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A STUDY ON RATIO ANALYSIS IN BANK OF INDIA,SALEM A Project Report submitted to the SRM University in partial fulfillment of the requirements

for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION Submitted by J.Anand (Reg.No. 3511010044)

Under the guidance of

Dr. T.Ramachandran

School of Management SRM University Kattangulathur MAY- 2012

SRM University Kattangulathur BONAFIDE CERTIFICATE

This is to certify that the Project Report entitled Ratio analysis in Bank of India on salem Branch , in partial fulfillment of the requirements for the award of the Degree of Master of Business Administration is a record of original training undergone by Mr.

J.Anand during the year 2012 of his study in the SRM School of Management, SRM University, Kattangulathur under my supervision and the report has not formed the basis for the award of any Degree/Fellowship or other similar title to any candidate of any University.



Submitted for the Viva Voce held on ______________ at SRM University.




I, J.Anand, hereby declare that the Project Report, entitled Ratio Analysis in Bank Of India on Salem Branch , submitted to the SRM University in partial fulfillment of the requirements for the award of the Degree of Master of Business Administration is a record of original training undergone by me during the period Feb-Apr 2012 under the supervision and guidance of Dr.T.Ramachandran, Professor, SRM School of Management, SRM for the award of any

University, Kattangulathur and it has not formed the basis

Degree/Fellowship or other similar title to any candidate of any University.

Signature of the Student

Place: Chennai


With great pleasure, Im presenting this project entitled A STUDY ON RATIO ANALYSIS IN BANK OF INDIA. The project of this dimension would not have been

possible without the sincere help and earnest support provided to me from all sources that was approached. I would like to express my heart filled thanks and gratitude Mr.Ashok Rathinam, manager for providing me an opportunity in this prestigious organization. It is a matter of privilege and honor for us to place on record our indebtedness to Chancellor, Dr.T.R.PACHAMUTHU, SRM University for who has given the official permission to undertake the project.

I would like to record our thanks to Mrs. Dr.Jayshree Suresh, (DEAN), School of Management, SRM University for encouraging and supporting me in doing this project successfully.

I owe my personal debt of gratitude to our guide Dr.T.Ramachandran for his valuable ideas, creative support, timely advice, keen interest and the encouragement shown in successful completion of this project.

My great and sincere thanks to all other faculty members, students, friends and all those who are directly and indirectly involved in this endeavor.

Above all, I thank God almighty for his entire blessing.






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Finance is a key in part of all round development of a concern. Finance is described as Lifeblood of an industry and pre-requisite for accelerating the process of development. Every business needs finance, finance is the live wire of an organization like the heart beat of a human being and money goes easily where it is treated best and shies away where it is treated shabbily. Financial analysis is the process of determining the significant operation and financial characteristics of a firm from accounting data and financial statements. Financial analysis is an examination of the organizations financial statements and the various ratios derived from information on its balance sheet and income statement. The term interpretation means explaining the meaning and significance of the data so simplified financial statements are indicators of the 2 significant factors a) Profitability & b) Financial Soundness

Banking in one form or another was in existence even in ancient times. The writings of Manu (the maker of old Hindu Law) and Kautilya (the Minister of Chandragupta Maurya) contained references to banking. However, banking as a kind of business i.e., modern banking is of recent origin. It came into existence only after the industrial revolution. After the industrial revolution, with the increase in the size of industrial and business units, joint stock company people with small means to become shareholders of big

industrial and business enterprises. Still, there were certain sections of public who were not prepared to invest their money on the shares of joint stock companies. However they were willing to part with a little surplus money, if they were assured of the repayment of their money with a little interest thereon. So naturally, there arose the need for formation of financial institutions that could collect the surplus funds of people on terms acceptable to them and make them available to the needy for productive purpose. Accordingly a large number of financial institutions called joint stock banks were set up after industrial revolution. As such joint banks or modern banks are of recent development. The Indian Banking Regulation Act of 1949 defines the term Banking Company as any company which transacts the business of banking in India and the term banking as Accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and with draw able by cheque draft order or demand otherwise. The term Banking includes not only the above motioned important activities but also several other activities. Such as collecting of cheque, drafts bills, remittance of funds, acceptance of safe custody deposits, which is generally referred to as subsidiary service. The essential characteristics of banks: Acceptance of deposits from the public on fixed, current, or savings bank accounts. Allowing of withdrawals of such deposits by cheque, drifts, order or other wise. Utilization deposits are hand for the purpose of lending or investment. Performance of other activities called subsidiary services n addition to the principal activities of receiving of deposits and lending of fund. A banker should deal mainly with other peoples money. He should use his brain but others money. The bank offering attractive interest on the saving of the people deposited with them, banks promote the habit of thrift and saving

among the people by accepting the saving of the people. Banks provides safety and security to the surplus money of the depositor. Banks are useful in several ways; we can rightly conclude that a strong and sound banking system is dispensable for development of any country.

Financial performance analysis as the name suggests, is the evaluation procedure of the performance on clients of the Bank of india. The evaluation is based on financial data provided by Bank of india and the data in the financial statements is used for the financial performance analysis. Financial performance analysis is the process of evaluating the relationship between component parts of financial statement to obtain a better understanding of the client position and performance. The financial statements extremely useful information to the extent the balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, etc and the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the costs incurred during the year Financial performance analysis is understood that the clients of the bank submit financial statements for at least a period of last 3 years along with application form requesting various credit facilities like working capital limits, term loan, etc. Limits requested for various purposes may be Fund Based or Non Fund Based. On receipt of application form & financial statements bank undertakes appraisal of application for credit facilities in a prescribed form. The various details of financial statements are incorporated in appraisal form as prescribed

by the bank . 1.3 Users are financial interested: The first task in the financial analysis is to select the information relevant to the decision under consideration from the total information contained in the financial statements.

The second step involved in this is to arrange the information in a way to establish the relationship. The final step is interpretation and drawing of inferences and conclusions. In short it is the process of selection, relation and evaluation. The financial performance analysis can be done using various tools. Financial ratio analysis is an important tool among the same. The other tools include the comparative analysis (i.e., inter- firm comparison). Time series analysis of ratios, common size statement analysis, indexed statement analysis, trend analysis, fund flow statement, and cash flow statement etc... But here Im used the financial tool can be done through by Ratio analysis. 1.4 RATIO ANALYSIS: Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial Structure, leverage, and interest coverage. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas. Ratio analysis is primarily used to compare clients of bank financial figures over a period of time; financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a client of Bank of india financial condition, its operations and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a client of bank financial statements. Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations. Overviews of some of the categories of ratios which are used by the Bank of India before permit various credit facilities to clients. Leverage Ratios which show the extent that debt is used in a client of bank Capital structure. Liquidity Ratios which give a picture of a company's short term financial Situation or solvency. Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets. Profitability Ratios which use margin analysis and show the return on sales and capital employed. Solvency Ratios which give a picture of a company's ability to generate cash flow and pay it financial obligations. Equity analysts look more to the operational and profitability ratios, to determine the future profits that will accrue to the shareholder. The stakeholders of a firm viz., shareholders, creditors, suppliers, managers, employees, tax authorities, banks and financial institutions are interested in broadly knowing about the firms financial conditions. Of course, their specific concern may differ. Trade creditors and short - term lenders are interested primarily in the short term liquidity of the firm and its ability to pay its dues in the next 12 months or so. Term lending institutions and debentures holders have a relatively longer time horizon and are concerned about the ability of the firm to service its debt over the next five to ten years. Long term shareholders and managers who want to make a career with the firm are interested in the profitability and growth of the firm over an extended period of time.

