Business Financial analysis of National Australian Bank

RUNNING HEAD: Business Financial analysis of National Australian Bank
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Name of the student
Topic- Business Financial analysis of National Australian Bank
University name

Table of Contents
Introduction...........................................................................................................................................3
1. Description of National Australian Bank...................................................................................3
2. Governance and Ownership structure............................................................................................4
3. Performance ratio analysis of National Australian Bank...............................................................5
Short term solvency ratio...................................................................................................................6
Long term Solvency ratios.................................................................................................................7
Asset utilization.................................................................................................................................8
Profitability ratios..............................................................................................................................9
Market value ratios..........................................................................................................................12
4. The share price graph and calculation for the movement of the share price.................................14
4.1 Graph reflecting the share price movement of the National Australian Bank............................14
4.2 The comparison between the Share price movement of National Australian Bank and share
price movement of all ordinary stock exchange...............................................................................14
5. Announcements...........................................................................................................................16
6. Research via internet....................................................................................................................16
6.1 Beta calculation...................................................................................................................17
6.2 Computation of required rate of return by using CAPM method...............................................18
6.3 Determining the investment method (Conservative investment)................................................19
7. Computation of the weighted average cost of capital...................................................................19
7.1 Computed Cost of Capital through Capital Assets Pricing model........................................19
7.2 Implications that a higher WACC on investment decision........................................................20
8. Debt ratio consideration of National Australian Bank.................................................................21
8.1 Stable Debt to equity ratio of the company....................................................................................21
8.2 Gearing ratio discussion.............................................................................................................22
9. Divided policies of the company.................................................................................................22
10. Letter of recommendation........................................................................................................23
11. Conclusion...............................................................................................................................25
12. References...............................................................................................................................26
13. Appendix.................................................................................................................................27

Business Financial analysis of National Australian Bank
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Introduction
With the changes in economic conditions and complex business structure, each and
every organization has implemented a proper strategic program to run the business
effectively. This report assist in evaluating whether National Australian Bank has positive
financial performance or not. In this report, financial performance of National Australian
Bank will be analyzed to determine whether bank has been running its busienss effectively or
not. The share price analysis of two years, weighted average cost of capital and investment
method of National Australian Bank has been analysed to identify where company needs to
make improvement in its business. In the end, letter of recommendation have been given to
directors and managers of Company.
1. Description of National Australian Bank
It is an Australian Bank which is one of the four biggest financial institutions in Australia in
context with the market capitalization, revenue and number of customers and earnings. This
company has gained momentum throughout the time and increased its number of clients. The
current CEO of the company is Andrew who takes all the necessary steps to run the business
effectively.

2. Governance and Ownership structure
The present CEO of the company is Andrew
The below-given table reflects the key major stakeholders who are owning the highest shares
in Company (Laudon, and Traver, 2013).

Business Financial analysis of National Australian Bank
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3. Performance ratio analysis of National Australian Bank
The ratio analysis assists in evaluating the financial performance of National Australian
Banks by setting the relation between two factors of the company (National Australian Bank.
2015).

Short term solvency ratio
1. Current ratio
It is evaluated that Current ratio of National Australian Bank is moderate which reflects that
company has managed to operate its business (Vogel, 2014).
Liquidity ratio Years
2017 2016
Current ratio 1.2 .89
Quick ratio .92 .57
This table shows that company has increased its current ratio by .30 points and also
increased its quick ratio by .31 points in 2017 as compared to last year data.
Note- If we do not consider any of its assets current then the current and quick ratio
would be determined as zero.
(National Australian Bank. 2015).