A Sum m er Training P roject R eport On

P roject Report subm itted for P artial fulfillm ent of the M aster of Finance & Control (M FC) Under Utkal University, Orissa,

Session : 2006 08

S s a riy Pa d eh p a n a
Regd No. 2740/03 Roll No : MF86025 In rn l G id te a u e
MR. S.P. PANDA
H.O.D (MFC) ASMIT UNDER THE GUIDANCE OF

Submitted By:

Ex rn l G id te a u e
SRI. S.K. DAS

Faculty, ACSTI Orissa State o-operaitve Bank Ltd.

ARYA SCHOOL OF MANAGEMENT & INFORMATION TECHNOLOGY

Plot No 320, Patrapada

ACKNOWLEDGEMENT
I take the opportunity to express my deep sense of imitate to Mr. S.P. Panda,(H.O.D MFC) Mr. Niranjan Panigrahi, faculty member of ASMIT, Bhubaneswar & finance staff of Orissa State Cooperative Bank Bhubaneswar. Who extend full co-operation and support to me, which help me to reach finance stage of making this report. And finally, I am thankful to Mr. Sainik Som, (Principal), ASMIT, for permitting me to do me summer training at OSCB, Bhubaneswar and giving me a chance adequate scope for doing something good and innovative last but not the list. I would like to thank my parents whose sincerely cooperation helped me a lot in bring this project in a fruitful manner.

Seshapriya Panda
ASMIT, Bhubaneswar

DECLARATION
I hereby declare that the present study entitled Project

Report on RATIO ANALYSIS being submitted by me to the

department of MFC (ASMIT) is partial fulfillment of Master of Finance & Control under Utkal University, Orissa,. It is my own and has not been submitted to any other university or published any time before.

Seshapriya Panda
Regd. No. 2740/03 Roll No : MF86025 ASMIT, Bhubaneswar

INTRODUCTION Subject Objectives of the study Place of the study Scope of the study Limitations METHODOLOGY Data Choice Objectives Tools PROFILE OF O.S.C.B. L TD Introduction History Milestones in the history of OSCB Limited Structure of O.S.C.B. Limited Hierarchy of O.S.C.B. Limited Functions and role of O.S.C.B. Limited Mission of the O.S.C.B. Limited Achievements RATIO ANALYSIS Introduction Nature of ratio analysis. Objectives or importance or Utility of ratio analysis.

 Interpretation of the ratios. Precautions for the use of ratios. Uses and significance of ratio analysis. Managerial uses of ratio analysis. Limitations or ratio analysis. Classification of ratios. Ratios relevance to study. Interpretations. SUGGESTIONS & CONCLUSIONS BIBLIOGRAPHY

CHAPTER 1
INTRODUCTION
Subject Objective of the study Place of the study

Scope of the study Limitations

CHAPTER 1
INTRODUCTION :
Finance is defined as the provision of money when it is required. Every enterprise needs finance to start and carryout, its operation. Finance is known as the life blood of an organization. So finance should be managed effectively.

SUBJECT :
Finances statement analysis refers to the process of determining financial strength and weakness of the firm by establishing. Strategic relationship between the terms of the balance sheet, profit and loss account and other operative data. The analysis of financial Statement is a process of evaluating the relationship between different parts of financial statement. Financial statement is used for decision making by various parties interested in them. First task of the analysis is to select the information to the decision. Second task is to arrange the information in a way to highlight significant relationship. Final task is interpretation and drawing of inferences and conclusion.

OBJECTIVE OF THE STUDY:

The present study is made as a part of the MBA programme for summer training in the form of on the job training with following activities.

To know the financial of the OSCB Limited. The Bank has the strength to fulfill its current obligation or not.

Find out the strength and weakness of OSCB Ltd.

Performance of OSCB Ltd. For granting credit, providing loans and making investment.

Growth rate of OSCB Ltd. Know the liquidity position of OSCB. Know the Long-term solvency of OSCB. Know the operating efficiency of OSCB Ltd. Know the over all profitability of OSCB.

PLACE OF THE STUDY:

All the activities of the project are carried out in the Orissa State Cooperative Bank Ltd., Bhubaneswar.

SCOPE OF THE STUDY:

The data and information were gathered during training. The scope is limited to the secondary data only. The scope is delimited to the year 2000-01 to 2005-06

LIMITATION :

It is only based on mathematical interpretation of the figures and ignores the factors such as management style, motivation of workers, leadership etc.

It is effected by price level changes. It is a post-mortem analysis of what has happened. The position in the interim period is not revealed by ratio analysis.

It does not give any clue for future.

CHAPTER II
METHODOLOGY Data Choice Objectives Tools

CHAPTER II
METHODOLOGY :
The research involved extensive and intensive studies of the Orissa State Cooperative Bank Limited. In this project report a sincere effort has been made to study the ratio analysis of the Bank. During this study, I study the financial position & performances of the Bank. At last, I have given interpretations & conclusions of the study.

DATA CHOICE:
The whole of my study is based on secondary data of O.S.C.B. LTD. I have no taken any primary data for my study because primary data would not have been helpful to my study. During the tenure of my study I have taken help of the following secondary data. (1) Annual Report of O.S.C.B. Ltd. (2) Annual Audit Report. (3) Balance Sheet. (4) Development Action Plan. (5) Profit and Loss Account.