1.5 NATURE OF RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and weakness of a firm. Calculation of mere ratios does not serve any purpose, unless several appropriate ratios are analyzed and interpreted. There are a number of ratios, which can be calculated and interpreted. There are a number of ratios, which can be calculated from the information given in the financial statements, but the Banker has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis. Accounting ratio may indicate not only that financial positioning precarious but also the past policies or actions which have caused it. 1.6 STEPS INVOLVED IN RATIO ANALYSIS: 1. Selection of relevant date from the financial statements depending upon the objective of the analysis. 2. Calculating of appropriate ratios from the above date. 3. Comparison of calculated ratios with the ratios of the same firm in the past or the ratios developed from projected financial statements the ratios of some other firms of the comparison with the ratios of the industry to which the firm belong. 4. Interpretation of the ratio. 1.7 Purpose of the ratio analysis: To study the short term solvency of the firm- liquidity of the firm. To study of the long term solvency of the firm-leverage position of the firm.

To interpret the profitability of the firm-profit earning capacity of the firm. To identify the operating efficiency of the firm- turnover of the ratios. 1.8 Utility of the Ratio Analysis: Easy to understand the financial position of the firm. Measure of expressing the financial performance and position. Intra firm analysis of the financial information over many number of years. Inter firm analysis on the financial information within the industry. Possibility for financial planning and control. 1.9 Limitations of the Ratio Analysis: It is a dependant tool of analysis. Ambiguity in the handling of terms Qualitative factor is not considered. Not ideal for the future forecast. Time value of money is not considered. False results if based on incorrect accounting data. No idea of probable happenings In future. No use if ratios are worked out for insignificant and unrelated figures. 1.10 Users are interested in Financial Performance Analysis: Generally speaking every segment of the society is directly or indirectly interested in the analysis of financial performance. Although every group is interested in financial position and operating business results of the organization, yet the primary information that each seeks to obtain from these statement differs materially reflecting the purpose the statement is to serve. How ever, it is practically impossible that a set of financial statements will satisfy the precise needs of each group. Financial statements are, therefore, general purpose statements intended to serve the various needs of general groups such as:

Owners: owner has an obvious interest in the analysis of financial statements they assume the primary risk of business by investing their money. Owners of business need periodic reports to find answers to various questions relating to profitability and financial position of the concern. Creditors: creditors are individuals, agencies or institutions that extend credit facilities to a firm. They are primarily concerned, with the safety for their investment in the borrowing firm, the prompt receipt of interest when due and the collection of the loan on the schedule date. Management: management depends heavily on the financial and managerial reports in order to formulate company policies, establish organizational objectives evaluate companys performance and its employees, and to make other related decisions. In order to plan and control business operations efficiently, functional mangers require accurate and current financial information pertinent to specific areas of responsibility. Employees: Employees are also interested in the companys financial position and its options. They make frequent use of available information to gain insights into such matters fringe benefits, salary determination and working conditions. Government: central, state and local government agencies have become increasingly interested in the internal operations of business enterprise. They use financial statement to ensure that the company is meeting its various legal obligations. Financial analyst: financial analysts are experts in the study of the financial information. Their responsibility is to assemble and examine volumes of financial information for use by their clients for investment decision-making purposes. Institutions investors such as mutual investment companies, Banks, insurance firms and trustees of large estates normally employ their own staff of financial analysis who serves as advisors to the institutions management on investment opportunities.

Investors: investors in a business learn a great deal about a company from its financial statements. Investors would like to be clear about the nature and prospectus of investment opportunity offered by a particular business before he commits his money to it. Banks: Banks would willingly part with their money only if they are assured of the profitability and long term solvency of the business in which they are asked to invest. Financial statements are normally used by the lenders to judge for themselves the profitability and liquidity of the business and to assure themselves of the security available for the money lent. Promote Research and development: for research and development, the amount of investment require is voluminous, which has not to be mobilized from either internally and externally to the requirement of the future prospectus of the bank Researcher use the financial statement information extensively for the purpose of their research work. To understand the financial performance analysis and condition of a firm, its banker looks at their financial statements of client. The Balance Sheet The Profit and Loss Account Note that the Companies Act requires that the Annual Report of the company, a public document that is sent to shareholders, contain the Balance Sheet, the Profit and Loss Account, the Directors report, and the Auditors report. Though not presently required by law, most companies present Fund Flow Statement and Cash Flow Statement as well in the Annual Report.

The most important type of income of banks is their interest income. It has been generally about 89 percent of their total income in case of Private sector banks.

The two major sources of interest income are income on advances and income on investment.

The second component of banks total income is the income generated by fee based activities such as commission, brokerage, profits on sale of land, income from exchange transaction etc 1.12 FINANCIAL STATEMENT ANALYSIS Financial statements contain large numbers of accounting data and figures. But the accounting or financial figures, as found in the financial statements (i.e.) the absolute financial figures, are not more than a group of accounting figures. They do not convey anything by themselves to a layman. However, they may tell a vivid (i.e. clear) story of the financial adventure of firm, if they are analyzed and interpreted. Through analysis and interpretation, the financial statements can be made to tell the story of actual progress and the financial position of the firm in clear and simple language, which can be easily understood by a layman.
DEFINITION: According to Kennedy and Muller- defines financial statement

analysis as The analysis and interpretation of financial statements are an attempt to determine the significance and meaning of financial statement data so that the forecast may be made of the prospects for future earnings, ability to pay interest and debt maturities and profitability and sound dividend policy. 1.13 Financial Statements, their uses and significance: The two financial statements viz. the Balance Sheet and the Profit and Loss Account aid the understanding of a firms financial performance.

