Financial Performance Comparison: Goldman Sachs and JP Morgan Chase

This report presents a detailed financial statement analysis comparing Goldman Sachs and JP Morgan Chase, two of the world's largest investment banks. The study aims to evaluate their financial performance by calculating and comparing key financial ratios such as Return on Equity (ROE), Price to Earnings ratio (P/E), and Return on Investment (ROI). The research explores the objectives of financial statement analysis, including assessing a bank's long-range objectives and maximizing firm value. It reviews relevant literature on balance sheet and income statement analysis, off-balance-sheet items, and the importance of interpreting profitability and operating efficiency ratios. The methodology section outlines the research approach, philosophy (positivism), and justification for the chosen methods, including descriptive research strategies and the deductive approach. The analysis aims to identify which bank performs better, the reasons behind the differences, and the implications for management decisions and stakeholder expectations. The report also highlights the significance of financial statement analysis in evaluating a bank's financial condition and detecting areas for improvement.

A STUDY ON FINANCIAL STATEMENT ANALYSIS OF THE BANKING
INSTITUTIONS

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Chapter 1
1.1Introduction
The research report contains a detail analysis of the financial statement analysis of
Goldman Sachs and JP Morgan chase which is considered to be the largest investment banks
in the world. JP Morgan chase is an American multinational company headquartered in New
york city it is the largest bank in US and the sixth largest bank in the world the company has
a total assets value of $2.535 trillion. By market capitalisation it is the world’s most valuable
bank. on the other hand Goldman Sachs is also a USA based company the headquarter of
which is situated in west street in Manhattan. The company assets valuation is about US
$1.542 trillion and is also considered as one of the largest banks in the world.
1.2 Research aim
The aim of the report is to make a comparative analysis of the financial statement of
both the banks and make a comparison among these two banks. For comparison different
ratios like the return on equity, price to earnings ratio, return on investment ratios is
calculated.
1.3 Research objective
The objective of the research is to find out that among these two banks which bank is
performing better and what is the reason of one bank being better, than the other one. The
research also try to find out the importance of the analysis of the financial statements like the
balance sheet and income statement, and how these financial statement is used to evaluate
the financial condition of any organisation.

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1.4 Problem statement
The main reason to make a comparison between these two banks is to find out the
reason why one bank is able perform better than the other and what actions the management
should take in order to reduce the gap that has been arise between these two organisations.
The financial statements is analysed to detect the isas where the banks should give more
emphasis in order to bring more efficiency in their operations and to meet the expectations of
the stakeholders.
Chapter 2
2.1literature review
The particular services each bank chooses to offer and the overall size of a banking
organization is reflected in its financial statements. The two main financial statements that
bank managers, customers (particularly large depositors not fully protected by deposit
insurance), and the regulatory authorities look at is the balance sheet and the income
statement.
A bank’s balance sheet lists the assets, liabilities, and equity capital (owner’s funds)
held by or invested in the bank on any given date. Because banks is simply business firms
selling a particular kind of product, the basic balance sheet identity
Assets=Liabilities+ Equity capital
must be valid for banks just like any other business firm.

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Prominent examples of off-balance-sheet items include:
1. Standby credit agreements, in which a bank pledges to guarantee repayment
of a customer’s loan received from a third party.
2. Interest rate swaps, in which a bank promises to exchange interest payments
on debt securities with another party.
3. Financial futures and option interest-rate contracts, in which a bank agrees
to deliver or to take delivery of securities from another party at a guaranteed
price.
4. Loan commitments, in which a bank pledges to lend up to a certain amount
of funds until the commitment matures.
5. Foreign exchange rate contracts, in which a bank agrees to deliver or accept
delivery of foreign currencies.
A bank’s income statement indicates the amount of revenue received and expenses
incurred over a specific period of time, such as the current year. The principal source of bank
revenue is the interest income generated by the bank’s earning assets, mainly its loans,
securities, any interest-bearing deposits that is part of cash assets held with other banks, and
any miscellaneous assets generating revenue(including any income earned by subsidiaries of
the bank or rental income from property that it owns.
Statement of Stockholders’ Equity
Is the financial report that reveals changes in the all-important capital account,
showing how the owners’ investment of funds in the bank has changed over time. Because

