A Study on Profitability Analysis of Five Bangladeshi Banks
109 Pages Posted: 19 Oct 2015 Last revised: 8 Jun 2018
Date Written: August 28, 2015
In light of recent events that have taken place in the Bangladesh, the importance of knowing the financial position of banks is imperative to stakeholders. In this sector the most used financial statements are the financial position, profit and loss account and statement of cash flow where the financial position shows the assets, liability and stock holder equity. Statement of cash flow shows the banks cash disbursement and saving, profit and loss account shows the net profit or net loss of a bank. The focus of this study is to confirm the validity of Altman’s Z-Score model as a predictor of Bangladeshi bank failures. This requires two data sets: failed and non-failed banks. The empirical findings verified the predictive ability of the Z-Score model to the Bangladeshi banks. Our data shows that all selected banks are insolvent. It show that all banks are performing very aggressive as working capital and Equity to Debt ratio is low. Some banks have negative working capital, so they cannot liquidate day to day business. Most of banks have low equity than liability. Because they are taking more deposit than loans. They have to reconstruct their capital structure and have to satisfy liquidity in order to be solvent.
Keywords: Bangladesh, Z-Score model, Bankruptcy, Financial stability, financial performance, Discriminant Analysis
JEL Classification: E60, E62, E66, F47, P34
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