THE OBJECTIVE:
The sole objective of the project is to help the management of the organization in decision making regarding the subject matter. Calculation of ratios is only a clerical task where as the interpretation of it needs immense skill, intelligence and foresightedness. The role objective of the project is to help the management of the organization in decision-making regarding the subject matter, Calculation ratios is only a clerical task where as the interpretation of it needs immense skill, intelligence

and foresightedness. One of the easiest and most popular ways of evaluating performances of the organization is to compare its present ratios with the past ones called comparison overtime and through Development Action Plan. It gives and indication of the direction of change and reflects whether the organizations financial position and performance has improved, deteriorated or remained constant over a period of time. The various kinds of interpretation of ratio as: (1) Simple absolute ratios. (2) Group of ratios, (3) Historical Comparison (4) Project ratios (5) Inter organization Comparison Here much emphasis was given on historical comparison and on forecasting the immediate future trends.

TOOLS:
There are some of the tools, which are relevant for the study of ratio analysis, and performance of OSCB Ltd. Is: (a) Liquidity Ratio: (1) Current Ratio. (2) Cash- Position Ratio/Absolute Ratio (b) Leverage or Capital Structure Ratio (1) Debt Equity Ratio. (2) Funded Debt to Total Capital Ratio (3) Equity or Proprietary Ratio. (4) Equity or Proprietary Ratio

(5) Current Assets to Proprietary Ratio (6) Fixed Assets to Proprietary Ratio (7) Solvency Ratio, (8) Debt. Assets Ratio (9) Fixed Assets to Current Assets Ratio. (c) Profitability Ratio: (1) Return in Assets (2) Return on Capital Employed (3) Return on Equity Capital Earning per share (EPS)

CHAPTER III
PROFILE OF O.S.C.B. LTD
Introduction History Milestone in the History of OSCB Limited. Structure of OSCB Limited. Hierarchy of OSCB Limited. Functions and Role of OSCB Limited. Mission of the OSCB Limited. Achievement.

CHAPTER III
INTRODUCTION:
The Orissa State Cooperative Bank and apex bank in Orissa has had office at Bhubaneswar with its branches at Cuttack, Paradeep, Sambalpur & Bhubeneswar it supports 17 Central Coopeative Banks which in turn supports more than 4000 primary co-operative societies. The Orissa State co-operative Bank Ltd. Was registered (Regd. No 29cu/dt 02.04.1948) under the Bihar & Orissa Cooperative Society Act 1935 as Orissa provisional cooperative bank with its headquarters at Cuttack and functioning from 2 April, 1948. Later the bank shifted to the state Capital Bhubaneswar.

HISTORY:
With the growth of Central Banks, the need for loans and advance and cash credit at a reasonable rate of interest grew for Central banks to enable them to make adequate finance available to the societies. So in April 1914 the Bihar and Orissa provincial Co-operative Bank was formed. The early 40s witnessed the introduction of provincial autonomy in all British Indian provinces and what was paramount importance was the birth of the Orissa Province on 1st April 1936. The Orissa provincial Cooperative Bank is one of the manifestations of the great historical identity of Oriya people. During this period the number of Central Banks in North Orissa and South Orissa are 13 & 2 respectively.

A few months after the formation of the separate Orissa province the Orissa Co-operative Bank was registered on 15 August 1936 and sum of Rs 10,520 was collected towards share capital of the bank. The main objective of the. bank was To finance the Co-operative societies. To act as a balancing center for the surplus funds of the societies in Orissa. To carry on banking business. The Central Banks and unions of Orissa applied for the bifurcation of the Bihar and Orissa provincial Co-operative Bank. The 13 Central Cooperative Banks in North Orissa served all connections with the Bihar provincial Co-operative Bank in 1938, and their net liability to the Bank was taken over by Orissa Govt. The Orissa Provincial Co-operative Bank registered on 15 August 1936 could not start its functions due to pending of Govt. decisions on the enquiry into the conditions of the co-operative movement in Orissa There was no apex bank for the 13 northern CCBs. However, the two southern were obtaining loans from the Madras provincial co-operative Bank as usual. On 2 April 1948, the Orissa Provincial Co-operative Bank was again registered under the Bihar and Orissa Co-operative Society act 1935, 22 members were enrolled and 100 shares were issued and share capital of Rs. 10,020/- was collected. So it was a twice born of the Bank. The name of the "Orissa provincial Co-operative Bank" was changed to "Orissa State Co-operative Bank" in the year 1951-52. The Institutional Rural Credit Delivery System of Agriculture Comprises of

1.Short term Co-operative Credit structure. 2.Long Term Co-operative Credit structure. 3.Regional rural banks. 4.Commercial banks.

5.NABARD. 6.Reserve Bank of India.

MILlE STONE IN THE HISTORY OF O.S.C.B. BANK LTD.

1854-55 The Orissa Co-operative Society Act1951 was enforced and the rules were formed there under. 1955 56 1956-57 M.T. Agricultural Loans were advanced to the farmer for the 1st time. 1. Line of Credit for Handloom introduced. 2. Bank's deposit exceeds 1 crores. 1957- 58 Loans and Advances of, the Bank exceeded Rs. 1 crores and stood Rs. 1.8 crores. 1959-60 1965-66 Financing of the Industrial Co-operative Society Started. The Banking regulation Act, 1949 was madeapplicable to co-operative

banks on 31-12-66. 1968-69 Crop loan was introduced.

