1.

INTRODUCTION

1.1.1Meaning of financial statements:

Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The term financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: The Balance Sheet Profit And Loss Account They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on 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 cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm. Financial statements are mainly prepared for decision making purposes. But the information as is provided in the financial statements is not adequately helpful in drawing a meaningful conclusion. Thus, an effective analysis and interpretation of financial statements is required.

1.1.2.Nature of financial statements:

The American Institute of Certified Public Accountants states the nature of financial statements as Financial Statements are prepared for the purpose of presenting a periodical review of report on progress by the management and deal with the status of investment in the business and the results achieved during the period under review. They reflect a combination of recorded facts, accounting principles and personal judgments. The financial statements are prepared on the basis of recorded facts. The recorded facts are those which can be expressed in monetary terms. The statements are prepared for a particular period, generally one year. The transactions are recorded in a chronological order, as and when the events happen.
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The accounting records and financial statements prepared from these records are based on historical costs. The financial statements, by nature, are summaries of the items recorded in the business and these statements are prepared periodically, generally for the accounting period.

1.1.3.Objectives of financial statements:

Financial statements are the sources of information on the basis of which conclusions are drawn about the profitability and financial position of a concern. They are the major means employed by firms to present their financial situation of owners, creditors and the general public. The primary objective of financial statements is to assist in decision making. Some stated below are the objectives of financial statements: (i) To provide reliable financial information about economic resources and obligations of business firm. (ii) To provide other needed information about changes in such economic obligations. (iii) To provide reliable information about changes in net resources (resources less obligations) arising out of business activities. (iv) To provide financial information that assists in estimating the earning potentials of the business. (v) To disclose, to the extent possible, other information related to the financial statements that is relevant to the needs of the users of these statements. (vi) resources and

1.1.4.Financial analysis:
Financial Analysis is to classify the data in simple form given in financial statements and to compare with each other to find out the strong points and weakness of the business and to take decisions for future. For instance, if all items relating to current assets are placed in one group while all items relating to current liabilities are placed in another group, the comparison between the two
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groups will provide useful information. Actually the figures given in financial statements do not speak anything themselves. The analysis of these figures helps the interested reader by giving tongue to these mute heaps of figures. In the words of Finney and Miller: Financial analysis consists in separating facts according to some definite plan, arranging them in groups according to certain circumstances and then presenting them in a convenient and easily read and understandable form. In the words of John N. Myres: Financial statement analysis is largely a study of relationships among the various financial factors in a business, as disclosed by a single set of statements and a study of the trends of these factors as shown in a series of statements. Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. Thus, the analysis and interpretation of financial statements is very essential to measure the efficiency, profitability, financial soundness and future prospects of the business units.

1.1.5.Purpose of Financial Analysis:

Measuring the profitability The main objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. It also helps in knowing the capacity to pay the interest and dividend. Indicating the trend of Achievements Financial statements of the previous years can be compared and the trend regarding various expenses, purchases, sales, gross profits and net profit etc. can be ascertained. Value of assets and liabilities can be compared and the future prospects of the business can be envisaged.
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 Assessing the growth potential of the business The trend and other analysis of the business provides sufficient information indicating the growth potential of the business. Comparative position in relation to other firms The purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms engaged in similar businesses. Such comparison also helps the management to study the position of their firm in respect of sales, expenses, profitability and utilising capital, etc. Assess overall financial strength The purpose of financial analysis is to assess the financial strength of the business. Analysis also helps in taking decisions, whether funds required for the purchase of new machines and equipments are provided from internal sources of the business or not if yes, how much? And also to assess how much funds have been received from external sources. Assess solvency of the firm The different tools of an analysis tell us whether the firm has sufficient funds to meet its short term and long term liabilities or not.

1.1.6.Parties interested in the financial analysis:

Analysis of financial statements has become very significant due to widespread interest of various parties in the financial results of a business unit. The various parties interested in the analysis of financial statements are : (i) Investors : Shareholders or proprietors of the business are interested in the well being of the business. They like to know the earning capacity of the business and its prospects of future growth.

