CHAPTER NO 4
HYPOTHESIS
Ho = µ1 = µ2: No gross profit margin sign difference
Ho = µ1 = µ2: No operating profit margin sign difference
Ho = µ1 = µ2: No net profit margin sign difference
Ho = µ1 = µ2:
No return on capital employed sign
difference
Ho = µ1 = µ2: No return on net worth sign difference
Ho
= µ1 = µ2: No debt
equity ratio sign difference
H1≠
µ1 ≠ µ2: Gross profit
margin sign difference
H1≠ µ1 ≠ µ2: Operating profit margin sign difference
H1
≠ µ1 ≠ µ2: Net profit margin sign difference
H1≠ µ1 ≠ µ2: Return on capital employed sign
difference
H1≠ µ1 ≠ µ2: Return on net worth
sign difference
H1≠ µ1 ≠ µ2: Debt equity ratio sign difference
CHAPTER NO 5
RESEARCH
METHODOLOGY
Purpose
of Research:
This
research study is explanatory causal research. In which independent variable is
mergers effects and dependent variable is financial performance.
Mode of
Observation:
This
research work mode of observation is case study because this work on a particular
bank i.e., Allied Bank Limited and this study under the qualitative research.
This study use secondary data i.e. annual reports for research work.
Time
Dimension of Research:
The
time dimension of this research work is longitudinal panel study because this
work over an extended period and this
research study work on effects of bank
merger per and post financial performance and study gathers information
on the same bank at each time point. This study will use ten years data for
this research work five years before merger and five years after merger.
Sampling
Design:
There
will no sampling design of this research study because this study work on a
single bank and the particular bank will be this work sample of study
Data
Analysis:
This
study will analyze the financial statements data through six financial ratios
and apply T- stat to these financial ratios. After this analysis we will find
out the effects of mergers pre and post in the financial performance of a
particular bank i.e. Allied Bank Limited and on this bases we accept or reject
our hypothesis.
CHAPTER NO 6
DATA FINDING AND ANALYSIS
Financial
Ratios Analysis:
The
six financial ratio calculations of ALLIED BANK LIMITED are given below to find
out the mergers effect on before and after financial performance:
1.
Gross Profit Margin:
I
will calculate gross profit margin from the following formula:
Gross Profit ÷ Revenue or Sale × 100
Gross
profit = Revenue ̶ Cost of goods sold
OR
CHAPTER
NO 7
CONCLUSION
We conclude from data analysis that some main
reasons of the merger and insufficient performance. These include deficiency
claim receivable, inward bills of collection, unused commercial letter of
credit, outstanding guarantees issued, outward bills of collection and late
deposits (payment) received and confirmed export letters of credit and others.
The fair values of results shows on the statement of condition represent the
current credit risk exposure but not the maximum risk exposure that could rise
in the future as a result of change in values.
Some
major notes regarding insignificant performance (acceptance of Ho) are below:
Unclassified loans
These
are loans that do not have a greater-than normal risk and don’t possess the
characteristics of classified loans. The borrower has the apparent ability to
satisfy his obligations in full and therefore no loss in ultimate collection is
estimated.
Classified loans
These
are loans which possess the characteristics outlined here under. Classified
loans are subdivided into four categories:
·
Loans
especially mentioned;
·
Substandard
·
Doubtful
·
Loss
·
Loans especially mentioned
These
are loans and advances that have potential weaknesses that deserve management’s
close attention.
·
Substandard
These
are loans or portions thereof which appear to involve a significant and
unreasonable degree of risk to the Bank because of unfavorable record or
unsatisfactory characteristics. There exists in such loans the possibility of
future lot have a well-defined weakness or weaknesses that
risk
their liquidation. Such well-defined weaknesses may include adverse trends or
development of financial, managerial, economic or political nature, or a
significant weakness in collateral.
·
Doubtful
These
are loans or portions thereof which have the weaknesses inherent in those
classified as ‘Substandard’, with the added characteristics that existing
facts, conditions, and values make collection or liquidation in full highly
improbable and in which substantial loss is possible.
·
Loss
These
are loans which considered uncollectible or worthless and of such little value
that their continuance as bankable assets is not warranted although the loans
may have some recovery or salvage value. The amount of loss is difficult to
measure and it is not practical to defer writing off these basically worthless
assets even though partial recovery may be obtained in the future.
The
overall results show that after merger financial performance of bank was not
satisfactory and not present increase in financial performance. In literature
review point of view it is unnecessary that mergers can increase financial
performance of bank. Hence, the after
mergers of bank show no as much improvement in performance.
