A STUDY OF COMPARATIVE FINANCIAL STATEMENT & COMPARATIVE ACCOUNTING POLICIES FOR 2011-2012 OF ICICI & PNB BANK A PROJECT

REPORT Submitted to University of Mumbai In partial fulfillment of the requirement For M.Com. (Accountancy) Semester I In the Subject Advance Financial Accounting By ROHAN R. KAWALE 12- 7230 K. V. PENDHARKAR COLLEGE NEAR VIJAY SALES, DOMBIVLI (E) 421 203 DIST. THANE SEPTEMBER 2012

DECLARATION

I Rohan Kawale, the student of M.com (Accountancy) Semester-I, (2012) Roll No.7230, K.V.Pendharkar College, Dombivli, Affiliated to university of Mumbai, hereby declare that I have completed the project on the topic A STUDY OF COMPARATIVE FINANCIAL STATEMENT & COMPARATIVE ACCOUNTING POLICIES FOR 2011-2012 OF ICICI & PNB BANK submitted by me to university of Mumbai for M.com Semester-I examination in the subject Advance Financial Accounting is based on actual work carried by me. I further state that this work is original and not submitted anywhere else for any examination.

PLACE: DOMBIVLI DATE: 5-10-2012

Signature of the Student: Name: ROHAN KAWALE Roll No: 12- 7230

ACKNOWLEDGEMENT

At the beginning I would like to thank god for his blessings. I am very much thankful to my Teacher Professor and Coordinator Professor Limey for their guidance, support and

encouragement. I also take this opportunity to show my sincere gratitude to my parents. Finally I would express my gratitude to all those who helped me directly and indirectly in completing this project.

PLACE: DOMBIVLI DATE: 5-10-2012 Name: ROHAN KAWALE Roll No: 12- 7230 M.Com (Accountancy) Semester-I

Chapter No.

Topic

Page No.

Certificate of the Institution Declaration Acknowledgement Executive Summary 1 Introduction Of Bank

1 2 3 5 5-8

Objective of the study of ICICI bank

9-27

Accounting Policies

28-36

Objective of the Study of PNB bank

37-48

Advantages & Limitations

49-50

Conclusion

51

Bibliography and Webliography

52

EXECUTIVE SUMMARY
In any organization, the two important financial statements are the Balance sheet & Profit and loss account of the business. Balance sheet is a statement of the financial position of an enterprise at a particular point of time. Profit and loss account shows the net profit or net loss of a company for a specified period of time. When these statements of the last few year of any organization are studied and analyzed significant conclusions may be arrived regarding the changes in the financial position, the important policies followed and trends in profit and loss etc. Analysis and interpretation of the financial statement has now become an important technique of credit appraisal. The investors, financial experts, management executives and the bankers all analyze these statements. Though the basic technique of appraisal remains the same in all the cases

butthe approach and the emphasis in analysis vary. A banker interprets thefinancial statement so as to evaluate the financial soundness and stability, the liquidity position and the profitability or the earning capacity of

borrowingconcern. Analysis of financial statement is necessary because it help ind epicting the financial position on the basis of past and current records. Analysis of financial statement helps in making the future decision andstrategies. Therefore, it is very necessary for every organization whether it is a financial or manufacturing etc. to make financial statement and to analyze it.

CHAPTER: 1 INTRODUCTION OF BANK

The term bank comes from the French word Banco which means a bench. In the earlier days, European money- lenders or money changers used to display coins of different countries in big heaps on benches or tables, for the purpose of lending or exchanging. A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it. Oxford Dictionary defines a bank as an establishment for custody of money, which it pays out on customer s order. Meaning Bank is a lawful organization, which accepts deposits that can be withdrawn on demand. It also lends money to individuals and business houses that need it. Banks also render many other useful services like collection of bills, payment of foreign bills, safe-keeping of Jewellery and other valuable items, certifying the creditworthiness of business, and so on. Banks accept deposits from the general public as well as from the business community. Any one who saves money for future can deposit his savings in a bank. Businessmen have income from sales out of which they have to make payment for expenses. They can keep their earnings from sales safely deposited in banks to meet their expenses from time to time. Banks give two assurances to the depositors a) b) Safety of deposit, and Withdrawal of deposit

Role of Banking Banks provide funds for business as well as personal needs of individuals. They play a significant role in the economy of a nation. Let us know about the role of banking. It encourages savings habit amongst people and thereby makes funds available for productive use. It acts as an intermediary between people having surplus money and those requiring money for various business activities. It facilitates business transactions through receipts and payments by cheques instead of currency. It provides loans and advances to businessmen for short te rm and long-term purposes. It also facilitates import export transactions. It helps in national development by providing credit to farmers, small -scale industries and self-employed people as well as to large business houses which lead to balanced economic development in the country. It helps in raising the standard of living of people in general by providing loans for purchase of consumer durable goods, houses, automobiles, etc.

Functions of Commercial Bank (A) Primary functions; and (B) Secondary functions.

The following types of deposits are usually received by banks i) Current deposit ii) Saving deposit iii) Fixed deposit iv) Recurring deposit v) Miscellaneous deposits

CHAPTER : 2 OBJECTIVE OF THE STUDY OF ICICI BANK

The main objectives of this project are the following: To study about ICICI BANK and its related aspects like its products & services, history, organizational structure, subsidiary companies etc. To analyze the financial statement i.e. P&L account and Balance sheet of ICICI BANK.