(ii)

Management :

The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions. It helps them in preparing budgets and assessing the performance of various departmental heads. (iii) Trade unions :

They are interested in financial statements for negotiating the wages or salaries or bonus agreement with the management. (iv) Lenders :

Lenders to the business like debenture holders, suppliers of loans and lease are interested to know short term as well as long term solvency position of the entity. (v) Suppliers and trade creditors :

The suppliers and other creditors are interested to know about the solvency of the business i.e. the ability of the company to meet the debts as and when they fall due. (vi) Tax authorities :

Tax authorities are interested in financial statements for determining the tax liability. (vii) Researchers :

They are interested in financial statements in undertaking research work in business affairs and practices. (viii) Employees : They are interested to know the growth of profit. As a result of which they can demand better remuneration and congenial working environment. (ix) Government and their agencies :

Government and their agencies need financial information to regulate the activities of the enterprises/ industries and determine taxation policy. They suggest measures to formulate policies and and regulations. (x) Stock exchange :

The stock exchange members take interest in financial statements for the purpose of analysis because they provide useful financial information about companies. Thus, we find that different parties have interest in financial statements for different reasons.

1.2.LITERATURE REVIEW

There have been several empirical studies that measured the financial performance of banks using various financial ratios and other tools. (Green and Griesinger 1996; Greenlee and Bukovinsky 1998; Siciliano 1996, 1997) They pointed out that many traditional financial ratios are not applicable to banks as their nature of business differs from other profit and non-profit organizations. Among many studies, Tuckman and Chang (1991) mentioned that applying financial ratios derived from private sector organisations to banks.Another study declared that(Siciliano, 1996, 1997),analysis of banks financial statement requires a distinct approach that recognizes a banks somewhat unique risks.Herman and Renz (1999) stated that An organizations effectiveness is multidimensional and will never be reducible to a single measure. That is, their study shows that the financial performance of an organization cannot be simply measured by a single ratio. However, as Ritchie and Kolodinsky (2003) said, there has not been enough empirical research to show the confidence in measuring financial performance of banks, while the importance of financial performance has been emphasized continuously.Tom ward, the President of Majestic Mortgage Corp, in a business article stated that Running a business without understanding its financial statement is like flying an airplane without seeing all the instruments.(2003)

1.3.OBJECTIVES OF THE STUDY

Primary objectives:
To study the financial position of Indian Bank over the period of five years [20072011].

Secondary objectives:
To know the Earning Capacity or Profitability. To know the Solvency. To know the Financial Strength of the company by analyzing the value of the assets and liabilities.

1.4.NEED FOR THE STUDY

Financial statement analysis is used to identify the trends and relationships between financial statement items. Both internal management and external users (such as analysts, creditors, and investors) of the financial statements need to evaluate a company's profitability, liquidity, and solvency. The most common methods used for financial statement analysis are comparative statements, common-size statements, funds flow analysis and ratio analysis. These methods include calculations and comparisons of the results to historical company data, competitors, or industry averages to determine the relative strength and performance of the company being analyzed. Financial statement analysis is to diagnose the information contained in financial statements so as to judge profitability and financial soundness of the firm. Just like a doctor examines his patient by recording hi body temperature, blood pressure, etc. before making conclusion regarding the illness and before giving his treatment, a financial analyst analysis before commenting up on the financial health or weakness of an enterprise.

1.5.LIMITATIONS OF THE STUDY

Financial statements are prepared on the basis of certain accounting concepts and conventions. Any change in the methods or procedures of accounting systems limits the utility of financial statements. Strong financial statement analysis does not necessarily mean that the bank has a strong financial future. Financial statement analysis might look good but there may be other factors that can cause the bank to collapse. Ratios of the past are not true indicators of future. Financial analysis is based on monetary information and non monetary is ignored. information

PROFILE Industry Profile

Banking means, the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque , draft,

order or otherwise. The banking activities in India are regulated by the Banking Regulations Act, 1949. The Indian banking sector comprises 26 state sector banks, besides a number of private as well as co-operative sector players which has made a significant progress in the last five years the growth is well reflected through parameters including profitability, annual credit growth, and decline in non-performing assets (NPAs). Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India

The Apex Bank of India:

The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held shares of nominal value of Rs. 2,20,000.

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Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the bank.

The RBI was constituted for the need of following:

To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.

