A

Financial

Project On

Report

TREND ANALYSIS AND RATIO ANALYSIS DharAti Co-Operative Bank Ltd.

of

Prepared by RAHUL L.SINGH Class - Tybba Seat No.

MISS. ALPA JOSHI GYANYAGNA COLLEGE AND MANAGEMENT,

Guided by College

OF SCIENCE RAJKOT.

Submitted to
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Saurashtra University, Rajkot.

Declaration
I, undersigned Rahul L. Singh, a student of TYBBA, here by declared that the project wor presented in this report is !y own wor and has been carried out under the super"ision of #iss. Alpa $oshi of %yanyagna &ollege of Science and #anage!ent, Raj ot. This wor has not been sub!itted pre"iously to any uni"ersity for any other e'a!ination. (ate) Signature *lace) +Rahul L. Singh,

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*reface
Indian !anage!ent scenario see!ed to be !i'ed of hopes at the co!!ence!ent of the nineties. #ost of the -ational as well as #ultinational co!panies were ha"ing their focus on their .inancial #anage!ent. -ewly de"eloped .inancial #anage!ent Syste!s were co!ing into force / the co!panies welco!ed the!. It is suggest to undergo such training to !anage business unit efficiently right fro! its inspection and a"oid the losses. 0eeping in "iew the central ideas objecti"es, Saurashtra 1ni"ersity has introduced the subject of 2.I-A-&IAL #A-A%3#3-T4. The !ain of this subject is to de"elop the s ill in proble! sol"ing and decision !a ing the .inancial #anage!ent. In light of abo"e objecti"es, the students are re5uired to prepare a *roject Report on co!panies. So, I a! glad to sub!it a *roject Report on 2(harati &o6operati"e ban Ltd.4

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A&0-78L3(%3#3-T A !a!!oth project of this nature calls for the intellectual nourish!ent, professional help and encourage!ent fro! !any 5uarters. I would li e to e'press !y gratitude to) #iss Alpa $oshi who ha"e shaped !y understanding through their rich and "aried contribution and #r.A.$. *ar!ar, chief !anager of the ban and also the assistant !anager, (har!esh 9apalia for generously sharing their insights and e'perience with !e. I a! "ery grateful to !y fa!ily and friends for the special interest they e"inced in this project. (ate) *lace) Signature +Rahul L. Singh,

INDEX
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7"er"iew of Ban ing Industry

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The anti5uated Indian ban ing syste! has its roots in the nineteenth century. The character and structure of the syste! has, howe"er, changed substantially since :;<;, when the !ajor ban s were nationali=ed. *rior to nationali=ation, ban ing was concentrated in urban areas. It was clear that a better ban ing syste! was needed to pro!ote the econo!ic goals of the new Indian state. Rural !ar ets for industrial goods could not be de"eloped so long as !oney lenders, charging usurious rates of interest, were the !ain source of rural credit. #oreo"er, the >green re"olution> depended on far!ers finding substantial sources of credit to pay for fertili=ers and hybrid seeds. India had a syste! of indigenous ban ing fro! "ery early ti!es, though it was not si!ilar to ban ing of !odern ti!es. There is e"idence to show that !oney lending e'isted e"en during the ?edic period. 8ith the ad"ent of the 3nglish traders in the :@ th century and the establish!ent of trading centers by the 3ast India &o!pany, indigenous ban ers found their position precarious. In econo!ic de"elop!ent of a nation ban s occupy an i!portant place. Ban ing institutions for! an i!portant part of the !oney !ar et and are indispensable in a !odern de"eloping society. Indian !oney !ar et co!prises both organi=ed as well as unorgani=ed sectors. The unorgani=ed sectors include !oneylenders and indigenous ban ers and largely cater to the needs of persons li"ing in "illages and s!all towns. It is esti!ated that about one6third of the total credit re5uire!ents of the country are !et by the unorgani=ed sector.

.ar!ers in India are scattered all o"er the country and need short6ter! s!all borrowings for agricultural purposes. This need is not fulfilled by co!!ercial ban s which are unsuited for financing agriculture. Land which these far!ers can offer to co"er ban ad"ances is not generally accepted as

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security by co!!ercial ban s. Therefore, special types of ban s are necessary purpose. The objecti"e of co6operati"e ban s is to offer ban ing facilities to persons of li!ited !eans re5uiring credit for producti"e purposes in the use of the land and labour at their disposal.

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(efinition 7f Ban
According to Ban ing regulation Act :;A; defines ban ing as 2Accepting for the purpose of lending or in"est!ent of deposits of !oney fro! the public, repayable on de!and or otherwise and withdrawals by che5ue, draft , order4.

According to %.&rowther in An 7utline of #oney, 2the ban erBs business of other people , to offer his own in e'change and thereby to create !oney4.

Types 7f ban
:,RBI)
The RBI is the supre!e !onetary and ban ing authority in the country and has the responsibility to control the ban ing syste! in the country. It eeps the reser"e of all scheduled ban s and hence is nown as the 2R3S3R?3 BA-04.

C,*1BLI& S3&T7R BA-0S)

State Ban 7f India and its associates -ationali=ed ban s Regional Rural ban s Sponsored by *ublic Sector Ban s.

D, *ri"ate Sector Ban )

*"t.ban s in india. .oreign ban .

