PREFACE

The summer training programme is merely objected to understand the corporate world and its aspects so as expose the through this summer training programme trainee undergoing

The corporate world is completely different from the definition of corporate given in the books and what really requires is practical and managerial knowledge to withstand and to make a presence in this professional world.

The Masters of business administration course is not limited to managing things but it has wide areas of performance and perspective, which are applied, in todays world of management jobs. The training programmed as an important part of any organization makes an individual more experienced and practical.

Acknowledgement

Successful completion of any work would be incomplete unless we mention the name of person who made it possible, whose guidance and encouragement served as a beckon of light and crowned my efforts success.

It gives me great pleasure and privilege to express my heartily thanks and deep sense of gratitude towards my guide for her sterling efforts, amicable assistance, and inspiration in all phases of the project work toward the path of completion.

I am grateful to J & K Bank Ltd, Kashmir, for giving me permission for the project work, and availing me their facilities. I am indebted to Mr. Mohammad Ashraf Mir (Associate

Executive) for his prompt assistance and guidance during the course of my project work.

I also take this opportunity to express my sincere thanks toward all staff members of J & K Bank Ltd. For sparing their valuable time especially while clearing my vague concepts in the field of their expertise.

INDEX

SR. NO.

PARTICULARS
EXECUTIVE SUMMERY

PAGE NO.
1 3 6 7 8 9 10 16 20 39 56 59 61

INTRODUCTION OF STUDY 1.1 OBJECTIVE OF STUDY 1.2 SCOPE 1.3 NEED 1.4 LIMITATION OF PROJECT

2 3 4 5 6 7 8

COMPANY PROFILE RESEARCH METHODOLOGY RATIO ANALYSIS DATA ANALYSIS & INTERPRETATION OBSERVATION RECOMMENDATION SUGGESTION & CONCLUSION

BIBLOGRAPHY

64

EXECUTIVE SUMMERY
The project is about RATIO ANALYSIS OF J & K BANK Ltd. project is an opportunity given to management student where one gets an insight in the practical aspect in the day to the theoretical knowledge that one acquire in business school. The project was undertaken to make a study on the various aspect of the RATIO ANALYSIS of the project highlights the main aims and object of project report.

It also explains the great importance of RATIO ANALYSIS. It covers specific introduction of Ratio Analysis. The period covered in project is three

financial years i.e. 2007-08, 2008-09 ,and 2009-10. Research methodology adopted for getting data is empirical in nature and therefore release in the companys annual report and financial statements.

INTRODUCTION OF STUDY
Finance is the starting point of every economic activity. It is called as science of money. Finance is the basic requirement for starting and running every human activity in an objective manner. Likewise finance is essential in business. It is treated as life blood of modern business. It is essential in business as blood is in the human body. Finance denotes money which is essential to initiate and operate business enterprises. The term finance means provision of money at the time it is required. The basic finance functions are as follow: 1. To determine the total capital requirement. 2. To decide the source from which the required capital is to be collected; and 3. To utilize the funds collected in purposeful manner.

Finance management: Management is an activity which is concerned with planning and controlling of different activities, in order to specific objective. It is also defined as an art of getting things done through and with people in formally organized groups. If we apply the concept to financial resources of a firm with a specific objective. In the present changing scenario, financial management deals with decision making on asset mix, capital mix, and profit allocation, etc. an understanding of the environment in which the firm is situated, time value of money, taxation and depreciation policy is essential for finance manager. Main scope of financial management is concerned with the following activities, viz. 1. Raising of funds 2. Investing of funds 3. Other decision like dividend decisions.

RATIO ANALYSIS RELATED TO FINANCIAL MANAGEMENT Use of ratio analysis as tool for financial analysis is given as follows; y The Ratio Analysis emerged as the principal technique of the Analysis of Financial Statement. A ratio analysis expressed in mathematical terms between two individual or groups of figures connected with each other in some logical manner. y A tool used by individuals to conduct a quantitative analysis of information in a companys financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

RESEARCH METHODOLOGY
OBJECTIVE OF PROJECT
As per the rules and regulations set by University, under two years of full time course of MBA degree, a student has to undertake a project related to Management discipline in an organization like manufacturing industry, consultancy firm etc. This project normally include data collection, data sorting, data analysis and making inferences from it, under the guidance of that organizational guide and his/her educational institution guide. Such project work thus become a live platform for the student to know the current management issues, development and the same time he/she can apply the knowledge gained through earlier class-room learning. The project study also provides an opportunity to develop communication skill, analytical skill and also expose to the organizations culture and the actual working of the organization.