Current scenario of Indian Banking System:

Banks in India have compared favourably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. However, the cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. While bank lending has been a significant driver of GDP growth and employment, periodic instances of the failure of some weak banks have often threatened the stability of the system. Recently banks implemented innovative forms of banking services like ATMs, mobile banking, phone banking, internet banking, and debit/credit cards. The private players constantly

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improved these services in order to retain customers and win the severe competition which had become a feature of the Indian banking industry. The private banks are going through a series of mergers and acquisitions and public sector banks are shrinking in the form of manpower, equity, and non-performing assets. The public sector banks have been grappling with attrition which surfaced after the Voluntary Retirement Scheme was announced. The dilution of equity from 51% to 33% has opened up opportunities for takeovers. Currently, the Indian banking framework is comprised of 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake, they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs.

Future is bright:
The Information Technology (IT) is becoming an important component of the banking sector. The customers have become more demanding and they need value added services from the banks. The foreign banks have raised the expectations of the customers causing the bank to invest strongly on IT. The Indian banks have started to meet the expectations of the people by opening both onsite and offsite ATMs. Banks have also started telebanking, anytime/anywhere banking, mobile banking and Internet banking to give the facilities to the customers. Banks have also following the RBI sponsored technology programmes like mail messaging, Electronic fund transfers (EFT), Structured Financial Messaging System (SFMS), (Real Time Gross Settlement (RTGS), Centralized Fund Management System (CFMS) and Negotiated Dealing System / Public Debt Office (NDS/PDO). Banks have been given more teeth to tackle the Non performing assets by passing the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Under this Act, the banks can take over the assets of the defaulters either by themselves or with the help of Court. The power is in addition to the power to recover through the Debt Recovery Tribunal. The Asset Reconstruction Companies have been formed which also take over the distress assets from the banks.

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Company Profile

Indian Bank:
Indian Bank is one of the indigenous banks of India that emerged as a result of the Swadeshi Movement during the British Raj. The bank was established on 15th of August, 1907. One of the prime figures associated with the establishment of the bank was V. Krishnaswamy Iyer, a lawyer from Madras (Now Chennai). The bank soon spread its wings outside India too, and opened its branch in Colombo, Sri Lanka in the year 1932 and Rangoon, Burma in 1940. The bank was further nationalized by the Government of India in the year 1969. Indian Bank offers a wide variety of Banking Products and Services to its customers, including various Deposit Schemes, Loan Options, Financial Services, Stock Investment Services and a number of specialized services such as Remittance, Collection, 7 Day Banking Branches, Cash Management and Electronic Funds Transfer. As of April 2009, the bank has Core Banking Solution (CBS) implemented in its 1642 branches and 66 extension counters. The bank has 755 connected Automatic Teller Machines (ATMs) installed in 225 locations nationwide.

Rural Banking services of Indian Bank:

Indian Bank has been a leader in bringing new initiatives for development of rural banking and extending help to the farmers of India. The bank has received award from Honorable Union Minister of Finance for Excellence in Agricultural Lending. Apart from it, the bank also received the Best Performer Award for Micro-Finance activities in Tamil Nadu and Union Territory of Puducherry from National Bank for Agriculture and Rural Development (NABARD).

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Subsidiaries of Indian Bank:

Apart from its Regular Banking Services, the Indian Bank has also been offering various other services through its 3 subsidiary companies, Indbank Merchant Banking Services, Indbank Mutual Fund and Indbank Housing. In the last couple of years, the Indian bank made various attempts to revive its loss-making subsidiaries, but without success which has led to the decision that it may close down its lossmaking subsidiaries that operate in the housing and merchant banking segments. IndBank Merchant Banking and IndBank Housing have been reporting losses and are a drain on the promoters of Indian Bank .The IndBank Merchant Banking reported a loss of Rs 10 crore in 2010-11 compared with a loss of Rs 1.6 crore the previous year. Its third subsidiary Ind Bank Mutual Fund has been defunct for the last few years .

Recent Activities:
Indian Bank has received the Government of India approval to raise an additional equity capital of Rs.61.40 crore through Follow on Public Offer(FPO)(comprising 6.14crore equity share of Rs.10each) where the premium is not yet decided. Indian Bank has introduced a new service for making complaints through SMS facility to strengthen its customer grievance redressal mechanism. Indian Bank is also considering setting up its operations in South Korea and Sao Paulo, and is looking at opening a representative office in Brazilian city Sao Paulo and a full service branch in South Korea.

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3.RESEARCH METHODOLOGY

3.1.Research design:
The research design refers to preplanning of what a researcher does in his study. The design adopted in the study comes under analytical research. Since the data collected from the financial statements of the company is analyzed under various financial and tactical tools.