A, co6operati"e ban s)
State co6operati"e ban s &entral co6operati"e ban s Land (e"elop!ent ban s *ri!ary agricultural credit societies

E,(e"elop!ent ban s) Industrial finance co6operation of India+I.&I,

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 Industrial de"elop!ent ban of india+I(BI, Industrial in"est!ent ban of India S!all industries de"elop!ent ban of India -ational ban for agriculture and Rural de"elop!ent+-ABAR(,. 3'port6I!port ban of India

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Role of co6operati"e ban s

-ow a days co6operati"e ban s are progressing "ery fast then any co!!ercial or nationali=ed ban s. The custo!er ser"ices, lending ser"ices and other ban ing facilities gi"en to the society is being better than other ban s. So people are also being attracted and interested in co6operati"e ban s. The !ain ai! of the ban is to e'tend credit facilities to the s!all traders,wor es and other !iddle class people. this ban deri"e their funds fro! wor ing partly through share capital contributed by the !e!bers and partly through deposits collected fro! !e!bers,general public and render usual ban ing ser"ices. The liability of !e!ber is nor!ally unli!ited. This enables the society to raise funds fro! outside agencies and also encourage !e!bers to ta e een interest in wor ing of the society. A co6operati"e ban is a financial entity which belongs to its !e!bers, who are at the sa!e ti!e the owners and the custo!er of their ban s. &F6 operati"e ban s are often created by personal belonging to the sa!e local or professional co!!unity or sharing a co!!on interest.co6operati"e ban s differ fro! sta eholder ban s by their organi=ation, their goals, their "alues and heir go"ernence.

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*roble!s And *rospects 7f Ban ing Industry)

Problems of Banking Industry Ban ing has played a "ery i!portant role in the econo!ic de"elop!ent of the nations of the world. In fact, ban ing is the life blood of !odern co!!erce. It !ay truly be said that !odern co!!erce is so dependent upon ban ing that any cessation of a ban ing acti"ity, e"en for a day, or two, would co!pletely paraly=e the econo!ic life of a nation. .ro! its original narrow scope and !odest purpose of ta ing care of other peopleBs !oney and lending of it, ban ing has de"eloped to such e'tent that there is hardly a business deal in which the assistance of a ban is sought in one for! or another. Indian ban ing syste! has achie"ed a re!ar able all6round growth during the last fifteen years, but so!e inherent wea nesses and shortco!ings re!ain there or ha"e cropped, and efforts should be !ade to o"erco!e the! as early as possible. So!e of the wea er points of Indian ban ing syste! are as under) :. C. D. A. E. <. *oor capital base Inefficient organi=ational structure Institutional 7"erlapping *oor and (eclining &usto!er Ser"ice (eclining *rofitability Reco"ery of Ad"ances

To o"erco!e the present drawbac s in the Indian ban ing syste!, there is a need of structural reorgani=ation at the !icro le"el of an indi"idual ban and at !acro le"el of the entire syste!, including all financial institutions.

8ell6co!puteri=ed foreign ban s are beginning to co!pete seriously with the nationali=ed ban s. They ai! at a profitable and wealthy part of
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the !ar et and, in contrast to the nationali=ed ban s, do not recogni=e any social responsibilities to s!all account holders or to a rural and se!i6urban clientele. Prospects of Banking Industry: A healthy ban ing syste! is essential for any econo!y stri"ing to achie"e good growth and yet re!ain stable in an increasingly global business en"iron!ent. The Indian ban ing syste! has witnessed a series of refor!s in the past, li e deregulation of interest rates, dilution of go"ern!ent sta e in *SBs, and increased participation of pri"ate sector ban s. It has also undergone rapid changes, reflecting a nu!ber of underlying de"elop!ents. This trend has created new co!petiti"e threats as well as new opportunities. This paper ai!s to foresee !ajor future ban ing trends, based on these past and current !o"e!ents in the !ar et. I-(IA- BA-0I-% stands at the threshold of a !ega change in the ne't fi"e years. #any new situations as co!pared to the present scenario are predicted to e!erge.
%i"en the co!petiti"e !ar et, ban ing will +and to a great e'tent already has, beco!e a process of choice and con"enience. The future of ban ing would be in ter!s of integration. The future of ban ing will undoubtedly rest on ris !anage!ent dyna!ics. 7nly those ban s that ha"e efficient ris !anage!ent syste! will sur"i"e in the !ar et in the long run. The effecti"e !anage!ent of credit ris is a critical co!ponent of co!prehensi"e ris !anage!ent essential for long6ter! success of a ban ing institution.

The future belongs to bigger banks alone, as well as to those which have minimized their risks considerably.

.1T1R3 &9ALL3-%3S / S1%%3STI7-S

&hallenges G&o!petition G&usto!er Retention G%lobali=ation GShrin ing #argin

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Suggestions GStrong In6house research / !ar et Intelligence G.ocused !ar eting6 .ocus on region6specific ca!paigns rather than national !edia ca!paigns The growth of the retail financial ser"ices sector has been a ey de"elop!ent on the !ar et front. Indian ban s +both public and pri"ate, will not only be een to tap the do!estic !ar et but also to co!pete in the global !ar et place. -ew foreign ban s will be e5ually een to gain a foothold in the Indian !ar et.