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stockholders’ equity represents a cushion of financial strength for the bank that can be used to
absorb losses and protect the depositors and other creditors, changes in the bank’s capital
account is closely followed by regulators and large depositors.
Evaluating a Bank’s Performance
How can we use a bank’s financial statements, particularly its balance sheet and
income statement to evaluate how well the bank is performing? What do we look at to help
decide if a bank is facing serious problems that its management should deal with?
Determining the Bank’s Long-Range Objectives
The first step in analysing any bank’s financial statements is to decide what objectives
the bank is or should be seeking. Bank performance must be directed toward specific
objectives. A fair evaluation of any bank’s performance should start by evaluating whether it
has been able to achieve the objectives its management and stockholders have chosen.
Certainly many banks have their own unique objectives.
Maximizing the Value of the firm: A Key Objective for any Bank
The basic principles of financial management, as that science is practiced today,
suggest strongly that attempting to maximize a bank’s stock value is the key objective that
should have priority over all others
Value of thebank ’ s stoc= Expected streamof future stockholder divid
Discount factor (based on the minimum required¿ market rate of return on equity capi
The value of the bank’s stock will tend to rise in any of the following situations:

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1. The value of the stream of future stockholder dividends is expected to increase, due
perhaps to recent growth in some of the markets served by the bank or perhaps
because of profitable acquisitions the banking organization has made.
2. The banking organization’s perceived level of risk has fallen, due perhaps to an
increase in the bank’s capital reserves, a decrease in its loan losses, or the perception
of investors that the bank is less risky overall (perhaps because it has further
diversified its service offerings and expanded the number of markets it serves) and,
therefore, has a lower equity risk premium.
3. Expected dividend increases is combined with declining risk, as perceived by
investors in the bank’s stock.
Among the most important ratio measures of bank profitability used today is the
following:
Return on e quity capital ( ROE)= Net income after taxes
Total equity capital
Return on assets (ROA)= Net income after taxes
Total assets
Earnings per share ( EPS )= Net income after taxes
Common equity shares outstanding
Interpreting profitability ratios
ROA is an indicator of managerial efficiency which shows how effectively the
management of the bank has been converting the institution’s assets into net earnings. ROE,
on the other hand, is a measure of the rate of return flowing to the bank’s shareholders. It

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approximates the net benefit that the stockholders have received from investing their capital
in the bank (placing their funds at risk in the hope of earning a suitable profit).
Among the most important measures of a bank’s operating efficiency and employee
productivity is its:
Operating efficiency ratio= Total operating expenses
Total operating revenues
Employee productivity rati= Net operating income
Number of full−time−equivalent employees
Size, location and regulatory bias in analysing bank performance.
The size of a bank can have a significant effect on its profitability and some other
performance measures. Therefore, it is best to compis banks of similar size when comparing
performance of one bank to another. Banks of similar size tend to offer similar services, thus
making comparisons of banks’ performance have some validity. To be able to conduct even
more valid comparisons, it is better to compis banks operating in the same or similar market
isas. Whether bank operates in major financial center, small city or rural isa has a great
influence on its performance.
Chapter 3: Research methodology for ratio analysis
3.1 Introduction:
The researcher of the study categorises the different methods strategies and policy that
need to be straggled for originating the suitable results for the study. However the
appropriateness of the acquired replies of the study mostly breaks on the specific research
methodology that is being selected by the research in order to get effective research results. In
addition recognising the research methods does not essentially provide any consequences for