3.2.Data Collection:
For a research, the researcher may depend either on primary data or secondary data. Primary data is usually collected with help of questionnaires. Secondary is collected from published journals or magazines or company reports. Primary data: Some informations are collected through discussions with finance and other executives of finance department. Secondary data: Most of the information is collected from the companys annual report, balance sheet, profit & loss account and other books of accounts.

3.3.Tools and Techniques used:

The analysis and interpretation of financial statements is used to determine the financial position. A number of tools or methods or devices are used to study the relationship between financial statements. However, the following are some of the important tools which are commonly used for analyzing and interpreting financial statements: Comparative financial statements Common size statements Ratio analysis

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4.ANALYSIS AND INTERPRETATION OF STUDY

4.1.Introduction to study:
Financial statements give complete information about assets, liabilities, equity, reserves, expenses and profit and loss of an enterprise. They are not readily understandable to interested parties like creditors, shareholders, investors etc. Thus, various techniques are employed for analysing and interpreting the financial statements. Techniques of analysis of financial statements are mainly classified into;

(i) Cross-sectional analysis: It is also known as inter firm comparison. This analysis helps in analyzing financial characteristics of an enterprise with financial characteristics of another similar enterprise in that accounting period.

(ii) Time series analysis: It is also called as intra-firm comparison. According to this method, the relationship between different items of financial statement is established, comparisons are made and results obtained. The basis of comparison may be : Comparison of the financial statements of different years of the same business unit. Comparison of financial statement of a particular year of different business units.

(iii) Cross-sectional cum time series analysis: This analysis is intended to compare the financial characteristics of two or more enterprises for a defined accounting period. It is possible to extend such a comparison over the year. This approach is most effective in analysing of financial statements.

Comparative Balance Sheet:

The comparative balance sheet shows the different assets and liabilities of the firm on different dates to make comparison of balances from one date to another. The comparative balance sheet has two columns for the data of original balance sheets. A third column is used to show
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change (increase/decrease) in figures. The fourth column may be added for giving percentages of increase or decrease. While interpreting comparative Balance sheet the interpreter is expected to study the; (i) Current financial position and Liquidity position (ii) Long-term financial position (iii) Profitability of the concern

Common size Balance Sheet:

The common size balance sheet is shown in analytical percentages. The figures of these statements are shown as percentages of total assets, total liabilities and total sales respectively. Thus the common size statement may be prepared by taking The total assets or liabilities are taken as 100. The individual assets are expressed as a percentage of total assets i.e.100 and different liabilities are calculated in relation to total liabilities.

Ratio Analysis:
A ratio is a simple mathematical expression. It is a number expressed in terms of another number, expressing the quantitative relationship between two. Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis.

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4.2.Comparative Balance Sheet: TABLE NO: 1

COMPARATIVE BALANCE SHEET AS ON 31ST MARCH FOR THE YEARS 2006 AND 2007
Particulars 2006 (in 000s) 2007 (in 000s) Absolute increase/decrease (in 000s)
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & 2,30,29,858 25043618 190170000 Investments 224846412 Advances 5187493 FIXED ASSETS: 8075326 OTHER ASSETS: 476352707 LIABILITIES & CAPITAL: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & 7438200 17475763 408055248 18872941 24510555 8297700 30109980 470909063 19364533 32805188 +859500 +12634217 +62853815 +491592 +8294633 +11.55 +72.29 +15.40 +2.60 +33.84 561486464 85133757 55.15 8438728 +363402 +4.50 5511785 +324292 +6.25 290581112 +65734700 +29.23 37294506 10883009 208777324 +14264648 -14160609 +18607324 +61.93 -56.54 +9.78

Percentage increase/decrease (in %)

Money at call and short notice

PROVISIONS:

476352707

561486464

85133757

135.68

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Interpretation:
It is inferred from the above table that current assets like Cash and Balances with RBI has increased by 61.93% and Balances with banks & Money at call and short notice has decreased by 56.54%, Investments increased by 9.78%, Advances increased by 29.23%, Fixed assets increased by 6.25% and other assets increased by 4.50%.The current liabilities has increased by 33.84%, Capital increased by 11.55%, Reserves and surplus increased by 72.29%, Deposits increased by 15.40% and borrowings being decreased by 2.60% during the period 2006-2007.