1970-71

The 1st Branch of the bank was opened at Bhubaneswar 15/12/70.

1974.75

The bank made loss of Rs 86,000/- in the history of 50 years 1947 to 2000.

1978- 79 1981.82 1985-86 1990-91 1994-95

Co-operative storage project started in Orissa. Computer was installed in the bank. The C.S.T.I of the bank was set up on 19/11/85. New Co-operative year commenced from 01/04/90. MOU was signed between O.S.C. Bank, NABARD and

Govt. of Orissa. 1996-97 Prudential norms on income recognition, asset of classification,

provisioning was made applicable by R.B.I. from 01/04/96. 1996-97 The bank became a member of the Indian Bank Association 23/04/96. 1997-98 The Bank Started total Branch automation, the main branch was fully

computerized, NABARD awarded the bank with 2 best performance prize for excellent performance. 2000.2 ATM were installed in Cuttack and Bhubaneswar. Customer attitude Survey was taken up through the Xavier Institute of Management, B.B.S.R. 2000.3 (I) Implementation of Kalinga Kisan Silver card. (KKSC) (ii) introduction of Co-op. Bank mutual arrangement scheme for Orissa (COBMASO) (iii) Recovery of Co-op. dues in Orissa. (iv) The Co-op. bank has earned highest profit in this year. 2003-04 (i) Co-operation of "Mini Bank Schemes" at PACS level mop up rural savings.
(ii) Computerization Programme for improving the quality of customer service streamlining MIS and Financial Accounting Systems.

STRUCTURE :
Reserve Bank of India (Central Bank)

Commercial S.B.I Group National Bank Regional Rural Bank Private Bank (Indian Foreign) (Indian Foreign)

Insurance Companies LIC G.I.C

Mutual Banks U.T.I.

Development Bank NABARD SIDBI

EXIM Bank SFCS IFC ICICI ICICI IRBI

State Land Development Bank

State Co-operative (Apex Bank)

Urban Cooperative Banks

Primary Land Development

17 District Central Co-operative Bank

2747 Primary Agricultural C-operative Society (PACS) How O.S.C.B. Get Finance? NABARD (National Bank for agriculture & Rural Development) Orissa State Co-operative Ban

District Central Co-operative Bank

Primary Agriculture Co-operative Society

Members

R.B.I:
On the recommendation of Royal Commission and Indian Central Banking Enquiry Committee, Reserve Bank of India was established on April 1 1935 under the Reserve Bank of India Act 1934 as the Central Bank of the country. It was nationalized on Jan 1st 1949 under the Reserve Bank Act 1948.

STATE CO-OPERATIVE BANK:

It forms the apex of the Co-operative credit structure in each state and as such, it is also known as apex bank. It finances, coordinates and controls the working of central Banks in each State. It serves as the link between. RBI, NABARO on one side and the central Co-operative Banks and primary Society on the other. They mobilize resources from the public by way of deposits and by borrowing from RBI, NABARO, SIOBI and other refinancing agencies. HIERARCHY OF OCCB LTD President Managing Director Chief General Manager Addl. Chief General Manager

General Manager

General Manager

General Manager

General Manager

General Manager

General Adm.Dept Finance & A/c Dept (Business Adm)

Investment Dept.)

(Credit Supervision

(Dept of

Dy. Gen (Admn)

Dy. Gen (General Account)

Dy. Gen. Manager (Compu. Operator)

Dy. Gen

Dy. Gen. Dy. Gen. Dy.Gen (Loan Agri) (Project Tech.)

Dy Gen (Inspection Supervision)

Manager Manager

Manager Manager Manager Manager Manger (Business (Loan Admin) Agri)

FUNCTIONS & ROLE OF THE ORGANISATION

The Orissa State Co-operative Bank as the apex level institution of the short term Co-operative credit delivery system in the State is playing measure rote strengthening DCCB /ACS for the social-economic enlistment of the State.
ROLE TOWARDS CREDIT POLICY AT THE STATE LEVEL

a) O.S.C.B. as the leader of the State Co-operative Credit Structure is drawing annual credit plan (DCCB wise and PACS wise and purpose wise). b) c) Simplification of loaning procedure. Kissan Credit card has been introduced to the farmers to ensure adequacy and time liner in credit delivery. 2. ROLE TOWARDS RURAL SAVING MOBILIZATION TO ATTAIN

SELF RELIANCE OF CCB AND PACS a) Apex bank has encouraged the DCCBs to introduce new deposit senate, such as incurrence linked deposit, daily deposit, pension senate b) Apex bank has advised to banks to identify the potential growth centers to open mini Banks at PACs level. Apex Bank has prepared model business for mini

banks So far 800 mini Banks are operating in the state and mobile more than 200 crore deposits c) Introduction of deposit guarantee scheme for deposit in PACs (mini-Bank) with contribution from State Government apex bank, CCB, PAC5 d) Arranging NABARD is instance from out of Co-operative Development Fund (CDF) for infrastructure development of PACs operating MINI Bank to provide iron safe deposit counters, furniture. e) Publicity through electronic media by Apex Bank for deposits mobilization of CCBs and PACs. 3. To serve as balancing center in the state for all types of Co-operative societies registered under the Co-operative Society Act. 4. 5. To make loans and advances to Co-operative societies in the state. To function as a banker and accept all types deposit is current savings, fixed etc. and borrow from NABARD, Reserve Bank of India to finance it's affiliated societies. 6. To act as refinancing agency to the affiliated societies in respect of production investment (agricultural) credit and Handloom credit In the state.

