Comprehensive Financial Analysis Report: HSBC Holding Plc

This report provides a financial analysis of HSBC Holding Plc, examining its financial performance based on its income statement, financial position, and cash flow statement. The report assesses key financial ratios, including profitability, liquidity, efficiency, and solvency, comparing data from 2018 and 2019. It highlights trends such as the decrease in net profit margin and changes in asset turnover. The analysis also covers the cash flow statement, noting the impact of operating, investing, and financing activities on the bank's financial position. Furthermore, the report outlines HSBC's marketing strategies, emphasizing its focus on maintaining a strong capital and liquidity position to ensure long-term growth. The conclusion summarizes the bank's financial health, pointing out areas of strength and weakness based on the financial data and strategic approaches employed by the bank.

Finance management

FINANCE 1
Contents
Introduction.................................................................................................................................................2
Purpose of Income statement and financial position....................................................................................2
Financial Ratios...........................................................................................................................................4
Cash Flow Statement of the company.........................................................................................................7
Marketing Strategies....................................................................................................................................8
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

FINANCE 2
Introduction
The main aim of this report is to demonstrate the ability to apply Financial Management
knowledge. Financial statements have been prepared by the companies to evaluate the financial
position. In this paper, the purpose of financial statements will be discussed. The financial ratio
of the company will also evaluated in order to estimate the financial position of the bank. HSBC
Holding Plc has been taken into consideration to examine the financial statements.
Purpose of Income statement and financial position
The purpose of income statement is to represent the net profit or loss of the organization during
the fiscal year. This statement also helps to examine the expenses and revenue of the
organization. The investors can analyses the financial position by evaluating the profit and loss
of the organization in the financial year (Schroeder, Clark, and Cathey, 2019). This statement
also helps the bank to evaluate the financial situation by comparing the expenses and revenue
from current to previous years. Increasing or decreasing situation of net profit helps to improve
the performance by implementing strategies. According to the income statement of HSBC
Holding Plc, the net profit of the bank is 9725 in the year 2019 (HSBC Holding Plc, 2019a).

FINANCE 3
(Source: HSBC Holding Plc, 2019b)
The purpose of financial position is to estimate the financial status of the organization by
evaluating the amount of assets and liabilities. This statement also states the amount of entity
which is owns by the bank (assets) and how much it owes (liability) and the amount of invested
in the business (entity). The evaluation of assets and liabilities helps the bank to determine the
ability of the organization to pay the short term or long term obligations by using the assets.
Recording assets and liabilities in all years helps the bank to determine the financial status by
comparing the financial situation from the previous years (Accounting Tools, 2019). As per the

FINANCE 4
financial position statement of the bank, it is observed that the 2715152 is the total assets of the
organization in the year 2019 which is increasing from the previous year 2018 such as 2558124
in the year 2018 (HSBC Holding Plc, 2019a).
(Source: HSBC Holding Plc, 2019b)
Financial Ratios
Ratio Analysis 2018 2019
Profitability Ratio
(Net) Profit margin Net Profit 13727000 7383000

FINANCE 5
(a/b)
Net Sales 63587000 68067000
22% 11%
Return on Assets EBIT 44466000 49926000
Total assets- TOTAL
CL
2,558,124,00
0
2,715,152,00
0
1.74% 1.84%
Liquidity Ratio
Current ratio (a/b) Current assets (a) 608,798,000 651,365,000
Current liabilities (b) 346,597,000 381,689,000
1.76 1.71
Quick ratio (a/b) Quick assets (a) 162843000 36431
Current liabilities (b) 346,597,000 381689000
0.47 0.00
Efficiency Ratio
Assets turnover ratio Net sales 63587000 68067000
Total assets 2558124000 2715152000
9.07 9.15
Solvency Ratio
Debt to Equity Total Debt 2363875.00 2522484.00