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TABLE NO: 2
COMPARATIVE BALANCE SHEET AS ON 31ST MARCH FOR THE YEARS 2007 AND 2008

Particulars

2007 (in 000s)

2008 (in 000s)

Absolute increase/decrease (in 000s)

Percentage increase/decrease (in %)

ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice 208777324 Investments 290581112 Advances 5511785 FIXED ASSETS: 8438728 OTHER ASSETS: 561486464 LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 8297700 30109980 470909063 19364533 32805188 8297700 43307249 610459473 12832398 30180052 +13197269 +139550410 -6532135 -2625136 +43.83 +29.63 -33.73 -8.00 705076872 143590408 114.48 14418134 +5979406 +70.85 5392706 -119079 -2.16 398387138 +107806026 +37.10 219150665 +10373341 +4.96 37294506 10883009 64329446 3398783 +27034940 -7484226 +72.49 -68.76

561486464

705076872

143590408

31.73

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Interpretation:
It is inferred from the above table that current assets like Cash and Balances with RBI has increased by 72.49% and Balances with banks & Money at call and short notice has decreased by 68.76%, Investments increased by 4.96%, Advances increased by 37.10%, Fixed assets decreased by 2.16% and other assets increased by 70.85%.The current liabilities has decreased by 8.00%, Reserves and surplus increased by 43.83%, Deposits increased by 29.63% and borrowings being decreased by 33.73% during the period 2007-2008.

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TABLE NO: 3
COMPARATIVE BALANCE SHEET AS ON 31ST MARCH FOR THE YEARS 2008 AND 2009
Particulars 2008 (in 000s) 2009 (in 000s) Absolute increase/decrease (in 000s)
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice 219150665 Investments 398387138 Advances 5392706 FIXED ASSETS: 14418134 OTHER ASSETS: 705076872 LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 8297700 43307249 610459473 12832398 30180052 8297700 63061417 725818310 5307830 38732202 +1975416 +115358837 -7524568 +8552150 +45.61 +18.89 -0.58 +28.33 841217459 136140587 310.07 15778549 +1360415 +9.43 15942247 +10549541 +195.62 514652810 +116265672 +29.18 228005666 +8855001 +40.34 64329446 3398783 62115751 4722436 -2213695 +1323653 -3.44 +38.94

Percentage increase/decrease (in %)

705076872

841217459

118361835

92.25

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Interpretation:
It is inferred from the above table that current assets like Cash and Balances with RBI has decreased by 3.44% and Balances with banks & Money at call and short notice has increased by 38.94%, Investments increased by 40.34%, Advances increased by 29.18%, Fixed assets increased by 195.62% and other assets increased by 9.43%.The current liabilities has increased by 28.33%, Reserves and surplus increased by 45.61%, Deposits increased by 18.89% and borrowings being decreased by 0.58% during the period 2008-2009.

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TABLE NO: 4
COMPARATIVE BALANCE SHEET AS ON 31ST MARCH FOR THE YEARS 2009 AND 2010
Particulars 2009 (in 000s) 2010 (in 000s) Absolute increase/decrease (in 000s)
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice 228005666 Investments 514652810 Advances 15942247 FIXED ASSETS: 15778549 OTHER ASSETS: 841217459 LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 8297700 63061417 725818310 5307830 38732202 8297700 74423411 882276581 9573576 39321879 +11361994 +156458271 +4265746 +589677 +18.02 +21.63 +80.36 +1.52 1013893147 161070880 161.6 12821025 -2957524 -18.74 15795508 -146739 -0.92 621461323 +106808513 +20.75 282683284 +54677618 +23.98 62115751 4722436 70607167 10524840 +8491416 -5802404 +13.67 -122.86

Percentage increase/decrease (in %)

841217459

1013893147

172675688

121.46

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Interpretation:
It is inferred from the above table that current assets like Cash and Balances with RBI has increased by 13.67% and Balances with banks & Money at call and short notice has increased by 122.86%, Investments increased by 23.98%, Advances increased by 20.75%, Fixed assets decreased by 0.92% and other assets decreased by 18.74%.The current liabilities has increased by 1.52% , Reserves and surplus increased by 18.02%, Deposits increased by 21.63% and borrowings being increased by 80.36% during the period 2009-2010.

