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SEMESTER SPRING 2014
MONEY & BANKING (MGT411)
DUE DATE: 31ST JULY 2014 MARKS: 10
Learning Objectives: This activity aims to enable the students to get an understanding about
the commercial banks’ objectives.
Minimizing Liquidity Risk
Contradictory nature of these objectives
Learning Outcomes: After going through this activity, the students would be able to
understand the conflicting objectives of commercial banks and how banks can operate by
minimizing such mismatch.
The two-fold objective for any commercial bank is to “Maximize Liquidity (for depositors)”
and “Maximize Profitability (for shareholders)”. But there is a trade-off between them, if one
increases the other decreases.
For liquidity, if a bank holds high reserves then it will have less investment, earn low profit and
low dividend for its share holders.
For profit maximization, if a bank keeps on investing its funds, then it will be difficult to meet
the cash withdrawals of depositors.
Now days, banks face ups and downs in meeting these objectives. A good bank should focus on
“portfolio management”: how the assets and liabilities are to be managed so that the profit
should be maximized and how to bring together these two inconsistent objectives. This need
experienced banking professionals to analyze situation, focus on objectives and opt a portfolio:
balanced & diversified.
In Pakistan, Faysal bank and UBL are two of the commercial banks.
Faysal Bank Limited was incorporated in Pakistan on 1994 as a public Limited company. Faysal
Bank has more than 256 branches in over 80 cities. Faysal Bank ambition is to provide par
excellence services to its customers while meeting their financial needs.
UBL was incorporated in 1959.UBL has kept pace with the changing needs of times. Keeping
the tradition of innovative alive, it introduced Pakistan’s first credit card, the UNICARD and
left its mark by launching the Pak Rupees Travelers cheques.
Now go to your LMS interface and download a “RAR file: MGT411 Assignment 2 SPR14.rar”
(includes the 3 files mentioned below), uploaded in the “Downloads” tab. Get this file
downloaded, extract data and solve the assignment using the data of Financial Year: 2013:
Faysal Bank Financial Statements.pdf
UBL Financial Statements.pdf
Compare the satisfaction level (in relation to the objective) of depositors of these two
banks. Which bank is in a good position? (Calculation: 3 marks + Comments: 2 marks)
Reserves include “In hand local currency and all the accounts which are kept with the
State bank of Pakistan”.
Checkable deposits include “Customers’ current accounts” only.
Depositors’ satisfaction level can be found out by Reserve Ratio.
Trade-off actually exists or not between the Liquidity and Profitability (using variables:
Assets and Equity). Comment
(Calculation: 3 marks + Comments: 2 marks)
Note: Show Complete Workings & Calculations
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students lets start discussion
Please Discuss here about this assignment.Thanks
Our main purpose here discussion not just Solution
We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.
First Thing we need is to identify the Deposits and Cash in hand ITEMS which are to be used to Calculate the Reserve Ratio
Deposits are :-This number expresses the amount that the bank would have to pay out if all of the bank's clients wanted to withdraw all of their money immediately............ If we interpret this statement i would mean that it is the liability of bank which it would have to pay all ways.
Cash the Bank has on hand :- This includes the money in the bank's safe, the bank's registers and any other physical location to which the bank personnel have immediate access.......... and meaning of this statement would be that Cash at hand of bank, its reserves and balances with other banks.
When these things Identified if Correctly
(NOTE : TO all STUDENTS if any thing which i have not mentioned kindly mentioned it with relation to above definitions and discuss to clear the doubt ness)
Now calculation of First UBL Bank:-
Taking items from its financial statement (Assets and Liabilities)
Deposits which bank has to pay Includes Items
-----Deposits and other Accounts (827,847,738)
Cash the Bank has on Hand Includes Items
---- Cash and balances with treasury banks (88,520,725)
----- Balances with other Banks (25,867,497)
----- Reserves (33,681,210)
For Assignment check out the File hope its helpful !!
kya is subject ka koi student nai ha?
g khushkismati s m hu mgt411 ki student :(:"(
u done up with the assignment
tariq sir plzz discuss about the 2nd question of the assignment
how we will calculate
Sir Tariq malik plzz assignment mein further help karein
Sir G please upload solution file....................... :(
sir tariq chotia khtm hu gai hain plz bring some solution
itni mushkil assignment aj grace day hai, pr 0 comments. Tariq Sir ya aap ka kam hai :P ajain meedan mai :D