Ratio Analysis

A STUDY ON RATION ANALYSIS OF VIJAYA BANK,
SHIVAMOGGA
CONTENTS
Chapter 1
INTRODUCTION
 Introduction
 Objectives of study
 Scope of the study
 Methodology
 Limitation of the study
Chapter 2
INDUSTRY PROFILE
Chapter 3
PROFILE OF VIJAYA BANK
Chapter 4
THEORETICAL BACKGROUND OF STUDY
Chapter 5
DATA ANALYSIS AND INTERPRETATION
Chapter 6
FINDINGS, SUGGESTIONS AND CONCLUSION
Annexure
Bibliography
Hoysala College of Management, Shivamogga

1
Chapter 1
INTRODUCTION
 Introduction
 Objectives of study
 Scope of the study
 Methodology
 Limitation of the study

2
Chapter 1
INTRODUCTION
Financial Ratio Analysis is the calculation and comparison of main indicators - ratios
which are derived from the information given in a company's financial statements. It
involves methods of calculating and interpreting financial ratios in order to assess a
firm's performance and status. This Analysis is primarily designed to meet
informational needs of investors, creditors and management. The objective of ratio
analysis is the comparative measurement of financial data to facilitate wise investment,
credit and managerial decisions.
 It is defined as the systematic use of ratio to interpret the financial statements so

that the strengths and weaknesses of a firm as well as its historical performance and
current financial condition can be determined.
 Thus, ratio analysis is a widely used tool of financial analysis.
 Ratios make the related information comparable. A single figure by itself has no
meaning but when expressed in terms of related figure, it yields significant
inferences. Thus, ratios are relative figures reflecting the relationship between
related variables.
Ratio analysis
A financial statement is an organized collection of data according to the logical
consistent accounting procedure. Financial statement contain summarized information
of firms financial affairs, organized systematically. They are means of present the
firm’s financial situation to the owners, creditor and general public. The top
management is responsible for the preparation of financial statements. Finance is the
life –blood of business, it is rightly termed, as the science of money. Finance is very
essential for the smooth running of the business.
Financial management is that managerial activity which is concerned with planning

and controlling of firms financial reserve. Financial management, as an academic
discipline, has undergone fundamental charges as regards its scope and coverage. In
the early years of its evaluation it was treated synonymously with the raising of funds.
In the current literature pertaining to this growing academic discipline a broad scope
as to include, in addition to procurement of funds. Efficient use of resources is
universally recognized. All business organizations are to prepare financial statements

3
after completing financial year. This report deals with the assessment of the financial
performance of a bank,
Objectives of study:
 To study the classification of the Ratio Analysis.
 To study of Ratio Analysis and it’s maintained the liquidity assets of the Bank.
 To understand the Banking services and problems of Banking Sectors.
 To analyze the capital system and ratios and leverages of banking Sectors.
 To understand up and down of the ratio is year to year.
 To procure the Knowledge of Ratio analysis of Banking Sectors.
Scope of the study

The scope of the study is limited to collecting financial data published in the annual
reports of the bank every year. The analysis is done to suggest the possible solutions.
The study is carried out for 3 years (2011– 14). Using the ratio analysis, firms past,
present and future performance can be analyzed and this study has been divided as
short term analysis and long term analysis. The firm should generate enough profits
not only to meet the expectations of owner, but also to expansion activities
Methodology
Data collection method
This report is prepared with the help of Primary and Secondary data.
Primary data:
Data for this study can be gathered by primary data collection method through in-
depth interview with managers and employees.
Secondary data:
Is collected from company’s official website, annual reports and from relevant
textbooks on the subject matter. Desk Research method is adopted for this study. The
required information was collected through secondary sources. Secondary data were
collected from various sources including the annual reports of the company for the
year 2011-12, 2011-12, 2013-14. Ratio analysis is the major tool for analyzing the
Ratios of Vijaya Bank and also the information for 3 years is collected.

4
Limitation of the study
 Ratio analysis is a retrospective, not prospective examination.
 Ratio analysis is based on accounting not economic data.
 Ratios don’t capture significant off-balance sheet items.
 Basic ratios can be manipulated through acceptable alterations of accounting
policies
 Financial statement accounts reflect historical cost not necessarily current
economic value.
 Cash flow measures have been proven to be more closely correlated with stock
price movement that income based measures.

5
Chapter 2
INDUSTRY PROFILE

6
INDUSTRY PROFILE
Regional office Shimoga

The Project undertaken has helped a lot in understanding the “Ratio Analysis” in
nationalized Bank with special reference to Vijaya Bank. Ratio analysis is a key
parameter which is playing a pivotal role in deciding profit ratio of the Banks. The
Project work has certainly enriched the knowledge about the effective management of
“Ratios” in Banking Sector.
“Ratio Analysis” is a volatile aspect and it is difficult to cover the entire ratio in a short
period. However, every effort has been made to cover most of the important ratios
which have a direct bearing improving the financial performance of Banking Industry.
Ratio Analysis has been Carried out using Financial Information for last three
accounting years i.e. from 2011-12 to 2013-14 Ratios like, Quick Ratio, Current
Ratio ,Gross Profit Ratio , Net Profit Ratio etc. have also been analyze
PROJECT OVERVIEW
Introduction :
Point of time, Calcutta was the most active trading port, mainly due to the trade of the
British Empire, and due to which banking activity took roots there and prospered. The
first fully Indian owned bank was the Allahabad Bank, which was established in 1865.
By the 1900s, the Originated in the first decade of 18th century with The General Bank
of India coming into existence in 1786. This was followed by Bank of Hindustan. Both
these banks are now defunct. The oldest bank in existence in India is the State Bank of
India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of
decades later, foreign banks like Credit Lyonnais started their Calcutta operations in
the 1850s. At that market expanded with the establishment of banks such as Punjab
National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of
which were founded under private ownership.
Banking in India:
Originated in the first decade of 18th century with The General Bank of India coming
into existence in 1786. This was followed by Bank of Hindustan. Both these banks are
now defunct. The oldest bank in existence in India is the State Bank of India being
established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades
later,

7
foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At
that point of time, Calcutta was the most active trading port, mainly due to the trade of
the British Empire, and due to which banking activity took roots there and prospered.
The first fully Indian owned bank was the Allahabad Bank, which was established in
1865.
Commercial Banks at Present:

Currently, India has 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. According to a report by ICRA Limited, a rating agency, the public
sector banks hold over 75 percent of total assets of the banking industry, with the
private and foreign banks holding 18.2% and 6.5% respectively.
Growth and Development

Since the launch of the economic liberalization and global programmer in 1991, India
has considerably relaxed banking regulations and opened the financial sector for
foreign investment. India is also committed to further open the banking sector for
foreign investment in pursuance to its commitment to the World Trade Organization
(WTO).
As monetary authority of the country, the Reserve Bank of India (RBI) regulates the
banking industry and lays down guidelines for day-to-day functioning of banks within
the overall framework of the Banking Regulation Act, 1949, Foreign Exchange
Management Act, 1999 and Foreign Direct Investment (FDI) policy of the
government.
The Indian banking sector is dominated by 28 state-owned banks which operate

through network of about 50,000 branches and 13,000 ATMs. The State Bank of India
(SBI) in the largest bank in the country and along with its seven associate banks has an
asset base of about Rs. 7,000 billion (approximately US$150 billion). The other large
public sector banks are Punjab National Bank, Vijaya Bank, Bank o Baroda, Bank of
India & IDBI Bank.
The public sector banks have overseas operations with Bank of Baroda topping
the list with 51 branches, subsidiaries, joint ventures and representative offices outside
India, followed by SBI (45 overseas branches/offices) and Bank of India (26 overseas

8
branches/offices). Indian banks, including private sector banks, have 171
branches/offices abroad. SBI is present in 29 countries followed by Bank of Baroda
(20 countries) and Bank of India (14 countries). Private sector banks India has 29
private sector banks including nine new banks which were granted licenses’ after the
government liberalized the banking sector.
On July 19th 1969, 14 major Indian commercial banks having aggregate deposits
of not less than 50 crores were taken over by the government of India through an
ordinance caused, “Banking Companies Acquisition of 1969”
The 14 Major Commercial Banks Are

1. Bank of India
2. The Central Bank of India
3. The Punjab National Bank
4. Bank of Baroda
5. United Commercial Bank
6. Vijaya Bank
7. United Bank of India
8. Dena Bank
9. Union Bank of India
10. Allahabad Bank
11. Syndicate Bank
12. Bank of Maharashtra
13. Indian bank
14. Indian Overseas Bank
On 15th April 1980 the government has nationalized 6 more banks having the deposits
of 200 crores or more: They are,
Banking Services
Although the type of services offered by a bank depends upon the type of bank and the
country, services provided usually include:
 Taking deposits from the general public and issuing checking and savings
accounts.
 Making loans to individuals and businesses.
 Cashing cheques.
 Facilitating money transactions such as wire transfers and cashier’s checks.

9
 Issuing credit card, ATM, and debit cards.
 Storing valuables, particularly in a safe deposit box.
Types of Banks:
Banks activities can be characterized as retail banking, dealing direct with
individuals and small business, and investment banking, relating to activities on the
financial markets. Most banks are profit-making, private enterprises. However, some
are owned by government, or are non-profit making.
In some jurisdictions retail and investment activities are, or have been, separated by
law.
Central banks are non-commercial bodies or government agencies often charged with
controlling interest rates and money supply across the whole economy. They act as
Lender of Last Resort in event of a crisis.
Types of retail banks:

 Commercial Bank is the term used for a normal bank to distinguish it from an
investment bank. Since the two no longer have to be under separate ownership,
some use the term “commercial bank” to refer to a bank or a division of a bank
mostly deals with corporations or large businesses.
 Community Development Bank is regulated banks that provide financial services
and credit to understand markets or populations.
 Postal Savings banks are savings banks associated with national postal systems.
Private Banks manage the assets of high net worth individuals.
 Offshore Banks are located in jurisdiction with low taxation and regulation. Many
offshore banks are essentially private banks.
 Savings Banks traditionally accepted savings deposits and issued mortgages.
Today, some countries have broadened the permitted activities of savings banks.
 Ethical Banks are banks that prioritize the transparency of all operations and make
only social-responsible investments.
Types of investment Banks:

 Investments banks “underwrite” (guarantee the sale of) stock and bond issues and
advise on mergers.
 Merchant banks were traditionally banks which engaged in trade financing. The
modern definition, however to banks provide capital to firms in the shares rather
than loans. Unlike venture capital firms, they tend not to invest in new companies.