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TABLE NO: 5
COMPARATIVE BALANCE SHEET AS ON 31ST MARCH FOR THE YEARS 2010 AND 2011
Particulars 2010 (in 000s) 2011 (in 000s) Absolute increase/decrease (in 000s)
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice Investments 282683284 Advances 621461323 FIXED ASSETS: 15795508 OTHER ASSETS: 12821025 1013893147 LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 8297700 74423411 882276581 9573576 39321879 8297700 86913343 1058041827 21003694 42926494 +12489932 +175765246 +11430118 +3604615 +16.78 +19.92 +119.39 +9.17 15162913 1217183058 +2341888 203289911 +18.26 +121.51 16060392 +264884 +1.67 752499056 +131037733 +21.08 347837590 +65154306 +23.05 70607167 10524840 68779385 16843722 -1827782 +6318882 -2.58 +60.03

Percentage increase/decrease (in %)

1013893147

1217183058

203289911

165.26

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Interpretation:
It is inferred from the above table that current assets like Cash and Balances with RBI has decreased by 2.58% and Balances with banks & Money at call and short notice has increased by 60.03%, Investments increased by 23.05%, Advances increased by 21.08%, Fixed assets increased by 1.67% and other assets increased by 18.26%.The current liabilities has increased by 9.17% , Reserves and surplus increased by 16.78%, Deposits increased by 19.92% and borrowings being increased by 119.39% during the period 2010-2011.

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4.3Common-size Balance sheet:

TABLE NO: 6 COMMON-SIZE BALANCE SHEET AS ON 31ST MARCH 2006 AND 2007
FIGURES IN PERCENTAGE PARTICULARS
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice Investments Advances FIXED ASSETS: OTHER ASSETS: 4.83 5.26 39.92 47.20 1.09 1.70 6.64 1.95 37.18 51.75 0.98 1.50

2006

2007

100 LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 1.56 3.67 85.66 3.96 5.15 100

100

1.48 5.36 83.87 3.45 5.84 100

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TABLE NO: 7
COMMON-SIZE BALANCE SHEET AS ON 31ST 2007 AND 2008
FIGURES IN PERCENTAGE PARTICULARS
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice Investments Advances FIXED ASSETS: OTHER ASSETS: 6.64 1.95 37.18 51.75 0.98 1.50 100 9.12 0.28 31.10 56.50 0.76 2.04 100

2007

2008

LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 1.48 5.36 83.87 3.45 5.84 100 1.18 6.14 86.58 1.82 4.28 100

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TABLE NO: 8
COMMON-SIZE BALANCE SHEET AS ON 31ST 2008 AND 2009

FIGURES IN PERCENTAGE PARTICULARS

ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice Investments Advances FIXED ASSETS: OTHER ASSETS: 9.12 0.28 31.10 56.50 0.76 2.04 100 7.38 0.56 27.10 61.18 1.90 1.88 100

2008

2009

LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 1.18 6.14 86.58 1.82 4.28 100 0.99 7.50 86.28 0.63 4.60 100

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TABLE NO: 9
COMMON-SIZE BALANCE SHEET AS ON 31ST 2009 AND 2010
FIGURES IN PERCENTAGE PARTICULARS
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice Investments Advances FIXED ASSETS: OTHER ASSETS: 7.38 0.56 27.10 61.18 1.90 1.88 100 5.65 1.38 28.58 61.82 1.32 1.25 100

2009

2010

LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 0.99 7.50 86.28 0.63 4.60 100 0.68 7.14 86.92 1.73 3.53 100

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TABLE NO: 10
COMMON-SIZE BALANCE SHEET AS ON 31ST 2010 AND 2011
FIGURES IN PERCENTAGE PARTICULARS
ASSETS: CURRENT ASSETS: Cash and Balances with RBI Balances with banks & Money at call and short notice Investments Advances FIXED ASSETS: OTHER ASSETS: 5.65 1.38 28.58 61.82 1.32 1.25 100 6.96 1.04 27.88 61.29 1.56 1.27 100

2010

2011

LIABILITIES & CAPITAL: CAPITAL & RESERVES: Capital Reserves and surplus DEPOSITS: BORROWINGS: OTHER LIABITIES & PROVISIONS: 0.68 7.14 86.92 1.73 3.53 100 0.82 7.34 87.02 0.94 3.88 100

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Interpretation: From the above analysis of common size balance sheet on the asset side it is clear that the fixed assets and investments percentage decreases during the period of 2007 to 2011.This shows that the companys asset value detoriates leaving the company out of the growth path, and advances made by the company has been increasing on the positive side. On the liabilities side the deposits and the borrowings of the company has been slowly increasing in a fluctuating manner.

