Performance of Goldman Sachs and Financial Ratio Analysis

Performance of Goldman Sachs and Financial Ratio Analysis Conventionally the Bank performance is evaluated by analysis of the financial ratios. However, despite of quite a few number of ratios being calculated, a sculpt that completely convinces the analysis of requirements and bank operations efficiency evaluation is yet to be developed. Hence for these reason, the financial ratio analysis is balance with unlike eminence evaluations, with characteristics such as organization quality, equity structure, spirited position and others which are incorporated in the concluding assessment. In this piece of work we are going to evaluate overall performance of Goldman Sachs and critically analyse how financial ratios are used to evaluate banks performance. The Goldman Sachs Group, Inc. is a American investment banking and securities organisation which slot in global investment banking, securities, investment management, and erstwhile financial services principally with institutional clients. Goldman Sachs was founded in the year 1869 and its headquarter is at 200 West Street in the Lower Manhattan area of New York City. It has additional offices in major international financial hubs. The Goldman Sachs offers mergers and acquisitions advice, underwriting services, asset management, and prime brokerage to its clientele, which include corporations, governments and individuals. The Goldman Sachs also engages in proprietary trading and private equity deals, and is a primary dealer in the United States Treasury security market (Goldman Sachs Website). Bank Internal Performance Evaluation Strategic planning Goldman Sachs ability to address and tap into important economic and financial trends through roles such as advisor, financier, market maker and asset manager are critical for fulfilling their mission to help spur growth and perform strongly as a firm. Technology Technology is a core part of GS product offering and client experience. GS ability to respond quickly and effectively to address its clients needs with customized systems, products and services helps differentiate the firm. A technological advantage for GS is that they have only one central risk system, which is partially a byproduct of not having done multiple, major acquisitions that often require merging and retrofitting platforms. Personnel development The success of the GSs efforts are measured by how effectively their people act. Over time, effective training and development have enrich their corporate culture and strengthen the values of client service and focus on reputational risk management. Recognition includes compensation, promotion, assignments and mobility opportunities. They have made it clear the link between the behaviour expected of its people and the recognition used to encourage it. This is critically important because it signals broadly the way GS expects its people to behave and conduct business (Goldman Sachs Annual report 2010). Bank External Performance Evaluation Market share GS has frequently performed above the market despite worsening economic conditions. Since the 2008, the company has outpaced the market enough to draw public admiration. With strong profits and expected strong returns, the company has set aside $500M to invest in small businesses. These efforts are a combination to both improve the economy and their public image. Regulatory compliance The Dodd-Frank legislation and new capital and liquidity requirements under Basel 3 are two of the more significant outcomes from the recent focus on enhancing financial stability. Given regulatory implementation is only just beginning, and unclear on how the new rules will ultimately impact the industry. The broad contours of new regulation, however, are clear: improve the safety and soundness of the global financial system, increase the transparency of derivatives markets, limit certain investing activities and reduce the consequences of a failure of a large financial institution. Public confidence Goldman Sachs announced in May 2010 that it formed a Business Standards Committee to reshape its business practices and mend its reputation. Chief Executive Lloyd Blankfein said at the time that there is a disconnect between how we view the firm and how the broader public perceives our roles and activities. GSs shareholders, BoDs, clients and customers have supported Mr. Blankfein through all the crisis and this shows their faith in bank (Goldman Sachs Annual report 2010). 4.0 Analyzing Bank Performance with Profit Ratios Goldman Sachs financial performance was better in 2009  than 2010 and Q4 2009 was the best quarter since the recession. 4.1 ROE Return on equity (ROE= net income after taxes/total equity) reveal GS capability to produce profits from shareholders equity (further referred as net assets or assets minus liabilities). In other words, ROE shows how effectively a company uses the shareholders money. As seen in graphical representation above, it is clear that Goldman Sachs is tendering a lower return on shareholders equity as compared to year ended in2009. The ROE of GS for the last year was 18.93% as compared to 10.08% this year. There has a been a significant decrease in the ROE which suggests GS is not utilising shareholders money properly. GS return on equity has declined substantially due to deleverage and is only marginally higher than its current cost of capital. 