways to suit any particular purpose.
Different kinds of ratios are selected for different types of situations. Mostly, the
purpose for which the ratios are used and the kind of data available determine
the nature of analysis. The various accounting ratios can be classified as follows:
Classification of Accounting Ratios / Financial Ratios
(A)
Traditional Classification or
Statement Ratios
(B)
Functional Classification
or Classification
According to Tests
(C)
Significance Ratios or
Ratios According to
Importance
• Profit and loss
account ratios or
revenue/income
statement ratios
• Balance sheet ratios
or position statement
ratios
• Composite/mixed
ratios or inter
statement ratios
• Profitability ratios
• Liquidity ratios
• Activity ratios
• Leverage ratios or

long term solvency
ratios

• Primary ratios
• Secondary ratios
Source: www.accountiingformanagement.com/financial_accounting_ratios.htm
In order to meet the vast needs of financial information user, Femi A. (2006),
provided the following classification as also depicted by (Pandy 2004)
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Financial Statement Analysis: A Tool for Performance Evaluation
PROFITABILITY RATIOS
Profitability ratios measure the results of business operations or overall
performance and effectiveness of the firm. Some of the most popular profitability
ratios are as under:
• Gross profit ratio
• Net profit ratio
• Operating ratio
• Expense ratio
• Return on shareholders investment or net worth
• Return on equity capital
• Return on capital employed
• Dividend yield ratio
• Dividend payout ratio
• Earnings Per Share Ratio
• Price earning ratio
LIQUIDITY RATIOS
These are the ratios which measure the short term solvency of financial position
of a firm. These ratios are calculated to comment upon the short term paying
capacity of a concern or the firm's ability to meet its current obligations. Following
are the most important liquidity ratios.

• Current ratio
• Liquid / Acid test / Quick ratio
ACTIVITY RATIOS:
Activity ratios are calculated to measure the efficiency with which the resources
of a firm have been employed. These ratios are also called turnover ratios
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Financial Statement Analysis: A Tool for Performance Evaluation
because they indicate the speed with which assets are being turned over into
sales. Following are the most important activity ratios:
• Inventory / Stock turnover ratio
• Debtors / Receivables turnover ratio
• Average collection period
• Creditors / Payable turnover ratio
• Working capital turnover ratio
• Fixed assets turnover ratio
• Over and under trading
LONG TERM SOLVENCY OR LEVERAGE RATIOS:
Long term solvency or leverage ratios convey a firm's ability to meet the interest
costs and payment schedules of its long term obligations. Following are some of
the most important long term solvency or leverage ratios.
• Debt-to-equity ratio
• Proprietary or Equity ratio
• Ratio of fixed assets to shareholders funds
• Ratio of current assets to shareholders funds
• Interest coverage ratio
• Capital gearing ratio
• Over and under capitalization
2.5 FINANCIAL ACCOUNTING RATIOS FORMULA
This is a collection of financial ratio formulas which can help you calculate
financial ratios in a given problem (Pandy 2004).

Analysis of Profitability
General profitability:
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Financial Statement Analysis: A Tool for Performance Evaluation
• Gross profit ratio = (Gross profit / Net sales) × 100
• Operating ratio = (Operating cost / Net sales) × 100
• Expense ratio = (Particular expense / Net sales) × 100
• Operating profit ratio = (Operating profit / Net sales) × 100
Overall profitability:
• Return on shareholders' investment or net worth = Net profit after interest
and tax / Shareholders' funds
• Return on equity capital = (Net profit after tax – Preference dividend) /
Paid up equity capital
• Earnings per share (EPS) ratio = (Net profit after tax – Preference
dividend) / Number of equity shares
• Return on gross capital employed = (Adjusted net profit / Gross capital
employed) × 100
• Return on net capital employed = (Adjusted net profit / Net capital
employed) × 100
• Dividend yield ratio = Dividend per share / Market value per share
• Dividend payout ratio or pay-out ratio = Dividend per equity share /
Earnings per share
Short Term Financial Position or Test of Solvency:
• Current ratio = Current assets / Current liabilities
• Quick or acid test of liquid ratio (for immediate solvency) = Liquid assets /
Current liabilities
• Absolute liquid ratio = Absolute liquid assets / Current liabilities
Current Assets Movement, Efficiency or Activity Ratios:
• Inventory / Stock turnover ratio = Cost of goods sold / Average inventory
at cost