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4.4.Ratio Analysis:
SOLVENCY RATIOS

Current Ratio: The current ratio is a financial ratio that measures whether or not a firm has enough

resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows: Current Ratio = Current assets Current liability A current ratio of assets to liabilities of 2:1 is usually considered to be acceptable (ie., your current assets are twice your current liabilities).

TABLE NO: 11 CALCULATION OF CURRENT RATIO

Year Current assets (in Cr.) 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 4817.75 6772.82 6683.82 8113.2 8562.31 Current liabilities (in Cr.) 3280.52 2967.72 3873.22 3932.19 4292.65 0.35 0.32 0.40 0.48 0.28 Ratio

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CHART NO: 1

Current Ratio
0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 0.48 0.4 0.35 0.32 0.28 Current Ratio

R a t i o

2007

2008

2009 Year

2010

2011

Interpretation: From the above graph it was analyzed that current ratio was decreased from 0.35 to 0.32, increased to 0.40 and increased to o.48 and again decreased to 0.28. The current ratio was not able to satisfy the rule of thumb 2:1 in all the 5 above years.

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Quick Ratio: The Acid-test or quick ratio or liquid ratio measures the ability of a company to use

its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick Ratio = Liquid assets

Current liability

A company with a Quick Ratio of less than 1 can not currently pay back its current liabilities.

TABLE NO: 12
CALCULATION OF QUICK RATIO

Year

Liquid assets (in Cr.)

Current liabilities (in Cr.) 3280.52 2967.72 3873.22 3932.19 4292.65 10.25 16.08 15.30 17.93 19.49

Ratio

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

1088.3 339.88 472.24 1052.48 1684.37

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CHART NO: 2

Quick Ratio
19.49 20 18 16 14 12 10 8 6 4 2 0 17.93 16.08 15.3

R a t i o

10.25 Quick Ratio

2007

2008

2009 Year

2010

2011

Interpretation: From the above graph it was analyzed that quick ratio was increased from 10.25 to 16.03 and decreased to 15.30 and increased to 17.93 and again increased to 19.49. The quick ratio was below the rule thumb of 1:1 i.e. quick assets were less than current liabilities.

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COVERAGE RATIOS

Debt-Equity Ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion

of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage.

Debt to Equity Ratio = Total Debt of the company Total Shareholders fund

TABLE NO: 13
CALCULATION OF DEBT-EQUITY RATIO Year Total debt (in Cr.) Total shareholders fund (in Cr.) 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 49027.36 62329.19 73112.61 89185.02 107904.55 829.77 829.77 829.77 829.77 829.77 14.74 13.37 13.32 13.33 13.40 Ratio

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CHART NO: 3

Debt-Equity Ratio
15 14.5 14 13.5 13 12.5 2007 2008 2009 2010 2011 13.37 13.32 13.33 13.4 Debt-Equity Ratio 14.74

Interpretation: From the above graph it was analyzed that the lenders contribution is more than the owners contribution, in the years 2005 and 2006 there is no owners contribution. So, the debt equity ratio became negative.

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Debt Service Coverage Ratio: The debt service coverage ratio (DSCR), also known as "debt coverage ratio," is the

ratio of cash available for debt servicing to interest, principal and lease payments. The higher this ratio is, the easier it is to obtain a loan.

Debt Service Covering Ratio = Earnings Before Interest & Tax Total Debt

TABLE NO: 14
CALCULATION OF DEBT SERVICE COVERAGE RATIO Year EBIT (in Cr.) 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 1801.98 1641.08 1329.58 1089.43 836.84 Total debt (in Cr.) 49027.36 62329.19 73112.61 89185.02 107904.55 1.51 0.41 1.50 1.56 0.48 Ratio

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CHART NO: 4

Debt service Coverage ratio

1.6 1.4 R a t i o s 1.2 1 0.8 0.6 0.4 0.2 0 2007 2008 2009 Year 2010 2011 0.41 0.48 Debt service Coverage ratio 1.51 1.5 1.56

Interpretation: From the above graph it was analyzed that Debt service coverage ratio was decreased from 1.51 to 0.41 in 2008, and increased to 1.50 and again increased to 1.56, and in 2011 decreased to 0.48 due to no proper control over the companys total debts.

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PROFITABILITY RATIOS

Operating Ratio: Operating margin, Operating income margin or Operating profit margin is the ratio

of operating income (operating profit) divided by net sales, usually presented in percent.