To learn about Cash Flow, Capital Structure. To understanding the meaning and need of Balance Sheet and profit and loss account.

The purpose is to portray the financial position of ICICI BANK with the help of Balance sheet and profit and loss account. To evaluate the financial soundness, stability and liquidity of ICICI BANK.

INTRODUCTION OF ICICI BANK

ICICI Bank is the largest private sector bank in India in terms of market capitalization. It is also the second largest bank in India in terms of assets with a total asset of Rs. 3,674.19 billion (US$ 77 billion) as on June 30,2009, the total profit after tax has been Rs. 8.78 billion. Formerly known as Industrial Credit and Investment Corporation of India, ICICI Bank has an extensive network of 1,544 branches with about 4,816 ATMS located across India and in 18 other countries. ICICI Bank serves about 24 Million customers throughout the world. It is considered as one of the Big Four Banks in India along with State Bank of India, HDFC Bank and Axis Bank. ICICI Bank provides a wide range of banking products and financial services to its retail and corporate customers. It has a wide variety of delivery channels and specialized affiliates and subsidiaries that ensure the flow of its offerings in the areas like investment banking, venture capital, life and non-life insurance and asset management. This bank is also Indias largest credit card issuer. The equity share of ICICI Bank is listed on various stock exchanges like NSE, BSE, Calcutta Stock Exchange and Vadodara Stock Exchange etc. Its ADRs are also listed on the New York Stock Exchange. ICICI Bank also has the largest international balance sheet among all the banks in India. It is also expanding its business in the overseas market at an enviable pace. In Q2 September 2008, ICICI Bank recorded a 1.15% growth in net profit over Q2 September 2007 to reach at Rs 1,014.21crores. The current and savings account (CASA) ratio of bank also went up from 25% in2007 to 30% in 2008.

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HISTORY OF ICICI BANK

ICICI Bank was originally promoted in 1994 by ICICI Limited an Indian financial institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in Indiain fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all stock amalgamation in fiscal 2001, and secondary market sales by ICICI toinstituti onal investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955at the initiative of the World Bank, the Government of India and representativesof Indian industry. The principal objective was to create a developm entfinancial institution for providing medium-term and long-term project financingto Indian businesses. In the 1990s, ICICI transformed its business from ad evelopment financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimalstrategic alternative for both entities, and would create the optimal legalstru cture for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments,higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In 10 October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
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merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Cist of Gujarat at Ahmadabad in March2002, and by the High Cist of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees.

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COMPANY PROFILE OF ICICI BANK

ICICI Bank is Indias second-largest bank with total assets of 3,997.95 billion(US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for they ear ended March 31, 2008 ICICI Bank is the most valuable bank in India in terms of market capitalization and is ranked second amongst all the companies listed on the Indian stock exchanges. In terms of free float market capitalization. The Bank has a network of about 1308Branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customer through a variety of delivery channels and through its specialized subsidiaries and affiliates in the are as of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, UnitedStates, United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. UK subsidiary has established a branch in Belgium. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange(BSE) and the National Stock Exchange (NSE) of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

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STUDY OF PROFIT& LOSS A/C MEANING It is a financial statement, which shows net loss of a company for a specified period. The accounting year means calendar year of 12months or less or more than 12 months. CONTENTS This presents the revenues and expenses of a company and shows the excess of revenues over expenses for profit and vice versa for a loss. FORMAT The Companies act does not provide any specific format for this account. However it is required to be prepared on the basis of the instructions given in part ii of schedule (vi) of the companies act. MAIN ITEMS OF PROFIT AND LOSS ACCOUNT Turnover or sales: The aggregate amount of sales and connected items with the sales such as commission paid to sole-selling agents and other selling agents and brokerage and discounts on sales other than usual trade discount. Depreciation: The amount of depreciation of fixed assets and the arrears of depreciation as per section 205(2) shall be disclosed by way of foot-note. Interest on loans and debentures: Interest on loans and debentures has to be stated separately. It will include the amount of interest paid as well as outstanding.

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Miscellaneous expenses: In this head items such as rates and taxes, insurance premium etc., must be stated separately. Preliminary expenses: Such expenses include the costs of formation of a company and since their amount is usually large, it is not desirable to write off them in one year. Provision for taxation: The profit and loss account of a company must be debited with the estimated liabilities for tax on the current profits at current rates of taxation. Unclaimed dividends: It is shown on the liabilities side of the balance sheet under the heading current liabilities. Interim dividends: It is an item of appropriation. It is transferred to the debit side of the Profit and loss appropriation account. Final dividend as an item of the trial balance: This is shown in the debit side of the appropriation section of the profit and loss account. Proposed dividend or final dividend proposed: Since it is an adjustment item, it has to be shown at two places- In the debit side of the profit and loss appropriation account and on the liabilities side of the balance sheet under the head current liabilities and provisions Dividend on interest income: This item is transferred to the credit side of the profit and loss account. Payment to auditors: It must be stated separately. This will include consultancy fee, auditing fees management services etc.
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Profit & Loss account of ICICI Bank