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the research. Moreover this documentation helps the researcher to obtain a specific path
which helps in obtaining authenticity and actuality to the research. Moreover research
methodology helps the research in gaining effective chances, which increases legitimacy of
the results gained by the researcher.
3.2 Method Outline for ratio analysis:
The researcher in this technique sketch sheds light on the aims of research
methodology. Moreover, the learner is using effective research methods that is used in the
research to obtain specific results. In addition, the investigator for this research has selected
positivism thinking, which is helpful in determining the actual research process. Moreover,
the researcher has also recognized deductive approach as an actual research approach, which
could be helpful in allowing and reaching results of the study. Flick (2015) cited that
deductive approach helps in defining the real outcome for the research. However, Cronin and
Lowes (2015) argued that deductive approach does not helps in validating the results found
from influenced data collected by the researcher. The researcher has also selected descriptive
research strategy for the study to meet the set aims of the research.
3.3 Research Philosophy required for ratio analysis:
Research philosophy enables the researcher to recognise the core of the research study
by using effective research pattern. Research philosophy comprises of four different types,
which mainly include positivism, interpretivism, realism and pragmatism. As opined by
Sutter et al (2015), the research philosophy has a set of characteristics, which include
epistemology, ontology and axiology. Positivism philosophy is based on the existence of
reality by using logically proven techniques. However, interpretivism philosophy is based
on empathetic involvements and acknowledgement of human beings (Mackey and Gass,

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2015). On the contrary, Kumar (2019) contended that positivism philosophy helps the
researcher to analyse the data accumulated by using both quantitative and qualitative
approaches.
The viewpoint of realism is applied to the matters of the research study. However,
pragmatism philosophy combines both the philosophies of positivism and interpretivism for
gaining greater correctness in the research outcome.
Figure 2: Figure showing the different research philosophies
(Source: Siddika and Baruah 2018)
3.3.1 Reason for the selection of the chosen research philosophy (Positivism research
philosophy) for ratio analysis:
The current study aims to dissect the economic implications of financial statements
analysis and comparison of the financial ratio of Goldman Sachs and the JP Morgan chase &
co. Therefore, in the present case, the researcher has made an attempt to analyse the financial
statements of Goldman Sachs and JP Morgan chase and co . As a result, the researcher has
applied the philosophy of positivism by linking the theories and models discussed in the
literature review section with the current scenario. As the current study focuses on evaluating
Research
Philosophies
Positivism Interpretivism Realism Pragmatism

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the financial ratios of Goldman Sachs and JP Morgan chase and co and thereby make a
comparison of these two companies, positivism is the most relevant philosophy to evaluate
the financial ratios of these two banks. The researcher has not applied the other philosophies,
as they is not based on scientifically proven theories and models.
3.4 Research Approach for ratio analysis:
Research approach is the most critical step in directing research study for arriving at
the real and anticipated result of the research. In this situation, Johnson et al (2017) stated
that research approach helps the researcher to recognise each step for execution the desired
actions of the research. Research approach is of two types, namely, inductive approach and
deductive approach. As per the opinion of Panneerselvam (2014), inductive approach
allows the researcher to structure new set of models and theories after quoting the results of
the research. On the contrary, Taylor et al. (2015) is of the view that deductive approach
focuses on scrutinising the available models and theories relating to the research study by
seeking help from the gathered data.
Figure 3: Figure showing the various research approaches
(Source: Gioia et al. 2013)
Research
Approaches
Inductive
Approach
Deductive
Approach

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3.5 Justification for the selection of the chosen research approach (Deductive) for ratio
analysis:
As the current research focus on evaluating the financial strength of JP Morgan chase
and Goldman Sachs, it will be required to analyse the financial statements of these two banks
and there by calculating the different ratios of JP Morgan chase and Goldman Sachs. Since
the researcher has used quantitative analysis for accomplishment of the outcome of the
research. The quantitative analysis is performed by appraising the responses received from
the defendants. In addition, the positivism philosophy is directly related to quantitative data
analysis, in which the data congregated has been assessed with the help of the historical
trends and prevailing models and recognized facts. Therefore, deductive approach has been
considered as the most pertinent one for accomplishment the actual consequences of the
research study.
3.6 Research Design for financial ratio analysis:
Research design offers the researcher a chance of guiding the study towards achieving
a specific goal based on the research purposes. As cited by Tesch (2013), research design
helps the researcher to deliver the orientation by preventing the embattled results, in which
the enduring part of the complete research is attained on the declisd goal. Research design
can be of three categories, which include explanatory research design, exploratory
research design and descriptive research design. Explanatory research design helps in
describing the cause-effect relationship by predicting the likely future consequences of the
constant process (Rimando et al 2015).
.

