The tools of the early civilization Essay Example for Free

The tools of the early civilization Essay The tools used by hunters-gatherers in order to survive within their environment are undeniably more primitive than those of the farmers. Born in a period when the benefits of technology and advanced industrialization were not yet present, the hunters-gatherers simply relied on bow and arrow and spears which they themselves made. Most of the time, these tools were only made by wood and trunks of trees which they only gathered around their surroundings. These tools are what they use in chasing for food. They also hunt stray animals for them to have something to cook. They also obtain fruits and other edible plants along their itinerary. The simplistic way by which these tools were constructed accounted for the kind of labor hunters-gatherers had to undergo just to provide for their basic needs. The resources that are immediately available and provided by nature were their principal recourses while using crude tools to exploit these resources. As mentioned above, the tools were usually man-made so the challenge of conceptualizing the design of the tools and the scarcity of materials that can be used really pressed hard on them. However, as man’s thinking developed, he learned that he can settle in some definite place where he can sustain his livelihood. This is in contrast to the stage of hunting and gathering where he had to ambulate in order to exhaust the available resources in all of the places. Once all the edible plants and animals have been plunked down in a certain area, they were obliged to transfer to another location where there will be new resources waiting to be consumed. Upon learning that they can stay put in one location, they subsequently learned to maximize the resources available in their surroundings. He begun cultivating the land around him and plant crops on it. The tools that they used to aid the farming process are much complex but are more helpful to what they are doing. They were also able to come up with simple machines that are far more advanced compared to the tools used by the hunters and gatherers. On the other hand, the tools used by the hunters-gatherers and farmers also have similarities. The tools used by both parties have facilitated their modes of production in the early civilization. Although slightly different in terms of the complexity of design, the tools developed by both hunters-gatherers and farmers were of large contribution to the mode of production. These tools were also mostly hand-made and manifest the simple industrial skills which the early men have possessed. Through their inventiveness and innovative thinking, they were able to come up with the tools that helped them in grappling for survival and sustaining their existence.

Using Environmental Management For Businesses

Using Environmental Management For Businesses Human beings depend on nature for various purposes like food, water, clothing, shelter and even the air to breath. But, the unintended impacts of human actions are now creating a number of environmental issues like global warming, tropical deforestation, toxic waste disposal, ozone depletion and so on. These environmental issues, in turn, cause increased awareness of the importance of environmental ethics, pertaining to the moral relation between human beings and their natural environment (Stewart, p. 154), and increased awareness of the importance of minimizing the impacts on environment arising out of the activities of manufacturing industries, supply chains, transportation, government etc. Manufacturing industries and business organizations cause major environmental issues and therefore effective Environmental Management has recently been viewed as imperative for businesses. This piece of research paper is an attempt to address the need and importance of environmental management for businesses, and outline the benefits of using such management system for business organizations. Environmental Management As Barrow noted, environmental management, a significant part of environmental ethics, is a system of efforts that attempt to minimize the negative environmental impacts of the products and services that a business is related with (p. 33). When companies are manufacturing large volume of goods by using of various technologies, it causes major issues of waste disposal, toxic wastes, air, water and environmental pollution and so on that in turn ultimately cause major environmental issues of global warming, ozone depletion etc. the fundamental concept of environmental management is that negative impacts of organizational activities on its environment should be minimized, energy to be saved, waste to be disposed effectively or to be renewed and environmental pollution to be avoided. In a broader sense, environmental management system that a business implements not only saves human being life, but also, keeps sustainable environment for animals, species and all others living beings in the earth. Environmental management is essentially a significant part of business ethics and corporate social responsibility, because, the operation of the business should never be harmful to the environment and social life. Ryding emphasized that a business, when it is socially responsible and ethical, must have commitment to keep sustainable environment. He suggested that a good corporate citizen must be socially and ethically committed to conduct operations in order to avoid serious damage to the environment and social life (p. 536). Business organizations, regardless of small or large, nationals or multinationals, should set up a system approach, by taking a group of people to be involved in and by setting certain organizational goals and standards to be achieved by them in order to make the company more ethical, socially responsible and morally committed to its environment (Tinsley, p. 2). In recent days, green business concept, environmental management and ISO 14001 have gained significant attention among the corporate giants. ISO 14001 is a specific and systematic international standards for environmental management, providing a framework on how a business can implement environmental management at corporate levels. The environmental management in a business can be effectively implemented if there are well defined policies, good communication among its members, strong desire from the management and social and ethical commitment towards sustainable environment. Importance of using environmental management for businesses The environmental management at corporate levels would be a system approach aligned with strategies, actions and managerial activities that aim at eliminating the impacts of business operation and its products or services on the environment. There are large numbers of electronic machines, plastic products, household goods, food items and chemicals that cause major pollution to the environment or dispose toxic and dangerous wastes or even cause major health issues to the humans. By effectively implementing the environmental management system or ISO 14001, these pollution and environmental issues can be eliminated up to a greater extent and can do justice to the occupants of the earth, including humans, animals and all other living beings. It shows that environmental management at business level can obviously help enhance environmental ethics. Businesses today face rigorous competition from counterparts that causing them to put any potential efforts that can help them achieve competitive advantages. Businesses require environmental management as an effective tool for achieving its competitive advantages because customers that they face are increasingly aware of environment and products and services that are environment-friendly. To be more specific, a business that fails to meet specific requirements of its customers pertaining to providing goods and services that are conforming to the environmental ethics, will lose its market. In contrast, a business with effective environmental management will eventually be socially responsible, ethical and thus to be able to achieve competitive advantages too. It also can be perceived that environmental management is helpful for businesses to create customer loyalty and reputation through satisfying their needs. Secondly, environmental management helps maintain healthy communication among the members of the organization, because people or workforce of the business are more likely to like working environment that are goods for their health and work and this in turn motivate them to perform in their works. Thirdly, by implementing effective environmental management system and by conforming its standards to that of ISO 14001, it can be certified as ISO 14001 that gives greater values in international relations. Waste minimization, energy saving and effective waste disposal are some of the positive aspects of implementing environmental management for businesses. Waste minimization and effective waste disposal can help the business become socially more responsible, especially among the people who live nearby the business. These both result cost saving to the business as well, because, by minimizing wastes and through better disposal methods, the company will be able to cut its costs down. Environmental management encourages energy saving, that not only helps reduce pollution to the nature, but also cut down expenses of the business. Evaluative Conclusion Ethics is perhaps one of the hot buzzwords of today. Ethics relates to both business and environment. This piece of research work integrated environmental ethics and business ethics, detailing how environmental ethics can be enhanced by businesses through an effective environmental management system. This research paper has highlighted key benefits of implementing environmental management for the businesses.

Dumping Subsidy and Trade Disputes Essay -- Economy Economics Essays

Dumping Subsidy and Trade Disputes Too many questions have been asked if dumping implies unfair trade practices. Recently, disputes over dumping make it difficult to decide whether or not we should allow this activity to enter our country. Many of us are equally familiar that more foreign imports mean more jobs are being destroyed in American industries. Because of this particular reason, WTO and GATT members have worked together to see if there is a relationship between dumping and unjust trades. In their study, some have discovered that dumping benefits the economy and helps increase competitions among various industries in the U.S. However, there were also some others who took the opposite side by arguing that dumping is an unreasonable practice of trade and may American economy in the future. If dumping really affects trade and costs jobs in the US, then what are the measures needed to prevent this practice and help maintain fair trade in the global economy. In Section 771(34) of the Act (19 U.S.C 1677(34)) â€Å"dumping is defined as the sale or likely sale of goods at less than fair value† (Beckman, Discrimination and Dumping—Web page). To simply put, dumping is the selling of a product in the United States at a price which is lower than the price for which it is sold in the home market after adjustments for differences in the merchandise, the quantities purchased, and circumstances of sale. For example, Japanese exports of digital cameras into the U.S at lower prices than at its home country; if this practice can be justified then Japan is guilty of dumping. But the question that we are concern here is whether Japanese dumping provides any benefits to our economy. According to Professor Paul Krugman from Princeton... ...ct that dumping hurts the economy as a whole and its subsidy is an unfair practice, and must be removed or prohibited from this global economy. Works Cited: A. Irwin, Douglas. â€Å"Free Trade under Fire†. (2002). R. Kruman, Paul et Obstfeld, Maurice. â€Å"International Economics Theory and Policy†. (1991). P. Stewart, Terence et S. Dwyer, Amy. â€Å"WTO ANTIDUMPING AND SUBSIDY AGREEMENTS†. (1998). Marceau, Gabrielle. â€Å"Anti-Dumping and Anti-Trust Issues In Free Trade Areas†. (1994). H. Jackson, John et A. Vermulst, Edwin. â€Å"Anti-dumping Law and Practice†. A Comparative Study. (1989). Global Trade Negotiation. â€Å"Anti-Dumping†. Oct, 20th 2004. http://www.cid.harvard.edu/cidtrade/issues/antidumping.html. Beckman, Steve. â€Å"Discrimination and dumping† Oct 20th 2004. http://econ.cudenver.edu/beckman/.