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%eneral Infor!ation of Ban

Inde'
:. 9istory of (harati co6operati"e ban
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C. *rofile of ban D. Board of directors A. ?ision and !ission E. Awards

Brief 9istory 7f (harati &o67perati"e Ban Ltd

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(harati co6operati"e ban ltd. Is a co!pletely co!puteri=ed ban . It has been established under Ban ing Regulations Act, :;A;. It has obtained license fro! RBI. Ban was established on :Fth (ec. :;HC. It has started its wor ing by share capital of just Rs. D,FF.FFF. The first chair!an of (harati co6 operati"e ban was (r. 9argo"indbhai Tila"at. Ban is also a !e!ber of the Ban &learing 9ouse. It pro"ides loans for purchase of fi'ed assets, housing loans, loans to traders, "ehicle loans, loans for 0ishan ?i as *atra. (ay by (ay, ban has progressed fro! the Year :;HC which can be seen fro! the following figures) Year :;HC6HD :;H;6;F :;;E6;< CFFF6F: CFFE6F< CFF;6CF:F -et profit Share &apital 6C:E:C DF:@FF E<E@C: HDDCEF :<AED;E CC:DCFF D@D;;:E AD<;EEF :<@@;F: DECACHH <E:F:FF :C;;C:FF Reser"es D:E@H ::DE;<E EA;H;<< :@@;HAFH CD;;<AE@ D@<DE;<A (eposits @CFDC; :D;;HFHF @C;A@DH< :<HE@:@; @ CHECF;CA ; A@AF;@<< H Loans / ad"ances CFAED; HEF;@H; DEDFE:DE ::<FHE;@@ :ECC@@D;D C<:<@AE:D

#r. Ranchodbhai Bhanderi was the chair!an of the ban since last E years. -ow, the present chair!an of the Ban is #r. Rajendrabhai. R. Bhanderi. Ban is celebrating its CE years of wor ing at present.

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*R7.IL3 7. BA-0
-a!e Address ) Shree (harati &o6operati"e Ban Ltd. ) I0uberI, (hebarbhai road, 7pp, 0anta Stri"i as
%ruh, Raj ot6D<F FFC.

Year of establish!ent Registration -o. ) .ounder Type of ban Initial !e!bers &urrent !e!bers Initial share capital &urrent share capital *rofit 3!ail I( 8or ing ti!e 8or ing days Branches *hone -o. Fax We !ite

) :;HC

) Shri 9argo"indbhai *. Tila"at ) &o6operati"e ban ) CHE@ ) <CFH ) DF:@FF ) :C;;C:FF ) DECACHH ) dharati@dataone.in ) ) ) : !ain branch, D other branches ) +91-281-2223037, 2234283 : +91-281-2220320 : """.dharati an#.$o%

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&oard '( )ire$tor!

-a!e Shri Rajendrabhai R. Bhanderi Shri (han"antbhai *. 0a ad

*osition &hair!an ?ice &hair!an (irector (irector (irector (irector (irector (irector &o6op (irector &o6op (irector

Shri Ranchhodbhai R. Bhanderi Shri.Shri 0. T. #a"adia Shri Bipinbhai R. 0otecha Shri (r. $itendrabhai A. %ajera Shri 9areshbhai B. *arsana Shri ?i!leshbhai Shah Shri Bipinbhai *. 0ota +&.A., Shri Yash"antbhai 0. %oswa!i

?ision And #ission

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?ision)
2Lets join our hands to !a e India shining4 The ban is co!!itted to !aintain the highest le"el of ethical standards, professional integrity and regulatory co!pliance. 7ur ban Bs philosophy is based on A core "alues) :. 7perational 3'cellence C. &usto!er .ocus D. Ser"ice Leadership A.8elfare of *eople #ission)
:. The !ission of (harati Ban is to !aintain FJ -*A. C. The Ban is planning to pro"ide AT# facilities to its !e!bers. D. The Ban is also planning to open !ore branches in nearby cities

li e $a!nagar, $unagadh etc.

A.

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S3R?I&3S AT BA-0) :. &urrent (eposits C. Sa"ing (eposits D. .i'ed (eposit A. &ash &redit faclitiies E. Recurring Account <. Loans li e a. 9ousing Loan b. &ar Loan c. Loan against property

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&onceptual fra!ewor of the topic

The financial perfor!ance of a fir! has a strong influence on the beha"ior of its people. *erfor!ance !any ti!es relies hea"ily on financial !easures. An e'cessi"e e!phasis on .inancial results in a business is li e an obsession with the sore card while playing &ric et. The score in a ga!e, li e .inancial results in a business, reflects the outco!e of past perfor!ance. In todayBs era, e"ery in"estor, analyst and other users of .inancial Reports would find "alue in !ore e'tensi"e disclosures of the co!panyBs !ar et and co!petiti"e position, !anage!ent goals and objecti"es and business seg!ent data. Analysis of .inancial *erfor!ance !ay be done for a "ariety of purposes, which range fro! a si!ple analysis of the short ter! li5uidity position of the fir! to co!prehensi"e assess!ent of the strengths and wea nesses of the fir! in "arious areas.

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I!portance 7f .inancial *erfor!ance Analysis

.inancial perfor!ance of any co!pany plays a "ital role in creating its i!age towards the public at large and !ost i!portantly towards its shareholders who are its owners. Shareholders always li e to see that their co!pany is doing well. They can now their co!panies position by going through the facts and figures which are represented by e"ery co!pany in their Annual Report. *roperly analy=ed / interpreted, .inancial State!ents can pro"ide ?AL1ABL3 I-SI%9TS into a fir!s perfor!ance. Analysis of .inancial *erfor!ance is of interest to Lenders +Short6Ter! as well as Long Ter!,, In"estors, Security Analysis, and #anagers / 7thers. It is helpful in assessing &orporate 3'cellence, $udging &reditworthiness, ?aluing 35uity Shares, .orecasting Bond Ratings, and *redicting Ban rupcy / Assessing #ar et Ris .