4.2 ROA Return on assets (ROA = net income after taxes/total assets) is how resourcefully a firm uses its assets. From the formula it is quite obvious that higher the ratio, the company is performing more efficiently and thus is generating more profits. A low ROA with enormous assets designate that the firm is handling its asset at a poor rate. As seen in graphical representation above, it is seen that Goldman Sachs has provided a lower ROA of 0.91% this year over 1.58% last year. There is one key differentiation between ROE and ROA and it is debt. In absence of debt, the shareholders equity is same as total assets of the firm which means that in this case, ROE and ROA are identical. Now if the firm come to a decision to take a loan, ROE exceeds ROA. A elevated ROE does not always guarantee a extraordinary performance of a firm. Incidentally, ROA is then a healthier pointer of the financial performance of a firm. With a high ROA and manageable debt, if ROE is also high it means that the company is generating decent profits using shareholders money. But if ROA is low and there is huge debt carried by the company, even a high ROE can only be a misleading figure. 4.3 Net Interest Margin 4.4 Leverage ratio Debt to Equity Ratio 4.5 Decomposition of ROE DuPont Analysis As revealed in Appendix B, The ROE of a bank is dependent on a various factors and thus change in any one of these factor can affect the rate of return on shareholders equity of the bank. As Net Income is the main source to calculate ROE in conjunction with the shareholders equity in the bank, every alteration in the Income and Expense of the bank openly affects the net income and thus influence the ROE of a bank. The detailed DuPont analysis of Goldman Sachs for year 2010 is presented in Appendix B. The ROE is decomposed as follows wrt dupont identity. Now assuming that changes are made in Income or Expense levels of the Goldman Sachs, its effect will be seen on ROA and ROE. Let us consider a case where the Interest Expense for Goldman Sachs goes down by 10% and there are no changes in its Interest Income, following are the effects on ROA and ROE of the bank. Scenario 1 : -5% change in interest expense Change Values after change Interest Expense -10% 6125.4 Interest Income 0% 12309 Effect on NI 6680.6 39841.6 Effect on ROA +0.07% 0.99% Effect on ROE +0.88% 11.68% A few other situations with amendment in Total Non-interest Income and expenses and their outcome on the ROA ROE of bank are given away in the chart below. Scenario 2 : -5% change in non-interest expense Change Values after change Total Non-interest Income -5% 31975.1 Effect on NI -1682.9 37478.1 Effect on ROA -0.19% 0.73% Effect on ROE -1.46% 8.62% Scenario 3 : +10% change in non-interest expense Change Values after change Total Non-interest Expenses 10% 27962 Effect on NI -2542 3160 Effect on ROA -0.31% 0.27% Effect on ROE -4.44% 3.78% Bank Performance Evaluation Based on Economic Profit 5.1 Risk-Adjusted Return on Capital (RAROC) In risk- adjusted return on capital the capital is allocated for two vital motives: (1) risk management and (2) performance evaluation. In support of risk-management rationale, the banks most favourable capital structure can be establish by allocation of capital to individual business units. This course of action entails assessing the amount of the risk (volatility) each business unit chip in to the total risk of the bank and hence to its overall capital requirements. Now, for performance-evaluation function, RAROC structure allocate capital to business units as part of a procedure for shaping the risk-adjusted rate of return and, eventually, the economic value added of each business unit. The EVA of every and each business unit is its adjusted net income minus the amount of equity capital allocated to the unit times the required return on equity. The purpose is to compute a business units input to shareholder value and so to provide a source for effective capital budgeting and incentive compensation at the business-unit level. RAROC is calculated by dividing risk-adjusted net income by the total amount of economic capital assigned which is dependent on the risk calculation. Risk-adjusted net income is calculated by taking the financial data allotment to the bank and fine-tuning the income statement for expected loss. A further modification is also required to take into account the effects on the net interest margin because the attention is moved from book profitability to economic profitability. Thus RAROC = Risk adjusted income / Allocated Capital RAROC for 2010 of Goldman Sachs therefore comes to 2.24 %. Let us consider some scenarios where the risk adjusted income for Goldman Sachs are changed by {-2%, +2%, -5% +5%}, The effect on its RAROC is represented as below. Change in Risk