10
 Universal Banks, more commonly known as a financial services company, engage
in several of these activities. For example, first bank, is a very large bank, is
involved in commercial and retail lending; finally its subsidiaries in tax-havens
offer offshore banking services to customers in other countries. Almost all large
financial institutions are diversified and engage in multiple activities. In Europe
and Asia, big banks are much diversified groups that, among other services, also
distribute insurance, hence the term banc assurance.
Other types of banks:

Islamic banks adhere to the concepts of Islamic Law. Islamic banking revolves
around several well established concepts which are based on Islamic canons. Since the
concept of interest is forbidden in Islam, all banking activities must avoid interest.
Instead of interest, the bank earns profit (mark-up) and a fee on financing facilities that
is extends to the customers. Also, deposits make earn a share of the bank’s profit as
opposed to a predetermined interest.
SCHEDULED BANKING STRUCTURE IN INDIA
Flow chart (1.1)

11
12
Chapter 3

13
After the end of the first world war the economy was in shamble. The businessmen,
traders, agriculturists etc. were suffering from scarcity of funds for their enterprises. In the
middle of the seventies of the twentieth century. Vijaya Bank limited was established. Vijaya
bank limited was founded was established. Vijaya bank limited was founded seventy five
years ago. In the coastal town of Mangalore in Dakshina Kannada district of Karnataka state
by a group of agriculturists with the main purpose of serving a small community of farmers of
the district. Today, it is a household. Name in the country, serving people from all walks of
life through a wide network of branches spread our 25 states and 3 union territories.
Vijaya bank has indeed come a long way. After having buffeted the storms of great
depression survived the 60’s when small banks were merged with bigger one’s, Vijaya bank
emerged stronger and began its exciting journey to success by pursuing a dynamic branch
expansion policy which enabled it to grow in to an all India bank. Was nationalized in the 15 th
April 1980 this opened a new chapter in its history a chapter of services to the needy and
under privileged which Vijaya bank is well geared to meet.
Growth and Development of Vijaya Bank:

The Vijaya bank can be traced to the efforts of a group of enlightened men, who in
those days had the foresight. To envisage the needs for a bank to service their fellow farmers.
Vijaya bank limited commenced business operation on 23 rd oct 1931, with an authorized
capital of Rs 5 lakhs and a paid up capital of Rs 8670/- the bank was housed in a rented
building in mangalore. “shri A Balakrishna shetty was the founder chairman, shri K
Jagannatha Krishna hegde, shri T narayanan bhandary shri soukar Anthaya shetty shri. K.
venkappa shetty, shri Y sooryanna shety, shri B manjayya hegde, shri Bumbram venkappa
punja , shri M Ramakrishna punja and shri A.S. mahabala Rai were the other founder
directors of the bank shri A Balakrishna. Shetty’s tenure as chairman from 1931-1936
coincided with the great depression with the unstinted support of his dedicated bank of
director and staff he had guided the bank through these turbulent times. A second branch was
opened in the town of udupi on 16th Feb 1936.
Early years:
Shri B. Manjayya Hegde, Advocate 7 founder director took over the chairmanship in
1937, when shri A.B. Shetty was called upon serve the people as a minister in the erstwhile
madras state. During his tenure, he consolidated the banks position & opened 5 new branches
to very doorsteps of the farmers. By 1941 & 1947, 6 more branches were added to the banks
network.
Another significant step was the opening of branch in Bombay, thus expanding the
banks operations beyond the south canara district. The national movements for independence
had united the people casting aside all provincial & caste barriers. Vijaya bank limited not

14
only expanded geographically, but threw open a fresh issue of the bank shares to all Indian
nations. By the end of 1951, the banks paid up capital arose to Rs 7.5 lakhs & deposits to Rs
4 lakhs.
The next chairman, shri k sundarram shetty, an advocate took over in 1953. the bank
is total resources crossed the Rs 1 crore mark in 1956. Vijaya bank limited which commenced
operations in a rented house was also the proved owner of building to house its silver Jubilee
on 14th Jan 1957 shri s Nijalingappa, the then chief ministor of the newly formed mysore state
presided over the function.
Scheduled bank:
With effect from 29th Nov 1958, Vijaya bank limited become a scheduled commercial
bank, when the reserve bank of India included if in the second schedule to the reserve bank of
India Act 1934. under the chairmanship of Dr. balappa shetty, a medical practitioners
mangalore the bank made further programmers and as the end of Dec. 1961 deposits totaled
Rs. 1.44 crores branches numbered 21, while the staff strength reached 159.
ERA of Mergers:
In the early 1960’s the reserve bank of India adopted a policy, by which the number of
banking institution in the country would be reduced to an administratively manageable
number. This was to be achived by merging the smaller banks. With comparatively larger
ones shri mulki shetty who took our as honorary chairman on may 1962 was quick to utilize
this apportunity to the benefit of the institutions. As a result of protracted negotiations &
tamilnadu and Karnataka were merged with Vijaya bank.
A part from adding 42 branches to its network these mergers added as catalyst for the
bank’s subsequent growth. In addition the bank opened 26 new branches. The bank’s
deposits as a result arose to Rs 13.21 crores in.
1968. Its branches increased to 89 and its employee’s number 982.
In 1969 was an eventful year of the Banking industry. Banks were brought under
Social control 1 and 14 major commercial banks were nationalized. In Vijaya Bank LTD, Shri
Sunder Ram Shetty told over the whole time chairman and chief executive officer of the
Bank’s administrative office to Bangalore. Thus began an area of record growth that has few
parallels in the history of Indian Banking. During this period i.e. From 1969 the banks
deposits shot up from Rs31.21 Crores as at the end of 1968 to Rs221.02 Crores at the close of
Dec. 19769, recording at the annual growth rate of 42.2%. The paid up capital increased to
Rs.18.83 Lakhs to Rs 117.90 Lakhs while reserve researched on all time high of Rs. 157.83
Lakhs the shareholders return in the form of dividend doubled from 6% to 12%. The banks
added 377 new branches and increased its staff strength to 7457 to man these officers, the
bank moved to various status in the North and North East. A small bank that had largely
confirmed its activities first to one district. Later to its own home state had now spread its
wings far and wide to state its claim as one all India institutions.

15
In 1976 the bank entrusted the Indian Institute Of Management Ahamedabad with task
of making a study of its recognition. Many of the recommendations have been implemented
and accordingly 18 Regional officers were set up. This lead to greater Decentralization.
Shri, B.Ranganath Hegde, sa director of the bank took over as chief executive officer
in many 1976. There after, Shri Satya Dev, the Banks Chief General Manager was oppointed
as the Chief Executive Officer.
Nationalization and New Challenges:

Vijaya Bank LTD was nationalized on 1st April 1980. Shri Satya Dev the chief
executive officer was appointed as Custodian. The change in the ownership has meant a
renewed thrust towards implementing the Government Economic policies and programs
aimed at helping the poor. To Vijaya Bank, these were not all together new challenges because
its tradition has been one of the services to the poor.
The Government of India appointed Shri, R.Vijay Raghavan, Joint Chief Officer.
Reserve Bank Of India, Chairman and managing director of Vijaya Bank with effect from 23 rd
March 1981 on 29th Oct 1981, a function was arranged at Bangalore to mark the compellation
by the Bank of 50years of useful and dedicated service to the nation. The celebration were
inaugurated by Shri R. Gundu Rao, the Honerable Chief Minister of Karnataka and Shri R.
Venkataraman, the union finance minister was the chief trust. The set up of the head office
was organized with effect from 1st December 1982. A department known as “Rural
Development and Priority Sector Department” has been created to further intensity the banks
efforts for lending the priority sectors and others weaker sections of society.
Banking Scenario:
During the year, the Reserve Bank Of India took several initiatives aimed at improving
the pruductial regulation. These include stipulating higher provisioning requirements for
NPAs included under doubtful for more than three years category effective from March 31 st
2005, prohibiting banks from investing in un rated non-SLR securities, advising banks to
maintain capital charge for market risk etc. Further several initiative were also taken during
the year aimed at improving the credit delivery to the agricultural and SSI sector. The
government announced a comprehensive policy enhancing a 30% increase in agriculture
credit in 2004-05 and doubling the credit flow to the agricultural in three years.
The aggregate deposit of scheduled commercial bank recorded a lower annual growth
rate of 10.8% in 2004-05 as compared with 17.6% recorded in 2003-04. Despite this lower
growth rate the gross credit to scheduled commercial banks recorded in impressive annual
growth rate of 26.2% in 2004-05 as compared to 16.0% in previous year. Growth was
observed in both food and non-food credit.

16
PERFORMANCE HIGHLIGHTS
The Board of Directors of Vijaya Bank adopted the audited financial results for the
year ended 31st March 2011 at its meeting held on 05.05.2011.
Bank’s performance in some of the key areas are as under:

Performance Highlights
 Bank has posted an Operating Profit of Rs.181.46 crore during the quarter ended 31st
March 2011.Operating Profit for the entire year is Rs. 718.23 crore against Rs.799.80
crore in the previous year.The lower profit is on account of the drop in Net Interest Margin
from 3.56% to 3.20%. The Staff Cost has increased by about Rs.60 crore on account of
wage revision. The Profit on Sale of Investments remained at Rs.148.44 crore due to
hardening of yield levels which restricted the treasury activity.
 Bank posted a Net Loss of Rs.34.53 crore during the Quarter (previous year’s Net profit in
last quarter was Rs.155.92 crore) on account of higher provisioning requirements. During
the quarter, Bank provided Rs.100 crore towards additional provisioning for NPAs and
accounted for over Rs.69.31 crore towards Diminution in the value of investments and
Amortisation Cost of Permanent category securities.
 Net Profit for the year is lower at Rs.126.88 crore against the previous year’s Rs.380.57
crore. Diminution in the value of Investments at Rs.257.36 crore due to hardening of Yield
levels on securities, Amortisation cost representing proportionate cost in respect of
premium paid on permanent category investments at Rs.85.71 crore, Provision for NPAs
at Rs.126.75 crore, Additional provisioning of Rs.26.51 crore towards Standard Assets as
per RBI guidelines and Provision for Deferred taxes at Rs.32.23 crore have pulled down
the Net Profits of the Bank.
 Interest Income from advances recorded a growth of 16.80% during the year and
increased from Rs. 1149.32 crore to Rs. 1342.41 crore.
 Total Business is Rs.44771 crore against Rs.40301 crore for the corresponding previous
period, thus recording 11.09 % increase. Total Deposits increased by 8.16% from
Rs.25617.98 crore to Rs. 27709.29 crore.
 Savings Bank deposits posted a higher growth of 18.03 % (yoy) and increased from
Rs.5396 crore to Rs.6369 crore.
 Total Advances recorded a growth of 16.20% from Rs.14682.81 crore to Rs.17061.84
crore. Bank has improved the Credit deposit ratio from 57.31% to 61.57%.
 Gross Non-Performing Assets is Rs.540.15 crore. Gross NPA ratio is 3.17% marginally up
from 2.94% as on 31.03.2005. Net NPAs stand at Rs.142.32 crore with Net NPA ratio of
0.85%. Bank holds Floating Provisions of Rs.213 crore over and above the minimum
provision of Rs.178.83 crore required for NPAs under RBI norms.
 Total Cash Recoveries during the year is Rs. 205.56 crore, which includes cash recovery
of Rs.128.19 crore towards NPAs.