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Approaches 7r Tools .or #easure!ent

The tools through which the .inancial *erfor!ance of a &o!pany can be analy=ed are as follows) .I-A-&IAL RATI7S 87R0I-% &A*ITAL L3?3RA%3 A-ALYSIS .I-A-&IAL STAT3#3-TS

Rationale .or The Study

7n the basis of Rationale Analysis .inancial *erfor!ance can be e"aluated, which pro"es helpful in ta ing se"eral i!portant .inancial (ecisions. #oreo"er the co!pany can !odify its policies / strategies on the basis of study. .inancial *erfor!ance Analysis can be "ery useful tool for understanding a fir!Bs perfor!ance and its condition. The tool through which we are going to Analy=e .inancial *erfor!ance is Trend Analysis & atio Analysis.

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9ypothesis 7f Study
#y study is based upon following 9ypothesis) +i, +ii, The Ban Bs Li5uidity position has i!pro"ed during last fi"e years. The Ban has started depending !ore on borrowed capital during last fi"e years.

+iii, The Ban has pro"ed successful in increasing its turno"er in last fi"e years. +i", The Ban Bs financial perfor!ance in ter!s of *rofitability has i!pro"ed.

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Analysis and Interpretation of .inancial (ata)

.or our purpose, we will di"ide the analysis into to broad categories :. Trend Analysis C. Ratio Analysis 8e will go through the last A financial annual reports of (harati &o6 operati"e Ban Ltd. Year CFF<6CFF@ Year CFF@6CFFH Year CFFH6CFF; Year CFF;6CF:F

A!" Trend Analysis

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Trend Analysis is the analysis of the trend of directions of the fir!Bs progress whether it is fa"orable or unfa"orable. It gi"es the ideas about the growth rates or decline rate of fir!. It is a tool for !onitoring the progress of the fir!. Trend ratios in"ol"es a co!parison of ratios of a fir! o"er ti!e, i.e. present ratios are co!pared with past ratios for the sa!e fir!. Trend ratios indicate the direction of change in the perfor!ance K i!pro"e!ent, deterioration or constancy K o"er the years. .ollowing are used category for trend analysis to analy=e the financial perfor!ance of (harati &o6operati"e Ban Ltd. ) :. Loans and Ad"ances C. (eposits D. Interest inco!e A. 7ther Inco!e E. -et *rofit <. Interest recei"ed to total inco!e

#!" $oans & Ad%ances

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Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F

L

A!ount :;DE:HD;: CD<C@:;EH CDDAC@;@< C<:<@AE:D

Loans and Advances

300000000 Loans & Advances (in Rs.) 250000000 200000000 150000000 100000000 50000000 0 2006-2007 2007-2008 2008-2009 2009-2010

Percentage c&ange in loans and ad%ances

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Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F

J change CC.F; 6:.C :F.@;

25 20 15 10 5 0 -5 20062007 20072008 20082009 20092010 loans and advances

Interpretation: .ro! the abo"e two graphs of loans and ad"ances, it can be interpreted that the loans and ad"ances has been increased to a greater e'tent during has A years, which is "ery good for the ban . The growth and e'pansion could be the reason for such increase.

'!" Deposits
Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F A!ount DCEC:HAFH DEDC@D@EE DHAD;:A<: A@AF;@<<H

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Deposits

500000000 450000000 400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0 2006-2007 2007-2008 2008-2009 2009-2010

Percentage (&ange in Deposits Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F J &hange 6 H.< H.H CD.DD

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25 20 15 10 5 0 20062007 20072008 20082009 20092010 deposits

Interpretation) It could be interpreted fro! the abo"e graphs of deposits that there is considerable increase in the a!t of deposits during last fi"e years. The increase during last three years is in increasing trend. The reason for this increase could be the increase in the rates of the deposit interest.

)!" Interest Income

Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F A!ount A@::F;: AE@:@:; EECCCE@ ECE<;E;

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Interest Income

6000000 5000000 4000000 3000000 2000000 1000000 0 2006-2007 2007-2008 2008-2009 2009-2010

Percentage c&ange in Interest Income Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F J change 6 6C.;E CF.@; 6A.H

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25 20 15 10 5 0 -5 -10 20062007 20072008 20082009 20092010 interest income

Interpretation It could be interpreted fro! the abo"e graph and table that the interest inco!e is has been decreased as co!pared fro! the year CFF:6FC. But ban ha"e !anaged to increase its interest inco!e co!parati"ely during last A years.
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*!" +t&er Income

Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F A!ount :ED:;EA :EAFDCH :<DH:;E :<E<C:E

Other Income

1660000 1640000 1620000 1600000 1580000 1560000 1540000 1520000 1500000 1480000 1460000 2006-2007 2007-2008 2008-2009 2009-2010

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Percentage c&ange in +t&er Income Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F J change 6 :.F; E.;@ :.F;

7 6 5 4 3 2 1 0 20062007 20072008 20082009 20092010 other income

Interpretation The abo"e two graphs and tables shows that there is considerable high increase in the a!ount of other inco!es of the ban . This could be due to the reason that the ban has grown and e'panded its acti"ity during last fi"e years.

