Financial Analysis of Commonwealth Bank

Running head: FINANCE
Finance
Name of the student
Name of the university
Student ID
Author note

1FINANCE
Abstract
Purpose of the report is to outline the core activities of Commonwealth Bank, market under
which it is operating and the history that may be significant for the company in gaining
competitive advantage. The report will focus on the financial analysis of the company
covering the description of the bank, computation and the analysis of performance ratios
including profitability ratio and efficiency ratios. It will further look into the cash management
cycle of the company through focusing on marketable securities and the systematic risks and
unsystematic risks involved with the company that may impact the financial performance
adversely. In addition to that it will also concentrate on the dividend policy and dividend
payout ratio of the company and whether the company can be considered for investment.

2FINANCE
Table of Contents
I. Introduction...........................................................................................................................3
II. Financial analysis.................................................................................................................3
2.1 Description of Commonwealth Bank.................................................................................3
2.2 Computation and the analysis of performance ratios.......................................................3
2.3 Cash management cycle...................................................................................................7
2.4 Sensitivity analysis............................................................................................................7
2.5 systematic risks and unsystematic risks that may impact the financial performance.......8
2.6 Dividend policy and dividend payout ratio.........................................................................9
III. Recommendation letter...................................................................................................10
IV. Conclusion......................................................................................................................10
Reference..................................................................................................................................12

3FINANCE
I. Introduction
Main purpose of the report is to outline the core activities of Commonwealth Bank,
market under which it is operating and the history that may be significant for the company in
gaining competitive advantage. The report will further, focus on the performance of the entity
based on the outcome of its profitability ratio and efficiency ratio. It will further recognize the
marketable securities of the company and will comment upon the securities for managing the
cash. In the next step the report will perform the sensitivity analysis with the help of the data
provided. Further, the report will discuss regarding the systematic as well as unsystematic
risks those may have adverse impact on the performance of the company. Moreover, the
dividend payout ratio of the company will be highlighted and will state the dividend policy of
the entity (Vogel, 2014).
Commonwealth bank (CBA) was established in the year 1911 under Commonwealth
Bank act and it started operating in next year that is in 1912. At present the bank has more
than 52000 employees and shareholders of more than 800,000. It provides wide range of
products and services required for financial business management and for helping the
progress of the business. Further, business banking products offered by the bank includes
business loans, business credit cards, business accounts, merchant services,
superannuation, asset finance, insurances, investments and management of international
money. It is the 1st bank that implemented the fully functioned mobile banking service. Though
other banks like Westpac and ANZ implemented the mobile banking service before CBA, it
was limited to iPhone only for full functioning. Further, adoption of methodologies like project
management, outsourcing and strategic planning helps it to solve various issues
(Commbank.com.au, 2019).
II. Financial analysis
2.1 Description of Commonwealth Bank
CBA is multinational financial institution that was established in Australia in early days
of 19th century. The bank’s vision is to become the finest organization in Australia in context of
financial services through standing out in providing the customer service and the strategies of
the bank is to identify considerable opportunities within the business for developing more
value for the customers, stakeholders and people. Major competitive advantage of the bank is
that it is significantly serious regarding the customer service. Further, it is one of the examples
regarding the technology adopted by the bank that delivers excellent services to the
customers through utilizing up-to-date technologies (Robinson et al., 2015). Business loan,
bank transactions and accounts and personal lending are the major products and the services
in the market. Customers prefer these services at different dimensions through different
characteristics and at different service quality, locations, geographies and prices. Major Banks
in Australian banking industry majorly competes over the price and sizes. However, adoption
of methodologies like project management, outsourcing and strategic planning helps it to
solve various issues and gain the competitive advantages over the competitors like NAB, ANZ
and Westpac (Omar et al., 2014).
2.2 Computation and the analysis of performance ratios
Profitability ratio –