INTRODUCTION
Deposit Taking Microfinance Institutions (DTMs) play a vital role in the economic resource allocation of countries as well as other financial institutions like banks and Savings and Credit Cooperative Societies (SACCOs). They channel funds from depositors to investors continuously. They can only do so effectively, if they generate necessary income to cover the operational cost they incur in the due course. In other words for sustainable intermediation function, DTMs need to be profitable. Beyond the intermediation function, the financial performance of DTMs and financial institutions in general has critical implications for economic growth of countries. Good financial performance rewards the shareholders for their investment. This, in turn, encourages additional investment and brings about economic growth. On the other hand, poor performance can lead to failure of DTMs and crisis which have negative repercussions on the economic growth.
Thus, financial performance analysis of DTMs has been of great interest to academic research. The performance of financial Institutions can be affected by internal and external factors (Al-Tamimi, 2010; Aburime, 2005). These factors can be classified into institution specific (internal) and macroeconomic variables. The internal factors are individual institution’s characteristics which affect the DTM's performance. These factors are basically influenced by the internal decisions of management and board. The external factors are sector wide or country wide factors which are beyond the control of the company and affect the profitability of DTMs. Studies show that performance of firms can also be influenced by ownership identity (Ongore, 2011).
In our study, we will concentrate on the in...
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...mpling
We intend to use a unit sample of four deposits taking micro finance institutions out of a population eight deposit taking microfinance institutions. This is because the four have been in business for the last years (licensed, 2010 CBK) thus there is consistency in terms of data.
Data Collection
We intend to use secondary data collected from the four sampled deposit taking micro finance analyzing their annual financial statements.
Data Analysis
We intend to use regression analysis where financial performance will be the dependent variable measured ROA, ROI and ROE.
The independent variables will be the liquidity ratios which are current ratio (current assets/ current liabilities), acid test ratio (current assets- stock/current liabilities) and liquid ratio (cash +investments/current liabilities).
We will fit simple linear regression equations of the form:
It is another indicator of liquidity which is determined by subtracting inventory from the current assets and dividing by current liabilities. Inventories are less liquid asset, so it is eliminated in determining this ratio. This ratio is already very less and every quarter it is decreasing which indicates about the poor financial health of the company. But in case of Chevron this ratio is far ahead and fluctuates between 1.35 to 1.46, whereas Exxon values are fluctuating within the range of 0.79 and 0.61. Chevron liquidity positi...
ROE = net profit margin X total asset turnover X total assets to equity ratio = -39.74% for FY 2016.
Current Ratio is computed by dividing the Current Assets of a company by its Current Liabilities. The ratio is considered as a test of liquidity for a company.
In regards to the corporation’s balance sheet, it is necessary to place an importance on liquidity ratios to demonstrate the company’s ability to pay its short term obligations such as accounts payable and notes that have a duration of less than one year. These commonly used liquidity ratios include the current ratio, quick ratio, and cash ratio. All three ratios are used to measure the liquidity of a company or business. The current ratio is used to indicate a business’s ability to meet maturing obligations. The quick ratio is used to indicate the company’s ability to pay off debt. Finally the cash ratio is used to measure the amount of capital as well short term counterparts a business has over its current liabilities.
Evaluating a company’s financial condition can be done by looking at its profitability or its ability to satisfy long-term commitments. These measures can be viewed through an analysis of a company’s financial statements, including the balance sheet and income statement. This paper will look at the status of Scholastic Company’s (Scholastic) ability to satisfy its long-term commitments and at the profitability of Daktronics, Inc. (Daktronics). This paper will include various financial ratio calculations and an analysis of the notable trends. It will also discuss the profitability and long-term borrowing positions of the firms discussed.
The horizontal analysis shows that IQ’s total current assets increased by 25% and its total current liabilities increased by 40% during 2005. This is largely explained by the increase in trade receivables, the increase in inventory, the increase in trades payable, and the increase in term loans (notes 5, 6, 12, and 13 of the 2005 financial statement). The higher increase in total current liabilities than in total current assets explains why the current and acid-test ratios decreased from 4.66 to 4.17 and from 4.02 to 3.5, respectively. However, IQ seems to remain highly liquid considering the values of the mentioned liquidity ratios.
Managerial Accounting addresses those aspects that relates to an individual organization return on investments (ROI). (Albrecht, Stice, Stice, & Skousen, 2002) A company’s profitability depends on periodic attention to its assets turnover and profit margin. This process is designed to support the decision making that adds value to an organization. Organizations are sometimes broad and divisional. Planning, controlling, and evaluating is key in the effective decision making process. (Albrecht, Stice, Stice, & Skousen, 2002) An organization must make decisions about its future products, services, operations, and investments. It must begin a tracking process for cost, quality, and performance. Finally it must analyze the results, and variances, providing feedback to assess areas of personnel, divisions, products, and processes. (Albrecht, Stice, Stice, & Skousen, 2002)
... Aoki, K. and Nikolov, K. (January 2013). Financial Disintermediation and Financial Fragility. Available: http://www.eea-esem.com/files/papers/EEA-ESEM/2013/598/Financial%20Disintermediation%20and%20Financial%20Fragility%20Feb%202013.pdf. Last accessed 28th Feb 2014.
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
Overall, microcredit has helped millions of people around the world and it continues to have a great impact on poor people, informing them that all they need is a little ‘push’ or start-up money to begin creating a better life and subsequently a better community. Each organization has its own goals and purposes depending on the country where they reside as well as different challenges that have appeared. Microcredit is helping poor people and small business owners to better themselves as well as to their families and have their time, skills, and ideas utilized in an effective and positive way.
Societies could be grouped into several economic segments. There are segments with surplus funds as well as in the same way there are those which have shortages and deficit. A financial system operates as an intermediary and acts as a medium to smoothen the flow of funds from the segments having surplus funds to the segments in deficit. The financial system is a combination and amalgamation of several institutions, regulations distinct markets, proceedings and demands, analysts and liabilities.
In the past, the company performance was measured by asking ‘how much money the company makes?’ To a certain extent, they are right because gross revenue, profitability, return on capital, etc. are the results that companies must bring to survive. Unfortunately, in today business if the management focuses only on the financial health of the company, numerous unwanted consequences may arise.
middle of paper ... ... inga (1999) and Pasiouras and Kosmidou (2007). The above estimation has left some questions pertaining to fill the gap by attempting to identify and measure factors that determine the profitability performance of commercial banks in Malaysia. What are bank-specific determinants and macroeconomic determinants influence on banks’ profitability in Malaysia compare to other countries?
This is followed in section 5 by an analysis of the recent changes in the banking industry. With the development of the financial system, declining entry barriers and the deregulation of the banking industry make banks no longer the monopoly suppliers of banking services and reduce their comparative advantages which they usually hold in the past. Whether the reasons give rise to the existence of banks are still powerful will be examined here, while section 6 offers a way of considering whether banks are declining by looking at the value added by the banks. When the value added by banks is examined, banks are not a financial intermediation, which not only conduct the traditional services but also provide more diversified
Financial ratios which would be used in this study are profitability ratios, activity turnover ratios, turnover ratios etc. These are found out from the financial statements prepared and presented by the company every year. These help us in speaking about the financial stability and profitability of the company. These also tell about the creditability of the company which help the outsider in taking important decisions.