Balance Sheet The Balance Sheet shows the financial condition of a business at a given point of time, in terms of assets and liabilities. Assets are classified into the following categories: fixed assets, investments, current assets, loans and advances and miscellaneous expenditures and losses. Liabilities are classified as follows: share capital, reserves and surplus, secured loans, unsecured loans, current liabilities and provisions. As per the Companies Act, the Balance Sheet of a company shall be in either the horizontal form or the vertical form. Profit and Loss Account The Profit and Loss Account technically is an adjunct to the balance sheet because it provides details relating to net profit, which represents the change in owners equity. Yet, in practice it is often considered to be more important than the Balance Sheet because the details of revenues and expenses provided in the Profit and Loss Account shed considerable light on the performance of the business. There is no prescribed standard format to make this account. However, the Companies Act does require that the information provided should be adequate to reflect a true and a fair picture of the operations of the company for the accounting period. The important items in the profit and Loss Account are: net sales, cost of goods sold, gross profit, operating expenses, operating profit, non-operating surplus/ deficit, profit before interest and tax, interest, profit before tax, tax, and profit after tax. Thus the Balance Sheet shows the financial position or condition of a firm at a given point of time. It provides a snapshot and may be regarded as a static picture. The income statement referred to in India or Profit and Loss Account reflects the performance of a firm over a period of time.

1.14 STEPS INVOLVED IN THE ANALYSIS OF FINANCIAL STATEMENTS: From a study of the meaning of analysis of the financial statements, it is clear that the work of analysis of financial statement involves three steps or processes they are: Analysis Comparison Interpretation ANALYSIS: The data shown in the financial statements are either the balances of individual accounts or groups of balances of many accounts. As a result, they lack homogenizing and uniformity. They are not of much help to an analyst, who requires homogenize and comparable data (i.e. inter connected data) for judging the profitability and the financial position of a concern. So, to obtain the desired homogeneous and comparable data (i.e., the inter-connected data) the figures founding the financial statements have to be analyzed. COMPARISON: Mere splitting up or regrouping of the figures found in the financial statements into the desired component parts is not sufficient for judging the profitability and the financial status of an enterprise. After the figures contained in the financial statements are dissected or split into the required comparable compound parts, the comparable component parts (i.e., the inter-connected figures) must be compared with each other, and their relative magnitudes (i.e., their relationship must be measured).

INTERPRETATION: After the financial statements are analyzed or dissected into comparable component parts and the relative magnitudes of the comparable components parts (i.e., the relationship of the inter-connected component parts) is measured through comparison, the results (i.e., the relationship between the interconnected components parts) must be interprete. 1.15 VARIOUS ACCOUNTING RATIOS ARE: Ratio may be based on figures in the balance sheet, in the P&L or in both, Ratios indicating financial position are calculated on the basis of the B/S these indicating profitability and efficiency of control over expenses are calculated or on the basis of P&L a/c and those which through light on operating efficiency or effective use of facilities and resource are calculated on the basis of figures in both statements. The accounting ratios are classified into various categories viz: Ratio to judge financial position and policies Profitability Ratios Turnover (performance or activity) Ratios These ratios have been discussed and analyzed in chapter Number 1) Ratio to judge financial position and policies: Most of the ratios to judge the soundness of financial position and policies are based on the Balance sheet basically two ratios viz, the debt equity ratio. Showing the long term financial policy followed by the concern and the current ratio showing the short term financial policy should through enough light o the financial position of the concern. a) Current Ratio: its one of the important accounting ratios for the finding out the ability of the business fleeces to meet the short-term financial commitments. For the calculation of this ratio current assets will include cash, bank balance, short term investment, bills receivable, trade debtors, short term loans and

advances, inventories and pre-paid payment sand current liabilities will include bank overdraft, bills payable, trade creditors, provision for taxation, proposed dividends, unclaimed dividends, advance payments and unexpired discounts, accrued interest on loans and debentures outstanding expenses and the portion of long term debt to mature within one year. With the help of this ratio is Current ratio = Current assets Current liabilities

b) Quick asset ratio (Acid Test Ratio): Its a ratio that expresses the relationship between the quick assets and current liabilities. Liquid assets are those assets which are readily converted in to cash and will include cash balances, bills receivable, sundry debtors and short-term, investments. Inventories and prepaid expenses are not included in liquid assets because the emphasis in on the ready availability of cash in case of liquid assets. Liquid liabilities include all items of current liabilities except bank overdraft. This ratio is the acid test of a concerns financial soundness. It is calculated Acid test ratio = Liquid assets Current liabilities Liquid asset = current assets-(closing stock + Prepaid Expenses) C) Debt Equity ratio: ratio b/w long term loans and share holders funds, Share holders funds consist of preference share capital, equity share capital, profit & Loss A/c, capital reserves, revenue reserve and reserves representing marked surplus, like reserves for contingencies, etc,, less fictitious assets. Whether a given debt to equity ratio shows a favorable or unfavorable financial position of the concern depends on the industry and the pattern of earning. Debt Equity Ratio = long term debt

Equity (shareholders fund)

D) Proprietary Ratio: The ratio illustrates the relationship between the owners contribution and the total volume of assets. Or how much funds are contributed by the owners in financing the assets of the firm. The greater ratio means that greater is the contribution made by the owners in financing the assets.

Proprietary ratio =

owners Funds or Equity or Shareholder funds Total assets

E) Fixed assets ratio: This ratio established the relationship between the fixed assets and long term source of funds. Whatever the source of long-term funds raised, they should be used for the acquisition of long term assets. Fixed assets ratio = Shareholders funds + Outsiders funds Net Fixed Assets F) Debt Service Coverage Ratio: This ratio is a key financial ratio for the lenders and is calculated in order to know the ability of a company to make payment of principle amount on time. It is calculated as fallows; DSCR = Net profit before interest and tax Interest + principal payment installment 1-tax rate

It indicates that net profit before interest and tax covers adequately both interest and principal repayment installment. Generally the ratio should be 0.33 but higher the cover is advantageous to the business as it improves its strength to service the debt properly.

G) TOL/NWC (Total Outside Liabilities/ Tangible Net Worth ): Total out side liabilities: This ratio is determined to ascertain the soundness of long-term financial policies of that company. Tangible Net worth: consist of preference share capital, equity share capital, Profit & Loss A/c, capital reserves, revenue reserves and reserves representing marked surplus like reserves for contingences, sinking funds for renewal of fixed assets of -redemption of debentures etc. less fictitious assets.


Total Out Side Liabilities Tangible Net Worth

2) Profitability Ratios: Profits enable of firm to improve its financial strength therefore ratios based on profitability are termed causal ratio indicating the caused of the present of repeated financial position.

The ratios are measuring the profitability of the firms in various angles viz: On sales On investments On capital employed and so on The profits are normally classified into various categories: a) Gross profit Ratio: the ratio elucidated the relationship between the gross profit and sales volume. It facilitates study the profit earning capacity of the firm out of the manufacturing or trading operations. Gross profits = Gross profit Ratio x 100 Sales b) Net Profit Ratio: The ratio expresses the relationship between the net profit and sales volume; it helps to portray the overall operating efficiency of the firm. The net profit ratio is an indicator of overall earning capacity of the firm in term of return out of sales volume.