------------------- in Rs. Cr. ------------------Mar '12 Mar '11 12 mths 12 mths Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths

Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalized Operating Expenses Provisions & Contingencies Total Expenses

33,542.65 25,974.05 7,908.10 7,108.91 41,450.75 33,082.96 22,808.50 3,515.28 2,888.22 524.53 5,248.97 0.00 8,843.63 3,333.37 34,985.50 Mar '12 12 mths 16,957.15 2,816.93 3,785.13 562.44 3,809.93 0.00 8,594.16 2,380.27 27,931.58 Mar '11 12 mths 5,151.38 -2.17 3,464.38 8,613.59 0.00 1,612.58 202.28 44.73 140.00 478.31 1,780.29 0.26 1,814.86 5,018.18 8,613.59

25,706.93 7,292.43 32,999.36 17,592.57 1,925.79 6,056.48 619.50 2,780.03 0.00 10,221.99 1,159.81 28,974.37 Mar '10 12 mths 4,024.98 -0.09 2,809.65 6,834.54 0.00 1,337.86 164.04 36.10 120.00 463.01 1,867.22 1.04 1,501.90 3,464.38 6,834.54

31,092.55 8,117.76 39,210.31 22,725.93 1,971.70 5,977.72 678.60 4,098.22 0.00 10,795.14 1,931.10 35,452.17 Mar '09 12 mths 3,758.13 -0.58 2,436.32 6,193.87 0.00 1,224.58 151.21 33.76 110.00 444.94 2,008.42 0.01 1,375.79 2,809.65 6,193.87
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30,788.34 8,878.85 39,667.19 23,484.24 2,078.90 5,834.95 578.35 3,533.03 0.00 10,855.18 1,170.05 35,509.47 Mar '08 12 mths 4,157.73 0.00 998.27 5,156.00 0.00 1,227.70 149.67 37.37 110.00 417.64 1,342.31 0.01 1,377.37 2,436.32 5,156.01

Net Profit for the Year Extraordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total

6,465.26 -0.43 5,018.18 11,483.01 0.00 1,902.04 220.35 56.09 165.00 524.01 2,306.07 0.32 2,122.39 7,054.23 11,483.01

STUDY OF BALANCE SHEET

MEANING The balance sheet is a financial snapshot of a company's condition at a single point in time. A balance sheet contains a listing of the company's asset, liability and Capital accounts. When someone, whether a creditor or investor, asks you how your company is doing, you'll want to have the answer ready and documented . The way to show off the success of your company is a balance sheet. A balance sheet is a documented report of your company's assets and obligations, as well as the residual ownership claims against your equity at any given point in time. It is a cumulative record that reflects the result of all recorded accounting transactions since your enterprise was formed. You need a balance sheet to specifically know what your company's net worth is on any given date. With a properly prepared balance sheet, you can look at a balance sheet at the end of each accounting period and know if your business has more or less value, if your debts are higher or lower, and if your working capital is higher or lower. By analyzing your balance sheet, investors, creditors and others can assess your ability to meet short-term obligations and solvency, as well as your ability to pay all current and longterm debts as they come due. The balance sheet also shows the composition of assets and liabilities, the relative proportions of debt and equity financing and the amount of earnings that you have had to retain. Collectively, external parties to help assess your companys financial status.

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MAIN ITEMS OF ASSETS

Current assets: Current assets include cash and other assets that in the normal course of events are converted into cash within the operating cycle. For example, a manufacturing enterprise will use cash to acquire inventories of materials. These inventories of materials are converted into finished products and then sold to customers. Cash is collected from the customers. This circle from cash back to cash is called an operating cycle. In a merchandising business one part of the cycle is eliminated. Materials are not purchased for conversion into finished products. Instead, the finished products are purchased and are sold directly to the customers. It is conceivable that almost all of the assets that are used to conduct our business, such as buildings, machinery, and equipment, can be converted into cash within the time required to complete an operating cycle. However, your current assets are only those that will be converted into cash within the normal course of your business. The other assets are only held because they provide useful services and are excluded from the current asset classification. If you happen to hold these assets in the regular course of business, you can include them in the inventory under the classification of current assets. Current assets are usually listed in the order of their liquidity and frequently consist of cash, temporary investments, accounts receivable, inventories and prepaid expenses. Cash : Cash is simply the money on hand and/or on deposit that is available for general business purposes. It is always listed first on a balance sheet. Cash held for some designated purpose, such as the cash held in a fund for eventual retirement of a bond issue, is excluded from current assets.

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Marketable Securities: These investments are temporary and are made from excess funds that you do not immediately need to conduct operations. Until you need these funds, they are invested to earn a return. Accounts Receivable: Simply stated, accounts receivables are theamounts owed to you and are evi denced on your balance sheet by promissory notes. Accounts receivable are the amounts billed to your customers and owed to you on the balance sheet's date. You should label all other accounts receivable appropriately and show them apart from the accounts receivable arising in the course of trade. If these other amounts are currently collectible, they may be classified as current assets. Inventories: Your inventories are your goods that are available for sale, products that you have in a partial stage of completion, and the materials that you will use to create your products. The costs of purchasing merchandise and materials and the costs of manufacturing your various product lines are accumulated in the accounting records and are identified with either the cost of the goods sold during the fiscal period or as the cost of the inventories remaining. Prepaid expenses: These expenses are payments made for services that will be received in the near future. Strictly speaking, your prepaidexpenses will not be converted to current assets in order to avoid penalizing companies that choose to pay current operating costs in advance rather than to hold cash. Often your insurance premiums or rentals are paid in advance.