17
Quantitative & Qualitative Features of Performance
 Net Interest Margin is 3.20% which is reasonably good in the industry.
 Average business per employee has gone up from Rs.3.13 crore to Rs.3.69 crore.
 Total Business per branch is Rs.48.51 crore as against Rs.44.29 crore as on 31.03.2005.
 Book value per share is Rs.38.51.
 Capital Adequacy Ratio stood at 12.23 % before dividend and is above the RBI stipulated
norm of 9%.
 Capital Adequacy Ratio [Tier I Capital] stood at 9.56% before dividend.
 Percentage of low cost deposit to total deposits has gone up from 32.56% to 35.31 %.
 Retail Loans at Rs.5748 crore constitute 33.69% of gross credit
 Priority Sector Credit at Rs.7666 crore is 45.58% of the Net Bank Credit against 44.29%
in the previous year.
 Growth in Priority Sector Credit is 24.1% against the overall credit growth of 16.20%.
 Excellent Growth of 33.60% in Agricultural Credit from Rs.1837 crore to Rs.2456 crore.
 Percentage of Agricultural Credit to Net Bank Credit increased from 13.17% to 14.60%.
 68588 New farmers were financed with Rs.348 crore during the year. This works to 149
farmers per Rural and Semi-urban branch against the norm of 100.
 52935 Kisan Cards were issued during the year involving credit facility of Rs.265 crore.
Total Card Base is about 2 lakh.
 SSI credit recorded a growth of 30.76% from Rs. 820.20 crore to Rs.1072.48 crore.
 SME Credit recorded a growth of 29.27% (RBI target 20%) from Rs.1120.20 crore to
Rs.1439.33 crore.
 Bank has credit linked 4886 SHG’s during the year with a credit exposure of Rs.34.21
crore. Total SHGs credit linked so far is 17900 involving an exposure of Rs.68 crore.
 The Bank continued the thrust on rural finance by financing to Self Help Groups, Agri
Clinic and Agri Business, Tractors and other farm equipments.
Business Intiatives – Reaching Out to Customers

 13 new branches opened during the financial year 2005-06 taking the total number of
branches to 923.
 The Bank launched no-frills Savings Bank Account Scheme “Vijaya Saral Savings
Account”. The account under this scheme can be opened with a minimum initial deposit
of Rs.10/- with a facility to continue the account with zero balance.
 The Bank has introduced two new customer friendly deposit products viz., “ V-Plus
Savings Bank Account” and “V-Plus Current Account” for customers of CBS branches.
These schemes provide facility to Savings Bank/Current Account customers to maximize
the yield by automatic transfer of excess amount over and above minimum limit, to a
Term Deposit Account.

18
 Bank has launched the following New products during the year: “V- Swashakti” – a
scheme for women entrepreneurs to make women self reliant and economically
independent. “ V-Arogyabima” – A health cum accident policy for the customers of the
Bank.
 Multi-city cheques were introduced as part of Any Branch Banking.
 Vijaya Global Debit cum ATM Card was launched during the year. The Global Card is
internationally valid card and can be used at ATMs & Merchant Establishments.
 Bank started the Segmented approach for issue of credit cards with the launch of Doctor’s
card.
 Anti- Money Laundering (AML) cell and AML Software were implemented to strengthen
the monitoring machinery.
 Service delivery has improved with the ATM network, extension of business hours,
Anywhere Banking in respect of CBS branches etc.
 Bank is constantly upgrading the system to match the technological and IT advancement
in tune with Bank’s business needs, as well as industry practices.
 The Bank’s website ‘www.vijayabank.com’ has been hosted for disseminating the
information about the Bank and for electronic correspondence by public with the Bank.
 The investment portfolio has already been significantly restructured and immunized to
minimize the impact of interest rate shock. The same will be further streamlined during
the year.
 Strategy has been drawn to ensure that at least 75% of the Branches are in Performing
Branches Category.
Plans for 2012-13

 Achieve Platinum Jubilee Business Target of Rs.50,000 crore by 30.09.2012 and Rs.60000
crore by 31.03.2013
 Increase the number of branches from 923 to 1000 during the year and also open overseas
representative offices at Hong Kong, China and Dubai.
 Improve the CD ratio with stress on quality business.
 Improve the low cost deposit base from 35% to 40% of the total deposits through
aggressive campaigns.
 Aggressive recovery of non-performing advances and prudentially written off accounts
and close monitoring of special watch accounts
 Maximize profit through operational efficiency and effective cost control measures.
 Extensively train the personnel in areas like Credit, Forex, Treasury and Risk
Management during the year.
 Deploy Right man for right job to maximize the operating as well as business efficiency.
 Aggressive focus on Retail Credit, Advances to SME, SSI, Agriculture advances.
 Set up Centralized Processing Cell for focussed growth of retail credit.

19
 Initiatives to extract maximum business opportunities from the Rural and Semi urban
branches.
 Concentrate on non-fund based business and fee based income.
 Churning of Trading portfolio and real-time monitoring of Investments.
 Product diversification and cross selling to counter competition.
 Increase the number of network ATMs from 128 to 250 by March 2007.
 Increase the number of branches under Core Banking Solution from the present 309
business outlets to 500 branches covering 80% of the bank’s business by March 2010.
 Implement Human Resources Management System, Integrated Risk Management System
and Integrated Treasury Management System in the current year.
 Reorganize the administrative set-up and the operating departments to focus on marketing
and operations.
 Augment adequate capital by issue of Hybrid Instruments and Tier II Bonds.
 Bank has initiated necessary action to ensure smooth transition to Basel II Capital
Adequacy Norms.
Dividend
 Bank has declared a dividend of 10 % for the financial year 2010-11.
Deposit Mobilisation:
The total deposit of the bank increased from Rs.21015.05 crore as on 31.3.2004 to Rs.
25617.98 crore as on 31.3.2005 recording an annual growth rate of 21.9% which is much
higher than the growth rate of 10.8% recorded by the scheduled commercial banks in 2004-
05. the average aggregate deposits increased from Rs. 18148.55 crore in 2003-04 to
Rs.21937.20 crore 04-05 recording 20.9% increase.
Agricultural Finance Outstanding Agriculture Finance:
The bank is on the fast track on doubling agricultural advances as per the
announcements made by the Government Of India. Total agricultural advances by the bank in
March 2005 stood at Rs.1910.99 crore as against Rs.818.56 crore registering in impressive
growth rate of 74.9% against the Government of India’s stipulation of 30% growth. As against
the benchmark level of 18% the achievement comes to 13.2%
Disbursement to agriculture:
Under special agricultural credit plan the bank has disbursed Rs.1294.27 crore to
agricultural sector during the year 2004-05 as against the annual target of Rs.111.6%. the
disbursements to agriculture as shown a significant growth rate of 46% over the
corresponding period of the previous year.
Kisan Credit Card Scheme:
During the year the bank has issued 34990 Kisan Credit cards and disbursed Rs.155.72
crore. The performance comes to 123% of the target of 28540 Kisan Cards set for the year.
From the inception the bank has issued 161933 Kisan Cards and disbursed Rs.666.12 crore.

20
Chapter 4

21
INTRODUCTION
Financial statements are primarily prepared for decision-making. They play a
dominant role in setting the framework of managerial decisions. The published
financial statements of business may be of considerable interest to present are potential
shareholders, managers, lenders, banks, financial institutions, government researchers,
trade organizations and many others.
MEANING OF FINANCIAL STATEMENT ANALYSIS

Financial analysis is the process of Identifying the financial strengths and weakness of
firm by properly establishing relationship between the items of the balance sheet and
profit and loss account.
The purpose of financial analysis is to diagnose the information contained in the
financial statements so as to judge the profitability and financial soundness of the firm.
A financial analyst, analyses the financial statements with various tolls of analysis
before commenting upon the financial position of the enterprises.
Tools of financial statement analysis:
1. Comparative statements
2. Common – size statements
3. Trend Analysis
4. Funds flow analysis
5. Cash flow analysis
6. Ratio analysis
7. Cost-volume-profit analysis
1. Ratio Analysis:
Ratio analysis is a technique of analysis and interpretations of financial
statements. It is the process of establishing and interpreting various ratios for helping
in making certain decisions. Ratio analysis is a widely used tool of financial analysis;
it is defined as the systematic use of ratio to interpret the financial statements so that
the strengths and weakness of firm as well as its historical performance and current
financial position can be determined.
2. Common size statements:

Common size financial statement facilitates both type of analysis, horizontal as
well as vertical analysis, it not only compares across years but also each individual

22
item of a group of assets and liabilities is related to the total of the group in respect of
every year. It means individual current asset is shown as a percentage of total current
assets main advantage of common size statements is that a comparison of the
performance and financial condition in respect of different units of the some industry
can also be done.
3. Trend Analysis:
The easiest way to evaluate the performance of a firm is to compare its present
ratio with the past ratios. When financial ratios over a period of time are compared it is
known as time series or trend analysis, it gives on indication of a direction of change
and reflects whether financial performance has improved as has deteriorated as has
remained constant overtime.
4. Funds flow analysis:

Fund flow statement is a method by which we study changes in the financial
position of a business enterprise b/w beginning and ending financial statements dates.
It is a statement showing sources and application of trends for a period of time, it is a
complimentary statement to the income statement. Funds flow statement considers
both capital and revenue items.
5. Cash flow statement:

It is a statement of changes in the financial position of firm on cash basis and
hence it is called cash flow statement. It summarizes the causes for changes in the cash
position of business enterprises between dates of two balance sheets. Cash flow
statement is a statement which describes the inflow and out flow of cash and cash
equivalents.
6. Cost-Volume-Profit Analysis:
It is a technique for studying the relationship between cost, volume and profit.
Profits of an undertaking depend upon a large number of factors. But the most
important of these factors are the cost of manufacture, volume of sales and the selling
prices of products.
It is the ascertainment of marginal costs and its effect on the profit of changes in
volume or type of output by differentiating between fixed cost and variable costs. It is
a technique, which is concerned with the changes in cost and profits resulting from
changes in the volume of profit.