Taking Care of Your Pet Essay -- Animals Pets Essays

Taking Care of Your Pet Can you hear the cries of those who do not communicate in the human language? How about the fearful mewing of a motherless kitten? Do you worry for the exhaustion of a donkey, staggering under a load to heavy to bear. Does your heart skip a beat when you hear the whimpering of a lost puppy? Are you filled with sadness when you an animal that has been hit by a car? Do you take in strays and feed them because they are all skin and bones? If so you are a pet lover. You would never hurt a pet. You know the importance of taking care of a pet. Taking care of your pets is a responsibility that you need to have. Pet care involves going the veterinarian, a nutritious diet, and plenty of exercise. First of all, it is recommended that you take your pet to the vet at least once a year. This ensures that your pet has a healthy diet. From your vet you can get any kind medicine that your pet might need. Like heartworm medicine, which should be given to your pet at least once a month. You can also get vitamins for your vet, which is very essential to your dogs diet. Vitamins help in the cold winter months, which can be the hardest on your pet’s joints and bones. If you notice that your pet is walking slower or is not as playful then it is recommended that you get vitamins for your pet. You can get these at you vet’s office, a pet store, a department store that has a pet department such as Wal-mart. When you first receive your pet you may need to go more than once to get all the shots for your pet. It is very important for your pets to have their shots. Shots can be very beneficial to their health. Shots protect your pet from getting many diseases. Also if y ou take in strays you should always have the che... ...dog on a daily basis loose five times more weight than those who walk alone. God was so interest in the welfare of the animals that He commanded Noah to build an Ark big enough to hold two of each kind of animal. In Genesis 1:26 God entrusted us to care for these beautiful creations. Taking care of your pet entails going to the vet, a balanced and nutritious diet, and plenty of exercise. So if you heart goes out the animals that are bred in cramped quarters and exploited for profit. If you cry at pictures and stories of abused animals, then you are an animal lover at heart. You know the importance of taking on the responsibility of caring for a pet. Pass the wisdom on to your children, friends, and neighbors. Everyone should treat animals with care. Animal abuse is a crime; people need to be educated in the responsibility of taking care of their pets.

Patients and Cancer

This paper explores different peer-reviewed articles that attempts to shed some light on the phenomenon of the lived experience of patients with cancer; supporting the fact that individuality is a huge factor in the care of cancer patients. Manu types of cancers exist and patients should be treated as individuals versus as a disease or diagnosis. As oncology nurses we accumulate knowledge on a daily basis that may be revised in practice. Therefore, it becomes our innate duty to visit the literature and gain the understanding and evidence that will help us in improving our practice of nursing.The articles, however, vary in the type of cancer with different treatment modalities and the collection methods but have the commonality of all participants being diagnosed with Cancer. The findings showed that patients have many unmet psychosocial and emotional needs among others but exercise hope when family support is present. These shortcomings or gaps in knowledge can alter how care is rece ived and administered. We as nurses, have a lot of work to do in assisting patients feel more individualized with the diagnosis of Cancer.Each day in practice we meet new patients and see old ones and we may see them smile or get sad or display other emotions but as nurses do not take enough time to find out what our patients face and how they handle their diagnoses of cancer. As nurses we get so wrapped up in our daily tasks. Cancer is an experience that can threaten not only the end of one’s life, but also touch all aspects of the person’s existence, making it significant to them and if it is significant to them then it should also be the same to us.Cancer also imposes so many burdens on patients, families and the society at large. So large that it is labeled the silent killer and will overtake disease as top killer by the end of 2010 (foxnews. com). I chose this topic because I realize the gap in knowledge and communication between what happens to patients between d iagnoses, treatment and discharge, up to the time they return for follow -up cycles to the time they may hear that the cancer has either metastasis or have been cured (in remission).Just knowing that your life will change is significant enough. We, as nurses are first line in the patient care area. The Doctor walks in and tells the patient that they have cancer and then walk out and the nurse is faced with the aftermath, the questions and the emotions that follow. The nurse is also the one that administers the chemotherapy and various radiation treatments and again is faced with questions and emotions. At discharge the nurse again becomes the one that is faced with questions and emotions.It may not be possible to answer all the questions and for the ones that we are not sure of, we can refer or ask the doctor to explain but having the knowledge of what it may be like for these cancer patients can help with how we approach these questions and the treatment options. Having this knowle dge can help in terms of support, teaching, prevention and alleviation of suffering, enabling us to give more culturally congruent care. Literature Review In Arber et al. s (2008) article on the lived experience of patients with pleural mesothelioma it was found that these patients had many unmet psychosocial and emotional needs and that there was a lack of information provided to patients . A feeling of isolation was also reported. All patients and care givers experienced frustration due to the physical experience (Arber et al. , 2008). It was showed that these patients wanted to tell their stories and wanted people to listen. The methodology was phenomenology which was appropriate for the study with unstructured interview questions allowing for participants to speak their mind and their experiences.As nurses sometimes we are unsure of what to say for fear of saying the wrong thing. There was also evidence of loss of intimacy with partners. Macmillan Cancer support (2006) states th at four out of ten couples where one partner has cancer report sexual problems (Arber et al. , 2008). The study was done only on patients with mesothelioma and was very small making it hard to generalize to other cancer areas. The patients and families were only from a specialist palliative community center assuming that these patients had incurable mesothelioma.Benzein et al. , (2005) studied cancer in palliative care in home care and made hope the center of the study. The findings showed that the participants used hope to live as normally as possible. The meaning of the experience of hope seemed to be a will to live for a while longer (Benzein et al. , 2005). The structural analysis revealed the hope of being cured, a hope of living as normally as possible, a presence of confirmative relationships and reconciliation with life and death.The commonality between this article and Arber et al. , 2008 is that these cancers were incurable, however in this article the study group was a mi x of males and females ages 54-83 with a median age of 65. The previous article failed to reveal the ages of the participants, making it difficult to impact practice. The other difference is that the latter was done in the patient’s own homes while the study on patients with mesothelioma was done in a different setting that may influence the outcome.Being surrounded by loved ones in the home setting would allow the patient to feel more human, than being in a hospital setting where they are just another patient and loved ones may not be able to visit at lib, which in the end has a negative impact on recovery. Demir et al. , (2008) in their quest to understand the experience of breast cancer survivors that underwent biopsies used a phenomenological approach to reveal three themes that were evident among participants, namely, the need for information, fear and spiritual needs.The study also suggests that results may be different considering different emotional investments in the ir breasts, sociocultural factors and age. The study was a very small group of twenty with the interviews being held in an unused room outside the clinic before the patients postoperative visits. Having the interviews on postoperative days may further aggravate feelings of fear that could invalidate the study. When compared to the study done by Perreault et al. , (2005) similarities were evident as participants exhibited fear and uncertainty. This study studied women with breast cancer and examined their experiences.Both studies used the interpretative phenomenological approach to gain insights. What this study included that would help with validity that Demir et al. , (2008) did not include was the staging. The staging of the cancer can have a great impact on the emotions and fear and response to experience. This sample size was only six person who lowered the reliability and generalizability. Lacey, (2005), researched breast cancer and support aides revealed that participants were identified as being too overwhelmed and stressed to make decisions about their care.They trusted their physicians to make the appropriate choices and appreciated and welcomed the support of family members. They also expressed hope. These same sentiments were echoed somewhat in Demir et al. , (2008) and Perreault et al. , (2005). All 3 studies involved breast cancer and the study method was the same and even though the same size and ages may have varied, it may prove to offer some insight as to what these women face adding to the validity. All 3 papers also suggest that more research may be necessary to facilitate the different decision- making and emotional abilities. The