This ratio explains per rupee profit generating capacity of sales. if the cost of sales is lower, then the net profit will be higher and then we divide it with the net sales, the result is the efficiency. If lower is the net profit per rupee of sales, lower will be the sales efficiency. The net profit ratio is calculated as

Net Profit Ratio = Net profit x 100 Sales

c) Operating Ratio: the operating ratio establishes the relationship between the cost of goods sold and operating expenses with the sales volume. Operating ratio = Cost of goods sold + Operating expenses x 100 Net sales d) Return on Assets: this ratio portray the relationship between the earning and total assets employed in the business enterprise. The effective utilization of the assets of the firm through the determining of return on total assets employed. Return on Assets = Net profit after taxes x 100 Average total assets 3) Turn over (performance activity) Ratio: Performance or activity ratio judge how will the facilities at the disposal of the concerns on being used. The importance performance ratios are: a) Total capital turn over ratio: takes into account long-term and short-term, capital and is calculated as: Total capital turnover ratio = Sales or cost of sales Capital employed

b) Fixed assets turnover ratio: It shows how well the fixed assets are being utilized. The way to ascertain the ratio is:

Fixed assets turnover ratio = Sales or cost of sales Net fixed assets c) Working capital turnover ratio: its ratio expresses the number of times a unit invested in working capital produces sale. The ratio is ascertained as, Working capita turnover ratio = Sales or cost of sales Net working capital d) Stock turnover Ratio or inventory Turnover Ratio: The ratio expresses the speed of converting the stock into sales. In other words, how quickly the stock is being converted into sales in a year? A greater ratio of conversion leads to lesser the number of days/weeks/months required to convert the stock into sales. Industries in which the stock turnover ratio is high usually work on a comparatively low margin of profit the rate of profit on sales must be hi if the stock turnover ratio is low. Stock turnover ratio = cost of goods sold Average stock Or Stock velocity period = average stock x 365 Cost of goods sold e) Debtor turns over Ratio: The relationship between credit sales and accounts receivable (trade debtors and bills receivable). This ratio exhibits the speed of the collection process of the firm in collecting the overdue amount from the debtors and against bill receivables. Debtor velocity Period = Average Debtors x 365 Net annual credit sales or sales x 100 closing stock


2.1 HISTORY OF THE BANK OF INDIA At least three banks having the name Bank of India had preceded the setting up of the present Bank of India. 1. A person named Ramakishen Dutt set up the first Bank of India in Calcutta (now Kolkata) in 1828, but nothing more is known about this bank. 2. The second Bank of India was incorporated in London in the year 1836 as an Anglo-Indian bank. 3. The third bank named Bank of India was registered in Bombay (now Mumbai) in the year 1864. 4. The current bank 5. Bank of India, Mumbai Main Branch 6. The earlier holders of the Bank of India name had failed and were no longer in existence by the time a diverse group of Hindus, Muslims, Parsees, and Jews helped establish the present Bank of India in 1906. It was the first in India promoted by Indian interests to serve all the communities of India. At the time, banks in India were either owned by Europeans and served mainly the interests of the European merchant houses or by different communities and served the banking needs of their own community. 7. The promoters incorporated the Bank of India on 7 September 1906 under Act VI of 1882, with an authorized capital of Rs. 1 crore divided into 100,000 shares each of Rs. 100. The promoters placed 55,000 shares privately, and issued 45,000 to the public by way of IPO on 3 October 1906; the bank commenced operations on 1 November 1906. 8. The lead promoter of the Bank of India was Sir Sassoon J. David (18491926). He was a member of the Sassoons, who in turn were part of a Bombay community of Baghdadi Jews, which was notable for its history of social service. Sir David was a prudent banker and remained the Chief Executive of the bank from its founding in 1906 until his death in 1926. 9. The first board of directors of the bank consisted of Sir Sassoon David, Sir Cowasjee Jehangir, J. Cowasjee Jehangir, Sir Frederick Leigh

Croft, Ratanjee Dadabhoy Tata, Gordhandas Khattau, Lalubhai Samaldas, Khetsety Khiasey, Ramnarain Hurnundrai, Jenarrayen Hindoomull Dani, Noordin Ebrahim Noordin. 10. 1906: BoI founded with Head Office in Bombay. 11. 1921: BoI entered into an agreement with the Bombay Stock Exchange to manage its clearing house. 12. 1946: BoI opened a branch in London, the first Indian bank to do so. This was also the first post-WWII overseas branch of any Indian bank. 13. 1950: BoI opened branches in Tokyo and Osaka. 14. 1951: BoI opened a branch in Singapore. 15. 1953: BoI opened a branch in Kenya and another in Uganda. 16. 1953 or 54: BoI opened a branch in Aden. 17. 1955: BoI opened a branch in Tanganyika. 18. 1960: BoI opened a branch in Hong Kong. 19. 1962: BoI opened a branch in Nigeria. 20. 1967: The Government of Tanzania nationalized BoI's operations in Tanzania and folded them into the government-owned National Commercial Bank, together with those of Bank of Baroda and several other foreign banks. 21. 1969: The Government of India nationalized the 14 top banks, including Bank of India. In the same year, the People's Democratic Republic of Yemen nationalized BoI's branch in Aden, and the Nigerian and Ugandan governments forced BoI to incorporate its branches in those countries. 22. 1970: National Bank of Southern Yemen incorporated BoI's branch in Yemen, together with those of all the other banks in the country; this is now National Bank of Yemen. BoI was the only Indian bank in the country. 23. 1972: BoI sold its Uganda operation to Bank of Baroda. 24. 1973: BoI opened a rep in Jakarta. 25. 1974: BoI opened a branch in Paris. This was the first branch of an Indian bank in Europe. 26. 1976: The Nigerian government acquired 60% of the shares in Bank of India (Nigeria). 27. 1978: BoI opened a branch in New York. 28. 1970s: BoI opened an agency in San Francisco. 29. 1980: Bank of India (Nigeria) Ltd, changed its name to Allied Bank of Nigeria. 30. 1986: BoI acquired Paravur Central Bank (Karur Central Bank or Parur Central Bank) in Kerala in a rescue.