,!" Net Profit

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Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F

A!ount C@<F<@@ @F@H@C: ECF@EF< DECACHH

Net Profit

8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2006-2007 2007-2008 2008-2009 2009-2010

Percentage- of Net Profit Year CFF<6CFF@ J change 6

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CFF@6CFFH CFFH6CFF; CFF;6CF:F

:E<.A: 6C<.AD 6DC.DC

200 150 100 net profit 50 0 -50 20062007 20072008 20082009 20092010
156.41

Interpretation) The abo"e graph and table shows that the net profit has been decreased to a greater e'tent. The decrease in the net profit !ay be due to decrease in interest inco!e

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.! Interest recei%ed to total income

Year CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F J :C.D :F.;< :E.HA ::.F:

Interest Received to Total Income

16 14 12 10 8 6 4 2 0 2006-2007 2007-2008 2008-2009 2009-2010

Interpretation The abo"e graph shows that the ratio of total interest recei"ed to total inco!e is in stable situation. The ratio e"en indicate that out of the total inco!e, the ratio of interest recei"ed is !ore than any other inco!e.

Introduction of atio Analysis

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B!" atio Analysis

Ratio analysis is a widely used tool of financial analysis. It is defined as the syste!atic use of ratio to interpret the financial state!ents so the strengths and wea nesses of a fir! as well as its historical perfor!ance and current financial condition can be deter!ined. Ter! MratioB refers to the nu!erical or 5uantitati"e relationship between two ite!sN"ariables. Ratios can be classified, for purposes of e'position, into four broad groups) :. Li5uidity Ratios C. &apital structureNle"erage ratios D. *rofitability ratios A. Acti"ity ratios

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/EANIN0 +1 ATI+ ANA$23I3

2Ratio is financial for! should the co!parison between two
! 000 0 0 !0 000 0 0 000 00 0 "ear #00 $

financial ter!s4.

It relationship between "arious related ite!s in these financial state!ents is established, they can pro"ide useful clues to judge accurately the financial health and ability of business to !a'i!i=e the profit. This relationship between related ite!s of financial is thus, one nu!ber e'pressed in for! of return on paid up capital the net profit of the business is di"idend by the paid up share capital. The figure so obtain is the ratio. It the sa!e is !ultiplied by :FF a percentage rate of return on paid up capital is obtained.

EXP E33I+N

Ratio can be e'pressed in three for!s6

In the for! of percentage In the for! of proportion of the "alue In the for! of nu!ber of ti!es

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I/P+ TAN(E +1 ATI+ ANA$23I3

I/P+ TAN(E +1 ATI+3

In application to studying the rupee a!ount shown in the financial state!ents, relationships between different ite!s !ay be established by co!puting "arious ratios. The relation between two related ite!s of financial state!ent is nown as Ratio. A ratio is thus, one nu!ber e'pressed in ter!s of other Ratios are particularly useful in co!paring one yearBs perfor!ance with other years, as well as one co!panyBs perfor!ance with anotherBs. In !any cases the a"erage ratios relating to co!panies in particular industries are a"ailable, and an indi"idual co!panyBs ratio !ay be co!pared with such an a"erage.

Ratios help to !a e 5ualitati"e judg!ents depending upon the calculations !ade which are 5uantitati"e judg!ents. The ratio analysis in"ol"es co!parison for a useful interpretation of the financial state!ents. A single ratio in itself does not indicate fa"ourable or unfa"ourable condition. It should be co!pared with so!e standards. Standard of co!parison !ay decided by the co!pany or fir! itself.

I/P+ TAN(E45TI$IT2

#" Profitability: 1seful infor!ation about the trend of profitability is a"ailable fro! profitability ratios. The gross profit ratio, net profit ratio of return on in"est!ent gi"e a good idea of the profitability of business. 7n the basis of these ratios, in"estors get an idea about the o"erall efficiency of business, the !anage!ent gets an idea about the efficiency of !anagers and ban as well as other creditors draws useful conclusions about repaying capacity of the borrowers.

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'" $i6uidity: In fact, the use of ratios was !ade initially to ascertain the li5uidity of business. The current ratio, li5uid ratio and acid test ratio will tell whether the business will be able to !eet its current liabilities as and when they !ature. Ban s and other leaders will be able to conclude fro! these ratios whether the fir! will be able to pay regularly the interest / loan install!ents.

)" Efficiency: The turno"er ratios are e'cellent guides to !easure the efficiency of !anagers. e.g. the stoc turno"er will indicate how efficiently the sale is being !ade, the debtorBs turno"er will indicate the efficiency of collection depart!ent and assets turno"er shows the efficiency with which the assets are used in business. All such ratios related to sales present a good picture of the success or otherwise of the business.

A, Inter firm comparison) The absolute ratios of a fir! are not co!pared with si!ilar ratios of other industry. This is inter fir! co!parison, wea ness of the fir! as co!pared to correcti"e !easures.

of !uch use, unless they are fir!s belonging to the sa!e which shows the strength and other fir!s and will indicate

," Indicate trend :7 The ratios of the last three to fi"e years will indicate the trend in the respecti"e fields. .or e'a!ple, the current ratio of a fir! is lower than the industry a"erage, but if the ratios of last fi"e years show an i!pro"ing trend, it is an encouraging trend. Re"erse !ay also be true. A particular ratio of a co!pany for one year !ay co!pare fa"orably with industry a"erage but, of its trend shows a deteriorating position, if is not desirable. 7nly ratio analysis will pro"ide this infor!ation.

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." 5seful for Budgetary (ontrol :7 Regular budgetary reports are prepared in a business where the syste! of budgetary control is in use. If "arious ratios are presented in these reports, if will gi"e a fairly good idea about "arious aspect of financial position.

8" 5seful for Decision making:7 Ratio guide the !anage!ent in !a ing so!e of the i!portation show an unsatisfactory position, the !anage!ent !ay decide to get additional li5uid funds. 3"en for capital e'penditure decisions, the ratio of return on in"est!ent will guide the !anage!ent can be judged on the basis and efficiency of each depart!ent can thus be deter!ined.