7. ROLE TOWARDS RECOVERY OF AGRICULTURAL LOAN:

With a view to inter competitive spirit among field staff O.S.C.B. has taken the following steps a) b) c) Introduction of incentive scheme for recovery of loan. Regular review of recovery performance of DCCB / PACs Publicity through electronic media for recovery of loan of DCCB/PACs

8.ROLE TOWARDS INSPECTION AND SUPERVISION:

O.S.C.B. has prepared guideline for inspection DCC/ PACs and deputes its senior officers for annual inspection of all DCCB and selected PACs for up gradation of their skill.

9. TOWARDS HUMAN RESOURCE DEVELOPMENT IN COOPERATIVE:

The agricultural co-operative staff-training institute (ACSTI) under the agenda of OSCB is impacting training to the staff of DCCB/PACs for up gradation of their skill.

10.

TOWARDS CUSTOMER SERVICE:

A committee under the chairmanship of Sri M.N Golporia has been set up in September 1990 on customer service by Reserve Bank of India Goiporia committee has made suitable recommendation of customer service in the Bank. O.S.C.B. has examine all the recommendation and advised it's branches and Dist Central Co-operative Banks to follow all the important recommend at- to ensure customer satisfaction in the Bank.

MISSION OF O.S.C.B. LTD.

The mission of O.S.C.B. LTD. Is to become a strong and vibrant Bank having competitive edge and to lead a rejuvenated shot term Co-operative Credit Structure to serve the people of Orissa.

ACHIEVEMENTS:
Net worth exceeding 140 crores and deposits More than 1026 crores. ATM Service is available in the Main branches for anytime banking. Earning profits since inception and paying dividend to share holders. Awarded for best performance by finance Ministry, Govt of India. Higher enter on all type of deposits Loans for commercial vehicles, small business building and for purchase of consumer & durables. Demand drafts issued on all types of deposits & on ace major cities of country.

CHAPTER : IV
Ratio Analysis Introduction Nature of ratio analysis. Objectives or Importance or Utility of ratio analysis. Interpretation of the ratios. Precautions for the use of ratios. Uses and significance of ratio analysis. Managerial uses of ratio analysis. Limitations of ratio -analysis. Classification of ratios. Ratios relevance to study. Interpretations.

CHAPTER - IV INTRODUCTION:
The term "Ratio Analysis" is made of two words 'Ratio' and' Analysis', Ratio analysis means a tool of analysis based on rations. Ratio analysis is the process of determining and interpreting numerical relationship of different items of financial statements, it provides a yardstick that to measure the relationship between variables or figures. This relationship can be expressed as per cent or as a quotient (one item as a certain number of times the other item) It is a technical tool in the hands of management to "measure the financial progress

NATURE OF RATIO ANALYSIS:

Ratio Analysis is a technique of analysis and interpretation of financial statement. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is the only means of fetter understanding of financial strength and weakness of a firm. There are no of ratios, which can be calculated form the information given in the financial statement. But the analysis has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis. The following one of four steps involve in ratio analysis. ii. Selection of relevant data from the financial statement depending upon the objective of the analysis. iii. iv. Calculation of appropriate ratios from the relevant data. Comparison of the calculation ratios with the ratios of the same organization in the past or the ratios developed from projected financial statements or the ratios of some other organization v. Interpretation of the ratios

OBJECTIVES

FOR

IMPORTANCE

OR

UTILITY

OF

RATIOANAL ANLYSIS:
Helpful in forecasting Useful in co-ordination

 Helpful in control Helpful in communication. Helpful in Efficiency Appraisal. Helpful in Evaluation of Financial Position. Helpful to Investors, Financial Institutions and Employee

INTERPRETATION OF THE RATIOS:

The interpretation of ratios is an important factor. Through calculation of ratios is also important but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness. The impact of factors such as price level changes, change in accounting policies, windows dressing etc. should also be kept in mind when attempting to interpret ratios. The interpretation of the ratios can be made in the following ways.

(i)

SINGLE ABSOLUTE RATIO:

Generally speaking one cannot draw any meaningful conclusion when a single ratio is considered in isolation. But single ratios may be studied in relation to certain rules of thumb which are based upon will proven conventions as for example 2: 1 is considered top be a good ratio for current assets to current liabilities.

(ii) GROUP OF RATIOS:

Ratios may be interpreted by calculating a group of related ratios. A single ratio supports by other related additional ratios becomes more understandable and meaningful for example. The ratio of current assets to current liabilities may be supported by the ratio of liquid assets to liquid liabilities to draw more dependable conclusion. (iii) HISTORICAL COMPARISON: One of the easiest and most popular ways of evaluating the performance of the organization is to compare its present ratios with the past ratios called comparison overtime, When financial ratios are compared over a period of time it gives and indication of the direction of change and reflects whether the organization performance and financial. Position has improved, deteriorated or remained constant over a period of time.

(iv) PROJECTED RATIOS:

Ratios can also be calculated for future standards based upon the projected or Performa financial statements, These future ratios may be taken as standard for comparison and the ratios calculated on actual financial statements can be compared with the standard ratios to end out variances, if any. Such variances help in interpreting and taking corrective action for improvement in future.

