National Australia Bank has been functional for almost 160 years since it was founded. The bank currently has more than 10million customers within 900 locations in Australia and around the world. Being Australia's largest banking organization the bank works with enormous, medium-sized and small businesses (Avkiran 1999). Thus ranking it among one of the central institutions that exist within the market. The bank was initially formed as a commercial banking corporation of Australia in 1982 but later merged with the national bank of Australasia. The merger played a significant part in expanding offshore expansion and further acquisitions with other bank allowing it to grow its market from domestic to global.
The NAB is one of the leading banking entities in Australia. The bank provides a large number of services financially including wealth management, banking and a platform for banking investment. The bank has branches throughout Australia and the United States as well as the UK. NAB is one of the four pillars of banking in Australia, but during 2004 it experienced what could be called NAB's annual horrible. The sequence of events that appeared to be a chain reaction rather than any planned processes began with the sacked foreign exchange traders acting as the catalyst and renegade of board director.
Despite finance services the bank also provides a range of investment and services related to insurance for institutional clients. Recently the bank has taken on a campaign to ensure that it stands out from other companies within the market. In line with the strategy the bank also intends to increase its market share by competing on cutting fees and prices. The paper aims at defining how the NAB functions and providing information on the liquidity and profitability ratios of the company (Bourke 1989). The article also aims at providing trend analysis of the company with the primary study being corporate governance and the role it plays within the company and the effects of ethical behavior to the overall functioning of the organization.
Liquidity is a measure of how an organization can be able to meet its maturing debt obligation. A look at the liquidity position of National Australian Bank's (NAB) liquidity position indicates that it has been consistent over the 2017 and 2016 period. The current ratio is at 1.045 (2017) and 1.042 (2016). The recommended current position would be a ratio of 2 which means that NAB is illiquid considering the current ratio (Butlin 1977). A more appropriate measure would be the quick ratio as it takes away current illiquid assets such as inventory. The recommended ratio is 1. NAB has a quick ratio of 1.022 (2017) and 1.012 (2016). This is within an acceptable limit in the case of liquidity. Another measure for liquidity is the cash flow ratio. NAB's cash flow ratio is 0.018 (2017) and 0.02 (2016) (Butlin 1977). Higher cash flow ratios would be preferred. Ratios that are above 1 is what investors would prefer. Considering the cash flow ratio, NAB can be said to be illiquid.
Profitability is an indicator of how well the company performs financially. A look at NAB's profitability ratios indicates that the company has maintained a relatively stable net income position. An analysis of the net profit margin indicates a sharp difference in the figure as it is 19.3% (2017) and 1.3% (2016). The definite difference can be attributed to a loss that the company experienced due to a discontinued operation in the year 2016. This can further be inferred from a gross profit margin that was 48.1% (2017) and 46.8% (2016) which represents a small difference between the two years (Joseph et al. 1999). The return on assets 0.02 (2017) and 0.02 (2016) and return on shareholders' equity 0.38 (2017) and 0.38 (2016) shows relatively stable returns for the period under study. As expected, the earnings per share (eps) has a sharp difference in the period, 194.7 cents (2017) and 8.8 cents (2016). This is expected due to the loss experienced from discontinued operations.
There is always the need to strike a balance between profitability and liquidity. A highly profitable company is usually less liquid while a highly liquid company is often less productive. Management of National Australian Bank needs to strike a balance well. Generally, though, NAB has maintained consistent positions in both the liquidity and profitability positions. That notwithstanding, there is a need for the company to improve on its liquidity position as earlier observed.
National Australian Bank (NAB) was founded in 1982. It is headquartered in Melbourne Australia and is currently one of the largest banks in Australia and the world. It has over 1.590 branches and over 4,412 ATMs. The offices and ATMs are spread over Australia, New Zealand and Asia serving millions of customers making it more of a regional bank than a local one. Its services are divided into business banking, personal banking, internet banking, and an investment arm.
Over the years, the bank has grown in customer numbers, profitability, operations and employees (Bourke 1989). This is an indication that the business has and is still doing well in the sector. NAB's latest product is the Internet banking service that now allows seamless, no boundary and round the clock baking. Just like any other institution operating at its level, it has not escaped controversies with issues on fraud, tax evasion and overcharging clients having affected them through slightly. That notwithstanding, the bank has remained resilient and is an active player in the corporate social responsibility segment in Australia and beyond. It offers scholarships and supports events in Australian football.