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Exploratory research design is mainly performed to recognize the details after the issues of
the research. It mostly emphases on the visions of the research subjects challenging the
glitches of the research (Braun et al 2019). On the other hand, descriptive research design
helps to discover and express the subjects and difficulties opposing the research learning. It
mainly offers the researcher a chance to extend the thoughtful and knowledge base.
Figure 4: Figure showing the different research designs
(Source: Morse 2015)
3.7 Data collection process for ratio analysis:
Data is restrained as the essential need to certify the accomplishment of a research
study, where the group of suitable data is founded on the character of study and the mark
results to be attained. In this regard, Claffy. and Fomenkov (2018) specified that data could
be classified as primary and secondary data. The secondary data is usually attained from the
secondary sources, which include records, journals and websites to understand the
hypothetical situations and historic performance. This would help in analysing the present
trend of the research issue recognized. Ness (2015) cited that secondary data has been
favoured more associated to main data, since they is readily obtainable from the operational
and offline sources.
Research
Designs
Explanatory
Research Design
Exploratory
Research Design
Descriptive
Research Design

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However, Almalki (2016) claimed that since primary data is collected from the human
replies, it is more reliable in nature related to that of the secondary data. Therefore,
concentrating on research study, the researcher has used both the primary and secondary data,
without trusting on a specific option. The primary data could also be categorized into
quantitative and qualitative data. For this particular research, the quantitative data has been
used. The qualitative data cannot be collected due to the lack of obtainability of time for
leading the research study.
Quantitative data for ratio analysis:
The quantitative data provides the necessary evidences that are essential to bring more
reliability of the research report (Gratton and Jones 2016). Therefore, it needs comparatively
better sample size for its assessment. In this particular research, the influence financial
statements like the balance sheet and the income statements of JP Morgan chase and
Goldman Sachs has been selected as the respondent to analyse the financial condition of the
banks and based on that a comparison has been made between these two banks .The balance
sheet and the income statements is considered as the main source of the quantitative data.
From the annual report the data is collected. The annual report is considered to be most
reliable source and thus it has been considered for quantitative data.
The researcher has collected both primary and secondary data from varied sources. In
this situation, Berger (2015) stated that the data needs to be gained from applicable and
reliable sources for representing valid inferences on the research study.
Primary data collection sources for ratio analysis:
The researcher has collected primary data by measuring the financial ratios of the
banks the major financial ratios like the return on equity , return on assets is considered inn
this situation. For accomplishment of the study, the researcher has agreed a planned survey,

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which contains both open-ended and close-ended questions. In this context, Alvesson and
Sköldberg (2017) stated that study is the best option to collect quantitative data, since it
enables to collect significant data from a large illustration size. Primary data is collected and
processed directly by the researcher, so it is considered that the information is unbiased. This
process of collecting the data from the primary sources makes the research report more
effective. For the existing study, the survey inquiry form it has been established founded on
research ingredients in order to gather the applicable indication. The researcher primarily
demanded the view of the various financial institutions and their employees also students of
various MBA colleges is considered to give their view on this issue. However, the researcher
has also distributed the questionnaires by sending e-mails to the respondents, who have
shown curiosity. Questionnaire is one of the important observing and analysing tools to make
the research process successful. The questionnaire is a series of question that is made by the
researcher which helps the researcher to get information from the respondents (Quinlan et al
2019).
The researcher has set the questions like which ratio is considered as the most
important ratio for analysing the financial condition of the banks. The process of calculation
of the ratios is considered to be more authentic and that will give accurate results. The most
appropriate methods that will help in making a comparison between the banks (Holzbaur
Ross and Rothrock 2016).
From the response of the respondents it will provide the primary data to the researcher
and that will enable the researcher to prepare a primary report about the financial strength of
the banks(Hox and Boeij 2015).
.