(V) INTER-ORGANISATION COMPARISON:

Ratios of one organization can also be compared with the ratios of some other selected organization in the same industry at the same point of time. This find of comparison helps in evaluating relative financial position and performance of the firm. But while making use of such comparison are has to very careful regarding the different accounting methods, policies and procedures adopted by different organization.

GUIDELINES OR PRECAUTIONS FOR THE USE OF RATIOS:

The calculation of ratios may not easy. The information on which these are based, the constraints of financial statements, objective for using them, the caliber of the analyst etc, are important factors which Influence the use of ratios Following guidelines or factors may be kept in mind while interpreting various ratios. 1. ACCURACY OF FINANCIAL STATEMENTS: The ratios are calculated from the data available in financial statements. The reliability of ratio's is linked to the accuracy of information in these statement. Before calculating ratios one should see whether proper concepts and conventions have been used for preparing financial statements or not. 2. OBJECTIVES OR PURPOSE OF ANALYSIS: The type of ratios be calculated will depend upon the purpose for which these are required, If the purpose is to study current financial position then ratios relating to current assets and current liabilities will be studies. The purpose of 'user' is also important for the analysis of ratios, the purpose or object for which ratios are required to be studies should always be kept in mind for studying various ratios.

3. SELECTION OF RATIOS:

Another precaution in ratio analysis is the proper selection of appropriate ratios. The ratios should match the purpose for which these are required. Only those ratios should be selected which can throw proper light on the mater to be discussed.

4. USE OF STANDARDS:
The ratios will give an indication of financial position only when discussed with reference to certain standards unless otherwise these ratios are compared with certain standards one will not be able to reach at conclusions. These standards may be rule of thumb as in case of current ratio (2-1) and acid-test ratio (1:1)

5. CALIBRE OF THE ANALYST:

The ratios are only the tools of analysis and their interpretation will depend upon caliber competence of the analyst. He should be familiar with various financial statements and the significance of changes, etc a wrong Interaction may create wave for the concern since wrong conclusions may lead to wrong decisions.

6. RATIOS PROVIDE ONLY A BASE:

The ratios are only guidelines for the analyst. He should not base his decisions entirely for them the interpreter should use the ratios as guide and may try to solicit any other relevant information, which helps in reaching a correct decision. Before reaching final conclusions.

USES AND SIGNIFICANCE OF RATIO ANALYSIS:

The ratio analysis is one of the more powerful tools for financial analysis. It is used as a devise to analyze and interpreter the financial health of enterprise. The use of ratios is not confined to financial managers only. As discussed earlier, there are different parties interested. in the ratio analysis for knowing the financial position of a firm for different purposes. With the use of ratio analysis one can measure the

financial condition of an organization and can point out whether the condition is strong, good, questionable or poor. The conclusions can also be drawn as to whether the performance of the organization is improving or deteriorating. Thus, ratios have wide applications and are of immense use today.

MANAGERIAL USES OF RATIO ANALYSIS:

1. HELPS IN DECISION -MAKING:

Financial statements are prepared primarily for decision- making. But the information provided in financial statements is not an end in itself and no meaningful conclusion can be drawn from these statements alone. Ratio analysis helps in making decisions from the information provided in these financial statements.

2. HELPS IN FINANCIAL FORECASTING AND PLANNIG:

Ratio analysis is of much help in financial forecasting and planning, Planning is looking ahead and the ratios calculated for a number of years work as a guide for the future Meaningful conclusions can be drawn for future from these ratios.

3. HELPS IN COMMUNICATING:
The financial strength and weakness of an organization are communicated. in easier and understandable manner by the use of ratios. The information contained in the financial statements is conveyed in a meaningful manner to the one for whom it is meant.

4. HELPS IN CO-ORDINATION:
Ratios even help in coordination, which is of utmost importance in effective business management. Better communication of efficiency and weakness of an enterprise results in better co-ordination in the enterprise.

5. HELPS IN CONTROL:
Ratio analysis even helps in making effective control of the business, Standard ratios can be based upon Performa of financial statements and various or deviations if any, can be found by comparing the actual with the standard so as to take a corrective action at the right time.

6. OTHER USES:
There are so many other uses of the ratio analysis, It is an essential part of the budgetary control and standard costing Ratios are of immense importance in the analysis and interpretation of financial statements as they bring the strength or weakness of an organization

LIMITATIONS OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understood they suffer from some serious limitations

1. LIMITED USE OF A SINGLE RATIO:

A single ratio usually does not convey much of a sense. To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion.

2. LACK OF ADEQUATE STANDARD:

There are no well-accepted standards or rules of thumb for all ratios, which can be accepted as norms, it renders interpretation of the ratios difficult.

3. INHERENT LIMITATIONS OF ACCOUNTING:

Like financial statements, ratios also suffer from the inherent weakness of accounting records such as their historical nature of the past are not necessarily true indicators of the future.

4. CHANGE IN ACCOUNTING PROCEDURE:

Changes in accounting procedure by a firm makes ratio: analysis misleading, Le., a change in the valuation of methods of inventories from FIFO to LIFO increase the cost of sales and reduces considerable the value of closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio.

WINDOW DRESSING:
Financial statements can easily be window dressed to present a better picture of its financial and profitability position to outsiders. Hence, one has to be very careful in making a decision from ratios calculated from such financial statements. But it may be very difficult for an outsider to know about the windows dressing made by an organization. PERSONAL BIAS:

Ratios are, means of financial analysis and not an end in itself. Ratios have to be interpreted indifferent ways.