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Investments: Investments are cash funds or securities that you hold for a designated purpose for an indefinite period of time. Investments include stocks or the bonds you may hold for another company, real estate or mortgages that you are holding for income-producing purposes. Your investments also include money that you may be holding for a pension fund. Plant Assets: Often classified as fixed assets, or as plant and equipment, your plant assets include land, buildings, machinery, and equipment that are to be used in business operations over a relatively long period of time. It is not expected that you will sell these assets and convert them into cash. Plant assets simply produce income indirectly through their use in operations. Intangible Assets: Your other fixed assets that lack physical substance are referred to as intangible assets and consist of valuable rights, privileges or advantages. Although your intangibles lack physical substance, they still hold value for your company. Sometimes the rights, privileges and advantages of your business are worth more than all other assets combined. Other Assets: During the course of preparing your balance sheet you will notice other assets that cannot be classified as current assets, investments, plant assets, or intangible assets. These assets are listed on your balance sheet as other assets.

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MAIN ITEMS OF LIABILITIES Current Liabilities: On the equity side of the balance sheet, as on the asset side, you need to make a distinction between current and long-term items. Your current liabilities are obligations that you will discharge within the nor maloperating cycle of your business. In most circumstances your current liabilities will be paid within the next year by using the assets you classified ascurrent.The amount you owe under current liabilities often arises as a resul t of acquiring current assets such as inventory or services that will be used in current operations. You show the amounts owed to trade creditors that arise from the purchase of materials or merchandise as accounts payable. If you are obligated under promissory notes that support bank loans or other amounts owed, your liability is shown as notes payable. Other current liabilities may include the estimated amount payable for income taxes and the various amounts owed for wages and salaries of employees, utility bills, payroll taxes, local property taxes and other services. Long-Term Liabilities: Your debts that are not due until more than a year from the balance sheet date are generally classified as long-term liabilities. Notes, bonds and mortgages are often listed under this heading. If a portion of your long-term debt is due within the next year, it should be removed from the long-term debt classification and shown under current liabilities. Deferred Revenues: Your customers may make advance payments for merchandise or services. The obligation to the customer will, as a general rule, be settled by delivery of the products or services and not by cash payment. Advance collections received from customers are classified as deferredreven ues, pending delivery of the products or services.

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Owner's Equity: Your owner's equity must be subdivided on your balance sheet: One portion represents the amount invested directly by you, plus any portion of retained earnings converted into paid-in capital. The other portioned presents your net earnings that are retained. This rigid distinction is necessary because of the nature of any corporation. Ordinarily, stockholders, or owners, are not personally liable for the debts contracted by a company. A stockholder may lose his investment, but creditors usually cannot look to his personal assets for satisfaction of their claims. Under normal circumstances, the stockholders may withdraw as cash dividends an amount measured by the corporate earnings. The distinction in this rule gives the creditors some assurance that a certain portion of the assets equivalent to the owner's investment cannot be arbitrarily withdrawn. Of course, this portion could be depleted from your balance sheet because of operating losses. The owner's equity in an unincorporated business is shown more simply. The interest of each owner is given in total, usually with no distinction being made between the portion invested and the accumulated net earnings. The creditors are not concerned about the amount invested. If necessary, creditors can attach the personal assets of the owners.

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BALANCE-SHEET STRUCTURE Basis of balance-sheet: Assets = Liability + Equity

Balance Sheet of ICICI Bank ------------------- in Rs. Cr. ------------------Mar '12 12 mths Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Mar '11 12 mths Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths

1,152.77 1,152.77 2.39 0.00 59,250.09 0.00 60,405.25 255,499.96 140,164.91 395,664.87 17,576.98 473,647.10 Mar '12 12 mths

1,151.82 1,151.82 0.29 0.00 53,938.82 0.00 55,090.93 225,602.11 109,554.28 335,156.39 15,986.35 406,233.67 Mar '11 12 mths

1,114.89 1,114.89 0.00 0.00 50,503.48 0.00 51,618.37 202,016.60 94,263.57 296,280.17 15,501.18 363,399.72 Mar '10 12 mths

1,463.29 1,113.29 0.00 350.00 48,419.73 0.00 49,883.02 218,347.82 67,323.69 285,671.51 43,746.43 379,300.96 Mar '09 12 mths

1,462.68 1,112.68 0.00 350.00 45,357.53 0.00 46,820.21 244,431.05 65,648.43 310,079.48 42,895.39 399,795.08 Mar '08 12 mths

Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs)

20,461.29 15,768.02 253,727.66 159,560.04 9,424.39 4,809.70 4,614.69 0.00 19,515.39 473,647.09

20,906.97 13,183.11 216,365.90 134,685.96 9,107.47 4,363.21 4,744.26 0.00 16,347.47 406,233.67

27,514.29 11,359.40 181,205.60 120,892.80 7,114.12 3,901.43 3,212.69 0.00 19,214.93 363,399.71 694,948.84 38,597.36 463.01