definite commonality expressed and assumed mong all these articles so far is the need for information especially at different stages. Molen, (2000) study sought to identify the different information needed for people with cancer. Adequate, appropriate and timely information can be a key element for many people in managing the experience of cancer. Different themes emerged from the research. There was a deficit in information regarding self-identity, body image, and family, social and work relationships. A cancer diagnoses impacts all areas of an individual’s life, and life management information is equally as important as medical information. Molen, 2000). Cancer was viewed as an intrusion and illness engendered feelings of vulnerability that impacted on their normal coping mechanisms. This research had six participants all with different types of cancer with ages ranging from 45 to 65. The end results showed feelings and questions received on a daily basis but the sample size was so small and the age range was so limited that may lessen the reliability. However, further research may be needed to identify the different ages when information becomes such a deciding factor or the processing of information since all the participants were older.Similarly, information needs proved to be a big part of the equation as evidenced in another research study done by Molen (2005). However the type of information, the amount and to what depth varied considerably between individuals proving that information needs are unlikely to remain static and consequently, will change throughout the cancer experience. The literature highlights the importance of information giving, however; many problems are encountered with its provision. People with cancer frequently express dissatisfaction with the information given to them and experience difficulty in retaining and processing information.The cancer experience invariably begins before the point of diagnoses and information needs clearly change over time. (Molen 2005) Jones et al. , (2006) in researching the lived experience showed similarity with the Molen, (2000) themes that emerged from the different stories including changing concepts of self, the significant of relationships, being different from the past and temporality. These patie nts were bone marrow transplant candidates who were experiencing a mountain of emotions that they believed were affecting them negatively.From their stories it was clear that all participants underwent many physical and emotional changes. Taking it to a different level Meenaghan et al. , (2010) researched elderly patients and their lived experience and concluded that all participants experienced fear and shock at diagnoses but also experienced hope despite their age. With good support from family and friends participants exhibited hope and revealed that they learned to cope with the diagnoses and its treatments. As expressed in Perreault et al. (2005), the same fear and uncertainty was revealed and the same method of data collection and interview was used. Walker et al. , (2009) attempted to understand the lived experience of cancer patients undergoing photodynamic therapy. Analysis of the data yielded six themes, the impact on day –to- day life, existential meaning, the phys ical effects of treatment, and the kaleidoscope of emotions, information gap and family burden. This article summarizes all the feelings expressed by all the previously reviewed articles.If not all a least one of the articles expressed the same feelings which leads nurses to believe that these are the expected emotions, fears and expressions that can be experienced and that we all should be mindful of the factors that to suffering and the nursing interventions that can be used to address these multiple dimensions of suffering. All these studies used the phenomenological approach which is appropriate and if not the interpretative design the descriptive. Sample sizes and ages vary but the information and end results remained the same or close to the same throughout this literature review.

The Economy vs the Enviroment

Yoveta Adams 12/14/12 English 1101 9:00 A. M. Essay # 6 The Economy vs. the Environment The unemployment rate is almost nine percent, the value of the American dollar is steadily declining, and the housing market is far from stable. It is undeniable that the American people need jobs. TransCanada, â€Å"a leader in North American energy production† (Canadian Business Resource) and its subsidiary, TransCanada Pipelines Limited has a seven billion dollar plan to create jobs by extending the already existing Keystone Pipeline.The Keystone pipeline harvests oil from the tar sands in Hardesty, Alberta then runs the crude oil to Patoka, Illinois. The plan is to extend the pipeline from Hardesty to run through Montana, South Dakota, Nebraska, Kansas, and Oklahoma to finally end in Port Arthur, Texas where it can be refined. According to TransCanada, this can potentially create thousands of jobs including: 13,000 Americans to construct the pipeline-pipefitters, welders, mechanics, ele ctricians, heavy equipment operators, among other jobs-in addition to 7,000 manufacturing jobs†¦.And additionally local businesses along the pipeline route will benefit from the 118,000 spin off jobs Keystone XL will create through increased businesses for local goods and service providers. (TransCanada) That’s a lot of jobs. Not only that, this can help to reduce our dependency on outside sources to supply us with crude oil, according to Chris Sorenson that this â€Å"36 inch diameter pipeline could Adams Page 2 Potentially triple the existing pipeline capacity to 1. 3 million barrels per day† That’s great!Not only will this create over a hundred thousand jobs, it can also help lower the price of gas, considering it won’t be coming from middle east, it will be coming from our neighbors to the north. So why has President Barack Obama, decided to push back the decision to approve or deny the extension until after the 2012 election? Many republicans, i ncluding Speaker of the House, John Boehner think this is detrimental to the American economy claiming, â€Å"By punting this project, the president has made it clear that campaign politics are driving U. S. policy decisions at the cost of American jobs. (Page 16) Maybe it has something to do with the environment. Like the fact that the already existing Keystone pipeline has been ordered shut down by the United States Department of Transportation, due to a series of leaks and spills. Elisabeth Rosenthal says that in May of 2011 alone, â€Å"the Keystone 1 pipeline suffered two leaks†¦one of which involved over 10,000 gallons of oil. † (Page 1) In spite of this, TransCanada claims that â€Å"pipelines are the safest, most reliable, economical and environmentally favorable way to transport oil and petroleum products.Leaks are rare and tend to be small. † I don’t call ten thousand gallons small. Not only that, Rosenthal also states: Environmental experts have raised concerns about the possibility of leaks from Keystone XL, in part because TransCanada has been granted waivers that Adams Page 3 Effectively allow it to use thinner steel that would normally be required in the United States. They add that the company’s pipelines are particularly vulnerable because the oil from tar sands is more corrosive than conventional oil and is pumped under higher pressure and temperatures. Page 1) Still, oil corporations claim that this source of crude oil is ethical, even though the methods used to extract it is devastating to the environment and the ecosystems within. Environmental activist Bill McKibben declares: The biggest machines in the world scrape away the woods and dig down to the oily sand beneath, and so far they got three percent of the oil, but they’ve already moved more soil than the Great Wall of China, the Suez Canal, and the Aswan Dam and Pyramid of Cheops combined†¦ (Page 40) And goes on to add:Right now, the atmos phere holds 392 parts per million CO2 already dangerously above the 350 ppm scientists say is the maximum level. If you could somehow burn all the tar sands at once†¦ the atmospheric concentration would rise another 150 parts per million. (Page 40) Lee Terry, a republican representative from Nebraska, recently drafted a bill that would allow the Federal Regulatory Commission to grant permits that would allow TransCanada to commence the project within thirty days of getting an application. I know we are desperate for Adams Page 4Jobs but, how far can this bill go if the decision to build this pipeline was in Barak Obama’s hands alone and he already made the decision to wait until after the next election to decide? As for the thousands of jobs TransCanada claim this will create, the U. S. Department of State predicts the number will be closer to between twenty-five hundred and four thousand. That’s a big difference. Maybe the difference will stem from people that Tr ansCanada will hire to clean up the existing mess that Keystone 1 has already created, and the ones that will happen in the future if they continue to use substandard materials to build the pipeline.What about reducing our dependency on outside resources for crude oil? I mean that has to have some bearing in all of this. Alexander Cockburn suggests that â€Å"from day one of the Keystone XL scheme the oil companies’ plan has been to take the heavy crude from Alberta, refine it in Texas and then ship it in the form of middle distillates-diesel, jet fuel and heating oil-primarily to Europe and Latin America. †(Page 9) I think this could potentially raise the price of gas in the U. S. considering we will be the ones to ship it.One should also keep in mind that this is a pipeline, it takes oil from the earth and eventually, it will run out. It seems to me that this is just a short term solution. It certainly isn’t going to get Americans away from using crude oil as a sustainable source of energy, regardless of the amount of jobs this will create. If the Republican Party and TransCanada truly cared about the American economy and job creation, they would come up with a cleaner, more efficient, and less harmful way. The Keystone XL pipeline is a bad idea, and the way I see it the environment is more important than the economy.

