Jordanian Banks Profitability And Return On Assets

Trend in Return on Equity Ratio

Discuss About The Jordanian Banks Profitability Return Assets?

Yes, there is a change in the profit margin over the past 3 years. The change in the profit margin shows a rise in the profit margin. In the year 2014 the company was not able to earn profit but in the year 2015, it shows 4.17% profit margin which again increased in the year 2016. In the year 2016, the profit margin of the company is approximately 5.39%. Might be possible that rise in the profit margin is because of the increase in the sales of the products of the company. The increase in the demand of the products by the customer can bring the increase in the sales of the product which ultimately affect the profit of the company (Vital Group Limited, 2014). The horizontal analysis shows that the profit for the year 2014 was in negative but in the year 2015 and 2016, it shows a rise in the profit. The vertical analysis also shows a positive rise in the net profit of the company. (Refer Appendix 1.1)

Can you identify a trend in the return on equity ratio over the past three years?  Comment on the trend.  Briefly, discuss possible reasons for this trend.

There is a vast change in the return on equity from the year 2014 to 2016. In the year 2014, the return on equity was negative 15.10% but in the year 2015 and 2016; it shows a rise in the return on equity. The reason behind the increase in the return on equity is quite genuine. The increase in the net profit will bring the rise in the return on equity. This simply means that company is able to make a profit with the amount invested by the equity shareholders. (Refer Appendix 1.1)                                                                                                                            

Identify if the asset turnover ratio increased or decreased over the past three years? Is this a good result for the company?  Briefly, discuss what the change indicates.

The assets turnover ratio of the company increased over the past 3 years. Yes, it is good for the company. In the year 2014, the Asset turnover was 3.68 and later it increases in the year 2015 and 2016. This change in the ratio shows that company is making the full use of the assets in increasing the efficiency of the company. With the increase in the efficiency, company will be able to make the profit (Vital Group Limited, 2015). The horizontal and the vertical analysis show that the total assets of the company were less in the year 2014 as compared to 2013. On the other hand in the year 2015 and 2016 total assets were 12.27% and 18.75% respectively. The balance sheet of the vertical analysis of the company also shows an increase in the assets of the company. (Refer Appendix 1.1)

Asset Turnover Ratio

Has the receivables turnover changed over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

Yes, there was a change in the Receivable turnover ratio over the past three years. In the year 2014 the receivable turnover was 13.438 but in the year 2015, it was 16.441 which is a rise in the value. In the year 2016, there was again a decline; the receivable turnover ratio was 15.882. The rise in the ratio is not a good result for the company because the rise in the receivable turnover ratio shows that the company is not able to manage the credit issues with the customers. The horizontal analysis shows a change in the trend of in the year 2014 was positive but in 2015, there was a decline in the change as compared to the previous year. Similarly, in the year 2016, there was a drastic change in the trend of the trade receivables. The vertical analysis of the trend shows a slightly up and down in the changes. This shows that company is trying to maintain the changes every year. (Refer Appendix 1.1)

Has the inventory turnover changed over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

Yes, there is a change in the inventory turnover ratio over the past 3 years. The inventory turnover ratio shows an up and down in the past 3 years. This simply means that company is trying to bring the stability in the inventory turnover ratio. The fewer ratios show the fewer sales of the company but the high ratio shows that there is a rise in the sales of the company. There might be a possibility that the company offered a discount that is the reason there is an increase in the sales of the company. (Refer Appendix 1.1)

Has the current ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

The current ratio shows a slightly increased changed over past three years. In the year 2014 the current ratio of the company was 0.62 and till the year 2016, the ratio was 0.81. This clearly shows that there is a negligible rise in the ratio. The rise is the current ratio is a good result for the company. This shows the company's payback its liabilities with its assets (Michalski, 2014). The vertical analysis shows a trend of the current rise in the current assets (Vital Group Limited, 2016). In the year 2013, the current assets were 35.11% there was a rise in 2014.  In the 2015 and 2016, there is an up and down % change. (Refer Appendix 1.1)

Receivables Turnover Ratio

Has the quick ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

The quick ratio increased over the past 3 years. The quick ratio of the company also shows a slight rise in the ratio from the year 2014 to 2016. Yes, this a good result for the company. The rise in the quick ratio is a good result for the company the reason being it shows the company's ability to meet its short-term obligations with its liquid assets (Al Nimer, Warrad, & Al Mari, 2015). (Refer Appendix 1.1)

Has the cash flow (to current liabilities) ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

The cash flow to current liability ration increased over the past 3 years. The operating cash flow ratio shows the liquidity of the company in the short term. Yes, it is a good result for the company. The company is trying to maintain a rise in the liquidity of the company. (Refer Appendix 1.1)

Has the debt to assets ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

The debt to assets shows a slight decline over the past 3 years. The high debt to assets ratio shows a high degree of leverage and consequently high financial risk. Yes, it is a good result for the company. Due to the high financial risk, the company avoids investing the debt amount in the assets. (Refer Appendix 1.1)

Has the debt to equity ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly, discuss what the change indicates.