31. 1987: BoI took over the three UK branches of Central Bank of India (CBI). CBI had been caught up in the Sethia fraud and default and the Reserve Bank of India required it to transfer its branches. 32. 2003: BoI opened a representative office in Shenzhen. 33. 2005: BoI opened a representative office in Vietnam. 34. 2006: BoI plans to upgrade the Shenzen and Vietnam representative offices to branches, and to open representative offices in Beijing, Doha, and Johannesburg. In addition, BoI plans to establish a branch in Antwerp and a subsidiary in Dar-es-Salaam, marking its return to Tanzania after 37 years. 35. 2007: BoI acquired 76 percent of Indonesia-based PT Bank Swadesi. 2.2 Products and services:

Saving Account:

Bank of India SB plus Bank of India Normal SB Bank of India zero balance SB Bank of India SB welcomes kit Bank of India SB NRI Bank of India SB NRO Current account Bank of India Diamond Bank of India Silver Bank of India Diamond plus

Fixed deposits Bank of India DBD-monthly Bank of India SDR-days Bank of India MIC-monthly Bank of India FDR-days

LOAN Bank of India Education loan (personal loan) Bank of India car loan (autofinance loan) Bank of India home loan (mortkage loan) Bank of India (holiday loan) Bank of India (Persion loan) Bank of India (Gold loan)


ATM internet facilities Fund transfer (RTGS) Free NEFT (RTGS) Net banking Free mobile banking (IMPS) Free internet banking 2.3 The bank launched several new products during the year: I. II. III. IV. Star SME contractor credit line Star SME auto Express Star SME liquid plus Star SME education plus

2.4 Competitors Information: Banking industry now-a-days is facing a very keen competition among the banking industry and also from non-banking industry. The banking competition exists between private and public sector banks commercial and financial institutions. There are also facing competition from corporate banks which are competing in the field of banking. They are also facing competition from corporate banks, land development banks, and even from post offices. In the south, Bank of India is facing serve competition from Dena Bank, City Union Bank, IDBI, karur vayusa bank. Which are having strong presence in this region?

CHAPTER-3 RESEARCH DESIGN 3.1 METHODOLOGY The methodology used in the present study on Financial Performance with reference to Ratio Analysis- in Bank of india is shown in this chapter. The study is nearly based on the data provided by the Bank of india i.e. (clients of the bank) in the annual reports of the ABC company for the year 2008-2009, 2009-2010, and 2010-2011. In this study sampling design technique was used. Entire unit was considered as sampling and financial performance was analyzed. It is analytical study and techniques of ratios, and net working capital analysis. Preparation of report based on the interpretation derived from the data, conclusion, and recommendation. 3.2 STATEMENT OF THE PROBLEM: A Study on Financial Performance With Reference To Ratio Analysis in Bank of india to find out the financial soundness of the client. This study attempts to find out the trade and how efficiency system and to re-continued the remedial measures its needed. This study on proper utilization of financial resources clients of the bank for last 3 years. So why clients of the bank doesnt perform well for year? What about the liquidity and solvency position of the company? So how increase the margins? All these answers require in depth. Therefore, an attempt has been made to analyze identify the areas where lapses have occurred and to suggest necessary remedial measure to overcome the lapses.

3.3 OBJECTIVES: Financial Performance is helpful in assessing the financial position and profitability on clients of the Bank of india. The main objectives of analyzing financial performance are to assess: The primary objective is to analyze the financial position on clients of Bank of india with reference to Ratio analysis for the past three years like 2008-09, 2009-10, 20010-11, To analyze liquidity, solvency, profitability and management efficiency position of NAGAPPA & Co... To study the present and future earning capacity or profitability of the Clients. To offer suggestion for the improvement on clients of the Bank of India The possibility of the developments in the future by making forecasts and preparing budgets. 3.4 Benefits of the Study (1) The study enhanced the knowledge in calculating various accounting ratios and methods of analysis. (2) The analysis had enabled to understand the current financial position and trend of the party. (3) The study serves as the basis for future operations to the company. (4) The study helps in knowing the strengths and weaknesses of the client. (5) The study provides valuable information for managerial decisions.

3.5 RESEARCH DESIGN: The study is conduct at circle office of Bank of India, Salem. The study comprised financial performance with reference to Ratio Analysis-on clients in Bank of india for last 3 years like 2008-09, 2009-10, 20010-11, data is collect from Bank of india and its analysis.The data regarding bank history & profile are collected through Exploratory Research Design particularly through the study of secondary sources and discussions with individuals. 3.6 DATA COLLECTION Data is defined as group of non-random symbols in the form of text, image, or voice representing quantities, actions as objects Data are mainly classified into two groups: Primary data Secondary data

Primary Data: The primary data collected through Discussion with the Senior Manager & officers of the bank to get general information about the bank, clients of the bank & its activities under (Risk Management & Credit Review Section) in Bank of india circle office. Having face to face discussions with the bank officials By taking guidance from bank guide & departmental guide. Secondary Data Collection of data through bank annual reports, bank manuals and other relevant documents. Collection of data through the literature provided by the bank. The secondary data collected through internet, magazines etc

3.7 Tools and Techniques for data collection: I used the ratio analysis has the statistical to the data and arrived at the conclusion tools for the collection. Limitations of the Study: The study is limited to circle office of the bank. The study does not consider the impact of non-financial items on financial performance. This variable includes Caliber, reputation and creativity of management Public relations Personnel management It is a general study of financial aspects and analysis of 3 years only. This being an academic study suffers from time and cost constraint. The study is limited to clients of the Bank of india and the banker has looked some important financial ratios.



1. CURRENT RATIO: Table No-1: The table showing calculation of current Ratio Particulars Current assets Current liabilities 1558.23 Current ratio 1.14 1641.45 1.12 1739.24 1.17 2008-2009 1772.19 2009-2010 1838.02 2010-2011 2028.13

Standard Norm of the Current Ratio The ideal norm is 1.33:1; which means that one rupee of current liability is appropriately covered by 1.33 of current assets. Interpretation of current ratio: An increase in the current ratio represents improvement in the liquidity position of the firm, while a decrease in the current ratio indicates that there has been deterioration in the liquidity position of the firm. The current ratio 1.14 in the year ending 2006-07 and its 1,12 in the year ending 2005. This is because there has been appropriately decrease in current assets and increase in current liabilities. Current ratio is ending 2008-09 is 1.17 which even higher than both previous year. Though current assets have increase proportionately increase in current liabilities has been more. How ever this is considered quite cruel as it doesnt take into account liquidity of each component of current asset, which may be used to meet its current obligations. It may be observed that the concern has a current ratio much lesser than the standard ratio 1.33:1.

