DEPARTMENT: ACCOUNTING AND FINANCE

PROGRAMMEOF STUDY: MSC ACCOUNTING AND FINANCE

COURSE: ACC 554, CORPORATE REPORTING

INDIVIDUAL ASSIGNMENT

NAME: ABDUL MANAN ABUBAKARI

STUDENT I D NUMBER: 20922332

INDEX NUMBER: PG4026922

REPORT.

DATE: 8th September 2023.

SUBJECT: ANALYSIS AND DISCUSSION OF THE FINANCIAL PERFORMANCE

AND POSITION OF BANK OF GHANA.

Introduction

This report is to provide an assessment of the financial performance and position of Bank of
Ghana and to ascertain the going concern status using 2022 and 2021 financial statements.
Profitability ratios, including operating profit margin, net interest margin, return on asset
(ROCE), gearing ratios, liquidity ratios and other ratios like cost to income ratio were used for
this analysis and hence the report should be read with reference to the ratios computed.

Growth
The bank of Ghana is an institution having the capacity to increase its size and revenue streams
in order to lessen the problems associated with insolvency and bankruptcy. In 2022, Bank of
Ghana revenue increased by 10%. However, because of the significant exchange differences,
impairments, loans and advances, and other liabilities accounting for nearly 90% of total
operating expenses, this could not be interpreted as profitable. The 5.6% expansion in overall
assets may have contributed to the increase in income. A cash flow deficit or negative net cash
flow was recorded in 2021 and 2022, according to the bank of Ghana's financial report.
Operating Profit Margin
Operating profit margin is a key profitability measure and provides indication of how well cost
of operations has been [Link] shows how much profit entity earns as profit after covering
all its operational expenses. Bank of Ghana recorded negative 1107% in 2022 which is far lower
compare to 24.8% in 2021. In the case of BoG in 2022, impairments on loans and securities
were the major contributing factor to the very low gross margin. Impairment alone made up of
about 82% of the operating expenses. However without impairment BoG would still have a
negative profit margin.
Net Interest Margin

Net interest margin is a measure of the net return on the banks earning assets. It simply looks at
how much a bank is generating from its loans as compared to how much it is paying out. A
higher NIM means the bank is generating more from its loans than its paying out. In 2022 BoG
has a net interest margin of 8% which is lower compare to 11.3% in 2021, this means on
average, BoG is able to generate net interest from loans. However, in order to get a clear picture
this has to be compared to other central banks in other countries.

Return on Assets

This ratio demonstrates the total amount of net income produced per asset. The bank is more
profitable the greater the ROA. BoG's return on assets in 2022 was a dismal -51%, down from
1.1% in [Link] suggests that the assets owned by BoG did not generate any returns..

Gearing Ratio

The debt to equity ratio, is a measure of leverage, compares the value of all debt and financial
obligations to the entire amount of shareholders' equity. With a debt equity ratio of -3.15:1 in
2022, the Bank of Ghana is plainly experiencing negative shareholder equity. Its liabilities,
which total GHS 173,798,412, outweigh its assets, which total GHS 118,678.319. It will
typically be regarded as an indication of high risk and an incentive to seek bankruptcy protection,
given the outcome of the 2022 performance. This effectively means that the Bank of Ghana's
total debt is greater than its equity. Additionally, It was dangerous in 2021 was the debt to equity
ratio, which was also larger than 1.

Liquidity Ratio

This ratio aids in assessing the bank's capacity to fulfill its immediate obligations. In 2021, the
current ratio was 0.85:1, while in 2022, it was 0.49:1. As a result, BoG won't be able to satisfy its
short-term obligations to the same extent, which shows a lower liquidity ratio.

Cost to Income Ratio

Cost to Income Ratio is one ratio that identifies how much money a firm is spending to operate
and how much it’s earning from revenue. It is an important financial metric determining the
profitability of the Bank of Ghana. In 2022, the cost to income ratio of -12.06:1 means that they
are spending -12.06 Ghana cedis for every 1 Ghana cedi of revenue they generate likewise in
2021, they spending -0.75 Ghana Cedis for every 1 Ghana cedi of revenue they generate. Cost to
income ratio makes it clear that the lower the cost to income ratio the better they are performing
but here even though it’s on the lower side, the negative aspect is not making it to be a good cost
of income ratio for the Bank.

Going concern

The Bank of Ghana recorded total liabilities, including those of its subsidiaries, exceeding its
overall assets by GHS 55, 120, 093 as of December 31, 2022, and it also made a staggering loss
of GHS 60, 829, 750. Additionally, the net value of the Group decreased as a result of the
domestic exchange program's (DDEP) effects and the impairment losses experienced by some of
the Group's assets. And as a result, the Bank won't be able to fulfill its short-term obligations and
loss in net exchanges due to local currency depreciation.

Conclusion

In conclusion, even if the Bank's performance from the financial statement poses a serious going
concern issue considering the enormous losses and as well as the ratios reflecting the Bank of
Ghana's bad performance, it is still a going concern. Since this is a central bank that is primarily
funded by the government of Ghana, its continued existence is never in doubt. If identical results
had come from a commercial bank, however, the viability of the institution would have been
seriously jeopardized.
 APPENDIX
RATIOS CALCULATIONS

YEAR
2022 2021
1. Profitability ratios

(A) Operating Profit Margin=Profit before interest and tax (PBIT)/Revenue

-60,829,750/5,496,982*100 -1106.6%
1236861/4995784*100 24.8%
(B)Net Interest Margin= Interest income- interest expense/Total interest
generating assets assets=
22,387,024+(-3,283,081)/ 5,094,084*100 8%
= (3466318-1533526)/17137212*100 11.3%

(C) Return on assets¿net profit/total assets= -60,829,750/118,678,319*100 -51.3%

=1236861/112394201*100 1.1%

2. Liquidity Ratio

Current Ratio current assets/ current liabilities=

=81,937,912/165,701,125 0.49:1
= (5775436+3086780+11833913+70486858)/107222917 0.85:1

3. Gearing Ratios

(A) Fixed Interest Cover=Profit After Tax/Interest Expense=

-60,829,750/-3283081 19 times
=1678556/1533526 1.1 times
(B) Debt to Equity ratio=Total debt/Total Equity= 173,798,412/55,120,093 3.1:1
=107222917/5171284 20.7:1