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Beside the questionnaire methods the researcher also arranges interviews to collect
primary data. Interview is considered to be one of the most effective medium for research
works.by this method researcher directly conducts with the user of the banks. In this process
the researcher take direct interviews with the employees of the banks and the users of the
banks and quickly gets information from the potential user of the banks. The process of the
interview may be made face to face or over the phone .it is recommended that the face to face
interview is more effective than the other methods of interview (McNabb 2015).
Observation is another method of collecting the primary data. Observation is the
simplest method for primary data research and it is not expensive. The researcher has to take
note of the behaviour of the people towards the activities of the banks. it is also required to
observe the performance of the competitor of the banks (Bell Bryman and Harley 2018).
Another method that is used is the web based questionnaires. This is a new and
inevitable growing methodology. This would mean receiving an email on which there would
click on an address that would take the respondent to a secure website to fill in the
questionnaire and on that basis the researcher will take the decision. This method is very
quick and also not that expensive (Bryman 2016).
Secondary Data Collection methods for ratio analysis:
The researcher has composed secondary data from various bases like past research
papers, magazines, trainings, books and websites relating to the financial ratios and various
books that is related with the explanation of the financial statements of the banks .secondary
data is information that is already present somewhere and collected for another purpose.
Secondary data is the data that is already collected by and available from different sources.
Such type of data is easily available and can be quickly obtained from any place. the
advantages of the secondary data is that it is economical and it saves efforts and expenses.

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The secondary data helps to improve the understanding of the problem.it provides a basis for
comparison for the data that is collected by the researcher. In the current research, the
literature review chapter has been assembled by collecting the secondary data to relate the
consequences of the study with the research objectives (Harrell and Bradley 2015).
Internal secondary data is generally an inexpensive information source for the company
conducting the research and is the place for existing operations(Polkinghorne 2015).
. The main sources of the internal data is the followings
 Sales and marketing reports
 Accounting and financial records
 Miscellaneous reports
 Internal experts
 The external data is collected from the following sources
 Federal government
 Statistics agencies
 Trade associations
 General business publication
 Annual reports
The various books magazines provide data regarding the process of analysing the
financial data of the bank and that is very helpful to prepis the research report. The
information’s of the books and the magazines is very essential as it provide the required
information and process of calculation of the various ratios that many recognised authors
considered to be essential for analysing the financial statements of the banks. The banks and
the magazines provide some effective techniques that are considered to be essential for
making comparison of the financial strengths of the banks. Thus by using the books and

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magazines as the primary source of data collection is considered to be an effective decision of
the researcher (Benfield and Szlemko 2016).
3.8 Sampling and sample size required for financial ratio analysis:
Specimen is the technique, in which the embattled respondents for the research study
are selected from larger inhabitants. Sampling empowers the researcher to choose the most
applicable source of primary data to combine relevant information, which equals the research
goals and aims (McCusker and Gunaydin 2015). The simple arbitrary specimen has been
used to demeanour a review with the specialists, as it provides equal chances to the
defendants of being selected in the survey. Therefore, quantitative data has been obtained by
using random sampling from a large sample. The random sampling methods are the purest
form of probability sampling. Each member of the population has an same and known chance
of being selected when there is very large population, it is often difficult or impossible to
identify every member of the population ,so the pool of available subjects become biased
(Hair et al 2015).
The most effective method of sampling is the convenience sampling. It is used in
expletory research where the researcher is interested in getting an inexpensive approximation
of the truth. the method is selected because they is convenient. This non probability method is
generally is often used during preliminary research efforts to get a gross estimate of the
results, without incurring the cost or time required to select a random sample (Johnston
2017).
It has been measured that quantitative analysis requires moderately bigger sample size
to find and analyse the replies of the respondents. Thus, many ex-employees of Goldman
Sachs and JP Morgan chase has been selected for analysing their responses(Liddy Wiens and
Hogg 2016)..