Graph No -1.1: the chart showing position of f current Ratio

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Category1 Cate egory2 Category3 Category y4 Series2 Series3 Series1


Table No o -2: the ta able show wing calcu ulation of quick rat tio Particul lars Quick as ssets Current liabilities Quick ratio m of the ra atio Standard Norm The id deal norm is 1:1; wh hich means that one rupee of current c ties is mat tched with h one rupe ee of quick k assets .liabilit asset 0.63 0.62 0. .74 2008-200 09 983.05 5 1558.23 3 2009-2010 1026.27 1641.45 2010 0-2011 128 88.89 173 39.24

Inter predation of the Quick asset If the actual liquid ratio equal or more than the standard quick ratio of 1:1 the conclusion can be the concern is liquid and so its can pay off its short term liabilities out of its quickly realizable assets without any difficulty. On the other hand, if the quick ratio is less than the standard the conclusion can be that the concern is not liquid. How ever while interpreting the quick ratio due consideration should also be given to the amount locked up in debtors. The above calculation indicated that the quick ratio is more than one that indicates effective management and good financial position of the concern. From the analysis quick ratio was increased in the year 2010-11 is 0.74 was compared to 2008-09 & 2009-10 were 0.63 & 0.62. This mainly because of high realization of sundry debtors on increase in C-liabilities and comparative decreases in cash and bank balance. Hence the concern is a position to pay its short term liabilities. Graph No-2: the graph showing position of quick asset

0.76 0.74 0.72 0.7 0.68 0.66 0.64 0.62 0.6 0.58 0.56 20052006 20062007 20072008 Quickassetratio

3. DEBT EQUITY RATIO: Table No- 3: the table showing calculation of debt equity ratio Particulars Debt Equity Debt Equity Ratio Standard Norm of the ratio The ideal norm is 1:2 which means that every one rupee of debt finance is covered by two rupees of shareholders fund. Interpretation of Debt Equity Ratio If debt equity ratio is high, the owners are putting up relatively less money of their own. It is a danger signal for the creditors. If the project should fail financially, the creditors would lose heavily. The greater the ratio, the greater the risk to the creditors. The above graph shows a mixed trend during last three years. Though the proportionate variation during last two previous years was very high it is due to high amount of debt taken. The result is favorable for the company. 2008-2009 214.4 615.83 0.35 2009-2010 226.97 620.54 0.37 2010-2011 182.61 694.06 0.26

Graph No- 3: the graph sh howing po osition of debt equit ty ratio

90 80 70 60 50 40 30 20 10 0 1 Qtr 1st 2ndQtr 3rdQtr 4thQtr

East West North

ETARY RATIO: 4. PROPRIE Table No-4 4: the table e showing g calculatio on of Prop prietary ra atio ulars Particu Owners funds Total fund f Proprieta ary ratio Standard norm m of the ra atio: Higher the ratio better is s the positi ion. Interp pretation of Propri ietary rati io: From the t analys sis proprie etary ratio o was chan nges in ev very year, 2008-09, 09-10, & 10-11 were 0.26, 0, 25 & 0. .26. Thou ugh propr rietary rat tio decrea ased in propor rtionately increase in i total as ssets has been mor re. This in ndicates th he firm quite satisfactory s y. 2008-200 09 615.83 3 2388.46 6 0.26 20 009-2010 620.54 2488.96 2 0.25 201 10-2011 694.54 26 615.91 0.26

Graph No- 4: the graph showing position of Propreitary ratio

14 12 10 8 6 4 2 0 Category1 Category2 Category3 Category4 Series3 Series2 Series1

5. FIXED ASSETS RATIO: Table -5: the table showing calculation of fixed assets ratio Particular Net Fixed Asset Capital Employed Fixed Asset Ratio 2008-09 642.36 813.23 1.29 2009-10 650.29 847.51 1.30 2010-11 580.22 876.67 1.51

Standard Norm of the ratio: The ideal norm of the ratio is 1:1, which means that the long-term funds raised are utilized for the acquisition of long-term assets of the Inter pretation of Fixed Asset Ratio: The asset turn ratio is increased over a period of time from 1.29 & 1.30in 2007 to 2009 and 1.51 in the year 2010-10 respectively. The proves the company is making utilization of fixed assets.

Graph: 5 the graph showing position of fixed asset ratio

Fixed Asset Ratio 1.55 1.5 1.45 1.4 1.35 1.3 1.25 1.2 1.15 2008-09 2009-10 2010-11

Fixed Asset Ratio

6. GROSS PROFIT RATIO: Table No: 6 the table showing calculation of Gross Profit ratio Particulars Gross profit Sales Gross Ratio Standard norm of the ratio: Higher the ratio, the better the position of the firm is, which means that the firm earns grater profits out of the sales and vice versa. Interpretation of Gross profit Ratio: The above graph shows that there is a decreasing trend in the gross profit ratio which was 23.14% in the year 2008-09 and further decrease 18.40% in the year 2009-10 and increase in 2010-11 i.e. 21.07% respectively. Higher the ratio is better it is a low ratio indicates unfavorable trends, therefore the above graph shows the efficiently of the company. 2008-2009 695.58 3438.12 profit 23.14% 2009-2010 670.25 3643.03 18.40% 2010-2011 899.54 4268.21 21.07%

Graph No: 6 the graph showing position of gross profit ratio




1 2 3


7. NET PROFIT RATIO: Table No: 7 the table showing calculation of Net Profit ratio Particulars Net profit Sales Net profit Ratio 2008-2009 154.08 3438.12 4.4% 2009-2010 90.21 3643.03 2.48% 2010-2011 165.11 4268.21 3.87%

Standard norm of the ratio: Higher the ratio, the better the operating efficiency of the firm is, which means that the firm earns greater volume of both operating as well as non-operating profit out of sales and vice versa. Inter predation of Net Profit Ratio: A high net profit ratio indicates that the profitability of the concern is good. On the other hand, a low net profit ratio indicates that the profitability of the enterprise is poor. But while interpreting the ratio it should be kept in mind that performance of profits must also be seen in relation to investments or capital of the firm and not only in relation to sales. In this case of performance of the Net Profit margin ratio is satisfactory in the year 2007-08 it was 4.4%. Further decreased compare In the year 2006-07 & 2008-09 that is 2.48% & 3.87% respectively.

Graph No: 7 the graph showing position of Net profit ratio

1 2 3




8. OPERATING RATIO: Table: 8 the table showing calculation of operating ratio Particulars Cost of sales Sales Operating Ratio 2008-2009 2642.54 3438.12 76.86% 2009-2010 2972.78 3643.03 81.60% 2010-2011 3368.67 4268.21 78.92%

Standard norm of the ratio: Lower the ratio, the more favorable and better the firms position is, which highlights the percentage of absorption, cost of goods sold and operating expenses out of sales and vice versa. Inter pretation of operating Ratio: The above graph shows that there is a variation trend in the operating ratio which was 76.86%, 81.60% & 78.92% in the year 2009 to 2011. Here it clearly shows that lower ratio, the more favorable i.e. cost of operating expenses was decreased compare to 2011 and better position of the firm.

Graph: 8 the graph showing position of operating ratio

1 2 3




9. RETURN ON ASSETS: Table No: 9 the table showing calculation of Return on Assets ratio Particulars Profit after tax Average assets Return on assets 2008-2009 154.08 2388.46 6.45% 2009-2010 90.21 1825.10 4.95% 2010-2011 165.11 1951.58 8.46%

Standard norm of the ratio: The higher ratio illustrates that the firm has greater effectiveness in the utilization of assets, means greater profits reaped by the total assets and vice versa.

