Financial ratio analysis as an important tool for evaluating the performance of business organization

Abstract

Stichting BRAC International is working in 10 countries. For such a massive organization financial statement and ratios are very important and therefore this internship report has been done on “Financial ratio analysis as an important tool for evaluating the performance of Business organization” considering the ratios of BRAC Sierra Leone Microfinance. Microfinance industry does not use traditional ratios and it has developed a set of ratios considering the criteria of business. So all ratios used in this report are industry special ratios and used professionally for presenting the financial reports. BRAC Sierra Leone Microfinance is running with a great success. Their last year’s performance was very good. Considering the good performance, it has increased the number of loan provided in 2017. As a result this year’s liquidity ratios are both not satisfactory, so the organization was not able to hold enough cash in hand compared to the last year. However its other ratios are showing a satisfactory result, except cost ($) per loan made ratio. Means that its cost of loans has increased but other fixed costs haven’t increased proportionately with the volume of loan provided. As a result most of its operational efficiency ratios are showing satisfactory result. Moreover the organization’s portfolio quality ratios are showing satisfactory result, however considering the fact that it has written off SLL 1,100,391,634 in November 2017, its portfolio quality is not satisfactory. Overall the organization is running well but it need to focus on providing quality loans rather than increasing the quantity of the loan. Lastly without analyzing the ratios, it won’t be possible to understand the actual condition of the business.