17,536.33 12,430.23 218,310.85 103,058.31 7,443.71 3,642.09 3,801.62 0.00 24,163.62 379,300.96 803,991.92 36,678.71 444.94
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29,377.53 8,663.60 225,616.08 111,454.34 7,036.00 2,927.11 4,108.89 0.00 20,574.63 399,795.07 371,737.36 29,377.55 417.64

858,566.64 883,774.77 64,457.72 47,864.06 524.01 478.31

STUDY OF CASH FLOW STATEMENT

MEANING: Cash flow statement or statement of cash flows is a financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). The statement shows how changes in balance sheet andincome accounts aff ectedcash and cash equivalents , and breaks the analysis down according to operating, investing, and financing activities. As an analytical tool the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. PURPOSE: The cash flow statement reflects a firms liquidity or solvency. The main purpose to make cash flow statement are as follows: 1. provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances. 2. provide additional information for evaluating changes in assets, liabilities and equity. 3. Improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4.indicate the amount, timing and probability of future cash flows

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ACTIVITIES INVOLVED IN CASH FLOW The cash flow statement is partitioned into cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. Operating activities: Operating activities include the production ,sales anddelivery of the compan y's product as well as collecting payment from itscustomers. This could include purchasing raw materials, building inventory, advertising. Investing activities: Investing activities focus on the purchase of the long-term assets a company needs in order to make and sell its products, and the selling of any long-term assets. Financing activities: Financing activities include the inflow of cash from investors such as banks and shareholders as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the longterm liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Analysis of cash flow statement is necessary for every organization to depict its cash inflow and outflow.

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Cash Flow of ICICI Bank

------------------- in Rs. Cr. ------------------Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Net Profit Before Tax Net Cash From Operating Activities Net Cash Investing Activities (used in)/from

8803.42 9683.82 -12280.17

6760.70 -6908.92 -2108.82 4283.20 -4783.61 38873.69 34090.08

5345.32 1869.21 6150.73 1382.62 8907.13 29966.56 38873.69

5116.97 -14188.49 3857.88 1625.36 -8074.57 38041.13 29966.56

5056.10 -11631.15 -17561.11 29964.82 683.55 37357.58 38041.13

Net Cash (used in)/from Financing Activities 3829.95 Net (decrease)/increase In Cash and Cash 2139.23 Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 34090.08 36229.31

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Capital Structure (ICICI Bank) Period Instrument Authorized Capital (Rs. cr) Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share 1275 1275 1275 1275 1275 1000 1000 1550 1550 300 300 300 300 300 300 Issued Capital - P A I D U P -

From 2011 2010 2009 2008 2007 2006 2005 2004 2003 2001 2000 1999 1997 1995 1994

To 2012 2011 2010 2009 2008 2007 2006 2005 2004 2002 2001 2000 1999 1997 1995

(Rs. cr) 1152.71 1151.77 1114.85 1113.25 1112.69 899.27 889.82 616.39 613.02 220.36 196.82 196.82 165 150 150

Shares (nos) 1152714442 1151772372 1114845314 1113250642 1112687495 899266672 889823901 616391905 613021301 220358680 196818880 196818880 165000700 150000700 700

Face Value 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10

Capital 1152.71 1151.77 1114.85 1113.25 1112.69 899.27 889.82 616.39 613.02 220.36 196.82 196.82 165 150 0

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CHAPTER : 3 ACCOUNTING POLICIES YEAR 2011-2012

OVERVIEW ICICI Bank Limited (ICICI Bank or the Bank), incorporated in Vadodara, India is a publicly held banking company engaged in providing a wide range of Banking and financial services including commercial banking and treasury operations. ICICI Bank is a banking company governed by the Banking Regulation Act, 1949.

Basis of preparation The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), The guidelines issued by Reserve Bank of India (RBI) from time to time, The Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Companies (Accounting Standards) Rules, 2006 (as amended) to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, except where otherwise stated, and the historical cost convention.

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The preparation of financial statements requires the management to make estimates and assumptions that are considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

1. Revenue recognition a) Interest income is recognized in the profit and loss account as it accrues except in the case of non-performing assets (NPAs) where it is recognized upon realization, as per the income recognition and asset classification norms of RBI. b) Income from leases is calculated by applying the interest rate implicit in the lease to the net investment outstanding on the lease over the primary lease period.

29

2. Investments Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation as given below. a) All investments are classified into ''Held to Maturity'', ''Available for Sale'' and ''Held for Trading''. b) ''Held to Maturity'' securities are carried at their acquisition cost or at amortized cost, if acquired at a premium over the face value. Any premium over the face value of fixed rate and floating rate securities acquired is amortized over the remaining period to maturity on a constant yield basis and straight line basis respectively. c) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to the profit and loss account. d) Equity investments in subsidiaries/joint ventures are categorized as ''Held to Maturity'' in accordance with RBI guidelines. The Bank assesses these investments for any permanent diminution in value and appropriate provisions are made.