Interpretation of Return on Asset If the actual ratio is 10% or more, it is an indication of higher productivity of the total resources. On the other hand, a return of less than 10% is an indication of lower productivity of the resources. The above calculation indicates a downward trend of return on total resources, which indicates the less proportionate increasing productivity. This higher percentage helps in optimizing the total assets of the company and the company has been able to

mainta ain efficie ent realiza able assets s in comp parison to o the prod duction ca apacity. Thoug gh there is a decreas sing trend d, but still the ratio compared d to others s in the same industry i i very hi is igh theref fore it ind dicates the e higher e efficiency of the firm. e graph sho owing pos sition of re eturn on assets ratio o Graph No: 9 the

Retu urnonassets
1 2 3


3 32%

25% %

10. TOTAL CAPITA AL TURN N OVER RATIO: R ble No: 10 0 the table e showing g calculati ions of tot tal capita al turn ove er Tab P Particular rs S Sales C Capital E Employed d T Total Capital 4.14% 4 4.30 0% 4.87% % 2 2008-2009 9 3 3438.12 8 830.23 2009 9-2010 3643 3.03 847. .51 2010-2011 4268. .21 876.6 67

T Turn over ratio

Analy ysis and in nterpretat tion: The to otal capita al turn over ratio is s 4.14, 4.3 30 & 4.87 7 time for r the year r 2009, 2010 & 2011 re espectively y. The pro oportionate e ratio is increases i t to 4.14% to 4.87 % this shows the e efficienc cy of capit tal turn ov ver to gene erate sales s in these year. y If capital l turn ov ver low, in efficie ency utili ization of f capital turn ove er. The

Management of ABC Co utilizes the fixed assets effectively in generating more years. Graph No: 10 the graph showing position of total capital turn over ratio

Total Capital Turn over ratio

5.00% 4.80% 4.60% 4.40% 4.20% 4.00% 3.80% 3.60% 2008-2009 2009-2010 2010-2011

Total Capital Turn over ratio

11. FIXED ASSETS TURN OVER RATIO: Table No: 11 the table showing calculations of fixed assets turn over Particulars Sales Net fixed assets 2008-2009 3438.12 642.26 2009-2010 3643.03 650.29 5.60% 2010-2011 4268.21 587.22 7.26%

Fixed asset turn 5.35% over ratio

Analysis: This ratio measures the efficiency of the assets use. The efficient use of assets will generate greater sales per rupee invested in all the assets of a concern. In the year of 2007 to 2008 fixed assets turn over ratio were 5.35, 5.60 & 5.70 respectively. To conclude that the fixed assets measures efficiency of the assets used properly.

Graph No: 11 the grap ph showin ng positio on of fix xed asset turn ove er ratio

Sa ales

1stQtr 2ndQtr 3rdQtr 4thQtr

12. WORKI ING CAP PITAL TU URN OVE ER RATI IO: Tab ble No: 12 2 the tabl le showing calculation of working w ca apital tur rn over ratio Particulars s Sa ales W Working ca apital W Working 2008-200 09 3438.12 213.96 200 09-2010 364 43.03 236 6.96 15.38% 2010-2011 4268.21 288.8 89 14.77 7%

capital 16.06%

tu urn over ra atio Standard norm m of the ra atio: The ratio r is be etter than the stock k turnover r ratio, sin nce it shows up effici iency or in nefficienc cy I the us se of the whole w of working c capital and not n merely y a part of f it viz tha at invested in stock k it is the whole of the e working g capital th hat leads to o sales. Analy ysis and in nterpretat tion: The hi igher the ratio, the e lower is s the inve estment in n working g capital and a the greater r are the profits. p H However, a very hig gh turnove er of work king capit tal is a sign of overtrad ding and may m put th he concer rn into fin nancial dif fficulties. On the h a low w working g capital tu urnover ra atio indica ates that w working ca apital is other hand, not eff ficiently utilized. u

Graph No 12: the graph showing position of debt equity ratio

Working capital turn over ratio 16.50% 16.00% 15.50% 15.00% 14.50% 14.00% 2008-2009 2009-2010 2010-2011 Working capital turn over ratio

13. STOCK/INVENTORY TURN OVER RATIO Table No 13: the table showing calculation of stock turn over ratio Particulars Cost sold Average stock Stock turn over ratio/velocity period 109 days 98 days 84 days 782.47 3.38% 797.11 3.73% 775.115 4.35% of goods 2008-2009 2642.54 2009-2010 2972.78 2010-2011 3368.67

tandard nor of the ratio: Higher the ratio, better the firm is in converting the stock into sales and vice versa Inter pretation of stock turn over ratio: Every year it has a very high stock turnover ratio. It is considered better as it indicates that more sales are being produced by each rupee of investment in stock but it may not always be an indicator of favorably results. It may be the result of a very low level of stock which results in frequent out of stock position. Such a situation prevents the company form meeting customers









so it clearly shows that the stock turn over ratio is increasing trend every year 2008 to 2010 it was 3.38, 3.73 & 4.35 times respectively. The stock turnover is better position in the company. Graph No: 13 the graph showing positin of stock turn over ratio

1stQtr 2ndQtr 3rdQtr 4thQtr

14. DEBTOR TURN OVER RATIO: Table No: 14 the table showing calculation of debtor turn over ratio Particulars Net annual credit sales Average debtors Debtor velocity 730.58 77 days 725.49 73 days 792.50 67 days 2008-2009 3438.12 2009-2010 3643.03 2010-2011 4268.21

Standard norm of the ratio

. Higher the ratio, better the position of the firm is in collecting the

overdue means the effectiveness of the collection department and vice versa Interpretation of debtor turn over ratio:

This ratio measure of the collectibles of accounts receivables and tells about how credit policy of the company is being enforced. The ratios in the years 2009 to 2011 are vary high i.e. 77days, 73days & 67 days respectively. This indicates that debts being collected more promptly from the debtors. It is very much satisfactory because the ratio should be increasing rather than decreasing.