23
7. Comparative Statements:
The comparative balance sheet analysis is the study of trend of the same items,
group of items and computed items in two or more balance sheet of the same business
enterprise on different dates. The changes in periodic balance sheet items at the
beginning and at the end of a period can be observed, which reflect a conduct of a
business.
Financial Ratio Analysis

Financial ratio analysis is the calculation and comparison of ratios which are
derived from the information in a company's financial statements. The level and
historical trends of these ratios can be used to make inferences about a company's
financial condition, its operations and attractiveness as an investment.
Financial statements contain much information relating to profit or loss and
financial position of the business. If these items in financial statements are considered
independently it will be or not be of much use. To make meaningful reading of
financial statements, this items found in financial statement have to be compared with
one another. Ratio Analysis, as techniques or Analysis of financial statement uses this
method of comparing the various items founding financial statements.
Ratio analysis is used to evaluate relationships among financial statement items.

The ratios are used to identify trends over time for one company or to compare two
or more companies at one point in time. Financial statement ratio analysis focuses
on three key aspects of a business: liquidity, profitability, and solvency.
According to H.G. Guthmann “Ratio is the relationship or proposition that one amount
bears to another, the first number being the numerator and the later denominator” The
relationship between two figures expressed mathematically is called a Ratio. It is
numerical relationship between two numbers which are related in some manner.
Ratio analysis is a term accounting ratio is used to describe significant

relationship which exist between figures shown in a Balance Sheet, in a Profit and
Loss account, in a budgetary control system or in any other part of the account
organization.
OBJECTIVES OF RATIO ANALYSIS

The major benefit arising from Ratio analysis or as follows:

24
 Ratio Analysis is a very powerful analytical tool use full for measuring
performance of an organization
 Ratio Analysis concentrates on the inter-relationship among the figures appearing
in the financial statements
 Ratio’s make comparison easy. The said Ratio is compared with the standard ratio
and this shows the degree of efficiency utilization of assets.
 The results of two companies engaged in the same business can be easily compared
with the help of ratio analysis.
 Short-term liquidity position and long-term solvency position can be easily
ascertained with the help of ratio analysis
 Ratio analysis helps the management to analyze the past performance of the firm
and to make further projections.
ADVANTAGES OF RATIO ANALYSIS FOR SHARE HOLDERS:

 Share holders will analyze Ratios for taking investment and disinvestment
decisions.
 The credit rating agencies will analyze the ratio of a firm to give the credit rating to
the firm.
 The Government agencies will analyze ratios of a firm for review of its
performance
 Bankers who provide working capital will analyze ratios for appraising the credit
worthiness of a firm.
 The financial institutions which provide long term debt will analysis ratios fro
project appraisal and debt servicing capacity of firm.
LIMITATIONS OF RATIO ANALYSIS:

 The Standards will differ from industry to industry. Comparison of ratios of firms
belonging different industries is not suggested.
 Since Ratios are calculated from past records there are no indicators of future.
 The changing price levels due to inflation will distort reliability of ratio analysis.
 The analyst should have through knowledge of methods of window-dressing.
 Ratios are calculated from financial statements which are affected by the financial
bases and policies adopted on such matters as depreciations and the valuations of
stocks.
 Knowledge of ratios alone is meaningless unless it is also ascertained how it is
made up.
 Lacks of homogeneity of data, person judgment, lack of consistency etc. are the
factors which limits the conclusion to be derived on the basis of accounting ratios.

25
 While making interfere comparison, the analyst must keep in mind that different
founds followed different accounting policies.
FACTORS AFFECTING THE EFFICACY OF RATIOS:

Ratios by themselves mean nothing. Caution has to be exercised in using ratios. They
must always be compared with.
 A norm or a target,
 Previous ratios in order to assess trends,
CLASSIFICATION OF RATIOS
1. LIQUIDITY RATIOS
 Current ratio
 Liquid ratio
2. TURNOVER RATIOS
 Working capital turnover ratio
 Inventory turnover ratio
 Debtor turnover ratio
 Creditor turnover ratio
 Fixed asset turnover ratio
3. LONG –TERM SOLVENCY RATIOS
 Debt-Equity ratio
 Proprietary ratio
 Capital gearing ratio
 Total coverage ratio
 Solvency ratio
 Fixed asset ratio
4. PROFITABILITY RATIO
 Gross profit ratio
 Net profit ratio
 Operating ratio
 Return on investment,
 Return on asset
 Return on share holders’ equity
 Return on equity capital

26
 Earnings per share.
 Dividend payout ratio
 Dividend yield ratio
LIQUDITY RATIOS
The Liquidity ratio measures the liquidity of the firm and its ability to meet its
maturing short-term obligations. Liquidity is defined as the ability realize value in
money, the most liquid of assets.
Liquidity refers to the ability to pay in cash, the obligations that are due.
Corporate liquidity has 2 dimensions.
 Quantitative
 Qualitative
Quantitative:
The Quantitative aspect includes the quantum, structure and utilization of liquid
assets.
Qualitative:
The Qualitative aspect is the ability to meet all present and potential demands on cash
from any source in a manner that ability to meet all present and potential demands
oncash from any source in a manner that minimizes cost and maximizes the value of
the firm.
Corporate Liquidity is a vital factor in business. Excess liquidity, though a
guarantor of solvency would reflect lower profitability, deterioration in managerial
efficiency, increased speculation and unjustified expansion, extension of the two
liberal credit and dividend policies. Too little liquidity than May lead to frustration,
business objection, reduced rate of return missing of profitable business opportunities
and weakening of morale.
The important Ratios in measuring short term solvency are:

 Current Ratio
 Quick Ratio
 Absolute liquidate Ratio
 Defensive interval Ratio
CURRENT RATIO

27
This Ratio measure the solvency of the company in the short-term. Current assets are
those assets which can be converted into cash within a year. Current liabilities and
provisions are those liabilities that are payable within a year.
Components of Current Ratio

Current Assets Current Liabilities
Cash in hand Outstanding or accrued expenses
Cash at bank Bills payable
Marketable securities (short-term) Sundry creditors
Short term investment Short-term advances
Bills Receivable Income-tax payable
Sundry Debtors Dividends payable
Inventories (stock) Bank overdraft (if not permanent
Work-in-progress arrangement)
Prepaid Expenses
Current assets
Current Ratio= ---------------------------
Current Liabilities
A Current Ratio 2:1 indicates a highly solvent position. A Current ratio of

1.33:1 is considered by banks as the minimum acceptable level for providing working
capital finance.
A very high current Ratio will have adverse impact on the profitability of the
organization. A high current ratio may be due to the piling up of inventory,
inefficiency in collection of debtors, high balances in cash and bank accounts without
proper investment.
Advantages of Current Ratio

 Current Ratio indicates the extent of Current Assets available to meet the
Current obligation. It is only from the current assets the immediate obligations
are met with the interest of creditors lie in this Ratio.
 The safe Ratio is 2:1.this means, for every current liability of Re.1, there should
be current of Rs2, so that the firm can conveniently meet its current obligations.
 This margin also leaves sufficient amount as working capital to carry out day-
to-day transactions.
 This is useful in assessing the solvency and liquidity position of the company.

28
Quick Liquid or Acid Test Ratio
Quick Ratio is used as a measure of the company’s ability to meet its current
obligations since bank overdraft is secured by the inventories, the other current assets
must be sufficient to meet other current liabilities.
Current Assets- Inventory

Acid test Ratio= ---------------------------------------
Current liabilities
A quick ratio of 1:1 indicates highly solvent position. This ratio serves as a
supplement to the current Ratio in analyzing liquidity.
Advantages of Quick Ratio

 This Ratio is very useful for cross checking the performance in other areas of
economic management of an enterprise. The Liquid ratio, cross-checked with
inventory throw light on the inventory accumulation. The Liquid ratio can throw
light on certain other aspects of inventory management which will be pointed out
later.
 It is an improved variant of the current ratio in arriving at a liquidity index for an
enterprise.
Absolute liquid/Super quick Ratio

The ratio of absolute liquid assets to quick liabilities. It is taken as ratio of
absolute liquid assets to current liabilities. Absolute liquid assets include cash in hand,
cash at bank and short-term or temporary investments.
Absolute liquid ratio

Cash Ratio= -----------------------------
Current liabilities
Absolute Liquid Assets = Cash in Hand + Cash at Bank + Short-term investments
The ideal absolute liquid ratio is taken as 1:2
CAPITAL STRUCTURE RATIOS AND LEVERAGE RATIO

29
Leverage or capital structure ratios are those ratios which measures the relative
interest of lenders and proprietors in a business organization. These ratios indicate the
long-term solvency position of an organization. These ratios help the management in
the proper administration of the capital.
Shareholders Equity Ratio

It is assumed that larger the proportion of the shareholders’ equity, the
stronger is the financial position of the firm. This ratio will supplement the debt-
equity ratio. In this ratio, the relationship is established between the shareholders’
funds and the total assets.
The ratio is calculated as follows:

Shareholder’s Equity
= -----------------------------
Total Assets (Tangible)
Shareholders funds represent equity and preference capital plus reserves and
surplus less accumulated losses. A reduction in shareholders’ equity signaling the over-
dependence on outside sources for long-term financial needs and this carries the risk of
higher level of gearing. This ratio indicates the degree to which unsecured creditors are
protected against loss in the event of liquidation.
Long-term Debt to Shareholders Net worth Ratio
The ratio compares long-term debt to the net worth of the firm. The capital and
free reserves less intangible assets. This ratio is finer than the debt-equity ratio and
includes capital that is invested in fictitious assets like deferred expenditure and
carried forward losses. This ratio would be of more interest to the contributories of
long-term finance to the firm, as the ratio gives a factual idea of the assets available to
meet the long-term liabilities.
Long-term Debt
= -----------------------------
Shareholders Net Worth
Capital Gearing Ratio