Adjusted Income 2 % + 2 % 5 % Effect on RAROC 2.20 % 2.29 % 2.13 % Economic Value Added (EVA) EVA (Economic Valued Added) is a present day financial dimension instrument which concludes whether a business is earning greater than its true cost of capital. EVA stands out apart from ROA ROE which are most accepted measures of bank performance. This is because it includes cost of equity capital employed. On the other hand, net banking income and the efficiency ratio, also, do not consider the cost of equity capital employed. Therefore, these ratios possibly will propose a banks performance as healthy but in fact it could be deteriorating its value to its shareholders. EVA is essentially a tool that focuses on maximizing shareholder wealth. EVA = Adjusted earnings Opportunity cost of capital {Net operating Profit after Taxes} {Cost of Equity X Equity Capital } With an aim of creating values, the return on invested capital (ROIC) for a bank must be greater than cost of capital. So, the EVA can be possibly increased in quite a few ways, by: 1) Increasing Net operating Profit after Taxes; 2) Lowering the Cost of Equity and 3) Reducing Equity Capital Conclusion Year on year Goldman Sachs revenues have descended by 11.04% from $51.67bn to $45.97bn. This along with an increase in the cost of goods sold expense has contributed to a reduction in net income from $13.39bn to $8.35bn, a 37.59% decrease. In 2010, Goldman Sachs did not generate a significant amount of cash. Cash Flow from Financing totalled $7.84bn or 17.05% of revenues. In addition the company used 6.16bn for operations while cash used for investing totalled $185m. Goldman results were also dragged down by a $465 million one-time expense to cover a U.K. payroll tax and a $550 million outlay to settle  SEC  charges that it favoured certain clients over others.

Differences in Competencies Between Associate Degree and Baccalaureate Degree Nurses Essay

Differences in Competencies Between Associate Degree and Baccalaureate Degree Nurses Nursing education can be confusing because there are so many ways to become a nurse. However, throughout history, nurse leaders have advocated the importance of higher education for nurses. But as nursing shortages developed, the need for more and more nurses became apparent. To help solve the nursing shortage problem, Mildred Montag developed the associate degree of nursing program (ADN) in 1952. It was designed to be completed in two years and provide a balance of general nursing education along with clinical courses. The original program designed by Mildred Montag was for associate degree nurses to work under the supervision of professional baccalaureate prepared nurses. Due to confusion, the graduates of the associate degree nursing program were allowed to sit for the National Council Licensure Examination (NCLEX-RN). This NCLEX exam was the same exam given to baccalaureate degree nurses (Creasia & Friberg, 2011). Now, associate degree nurses can be found in almost every setting from hospitals to long term care facilities. However, even though associate nurses have the skills to provide adequate patient care, the advanced education of the baccalaureate degree nurse provides leadership skills, advanced critical thinking skill and improved patient outcomes (Lane & Kohlenberg, 2010). Therefore, in recent years the difference in competencies between the associate degree nurse and the baccalaureate degree nurse has been examined, resulting in a push for more nurses to obtain a bachelors degree (BSN). Associate degree nursing programs teach the technical aspect of nursing care. An associate prepared nurse can function well at the bedside. She can monitor the patient’s needs and record the outcomes of treatments. An associate prepared nurse can use critical thinking skills to determine her best course of action in most situations. But the constantly changing field of healthcare is demanding higher educated nurses. It is demanding nurses that are more professional and have an understanding of theory based practice. Nursing and medical organizations across the nation are recommending that all RNs advance their education. An advanced level of education can improve patient safety and quality of care (â€Å"Fact Sheet: Creating,† 2013). This has been evidenced by numerous studies on the correlation between higher educated nurses and patient outcomes. Researchers at the University of Pennsylvania conducted a study that found surgical patients had 14% lower odds of dying as an inpatient within 30 days when being cared for by higher educated nurses. Another study conducted at the University of Toronto found hospitals that increased their pool of baccalaureate prepared nurses by just 10% had a decrease in death of discharged patients (â€Å"Fact Sheet: Creating,† 2013). To fully understand the differences in competencies between an ADN and a BSN, it may be necessary to evaluate how each would perform in a specific patient care situation. For example, a 66 year male is hospitalized with an open wound on his leg. The wound is positive for MRSA and the patient is diabetic. The associate degree