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INTRODUCTION:AUDIT:

An examination and verification of companys financial and

accounting record and supporting documents bay a professionals

such as public certified accountant.

An audit is an evaluation of an organization, system, process, project or product. It

is performed by a competent, independent, objective, and unbiased person or persons,

known as auditors. The purpose is to verify that the subject of the audit was completed or

operates according to approved and accepted standards, statutes, regulations, or practices. It

also evaluates controls to determine if conformance will continue, and recommendsnecessary changes in policies, procedures or controls. Auditing is a part of some quality

control certifications such as ISO 9000

IN ACCOUNTING AUDIT IS:

Systematic examination and verification of a firms book of accountant, transaction

record, other relevant documents, and physical inspection of inventory by qualified

accountants (auditors).

Quality control:Periodic (usually every six months) onsite-verification (by a certification

authority) to ascertain whether or not a documented quality system is being effectively

implemented.

.

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AUDIT REPORT:

An audit report is a codification of the process, findings and

outcomes of the audit process, usually prepared by the auditorsand project team.

The auditors report is a formal opinion, or disclaimer thereof, issued by either an

internal auditor or an independent external auditor as a result of an internal or external

audit or evaluation performed on a legal entity or subdivision thereof (called an auditee).

The report is subsequently provided to a user (such as an individual, a group of persons,

a company, a government, or even the general public, among others) as an assurance

service in order for the user to make decisions based on the results of the audit

UNESCO definition refers to audits of institutions and also audits of

agencies:

(I) the document prepared following a quality assessment peer review team site

visit that is generally focused on institutional quality, academic standards, learning

infrastructure, and staffing. The report about an institution describes the quality

assurance (QA) arrangements of the institution and the effects of these

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arrangements on the quality of its programmes. The audit report is made available

to the institution, first in draft form for initial comments, and then in its final,

official form. It contains, among other things, the description of the method of the

audit, the findings, the conclusions of the auditors, and various appendices listing

the questions asked. In Europe, the document is often called an evaluation report

or an assessment report. (ii) Such a report may also be prepared about an

accreditation agency, describing its quality assurance arrangements and the effect

of these arrangements on the quality of the programmes in the institutions for which

it is responsible. (Vlsceanu et al., 2007, p. 32)

CHEA (2002) refers to the UK situation

Audit Report: (U.K.) The document prepared following a quality assessment peer

review team site visit. The report generally focuses on institutional quality,

academic standards, learning infrastructure, and staffing. In Europe, the document

is more likely to be called an "evaluation report" or "assessment report."

HEQC (2004) in South Africa define:

Audit report: Evaluation report from the HEQC to the audited institution. On the

basis of the quantitative and qualitative evidence gathered during the audit, the

report is developed by the HEQC on the basis of panel deliberations and finalised in

consultation with the chairperson and other members of the audit panel. The report

provides an assessment of the adequacy and effectiveness of the internal quality

arrangements of the institution, as well as commendations and recommendations in

the various target areas of the audit.

Audit Report RatingsAn audit report gives the company or person in question one of four ratings or

categorizations based on the findings of the auditor. An "unqualified" audit signals a clean

report, wherein no discrepancies were found with the financial statements or paperwork. A

"qualified" report means a few problems were found but nothing that raises red flags or is

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so egregious that they hurt the reputation of whoever is being audited. An "adverse

opinion report" means there were too many errors and misrepresentations found in the

financial statements that the person being audited cannot be considered to be in conformity

of standard accounting principles and laws. Finally a "disclaimer of opinion" report

means the auditor cannot give a rating at all, be it due to conflict of interest or lack of

proper paperwork that makes a fair rating impossible or unethical to give.

Unqualified Opinion

The most frequent type of report is referred to as the Unqualified Opinion, and is

regarded by many as the equivalent of a clean bill of health to a patient, which has led

many to call it the Clean Opinion, but in reality it is not a clean bill of health. This type of

report is issued by an auditor when the financial statements presented are free of materialmisstatements and are represented fairly in accordance with the Generally Accepted

Accounting Principles (GAAP), which in other words means that the companys financial

condition, position, and operations are fairly presented in the financial statements. It is the

best type of report an auditee may receive from an external auditor.