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#" $i6uidity atios

The i!portance of ade5uate li5uidity in the sense of the ability of a fir! to !eet currentNshort ter! obligations when they beco!e due for pay!ent "ery hardly be o"er6stressed. In fact, li5uidity is a pre6re5uisite for the "ery sur"i"al. The li5uidity ratios which indicate the li5uidity of a fir! used for financial perfor!ance analysis for our purpose are) :. -et 8or ing &apital C. &urrent ratios

Net 9orking (apital

-et 8or ing &apital +-8&, represents the e'cess of current assets o"er current liabilities. An enterprise should ha"e sufficient -8& in order to be able to !eet the clai!s of the creditors and !eeting day6to6day needs of business. The greater the a!ount of -8& , the greater the li5uidity of the fir!. -8& is a !easure of li5uidity. Inade5uate wor ing capital is the first sign of financial proble!s for a fir!. -8& L &urrent Assets6 &urrent Liabilities Year CFF;6CF:F -8&L;FF;@DFF6;H;@FFH L HFCFFC;C Year CFF<6CFF@ -8&L:C:DH<ECFF6H<AEE:D L ::C@A:FF@ Year CFF@6CFFH -8&L::E<AE::C6A;;<:<: L ::F<AH;E: Year CFFH6CFF; -8&L@A:FF;C;6DH;AEHF L @FCF<DA; Year CFF;6CF:F -8&L@;HH;CF@6DHCCCH@ L @<F<<;CF Year A!t.
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CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F

HFCFFC;C ::C@A:FF@ ::F<AH;E: @FCF<DA; @<F<<;CF

Net Working Capital

120000000 100000000 80000000 2001-2002 2002-2003 2003-2004 2004-2005 40000000 20000000 2001-02 2002-03 2003-04 0 2005-2006

NWC

60000000

2004-05

Year

Interpretation It can be interpreted fro! the abo"e graph that the -8& of the ban has been fluctuating during the years but the -8& of year CFFE6F< is relati"ely less than the year CFF:6FC. It shows that the ban has ade5uate -8& so there will be less chance to face the situation of inade5uacy.

(urrent atio

The current ratio is the ratio of total current assets to total current liabilities. The current ratio of a fir! !easures its short6ter! sol"ency, i.e., its ability to !eet short6ter! obligations. As a !easure of short6

2005-06

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ter!Ncurrent financial li5uidity, it indicates the rupees of current assets a"ailable for each rupee of current liabilityNobligation. The higher the current ratio, the larger the a!ount of rupees a"ailable per rupee of current liability, the !ore the fir!Bs ability to !eet current obligations and the greater the safety of funds of short6ter! creditors. The fir! with the higher current ratio has better li5uidityNshort ter! sol"ency. &urrent Ratio L Year CFF;6CF:F &urrent Ratio L Year CFF<6CFF@ &urrent Ratio L Year CFF@6CFFH &urrent Ratio L
::E<AE::C LCD.:E A;;<:<: :C:DH<ECF L:A.FA H<AEE:D ;FF;@DFF L;.:F ;H;@FFH &urrent Assets &urrent Liabilities

ti!es

ti!es

ti!es

Year CFFH6CFF; &urrent Ratio L Year CFF;6CF:F &urrent Ratio L . Year CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F &urrent Ratio +in ti!es, ;.:F :A.FA CD.:E :;.FD CF.;F
@;HH;CF@ DHCCCH@ @A:FF;C; DH;AEHF

L:;.FD ti!es

LCF.;F ti!es

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Current Ratio (in times) 25 %&rrent Ratio (in times) 23.15 20 15 20.9 19.03 14.04 9.1

10 5

0 2001-02 2002-03 2003-04 "ear 2001-02 2004-05 2002-03 2005-06 2003-04 2004-05 2005-06

Interpretation
The fir! with the higher current ratio has better li5uidityNshort ter! sol"ency. The abo"e graph shows that the &urrent Ratio has been increased to a greater e'tent which shows that the li5uidity position of the ban is sound. The reason !ay be due to the decreasing -*A.

ii, Le"erageN&apital Structure Ratios

The second category of financial ratios is le"erage or capital structure ratios. The long6ter! sol"ency of a fir! can be e'a!ined by using le"erage or capital structure ratios. The le"erage or capital structure ratios !ay be defined as financial ratios which throws light on the long ter! sol"ency of a fir! reflected in its ability to assure the long ter! creditors with regard to +i, periodic pay!ent of interest during the period of the loan and +ii,

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repay!ent of principal on !aturity or in pre6deter!ined install!ents at due dates. .or our purpose, we ha"e used only interest co"erage ratio to analy=e the perfor!ance of the ban .

