Year End Project - Financial Analysis

Senior Accounting Financial Report

Royal Bank of Canada

Jan-Paul Van Dorp

Mr. Grace

BAT4M

Tuesday, May 28, 2013

http://www.rbc.com/investorrelations/pdf/ar_2012_e.pdf

Executive Summary:

Royal Bank of Canada has a brief history, with some historical data in the company information. In the financial information, it was determined after the financial audit of Deloitte and Touche LLP, that RBC had records earnings of the year, which was $7.5 Billion, up 17% from prior year. They had record results for the year and in three of their business segments. a 11% increase in quarterly dividends in 2012. Some of the key highlights to be found are the ratios from the years of  2010, 2011, and 2012, with a comparison to TD Canada Trust Bank financial statements. In this report, there can be found the major sources of revenue of approximately $20 billion, where ¾ of that came loans. A list of ratios can be found which can determine the profitability of RBC, along with the liquidity, and the solvency of the company. By looking at these ratios, we can determine that their profitability, liquidity, and solvency are overall, not very good. This is where the recommendation to not invest our company’s earnings into purchasing RBC shares came from. The liquidity is not good, simply by looking at their Working Capital ratios, or Current Ratios for example. The profitability is okay, but not ideal, which helps determine how we got to our recommendation. Listed are also the current and fixed/long term assets and liabilities. The shares prices are also reviewed over the past five years, and also looked at are the different types and different number of shares that RBC has. Methods of Depreciation and Goodwill are also further discussed further in the report. Also shown are the two simplest ways to analyze your financial statements are vertically and horizontally. A vertical analysis shows you the relationships among components of one financial statement, measured as percentages. On your balance sheet, each asset is shown as a percentage of total assets; each liability or equity item is shown as a percentage of total liabilities and equity. On your statement of profit and loss, each line item is shown as a percentage of net sales. The horizontal analysis provides you with a way to compare your numbers from one period to the next, using financial statements from at least two distinct periods. Each line item has an entry in a current period column and a prior period column. Those two entries are compared to show both the dollar difference and percentage change between the two periods. These are some of the key highlights to be found in the report.