30
Capital gearing ratio indicates the degree of vulnerability of earnings available for
equity shareholders. The Ratio signals the firm which is operating on trading on
equity. It also indicates the changes in benefits accruing to equity shareholders by
changing the levels of fixed interest bearing funds in the organization.
It is the proportion of fixed interest bearing funds to equity shareholders funds;
Fixed Interest Bearing Funds

--------------------------------------
Equity Shareholders Funds
The fixed interest bearing funds include debentures, long-term loans and
preference share capital. The equity shareholders funds include equity share capital,
reserves and surplus.
Advantages of Capital Gearing Ratio

 Capital gearing ratio measures the Bank’s capitalization.
 This ratio is useful to the new investors for making sound investment decisions.
 Capital gearing ratio shows the claim of owners as against the claim of lenders
and preference share holders.
Debt-Equity Ratio
Debt-Equity ratio measures the relative claim of creditor and owners in a

business organization Debt usually includes all external long term Liabilities. And
also both short-term and long-term Liabilities are included in the preview of debt.
Equity includes owners or proprietors fund, it comprises of capital, all
accumulated reserves and profits. Any accumulated losses should be deducted.
Debt Equity ratio can be expressed as follows:

Debt
Debt-equity ratio=--------------------
Equity
Debt = all external long term liabilities

Equity = Share capital and all reserves and provisions.
Ideal ratio of the debt-equity ratio is 2:11

31
2 Debt for one Equity. Any higher ratio is considered as a risky position for the
firm as more debt is involved and a lower ratio indicates a sound financial position.
Advantages of Debt – Equity Ratio

 This ratio is measure of contribution of owners to the business as compared to
long-term creditors.
 It tests the long-term liquidity or solvency of an organization.
Fixed Assets to Long-Term Funds Ratio

This ratio indicates the proportion of long-term funds deployed in fixed assets.
A fixed asset represents the gross fixed assets minus depreciation provided on this till
the date of calculation. Long-term funds include share capital, reserves and surplus
and long-term loans. The higher the ratio indicates the safer the funds available in
case of liquidation. It also indicates the proportion of long-term funds that is invested
in working capital.
Fixed Assets
= -----------------------------
Long – Term Funds
Proprietary Ratio
It expresses the relationship between shareholder’s net worth and total assets.
Shareholders Net worth

= -----------------------------
Total Assets
Reserves earmarked specifically for a particular purpose should not be included

in calculation of net worth. A high proprietary ratio is indicative of strong financial
position of the business.
Owners’ funds mean the sum of the paid-up equity share capital plus preference
share capital plus proprietary reserves.
Net worth = Equity share Capital + Preference Share Capital + Reserves –

fictitious Assets
Total assets = Fixed assets + Current assets – fictitious assets

32
Advantages of Proprietary Ratio
 Proprietary ratio shows the relation between own fund and borrowed fund.
 It shows the amount of proprietors funds invested in the total assets of the firm.
Current Assets to Net worth Ratio

This ratio signifies the relationship between current assets and net worth.
Current Assets to net worth Ratio = Current Assets / Net worth
A use of this ratio is, this ratio indicates the current assets financial by owners
of the business. And it also shows the relative claim of owners on the fixed assets of
the business organization.
ASSET MANAGEMENT RATIO OR TURNOVER RATIO

Asset management ratios measure how effectively the firm employs its
resources. These ratios are also called ‘Activity or Turnover ratio’ which involve
comparison between the level of sales and investment in various accounts –
Inventories, Debtors, Fixed assets, etc. Assets management ratios are used to measure
the speed with which various accounts are converted into sales or cash. The following
asset management ratios are calculated for analysis. These Ratios also analyze the use
of resources and the totality
Of each component of total assets. The profitability of the firm can be determined by
activity ratios coupled with the degree of leverage.
Inventory Ratio
The level of inventory in a company may be assessed by the use of the inventory ratio,
which measures how much has been tied up in inventory.
Inventory
----------------------------- X 100
Current Assets
Inventory Turnover Ratio

A considerable amount of a bank capital may be tied up in the financing of raw
materials, work-in-progress and finished goods. It is important to ensure that the level

33
of stocks is kept as low as possible, consistent with the need to fulfill customers’
orders in time.
Sales COGS
Inventory turnover ratio=--------------------------- or ------------------
Closing inventory Avg inventory
The higher the stock turnover rate or the lower the stock turnover period the better,
although the ratios will vary between companies.
The inventory turnover ratio measures how many times a company’s inventory
has been sold during the year. If the inventory turnover ratio has decreased from past,
it means that either inventory is growing or sales are dropping.
Debtors Turnover –Ratio

Debtors Turnover, which measures whether the amount or resources tied up in debtors,
is reasonable and whether the company has been efficient in covering debtors into
cash.
Credit Sales
= ----------------------
Average Debtors
The higher the ratio, the better the position
Debtors Collection Period

Average debtors collection period measures how long it takes to collect amounts from
Average Debtors
= ------------------------ X 365 (in days)
Credit Sales
The actual collection period can be compared with the stated credit terms of the
company.
Advantages of Debtor Turn – Over Ratio

 This ratio helps to monitor credit and collection policies.
 It can signal the need for corrective the action particularly if compared with a
norm.

34
 This ratio highlights the impact of management policies on the liquidity of the
enterprise as well as its profitability.
 It is a barometer of the general state of health of an enterprise.
 It is easy to understand, particularly when expressed as debtor’s collection
period.
Bad Debts to Sales Ratio

A Bad Debt to sales ratio indicates the efficiency of the credit control
procedures of the company. Its level will depend on the type of business. Mail order
banks have to accept a fairly high level of bad debts, while retailing organizations
should maintain very low levels or ratio. The actual ratio is compared with the target
or norm to decide whether it is acceptable or not.
It measures the proportion of bad debts to sales:
Bad Debts
= ------------------------ X 100
Sales
Creditors Turnover Ratio

The measurement of the credit turnover period shows the average time taken to
pay for goods and services purchased by the company.
Net Credit Purchase

= ------------------------
Average Creditors
Purchase refers to net credit purchases and an average creditor is given by Opening
Creditors and Bills Payable + Closing Creditors and Bills payable divided by two.
The longer the credit period achieved the better, because delays in payment
mean that the operations of the bank are being financed interest free by suppliers of
materials,. But there will be a point is young which delays in payment will damage
relationships with suppliers which, if they are operating in a seller’s market, ay harm
the bank. If too long a period is taken to pay creditors, the credit rating of the
company may suffer, thereby making it more difficult to obtain supplies in the future.

35
Fixed Assets Turnover Ratio
This ratio will be analyzed further with ratios for each main category of asset.
This is a difficult set of ratios to interpret, as asset values are based on historic cost.
An increase in the fixed asset figure may result from the replacement of an asset at an
increased price or the purchase of an additional asset intended to increase production
capacity.
Sales
= --------------------
Fixed Assets
The ratio of the accumulated depreciation provision to the total of fixed assets at cost
might be used as an indicator of the average age of the assets, particularly when
depreciation rates are noted in the accounts. The ratio of sales value per square foot of
floor space occupied is particularly significant for trading concerns, such as a
wholesale warehouse or a departmental store.
PROFITABILITY RATIOS
These ratios are to help assessing the adequacy of profits earned by the company
and also to discover whether profitability in increasing or declining the profitability of
the firm is the net result of a large number of policies and decisions. The profitability
ratios show the combined effects of liquidity, asset management and debt management
on operating results. Profitability ratios are measured with reference to sales, capital
employed total assets employed shareholders funds. These ratios are very important
from the point of view of different set of people who are interested in the business
organization like owners, creditors, employees, suppliers, government organizations.
Gross Profit Margin
The Gross profit ratio is also known by the names
 Gross margin ratio
 Trading margin ratio
 Manufacturing margin ratio
 Turnover ratio
Sales -- Cost of Goods Sold
= -------------------------------------- X 100
Sales
The gross profit represents the excess of sales proceeds during the period under
observation over their cost, before taking into account administration, selling and

36
distribution and financing charges. The ratio measures the efficiency of the company’s
operations and this can also be compared with the previous year’s result to ascertain
the efficiency.
This ratio shows the gap between revenue and expense at a point after which an
enterprise has to meet the expenses related to the non-manufacturing at activities, like
marketing administration. This ratio acts as an index of the mobility of an enterprise
to meet.
 Marketing expenses
 Administration expenses
 Finance cost
 Taxes
 Appropriations like dividend.
Net Profit Margin

The ratio is designed to focus attention on the net profit margin arising from business
operations before interest and tax is deducted. The conventions to express profit after
tax and interest as a percentage of sales.
This ratio reflects net profit margin on the total sales after deducting all
expenses but before deducting interest and taxation. This ratio measures the efficiency
of operation of the company. The net profit is arrived at from gross profit after
deducting administration, selling and distribution expenses. The non-operating
incomes and expenses are ignored in computation of net profit before tax, depreciation
and interest in the industry. This measure will depict the correct trend of performance
where there are erratic fluctuations in the tax provisions from year to year.
Net Profit before Interest and Tax

= -------------------------------------------- X 100
Sales
Net Profit Ratio
Net Profit ratio expresses net profit as a percentage of sales. It can be computed as
follows
Net Profit
Net Profit Ratio = ---------------------- X 100
Net Sales

37
This ratio indicates the profitability and efficiency of the business. However,
the ratio would be more useful if studied with operating ratio.
At this stage, it is important to differentiate between:

 Operating profit ratio
 Net profit ratio.
Operating profit ratio offers from the net profit ratio in as much as it is calculated after
adding non-operating expenses to the net profit and deducting non-operating expenses
to the net profit.
Cash Profit Ratio

Cash profit ratio measures the cash generation in the business as a result of the
operations expressed in terms of sales.
Cash Profit
= ---------------------- X 100
Sales
Cash Profit = Net Profit + Depreciation
This ratio is a more reliable indicator of performance where there are sharp
volatility in the profit before tax and net profit from year to year owing to difference in
depreciation charged. This ratio measures the efficiency of operations in terms of cash
generation and is not affected by the method of depreciation charged. It is also useful
for inter-firm comparison of performance since different methods of depreciation may
be adopted by different companies.
Return on Total Assets

The profitability of the firm is measured by establishing relation of net profit
with the total assets of the organization. This ratio indicates the efficiency of
utilization of assets in generating revenue.
This ratio is calculated as follows:
Net Profit after Tax
= ---------------------- X 100
Total Assets

38
Return on Shareholders’ funds
This ratio expresses the net profit in terms of the equity shareholders funds.
This ratio is an important yardstick of performance for equity shareholders since it
indicates the return on the funds employed by them. However, this measure is based
on the historical net worth and will be high for old plants and low for new plants.
Net Profit after Interest and Tax

= ------------------------------------------ X 100
Net Worth
Net worth = Equity capital + Reserves and Surplus

This ratio is useful in measuring the rate of return as a percentage of the book value of
shareholders equity.
Return on Equity
Profit after Tax Net Sales Total Assets

= -------------------------- X ---------------- X --------------------
Net Sales Total Assets Net Worth
The ratio indicates: measure of profitability, the efficiency in use of assets in

achieving sales, measure of leverage.