Interest (o%erage atio

This ratio !easures the debt ser"icing capacity of a fir! in so far as fi'ed interest on long ter! loan is concerned. .ro! the point of "iew of the creditors, the larger the co"erage, the greater the ability of the fir! to handle fi'ed6charge liabilities and the !ore assured the pay!ent of interest to the creditors. 9owe"er, too high a ratio !ay i!ply unused debt capacity. In contrast, a low ratio is a danger signal that the fir! is using e'cessi"e debt and does not ha"e the ability to offer assured pay!ent of interest to the creditors. Int. &o"erage Ratio L Year CFF;6CF:F Int. &o"erage Ratio L Year CFF<6CFF@ Int. &o"erage Ratio L Year CFF@6CFFH Int. &o"erage Ratio L Year CFFH6CFF; Int. &o"erage Ratio L Year CFF;6CF:F Int. &o"erage Ratio L :HFHAH<D L:.F; ti!es Year Int. &o"erage Ratio +in
Page 47 :;@<C<<A CF:A<ACCC :HC@C@CE :HHF@<;A L:.:C :<HF<;AF :@H;:DH: :<E<EHHE :H;DF@D; :D@HH;DF EBIT Interest

L :.D@ ti!es

L :.FH ti!es

ti!es

L:.:F ti!es

CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F

ti!es, :.D@ :.FH :.:C :.:F :.F;

Int. Coverage Ratio

1.4

Int. coverage ratio (in times)

1.2 1 0.8 0.6 0.4 0.2 2001-02 2003-04 2002-03 2004-05 2005-06 0 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

Year

Interpretation The higher the interest co"erage ratio better will be the fir!Bs &apital Structure. This abo"e graph shows that there has been decrease in the ratio which show that the ban has not the opti!u! capital structure. The reason !ay due to the hea"y loans and ad"ances pro"ided to different custo!ers.

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iii" Profitability atios

Apart fro! the creditors, both short6ter! and long ter!, also interested in the financial soundness of a fir! are the owners and !anage!ent or the co!pany itself. *rofitability is a !easure of efficiency and the search for it pro"ides an incenti"e to achie"e efficiency. The profitability of a fir! can be !easured by its profitability ratios. .or our purpose, we ha"e use ratios such as :. 3arnings *er Share C. *rice 3arnings ratio D. (i"idend ratio A. Int. paid on deposit to total inco!e ratio E. Total loans to total deposits ratio

Earning Per 3&are

Apart fro! the rates of return, the profitability of a fir! fro! the point of "iew of the ordinary shareholders is the 3*S. It !easures the profit a"ailable to the e5uity holders on a per share basis, i.e., the a!ount that they can get on e"ery share held. It is calculated di"iding the profits a"ailable to the shareholders by the nu!ber of the outstanding shares. 3*S represents what the owners are theoretically entitled to recei"e fro! the fir!. Earningsavailabletoe ityshareholders 3arnings *er Share L !o.ofe uityshares

Year CFF;6CF:F 3*S L

E:A:;FH L AFFFFF

:C.HE Rs. *er share

Year CFF<6CFF@
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3*S L 3*S L

:DCEA;< AFFFFF CFFF@EA AFFFFF

L D.D: Rs. *er share L E.FF Rs. *er share

Year CFF@6CFFH

Year CFFH6CFF; 3*S L

:A@D<;< AFFFFF

L D.<H Rs. *er share

Year CFF;6CF:F 3*S L

:<@@HF: AFFFFFF

L A.:; Rs. *er share Year CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F 3*S +in Rs. *er share, :C.HE D.D: E.FF D.<H A.:;

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EPS (in Rs. Per share) 14 12 'P( (in R(.) 10 8 6 5 4 2 0 2001-02 2002-03 2003-04 2004-05 2005-06 "ear 2001-02 2004-05 2002-03 2005-06 2003-04 3.31 3.68 4.19 12.85

Interpretation The abo"e graph shows that the 3*S is the highest in the Year CFF:6 FC. The higher the 3*S higher will be the profitability of the ban . There is continuous decrease in the 3*S during the last fi"e years. The reason could be the decrease in the -et *rofit of the ban during the last fi"e year.

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 Price Earnings atio

The *N3 ratio reflects the price currently being paid by the !ar et for each rupee of currently reported 3*S. In other words, the *N3 ratio !easures in"estors. 3'pectations and the !ar et appraisal of the perfor!ance of a fir!. The higher the *N3 ratio, the better it is for the owners. This ratio is popularly used by security analysts to assess a fir!Bs perfor!ance as e'pected by the in"estors. *rice 3arning Ratio L Year CFF:6FC *N3 Ratio L
CE :C.H< $arket *r ice"er#hare E"#

L :.;Eti!es

Year CFFC6FD *N3 Ratio L

CE D.D

L @.EE ti!es

Year CFFD6FA *N3 Ratio L

CE E

L E ti!es

Year CFFA6FE *N3 Ratio L

CE D.<H

L <.@; ti!es

Year CFFE6F< *N3 Ratio L

CE A.:;

L E.;@ ti!es

Year CFF;6CF:F CFF<6CFF@

*N3 Ratio +in ti!es, :.;E @.EE

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CFF@6CFFH CFFH6CFF; CFF;6CF:F

E.FF <.@; E.;@

P/E Ratio

8 7

P/E Ratio (in times)

6 2001-2002 5 4 3 2 1 2001-02 2002-03 2004-05 2003-04 2005-06 0 2002-2003 2003-2004 2004-2005 2005-2006

Year

Interpretation The higher the *N3 ratio, the better it is for the owners. The abo"e interpretation in the graph shows that there is increase in the *N3 ratio and to a great e'tent it re!ains fluctuate. The reason could be the continuous fluctuations in the !ar et price of the share and also decrease in the 3*S.

