Assessing Performance of a Firm Using Financial Analysis Techniques

Abstract

This thesis explores financial analysis techniques used to assess the performance of a firm. Special attention is given to banking sector in Azerbaijan to provide a deeper insight into financial performance. The focus of the research is to model the role of bank performance using key financial variables, including profit, revenue, risk-weighted assets, capital, and capital adequacy ratio as independent variables, with profit margin as the dependent variable. The first chapter introduces the theoretical foundation of performance assessment, exploring how firms, particularly banks, measure performance through productivity, flexibility, and value creation. In this chapter, it also discusses the key stakeholders involved in performance assessment and the role of both internal and external factors. The second chapter delves into financial analysis methods such as DuPont analysis, EVA, WACC, and CAPM highlighting how these techniques provide a more nuanced view of financial performance. The third chapter presents an econometric analysis of Kapital Bank and Pasha Bank’s financial performance (2016–2024) using multifactor regression models. Key findings highlight net profit and CAR ratio as contributors to profit margins for both banks, while inefficiencies in cost management and capital allocation were noted. As a result of the study, the analysis confirms that financial indicators such as net profit, CAR ratio, revenue, total capital, and risk-weighted assets significantly influence profit margins. Also, the impact of financial indicators differs among banks.