NAB faces stiff competition from Commercial Bank which usually generates $1.1B less revenue than NAB. This bank has been in existence since 1911. The second major competitor of NAB is Westpac which was founded in 1817 in Sydney, New South Wales. When compared to NAB is has 1,674 more employees. The last major competitor is ANZ with his headquarters in Docklands, Victoria and was founded in 1835. It too operates in the Mortgage Finance industry. Compares to NAB, ANZ generates 60% of NAB's revenue.
Corporate governance rules are the most critical aspects of an organization. The Australian bank deals with various banking and financial elements through their renowned structure of banking. NAB has set policies that guide the corporate governance contrary to the current set standards of accountability, Transparency and risk management. Over the past years, NAB has been going through investigation that was done by the Security and Exchange Commission as a result of breaches of auditors' independence.
The bank aims at providing services to the people who avail facilities related to it. Corporate governance is helpful to the bank in delivering suitable aspects and standards to the higher improvements to manage the coordination that's exhibited between the organization and stakeholders as well. It helps to identify features like proper coordination, fairness, transparency and many other aspects of the banking system (Erkens et al. 2012). It's also responsible for maintaining a balanced equilibrium between stakeholders and the bank by ensuring that they both stay in line with the available rules laid won for the bank's overall improvement.
The policies and standards, as well as principles laid down by the bank, are similar to those of other organizations as they all aim at providing assistance to the organizations to achieve their objectives that will enable them to maintain an appropriate and smooth flow within the process of running the organization (Erkens et al. 2012). Corporate governance always aims at improving working aspects and efficiency within the organization. The government specifies corporate governance standards followed by the bank whereas the organization itself sets some of them. Corporate governance also plays a significant role in solving problems related to stakeholders who are managed with corporate governance. By taking into consideration all the necessary controls and qualities related to the governance principles of the bank its observable that to handle the appropriate coordination and the equilibrium that exists between stakeholder and the organization its vital that all rules defined by the corporate governance are followed to the latter.
Challenges Facing the Company Concerning Ethical Behavior
Ethical issues that exist within the bank tend to affect everyone including even consumers. Due to the vast size of the company, it's bound to garner lots of headlines in case of ethical lapses (Swensson & Wood 2008). Some of the significant failures tend to morph from self-interest which inspires individuals to focus on the short-term profit accumulation. The behavior can also be because of people suffering from moral development that's stunted which is caused by the failure to look beyond proper mentoring (Phau & Kea 2007). Sometimes company demands can also conflict with professional duty, and in most cases, they go hand in hand with the equation of legal behavior to moral behavior. In such cases, people tend to disregard the fact that even though an act is legal professionally, it might still not be moral. Individual responsibilities can also at times wither when the demands of the client are supposed to be met when the client pushes the employees to act.
In conclusion, the NAB has been able to maintain its position as a national bank. This is reflected through the liquidity measure of the bank and the profitability rate at which the company continues to perform financially. The company has been able to maintain a stable net income position all throughout. Over the years, the bank has grown in both customer numbers operations and profitability which acts as an indication that the company is still developing despite the huge competition it faces within the market. Corporate governance has played a significant role in resolving issues that exist within the bank and its stakeholders and at the same time played a significant part in defining the overall functioning of the government. The company faces many challenges ethically but using corporate governance they can curb the issues and promote ethical behavior within the organization.
The failure of NAB to ensure transparent systems of control and ensure accountability of divisions within the organization by ongoing mutual monitoring let to significant falls in profitability, loss of shareholders value and climbing cost ratios. The comparison of NAB's performance with the other majors in 2004-2005 tells a compelling story. In the measure of profitability and cost efficiency examined, NAB had the lowest ROE, ROA and net interest income/average assets and the highest cost to revenue and the increase of the expenses for NAB. The failure of accountability and board function at NAB highlights those good intentions are not sufficient to protect the interest of the principal in a firm. The board needs to be proactive spend significantly increased amount of time and acquired expertise that is necessary for the performance of his duties, in line with the latest recommendation.
Avkiran, N.K., 1999. The evidence on efficiency gains: The role of mergers and the benefits to the public. Journal of banking & finance, 23(7), pp.991-1013.
Bourke, P., 1989. Concentration and other determinants of bank profitability in Europe, North America, and Australia. Journal of Banking & Finance, 13(1), pp.65-79.
Butlin, M.W., 1977. A preliminary annual database 1900/01 to 1973/74 (No. rdp7701). Reserve Bank of Australia.
Erkens, D.H., Hung, M. and Matos, P., 2012. Corporate governance in the 200...
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