The first paragraph (commonly referred to as the introductory paragraph) states

the audit work performed and identifies the responsibilities of the auditor and the auditee in

relation to the financial statements. The second paragraph (commonly referred to as the

scope paragraph) details the scope of audit work, provides a general description of the

nature of the work, examples of procedures performed, and any limitations the audit faced

based on the nature of the work. This paragraph also states that the audit was performed in

accordance with the countrys prevailing generally accepted auditing standards and

regulations. The third paragraph (commonly referred to as the opinion paragraph) simply

states the auditors opinion on the financial statements and whether they are in accordance

with generally accepted accounting principles.The following is an example of a standard

unqualified auditors report on financial statements as it is used in most countries, using the

name ABC Company as an auditees name:

INDEPENDENT AUDITORS REPORT

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Board of Directors, Stockholders, Owners, and/or Management of

ABC Company, Inc.

123 Main St.

Any town, Any Country

We have audited the accompanying balance sheet of ABC Company, Inc. (the

Company) as of December 31, 20XX and the related statements of income, retained

earnings, and cash flows for the year then ended. These financial statements are the

responsibility of the Company's management. Our responsibility is to express an opinion

on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted

in (the country where the report is issued). Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are

free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as

well as evaluating the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all

material respects, the financial position of the Company as of December 31, 20XX, and the

results of its operations and its cash flows for the year then ended in accordance with

accounting principles generally accepted in (the country where the report is issued).

AUDITORS SIGNATURE

Auditors name and address

Date = Last day of any significant field work

this date should not be dated earlier than when the auditor has sufficient audit

evidence to support the opinion.

Qualified Opinion report

A Qualified Opinion report is issued when the auditor encountered one of two

types of situations which do not comply with generally accepted accounting principles,

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however the rest of the financial statements are fairly presented. This type of opinion is

very similar to an unqualified or clean opinion, but the report states that the financial

statements are fairly presented with a certain exception which is otherwise misstated. The

two types of situations which would cause an auditor to issue this opinion over the

unqualified opinion are:

Single deviation from GAAP this type of qualification occurs when one or

more areas of the financial statements do not conform to GAAP (e.g. are

misstated), but do not affect the rest of the financial statements from being

fairly presented when taken as a whole. Examples of this include a company

dedicated to a retail business that did not correctly calculate the depreciation

expense of its building. Even if this expense is considered material, since the

rest of the financial statements do conform with GAAP, then the auditor

qualifies the opinion by describing the depreciation misstatement in the report

and continues to issue a clean opinion on the rest of the financial statements.

Limitation of scope - this type of qualification occurs when the auditor could

not audit one or more areas of the financial statements, and although they could

not be verified, the rest of the financial statements were audited and they

conform GAAP. Examples of this include an auditor not being able to observe

and test a companys inventory of goods. If the auditor audited the rest of the

financial statements and is reasonably sure that they conform with GAAP, then

the auditor simply states that the financial statements are fairly presented, with

the exception of the inventory which could not be audited.

The wording of the qualified report is very similar to the unqualified opinion, but an

explanatory paragraph is added to explain the reasons for the qualification after the scope

paragraph but before the opinion paragraph. The introductory paragraph is left exactly the

same as in the unqualified opinion, while the scope and the opinion paragraphs receive a

slight modification in line with the qualification in the explanatory paragraph.

The scope paragraph is edited to include the following phrase in the first sentence,

so that the user may be immediately aware of the qualification. This placement also

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informs the user that, except for the qualification, the rest of the audit was performed

without qualifications:

Except as discussed in the following paragraph, we conducted our audit...

The opinion paragraph is also edited to include an additional phrase in the first

sentence, so that the user is reminded that the auditors opinion explicitly excludes the

qualification expressed. Depending on the type of qualification, the phrase is edited to

either state the qualification and the adjustments needed to correct it, or state the scope

limitation and that adjustment could have but not necessarily been required in order to

correct it.