7. UNCOMPARABLE:
Not only industries differ in their nature but also the organizations/firms of the similar business widely differ in their size and accounting procedure etc It makes comparison of ratios difficult and misleading Moreover comparisons are made difficult due to differences in definitions of various financial terms is used in theratio analysis.

9. PRICE LEVEL CHANGES:

While making ratio analysis, no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid.

10. RATIOS NO SUBSTITUTES:

Ratio analysis is merely a tool of financial statements. Hence, ratios become useless of separated from the statements form, which they are computed.

11. CLASSIFICATION OF RATIOS:

The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm/organization for different purposes. In view of various users of ratios, there are many types of ratios, which can be calculated from the information given in the financial statements. The particular of the user determines the particular ratios that might be used for financial analysis. Various accounting ratios can be classified as follows

RATIOS
(A)
Traditional Classification Or Statement Ratios

(B)
Fundamental Classification Or Classification According to importance.

(c)
Significance Rations Or Ratios Importance

TRADITIONAL CLASSIFICATION OR STATEMENT RATIOS

Balance Sheet Ratios Or Position Statement Ratios

Profit & Loss Account Ratios Revenue/ Income Statement Ratios According To

Composite / Mixed Or Inter Statement Ratios

Classification of Ratios

The usage of ratio analysis is not limited be financial manager only different parties are interested to in ration analysis to know the financial position of the organization. In view of various usage of ratios, there are many types of ratio, which can be calculated from the information given in the financial statement. Various accounting rations can be classified as follows:

A classification According to functions.

1.Eiquidity rations Current ratio Eiquid ratio Absolute liquid

ANALYSIS OF RATIOS:

2 Lieverage ration : Debt- Equity ratio current assets to proprietary ratio fixed asset to proprietary ratio Solvency ratio fixed assets to current asst

3. Profitability ratios Return on assets Return on capital employed Returned on Equity capital Earning per share -j

(A) LIQUIDITY RATIOS

Liquidity ratio measures the organizations ability to meet its current obligation. In fact analysis of liquidity budgets and cash and fund flow statement but liquidity ratios by establishing a relationship between case and other current assets to current obligation. Provide a quick measure of liquidity. A very high degree of liquidity is also bad sidle assets earn nothing. So it is necessary to strike a proper balance between high liquidity and lack of liquidity. The most common ratio relevant to the study is Current ratio Absolute liquid ratio Current ratio: Current ratio is defined as the relationship between current assets and current liabilities. This ratio, is also known as working capital ratio is widely used to make the analysis of short term financial position of a firm. Current Ratio Current asset = --------------Current Liabilities Current assets 1. Cash 2. Balance with other Banks Current liability 1.Borrowing Short-term loan 2. Bills payable.

3. Money at call & short notice 4. Advance (short term loan cash credit & Over draft 5. Interest receivable 6. Bills receivable YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 CURRENT ASSETS 8,653,318,162 9,236,337,326 10,229,969,731 10,880,456,830 110,632,206,762 10,687,469,234

3. Interest payable 4. Other liabilities. 5. Saving Banks deposits 6. Current deposits

CURRENT LIABILITIES 406,729,144 4,694,947,559 5,601 ,96 6,365,329,730 6,454,307,961 6,93,300,000

RATIO 2.14:1 1.97:1 1.83:1 1.70:1 1.64:1 1.53:1

Interpretation: As a convention of current ratio the minimum of 2: 1 is referred to as a banker's rule of thumb. Current ratio of "05C8" for200001, 2002-03, 203-04 & 2004-05 it is not satisfactory.

Absolute liquid Ratio:

It is defined as the relationship between liquid assets & current liabilities.

Absolute liquid assets:

1 2. 3. Cash Balance with other Banks. Money at call & Short notice. CURRENT ASSETS 2,260,446,912 2,389,813,041 2,381,646,845 2,823,489,066 1,580,818,493 2,129,269,639 CURRENT LIABILITIES 4,046,729,244 4,694,947,559 5,601,968,420 6,365,239,730 6,454,307,961 6,653,967,611 RATIO 0.56:1 0.51:1 0.43: 1 0.44: 1 0.24:1 0.32:1

YEAR
2000-01 2001-02 2002-03 .2003-04 2004-05 2005-06

INTERPRETATION:

The standard norm of absolute liquid ratio is 0.5: 1 . In case of OSCB absolute liquidity position in 2000-01,01-02 is satisfactory. But in 02-03, 03-04 & 04-05 it is not satisfactory.

(B) LEVERAGE RATIO

It is defined as the firm's ability to meet the fixed interest & cost & repayment schedules associated with its long term borrowing, leverage ratio shows the proportion of debt & equity in financing of the firm. The various leverage ratios relevant to the study are. (i) (ii) (iii) (iv) (v) (vi) Debt - equity ratio Funded debt to total capital ratio. Equity I proprietary ratio. Current assets to proprietary ratio. Fixed assets to proprietary ratio. Solvency ratio.

(vii) (viii)

Debt assets ratio I Fixed assets to current assets ratio.