39
Operating Ratio
Operating ratio expresses the relationship of cost of goods sold plus operating
expenses to net sales.
perating Cost
Operating Ratio = -------------------- X 100
Net Sales
Cost of Goods Sold + Operating Expenses

Operating Ratio = --------------------------------------------------- X 100
Net Sales
Uses of Operating Ratio

Operating ratio indicates the operating efficiency of the company. It depicts the cost
picture or the debit aspect of the profit margin ratio. Higher the operating ratio, given
a level of sales, lower will be the profit margin or the net profit ratio.
Advantages of Operating Ratio

The operating ratio leads itself to the idea of standards and standard costs. An
evaluation of the efficiency of an enterprise can be made with a fair degree of
precision. Every enterprise has a typical operating ratio. The idea of hying down
norms is, therefore, a feasible proposition.
This ratio is useful as a yardstick to measure the efficiency of the business
enterprises, with respect to the inputs associated with the various functional areas of
business management, marketing, administration and finance.
Operating Profit Ratio = Operating Profit X Net Sales X 100
Expense Ratio
Expense ratio called cost ratios, show the relationship between operating costs
and expenses on the one hand and volume of sales on the other. In other words, these
ratios express each element of cost and expenses as percentage of sales.
Expenses
Expenses Ratio = -------------------- X 100
Net Sales
Interest cover

40
The interest coverage ratio shows how many times interest charges are covered
by funds that are available for payment of interest. Interest cover indicates how many
times a company can cover its current interest payments out of current profits. It gives
an indication of problem in servicing the debt. An interest cover of more than 7 times
regarded as safe and more than 3 times is desirable. An interest cover of 2 times is
considered reasonable by financial institutions.
Profit before Interest, Depreciation and Tax
= -------------------------------------------------------- X 100
Interest
A very high interest cover ratio indicates that the firm is conservative in using debt
and a very low interest coverage ratio indicates excessive use of debt.
Dividend cover
This ratio indicates the number of times the dividends are covered by net profit.
This highlights the amount retained by a company for financing of future operations.
(a) Equity Dividend Cover
Net Profit after Tax -- Preference Dividend
= --------------------------------------------------------
Equity Dividend
(b) Preference Dividend cover

= --------------------------------
Preference Dividend
Debt Service Coverage ratio

Debt service Coverage Ratio is the key indicator to the lender to assess the
extent of ability of the borrower to service the loan in regard to timely payment of
interest and repayment of loan installment.
Profit after Taxes + Depreciation + Interest on Loan

= ---------------------------------------------------------------------
Interest on Loan + Loan repayment in a Year

41
The greater debt service coverage ratio indicates the better debt servicing
capacity of the organization. A ratio of 2 is considered satisfactory by the financial
institutions. By means of cash flow projection, the borrower should work DSCR for
the entire duration of the loan.
This will be use full to lender to take correct view of the borrower’s repayment
capacity. This ratio indicates whether the business is earning sufficient profits to pay
not only the interest charges by also the installments due of the principal amount.
Advantages of Expense Ratio

 These ratios are easy to compute and simple to understand. This advantage
strongly speaks of these expenses ratios as a practical tool of financial analysis.
 The expense ratios presented in logical form can throw light on the efficiencies
of internal operations of a business unit.
 The expense ratios lend themselves to scientific standards and, therefore,
provide readymade norms that can be used to compare the actual performance
with predetermined performance.
Return on Capital Employed:

This ratio is also called Return on Investment (ROI). The strategic aim of a
business enterprise is to earn a return on capital. If in any particular case, the return in
the long-run in not satisfactory, then the deficiency should be corrected or the activity
be abandoned for a more favorable one. The return on investment is determined by
dividing net profit or income by the capital employed or investment made to achieve
that profit.
ROI consists of two components:
(a) Profit Margin,
(b) Investment Turnover.
Net Profit Net Profit Sales

---------------- Or --------------------- X ------------------------
Capital Employed Sales Capital Employed
Advantages of Return on Investment Ratio

Return on investment analysis provides a strong incentive for optimal
utilization of the assets of the company. This encourages managers to obtain assets
that will provide a satisfactory return on investment and to dispose of assets that are
not providing an acceptable return.

42
In selecting amongst alternative long-term investment proposals, ROI provides
a suitable measure for assessment of profitability of each proposal. The return on
capital employed ratio is helpful in measuring the managerial performance in the
following ways:
 It helps in making comparison of inter-divisional and inter-firm comparison.

 It helps in measuring the profitability of the firm.
 It indicates how effectively the operating assets are used in earning return.
 The actual return on capital employed can be compared with the targeted rate of
return.
 It focuses the attention on efficiency of management in managing the investments
made into business.
 It can be used as a sensitive gauge of profit making ability of the firm.
 It correlates the return with various assets used in the business.
Return on Capital Employed Ratio

Return on capital employed is the ratio of adjusted net profit to capital
employed. It is expressed in percentage. The return on “Capital employed” may be
based on Gross Capital or Net Employed.
Profit
Return on Capital Employed Ratio = ----------------------------- X 100
Net Capital Employed
Advantages of Computing return on Capital Employed

 Return on capital employed shows overall profitability of business.
 It shows the overall performance of the business enterprise.
 It facilitates comparisons of the relative profitability of the various departments
and the different types of products.
 It helps in evaluating and controlling capital expenditure projects
 It helps in profit planning.
MARKET BASED RATIOS

Market-based ratios give management an indication of what investors think of
the company’s past performance and future prospects. The market based ratios relate
the firm’s stock price to its earnings and book value per share. If firm’s profitability,
solvency and turnover ratios are good, then the market based ratios will be high and its
share price price is also expected to be high.

43
Earnings per Share
The EPS is one of the important measures of economic performance of a
corporate entity. The flow of capital to the companies under the present imperfect
capital market conditions would be made on the evaluation of EPS.
A higher EPS means better capital productivity. EPS is one of the most
important ratios which measure the net profit earned per share. EPS is one of the
major factors affecting the dividend policy of the firm and the market prices of the
company. A steady growth in EPS year after year indicates a good track of
profitability. EPS is computed by dividing the net profit after tax and dividend to
preference share holders.
This avoids confusion and indicates the profit available to the ordinary shareholders
on a “per share basis”.
Net Profit after Tax and Preference Dividend
EPS = ----------------------------------------------------------------- X 100
No. of Equity Shares
Price Earnings Ratio

It measures the number of times the earnings per share discounts the market price of
an equity share. The ratio indicates the market price of an equity share to the earnings
per share. This is one of the important valuation ratios. Risk involved in the
investment and return on investment is the two vital factors which influence the
valuation. These two have a combined impact on valuation. The utility of price
earnings ratio is that the investor can think of better investment by adopting this ratio.
For the management too, this ratio helps in financial forecasting. The share valuation
can also be easily assessed. The management can now asses, whether the share is
undervalued or overvalued. It is computed as follows:
Price Earnings Ratio = Market Price Share / Earnings per share
Benefits of Price Earnings Ratio

 This ratio indicates how much an investor is prepared to pay per rupee of
earnings.
 Price Earnings ratio reflects the market’s confidence on company’s equity.
 This ratio helps to ascertain the value of equity share,
 Price-earning approach to share valuations simple and more poplar.
 Price-earning approach to share valuation is simple and more popular.

44
 This ratio reflects the market’s assessment of the future earnings potential of the
company.
Market Price to Book Value Ratio

This Ratio measures the relationship between the accounting value of the firm’s
assets and the market price of its stock. In case of growth firms i.e., firms with high
growth of sales and earnings will have this ratio higher than 1, for the reason that the
potential future growth in earnings is reflected in the current stock price. The ratio is
calculated by dividing the stock price per share by the book value of share.
Market price per share
= --------------------------------
Book value per share
Cash Earnings per Share

Cash earnings per share is a more reliable yardstick for measurement of
performance of companies, especially for highly capital intensive industries where
provision for depreciations substantial. This measures the cash earnings per share and
is also a relevant factor for determining the price for the company’s shares. This
method is not as popular as EPS and is used as a supplementary measure of
performance only. The cash earnings per share is calculated by dividing the net profit
before depreciation with number of equity shares.
Net Profit after Tax + Depreciation
= -------------------------------------------
No of Equity Share
Dividend Payout Ratio
Dividend payout ratio indicates the extent of the net profits distributed to the
shareholders as dividend. A high payout signifies a liberal distribution policy and a
low payout reflects conservative distribution policy. This ratio is calculated by
dividend per share dividend by the earnings per share
Dividend per Share
= ------------------------
Earnings per Share
Book Value
The book value is a reflection of the past earnings and the distribution policy of
the company. A high book value indicates that a company has huge reserves and is a
potential bonus candidate. A low book value signifies a liberal distribution policy of

45
bonus and dividends, or a poor track record of profitability. Book value ratio indicates
the net worth per equity share.
Equity Capital + Reserves – Profit and Loss A/c Debit balance
= --------------------------------------------------------------------------------
Total number of Equity Shares
Dividend Yield
Dividend Yield Ratio reflects the percentage yield than an investor receives on
this investment at the current market price of the shares. This ratio is computed by
dividend per share divided by market price multiplied b hundred.
Dividend per Share