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3.9 Data analysis plan for ratio analysis:
The data has been assessed with the aid of various analytical methods. In this regard,
Heale and Twycross (2015) stated that operative collection of analytical methods is vital to
reach appropriate and relevant assumption. In addition, it also helps in upholding clearness
and understanding the collected data. The quantitative data has been characterized with tables
and graphs to abridge the explanation process of the collected data. Moreover, the excel
submission has been used to alter the customers’ judgment into the proportion to guess the
trend of respondents’ understandings.
3.10 Ethical consideration for ratio analysis:
The researcher has maintained proper code of conduct in accomplishment of tasks in
numerous data gathering process. The secondary data has been collected from varied lawful
and reliable bases to confirm the reliability of the research results. The researcher has also
evaded the faint questions in the investigation to encourage the applicants taking part in the
survey with the joint consent. Moreover, the distinctiveness of the respondents have not been
revealed for the reservation issues, in which no such commercial use of the research
declaration has been amused from the end of the researcher (Etikan Musa and Alkassim
2016).
3.11 Data validation and reliability of ratio analysis:
The researcher has vexed to collect the data from the most reliable sources and the
human replies. The researcher has attempted to keep the trustworthiness of the data gathered
by using excel submissions to understand the data. In addition, the researcher has also used
the most relevant and authentic websites for gathering the data gathered and chose the
economists of both the country for addressing the research issues (Cyr 2016).
3.12 Restraint of primary and secondary data for ratio analysis:

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The primary data has been composed from the experts who have deep knowledge
about the financial statement analysis and is known as financial analyst and who is awis of
the current financial condition of the banks. The authenticity of the evidence is the key
limitation that creates the hindrance between the research consequences and the success of
the study. The professionals have the resolved of providing the optimistic image of the
organisations by not enlightening the main topics. As a result, the researcher could face
difficulties in recognizing the matters and creating references to overwhelmed them. It has
been measured that the secondary data could be influenced to some amount, which might
obstruct the superiority of the research and in turn, the research consequence.
3.13 summary
This segment agreement with classifying several research procedures used by the
researcher for transference of the research learning. The researcher has surveyed the
positivism philosophy, deductive approach and expressive research strategy. The researcher
has collected both primary data and secondary data for incoming at the consequence of the
research study. In addition, the researcher has selected the opinion of the financial analyst for
transferring their responses into the excel applications. Finally, the researcher has followed
the proper code of ethics for the conduction of the research study.

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Chapter 4
Data analysis
Structure of income statement of Goldman Sachs
In the year the revenue earned by the bank is $32,730 which shows that the company
is performing well in that year if compared with the other investment banking companies.
The cost of goods sold is $2876 which indicates that the company is able to control the cost
and that leads to the increase of the profit margin. The gross profit in the year 2017 is $29854
which in comparison to the peer companies is again higher and that make Goldman Sachs as
one of the most efficient company in the world. The company expended in its research and
development expenses $588 which indicates that company is willing to spend in the research
and development which enables them to bring more innovation in their product and for that
reason the efficiency of the company increases. the operating expenses of Goldman Sachs is
also lower than the other banks in the market and that make them the highest profit earning
bank in the year 2017. The operating expenses in the year 2017 are $21598. The operating
incomes in the year 2017 are $ 11132 which is higher in comparison to the other banks. The
high operating income of the company indicates that Goldman Sachs has performed
efficiently and has beaten all the peer companies in the earning of operating income. The
EBIT in the year 2017 is $11132 which if compared with the other banks is comparatively
higher and also indicates that company is earning high profit.
Balance sheet of Goldman Sachs

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The balance sheet contains two parts assets and liabilities. The assets is is again
classified in to different types like the fixed assets, current assets, tangible and intangible
assets. The total current assets in the year 2017 are $572442 billion that indicate that the
company has strong financial position to meets its short term obligation. Beside that the
current assets is also higher than the other banks. The total of fixed assets in the year 2017 is
344334 billion and that considered to be one of the main factor to measure the financial
strength of the bank a high value of the fixed assets indicates that the company is performing
well and have sufficient financial strength to sustain in the market.
Analysis of liabilities
Liability is the opposite of the assets the banks always try to reduce the liabilities.
Liabilities are the obligation that a company has to pay in the future. The total liabilities in
the year 2017 are $834533 which indicates that the company has been able to do business
without taking too much loan in comparison to the other competitor. The liability part also
contains the shareholders equity which indicates that how much amount the shareholders
have invested in the business. The shareholder equity in the year 2017 was $82243. The
operating expense of JP Morgan is lower than that of Goldman Sachs and for that reason the
operating income of the company is higher than that of Goldman Sachs the operating profit of
JP Morgan increases in comparison to the other banks.