3. Provisions/write-offs on loans and other credit facilities a) All credit exposures, including advances at the overseas branches and overdue arising from crystallized derivative contracts, are classified as per RBI guidelines, into performing and NPAs. Advances

30

held at the overseas branches that are identified as impaired as per host country regulations but which are standard as per the extant RBI guidelines are identified as NPAs at borrower level. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. The Bank holds specific provisions against non-performing loans, general provision against performing loans and floating provision taken over from erstwhile Bank of Rajasthan upon amalgamation. The assessment of incremental specific provisions is made after taking into consideration the existing specific provision held. The specific provisions on retail loans held by the Bank are higher than the minimum regulatory requirements. b) Provision on assets restructured/rescheduled is made in accordance with the applicable RBI guidelines on restructuring of advances by Banks. c) Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account. d) In addition to the specific provision on NPAs, the Bank maintains a general provision on performing loans. The general provision covers the requirements of the RBI guidelines. 4. Transfer and servicing of assets

31

The Bank transfers commercial and consumer loans through securitization transactions. The transferred loans are de-recognized and gains/losses are accounted for only if the Bank surrenders the rights to benefits specified in the underlying securitized loan contract. Recourse and servicing obligations are accounted for net of provisions. a) Depreciation on leased assets and leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease or rates specified in Schedule XIV to the Companies Act, 1956, whichever is higher. b) Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been put to use. c) Items costing up to Rs 5,000/- are depreciated fully over a period of 12 months from the date of purchase. d) Assets at residences of Banks employees are depreciated at 20% P.A

5. Transactions involving foreign exchange Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date of the transaction. Income and expenditure items of integral foreign operations (representative offices) are translated at daily closing rates, and income and expenditure items of non-integral foreign operations (foreign branches and offshore banking units) are translated

32

at quarterly average closing rates.

6. Accounting for derivative contracts The Bank enters into derivative contracts such as foreign currency options, interest rate and currency swaps, credit default swaps and cross currency interest rate swaps.

7. Staff Retirement Benefits Gratuity ICICI Bank makes contributions to five separate gratuity funds for employees. Separate gratuity funds for employees inducted from erstwhile ICICI, erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank of Rajasthan are managed by ICICI Prudential Life Insurance Company Limited. The gratuity fund for employees of ICICI Bank, other than employees inducted from erstwhile ICICI, erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank of Rajasthan is administered by Life Insurance Corporation of India (LIC) and ICICI Prudential Life Insurance Company Limited.

Pension The Bank purchases annuities from LIC and ICICI Prudential Life Insurance Company Limited as part of master policies for payment of pension to retired employees. Actuarial valuation of pension liability is calculated based on certain

33

assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method.

Provident Fund ICICI Bank is statutorily required to maintain a provident fund as a part of retirement benefits to its employees. There are separate provident funds for employees inducted from erstwhile Bank of Madura, erstwhile Sangli Bank, erstwhile Bank of Rajasthan and for Other employees of ICICI Bank. In-house trustees manage these funds. Each employee contributes 12.0% of his or her basic salary (10.0% for certain staff of erstwhile Sangli Bank) and ICICI Bank contributes an equal amount. The funds are invested according to the rules prescribed by the Government of India. Leave encashment The Bank provides for leave encashment benefit, which is a long-term benefit scheme, based on actuarial valuation conducted by an independent actuary.

8. Income Taxes Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense is determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income issued by ICAI, respectively. Deferred tax adjustments

34

comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized on a prudent basis for the future tax consequences of timing differences arising between the carrying values of assets and liabilities and their respective tax basis, and carry forward losses.

9. Impairment of Assets Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment is recognized by debiting the profit and loss account and is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

10. Provisions, contingent liabilities and contingent assets The Bank estimates the probability of any loss that might be incurred on outcome of contingencies on the basis of information available up to the date on which the financial statements are prepared. A provision is recognized when an enterprise has a present obligation as a result of a

35

past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are determined based on management estimates of amounts required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

11. Earnings per share (EPS) Basic and diluted earnings per share are computed in accordance with Accounting Standard-20 - Earnings per share. Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

12. Cash and cash equivalents Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice.

CHAPTER : 4

36

OBJECTIVE OF THE STUDY OF PUNJAB NATIONAL BANK

The main objectives of this project are the following: To study about PUNJAB NATIONAL BANK and its related aspects like its products & services, history, organizational structure, subsidiary companies etc. To analyze the financial statement i.e P&L account and Balance sheet of PNB BANK. To learn about Cash Flow , Capital Structure. To understanding the meaning and need of Balance Sheet and profit and loss account. The purpose is to portray the financial position of PNB BANK with the help of Balance sheet and profit and loss account. To evaluate the financial soundness, stability and liquidity of PNB BANK.

INTRODUCTION TO PUNJAB NATIONAL BANK

37

Punjab National Bank(PNB) was registered on May 19,1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The Bank is the second largest government-owned commercial bank in India with about 4,904 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248 th biggest bank in the world by Bankers Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion. Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalized in July 1969 along with 13other banks. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present. A professionally managed bank with a successful track record of over 110 years. Strategic business area covers the largeIndo-Gangetic belt and the metropolitan centers. Strong correspondent banking relationships with more than 217 international banks of the world. More than 50 renowned international banks maintain their Rupee Accounts with PNB. Well equipped dealing rooms; 20 different foreign currency accounts are maintained at major centers all over the globe.