For a qualification arising from a deviation from GAAP, the following phrase is

added to the opinion paragraph, using the depreciation example mentioned above:

In our opinion, except for the effects of the Companys incorrect determination of

depreciation expense, the financial statement referred to in the first paragraph

presents fairly, in all material respects, the financial position of

Adverse Opinion report:

An Adverse Opinion is issued when the auditor determines that the financial

statements of an auditee are materially misstated and, when considered as a whole, do not

conform to GAAP. It is considered the opposite of an unqualified or clean opinion,

essentially stating that the information contained is materially incorrect, unreliable, and

inaccurate in order to assess the auditees financial position and results of operations.

Investors, lending institutions, and governments very rarely accept an auditees financial

statements if the auditor issued an adverse opinion, and usually request the auditee to

correct the financial statements and obtain another audit report.

The wording of the adverse report is similar to the qualified report. The scope

paragraph is modified accordingly and an explanatory paragraph is added to explain the

reason for the adverse opinion after the scope paragraph but before the opinion paragraph.

However, the most significant change in the adverse report from the qualified report is in

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the opinion paragraph, where the auditor clearly states that the financial statements are not

in accordance with GAAP, which means that they, as a whole, are unreliable, inaccurate,

and do not present a fair view of the auditees position and operations.

In our opinion, because of the situations mentioned above (in the explanatoryparagraph), the financial statements referred to in the first paragraph do notpresent

fairly, in all material respects, the financial position of

Disclaimer of Opinion report:

A Disclaimer of Opinion, commonly referred to simply as a Disclaimer, is issued

when the auditor could not form, and consequently refuses to present, an opinion on the

financial statements. This type of report is issued when the auditor tried to audit an entitybut could not complete the work due to various reasons and does not issue an opinion.

The Disclaimer report is issued only when the auditors are unable to perform their

work. When not enough time or information is available, a disclaimer of opinion report is

issued. This is rare: An auditor will often only make this report if the company refuses to

reveal specific information or if the auditing firm and the company break their contract.

The following is a draft of the three main paragraphs of a disclaimer of opinionbecause of inadequate accounting records of an auditee, which is considered a significant

scope of limitation:

We were engaged to audit the accompanying balance sheet of ABC Company,

Inc. (the Company) as of December 31, 20XX and the related statements

of income and cash flows for the year then ended. These financial

statements are the responsibility of the Company's management.The Company does not maintain adequate accounting records to provide

sufficient information for the preparation of the basic financial statements.

The Companys accounting records do not constitute a double-entry system

which can produce financial statements.

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Because of the significance of the matters discussed in the preceding

paragraphs, the scope of our work was not sufficient to enable us to

express, and we do not express, an opinion of the financial statements

referred to in the first paragraph.

Uses

An audit report comes in handy in many financial situations. The report is

essentially the same as a job reference. It takes the research and findings of a trained

financial specialist and uses them to verify that your financial reputation and future is

secure. The audit report then serves as a good word to creditors, banks and any other

financial institution that may need to investigate your financial history and stability. A

clean audit report can help when getting a loan or line of credit.

PRACTICAL STUDY

SELECTED ORGANIZATION:

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INTRODUCTION:

Muslim Commercial Bank Limited. (MCB), the largest private sector bank in

Pakistan. Incorporated in 1948 by the Adamjee group, MCB soon earned a reputation of

solid and conservative financial institution. During the 1960s the bank grew rapidly with a

concentration on trade finance products. In 1947, MCB was nationalizes along all otherprivate sector banks. MCB was the first bank to be privatized in 1991 during the Nawaz

Sharifs government financial sector deregulation policies. During the first five years, the

private management concentrated on growth utilizing its extensive network of branches

and developed a large and stable deposit base. Since privatization, the bank has made

tremendous headway in improving the operational efficiency through human resource

development and employment of technology. The bank today boasts the target online brand

and ATM network in the country.