The ratio in the years 2008-09 & 10-11are very high which indicates that debts being collected more promptly from the debtors. In the rest of the years except the year 2011-12, the ratio is stable rather than variation. It is very much satisfactory because the ratio should be increasing rather than decreasing. Graph No 14 the graph showing position of debtor turn over ratio
4500 4000 3500 3000 2500 2000 1500 1000 500 0 20082009 20092010 20102011

Net annual credit sales Average debtors

CHAPTER-5 Summary of Findings, Suggestion and Conclusion


The project is related to A study on financial performance with reference to ratio analysis in Bank of India. There are different clients approaches Bank of India for Credit facility. Performance analysis of M/s NAGAPPA co (Pvt) Ltd for the last three years ranging from 2009-2011 reveals the following: The sales operating profit, net profit are on the increase. After incurring lesser continually since 2009-11 the company has been earning profits successfully year after year, the company come out of sincere in 2008-09. The cost increases butyl. Rubber and petrol based raw materials has affected the manager. Current ratio and Net working capita here improved. Capital turn over ratio is improving for the last 3 years. This speaks of better management of capital turnover by the company. The financial position in general is satisfactory. For limits of Rs: 100 lakhs and above (working Capital) the parameters form scaring system for charging graded rate of interest applicable to the parties enjoying fund based limits of Rs: 100 lakhs and above: Observation: Increase in net sales for the current year is estimated from Rs 46028 crore to Rs performance up to august 2009 is Rs: 20.33 overalls achievement 42.69%. Circle Office have recommended enhancement in FB limit it from Rs: 5.80 crore to Rs: 11.50 crore i.e. increase by 98.28%

5.2 SUGGESTION: A study on financial performance with reference to ratio analysis in Bank of India, the project is completed in Circle office. This chapter has been designed to recapitulate the key findings of the study as well as to make suitable suggestions if any to improve the financial performance of the industries using some important key ratio: Management receivable ratio Management cash ratio Management inventory ratio Current assets were decrease in the year of 2009-10, so the company has to take the decision improve the current Ratio for the next consecutive year. Higher the ratio reflects an excess investment in current assets Otherwise its effects working capital. Gross profit and Net profit have decreased in the year 2009-10. so management has to take the decision to improve the profitability of the concern. Debt equity ratio and share holders funds are not properly leveraged because outside liabilities are increasing gradually. This may in future affect liquidity position of the company. So management should control with a limited investment. Company should try to decrease the cost of production as it is very high. It should undertake value analysis to avoid unnecessary expenditures.

5.3 CONCLUSION During the course of the project at Bank of india I had the opportunity to view five case studies, wherein the business firms had submitted application for various credit facilities. The financial statements of the said five firms were taken up for studies to analyses and understand how banks conduct performance analysis of their clients for the purpose of taking credit decisions. From the above analysis it is understood that the clients of the bank submit financial statements for at least a period of last 3 years along with application form requesting various credit facilities like working capital limits, term loan, etc. Limits requested for various purposes may be Fund Based or Non Fund Based. On receipt of application form & financial statements bank undertakes appraisal of application for credit facilities in a prescribed form. The various details of financial statements are incorporated in appraisal form as prescribed by the bank. Various ratios like Current Ratio, TOL/TNW, Debt Equity ratio, DSCR etc. are calculated and comparative study is made for a period of say 3 to 5 years. Bankers prescribe a standard benchmark ratio for each of such ratio say for example: Current Ratio bench mark is prescribed as 1.33. While comparing the ratio of the applicant firm with benchmark ratio, if the financial ratios of the firm are in tune with the prescribed norms, credit decision is done accordingly or else based on the benchmark parameters; application for a credit facility may be rejected as per the credit policy of the Bank. However some relaxations are permitted in respect of certain Priority Sector lending like SME agriculture etc It is understood that the bank has very well developed system of using performance analysis for the purpose of arriving at credit decisions. Its also understood that the bank constantly revises and updates the methodology in tune with various developments in the economy. To conclude I wish to state that the project study on Performance of Financial Analysis has enabled me to learn a lot on the subject.

Thank you Analysis of the balance sheet of NAGAPPA Co (Pvt) Ltd as on 31-3-2009 to 31-3-2011
LIABILITIES Share holders Funds 1) Capital s2) Reserves Gen 3) Reserves & others 4) Revaluation Reserves 5) P&L a/c sub total Term liabilities term loans-Banks Term loans-FI Deposits payable after -one year Deferred payment credits Term deposits Debenture Other term liabilities sub Total current Liabilities Bank borrowings borrowings-associates Directors Others Deposits from dealers Adv payment from Dealers Provision for tax dividend Others Interest payable/Dep/Deb Others C-Liabilities 31-3-2009 31-3-2010 (Rs in lacs) 31-3-2011

189.28 123.76 185.37 117.42 615.83

189.28 148.76 150.01 132.49 620.54

189.28 198.76 116.67 189.35 189.35 694.06

116.13 71.17 27.1

97.54 96.47 32.96

61.27 96.47 24.87







40.52 43.16 63.21 54.72 285.7

34.26 44.06 44.29 24.96 55.25 319.13

59.72 63.16 66.43 45.38 39.87 359.29

Sub Total Grand Total

1558.23 2388.46

1641.45 2488.96

1739.24 2615.91

ASSETS Fixed Assets Gross block less: Depreciation Net Block Capital WIP Advances for capital goods Sub Total Investment in other COS Deferred receivables Goodwill/Miscel Exp Not written off P&L a/c Sub total Current Assets Raw-Materials- Imp Indag Work in progress Finished goods Stores & Spares Debtors(<6months) Export Local Debtors(>6months) Export local Loans and advances Loans to supplies Deposits Cash & Bank Balances

31-3-2006 1470.15 828.39 642.26

31-3-2007 1575.21 924.92 650.29

31-3-2008 1599.21 1012.05 587.22




0.58 0.58

0.65 0.65

0.65 0.65

245.53 98.6 33.28 321.79 82.94

108.28 159.19 57.21 401.59 85.48

78.03 222.9 64.89 273.79 99.62

130.85 573.15

69.22 651.18

62.19 802.42


31 99.31



Other Current assets other C-Assets Sub total Grand Total

129.36 129.36 1772.19 2388.46 1838.02 2488.96 2028.13 2615.91

Analysis of the Profit & Loss a/c of ABC Co (Pvt) Ltd as on 31-3-2009 to 31-3-2011
Gross Sales domestic Sales Export sales total less: excise duty Net sales cost of sales raw materials Imported Indigenous other spares Power & fuel Direct labour Repairs and maintenance other mgt expenses Depreciation sub total add opening WIP Less closing cost of production add opting stock of FG less Closing stock FG Cost of Sales Gross Profit selling gen-adm-expences 31-3-2007 2803.11 934.22 3737.33 299.21 3438.12 (Rs In lacs) 31-3-2008 3127.69 875.3 4002.49 359.96 3643.03 31-3-2009 3879.55 874.71 4754.26 486.05 4268.21

1547.23 661.83 1353.82 136.99 284.16 506.74 86.22 75.22 58.53 2695.09 32.58 29.34 2698.33 269.74 325.53 2642.54 795.58 490.29 754.27 1426.46

292.28 642.24

334.82 642.93

10.18 62.58 3022.93 29.34 57.21 2995.06 308.51 330.79 2972.78 670.25 454.69

1.77 67.12 3277.37 57.21 64.84 3269.69 330.79 231.81 3368.67 899.54 557.86

interest sub total operating Profit add: other income profit before tax provision for taxes Net P & L

94.74 585.03 210.55 38.83 249.34 95.26 154.08

114.42 569.11 101.14 53.3 154.44 64.23 90.21

113.27 171.13 228.41 60.03 288.44 123.23 165.11