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Di%idend 2ield +n E6uity 3&ares

%ividend"er#hare $arket *r ice"er#hare

(i"idend Yield on 35uity Shares L Year CFF:6FC (i"idend Yield L Year CFFC6FD (i"idend Yield L Year CFFD6FA (i"idend Yield L Year CFFA6FE (i"idend Yield L Year CFFE6F< (i"idend Yield L
: CE : .E CE : CE : CE : .E CE

' :FF

' :FF L <J

' :FF L AJ

' :FF L AJ

' :FF L <J

' :FF L AJ Year CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F (i"idend Yield +in J, < A A < A

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Dividend Yield

6 5 4 3 2 1 0 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

Dividend Yield (in % )

2003-04

2004-05

Year

Interpretation The abo"e table and graph shows that there stable di"idend yield in the ban . This shows that the profitability of the ban is !aintained during the years. The reason for this stability could be the stable rate of di"idend to the shareholders.

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2005-06

2001-02

2002-03


Ratio L

Interest Paid +n Deposit To Total Income atio

Interest"aid TotalIncome

' :FF

Year CFF:6FC Ratio L

:<E<HHE C@<@;AHF

' :FF L E;.HEJ

Year CFFC6FD Ratio L

:D@HH@DF C;H@H@@

' :FF L A@.FHJ

Year CFFD6FA Ratio L

:<HF<;AF C@@DHDA:

' :FF L <F.E;J

Year CFFA6FE Ratio L

:H<@C@CE CH@;;CFE

' :FF L <A.HAJ

Year CFFE6F< Ratio L

:HFHAH<D CHH;DCAD

' :FF L <C.E;J Year CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F Ratio +in J, E;.HE A@.FH <F.E; <A.HA <C.E;

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Int. paid on deposit to total income Ratio

70 60 50 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 20 10 0

Ratio (in %)

40 30

2002-03

2003-04

2004-05

2001-02

Year

Interpretation Interest paid on deposit to total inco!e ratio should be always be less. The abo"e graph shows that the ratio is increasing that the last years. This interprets that out of the total inco!e the co!es !ore pay!ent to the int. on deposits during the last fi"e years. The reason for this increase !ay be due to the increase in the rates of the interest on deposits.

2005-06

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Ratio L

Total $oans to Total Deposits atio

Total'oans Total%e&osits

' :FF

Year CFF:6FC Ratio L

:CD@C;H:< :;A@@:<DA

' :FF L <D.EDJ

Year CFFC6FD Ratio L

::<CE::EH CD::HAD;:

' :FF L EF.C;J

Year CFFD6FA Ratio L

:CDH<DAFF CAEA;@HAD

' :FF L EF.AEJ

Year CFFA6FE Ratio L

:C;H;E:HE CEHHDE;DC

' :FF L EF.:HJ

Year CFFE6F< Ratio L

:ECC@@D;D CHECF;CA;

' :FF L ED.D;J Year CFF;6CF:F CFF<6CFF@ CFF@6CFFH CFFH6CFF; CFF;6CF:F Ratio +in J, <D.ED EF.C; EF.AE EF.:H ED.D;

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Total Loans to total Deposits Ratio

70 60 50 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 20 10 2001-02 0

Ratio (in %)

40 30

2002-03

2004-05

Year

Interpretation 9igher the total loans to total deposits ratio higher the ris to profitability of the ban . This graph interprets that the deposits of the fir! is less than the loans and ad"ances pro"ided by it. It can be said that the ratio has decreased o"er periods of last fi"e years which is a good sign.

2003-04

2005-06

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.indings
7n the basis of analysis and interpretation of financial data, the co!!on findings can be listed as follows) :. The trend analysis shows that the loans and ad"ances gi"en has been increased fro! last fi"e years which shows that the ban has grown and e'panded its acti"ities. 3"en the deposits shows the increasing trend which interprets that the ban has attained the trust of the general public that it is safe to deposit their sa"ings in this ban . The interest inco!e, which is the !ain inco!e source of any ban , shows the increasing trend which interprets that the ban has earned enough inco!e in the years. C. 7n the basis of the findings) i., atio Analysis, we ha"e found the following

The Li5uidity Ratio shows that the li5uidity position of the ban has increased years after years. It !ay put ban into a "ery pleasant position. .ro! the Le"erage Ratio we can see that e5uity capital is the !ost preferred source of finance for this co!pany. #ore and !ore pro"iding of the loans and ad"ances has pro"ed beneficial for the ban , which is reflected in its Interest &o"erage Ratio.

ii.,

iii., The *rofitability Ratio shows the ban had not earned sufficient profitability which is reflected in the 3*S. The net profit has also been deteriorated which shows decreased profitability.

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Suggestions
In the recent years, there has been fall in the net profit of ban . The ban should try to increase its net profit so that the profitability of the ban beco!es fa"ourable. According to our study, the ban is has been on the path of achie"ing the -*A at =ero percent which shows that the co!pany has "ery less -on6 *erfor!ing Assets which indicates the soundness of the fir!. The *rice 3arning Ratio of the ban has been decreasing years after years. 9ence the ban should !a e efforts to increase the price earning ratio. The 3*S also shows a decreasing trend which will pro"e har!ful for the ban as the ordinary share holders will be dissatisfied. So the ban should try to increase its 3*S by increasing !ore profit and also creating less reser"es co!parati"ely or plough bac less profit.

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&onclusions
I conclude !y project of analy=ing the financial perfor!ance of the (harati &o6operati"e Ban Ltd., indicating future e'pansion and de"elop!ent of the Ban . According to this project, the ban has better prospects in the future.

At last it can be said that future of the (harati Ban is "ery bright with the e'pectation of high profitability and good returns with the increased trust of the general public.

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Bibliography

:. .inancial #anage!ent 6 0han and $ain C. .inancial #anage!ent 6 *rashanachandra D. 8ebsite) www.google.co! A. Annual Reports of (harati &ooperati"e Ban E. www.dharatiban .co!

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