MCBs main focus remains on consumer banking and its growing reputation as a

full service provider gives the bank an edge in front of increased competition in the

banking sector in Pakistan. With a network of over 1200 branches and a team of dedicated

professionals, MCB with an international outlook and a regional focus ensures prompt

customer service and innovative solutions to business and personal needs.

Organizational Structure of MCB:

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BALANCE SHEET OF MCB

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INCOME STATEMENT OF MCB

2007 2008 2009

Markup/return/interest earned 31,786,595 40,043,824 51,616,007

Markup/return/interest expense 7,865,533 11,560,740 15,814,463Net Markup Interest 23,921,062 28,483,084 35,774,544

-provision fordimininution in the

value of investment

105,269 2,083,994 1,484,218

-provisions against loans and

advances

2,959,583 1,335,127 5,796,527

-bad debt written off directly 199 - 41,576

3,065,051 4,019,121 7,322,321

Net Markup/Interest income

after provision

20,856,011 24,463,963 28,452,223

Non Markup Interest income

Fee, commission andbrokerage income

2,634,610 2,953,394 3,331,856

Dividend income 632,300 617,554 459,741

Income from dealing in foreign

currencies

693,408 727,564 341,402

Gain on investment 1,500,865 740,429 773,768

Unrealized loss on revaluation of

investments classified as held fortrading

(13,105) (103,198) -

Other income 563,213 855,697 736,118

Total non markup interest

income

6,011,291 5,791,440 5,642,88

Income after interest income 20,867,302 30,255,403 34,095,108

Non Markup Interest Expense

-administrative expense 5,022,416 7,546,878 10,107,189-other provision/write off (3,743) 23,135 142,824

-other charges 540,594 817,824 690,150

Total non markup /interest

expense

5,559,267 8,387,837 10,940,163

Extra ordinary/unusual items - - -

Profit before taxation 21,308,035 21,867,566 23,154,945

Taxation current year 6,422,356 7,341,357 7,703,305

2007 2008 2009AssetsCash & balance with treasury

banks

393,683,883 39,631,172 38,774,871

Balance with other banks 3,807,519 4,043,100 6,009,993

Lending to financial institutions 1,051372 4,100,079 3,000,000

Investments 113,089,261 96,631,874 167,134,465

Advance 216,960,598 262,135,470 253,249,407

Operating fix assets 16,024,123 17,263,733 18,014,896

Deferred tax assets - - -

Other assets 17,868,761 19,810,476 23,040,095

410,485,517 443,615,904 509,223,727

Liabilities

Bills payable 10,479,058 10,551,468 8,201,090

Borrowings 39,406,831 22,663,840 44,662,088

Deposits & other accounts 292,098,066 330,181,624 367,604,711

Sub ordinate loans 479,232 - -

Liabilities against asset subjectto finance lease

- - -

Deferred tax liabilities 21,345,781 437,137 3,196,743Other liabilities 1,180,162 21,345,781 15,819,082

355,365,842 385,179,850 439,483,714

Net assets

55,119,675 58,436,054 69,740,013

Represented by

Share capital 6,282,768 6,282,768 6,911,045

Reserve 34,000,638 36,768,765 38,385,760

Inappropriate profit 5,130,750 9,193,332 15,779,127

45,414,156 25,244,865 61,075,932

Surplus on revaluation of asset 9,705,519 6,191,189 218,664,081

55,119,675 58,436,054 69,740,013

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-prior years 894,590 16,533 2,188,569

-deferred 6,042,473 6,492,966 7,659,648

6,042,473 6,492,966 7,659,648

Profit after taxation 15,265,562 15,374,600 15,495,297

Unappropriate profit brought

forward

5,530,973 5,130,750 9,193,332

Transfer from surplus on

revaluation of fixed assets

11,855 21,319 22,324

Profit available for

appropriation

20,808,390 20,526,669 24,710,953

Basic /diluted earning per share 24.30 22.25 22.42

Financial ratios Analysis:

Current Ratio:

