The Effective Financial Management
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Added on 2019-12-04
The Effective Financial Management
Added on 2019-12-04
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FINANCIALMANAGEMENT
EXECUTIVE SUMMARY Financial management is referred to as an effective and efficient management of thefunds in a way that assists in the attainment of business objectives. It is referred to as aspecialized function that is directly attached with top management. Banking industry in Malaysiacan be traced back to early 1990s during the era of rapid economic development. This has beenmainly because of increase in profit accrued from the plantation of rubber as well as tin industry.By making analysis of the balance sheet it has been gained that financial position of MalayanBanking Berhad is sound as compared to CIMB Group Holdings Berhad. This is because there ismajor increase in assets that are related with cash and cash equivalents. In addition to this bymaking evaluation of the income statement of both the firms it has been gained that MalayanBanking Berhad's profitability position is sound in comparison with its competitor that is CIMBGroup Holdings Berhad. This is because the sales of the firm is increasing to a greater extent.The analysis of shareholder equity statement provides the information with respect to retailedearning made by both the banks. It can be concluded from the study that retained profit ofMalayan Banking Berhad is higher as compared to CIMB Group Holdings Berhad which is dueto increase in the profitability that results in enhancing the amount which could be saved in orderto meet future contingencies. It has been inferred from the analysis of the cash flow statementthat net income of Malayan Banking Berhad is increasing as compared to CIMB Group HoldingsBerhad that possess decreasing net income. The company like CIMB Group Holdings Berhadhas unsound financial position. Thus it suggested to the company to keep a track on its expensesso that it can increase its profitability to a greater extent. 2
TABLE OF CONTENTSIntroduction .....................................................................................................................................4TASK 1 ...........................................................................................................................................4TASK 2 ...........................................................................................................................................5TASK 3 liquidity analysis................................................................................................................8TASK 4 debt analysis......................................................................................................................9TASK 5 profitability analysis........................................................................................................10TASK 6 valuation analysis ...........................................................................................................12ADVANTAGES AND DISADVANTAGES OF RATIO............................................................13CONCLUSION AND RECOMMENDATION.............................................................................13References ...................................................................................................................................15APPENDIX....................................................................................................................................173
INTRODUCTION TASK 1 The corporation and its business competitorsFinancial management is referred to as an effective and efficient management of thefunds in a way that assists in the attainment of business objectives. It is referred to as aspecialized function that is directly attached with top management. In addition to this, financialmanagement is also considered as planning, directing, organizing as well as controlling offinancial activities that are related with procurement and utilization of funds within the business(Havrylchyk, 2006). In the present report, financial management has been discussed with respectto banking industry in Malaysia. In this regard, two local banking firms have been taken intoaccount. This includes CIMB Group Holdings Berhad and Malayan Banking Berhad. CIMBgroup is a leading ASEAN universal bank. Further, it is one of the largest Asian investmentbanks which is headquartered in Kuala Lumpur, Malaysia. Corporation provides consumerbanking, wholesale banking, Islamic banking and asset management products as well as services(Shen and Chih, 2005). CIMB is the fifth largest banking group in ASEAN that has over 40000staff in around 17 locations. Malayan Banking Berhad is one of the competitors of CIMB group.It is leader in Malaysia's regional financial services and serves around 22 million customers. Thefirm possesses international network of over 2200 branches in across 20 countries. Industry background Banking industry in Malaysia can be traced back to early 1990s during the era of rapideconomic development. This has been mainly because of increase in profit accrued from theplantation of rubber as well as tin industry. This has led to open the branches of foreign bankswithin the country and assist in the establishment of first domestic bank in the country. InMalaysia, there is greater transformation of banking industry which has led to introduction ofnew financial services and products that include investment banking, trade as well as sharefinancing and Islamic banking (Belkhir, 2009). Increase in deregulation and enhancement inliberalization play a crucial role in increasing flexibility of financial institution. Further, it alsooffers opportunities for the new investments and enhancing the competitiveness of bankingsector. Recent developments in banking sector in Malaysia have led to positive outcomes for4
financial system. In recent times, financial sector has revolutionized from traditional role thatrelates with enabler of economic growth to crucial sources of own growth and expansion. InMalaysia, banking sector is offering employment to at least 123000 citizens of the country.Instead of global financial challenges in the initial decades, Malaysian banking sector has beenconsistent at solid financial grounds. It has risk weighted capital ratio of 13%. TASK 2 Summary of Balance sheet CIMB Group Holdings BerhadBalance sheet of CIMB group presents that in 2014, total assets of the company wasRM414156,000. This was lower in case of year 2013 which was RM370913,000. Further, it canbe examined that cash and cash equivalent in the year 2013 was RM29,90,7,000 and in the year2014, it was RM29303,000. This presents that cash with the company in 2014 was less incomparison with 2013. Thus, it can be said that sales of the company was lower in 2014 whichhas reduced the amount of cash in the particular financial year. On the other hand, totalliabilities of the company in the year 2013 was RM313553,000 which has increased toRM348604,000 in the year 2014. This implies an increase in the liability of CIMB Group whichis due to increase in long term debt of the company to a greater extent (Brigham and Houston,2011). 5
Malayan Banking Berhad From the analysis of balance sheet of Malayan Banking Berhad,it can be interpreted thatin 2014, total assets of the company was RM640300,000. Further, in the year 2013, it was lowerdown and which was RM560319,000. Along with this, it can be examined that cash and cashequivalent in the year 2013 was RM50870,000 and in the year 2014, it was RM61547,000. Thispresents that cash with the company in 2013 was less as compared to 2014. Thus, it can be saidthat sales of the company was lower in 2013 which has reduced the amount of cash within thatparticular year. In contrast to this, total liabilities of the company in the year 2013 wasRM512576,000 which has increased to RM58559,000 in the year 2014. This implies an increasein the liability of Malayan Banking Berhadwhich is due to increase in long term debt of thecompany to a significant level (Athanasoglou, Brissimis and Delis, 2008). 6
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