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Financial Statement Analysis: A Tool for Performance Evaluation
• Debtors of receivables turnover ratios = Net credit sales / Average trade
debtors
• Average collection period = (Trade debtors No. of working days) / Net
credit sales
• Creditors or payables turnover ratio = Net credit purchase / Average trade
creditors
• Average payment period = (Trade creditors No. of working days) / Net
credit purchase
• Working capital turnover ratio = Cost of sales / Net working capital
Analysis of Long Term Solvency:
• Debt to equity ratio = Outsiders funds / Shareholders funds or External
funds / Internal funds
• Ratio of long term debt to shareholders funds (Debt equity) = Long term
debt / Shareholders funds
• Proprietary of equity ratio = Shareholders funds / Total assets
• Fixed assets to net worth = Fixed assets after depreciation / Shareholders'
funds
• Fixed assets ratio or fixed assets to long term funds = Fixed assets after
depreciation / Total long term funds
• Ratio of current assets proprietors' funds = Current assets / Shareholders'
funds
• Debt service or interest coverage ratio = Net profit before interest and tax /
Fixed interest charges
• Capital gearing ratio = Equity share capital / Fixed interest bearing funds
2.6 ADVANTAGES OF RATIOS ANALYSIS
Ratio analysis is an important and age-old technique of financial analysis. The
following are some of the advantages / Benefits of ratio analysis (Rasid J. 2009):
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Financial Statement Analysis: A Tool for Performance Evaluation
1. Simplifies financial statements: It simplifies the comprehension of financial
statements. Ratios tell the whole story of changes in the financial condition
of the business
2. Facilitates inter-firm comparison: It provides data for inter-firm comparison.
Ratios highlight the factors associated with successful and unsuccessful
firm. They also reveal strong firms and weak firms, overvalued and
undervalued firms.
3. Helps in planning: It helps in planning and forecasting. Ratios can assist
management, in its basic functions of forecasting. Planning, co-ordination,
control and communications.
4. Makes inter-firm comparison possible: Ratios analysis also makes
possible comparison of the performance of different divisions of the firm.
The ratios are helpful in deciding about their efficiency or otherwise in the
past and likely performance in the future.
5. Help in investment decisions: It helps in investment decisions in the case
of investors and lending decisions in the case of bankers etc.
2.7 LIMITATIONS OF RATIOS ANALYSIS:
The ratios analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand, they suffer from
serious limitations (Pandy 2004).
1. Limitations of financial statements: Ratios are based only on the
information which has been recorded in the financial statements. Financial
statements themselves are subject to several limitations. Thus ratios
derived, there from, are also subject to those limitations. For example,
non-financial changes though important for the business are not relevant
by the financial statements. Financial statements are affected to a very
great extent by accounting conventions and concepts. Personal judgment
plays a great part in determining the figures for financial statements.
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Financial Statement Analysis: A Tool for Performance Evaluation
2. Comparative study required: Ratios are useful in judging the efficiency of
the business only when they are compared with past results of the
business. However, such a comparison only provide glimpse of the past
performance and forecasts for future may not prove correct since several
other factors like market conditions, management policies, etc. may affect
the future operations.
3. Ratios alone are not adequate: Ratios are only indicators; they cannot be
taken as final regarding good or bad financial position of the business.
Other things have also to be seen.
4. Problems of price level changes: A change in price level can affect the
validity of ratios calculated for different time periods. In such a case the
ratio analysis may not clearly indicate the trend in solvency and
profitability of the company. The financial statements, therefore, be
adjusted keeping in view the price level changes if a meaningful
comparison is to be made through accounting ratios.
5. Lack of adequate standard: No fixed standard can be laid down for ideal
ratios. There are no well accepted standards or rule of thumb for all ratios
which can be accepted as norm. It renders interpretation of the ratios
difficult.
6. Limited use of single ratios: A single ratio, usually, does not convey much
of a sense. To make a better interpretation, a number of ratios have to be
calculated which is likely to confuse the analyst than help him in making
any good decision.
7. Personal bias: Ratios are only means of financial analysis and not an end
in itself. Ratios have to be interpreted and different people may interpret
the same ratio in different way.
8. Incomparable: Not only industries differ in their nature, but also the firms
of the similar business widely differ in their size and accounting
procedures etc. It makes comparison of ratios difficult and misleading.