The current ratio measures the number of items of the firm s current assets cover it s current

liabilities. The current ratio should be part of your business' basic financial planning, meaning it

should be tracked monthly or quarterly. By keeping a close eye on this figure, you will recognize if it

begins to get out of line. This will allow you to take early action to prevent your business from

ending up in a difficult position

Current ratio=current asset/ current liabilities

2007 2008 2009

Current asset 376,592,633 406,541,695 468,168,736

Current liabilities 342,463,187 363,396,932 420,467,889

Current ratio

Quick ratios:

Quick ratio shows a firms ability to meets it current liabilities with its current assets

excluding inventories and prepaid expenses, which are least liquid portion of the currentassets. Since banks dont have any sorts of inventories, therefore only prepaid expenses

are subtracted from the current assets of the bank.

Quick Ratio = Cash + Account Receivable + Marketable Securities/Current Liabilities

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2007 2008 2009

Cash + A/R+MAS 263,503,372 309,909,821 301,034,271

Current liabilities 342,463,187 363,396,932 420,467,889

Quick Ratio .77 .85 .72

Working Capital:

Working capital is the difference between current assets and current liabilities. Working

capital is often considered a measure of liquidity by it self. This ratio shows the amount of

liquidity. Working capital is used to check liquidity of the organization.

Working Capital= Current Assets Current Liabilities

2007 2008 2009Current asset 376,592,633 406,541,695 468,168,736

Current liabilities 342,463,187 363,396,932 420,467,889Working capital 34,129,446 43,144,763 47,700,847

Cash Ratio:

Cash and equilent are the most liquid assets. The cash ratio shows the proportion of

the assets held in the most liquid possible form. It is used to check the liquidity of the

organization Cash Ratio= Cash Equivalents + Marketable Securities/Current

Liabilities

2007 2008 2009

CE+MS 43,491,402 43,491,402 44,784,864

Current Liabilities 342,463,187 363,396,932 420,467,889

Cash ratio 0.13 0.12 0.11

Debt to Equity Ratio:

Debt-to-Equity ratio shows the extent to which debt financing is used relative to

equity financing. Debt equity is calculated by dividing total liabilities of the bank by

the total owner equity.

Debt to equity ratio=Total Liabilities / shareholders equity

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2007 2008 2009

Total Liabilities 355,365,842 385,179,850 439,483,714

shareholders equity 6,282,768 6,282,768 6,911,045

Debt to equity ratio 56.56% 61.30% 64%

Debt Ratio:

It shows that how much assets have been financed by liabilities and it also shows

the Margin of protection available for the creditors.

Debt Ratio: Total Liabilities / Total Assets

2007 2008 2009

Total Liabilities 355,365,842 385,179,850 439,483,714

Total Assets 410.485.517 443,615,904 509,223,727Debt Ratio 87% 87% 86%

Return on Investment:

Return on investment measure the ratio of profit generated in relation to the total

assets employed. Net profit after tax divided by total assets gives the return on investment.

ROI= Net Profit after Tax/Average (Long-term Liabilities + Equity

2007 2008 2009

Net Profit after Tax 15,265,562 15,374,600 15,495,297

Average 52,572,491 66,172,297 77,059,770

ROI 29% 23.23% 20%

Interest Coverage Ratio

Interest coverage ratio shows the ability of a firm to cover up its interest charges on

the income before interest and taxes. The ratio is obtained through dividing earning before

interest and taxes (EBIT) of the bank by its interest expenses.

