Examine the financial stability of Islamic bank of Britain in comparison with Islamic windows

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TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

4.1 Financial ratio analysis1

4.2 HSBC Bank financial analysis3

4.2.1 Liquidity analysis3

4.2.2 Profitability analysis4

4.2.3 Efficiency analysis6

4.2.4 Solvency and risk analysis6

4.3 Lloyds Bank financial analysis7

4.3.1 Liquidity analysis7

4.3.2 Profitability analysis8

4.3.3 Efficiency analysis8

4.3.4 Solvency and risk analysis9

4.4 Islamic bank of Britain9

4.4.1 Liquidity analysis9

4.4.2 Profitability analysis10

4.4.3 Efficiency analysis11

4.4.4 Solvency and risk analysis11

4.5 Summary12

REFERENCES13

CHAPTER 4 DATA ANALYSIS

4.1 Financial ratio analysis

Ratio analysis is the comparison of data to examine the performance of a company. Ratios are often used to analyse financial information, such as indebtedness, stock performance and profitability. Analysts can measure ratios against industry benchmarks to compare a company's performance relative to other firms in its market. Common ratios include the current ratio (current assets divided by current liabilities); the liquidity ratio or acid test ratio (current assets minus stock divided by current liabilities); the insolvency ratio (shareholders' funds divided by the loss); and return on shareholders' funds ratio (profit before tax divided by 100, then divided again by shareholders' funds) (Copeland 2003, 36).

Financial ratio analysis is the study of the relationships between financial variables. Ratios of one firm are often compared with the same ratios of similar firms or of all firms in a single industry. This comparison indicates if a particular firm's financial statistics are suspect. Likewise, a particular ratio for a firm may be evaluated over a period to determine if any special trend exists (Costales and Szurovy 2009).

Financial ratios are numerical indicators of how two components in the financial statements correlate with one another (Bragg 2007, 20). These ratios are compared to a standard before it can provide significant results. For example, financial ratios can be used to compare trends from the industry averages, prior periods, and budgets. Financial ratios are useful for various purposes and decisions. They can be used for budgeting, credit rating, bankruptcy prediction, performance evaluation, and mergers and acquisitions. Financial ratios involve the use of trend or cross-section analysis in order to interpret and evaluate a firm. Trend analysis is used to identify upward or downward patterns by plotting a firm's ratio over a certain time period. Cross-section analysis is used to compare benchmarks by using industry averages (Edmister 2009, 1477).

Financial ratios analysis has different purposes to different users. For example, investors use various ratios to determine company performance, whereas ...