Commercial Banking

Assignment 1 Executive Summary The purpose of this report is to evaluate the performance of both Hong Leong Bank and its peer bank RHB Bank for the financial year ended in 2010. The DuPont model is used to provide the information on the bank’s liquidity, profitability, efficiency and leverage status that allows financial analyst to evaluate on the performance of the bank as a result of the changes of these factors. A trend comparison for year 2010, 2009 and 2008 is conducted and evaluated its respective ratios and other financial data.The peer comparison of financial ratios between RHB Bank & Hong Leong Bank is evaluated and analysed to see which bank performs better in 2010. The other key ratios are also calculated in for deep analysis on to see how well these two banks in Malaysia perform in 2010. In addition, its credit risk that includes the risk management and its policy of both banks is then evaluated and compared to see which bank manages its credit risk properly.Fi nally, this report provides an overview of the performance of both RHB Bank and Hong Leong Bank for the financial year ended in 2010 and conclude which bank perform better in terms of various financial ration and management of credit risk. II II Assignment 1 Part A: Bank Performance Question 1: Dupont Model: a. Dopont Model: The DuPont model analysis is a common form of financial statement analysis and this model provides information on the bank’s liquidity, profitability, efficiency and leverage status that allows financial analyst to evaluate on the performance of the firm as a result of changes in one or more of these actors (Milbourn & Haight, 2005). According to Narayanan (2010), the DuPont model provides a starting point to determine the strength and weakness of the firm. It is also a very powerful financial tool to assist financial analyst, shareholders, investors and bankers in understanding the profitability of the firm and a tool that evaluate the firm’s financial statements by comparing the relationships within the income statement and balance sheet, or between the two statements. (Milbourn & Haight, 2005). The DuPont Model starts with the return of equity (ROE).The ROE is a strong measure on how well the management of the bank creates value to the shareholders (Pinsent, 2010). It is also a good starting point in the analysis of a bank’s financial condition. ROE is calculated by dividing the net income by total equity (Gup, Avram, Beal, Lambert & Kolari, 2007). The formula is as follows. ROE= Net incomeEquity According to Gup et at, (2007), the ROE ratio is equal to the Return of Assets (ROA) ratio times the Leverage multiplier that shows the dollar amount of assets that are financed by each dollar of the equity. The leverage multiplier is one indicator of financial leverage.ROE=ROA x Leverage Multiplier Net IncomeEquity = Net IncomeTotal Assets x Total AssetsEquity Leverage multiplier shows the extent to which the b ank relies on debt financing. The higher the leverage multiplier, the more debt the bank is carrying. Leverage Multiplier= Total AssetsEquity The Return of Assets (ROA) measures the bank profits as a percent of its assets and also measures the ability of the firm to use the real financial resources of the bank to generate revenue. It is commonly used to evaluate bank management (Gup et al, 2007). ROA is calculated by dividing net income y total assets. ROA= Net IncomeTotal Assets In the DuPont model analysis, the ROA is expended into another equation: Net IncomeTotal Assets = RevenueTotal Assets x Net IncomeRevenue Thus the DuPont model translates the ROA equation into the following: ROA=Asset Utilisation x Net Profit Margin The net margin ratio shows how much profit the bank makes for every $ 1. 00 it generates from the revenue. Generally, the higher the ratio, the better the net margin. In order to obtain more revenue, most banks will want to reduce the net income to achieve a hig her net margin ratio.Net Margin= Net IncomeRevenue The asset utilisation shows the amount of income the bank generated for every dollar worth of the assets available. This shows the bank’s efficiency in utilising the assets. Basically, the higher the asset turnover, the better the firm use the assets. Asset Turnover= RevenueTotal Assets In order for the bank to increase the ROE, banks need to increase their credit risk; this can be done by providing more loans to customers and subsequently, the bank will earn more income. This will in turn increase the ROA and the same time increases the ROE.Limitations of the Dupont model analysis: * It is based on accounting numbers, which are basically not reliable. * it does not include the Cost of Capital. * Garbage in, garbage out. Assumptions of the DuPont method: * Accounting numbers are reliable. b. Dopont Model Analysis: i. & ii. Trend Comparison of Hong Leong and RHB (2008, 2009 & 2010): Hong Leong Bank’s data: | 201 0| 2009| 2008| | RM’000| RM’000| RM’000| Revenue| | | | Interest income| 2,592,586| 2,937,002| 3,064,785| Non-interest income| 506,979| 511,537| 501,067| Total| 3,099,565| 3,448,539| 3,565,852| | | | | Operating costs| | | |Interest expense| 1,209,792| 1,579,883| 1,688,293| Non-interest expense| 831,139| 806,030| 786,194| Total| 2,040,931| 2,385,913| 2,474,487| | | | | Net profit| 767,817| 659,678| 838,874| Total assets| 77,730,208| 70,732,513| 69,992,756| Equity| 5,815,063| 5,319,288| 4,923,133| RHB Bank’s Data | 2010| | RM’000| Revenue| | Interest income| 4,530,637| Non-interest income| 722,818| Total| 5,253,455| Operating Cost| | Interest Expense| 1,811,153| Non-interest Expense| 1,302,007| Total| 3,113,160| | | Net profit| 1,294,437| Total assets| 105,179,231| Equity| 8,397,474| Dupont Model of Hong Leong Bank 2010| 2009| 2008| Return On Equity: Net incomeEquity| RM767,817,000RM5,815,063,000= 13. 20%| RM659,678,000RM5,319,288,000= 12. 40%| RM83 8,874,000RM4,923,133,000= 17. 04%| Leverage Multiplier:Total AssetsEquity| RM77,730,208,000RM5,815,063,000=13. 37times| RM70,732,513,000RM5,319,288,000= 13. 30times| RM69,992,756,000RM4,923,133,000= 14. 22times| Return On Assets:Net IncomeTotal Assets| RM767,817,000RM77,730,208,000= 0. 99%| RM659,678,000RM70,732,513,000= 0. 93%| RM838,874,000RM69,992,756,000= 1. 20%| Asset Utilization:RevenueTotal Assets| RM3,099,565,000RM77,730,208,000= 3. 9%| RM3,448,539,000RM70,732,513,000= 4. 88%| RM3,565,852,000RM69,992,756,000= 5. 10%| Net margin:Net incomerevenue| RM767,817,000RM3,099,565,000= 24. 77%| RM659,678,000RM3,448,539,000= 19. 13%| RM838,874,000RM3,565,852,000= 23. 53%| Dupont Model of RHB Bank | 2010| Return On Equity: Net incomeEquity| RM1,294,437,000RM8,397,474,000=15. 41%|Leverage Multiplier:Total AssetsEquity| RM105,179,231,000RM8,397,474,000=12. 53times| Return On Assets:Net IncomeTotal Assets| RM1,294,437,000RM105,179,231,000=1. 23%| Asset Utilization:RevenueTotal Assets| RM5, 253,455,000RM105,179,231,000=4. 9%| Net margin:Net incomerevenue| RM1,294,437,000RM5,253,455,000=24. 64%| c. Analysis and Discussion: Trend comparison of Hong Leong Bank Ratio| 2010| 2009| 2008| Net margin| 24. 77%| 19. 13%| 23. 53%| Asset utilisation| 3. 99%| 4. 88%| 5. 10%| Return on assets| 0. 99%| 0. 93%| 1. 20%| Leverage multiplier| 13. 37times| 13. 30times| 14. 22times| Return on equity| 13. 20%| 12. 40%| 17. 04%| Hong Leong Bank’s net margin is higher in year 2010 (24. 77%) compared to the year 2009 (19. 13%) and year 2008 (23. 53%). It means that operating costs are relatively lower in year 2010 compared to year 2009 and year 2008.Operating costs in the year 2010, 2009 and 2008 are RM2,040,931,000, RM3,448,539,000 and RM2,474,487,000 respectively. This indicates that operating costs are well controlled by Hong Leong Bank in 2010 compared to 2009 and 2008. Thus this shows that the bank run their operations effectively in 2010 that increased its profitability. Hong Leon g Bank’s asset utilisation is lower in year 2010 (3. 99%) compared to the year 2009 (4. 88%) and 2008 (5. 10%). It decreased constantly from year 2008 to 2010. The decline in the figures shows that beginning in the year of 2009, the bank did not utilise much of its assets to generate more revenue.Therefore revenue was decreasing from 2008 to 2009. Revenue for the year 2010, 2009 and 2008 are RM3,099,565,000,RM3,448,539,000 and RM3,565,852,000. This shows that the bank well utilised the assets to generate revenue in 2008 compared to 2010. Hong Leong Bank’s return on assets is lower in year 2010 (0. 