Dividend Yield = ------------------------------ X 100
Market Price

46
ANALYSIS AND INTERPRETATION OF DATA
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-3-2012 TO 31-3-2014
Mar 2014 Mar 2013 Mar 2012
INCOME :
Interest Earned 3983.42 2823.11 2311.80
Other Income 542.08 380.18 372.54
Total I 4525.50 3203.29 2684.34
II. Expenditure
Interest expended 3058.42 1751.16 1339.02
Payments to/Provisions for Employees 404.92 392.14 378.84
Operating Expenses & Administrative 145.38 120.60 108.04
Expenses
Depreciation 30.80 39.58 39.85
Other Expenses, Provisions & 608.39 552.06 639.13
Contingencies
Provision for Tax 0.00 -7.79 17.00
Fringe Benefit tax 3.40 4.10 3.35
Deferred Tax -87.09 20.10 32.23
Total II 4160.82 2867.85 2554.11
III. Profit & Loss
Reported Net Profit 361.28 331.34 126.88
Extraordinary Items 5.31 8.84 -0.04
Adjusted Net Profit 355.97 322.50 126.92
Prior Year Adjustments -4.76 0.00 -1.20
Profit brought forward 610.8 493.04 240.77
IV. Appropriations
Transfer to Statutory Reserve 90.32 82.84 31.74
Transfer to Other Reserves 24.96 30.50 -207.76
Trans. to Government /Proposed 101.44 100.15 49.43
Dividend
Balance carried forward to Balance 750.69 610.89 493.04
Sheet
Equity Dividend % 20.00 20.00 10.00
Earnings Per Share-Unit Curr 7.99 7.33 2.79
Earnings Per Share(Adj)-Unit Curr 7.99 7.33 2.79
Book Value-Unit Curr 48.59 42.70 37.37

47
BALANCE SHEET AS ON 31-3-2012 TO 31-3-2014
(Rs. In Crores)
Particulars Mar 2014 Mar 2013 Mar 2012
SOURCES OF FUNDS :
Capital 433.52 433.52 433.52
Reserves Total 2025.53 1463.16 1235.63

Deposits 47952.01 37604.50 27709.29
Borrowings 1918.87 198.14 515.82
Other Liabilities & Provisions 3855.19 2658.25 1642.79
TOTAL LIABILITIES 56185.12 42357.57 31537.05
APPLICATION OF FUNDS :
Cash & Balances with RBI 5661.55 3399.71 2248.64
Balances with Banks & money at
435.81 1670.41 586.50
Call
Investments 16617.32 12018.41 11179.70
Advances 31689.22 24223.55 16664.01
Fixed Assets 507.82 186.18 202.49
Other Assets 1273.40 859.31 655.71
Miscellaneous Expenditure not
0.00 0.00 0.00
written off
TOTAL ASSETS 56185.12 42357.57 31537.05
Current Assets (Rs. In Crores)
Particulars 2011-12 2011-12 2013-14

Cash Balance RBI 2248.64 3399.71 5661.55
Balance with Bank 586.50 1670.41 435.81
Other Assets 655.71 859.31 1273.40
Total 3490.85 5921.43 7370.76

48
Total Assets (Rs. In Crores)
Particulars 2011-12 2012-13 2013-14
Cash Balance RBI 2248.64 3399.71 5661.55
Balance with Bank 586.50 1670.41 435.81
Investments 11179.70 12018.41 16617.32
Advances 16664.01 24223.55 31689.22
Fixed Asset 202.49 186.18 507.82
Other Assets 655.71 859.31 1273.40
Total 31537.05 42357.57 56185.12
Absolute liquid Assets

(Rs. In Crores)
Particulars 2011-12 2012-13 2013-14
Cash in Hand 2248.64 3399.71 5661.55
Cash at Bank 586.50 1670.41 435.81
Total 2835.14 5070.12 6097.36
Current Liabilities (Rs. In Crores)

Particulars 2011-12 2012-13 2013-14
Liabi & Pro 1642.79 2658.25 3855.19
Total 1642.79 2658.25 3855.19
Debt (Rs. In Crores)

Particulars 2011-12 2012-13 2013-14
Borrowing 515.82 198.14 1918.87
Total 515.82 198.14 1918.87
Equity ` (Rs. In Crores)

Particulars 2011-12 2012-13 2013-14
Equity 433.52 433.52 433.52
Total 433.52 433.52 433.52

49
Fixed interest bearing funds (Rs. In Crores)
Particulars 2011-12 2012-13 2013-14
Borrowing 515.82 198.14 1918.87
Total 515.82 198.14 1918.87
Equity Share Holders fund (Rs. In Crores)

Particulars 2011-12 2012-13 2013-14
Equity 433.52 433.52 433.52
R&S 1235.63 1463.16 2025.53
Total 1669.15 1896.68 2459.05
Net Profit after tax (Rs. In Crores)

Particulars 2011-12 2012-13 2013-14
N PAT 126.88 331.34 361.28
Total 126.88 331.34 361.28
Long term funds (Rs. In Crores)

Particulars 2011-12 2012-13 2013-14
Equity 433.52 433.52 433.52
R&S 1235.63 1463.16 2025.53
LTL 1918.87 198.14 515.82

Total 3588.02 2094.82 2974.87

50
Chapter 5
DATA ANALYSIS AND INTERPRETATION

51
“Evaluating the Ratio Analysis of Vijaya bank”
1. Current Ratio:
Current assets
Current Ratio= ------------------------
Current liabilities
(Rs. in Crores)
Particulars/years 2011-12 2012-13 2013-14
Current Assets 3490.85 5929.43 7370.76
Current Liability 1642.79 2658.25 3855.19
Current Ratio 2.12 2.23 1.89
Interpretation:
The above table and graph shows that the total current ratio is 2.12 in 2011-12, in the year
2012-13 the CR increased to 2.23 and which has been decreased 1.89 in the year 2013-14,
This ratio measures that efficient of the management and utilization of assets here in the year
2011-12 lower the turn over which has been increases in the year 2012-13 more efficiency and
utilization of assets in that year. In the year in2013-14 which has been decreases the current
ratio underutilization of available resources and presence of idle capacity.

52
2. Shareholders Equity Ratio:
Shareholder’s Equity
-----------------------------
Total Assets (Tangible)
(Rs.in Crores)
Shareholder’s Equity 1669.15 1896.68 2459.05
Total Assets 31537.05 42357.57 56185.12
S E Ratio 0.053 0.045 0.044
Interpretation:
The above table and graph shows that the total of SER is 0.053 in 2011-12 in the year
2012-13 the SER is decreased to 0.045 in the year 2013-14. This ratio measures that larger
the proportion of the share holders equity, the stronger is the financial position of the firm,. A
reduction in shareholder’s equity signaling the over-dependence on outside sources.

53
3. Absolute liquid ratio:
Absolute liquid assets

Cash Ratio= -----------------------------
Current liabilities
(Rs. in Crores)
Absolute liquid Assets 2835.14 5070.12 6097.36
Current Liability 1642.79 2658.25 3855.19
Cash Ratio 1.73 1.90 0.63
Interpretation:
The above table and graph shows that the total of ALR is 1.73 in 2011-12, in the year
2012-13 the ALR is increased to 1.90 and which has been decreased 0.63 in the year 2013-14.
This ratio measures cash position f the financial institutions the ideal absolute Liquid ratio
will be taken as 1:2.

54
4. Debt Equity ratio:
Debt
Debt-equity ratio = --------------------
Equity
(Rs in Crores)
Debt 515.82 198.14 1918.87
Equity 433.52 433.52 433.52
Debt Equity ratio 0.84 0.45 4.42
2011-12 2012-13 2013-14
Interpretation:
The above table and graphs shows that the DE ratio is 0.84 in 2011-12, in the year 2012-
13 it decreases to 0.45 and which has been increases to 4.42 in 2013-14. This measures the
relative claim of creditors and owners in a business organization. Higher ratio is considered
as a risky position for the firm and lower ratio indicates a sound financial position.

55
5. Debt to asset ratio:
The debt to asset ratio measures the extent to which borrowed funds supports the
firm’s assets.
Debt
Debt to asset ratio=-----------------------------
Asset
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
Debt 515.82 198.14 1918.87
Asset 31537.05 42357.57 56185.12
DAR 0.016 0.0046 0.034
2011-12 2012-13 2013-14
Interpretation:
The above table and graph shows that the DAR is 0.016 in 2011-12, in the year 2012-13 is
decreased to 0.0041 and which has been increased to 0.034 in 2013-14. This ratio would be
more interest to the contributories of long term finance to the firm. It give idea of the assets
available to meet the long term Liabilities.

56
6. Capital Gearing Ratio:
Fixed Interest Bearing Funds

= --------------------------------------
Equity Shareholders Funds
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
FIBF 515.82 198.14 1918.87
ESF 1669.15 1896.68 2459.05
CG Ratio 0.31 0.10 0.78
2011-12 2012-13 2013-14
Interpretation:
The above table and graph shows that the total CGR is 0.31 in 2011-12 in the year 2012-
13 the CGR is decreased to 0.10 and which has been increased to 0.78 in 2013-14. This
indicates the degree of availability of earnings for equity shareholders. It indicates the
changes of benefits acquiring to equity shareholders by changing the levels of fixed interest
bearing funds in the organization.

57
7. Return on Total Assets:
= ---------------------- X 100
Total Assets
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
NPAT 126.88 331.34 361.28
TA 31537.05 42357.57 56185.12
ROTA 0.40 0.78 0.64
2011-12 2012-13 2013-14
Interpretation:
The above table and graph shows that the total of RTA is 0.40 in 2011-12, in the year
2012-13 the RTA is increased to 0.78 and which has been decreased to 0.64 in 2013-14. This
measures the profitability of the firm and it also indicates the efficiency of utilization of assets
in generating revenues.

58
8. Long-term Debt to Shareholders Net worth Ratio:
Long-term Debt
= -----------------------------
Shareholders Net Worth
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
LTD 515.82 198.14 1918.87
SNW 1669.15 1896.68 2459.05
SNR 0.309 0.104 0.780
2011-12 2012-13 2013-14
Interpretation:
The above table and graph shows that the total of LTO is 0.309 in 2011-12, in the year
2012-13 the LTD is decreased to 0.104 and which has been increased to 0.7803 in 2013-14.
This ratio would be of more interest to the contributories of long-term finance to the firm, as
the ratio give a factual idea of the assets available to meet the Long-term Liabilities.