Interest coverage ratio=EBIT/Interest expense

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2007 2008 2009

EBIT 21,308,035 21,867,566 23,154,945Interest

expense

7,865,533 11,560,740 15,841,463

Interest

coverage ratio

270% 189% 146%

ROA:

ROA=Net Profit After tax / Average Total Asset

2007 2008 2009

Net Profit After tax 15,265,562 15,374,600 15,495,297

Average Total Asset 376,296,880 427,050,710 476,419,815ROA 4.1% 3.6% 3.3%

Income/Expense Ratio

Income/Expense Ratio= Total Income/Operating Expense

2007 2008 2009

Total Income 29,932,353 34,274,524 41,417,429

Operating Expense 5,563,010 8,364,252 10,797,339

Expense Ratio 5.3 Times 4.10 Times 3.83 Times

Earning Per Share

Earning Per Share=Net Income after Tax/Weighted Average Number of Common

Share Outstanding

2007 2008 2009Net Income AT 15,265,562,000 15,374,600,000 15,495,297,000

WANCSOS 628,276,843 628,276,843 691,104,527

EPS Rs. 24.30 Rs. 24.47 Rs. 22.42

Price/Earning Ratio :

Price/Earning Ratio=Market Price per Share/Diluted Earning Per share

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2007 2008 2009

Market Price per Share 399.95 125.81 219.68

Diluted Earning Per share 24.30 22.25 22.42

P/E 16.5 Times 5.65 Times 9.8 Times

Dividend Payout Ratio

Dividend Payout Ratio= Dividend per Common Share/ Diluted Earning Per Share

2007 2008 2009

Dividend per Common Share 12.50 11.50 11.00

Diluted Earning Per Share 24.30 22.25 22.42

Dividend Payout Ratio 51.44% 51.68% 49.06%

Dividend Yield

Dividend Yield= Dividend per Common Share / Market Price per Common Share

2007 2008 2009

Dividend per Common Share 12.50 11.50 11.00

Market Price per Common Share 399.95 125.81 219.68

Dividend Yield 3.13% 9.14% 5%

Ratio Analysis Showing In Graph as Year of 2007, 2008 &

2009

2007 2008 2009Current ratio 1.10 1.12 1.11Quick ratio .77 .85 .72

Working capital 34,129,446 43,144,763 47,700.847Cash ratio 0.13 0.12 0.11

Debt to equity ratio 56.56% 61.30% 64%Debt ratio 87% 86% 86%

ROI 29% 23.23% 20%Interest coverage 270% 189% 146%

ROA 4.1% 3.6% 3.3%Income expense 5.3 Times 4.10 Times 3.83 times

EPS Rs. 24.30 Rs. 24.47 Rs. 22.42Dividend pay out 51.44% 51.68% 49.06%

Dividend yield 3.13% 9.14% 5%

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GRAPHICAL REPRESENTATION:

Current Ratio:

1.09

1.095

1.1

1.105

1.11

1.115

1.12

ratio

2007 2008 2009

years

current ratio

current ratio

Quick Ratio:

Working Capital Ratio:

18

0.65

0.7

0.75

0.8

0.85

quick ratio

2007 2008 2009

years

Quick ratio

quick ratio

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05,000,000

10,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,000

amount

2007 2008 2009

years

working capital

working capital

Cash Ratio:

Debt to equity Ratio:

52.00%

54.00%

56.00%

58.00%

60.00%

62.00%

64.00%

percnetage

2007 2008 2009

years

debt to equit rati

debt to equit rati

Debt Ratio:

19

85%

86%

86%

86%

86%

86%

87%

87%

87%

percentage

2007 2008 2009

years

Debt Ratio

Debt Ratio

0.1

0.105

0.11

0.115

0.12

0.125

0.13

ratio

2007 2008 2009

years

cash ratio

cash ratio

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ROI:

Interest Coverage Ratio:

ROA:

20

0%

50%

100%

150%

200%

250%

300%

ICV

2007 2008 2009

years

Interest cov erage ra

Interest cov erage ra

0%

5%

10%

15%20%

25%

30%

percentage

2007 2008 2009

years

ROI

ROI

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0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

ROA

2007 2008 2009

years

ROA

ROA

Income Expense Ration:

Earning Per Share:

Dividend Payout Ratio:

21

21

21.5

22

22.5

23

23.5

24

24.5

Rs.

