Accounting for Marketable SecuritiesPresentation Transcript
Accounting for Marketable Securities
Introduction• Equity or debt instrument (share/stock, bond, note) that is listed on an exchange and can be readily bought or sold. A marketable security is a near-cash (liquid) asset and is recorded at acquisition cost (purchase price plus incidentals, commissions, and taxes) or market value (whichever is lower) in the account books under current assets. Non-marketable securities include savings bonds and restricted shares/stock.
Marketable securities• Marketable Securities are a class of investment that the company makes on a temporary basis. There are two basic types of marketable securities: – Marketable Equity Securities - any instrument that demonstrates ownership of shares in a company such as common stock and preferred stock. – Marketable Debt Securities - any debt security instrument, the most common being bonds of another company.• Marketable securities are temporary investments one company might make in another company in the hopes of providing higher returns to its investors. For example, an investment in marketable securities may provide stockholders with a higher return than a cash account with a bank.
Company Background• Meezan Bank Limited is a publicly listed company offering Islamic Banking in Pakistan. It was first incorporated on January 27, 1997, starting operations as an Islamic investment bank in August of that year. In January 2002, Meezan Bank was granted Pakistans first full-fledged commercial banking license dedicated to Islamic Banking, by the State Bank of Pakistan. – The Banks main shareholders are financial institutions, including the Pak Kuwait Investment Company, the ‘Islamic Development Bank of Jeddah’, and the ‘Shamil Bank of Bahrain’.
Vision“Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind”
Mission“To be a premier Islamic bank, offering a one- stop shop for innovative value-added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders’ value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.”
Functions• Personal Banking and Finance• Corporate Finance• Commercial Finance• Project Financing• Islamic Financial Advisory Services• Treasury• Car Ijarah - Car Financing• Home Financing• Asset Management
Relation with topic• There are different types of marketable securities held by Meezan Bank, and the underlying theme among all of them is that they are traded, or bought and sold, frequently. This is a sign of liquidity.• Those marketable securities that are types of bonds or certificates of deposit must have a maturity date or time at which a contract expires of no less than 12 months out. Bonds are debt instruments, while certificates of deposit are savings certificates, although both pay investors an interest rate over the life of the contract. These securities trade in the secondary market, a segment of the financial markets where previously issued securities are bought and sold.
SWOT Analysis• Strength – MBL has this privilege to be the first in the Islamic Banking sector which gives MBL a competitive edge over all other banks and being the pioneer of this industry MBL is enjoying major share of it. – The largest Islamic Bank in Pakistan with a network of over 201 branches in 54 cities. – The members of the Shariah Supervisory Board of Meezan Bank are Internationally-renowned scholars, serving on the boards of many Islamic banks operating in different countries. – Meezan Bank, the largest Islamic Bank in Pakistan has been conferred the Best Islamic Bank Award by Rawalpindi Chamber of Commerce and Industry. – Being an Islamic bank, MBL has a wide national network. As an emerging markets bank, it has branches in all the major cities of Pakistan with the facility of online banking, it is very easy for its customers to transact all over the country
• Weakness – Till the last year, MBL had a totally different perspective. The management was of the view that the customer should come to them and they don’t need to go to the customer. But in this era of mass marketing and advertising, it is not possible to stay in competition without these took. The bank has now changed its perception arid has started an effective marketing and advertising strategy. But the previous gaps are still there and there is lack of awareness in the people about the bank and its products. The bank needs to improve on its marketing and advertising areas. – Due to the dissatisfaction of staff, there is high turnover among them. People who find other alternatives do not stay with the bank. Therefore, the bank incurs loss on their training and development. – The decision-making is carried out the upper management level and the subordinates are not included in this process. This creates a sense of insecurity in the lower managers and that is why there is a lack of loyalty among the personnel
• Opportunities – House financing sector can be targeted to maximize the profit. – Growing demand of Islamic financial product and services. – Venturing into Islamic groups out side the countries as opportunity to expand business in UAE and Golf states. i-e financial institutions. – Coming up with. Products for the SME to targeting the medium level customers. – Doing business with companies having Islamic mindset. I-e Islamic financial Institutions. – Increase branch network within the country
• Threats – Right now there are a few banks that are providing islamic banking services in addition to the Meezan Bank. These banks include Bank Islami, Al-Barkah Bank and some branches of Bank Alfalah which are dedicated for islamic banking services. That’s why we can say that although there is no intense threat for the Meezan Bank in the near future but it is not difficult to say that more banks may enter in this field as the awareness of islamic banking is increasing among the public. Therefore the Meezan Bank should not be contented to its present market share but should strive for providing better and better and modern services. – Due to the increase in the number of conventional commercial banks, there is an increase in competition. Also there is a lot of aggressive marketing by the competitor banks. This is also a threat for MBL
Conclusion• The employee turnover is very high which they have to cut down as they are losing a number of good trained employees due to its poor policy.• The year 2010 is expected to offer increased competition in the secured assets business as more Islamic banks are in the market.• Lack of awareness of Islamic banking in general public.• Financial information of Meezan bank are not clearly disclose on any media• Branches increases but business of Meezan bank may not increase with same speed