Assignment:

Financial Statement Analysis

Submitted To:
Mr. Naveed Mughal
Group Members:
Maryam Safdar
11108194
Rabia Hameed
11108221
Shumaila Safdar
11108219
Class: BBA
Fall-2011

1. What is the nature of the business of the company? How does the company
make money?
Nature of the business:
MCB Bank Limited is banking company incorporated in Pakistan and is engaged in
commercial banking and related services. MCB is in its over 67 years of operation. It has a
network of nationwide and abroad with business establishment in srilanka, Bahrain, Colombo
main, petthah, maradana, wellwatte. The branch break-up province wise is Punjab (57%), Sindh
(21%), NWFP (19%) and Baluchistan (3%) respectively.
The Banks ordinary shares are listed on all the stock exchanges in Pakistan whereas its Global
Depository Receipts (GDRs) representing two ordinary shares in 2012 are traded on the
International Order Book (IOB) system of the London Stock Exchange.
Reference: (annual report of MCB 2013, pg: 120)
Bank makes money:
There are three main ways banks make money:
By charging interest on money that they lend
By charging fees for services they provide
By traded financial instrument in the financial market
MCB makes money through these ways same like other banks. They make money on the
interest they charge on loans because that interest is higher than the interest that they pay on
depositors' accounts. Banks also charge fees for services like checking, ATM access and
overdraft protection. Loans have their own set of fees that go along with them. Another source of
income for bank is investments and securities.
Reference: (risksandrewards.org.uk/background banks, 151.html)
(Annual report of MCB 2013, pg: 19, 21)

2. What financial statements are commonly prepared for external reporting

purposes? What titles does the company gives these statements?
For external reporting purpose mostly company prepared balance sheet, income statement and
statement cash flows. Companies updated to these statement for investors, lenders and customers
about financial position.
Financial statement prepared by the management of the Bank. They present its state of affairs
fairly, the result of its operations and the company performance. In MCB bank presented five
consolidated statements with titles in their annual report that are follows.

 Statement of financial position,

Statement of profit and loss account,
Statement of comprehensive income,
Cash flow statement
Statement change in equity
Reference: (Annual report of MCB 2013, pg: 3)

3. Which accounting framework has been adopted while preparing these

financial statements? Where would you get this information from the
report?
Different companies follow different standards like IFRS and GAAP. International Financial
Reporting Standards (IFRS), as applicable in Pakistan, have been followed in preparation of
financial statements and any departure there from has been adequately disclosed and
explained.MCB Bank LTD follows IFRS but prepares liquidity-based presentations in which all
assets and liabilities presented in order of liquidity.
We get this information notes to the financial statement of MCB annual report.
Reference: (Annual report of MCB 2013, pg: 120)

4. How often do publicly traded companies (whose shares trade on the stock
exchanges) typically prepare financial statements for external reporting
purposes?
According to IFRS, Entities have to present a complete set of financial statements (including
comparative information) at least on an annual basis. Mostly companies prepared annual basis as
well as quarterly prepared their financial reports. They prepared reports quarterly on bases of
getting better analysis of their companies.
MCB is prepared annual basis reporting by follow IFRS, but for getting clear analysis result
they also prepared reports on quarterly basis.
Reference:
(https://www.cgapdnet.org/Non_VerifiableProducts/ArticlePublication/IFRS_E/IAS_1.pdf)

5. Speculate on who uses the financial statements the company prepares?

Owners and managers require financial statements to make important business decisions that
affect its continued operations. Financial analysis is providing management with a more detailed
understanding of the figures. These statements are also used as part of management's annual
report to the stockholders.

Employees also need these reports in making collective bargaining agreements (CBA)

with the management

Prospective investors make use of financial statements to assess the viability of investing
in a business.

Financial institutions (banks and other lending companies) use them to decide whether to
grant a company with fresh working or extend debt securities.
Reference: (http://en.wikipedia.org/wiki/Financial_statement)

6. Who are companys external auditors? What sort of audit opinion did the
company receive in its last year report? In your own words, what does the
opinion mean? Why the audit report is dated several months after
companys year end?
MCB external auditors are M/s A.F. Ferguson & Co. Chartered Accountants, for the year 201314. In view of company auditor report they said on bases of report review that nothing has come
to our attention which causes us to believe that the statement of compliances does not
appropriately reflect the companys compliance.
In their opinion, proper books of account have been kept by the Bank as required by the
Companies Ordinance, 1984
The unconsolidated statements and their notes have been drawn up in conformity with the
Banking Companies Ordinance 1962, and the Companies Ordinance, 1984.
The business conducted, investments made and the expenditure incurred during the year
were in accordance with the objects of the Bank and the transactions of the Bank which
have come to their notice have been within the powers of the Bank.
Opinion:
In our opinion MCB bank completely follows international accounting standards as
well as companies ordinance 1984. They prepared proper books of accounts and prepare
unconsolidated statements according to ordinance. They follow all standard and they are saying
financial statement of company is free from error.
Audit report dated:
Audit report is dated several months after ending of accounting period because it
takes time to perform an audit. If you have a Dec 31 year-end, the accountant will need some time to
close the a/c before handing them over to the auditors, who will take at least a few weeks more. Auditors
are supposed to date their audit report at the end of their field work, so that's easily 2 months after the
financial year-end.

Reference: (https://answers.yahoo.com/question/index?qid=20071121040316AAH6f93)