Operating Ratio = Operating income Sales

TABLE NO: 15
CALCULATION OF OPERATING RATIO

Year

Operating income (in Cr.)

Sales (in Cr.) 4,284.65 5,150.78 6,830.33 7,714.37 9,361.03 15.55 13.57 22.39 22.67 20.58

Ratio

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

10542.92 9030.78 7865.77 6218.67 5107.71

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CHART NO: 5

Operating Ratio
25 20 R a 15 t i 10 o s 5 0 2007 2008 2009 Year 2010 2011 22.39 22.67 20.58 15.55 13.57 Operating Ratio

Interpretation: From the above graph it was analyzed that the operating ratio decreased from 15.55 to 13.57 and increased to 22.67 in 2010 and decreased to 20.58 in 2011.

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Net Profit Ratio: Profit margin, net margin, net profit margin or net profit ratio all refer to a measure

of profitability. It is calculated by finding the net profit as a percentage of the revenue.

Net Profit ratio = Net profit Sales

TABLE NO: 16
CALCULATION OF NET PROFIT RATIO Year Net Profit (in Cr.) 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 1714.07 1554.99 1245.32 1008.74 759.77 Sales (in Cr.) 4,284.65 5,150.78 6,830.33 7,714.37 9,361.03 15.45 16.52 16.25 17.03 16.35 Ratio

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CHART NO: 6

Net Profit Ratio

17.5 17 R a 16.5 t 16 i o 15.5 s 15 14.5 2007 2008 2009 Year 2010 2011 16.52 16.25 17.03 16.35

15.45

Net Profit Ratio

Interpretation: From the above graph it was analyzed that the Net profit ratio increased from 15.45 to 16.52,and decreased to 16.25 and again increased to 17.03 and decreased to 16.35 in 2011.

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FINDINGS
The share capital of the Indian bank is Rs.829.77 crores which has not undergone any changesand is stable since 2007, which had a capital of Rs.743.82 crores during 2006. Operating profit increased to Rs.3291.7 crore as against Rs.2747.4 crore for 2009-10 registering a growth of 19.8 per cent.Net profit for 2010-11 crossed the Rs.1700 crore mark and was at Rs.1714.1 crore as compared to Rs.1555 crore for 2009-10, showing a growth of 10.2 per cent. Total Deposits grew by Rs.17,576 crore to Rs.105,804 crore, a growth of 19.9 per cent for the year 2010-11 due to the increase in the number of ATMs being increased to 1128, which included 322 offsite ATMs and customers can have access to 70000 ATMs in the shared network. In the year 2010-2011 the total income of the Bank increased to Rs.10542.9 crore with a strong growth in interest income to the tune of Rs.9361.0 crore or 21.4 per cent. In all the years, the current ratio is below the accepted standard of 2:1 and hence the short term liquidity position of the company is not satisfactory or unsatisfactory. From the liquid ratio it is also seen that the company does not hold sufficient cash and bank balances for its total debts.

In spite of the global economic recession and financial turmoil, Indian bank has continued generating reasonable profits. Profitability ratios indicate that the firm has high operating efficiency backed by a strong management. The firm is high on leverage. The owners contribution in funds is minimum. The leverage ratios indicate the firm is high on financial leverage. The firm does not have much idol cash and bank balances which can be used for constructive purposes.
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CONCLUSION

Aided by buoyant growth in the economy, Indian Bank crossed yet another milestone with overall Business crossing Rs.180,000 crore mark. The Indian Bank attained a business level of Rs.181,530 crore in the year 2010-2011. Deposits crossed the Rs.100,000 crore mark to reach Rs.105,804 crore, increasing by Rs.17,576 crore at 20 per cent. Its Credit expanded by Rs.13,068 crore at 21 per cent to Rs. 75,726 crore. The present study of FINANCIAL STATEMENT ANALYSIS IN INDIAN BANK. was conducted with the help of annual report and the companys balance sheet. Various financial tools are used in this study like comparative balance sheet, common size balance sheet and ratio analysis. To extent possible the study has achieved its stated objectives. Finally the study helped me to acquire practical knowledge that was only over by books and papers alone. I take up this opportunity to thank one and all for making this study a complete one

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BIBLIOGRAPHY www.indianbank.com www.mckinsey.com www.moneycontrol.com www.googlefinance.com www.investopedia.com

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