There is a decrease in the debt to equity ratio, in the year 2014 the ratio was 3.06. In the year 2015 and 2016, the ratio was 1.89 and 1.45 respectively. This ratio shows the company’s financial leverage, the ratio indicated how much debt the company is using to finance its assets. Yes, it is good for the company; the high equity ratio shows that the company is becoming aggressive in financing its growth with the use of the debt amount. (Refer Appendix 1.1)

Conduct a horizontal analysis of the Income Statement for the past 4 years.  Comment on any trends.

Inventory Turnover Ratio

The horizontal income statement of the company is also based on the base year 2013. The net profit of the company shows the decline in the year 2014 as compared to the year 2013. There is a rise in the trend change in the year 2015 and 2016. In the year 2015 and 2016, the change is 484.27% and 160.69% respectively. (Refer Appendix 1.2)

Conduct a horizontal analysis of the Balance Sheet for the past 4 years.  Comment on any trends.

The horizontal balance sheet shows the changes according to the base year that is 2013. The company tries to maintain the liquidity to make the easy payment for the liabilities (Berg, A., & Bjarnegård, 2016). The cash of 2014 shows a decline as compared to 2013. Though, in the year 2015 and 2016, there is a hike in the trend that is approximately 67.90 and 30.80 respectively.  (Refer Appendix 1.2)

Conduct a vertical analysis of the Income Statement for the past 4 years.  Comment on any trends.  

The vertical income statement shows the change in the trends of the company for past 4 years. In this, the revenue of the year 2013, 2014, 2015, and 2016 kept as 100%. There is a drastic change in the trends of the cost of goods sold. In the year 2013, the change was 31.02 but in the year 2014 and 2015 there is a change in the 66.47% and 67.96% respectively. (Refer Appendix 1.3)Conduct a vertical analysis of the Balance Sheet for the past 4 years.  Comment on any trends.  

The vertical analysis of the balance sheet for the past year includes the amount related to the assets and the liability. The total assets are kept as a 100% for the year 2013, 2014, 2015, and 2016. The most of the item included in the balance indicated in the rise in the change trend (Weygandt, Kimmel, & Kieso, 2015). The intangible assets (Goodwill) of the company show a decline in the changes over the past 4 years. (Refer Appendix 1.3)

Conduct a trend analysis of Revenue and Net Profit after Tax and Abnormals in the Profit and Loss Statement for the past 3 years.  Comment on any trends.  

The trend analysis of Revenue shows a positive change with the increase in the revenue of the company. This shows that the company might offer discount to the customers that result in the demand of the product along with the rise in the sales of the company.

The graph shows that trend analysis of net profit of the 4 years. In the year 2014, there was a decline in the net profit as compared to the year 2013. Talking about 2015 and 2016 there is drastic high in the net profit of the vital group limited. 

References

Al Nimer, M., Warrad, L., & Al Mari, R. (2015). The Impact of liquidity on Jordanian banks profitability through return on assets. European Journal of Business and Management, 7(7), 229-232.

Berg, A., & Bjarnegård, E. (2016). Dissecting Gender Imbalance: A Horizontal Perspective on When Risk Matters for the Assignment of Women to UN Peacekeeping Missions. Res Militaris, (2).

Michalski, G. (2014). Value maximizing corporate current assets and cash management in relation to risk sensitivity: Polish firms case. Browser Download This Paper.

Vital Group Limited. (2014). Annual Report 2014. viewed on 20^th September 2017, https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwisr4ulpbPWAhUUTo8KHe55BWcQFggrMAE&url=http%3A%2F%2Fwww.vitagroup.com.au%2Fscript%2Fdoc%2Fdocumentx.asp%3FObjectID%3DCE0BC9A7-E2D2-4263-88B9-B9C3A09064D1&usg=AFQjCNFizWlEDNybOvOaJ9psf06V6a6Veg

Vital Group Limited. (2015). Annual Report 2015. viewed on 20^th September 2017, https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwisr4ulpbPWAhUUTo8KHe55BWcQFggrMAE&url=http%3A%2F%2Fwww.vitagroup.com.au%2Fscript%2Fdoc%2Fdocumentx.asp%3FObjectID%3DCE0BC9A7-E2D2-4263-88B9-B9C3A09064D1&usg=AFQjCNFizWlEDNybOvOaJ9psf06V6a6Veg

Vital Group Limited. (2016) Annual Report 2016. viewed on 20^th September 2017, https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwj--InspbPWAhXLro8KHZcpBrUQFggrMAE&url=http%3A%2F%2Fwww.vitagroup.com.au%2Fscript%2Fdoc%2Fdocumentx.asp%3FObjectID%3DCBB55C46-ECE0-4344-BB7B-350B7EB7B362&usg=AFQjCNHBzEVcv5Kb_mLUG7nP7BH9wlOMlA