59
9. Fixed Assets to Long-Term Funds Ratio:
Fixed Assets
= -----------------------------
Long – Term Funds
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
FA 202.49 186.18 507.82
LTF 3588.02 2094.82 2974.87
FALT Ratio 0.056 0.089 0.171
2011-12 2012-13 2013-14
Interpretation:
The above table and graph shows that the total of FA to LTFR is 0.056 in 2011-12, in the
year 2012-13 the FA to LTFR is increased to 0.089 and which has been increased to 0.171 in
2013-14. This indicates the higher the ratio indicates the safer the funds available in case of
Liquidation. It also indicates the proportion of Long-term funds that is invested in working
capital.

60
10. Current Assets to Net worth Ratio
Current Assets to net worth Ratio = Current Assets / Net worth
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
CA 3490.84 5929.42 7370.76
NW 1669.15 1896.68 2459.05
CANWR 2.09 3.13 3.00
2011-12 2012-13 2013-14
Interpretation:
The above table and graph shows that the total of is 2.09 in 2011-12, in the year 2012-13
the increased to 3.13 and which has been decreased to 3.00 in 2013-14. This ratio shows the
current Assets financial by owners of the business and shows the relative claim of owners on
the fixed assets of the business organization.

61
11. Return on Shareholders’ funds:
Net Profit after Interest and Tax

= ------------------------------------------ X 100
Net Worth
Net worth = Equity capital + Reserves and Surplus
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
NPIT 126.88 334.68 361.28
NW 1669.15 1896.68 2459.05
ROSF 7.60 17.47 17.84
Interpretation:
The above table and graph shows that the total of RNW is 7.60 in 2011-12. In the year
2012-13 the RNW is increased to 17.47 and which has been increased to 17.84 in the 2013-
14. This ratio expresses the net profit in terms of equity shareholders funds.

62
12. Interest cover :
Profit before Interest, Depreciation and Tax

= -------------------------------------------------------- X 100
Interest
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
PBIT 2684.34 3203.29 4525.50
Interest 1339.02 1751.16 3058.42
Times 2.00 1.83 1.48
Interpretation:
The above table and graph shows that the interest cover is 2.00 times in 2011-12, in the
year 2012-13 is decreased to 1.83 times and which has been decreased to 1.83 times and
which has been decreased to 1.48 times in 2013-14. The interest coverage ratio shows how
many times a company can cover its current interest payments out of current profits. An
interest cover of 2 times is considered reasonable by financial institution.

63
13. Debt Service Coverage Ratio:
Profit after Taxes + Depreciation + Interest on Loan

= ---------------------------------------------------------------------
Interest on Loan + Loan repayment in a Year
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
PDI 4010.63 4977.53 7699.03
Interest on Loan 1339.02 1751.16 3058.42
DSCR 2.99 2.84 2.52
Interpretation:
In the above table and graph shows that the DSCR is 2.99 in 2011-12, in the year 2012-13
is decreased to 2.84 and which has been decreased to 2.52 in 2013-14. The greater debt
service coverage ratio indicates the better debt servicing capacity of the organization. A ratio
of 2 is considered satisfactory by the financial institutions.

64
14. Return on Capital Employed
Net Profit
= ----------------
Capital Employed
(Rs. in Crores)
Particulars 2011-12 2012-13 2013-14
Net Profit 1126.92 322.50 2183.97
CE 2183.21 2094.82 4373.22
RCE 0.058 0.15 0.16
Interpretation:
In the above table and graph shows that the Return on capital employed is 0.0581 in
2011-12. In the year 2012-13 is increased to 0.154 and which has been increased to 0.163 in
2013-14. This shows the overall performance and overall profitability of business. It also
evaluating control the capital expenditure projects.

65
15. Dividend Payout Ratio
Dividend per Share
= ------------------------
Earnings per Share
(Rs in Crore )
Particulars 2011-12 2012-13 2013-14
DPS 1 2 2
EPS 2.79 7.33 7.99
DPR 0.358 0.273 0.250
2011-12 2012-13 2013-14
Interpretation:
The above table and graphs shows that the DPR is 0.36 in 2011-12 in the year 2012-13
it is decreases to 0.273 and which is decreased to 0.2503 in 2013-14 it indicates the extent of
the net profits distributed to the shareholders as divided. A high payout signifies a liberal
distribution policy and a low payout reflects conservative distribution policy.

66
Chapter 6
FINDINGS, SUGGESTIONS AND CONCLUSION

67
Findings, Suggestions and Conclusion
Findings
The standard current ratio is 1.33:1. The company has maintained almost to its
standard current ratio the company has a ability to repay the short term commitments
promptly. The liquidity position of the company should be improved.
 The absolute cash ratio is not near to the standard ratio 0.5:1 lack of immediate
cash may not matter if the firm can stretch its payment or borrow money at short
notice if it is not able to do this, firm should maintain adequate cash and bank
balance to meet short term obligations.
 The debt equity ratio of the company is varying every year. The company is more
dependent debt funds for its operation.
 Subsidiary services of Vijaya bank are well appreciated by their customers & they
enjoy the full benefits of such services.
 Subsidiary services of Vijaya bank are well appreciated by their customers & they
enjoy the full benefits of such services.
 The debt to asset ratio has been increased in the year 2007-2008. This shows that
extent to which borrowed funds support the firm assets. In terms of company
increases the asset proportion compare to debt proportion regarding this company
is efficiency in managing the funds. The company is not fully depends on the
external funds.
 The Dividend Payout Ratio indicates the extent of the net profits distributed to the
shareholders as divided. A high payout signifies a liberal distribution policy and a
low payout reflects conservative distribution policy.
 The Return on capital employed Ratio is 0.0581 in 2011-12. In the year 2012-13 is
increased to 0.154 and which has been increased to 0.163 in 2013-14. This shows
the overall performance and overall profitability of business. It also evaluating
control the capital expenditure projects.

68
Suggestions
 The bank has to increase the profit maximization and has to decrease the operating
expenses.
 By considering the profit maximization in the bank the earning per share,
investment and working capital also increases. Hence, the outsiders are also
interested to invest.
 Return on investment is fluctuates every year. The bank has to make efforts in
increasing return on investments by reducing its administration, selling and other
expenses.
 The bank should increase its interest coverage ratio to serve long term debts.
 The net profit of the bank is increasing over the study period. Hence the
organization maintaining good control on all trees of expenses.

69
Conclusion
As part of the curriculum, the present study has been undertaken at Vijaya bank,
Shimoga.
On the basis of the study, it is concluded that the overall performance of the
Bank is increasing from the year 2011-12. The Bank is earning better returns on their
investment in the year 2007-2008. The shareholders are also getting better returns on
their investment. The short term liquidity position of the Bank is up to that level. The
Bank is depended on its shareholders funds & the debt funds. This decreases the risk
level of the shareholders of the Bank.
There is a drastic improvement can be seen in the Investment and Deposit of the
Bank from the year 2007-2008. It shows the better utilization of owners fund and
borrowed fund in the organization.
In the light of the study, it may be concluded that the overall efficiency of the
Bank has been increased due to the efficiency in operation of the Bank. The Bank can
make a higher profit.
Vijaya Bank has a bright future as it gives greater trust towards technological up
gradation of its operations besides this, the bank has also installed ATM at most of its
branches. Realizing and evolving the diverse needs of customers the bank has
diversified too, entering several new areas such as credit card, merchant banking, hire
purchase and leasing and electronic remittance services etc
Vijaya Bank is one among the few banks in the country to take up principal
membership of VISA international and master card international. Thus the activities of
the bank are improving day to day. Today Vijaya Bank is a vibrant institution. It has
spread its branch network in all 28 states 4 union territories of the country including
Northeastern states.

70
Finally, I want to say that I have gained lots of knowledge from doing this
project, the project has helped me improve my skills and in better understanding of the
ratios.
BIBLIOGRAPHY
BOOKS REFFERED
1. M.Y. Khan and P.K. Jain, Management Accounting (Third Edition), Tata McGraw
Hill.
2. Sudhindra Bhat , Financial Management & Principal and Practice (Second
Edition), Tata McGraw Hill.
3. Donald R Cooper and Pamela S Schindler, Business Research Methods, ( Edition),
Tata McGraw Hill.
WEB SITES
www.vijayabank.com
www.businessline.in
www.google.com.
www.rbi.org
MAGZINES AND JOURNALS

Annual Reports of Vijaya Bank
Vijaya Bank. Manuals

71

Ratio Analysis

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Ratio Analysis

Hochgeladen von

Copyright:

Verfügbare Formate

A STUDY ON RATION ANALYSIS OF VIJAYA BANK,

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

 It is defined as the systematic use of ratio to interpret the financial statements so

Financial management is that managerial activity which is concerned with planning

Hoysala College of Management, Shivamogga

Scope of the study

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

Regional office Shimoga

Hoysala College of Management, Shivamogga

Commercial Banks at Present:

Growth and Development

The Indian banking sector is dominated by 28 state-owned banks which operate

Hoysala College of Management, Shivamogga

The 14 Major Commercial Banks Are

Hoysala College of Management, Shivamogga

Types of retail banks:

Types of investment Banks:

Hoysala College of Management, Shivamogga

Other types of banks:

SCHEDULED BANKING STRUCTURE IN INDIA

Flow chart (1.1)

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

Growth and Development of Vijaya Bank:

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

Nationalization and New Challenges:

Hoysala College of Management, Shivamogga

Bank’s performance in some of the key areas are as under:

Hoysala College of Management, Shivamogga

Business Intiatives – Reaching Out to Customers

Hoysala College of Management, Shivamogga

Plans for 2012-13

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

Hoysala College of Management, Shivamogga

MEANING OF FINANCIAL STATEMENT ANALYSIS

2. Common size statements:

Hoysala College of Management, Shivamogga

4. Funds flow analysis:

5. Cash flow statement:

Hoysala College of Management, Shivamogga

Financial Ratio Analysis

Ratio analysis is used to evaluate relationships among financial statement items.

Ratio analysis is a term accounting ratio is used to describe significant

OBJECTIVES OF RATIO ANALYSIS

Hoysala College of Management, Shivamogga

ADVANTAGES OF RATIO ANALYSIS FOR SHARE HOLDERS:

LIMITATIONS OF RATIO ANALYSIS:

Hoysala College of Management, Shivamogga

FACTORS AFFECTING THE EFFICACY OF RATIOS:

Hoysala College of Management, Shivamogga

The important Ratios in measuring short term solvency are:

Hoysala College of Management, Shivamogga

Components of Current Ratio

A Current Ratio 2:1 indicates a highly solvent position. A Current ratio of

Advantages of Current Ratio

Hoysala College of Management, Shivamogga

Current Assets- Inventory

Advantages of Quick Ratio