99%) compared to the year 2009 (0. 93%) and 2008 (1. 20%). This shows that Hong Leong Bank did not do well in managing and utilising its asset base in 2010. Hong Leong Bank’s leverage multiplier decreased from the year 2008 (14. 22times) to year 2009 (13. 30times) and increased back in year 2010(13. 7times).This implies that Hong Leong Bank does not depend too much on debt financing in their activities and carried less debt in their operations in 2009 compared to year 2010 and 2008. Thus, Hong Leong Bank was exposed to more risk in 2008 compared to year 2010. Hong Leong Bank’s return on equity decreased from year 2008 (17. 04%) compared to year 2009 (12. 40%) and increased back in year 2010 (13. 20%). This implies that it did not manage and utilise its equity base and therefore the investors did not get a better return from the Hong Leong Bank in 2010.Overall, Hong Leong Bank performance on profitability was better in 2008 compared to the year 2009 and 2010. Peer comparison Ratio| Hong Leong Bank| RHB Bank| Net margin| 24. 77%| 24. 64%| Asset utilisation| 3. 99%| 4. 99%| Return on assets| 0. 99%| 1. 23%| Leverage multiplier| 13. 37times| 12. 53times| Return on equity| 13. 20%| 15. 41%| Hong Leong Bank’s net margin (24. 77%) is higher than RHB Bank’s (24. 64%). It means that RHB Bank’s operating costs are relatively hig her. RHB Bank’s operating costs are RM3,113,160,000 whereas Hong Leong Bank’s operating costs are RM2,040,931,000.Thus, RHB Bank’s operating costs are higher by RM1,072,229,000. This indicates that operating costs are well controlled by Hong Leong Bank compared to RHB Bank. RHB Bank’s asset utilisation (4. 99%) is higher than Hong Leong Bank’s (3. 99%). This shows that RHB Bank used most effectively of its assets to generate more revenue than Hong Leong Bank. RHB Bank’s revenue is RM5,253,455,000 which is higher than Hong Leong Bank’s revenue which is RM3,099,565,000. Hong Leong Bank’s return on assets is 0. 99% which is slightly lower than RHB Bank’s return on assets which is 1. 23%.This can be implied that Hong Leong Bank did not manage and utilise its assets base better than RHB Bank during operations to generate revenue. However, both banks generated low return on the basis of their assets. With total assets of RHB B ank is RM105,179,231,000, it generated revenue of RM5,253,455,000 whereas Hong Leong Bank’s total assets is RM77,730,208,000 and it generated revenue of RM3,099,565,000. Even though, RHB Bank has assets of 1. 35times more than Hong Leong Bank, its return on assets is still low.Thus Hong Leong Bank managed its assets better than RHB Bank. Hong Leong Bank’s leverage multiplier (13. 7times) is higher than RHB Bank’s (12. 53times). Hong Leong bank has leverage multiplier of 0. 84times more compared to RHB Bank. This implies that RHB Bank does not depend too much on debt financing in their activities and carries less debt in their operations. Thus, Hong Leong Bank is exposed to more risk than RHB Bank. Hong Leong Bank’s return on equity is 13. 20% which is lower than RHB Bank’s 15. 41%. RHB Bank has a higher ROE because possibly the bank does not rely too much on debt financing and offers a high return to shareholders of the bank. Thus, shareholders of RHB Bank will be happy and stay with RHB Bank.Shareholders of Hong Leong Bank may sell its shares and leave the bank. Generally, the overall financial performance of Hong Leong Bank is not very well in comparison with RHB Bank (peer bank). It is possible that Hong Leong Bank’s objectives and strategies are different from RHB Bank’s. Question 2: Hong Leong Bank’s data of 2010 Interest earning asset 1:| RM’000| Deposits and placements with banks and other financial institutions| 7,004,664| Securities held at fair value through profit or loss| 6,703,224| Available-for-sale securities| 3,859,367| Held-to-maturity securities| 7,042,610| Loans, advances and financing| 33,589,093|Other assets| 2,014,821| Total| 60,213,779| | | Earning assets 2:| | Interest Income Assets:| | Deposits and placements with banks and other financial institutions| 7,004,664| Securities held at fair value through profit or loss| 6,703,224| Available-for-sale securities| 3,859,367| Held -to-maturity securities| 7,042,610| Loans, advances and financing| 33,589,093| Other assets| 2,014,821| | | Non-Interest Income Assets:| | Investment in subsidiary companies (Note 31) earning dividend| 714,092| Investment in associated company (Note 31) earning dividend| 946,505| Total| 61,874,376| | |Interest sensitive assets 3:| | Cash and short-term funds| 13,421,408| Deposits and placements with banks and other financial institutions| 7,004,664| Available-for-sale securities| 681,619| Held-to-maturity securities| 1,705,674| Loans, advances and financing| 30,712,038| Total| 53,525,403| | | Interest bearing liabilities 4:| | Deposits from customers| 63,239,050| Deposits and placements of banks and other financial institutions| 3,791,129| Bills and acceptances payable| 285,366| Other liabilities| 3,890,295| Total| 71,205,840| | | Interest sensitive liabilities 5:| | Deposits from customers| 54,798,922|Deposits and placements of banks and other financial institutions| 3,784,376| Bil ls and acceptances payable| 25,453| Total| 58,608,751| | | | | Liquid assets 6:| | Cash and short-term funds| 13,928,247| Deposits and placements with banks and other financial institutions| 7,004,664| Loans, advances and financing (Note 8)| 9,057,329| Available for sales securities| 3859367| Total| 33,849,607| | | Deposits | 7,004,664| Shareholders’ fund = Total equity| 5,815,063| | | Net-write offs 7:| 202,219| NOTES: 1 Interest earning asset are assets that earns interest income. (Note 28 of pg113 of Hong. Leong Bank Annual Report 2010) Earning assets Income earning assets held by a bank typically include interest bearing balances, investment securities and loans. (Note 28 of pg113 & Note 31 of pg115 of Hong Leong Bank Annual Report 2010) 3 Interest sensitive assets are the dollar value of assets that either mature or can be repriced within within a selected time period such as one year. 4 Interest bearing liabilities are those liabilities that have to pay interest. 5 Interest sensitive liabilities are the dollar value of liabilities that either mature or can be reprised within a selected time period usually of one year.Liquid assets are unpledged, marketable short term securities that are classified as available for sale, plus federal funds sold and securities purchased under agreement to resell, a liquid asset can be easily and quickly converted into cash with minimum loss. 7 Net Write Offs is the amount written off under the assets of loans, advances and financing. (Note 8of pg95 of Hong Leong Bank Annual Report 2010) NOTES: 8 Interest Sensitive Assets RM’000 13,421,408 7,004,664 681,619 1,741,674 30,712,038 Interest Sensitive Liabilities RM’000 54,798,922 3,784,376 25,453 Interest Sensitive Assets RM’000 3,421,408 7,004,664 681,619 1,741,674 30,712,038 Interest Sensitive Liabilities RM’000 54,798,922 3,784,376 25,453 RHB Bank’s data of 2010 Interest Earning asset 1:| RM’000| Loans, advances and financ ing| 71,125,558| Money at call and deposit placements with banks and other financial institutions| 1,539,648| Securities purchased under resale agreement| 276,407| Financial assets held-for-trading| 129,583| Financial investments available-for-sale| 8,143,221| Financial investments held-to-maturity| 8,143,221| Total| 89,357,638| | | Earning assets 2:| | Loans, advances and financing| 71,125,558|Money at call and deposit placements with banks and other financial institutions| 1,539,648| Securities purchased under resale agreement| 276,407| Financial assets held-for-trading| 129,583| Financial investments available-for-sale| 8,143,221| Financial investments held-to-maturity| 8,143,221| Total| 89,357,638| | | Interest sensitive assets 1:| | Cash and short-term funds| 10,270,874| Securities under resale agreement| 276,398| Deposits and placements with banks and other financial institutions| 777,779| Financial investment available-for-sale | 1107052| Held-to-maturity securities| 3833825| Loans, advances and financing| 52741914| Total| 69,007,842| | | Interest bearing liabilities 4:| | Deposits and placements of banks and other financial institutions| 6,158,453| Deposits from customers| 80,567,577| Subordinated obligations| 3,018,157| Recourse obligation on loans sold to Cagamas Berhad| 818,503| Hybrid