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Ratio analysis of Goldman Sachs

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Analysis of the structure of the income statement of JP Morgan chase
Revenue earned by JP Morgan in comparison to Goldman sachs is lower the reveneue
in the year 2017 is $114980 this indicates that JP Morgan is not performing that well in
comparison to Goldman Sachs. The company is trying to improve its condition and try to
give more competition to Goldman Sachs. The cost of goods sold in the year 2017 is $14275
which indicates that the company in comparison to Goldman Sachs has failed to manage its
overhead costing and that results in to the reduction of the profit margin. The increase in the
cost becomes a main reason that the company failed to earn profit. The profit in the year 2017
is $100705 which is much lower than the Goldman Sachs. The company does not have
invested any amount in the research and development for which the bank failed to bring any

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innovation in its product and that become the main reason for the failure of the company. the
operating income of JP Morgan in the year 2017 is $35900 which is more than the other
banks. This improvement in the operating income has made JP Morgan as one of the leading
investment banking company in the world. The EBIT of the bank in the year is nil which
indicates that due to the high operating income the company has to pay more tax and that
leads to the decrease in the EBIT margin of the company.
Analysis of the structure of the balance sheet of JP Morgan
The total current assets of JP Morgan is $1996392 which is enough to cover the
obligation of the company which indicates that the company is financially capable and will be
able to continue its operation in the long term. The fixed assets in the balance sheet are
$2533600 which is considered to be good for the banking industry. Being a reputed banking
company JP Morgan has been able to manage the assets properly.
Analysis of the liability
The liability of JP Morgan is higher than that of Goldman Sachs. It indicates that the
company has taken huge amount of loan from the market and that increases the financial
obligation of the company. The investors also lose their interest to invest in the company and
that become a major reason for the decrease of the shareholders equity of the company which
is $255693.

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Ratio analysis of JP Morgan chase

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Sources (https://www.bloomberg.com/)
From the above data analysis it can be realised that JP Morgan chase is performing better
than Goldman Sachs. All the ratios of JP Morgan chase is much higher in comparison to
Goldman Sachs. The revenue earned by JP Morgan chase is higher than Goldman Sachs
which indicates that JP Morgan chase has been able to perform more efficiently than
Goldman Sachs. The ratios like return on equity, return on assets of JP Morgan chase is
higher than that of Goldman Sachs.
Difference between the banks affects the validity of performance comparison between two
banks
There is certain differences between two banks that affect the validity of performance
comparison. Some of the major factors is the efficiency, costs structure , profit earning
capacity and the market structure. Different banks have different efficiency level and the
performance of the banks depends on the efficiency level of that particular banks thus

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efficiency level is considered to be a main difference that affects the validity of performance
comparison. Similarly the cost structure also affects the operation of the banks and the cost
structure of different banks varies from each other which also become a vital factor to
determine the performance of the ban.
The profit earning is the major objective of every financial institutions so the
performance comparison is largely affected by the profit earning capacity of the banks.
In cases where the concept of market structure is denoted by the quantity of banks a
optimistic connection with competition is generally expected the presence of more banks
indicates more opportunity for competition.
Conclusion
From the above discussion it can be concluded that in order to interpret the financial
condition of any organisation it is essential to analyse the financial statements of that
organisation. The most important financial statements that is to be considered for analysis is
the balance sheet and the income statements. Both the statements contains all the records that
is required to calculate various efficiency ratio based on which it will be possible to measure
the financial strength of the organisation. in this report by analysing the financial statements
of JP Morgan chase &co and Goldman Sachs it has been possible to interpret the various
efficiency ratios like the return on equity, return on investment ,price to earnings ratio and on
that basis the financial condition of these two companies has been measured.

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References:
Books:
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Appendix 1

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Appendix 2
Income statement of JP Morgan chase
Balance sheet of JP Morgan chase

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