2007 2008 2009

years

EPS

EPS

0

1

2

3

4

5

6

time

2007 2008 2009

years

Income/Expense Ratio

Income/Expense Ratio

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47.50%

48.00%

48.50%

49.00%

49.50%

50.00%50.50%

51.00%

51.50%

52.00%

precent age

2007 2008 2009

years

dividenr pay out Ratio

Ratio

Dividend yield:

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

10.00%

dividend

yeild

2007 2008 2009

years

dividend yeild

dividend yeild

Comment on Ratio Analysis:

Current Ratio :

In MCB bank limited 2008s current ratio is strong than other two years. It shows

that this years liabilities could be recovered with its assets. After 2008, a bank has

maintained good current ratio in 2009 Current ratio does not show the true picture of the

organization. Sometimes it shows that organization has ability to pay its obligations but its

profitability ratio tells that it has not ability to pay its obligation. But still it is very

useful for the analysts especially for the creditors.

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Quick Ratio:

Prepaid expenses are considered as current assets so they are included in current

ratio calculation. Prepaid expenses are less liquid. Normally it is not easily converted into

cash on short notice. In 2008 quick ratio is better than other years it show that bank can

easily recover its liabilities on short notice.

Working Capital

Working capital is better in 2009, which is 47,700,847. It means that are Assets

utilized more economically in 2009 as compared to 2007, 2008.

Cash Ratio:

Higher cash ratio also shows the higher rate of satisfaction like other liquidity

ratios. Cash ratio is more important liquidity ratio. Cash ratio is higher in 2007 as

compared to 2008 & 2009.

Debt Ratio:

Financial leverage is the extent to which a firm is financed with debt. In Muslim

Commercial bank, years 2007 & 2008 were financed with debt as compare to year 2009.

Debt to Equity Ratio:

The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio

shows how the firms stockholder bears the risk of the firm. Greater the debt greater risk

for the firm s shareholders .In 2007 risk for the share holders was very low as compared to

the year 2009.

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Return on Investment :

This ratio is more meaningful for share holders who are interested to know the

profit earned by the company because the dividend paid from available profit higher ratio

means factor of production fully utilized and good position. Here return on Investment is

higher in 2007 as compare to year 2008 & 2009.

Interest Coverage Ratio :

Coverage ratio shows the number of the times a firm can recover or meet particular

financial obligations. The interest coverage ratio, which is also called the time interest

earned ratio, measure the coverage of the firm s interest expense. Year 2007 is better in

interest coverage ratio as compare to the other years.

Return on Assets:

This ratio has a decreasing trend. It means the assets of the business are not fully

utilized in more and efficient way and also shows an unfavorable trend of the business.

This ratio of the bank was too low in the year 2009, as compare to other two years.

Interest to Expense Ratio:

The interest to expense ratio is the profitability ratio. The more the good ratio means

that the business is running well. The Interest to expense ratio of the MCB is not good as

compare the year 2007, 2008.

Earning per Share:

This ratio got really improved as it has gone with the increase in profit. Earning per

share is a good measure of profitability when compared with similar other business. Here

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decreasing EPS, which will surely decrease share price. This ratio has the same trend as the

return on the assets.

Price earning Ratio:

Price earning ratio of MCB bank is high in 2007 as compared to the other years.

Because the market price per share is high in 2007. Because in this year MCB generate an

excellent profit. 2009 is also good but 2008 is worst all of them.

Dividend Payout Ratio:

The dividend payout ratio of the MCB is almost constant for the years 2007, 2008,

2009.

Dividend Yield Ratio:

The dividend yield ratio of the MCB is higher in 2007 because the share price was

higher in 2007. Dividend yield Ratio is good in 2009 and worst at all in year 2008

SWOT ANALYSIS:

STRENGTHS:

The largest private sector bank in Pakistan with a network of 941 domestic and 5

foreign branches.

MCB has long-term vision, which plays a very important role in organizations

success.

First bank to privatize, which has, now become the leader in market with largest on

line ATM network in the country.

Banks emphasis on consumer banking by providing them with innovative saving

schemes, products and services suiting best to their life style.

Extension and improvement in services to domestic as well as foreign customer.