Tier I Capital Securities| 605,407| Long term borrowings| 819,362| Others liabilities| 868,165| Total | 92,855,624| Interest sensitive liabilities 2:| | Deposits from customers| 63,270,532| Deposits and placements of banks and other financial institutions| 5558376| Bills and acceptances payable| 2934533|Recourse obligation on loans sold to Cagamas Berhad| 147030| Long term borrowings| 817127| Total| 72,727,598| | | | | Liquid assets 3:| | Cash and short-term funds| 11093561| Securities purchased under resale agreements| 276,407| Deposits and placements with banks and other financial institutions| 782,462| Financial assets held-for-trading| 119,374| Financial investment available-for-sale| 1176035| Financial investment held-to-maturity| 3854749| Loans, advances and financing| 14124170| Other assets| 88835| Derivative assets| 190637| Total| 31,706,230| | | Deposits | 1,539,648|Shareholders’ fund = Total equity| 8,397,474| | | Net-write offs 7:| 1,033,573| NOTES: 1, 2, 3 – Please refer to appendix. | Hong Leong BankRM’000| RHB BankRM’000| Interest earning assets| 60,213,779| 89,357,638| Interest bearing liabilities| 71,205,840| 92,855,624| Earning Assets| 61,874,376| 89,357,638| Interest sensitive assets (RSA)| 53,525,403| 69,007,842| Interest sensitive liabilities (RSL)| 58,608,751| 72,727,598| Liquid assets | 33,849,607| 29,990,240| Shareholders’ fund| 5,815,063| 5,815,063| Net-write offs| 202,219| 1,033,573| Operating Income| 3,099,565| 5,253,455|Operating Expense| 2,040,931| 3113160| Other key indicators for the year ended 2010: Bank efficiency| Hong Leong Bank| RHB Bank| Efficiency ratio:Operating expenses Ope rating income| RM2,040,931,000RM3,099,565,000= 65. 85%| RM3,113,160,000RM5,253,455,000= 59. 26%| Cost to assets ratios:Operating expenses Total assets| RM2,040,931,000RM77,730,208,000= 2. 63%| RM3,113,160,000RM105,179,231,000= 2. 96%| Efficiency ratio measures the changes of costs in relation to income. Hong Leong Bank has an efficiency ratio of 65. 85% while RHB Bank is one with the lower which is 59. 26%.This implies that Hong Leong Bank’s rate in increasing the operating income is at lower rate compared to RHB Bank. In terms of rate of increase in operating income, Hong Leong has the lower efficiency compared to RHB. Cost to assets ratio is used to measure the costs incurred in relation to the assets size. RHB Bank has a higher cost to assets ratio that is 2. 96% compared to Hong Leong Bank that has a figure of 2. 63%. Therefore in term of cost of control relative to the total assets owned, Hong Leong is more efficient than RHB Bank. Interest differentials| Hong Leong Bank | RHB Bank|Net interest income:Interest earned -Interest expense| RM2,592,586,000 -RM1,209,792,000= RM1,382,794,000| RM4,530,637,000-RM1,811,153,000= RM2,719,484,000| % of interest margin:interest earned – interest expenses Earning assets| RM2,592,586,000-RM1,209,792,000RM61,874,376,000= 2. 23%| RM4,530,637,000-RM1,811,153,000RM89,357,638,000= 3. 04%| %interest spread(interest earned/interest earning assets) – (interest expense/ interest bearing liabilities)| (RM2,592,586,000/RM60,213,779,000)-(RM1,209,792,000/RM71,205,840,000)= 2. 1%| (RM4,530,637,000/RM89,357,638,000)-(RM1,811,153,000/RM92,855,624,000)= 3. 12%| Net interest income refers the difference between revenue that is generated from the bank’s assets and expenses associated with paying out its liabilities. In the table above, RHB Bank’s net income is RM2,719,484,000 which is higher than Hong Leong Bank which have a figure of RM1,382,794,000. This means that RHB Bank has higher excess revenue and interest income after deducting interest paid on deposit from interest earned on assets.Percentage interest margin shows the dollar difference between interests earned and interest expense, as a percentage of earnings assets. Hong Leong Bank’s% interest margin is 2. 23% which is lower than RHB Bank which is 3. 04%. This implies that RHB Bank made a better investment than Hong Leong Bank due to higher percentage interest margin. Percentage interest spread refers to the difference in borrowing and lending rates of financial institutions (such as banks) in nominal terms. RHB Bank’s % interest spread is 3. 12% which is higher than Hong Leong Bank’s 2. 23%. Risk management| Hong Leong Bank| RHB Bank|Interest rate riskinterest sensitive assets interest sensitive liabilities| RM53,525,403,000RM58,608,751,000= 0. 91| RM69,007,842,000RM72,727,598,000= 0. 95| Credit risk net write-offs total assets| RM202,219,000RM77,730,208,000= 0. 26%| RM1,033,573,000RM105,179,231,000= 0. 98%| Liquidity risk :liquid assets/total asset liquid assets/deposits| RM33,849,607,000/RM77,730,208000= 0. 44RM33,849,607,000/RM7,004,664,000= 4. 83| RM29,990,240,000/RM105,179,231,000= 0. 29RM29,990,240,000/RM1,539,648,000= 19. 48| Capital risk :shareholders’ funds total assets| RM5,815,063,000RM77,730,208,000= 7. 48%| RM8,397,474,000RM105,179,231,000= 7. 8%| Interest Sensitivity ratio measures the interest rate risk and it measures the level of repricing irregularities between the bank’s assets and liabilities. RHB bank has an interest sensitivity ratio of 0. 95 while Hong Leong has 0. 91 which is slightly lower than RHB Bank. This implies that RHB Bank can replace assets with higher yielding assets quicker than replacing the low cost deposits with more funds compared to RHB. Credit risk refers to risk of loss of principal due to the borrower’s failure to repay the loans or otherwise meet the contractual obligation. RHB bank has a higher credit risk which stands at 0. 8 % compared to Hong Leong that has a lower figure of 0. 26%. This shows that Hong Leong is better in managing its credit risk compared to RHB. Liquidity ratio is used to measure the ability of the bank to repay off its short term obligations. RHB Bank has lower liquidity ratios of 0. 29 while Hong Leong has a higher ratio of 0. 44. This shows that Hong Leong has higher liquid assets to meet short term obligation and able to repay all short term debt in time compared to RHB Bank. The capital risk ratio is used to calculate the capital risk and it measures the financial stability of the bank.RHB Bank has a higher simple capital ratio that has a figure 7. 98% compared to Hong Leong bank that has a value of 7. 48%. This implies that RHB is well protected against any operating losses incurred than Hong Leong. Overall, in terms of risk management RHB Bank is performing well compared to Hong Leong Bank for the year ended 2010. Question 3: Comparison of forms of loans between RHB and Hong Leong Bank OverdraftsTerm loans/financing-Housing and shop loans/financing- Syndicated term loans/financing- Hire purchase receivables- Lease receivables- Other term oans/financingCredit/charge card receivablesBills receivableTrust receiptsClaims on customers under acceptance creditsBlock discountingRevolving creditStaff loans/financingFloor stockingOther loans/financingUnearned interest and incomeGross loans, advances and financingFair value changes arising from fair value hedgesUnamortised fair value changes arising from terminated fairvalue hedgesAllowance for impaired loans and financing-individual impairment allowance-collective impairment allowance-general allowance-specific allowanceAllowance for bad and doubtful debts and financing:- specific- generalTotal net loans, advances and financing| RHB Bank (RM’000)5,976,56915,908,732835,5889,322,667-29,854,4431,644,4651,418,203325,1774,130,205-3,491,071336,5281,56973,245,217-(682,522)(1,437,137)—-71123,9 89| Hong Leong Bank (RM’000)2,086,55016,933,8161,458,6333,284,687-1,653,6902,017,519211,01992,9823,184,6968,2181,219,78096,668-44,390(613,549)31,679,09928,3858,714—(306,807)(471,305)30,938,086|Credit risk is the risk of financial loss due to a borrower or counterparty being unable or unwilling to deliver on its payment obligations to the Bank, which leads to a loss of revenue and the principal amount. It arises principally from lending, trade finance and treasury activities (Hong Leong Bank Annual Report 2010 pg. 150). Based on the above table shows the comparison of the total amount of loans for Hong Leong Bank and RHB Bank for the financial year ended 2010. RHB Bank has the highest number of loans that stands at RM71,125,558,000 while Hong Leong Bank has a total of RM 33,589,093,000. However, based on the credit risk ratio RHB Bank has a higher credit risk which stands at 0. 98 % compared to Hong Leong that has a lower figure of 0. 