nurse dresses the wound properly, and teaches the patient how to take care of the wound. She helps manage the patient’s diabetes and teaches him how to manage it at home. The patient is discharged home with instructions and prescriptions. He is re-admitted a week later with high blood sugars and a worsening leg wound. The same patient is cared for by a nurse with a BSN. During his stay the nurse dresses his wound properly, and manages his blood sugar levels. During her time with him, the nurse questions the patient about his family and his home. Through casual conversation she discovers the patient lives alone, but his daughter lives close by. She also learns he is unable to clean his home properly, but he is adamant about staying there. With the patient’s permission, the nurse contacts the patient’s daughter to learn more about the challenges the patient faces in caring for himself. After talking with the daughter, the nurse discovers the patient has not had an eye exam in 5 years and his vision is poor. He does not follow a diabetic diet and prefers to eat out rather than cook at home. Armed with this new information, the nurse talks with the patient. She tactfully points out his vision problems and poor diet choices. The patient admits he needs new glasses, but cannot afford them. He admits to having trouble seeing the numbers on his insulin syringe. He also states following a diabetic diet is too difficult so he doesn’t bother. The nurse takes this information to the hospital’s case management team and together they get home health care that will help him with his dressings. They also manage to find help to clean his home and funding to get him new glasses. The nurse then makes an appointment for the patient for diabetic teaching provided by the hospital. Prior to discharge the nurse teaches the daughter how to change the wound dressing and how to give insulin injections. She encourages the daughter to go with  the patient to diabetic education classes. The BSN nurse did more than just discharge the patient. She used the metaparadigm of nursing model to treat the patient as a whole. The metaparadigm consists of person, environment, health, nursing and how they all interact with each other. (Gunther, 2011). She recognized the patient was an individual person with individual health needs. She discovered his physical and environmental challenges and learned how they were affecting his health. Utilizing the information she obtained she found the patient the appropriate help for his situation. The associate degree nurse is certainly capable of taking care of patients in almost any healthcare setting. However, healthcare is changing rapidly with increased acuity and short lengths of stay and nursing must change with it by producing more professional, well-educated nurses. References Creasia, J. L. , & Friberg, E. E. (2011). Pathways of Nursing Education. In M. Iannuzzi, & R. Richman (Eds. ), Conceptual foundations: The bridge to professional nursing practice (5th ed. (pp. 23-26). [PageBurst]. Retrieved from www. elsevier. com Fact sheet: Creating a more highly qualified nursing workforce. (2013). Retrieved from http://www. aacn. nche. edu/media-relations/fact-sheets/nursing-workforce Gunther, M. (2011). Theories and frameworks for professional nursing practice. In M. Iannuzzi, & R. Richman (Eds. ), Conceptual foundations: The bridge to professional nursing practice (5th ed. (pp. 97-99). [PageBurst]. Retrieved from www. elsevier. com Lane, S. H. , & Kohlenberg, E. (2010). The future of baccalaureate degrees for nurses. Nursing Forum, 45(4), 218-227. doi:10. 1111/j. 1744-6198. 2010. 00194.

TOWS Matrix Analysis of Interface Inc. - 1133 Words

The TOWS Matrix has been introduced by Heinz Weihhrich in 1982 and therefore analyzes the competitive advantages of a company and lead to the development of different strategies. It is a conceptual framework for systematic analysis that facilitates matching of the external environmental factors (Threats and Opportunities) with the internal ones (Strengths and Weaknesses) of the organization. It is a two- by- two cell approach that assists companies to determine their strategies. By applying this matrix, the company can easily identify how to take advantage of the opportunities it has and at the same time minimize the impact of weaknesses and protect it against threats. The TOWS matrix is a variant of the SWOT analysis, both of these techniques require the primary identification of strengths, weaknesses, opportunities and threats. The aim of SWOT analysis is to use strengths and weaknesses to reduce threats and maximize opportunities, while TOWS compares the internal and external factors. When matching strengths with opportunities, it is clear that advantage will be taken of the external opportunities by using the internal strengths. For instance, in the case of Mercedes Benz, with the technical know-how and the quality image (strength), can take advantage of the external demand for luxury cars (opportunity) by an increasingly affluent public (Clarke, 2002). 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