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Best and optional policies and attractive compensation packages, for employees,

which has really improved their commitment, dedication and hard work, towards

the accomplishment of banks objectives.

MCB instant financing products for customer wanting instant loan facility at MCB

branches.

Attention and sensitivity to competition prevailing in the country.

Easy access to the customers at their residential localities through a large number of

branches.

Recognition of critical condition and need for Drastic immediate change.

It is well aware of the Market and adopts strategy according to the competitors

strategy.

Weaknesses:

. Less job satisfaction of employees.

Customer facing problem of NADRA verification while opening their accounts

because its process is time consuming

To give everyone equal protocol is lacking among employees Customers having

account with small amount are not given same services like dealing to others who

have high account.

Lack of decentralization. Banks is planning to restructure its departments and is

going to be centralized very soon.

Lack of organizational loyalty among employees.

Promotions generally on seniority basis.

Attitude of senior managers at head office has to change towards junior staff

Competent staff unwilling to serve in the audit due to an absence of firm rotation

policy.

As most of the employees are young they have more tendencies to switch the

organization and to seek more opportunities.

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Opportunities:

To go global fully.

Low exposure to consumer banking providing opportunity to explore the segment.

Emergence of Islamic banking in the country and MCB is increasing its Islamic

Banking operations.

SBP policy to allow Islamic banking business separately.

Bank has earned a good name by introducing innovative products like car financing

home financing credit cards these products can easily enhance the market share.

Bank introduces Islamic banking in country that attracts large number of people.

Free staff training facilities offered.

Greater profitability can be achieved through strong internal control

Profit and deposit of banking industry have shown an increasing trend because of

better marketing environment.

Elimination of risk of fraud through professional training

Opportunity to open branch in ruler area to increase its branch network and gain

more profit.

The bank can earn more profit by advancing to farmers and industrialists at low

rates.

New schemes for deposits and finances should be introduced regularly

Threats:

Current economic crunch.

Political instability.

Strong competition.

Rising deposit rates.

Foreign banks in market having more marketing budgets.

People losing trust in banks.

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Decline in private and public sector credit due to tight monetary policy

Participation of foreign banks local market that can hurt the market share

Growing NPLs of the industry which may hurt MCB

Mergers and acquisition activities, consolidating the banking sector of MCB is also

vulnerable it

Changes in government policies

Data collection method:

I took data from internet, books, reports, etc.i have collected secondary data

which I use as my primary data

Recommendations:

The bank should finance its loans in those projects that are meeting the required

standard and should avoid the political pressure.

The bank should bring forward the new talent as fresh knowledge and education is

considered very important to increase the efficiency and production.

There is needed to make the outlook situations of branches in those manners that

can complete the other modern banks in the banking market.

Keeping in view the hard work by the staff members at all levels of management,

staff should be given bonus and increment every year. Nepotism should be avoided

in this connection

There are some employees untrained which decreases the efficiency of the bank

branch. All the employees should well train.

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Most of the bank employees are sticking to one seat only, with the result that they

become master of one particular job and loose their grip on other banking

operation. In my opinion each employee should have regular job change.

People have to wait for re-cashing their cheques and for paying their School Fees,

which is not good for reputation of bank, it should be improved.

REFERENCES:

www.forum4finance.com

www.qualityresearchinternational.com

www.en.wikipedia.org

www.ehow.com

www.mcb.com

Annual report of MCB 2009

www.fool.com

www.accountingformanagement.com

www.multpl.com

www.wikinvest.com

http://www.forum4finance.com/http://www.qualityresearchinternational.com/http://www.en.wikipedia.org/http://www.ehow.com/http://www.mcb.com/http://www.fool.com/investing/value/2006/08/29/how-to-use-the-pe-ratio.aspxhttp://www.forum4finance.com/http://www.qualityresearchinternational.com/http://www.en.wikipedia.org/http://www.ehow.com/http://www.mcb.com/http://www.fool.com/investing/value/2006/08/29/how-to-use-the-pe-ratio.aspx