26%.This shows that Hong Leong is b etter in managing its credit risk compared to RHB Bank RHB Bank has 2. 1times more loans than Hong Leong Bank, but it’s credit risk is 3. 76times more than Hong Leong Bank. It implies that Hong Leong is better in managing its credit risk and loan portfolio because most borrowers able to pay back the loan to the bank. Therefore, Hong Leong provided the best of the credit risk quality. In order for the bank to increase and strengthen the risk management practices, RHB Bank ensures to maintain the credit quality of its loan portfolios, improve cost effectiveness, and ensure the liquidity and capital stay strong throughout the financial year in 2010.Therefore, RHB Bank manages risk through clearly defined guidelines that are approved by the Board of Directors, through a framework of established control and reporting process. Hong Leong Bank also gives a strong priority for managing effectively in credit management. It is also managed by high-experience personal with high level re view undertaken by the Management Credit Committee under the supervision of the Board Credit Supervisory Committee. The bank integrated risk management structure is similar to RHB Bank whereby credit risk framework that is compliant with Bank Negara Malaysia’s guidelines on ‘‘Best Practices for the Management of Credit Risk†.The Group Risk Management Committee (GRMC) had been established by RHB Bank for risk oversight within the bank. Among the committees of this group are namely the Group Credit Risk Management Committee (GCRMC), Group Operational Risk Management Committee (GORMC) and Group Assets and Liabilities Management Committee (GALCO) assist the GRMC in managing credit risk, operational risk as well as market and liquidity risk. The committee ensures the development and implementation of risk policies as well as the effectiveness of policies. Among the exposure of credit risk in RHB Bank may be categorized as primary exposure. Loans, advances and fin ancing are the credit risk that arises in the primary exposure.Most of the lending activities in the bank are guided by the Group’s Credit Policies and Guidelines, in line with Best Practices in the Management of Credit Risk, issued by Bank Negara Malaysia. The credit risk policy includes an overview of the lending organisation, and the responsibilities of the parties in the organisation whereby the Board have a loan committee that oversees major new loan and renewals and the performance of the loan portfolio (Gup et al, 2007). Example, Hong Leong will be redeveloping a new credit risk system for corporate and commercial borrowers while for the retail segment, the bank has implemented a credit application and behavioural scoring system in order to improve the Bank’s ability to control credit losses within predictive ranges and achieve a well balanced portfolio.This is accordance to the Basel II that RHB Bank is also practising whereby every bank requires to hold adequa te capital in order to fulfil the minimum capital adequacy of the bank. This is also supported by Hassan & Muhammad, (2007) whereby bank loans are the most largest and obvious credit risk. Therefore the Basel II is required so that most banks will know how much capital they must hold. The Bank’s credit risk management process is documented and processed In the Credit Manual. One of the functions of the Credit Manual that is introduced by Hong Leong Bank is to set out the lending policies, lending authorities, credit risk rating, credit reviews, collateral, credit administration and security documentation, and timely rehabilitation and restructuring of problematic and delinquent accounts.Apart from that, this is to ensure that structures are there to maintain to enhance the Bank’s risk assessment capabilities in key areas of credit that includes sound credit policies and procedures, quality credit approvals, appropriate risk measurement. ARHB Bank does not have this Credit Manual but they form a second line defence that formulate the risk management policies. The function of an internal audit is to provide independent reviews of the quality of the loans (Gup et al, 2007). Based on the Hong Leong Bank Annual Report (2010), it states that Internal Audit conducts independent post to reviews on the financial statements and the capital of the bank.This is to ensure that the qualities of credit risk and approval standards are in accordance with the credit standards and the lending policies and directives established and approved by the Bank’s management and Board of Directors. Question 4: Conclusion In conclusion, the performance of Hong Leong Bank for the financial year ended in 2010 is not as good as its peer bank RHB Bank. This is due to that the ROE is lower compared to RHB Bank. This can be improved by not relying too much on debt financing for its operations and to provide more return to investors. Also, Hong Leong Bank did not create m uch value to the shareholders due to low ROE. However, only the net margin part is the main strength of Hong Leong compared to RHB Bank This indicates that operating costs are well controlled by Hong Leong Bank compared to RHB Bank.This is a good indicator as this prevents wastage and smartly uses the assets to generate more income. The liquidity ratio for both the banks are below 1 which is not safe for both banks because they cannot meet the requirements to pay off the obligations and current assets are less than current liabilities they having. Based on the ratio analysis for year 2009 to 2010, the ROE, ROA and net margin ratio shows a good improvement due to economic boom and inflation happens during the period. However, in 2009, most of the ratio for Hong Leong Bank declines because may be due to economic recession and the decline in the economic activity of the bank.For the credit risk, RHB Bank did not manage its credit risk well compared to Hong Leong based on the credit ana lysis. RHB could improve their credit risk by having an internal audit to check on the loan defaulters and the accounts. Personal experience of visiting banks We visited Hong Leong Bank and RHB Bank in Ampang branch and Cheras branch. We asked the branch manager of RHB Bank for more details of their items on balance sheet and income statement. She did not know what items are called interest earning assets in Balance sheet. She does not know Income Statement and Balance Sheet. I was surprised, she is a manager and she does not know.She was kind enough to call the headquarter of RHB Bank and made me speak to the person in charge of financial statements. Well, I was told that each bank has different items calling interest earning assets and liquid assets. He cannot release those details. The RHB Bank and Hong Leong Bank in Ampang Branch have 400 to 500 customers daily and they are overcrowded during lunch hours. However, the RHB Bank has 100-150 customers daily and Hong Leong Bank has 50-100 customers daily in Cheras branch. Most customers come during the lunch hours. Ampang branch has more customers compared to RHB Bank. Thus it depends on location, the number of customers visit banks. Below are the cards of Hong Leong bank and RHB Bank:Ampang Branch Cheras Branch Part B: Virtual Bank Balance Sheet |   |   | |   |   |   | | Liabilities| |   | | Asset| | 1. Deposit| | |   | 1. Gold and foreign exchange| i. Current deposit | |   | 2. Cash and Liquid Assets| | ii. Fixed deposit| |   | 3. Securities| | iii. Certificates of deposit|   | i. Trading securities | | iv. Other deposits such as call deposits, cash| ii. Investment securities | | management accounts and savings account| iii. Short term discount security| 2. Non-deposit liabilities| |   | iv. Long term bonds or notes| Liabilities due to clearing houses and financial| 4.Loans and advances| | institutions and rank in priority after deposit| i. Overdraft | | i. Repurchase agreements|   | ii. Credit card outstanding| ii. Promissory notes| |   | iii. Housing finance | | iii. Liabilities on bill acceptances|   | iv. Other term loans| | iv. Corporate bonds and other long-term borrowings| v. Lease and hire purchase finance | 3. Due to other banks| |   | 5. Due from other banks| | 4. Trading derivatives| |   | 6. Trading derivatives| | 5. Other financial liabilities at fair value| 7. Other financial assets at fair value| 6. Other borrowings| |   | 8. All other asset| | 7. Bonds, notes, and subordinated debt| 9.Due from customer on acceptance | 8. Other debt issues| |   | | | | 9. All other liabilities| |   | | | | 10. Goodwill and other intangible asset| | | | | | |   | | | | | | |   | | | | | Capital| |   | | | | Capital acts as a buffer against unexpected losses and| | | | protects against insolvency. |   | | | | i. Debt capital : borrowed funds|   | | | | ii. Equity capital : shareholders' fund| | | | NOTES : Asset 1. Changes in this item reflec t transactions of the following kinds: a. the Bank's transactions in foreign exchange and foreign securities (including under repurchase agreements); b. earnings on foreign currency investments; and c. hanges in the valuation of foreign currency and gold, and changes in the market prices of the Bank's holdings of foreign currency securities. 