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Financial Statement Analysis: A Tool for Performance Evaluation
2.8 LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS
Although financial statement analysis is highly useful tool, it has two limitations.
These two limitations involve the comparability of financial data between
companies and the need to look beyond ratios
(www.accountingformanagement.com/limitation_of_financial_statement_analysis
Comparison of Financial Data
Comparison of one company with another can provide valuable clues about the
financial health of an organization. Unfortunately, differences in accounting
methods between companies sometimes make it difficult to compare the
companies' financial data. For example if one firm values its inventories by LIFO
method and another firm by the average cost method, then direct comparison of
financial data such as inventory valuations and cost of goods sold between the
two firms may be misleading. Sometimes enough data are presented in foot
notes to the financial statements to restate data to a comparable basis.
Otherwise, the analyst should keep in mind the lack of comparability of the data
before drawing any definite conclusion. Nevertheless, even with this limitation in
mind, comparisons of key ratios with other companies and with industry average
often suggest avenues for further investigation.
The Need to Look Beyond Ratios:
An inexperienced analyst may assume that ratios are sufficient in themselves as
a basis for judgment about the future. Nothing could be further from the truth.
Conclusions based on ratios analysis must be regarded as tentative. Ratios
should not be viewed as an end, but rather they should be viewed as starting
point, as indicators of what to pursue in greater depth. they raise many
questions, but they rarely answer any question by themselves.
In addition to ratios, other sources of data should be analyzed in order to make
judgment about the future of an organization. The analyst should look, for
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Financial Statement Analysis: A Tool for Performance Evaluation
example, at industry trends, technological changes, changes in consumer tastes,
changes in broad economic factors, and changes within the firm itself. A recent
change in a key management position, for example, might provide a basis for
optimization about the future, even though the past performance of the firm (as
shown by its ratios) may have been mediocre
2.9 ADVANTAGES OF FINANCIAL STATEMENT ANALYSIS
There are various advantages of financial statements analysis. The major benefit
is that the investors get enough idea to decide about the investments of their
funds in the specific company. Secondly, regulatory authorities like International
Accounting Standards Board can ensure whether the company is following
accounting standards or not. Thirdly, financial statements analysis can help the
government agencies to analyze the taxation due to the company. Moreover,
company can analyze its own performance over the period of time through
financial statements analysis.
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Financial Statement Analysis: A Tool for Performance Evaluation
METHODOLOGY
3.1 Data specification
The study, “financial statement analysis: A tool for performance evaluation” used
secondary data for the analysis of financial statement. This is due to the fact that
the source of data is the banks financial statements published and posted to
banks’ web sites.
3.2 Population and Sample Frame
The population of the study comprises all commercial banks in Nigeria (21 as at
January 2010). A random sampling is used to select one bank out of the twenty
one banks in Nigeria. For the purpose of the study, Oceanic bank is chosen for
analysis.
3.3 Method of Data Analysis
The analysis of the data is based on the following methods or approaches of

financial statement analysis:
1. Trend analysis
2. Ratio analysis – only five ratios will be used viz: ROI, EPS, current,
working capital turnover and proprietary ratio.

