Analysis of Citigroup Financial Company

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Introduction

Citigroup is a public limited company. This was formed after a merger in 1998 of Citi corp. and Travelers Group. The company has shareholders traversing several countries and has branches in over 100 countries across the globe. The company has been greatly expanding although it has equally been forced to discontinue operations in loss-bund areas. Nikko Cordial Securities is an example of a sale that had to take place hence discontinuing operations thereof. The global economic crisis did have a toll on the performance of the company over the last two years and this could partly explain the results noted. The company is a major financial services provider currently with branches very many countries of the globe. The company was negatively affected by the global financial crisis but the bailout program by the United States government has worked to stabilize its operations more. According to the CEO of the company, Mr. Vikram S. Pandit, “the company is in a healthier position now than it was 2 years ago at the onset of the crisis.”

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Products /service

Citi is majorly known for its banking services. These include the keeping of customers’ deposits and offering credit services where it does lend money to individuals and corporate organizations. The money lent out attracts interest. The firm also offers consultancy services relating to financial management, both for individuals and corporate. The firm guarantees its customers to take loans or buy equities in other firms.

Safe custody of certificates and other vital documents is also a service that Citigroup offers. Citi also carries out consumer finance where individuals who are not business-oriented get financial support from the firm at a given interest level. The firm also offers brokerage services where clients could trade in currencies and stocks in the major world markets through the help of Citi. Insurance is another product that Citi offers to its customers. This though is mainly through the subsidiaries of the giant financial institution.

Fiscal year

The fiscal year for the Group ends on 31st December of every year. Their year is divided into four quarters of three months each. The four quarters end as at 31st March, 30th June, 31st September and 31st December.

Auditing of Financial Statements

The financial statements of Citi Group are audited by an independent Certified Public Accountant (CPA). The auditors of the Group are KPMG. This is because there is no relationship business or otherwise between the two entities that could cause a conflict of interest. The statements are audited after each quarter to ensure that any errors omissions or fraud are detected well in advance and the effect reduced.

Asset change

The assets decreased by 4% in 2009 to stand at $ 1856164.00 down from $1888599.00 in 2008.

Net income change

The net income increased by 58% from $ 51,559,000,000.00 to $ 80,285,000,000.00

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Balance sheet equation

Using the results for 2009, the equation of Assets=liabilities + shareholders equity for Citi group balances at $ 1,856,164,000,000.00

Current liabilities

The current liabilities of the firm stand at $ 500,786,000,000.00

This is computed as fed funds +brokerage payables+ trading account liabilities +short term borrowings+ liabilities related to discounted operations held for sale.

The revenue principle

The revenue realization principle states that revenues are only to be recognized when the chance of them being collected is beyond reasonable certainty (Kakani 88). In this case, the principle is observed by the company since there are some provisions established where revenues may not be realized. Some revenues whose certainty is not reasonably assured are included as notes to the financial statement. Only the revenues actually realized are included in the statement of income.

Net profit margin ratio

The company made a loss in both years attributable to the global financial crisis that began hitting Wall Street in 2007. The losses were mainly because of subprime lending and the consequent high default rates. Mortgages of the firm have also experienced high default rates and therefore the resultant losses suffered by the company. The trickle-down effect over the years has seen the firm incur losses over the two years. Instead of the profit margin, the company has a loss margin.

  • Net profit margin ratio= Net profit /Net revenue
  • The net loss for the year 2009= 27684 (loss)
  • The net loss for the year 2008=1606 (loss)
  • Divide the net loss by the Net Revenue for each year.
  • Net loss margin for 2009= (27684)/51599= -53.65%
  • Net loss margin for 2008= (1606)/80285= -2.00%

There has been a tremendous drop in the net loss margin (consequently this is an improvement in the profit margin) According to the Citi Annual report and statement proxy, the net loss margin increased from-53.65% to -2.00%. This indicates that there was either decline in costs, an increase in revenues at a higher rate than an increase in costs, or both.

N/B: From a negative of 53.65% to a negative of 2.00% is an improvement in the profit margin (or a drop in the loss margin depending on how you view it.)

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References

Kakani, Ram. Financial Accounting for Management. New Delhi: McGraw Hill Publishing, 2005. Print.

Citi Annual Reports and Proxy Statements. 2010. Web.

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BusinessEssay. (2022, February 17). Analysis of Citigroup Financial Company. Retrieved from https://business-essay.com/analysis-of-citigroup-financial-company/

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BusinessEssay. (2022, February 17). Analysis of Citigroup Financial Company. https://business-essay.com/analysis-of-citigroup-financial-company/

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"Analysis of Citigroup Financial Company." BusinessEssay, 17 Feb. 2022, business-essay.com/analysis-of-citigroup-financial-company/.

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BusinessEssay. (2022) 'Analysis of Citigroup Financial Company'. 17 February.

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BusinessEssay. 2022. "Analysis of Citigroup Financial Company." February 17, 2022. https://business-essay.com/analysis-of-citigroup-financial-company/.

1. BusinessEssay. "Analysis of Citigroup Financial Company." February 17, 2022. https://business-essay.com/analysis-of-citigroup-financial-company/.


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BusinessEssay. "Analysis of Citigroup Financial Company." February 17, 2022. https://business-essay.com/analysis-of-citigroup-financial-company/.