2. Liquid assets are assets that can be converted into cash quickly without loss of value 3. i. Trading securities : banks plans to sell before maturity ii. Investment securities : banks plan to hold till maturity iii. Short term discount securities : pay face value at maturity iv. Long term bonds or notes which pay coupons during the life of the security and the face value of maturity. 4. Includes loans, deposits with central banks and other regulatory authorities and settlement account balances due from other banks.Amounts due from other banks are initially recognised at fair value and subsequently measured at amortised cost. Advances: non-der ivative financial assets with fixed payments that are not quoted in an active market i. Overdraft : – borrower can draw up to the limit * Interest payable on amount drawn * Commitment fee is payable on the undrawn amount| ii. Credit card outstanding: – borrower can purchase on credit| or take cash in advance -form of revolving credit -Interest payable on amount drawn -annual fee may be charged | | | | iii.Housing finance : – Mortgage where the collateral is real estate – loan application fees are charged – variable rates(up to 30 years) – fixed rates(3-5 years)| iv. Other term loans : – example such as fully drawn advance – maturity of 5-8 years – a single loan of a specific dollar amount – fixed interest rate – application fees, establishment fees – repayment maybe fully amortised or structured to match the profits Generated by project being finance. | v.Lease and hire purchase finance : – se cured loans where the collateral is an asset – term of loan related to the life of the collateral – fixed interest rate – application fees, establishment fees| | | 5. Trading derivatives have not been shown by contractual maturity because they are typically held for various periods of time. 6. Also called as market related contingencies such as futures, swaps, options, forward rate agreements 7. example: land, buildings 8.Due from customer on acceptance : customer who wants to borrow from the bank may be offered a â€Å"bill facility† and the customer must agree to repay the bank. The bank is the acceptor(promise to pay the holder the face value Liabilities: Deposit: 1. Current deposit : – No maturity and no minimum balance – Withdrawals by writing a cheque or through electronic transactions – May be interest bearings(variable interest rate) or non-interest bearing 2. Fixed deposit : – Minimum amount – Specific term eg. 1-5 years – Early withdrawals incur a penalty – Fixed interest rate 3. Certificates of deposit : – Face value at least $100,000 – Maturities between 14-270 days – Fixed interest rate – Originally issued at par but may trade above or below depending on Market yields. At maturity, receives face value plus interest 4. The deposits : a) Call deposit – must give notice of withdrawal, variable interest rate b) cash management accounts – minimum balance requirement, variable interest rate linked to money market yields c) savings account – no minimum balance or notice of withdrawal requirements – variable interest rate Non-Deposit: i. Repurchase agreements : – banks borrow for a short period (5 years) – sell securities with an agreement to repurchase on agreed date at agreed price ii. Promissory notes : – discount securities – bank sells to the market iii. Liabilities on bill acceptance : -bank is the acceptor and pays face value at maturity iv.Corporate bonds and other long term borrowings : example domestic bonds, eurobonds Due to Other Banks: Includes deposits, vostro balances, repurchase agreement and settlement account balances due to other banks. Trading derivatives: Financial liabilities at fair value are financial liabilities held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term. | Other financial liabilities at fair value Borrowings are initially recognised at fair value, net of transaction costs incurred. It is subsequently carried at amortised cost, any difference between initial recognised amount and the redemption value is recognised in the profit or loss.For example: borrowing from reverse bank, other banks, or borrowing from outside of the country. Other financial liabilities at fair value: Short term and long-term debt issues of the group including commercial paper, notes, term loans, medi um-term notes, mortgage backed securities and other discrete debt issues. All other liabilities: I) Bills Payable (drafts, telegraphic transfers, mail transfers payable, pay slip, bankers cheques, other miscellaneous items, etc) II) Inter-Office (The inter-office adjustments balance, if in credit, should be shown under this head. Only net position of interoffice accounts, inland as well as foreign should be shown here)III) Interest Accrued (Includes interest due and payable and interest accrued, but not due on deposits and borrowings Includes net provision for income tax and other taxes like interest tax (less advance payment, tax deducted at source, etc. ) IV) Deferred Tax (surplus provisions in bad debts provision account, surplus provisions or depreciation in securities, Contingency funds which are not disclosed as reserves but are actually in the nature of reserves, proposed dividend/transfer to Government. ) V) Others (which are not disclosed under any of the major heads such a s unclaimed dividend, provisions and funds kept for specific purposes, unexpired discount, outstanding charges like rent, conveyance, etc. certain types of deposits like staff security deposits, margin deposits, etc) Goodwill and other intangible asset:Goodwill arises on the acquisition of an entity and represents the excess of the aggregate of the fair value of the purchase consideration and the amount of any non-controlling interest in the entity over the fair value of the Group’s share of the identifiable net assets at the date of the acquisition. Capital Debt capital : borrowed funds, ranks higher than equity capital for the repayment of annual returns. Equity capital : -shareholders’ fund which represents the remaining interest in assets of a company. -permanent commitment of funds -earns the residual income of the firm after all interest and other costs -main components includes issue share, reserve and retained earnings References Hong Leong Bank. (2011). Annual Report: 2010. Retrieved September 14, 2011 from http://www. hlb. com. my/data/ar2010. pdf RHB Bank. 2011). Annual Report: 2010. Retrieved September 12, 2011 from http://www. rhb. com. my/corporate_profile/investor_relation/pdf/annual_reports/2010/RHB%20Bank%20Berhad%202010. pdf Gup, B. E. , Avram, K. , Beal, D. , Lambert, R. , ;amp; Kolari, J. W. (2007). Commercial Banking. Milton, Qld: John Willey ;amp; Sons Hassan, H. , ;amp; Mohammed, F. (2007). Banks’ risk management: a comparison study of UAE national and foreign banks. The Journal of Risk ;amp; Finance, 8(4), 394-409. Hong Leong Bank Berhard. (2009). Annual Report: 2009. Retrieved September 14, 2011 from http://www. hlb. com. my/data/ar20091. pdf Milbourn, G. , ;amp; Haight, T. (2005).Providing Students with an Overview of Financial Statements Using the Dupont Analysis Approach. The Journal of American Academy of Business, Cambridge. 9(3), 46-50 Narayanan, L. (2010). How DuPont Analysis Reveals Return on Equity Ratio. Managing Credit, Receivables ;amp; Collections. 2(1), 12-14. Pinsent, W. (2010). Decoding DuPont Analysis. Retrieved September 2, 2011, from http://www. investopedia. com/articles/fundamental-analysis/08/dupont-analysis. asp Class Dupont. (2010). Current Financial Accounting. Retrieved September 10, 2011, from http://www. sjrbiz. info/Current%20Classes/Financial%20Accounting%20Class/Dupont%20Model%20in%20a%20Nutshell. pdf