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HISTORY OF PUNJAB NATIONAL BANK

1895:PNB commenced its operations in Lahore.PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was established in 1881in Faizabad, but failed in 1958 .)PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years. 1904 :PNB established branches in Karachi and Peshawar. 1940 PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi circle. 1947 : Partition of India and Pakistan at Independence. PNB lost its premises in Lahore, but continued to operate in Pakistan. 1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became Bharat Nidhi Ltd. 1961: PNB acquired Universal Bank of India. 1963: The Government of Burma nationalized PNB's branch in Rangoon (Yangon). 1965 : After the Indo- Pak war the government of Pakistan seized all the offices in Pakistan of Indian banks, including PNB's head office, which may have moved to Karachi. PNB also had one or more branches in East Pakistan (Bangladesh). 1969 : The Government of India (GOI) nationalized PNB and 13other major commercial banks, on July 19,1969 . 1976 : PNB opened a branch in London.

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1986: The Reserve Bank of India required PNB to transfer its London branch to State Bank of India after the branch was involved in a fraud scandal. 1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The acquisition added Hindustan's 142 branches to PNB's network. 1993:PNB acquired New Bank of India, which the GOI had nationalized in 1980 . 1998 :PNB set up a representative office in Almaty, Kazakhstan. 2003: PNB took over Nedungadi Bank, the oldest private sector bank in Kerala. At the time of the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its shareholders received no payment for their shares.PNB also opened a representative office in London. 2004 : PNB established a branch in Kabul, Afghanistan. PNB also opened a representative office in Shanghai.PNB established an alliance with Everest Bank in Nepal that permits migrants to transfer funds easily between India and Everest Bank's 12 branches in Nepal. 2005 : PNB opened a representative office in Dubai. 2007 : PNB established PNBIL - Punjab National Bank (International) - in the UK, with two offices, one in London, and one in South Hall. Since then it has opened a third branch in Leicester, and is planning a fourth in Birmingham. 2008 : PNB opened a branch in Hong Kong. 2009: PNB opened a representative office in Oslo, Norway, and a second branch in Hong Kong, this in Kowloon.

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COMPANY PROFILE OF PUNJAB NATIONAL BANK

With over 38 million satisfied customers and 4668 offices, PNB has continued to retain its leadership position among the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business; Gold coins & asset management business, etc. Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2009 amounted to Rs 3,64,463 crore. Today, with assets of more than Rs 2,46,900 crore ,PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches ( 4668 including 238 extension counters and 3overseas offices. PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its IT strategy follows the Business strategy Along with the achievement of 100%branch computerization, one of the major achievements of the Bank is covering all the branches of the Bank under Core Banking Solution (CBS), thus covering 100% of its business and providing Anytime Anywhere banking facility to all customers including customers of more than 2000 rural branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets,
41

payment of bills of utilities, purchase of airline tickets etc .Towards developing a cost effective alternative channels of delivery, the bank with more than 2150 ATMs has the largest ATM network amongst Nationalized Banks. With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth in the Indo- Gangetic belt, the Banks mission is Banking for Unbanked. The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The BC/BF will address the outreach issue while technology will provide cost effective and transparent services. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, diary farmers, construction workers, etc. The Bank has already achieved 100% financial inclusion in 21,408 villages. Backed by strong domestic performance, the bank is planning to realize its global aspirations. In order to increase its international presence, the Bank continues its selective foray in international markets with presence in Hongkong, Dubai, Kazakhstan, UK, Shanghai, Singapore, Kabul and Norway. A second branch in Hongkong at Kowloon was opened in the first week of April 09.Bank is also in the process of establishing its presence in China, Bhutan, DIFC Dubai, Canada and Singapore. The bank also has a joint venture with Everest Bank Ltd. (EBL),Nepal. Under the long term vision, Bank proposes to start its operation in Fiji Island, Australia and Indonesia. Bank continues with its goal to become a household brand with global expertise. Amongst Top 1000 Banks in the World, The Banker listed PNB at 250 th place. Further, PNB is at the 1166th position among 48 Indian firms making it to a list of the worlds biggest companies compiled by the US magazine Forbes. Financial Performance: Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, The impressive operational and financial performance has been brought about by Banks focus on customer based business with thrust on SME, Agriculture, more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank.
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Profit & Loss account of Punjab National ------------------- in Rs. Cr. ------------------Bank Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses 23,013.59 15,179.14 4,723.48 4,461.10 3,353.59 2,813.45 292.26 255.85 12,944.02 3,121.14 1,701.46 222.83 3,137.42 0.00 5,761.36 2,421.49 21,126.87 12,295.30 2,924.38 1,406.42 191.06 2,337.80 0.00 5,026.81 1,832.85 19,154.96 8,730.86 2,461.54 884.19 170.23 1,966.98 0.00 3,902.55 1,580.39 14,213.80 36,428.03 26,986.48 4,202.60 3,612.58 40,630.63 30,599.06 21,466.91 3,565.31 25,032.22 19,326.16 2,919.69 22,245.85 14,265.02 1,997.56 16,262.58

4,363.51 3,456.02 0.00 0.00

9,405.85 8,367.96 3,326.99 2,618.46 35,746.43 26,165.56

43

Mar '12 Mar '11

Mar '10

Mar '09

Mar '08

12 mths 12 mths

12 mths

12 mths

12 mths

Net Profit for the Year Extra ordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (Annualized) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt. Balance c/f to Balance Sheet Total