FINANCE 6
Total equity 194249.00 192668.00
12.17 13.09
As per the financial ratio of HSBC Holding Plc, it has been evaluate that the net profit margin
has been decreases due to decreasing net profit with the amount of net sales. The net profit
margin of the bank is 22% and 11% in the year 2019 and 2018 respectively. It states that the
bank is not able to generate the net profit by selling the goods and services (HSBC Holding Plc,
2019b).
The liquidity position of the bank is strong as the amount of current assets is high as compare to
amount of current liabilities. The current ratio of the bank is 1.76 and 1.71 in 2018 and 2019
respectively (HSBC, 2019). The current ratio of the bank has been decreases which is beneficial
for the company because the amount of current assets is increases with the amount of current
liabilities. But the amount of current assets is high which states the ability to pay the current
liabilities.
According to efficiency ratio of the bank, it has been calculated that assets turnover ratio of the
bank has been increases. The net sales of the bank have been increases with the increasing
amount of total assets. The capability of the bank is to generate the net sales by using the net
assets as the assets turnover ratio has been increases such as 9.07 and 9.15 from 2018 to 2019
(Yahoo Finance, 2019).
Cash Flow Statement of the company
The cash flow statement of the company states all inflow and outflow of cash in order to
determine the financial situation over the particular period of time. According to the cash flow

FINANCE 7
statement of HSBC Holding Plc, the net cash from operating activities is 29743 and 32515 in the
year 2019 and 2018 respectively. The operating cash flow has been decreases due to increasing
expenses amount (HSBC Holding Plc, 2019a).
(Source: HSBC Holding Plc, 2019b)
The investing activity of HSBC Holding Plc has been decreases due to increasing amount of
investment. It is observed that the company purchasing amount has been increases due to which
it financial position has been affected. The investing activity of the bank is 35318 and 16646 in
the year 2019 and 2018. According to cash flow statement of HSBC Holding Plc, the financing
activities of the bank have been decreases such as 14842, 16781 in 2019 and 2018 in respective
manner. The bank finance in different activities to operate the business but in 2019, the bank
finance the less amount due to which its amount of financing has been decreases (HSBC Holding
Plc, 2019a).

FINANCE 8
(Source: HSBC Holding Plc, 2019b)
Marketing Strategies
The main strategy of the bank is to maintain a strong capital, funding and liquidity position. This
strategy helps the company to operate the business effectively. It operates the business model
with low earnings volatility. This strategy gives the foundation to sustain the dividend and a
strong capacity for allocation to shareholders. The bank develops the strategy position that
directly helps it to grow in long term (HSBC, 2019).

FINANCE 9
Conclusion
At the end of this report, it is concluded that the financial performance of HSBC Holding Plc is
good but not too strong. According to the financial analysis, it has been estimated that the bank
has good liquidity position but its ability to generate the net profit with the use of net sale has
been decreases. As per the marketing strategies of the bank, the bank has strong capital, funding
and liquidity position that helps to operate the business for long term.

FINANCE 10
References
Accounting Tools. (2019) The Purpose of the Balance Sheet. Available From:
https://www.accountingtools.com/articles/the-purpose-of-the-balance-sheet.html [Accessed
15/3/2020].
HSBC Holding Plc. (2019a) Annual Report and Accounts 2018. Available From:
file:///C:/Users/SystemJP/AppData/Local/Temp/190219-annual-report-and-accounts-2018.pdf
[Accessed 15/3/2020].
HSBC Holding Plc. (2019b) Annual Report and Accounts 2019. Available From:
file:///C:/Users/SystemJP/AppData/Local/Temp/200218-annual-report-and-accounts-2019-1.pdf
[Accessed 15/3/2020].
HSBC. (2019) HSBC UK. Available From: https://www.hsbc.co.uk/ [Accessed 15/3/2020].
HSBC. (2019) Our Strategic Advantages. Available From: https://www.hsbc.com/our-
approach/our-strategy [Accessed 15/3/2020].
Schroeder, R.G., Clark, M.W. and Cathey, J.M. (2019) Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
Yahoo Finance. (2019) HSBC Holdings plc (HSBC). Available From:
https://au.finance.yahoo.com/quote/HSBC/balance-sheet?p=HSBC [Accessed 15/3/2020].