Financial Performance Appraisal of Juaben Rural Bank and Atwima Kwanwoma Rural Bank

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Rural banks plays a very key role in a developing economies like that of Ghana as they provide banking services to low income communities who otherwise will not qualify for such facilities offered by commercial banks. This thesis applies financial ratio analysis in appraising the financial performance of 2 of the 22 rural banks in the Ashanti Region, Juaben Rural Bank (JRB) and Atwima Kwanwoma Rural Bank (AKRB). That is, evaluating how well the banks have performed over a seven year period (2000 - 2006). The goal is achieved through the evaluation of the banks under 4 key areas; namely profitability, liquidity, leverage and efficiency. In all, 14 ratios were used in assessing the banks under these four broader headings. The profitability measures revealed that AKRB was more profitable over the period than JRB even though the latter controlled cost better than the former. This was as a result of AKRB introducing some debt which improved its capital base. However in terms of efficiency, JRB utilised its assets better than AKRB. Notwithstanding the debt in the capital structure of AKRB, both banks are highly protected against insolvency as shown by the leverage ratios. The banks were found to be liquid enough as the current assets were just enough to pay off their current liabilities. Finally, both banks were found to be having problems sustaining growth in profitability.
A thesis submitted to the Department of Accounting and Financc, Kwame Nkrumah University of Science and Technology | in partial fulfilment of the requirements for the degree of Master of Business Administration, 2009