Financial Performance and Financial Distress Analysis of Dhaka Bank PLC

Abstract

Dhaka Bank PLC's financial health through a comprehensive analysis of its liquidity, efficiency, profitability, and solvency ratios, along with the application of vertical and horizontal analysis methods and the Altman Z-Score to assess financial distress. The study leverages secondary sources, including the bank's annual reports, textbooks, publications, and relevant online materials. The findings reveal that Dhaka Bank PLC maintains stable liquidity, with current and quick ratios consistently above 1, suggesting solid financial standing in the short run. While there is considerable fluctuation in the bank's profit margins, overall profitability is shown by its positive net profit margin. Stable overall asset growth indicates business growth, and steady non-interest revenue from brokerage and commissions highlights healthy revenue diversification. Growing shareholders' equity demonstrates sound financial standing and resilience to shocks. However, the study identifies several issues. The rising efficiency ratio suggests potential inefficiencies in cost management, while decreasing ROA and ROE indicate challenges in generating profits from assets and equity. High financial leverage and debt ratios pose significant financial risk, particularly during economic downturns. An Altman Z-Score of moderate indicates a possible financial distress risk, requiring vigilant risk management and close observation. Profitability is concerned about the drop in net profit and EPS after 2021, and high interest and profit rates on borrowings and deposits may have a negative effect on net interest margins. The study suggests implementing cost control techniques to improve operational efficiency, increasing profitability by diversifying income streams andoptimizing asset usage, and controlling leverage to maintain debt levels under acceptable risk thresholds in order to solve these problems. Strengthening equity through increased equity financing can improve the proprietary ratio and reduce reliance on debt. Furthermore, the bank should continuously monitor financial health indicators, particularly the Altman Z-Score, to mitigate financial distress risks. Strengthening revenue diversification, enhancing asset utilization, ensuring adequate capital buffers, and implementing effective debt management strategies are crucial for sustaining long-term growth and financial stability. Dhaka Bank PLC can support sustainable growth and strong financial health by putting these ideas into practice, which will also strengthen its financial position, increase profitability, and provide resilience against economic challenges.