Debt - Equity ratio

It measures the relative claims of outsiders & owners against the firms asset. The financing of total asset of a business concern is done by owner's equity as well as by outsider's debts. Debt-Equity ration = Outsider Fund Share holders fund

1. Borrowings:
a. From RBI /NABARD b. From State Govt. c. From other institutions

Shareholder's fund
1. Share Capital 2. Reserve fund & other Reserves. 3. Over due interest reserve 4. Overdue interest reserve 5. Profit & Loss

2. Interest Payable 3. Other liabilities. 4. Deposits & other account a. Fixed deposits b. Saving Bank deposits c. Current deposits

YEAR

OUTSIDER

SHAREHOLDER'S FUND

RATIO

FUND
2000-01 2001-02 2002-03: 2063O4 2004-05 2005-06 12,229,901,744 14,676,665,923 15,511,962,098 18,548,584,207 18,506,331,193 19,862,539,768 1,703,885,146 2,589,694,274 2,393,797,905 2,722,375,247 2,943,835,475 2,849,870,112 7.18:1 7.14:1 6.48: 1 6.81:1 6.28:1 6.96:1

Interpretation: The OSCB outsider's fund has increased over the year, which states that the claims of outsiders are greater than those of own (ii) Funded Debt to total capitalization ratio It establishes a link between the long term funds realized from outside & total long term fund available in business. Total Assets 1. Cash 2. Balance with other Bank 8. Adjusting head 9. Premises

3. Money at call & short notice 10. Furniture &Fixture less depreciation 4. Investments 5. Advances 11. Other assets 12 Non banking assets acquired in satisfaction of claims 6. Interest receivable 7. Bill Receivable 13. Profit& Loss

YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

SHARE HOLDER FUND 1,703,885,146 2,589,694,274 2,393,797,905 2,722,375,247 2,943,835,4 75 2,984,476,375

TOTAL ASSETS 13,944,362,857 16,743,339,649 17,918,499,832 21 ,297,744,258 21,453,862,751 21,582,633,954

RATIO 12% 15% 13% 13% 14% 13%

Interpretation: The proprietory ratio of OSCB over the year shows that Business concern depends more upon creditors to supply its working capital. (iv) Current asset to proprietory ratio This ratio is the relationship between current assets & share holders fund. Current asset to proprietory ratio = Funded Debt X 100 Total capitalization

Current Assets
1. Cash 2. Balance with other Bank 3. Money at call & short 4. Investments 5. Advance 6. Interest receivable 7. Bills receivable. 8. Adjusting head 9. Non-Banking assets faction of claims. 10. Profit & Loss

YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

CURRENT ASSET 8,653,318,162 9,236,337,326 10,229,969,732 10,880,456,830 10,632,206,762 10,632,206,762

SHAREHOLDER'S FUND 1,703,885,146 2,589,964,274 2,393,797,905 2,722,375,247 2,943,835,475 2,943,385,475

RATIO 5.08:1 3.57:1 4.27:1 3.99:1 3.61:1 3.61.1%

Interpretation: The current assets over the shareholders fund are very high over the years. It means that proprietors funds are fully utilized in current asset. (v) Fixed asset to proprietory ratio It indicates the relation ship between fixed asset and shareholders fund. Fixed assets to proprietory ratio = Fixed assets x 100 Share holders fund

Fixed Asset
1. Premises 2. Furniture & fixture less depreciation. 3. Library
YEAR FIXED ASSETS SHAREHOLDER'S FUND PERCENTAGE

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

55,107,952 57,983,558 70,511,218 76,366,541 74,604,271 77,511,218

1,703,885,146 2,589,694,274 2,393,797,905 2,722,375,247 2,943,835,475 3,104,797,146

3% 2% 3% 3% 3% 2%

Interpretation: The fixed assets to share holders fund of the bank over the years are not satisfactory. (vi) Debt Asset Ratio It establishes relationship between debt and total asset. It shows the financial risk in long term. Debt Total asset

Debt asset ratio =

X 100 RATIO 0.88:1 0.88:1 0.87:1 0.70:1 0.70:1 0.76:1

YEAR DEBT TOTAL ASSETS 2000-01 12.229,901,744 13,944,362.857 2001-02 14,676,665,923 16,743,339,649 2002-03 15,511.962.098 17.918,499,831 2003-04 15,022,967,513 21,297.744,258 2004-05 15,117,126.662 21,453,862,751 2005-06 16,965,901,097 22.299,832,506 It indicates the relationship between total liabilities to outsiders

Interpretation: The debt asset ratio of "05CB" is lower over the year, which is satisfactory to the company in order to make additional loans. (vii) Solvency ratio It indicates the relationship between total liability to outsiders and total assets of a firm. Solvency Ratio= Total liability to outsiders X 100 Total assets TOTAL ASSET 13,944,362,857 16,743,339,649 17,918,494,832 21,297,744,258 21,453,862,751 21,862,754,944 PERCENTAGE 88% 88% 87% 70% 70% 76%

TOTAL LIABILITY YEAR OUTSIDERS 2000-01 12,229,901,744 2001-02 14,676,665,923 2002-03 1 5,511,962,098 2003-04 15,022,967,513 2004-05 . 15,117,126,662 2005-06 16,676,904,922

Interpretation: Generally low solvency ration is for the Business. But in OSCB it is too high over the years, 50-solvency ration is not satisfactory. (viii) Fixed Asset - Current Asset Ratio: This ratio calculates the idle money of the company kept it. Fixed asset Fixed asset to current assets =Current asset YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 FIXED ASSET 55,107,952 57,983,558 70,511,218 76,366,541 74,604,271 75,511,107 CURRENT ASSET 8,653,318,162 9,236,337,326 10,229,969,73 1 10,880,456,83 0 10,632,206,76 2 11,880,162,65 3 RATIO 6.37:1 6.27:1 6.89:1 7.01:1 7.01:1 6.51.