4,884.20 4,433.50 7.88 0.00 0.00 0.00

3,905.36 0.00 7.64 3,913.00 0.00 693.67 116.43

3,090.88 0.00 0.00 3,090.88 0.00 630.61 107.17

2,048.76 0.00 15.52 2,064.28 0.00 409.89 69.66

4,892.08 4,433.50 0.00 746.19 121.05 0.00 696.99 113.07

144.00 220.00 777.39

139.94 220.00 632.48

123.86 220.00 514.77

98.03 200.00 416.74

64.98 130.00 341.98

1,390.32 1,258.39 2,634.53 2,365.05 867.24 0.00 810.06 0.00

1,532.46 1,570.44 810.10 0.00 3,913.00

1,155.46 1,190.00 737.78 7.64 3,090.88

596.14 988.59 479.55 0.00 2,064.28

4,892.09 4,433.50

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Balance Sheet of Punjab National Bank

------------------- in Rs. Cr. ------------------Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 339.18 339.18 0.00 0.00 316.81 316.81 0.00 0.00 315.30 315.30 0.00 0.00 15,915.63 1,491.99 17,722.92 249,329.80 19,262.37 268,592.17 10,317.69 296,632.78 315.30 315.30 0.00 0.00 12,824.59 1,513.74 14,653.63 209,760.50 4,374.36 214,134.86 18,130.13 246,918.62 315.30 315.30 0.00 0.00 10,467.35 1,535.70 12,318.35 166,457.23 5,446.56 171,903.79 14,798.23 199,020.37

26,028.37 19,720.99 1,449.53 1,470.76

27,817.08 21,508.56 379,588.48 312,898.73 37,264.27 31,589.69 416,852.75 344,488.42 13,524.18 12,328.27 458,194.01 378,325.25

45

Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets 18,492.90 23,776.90 10,335.14 5,914.32 293,774.76 242,106.67 122,629.47 95,162.35 5,265.08 2,096.22 3,168.86 0.00 9,792.88 4,981.60 1,876.01 3,105.59 0.00 8,259.42 18,327.58 5,145.99 186,601.21 77,724.47 4,215.21 1,701.74 2,513.47 0.00 6,320.07 296,632.79 17,058.25 4,354.89 154,702.99 63,385.18 3,930.36 1,533.25 2,397.11 0.00 5,020.20 246,918.62 15,258.15 3,572.57 119,501.57 53,991.71 3,699.64 1,384.12 2,315.52 0.00 4,380.84 199,020.36

458,194.01 378,325.25

Contingent Liabilities Bills for collection Book Value (Rs)

173,768.84 101,465.73 50,981.22 37,449.53 777.39 632.48

68,124.47 33,215.78 514.77

79,270.65 31,941.43 416.74

80,606.88 23,448.99 341.98

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Cash Flow of Punjab National Bank

------------------- in Rs. Cr. ------------------Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

12 mths

12 mths

12 mths

12 mths

12 mths

Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities

7037.04 -811.22 -492.34

6563.72 8045.67 -1083.66 -744.36 6217.65 23473.56 29691.21

5904.78 1835.99 -409.41 633.84 2060.42 21413.14 23473.56

4766.92 2105.16 -395.84 873.11 2582.42 18830.72 21413.14

3295.91 1756.13 -444.46 1873.54 3185.21 15645.52 18830.72

Net Cash (used in)/from Financing Activities 440.38 Net (decrease)/increase In Cash and Cash -863.18 Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 29691.21 28828.03

47

Capital Structure (Punjab National Bank) Period Instrument Authorized Capital (Rs. cr) Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share 3000 3000 3000 1500 1500 1500 1500 1500 1500 1500 1500 Issued Capital - P A I D U P -

From 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

To 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

(Rs. cr) 339.18 316.81 315.3 315.3 315.3 315.3 315.3 315.3 265.3 265.3 265.3

Shares (nos) 339178683 316812157 315302500 315302500 315302500 315302500 315302500 315302500 265302500 265302500 212241300

Face Value 10 10 10 10 10 10 10 10 10 10 10

Capital 339.18 316.81 315.3 315.3 315.3 315.3 315.3 315.3 265.3 265.3 212.24

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CHAPTER : 5 ADVANTAGES & LIMITATIONS

Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis:

1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business. 2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms. 3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications. 4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. 5. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.

49

LIMITATIONS The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations. 1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. 2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations. 3. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. 4. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult. 5. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. 6. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpret and different people may interpret the same ratio in different way. 7. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading.

50

CHAPTER : 6 CONCLUSION

Ratios make the related information comparable. A single figure by itself has no meaning, but when expressed in terms of a related figure, it yields significant interferences. Thus, ratios are relative figures reflecting the relationship between related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute figures, are not of much use. Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company. Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company. The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm position and performance. The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationships. Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an important tool of financial analysis.
51

BIBLIOGRAPHY & WEBLOGRAPHY

Web sites : www.sbi.com www.icici.com www.pnb.com

Books referred :

Basic Financial Management - M Y Khan P K Jain Financial Management - Prasanna Chandra

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