22
Financial Statement Analysis: A Tool for Performance Evaluation
DATA ANALYSIS
Based on the financial statement of the bank the following analysis was
undertaken.
Trend and Vertical Analysis
COMMON SIZE BALANCE SHEET.

2008 2007 2006 2005 2004
CASH WITH CBN
1520.9
2 1326.38 146.14 107.89 100
Treasury bills &
Other bills 220.32 1240.17 111.58 203.71 100
Due from other
bank
1321.4
3 860.05 1277.85 404.52 100
Loans and
advances to
customers
2369.2
9 1395.14 407.56 320.67 100
Advances under
finance lease

1063.4
5 543.75 512.46 280.53 100
Investment
Securities
3283.6
3 1475.08 726.21 207.44 100
Investment in
subsidiaries
28128.
23 5806.47 1074.74 100.00 100
Other Assets 726.25 448.47 214.93 162.13 100
Property &
Equipment
2357.2
8 1101.68 536.62 194.99 100
current asset
1443.3
8 1243.60 439.79 259.22 100
Total Asset
1423.6
0 1185.99 427.73 250.74 100
fixed Assets
1241.1
9 654.70 316.49 172.51 100
Financed by:
Share capital 370.36 194.03 155.23 155.23 100
Share Premium
Reserve 355.90 412.94 249.12 159.74 100
Deposit for shares
Shareholders'

fund
2066.1
0 2147.38 363.60 300.10 100
Customer deposits
1272.6
7 1035.77 465.66 251.22 100
Due to other banks
2748.3
4 2147.96 384.56 255.95 100
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Financial Statement Analysis: A Tool for Performance Evaluation
Borrowed funds
Current income tax 286.80 466.48 164.78 191.09 100
Other liabilities 453.59 620.76 176.76 178.80 100
Deferred tax
liabilities 792.27 1434.11 676.94 76.07 100
Retirement Benefit
Obligations 357.59 305.70 348.12 182.58 100
current liabilities
1336.6
2 1055.83 436.41 244.06 100
1423.6
0 1185.99 427.73 250.74 100
COMMON SIZE INCOME STATEMENT
2008 2007 2006 2005 2004
Gross Earning 1465 584 354 193 100
Profit before
taxation 236 648 337 211 100
Taxation 284 3298 1302 866 100
Profit after taxation 234 521 291 179 100

Proposed Dividend 792 261 199 100
Transfer to reserves 430 294 316 163 100
RATIO ANALYSIS
Proprietor of
equity ratio

0.17

0.22
0
.10

0.14

0.12
Current ratio

1.11

1.21
1
.03

1.09

1.02
EPS (Naira) 35k 147.17k 102.63 20 27
Working Capital
T/O 0.09 0.16 0.03 0.08 0.02
ROI

0.04

0.08
0
.25

0.19

0.32
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Financial Statement Analysis: A Tool for Performance Evaluation
SUMMARY
Financial statement analysis is one of the useful tools for decision making and
performance evaluation. It is apparent that despite the economic crisis the bank
was able to stable above the sinking level.
Based on the common size statements, there is an improvement in the financial
figures. The earning of the bank continued to increase indicating little or no effect
sign of the economic crisis.
The ratios indicate improvement though at a reduced rate. The economic crisis
was noticed using the ratio analysis. EPS rose from 20 to 102 to 147 in 2004
through 2007 but in 2008 it dropped to 35k. Return on investment had an upward
– downward trend with 2008 recording the least figure.
CONCLUSION
In conclusion, the study is able to able to come up with some reasonable as well
as educative piece. The combination of the techniques for financial statement
analysis brought about the hidden features of financial statement. By mere
looking at financial statements does not give an investor or analyst enough
information.
Despite the fact that financial statement analysis techniques, there are still

unresolved issues which remain with the data itself (the financial statement). The
effect of inflation, historic cost issues are major issues to be talked.
Nevertheless the study brought to the mind of the researcher an opportunity to
undertake a wider research in the field of financial statement analysis as a basis
for performance evaluation.
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Financial Statement Analysis: A Tool for Performance Evaluation
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