Interpretation: the fixed asset to current assets of OSCB is very high which has remained idle, that is not satisfactory to the company

(C) PROFITABILITY RATIO

The primary objectives of business under taking is to earn profit in the words of lord Keynes "Profit is the engine that drives the Business enterprise. Profit is not only needed for its existence but also for its expansion and diversification. The investors want an adequate return on their investment, workers want higher wages, creditor want high security for their interest and loan soon. Following are the important over all profitability ratios, which relevant to the Business concern are: 1 Return on assets

2 3 4

Return on capital employed Return on Equity capital Earning per share

(1)Return on Assets It states the relationship between net profit and total assets. Net profit Return on assets = Net Profit X 100 Total assets YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 NET PROFIT 64,924,131 74,953,072 84,731,646 1,34,751,259 1,74,443,023 1,69,64,997 TOTALASSETS 13,944,362,857 16,743,339,649 17,918,494,832 21,297,744,258 21,453,862,751 25,773,075,463 PERCENTAGE 0% 10% 10% 11% 11% 8%

Interpretation: The return on assets of OSCB is not satisfactory. The Assets are not utilized property. (ii) Return on capital employed It is widely used to measure the over all profitability and efficiency of the business. Return on capital employed Capital Employed: 1. Share capital 2.Reserve Fund & other Reserve YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 NET PROFIT 64,924,131 74,953,072 84,731,646 1,34,751,259 1,74,443,023 196,964,997 EMPLOYED CAPITAL 1,206,388,387 3,326,568,012 3,696,509,930 1,887,613,988 2,191,252,452 25789152,623 PERCENTAGE 5% 3% 3% 7% 7% 8% x 100 Total capital employed Net profit

Interpretation: The return on capital employed of OSCB is in increasing trend it is good sign for the Bank. (iii) Return on Equity capital Equity shareholders are the real owner of the company. They assume highest risk in the company. Return on capital employed Net profit Equity capital x 100

EQUITY CAPITAL
1. Share capital YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Interpretation : NET PROFIT 64,924,131 74,953,072 84,731,646 1,34,751,259 1,74,443,023 196,964,997

EQUITY CAPITAL
3,10,104,800 3,75,228,000 4,38,206,575 4,95,832,675 5,16,861,625 643,789,225

PERCENTAGE 21% 20% 19% 27% 7% 30%

The return on equity capital of OSCB provides a high rate of dividend to his equity shareholders (iv) Earning per share (EPS): It is small variation of return on equity capital. It shows the profit available to each shareholder. Earning per share: Net profit No. of Equity Holders

YEAR 2000-01 2001-02 2003-04 2004-05 2005-06

NET PROFIT 64,924,131 74,953, 072 1,34,751,259 1,74,443,023 1,96,964,997

NO OF EQUITY SHAERS 5,645,77, 4,500.000 4,500,000 4,500,000 4,500

AMOUNT 11.88 16.65 29,94 38,76 43,76

Interpretation: The EPS of OSEB over the year has gradually increased, which is satisfactory to the equity share holder.

Suggestions:
Increase share capital rather than debt capital Decrease the long term debt in total debt Decrease the liability paid to the outsiders Assets should be properly utilized to get a sound return. Increase the return on total investment to increase share capital easily. Bank should invest in long term so that it should liquidity of the firm.

CONCLUSION:
1. 2. 3. 4. 5. The current ratio of OSCB is not satisfactory The absolute liquid ratio of OSCB is overall satisfactory. The debt equity ratio of OSCB has decreased over the year The funded debt to total capitalization of OSCB is satisfactory. The proprietory ratio of OSCB states that the Bank depends more upon creditor to supply its working capital. 6. The proprietory ratio of OSCB shows that proprietors' funds are fully utilized in current assets. 7. 8. 9. 10. 11. 12. 13. The fixed assets to proprietor ratio of OSCB are not sound. The debt assets ratio is favourable to the OSCB The solvency ratio of OSCB is not satisfactory The solvency ratio of OSCB is not satisfactory. The return on asset of OSCB is not sound. The return on capital employed of OSCB is satisfactory The return on equity capital of OSCB reveals that the Bank provides a high rate of dividend to equity holders. 14. The earning per share of OSCB over the year has gradually increased, which is satisfactory to the equity holders The performance highlights that the over all performance of the OSCB is satisfactory the growth rate of the Bank shows a good sign to the Bank.

SUGGESTIONS
From all the studies we can suggest some point to improve the profitability of the organization.

The bank should focus more on advancing loans and getting money from depositors. It should recover its money from defaulters in a limited time. It should control the non-operation expenses and other expenditure. It should ready for the coming competitive as all banks are going to be privatized. .It should diversify its business and should give loans to non agriculture sector.

CONCLUSION:
From all the above interpretation we may conclude that the overall performance of the bank is satisfactory. The growth rate of the bank shows a sound position.

BIBLIOGRAPHY ww.oscb.coop www.google.com Reference Books: Annual report of OSCB, BBSR, B/S of OSCB, BBSR. Management Accounting by Sharma and Gupta. Chandra Prasanna, Financial Management- Theory and Practice.

THANKS