SCOPE OF PROJECT
The scope of this project covers a brief RATIOS ANALYSIS STATEMENT of J & K BANK LTD. from 2007-08 and, 2009-10 by using the annual report of the company for the four years. It also includes study of accounting standards and accounting policies related to financial statements. After taken in to consideration each and every financial statement, comparative analysis financial performance of J & K BANK LTD

The scope of study includes:

a) Environment, Threats and Opportunities (ETOP) Analysis for J & K BANK

LTD
b) Statement of RATIO Analysis: y Significance & Objectives y Tools such as Comparative Statements y Trend Analysis, Ratio Analysis y Liquidity/Profitability/Turnover/Leverage Ratios and their trends y Limitations of RATIO ANALYSIS

Concept of Research:

Research concerns itself with obtaining information through empirical observation that can be used to systematically develop logically related prepositions so as to attempt to establish casual relationships among variables. Research may mean the first small in an Endeavor to better understand the change occurring and at times forced upon we as individuals or as a society. Research as a process involves defining & redefining problems, hypothesis formulation, organizing & evaluating data, deriving deductions, inferences & conclusions, after careful testing.

Research Methodology:

Research Methodology is a process of collecting the information & helps to find out the solutions to the topic selected by the researcher. It is a systematic way of presenting information. Once the research problem is formulated and the research design is determined, the next task is data collection. Data are facts, figures and other relevant materials past & present serving as basis for study & analysis. Research Methodology includes Four Stages.

They are as follows:a) Collection of data. b) Analysis of data. c) LEGEND of data. d) Presentation of data.

 Collection of data:
The data is collected on the basis of pre-determined set up objectives, scope & purpose for getting direction. The data is collected in various types as stated below.

 Types of data collected: The different types of data collected are Primary data & Secondary data. The sources or methods of collecting both the types of data are different. The various methods of such data collections are as below.

DATA COLLECTION METHOD The different types of data collected are Primary data & Secondary data. The sources or methods of collecting both the types of data are different. The various methods of such data collections are as below.

1. Primary Data: Primary data was collected from Managers and Executives of Divisional office and Corporate office at Srinagar. This data includes information on company profile, its products, its share holding pattern, Accounting policies and standards etc.

2. Secondary Data: Secondary data was taken from Annual Reports of J & K BANK LTD. for the period of 2007-08, 2009-10, available on companys website www.jkbank.net

LIMITATION OF PROJECT
1. Time constraint:

The time duration given for project work is not enough to get whole knowledge and over all idea of working of the company.

2. Lack of information:

The organisation was not able to provide whole information of its internal work and affairs on the basis of privacy policy. So it unable to the trainee to understand and express the financial position of the organisation.

3. Responses from the employees:

Employees was not too cooperative to provide guideline to do the research due to there daily time schedule of work.

RATIO ANALYSIS: MEANING OF RATIO:

The relationship between two accounting figures, expressed mathematically, is known as financial RATIO (or simply as a ratio). Ratio helps to summarized large quantities of financial data and to make qualitative judgment about firms financial performance .The ratio analysis is the most powerful tool of financial analysis. Many diverse groups of people are interested in analyzing the financial information to indicate the operating and financial efficiency, and growth of the firm.

Ratio analysis plays an important role in the corporate world. It is a widely used tool of financial analysis. Ratio Analysis is relevant in assessing the performance of a firm in respect of liquidity position, long-term solvency, operating efficiency, overall profitability, inter-firm comparison and trend analysis.

DEFINITIONS:
A ratio is an expression of the quantitative relationship between two numbers -Wixon, kell & Beoford Accounting ratio is used to describe significant relationship which exit between figures shown on a balance sheet, P&L a/c or in a budgetary control system. J. Batty Ratio analysis is a study of relationship among the various financial factors in a business. - John. N. Myer With the help of ratio analysis, one can determine:

y The ability of firm to meet its current obligations;

y The extent to which the firm has used its long term solvency by barrowing funds ; y The efficiency with which the firm is utilising its assets in generating sales revenue , and y The overall operating efficiency and performance of the firm. A financial RATIO is the relationship between two accounting figure expressed as a proportion. RATIO provides clues to the financial position of a concern. These are the pointers or indicators of financial strength, soundness, position or weakness of an enterprise. Ratio analysis is one of the methods of analyzing financial statements. It is an attempt to present the information of the financial statements in simplified, systematized and summarized form. It measures the profitability, efficiency and financial soundness of the business. Ratio analysis is therefore, a toll to present the figures of financial statements in simple, concise and intelligible form. There are a number of ratios, which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same, keeping in mind the objectives of analysis.

CLASIFICATION OF RATIOS

Ratio can be classified as under A - LIQUIDITY RATIOS:

Current ratio

 Acid test ratio  Cash ratio  Net working capital ratio

B - LEVERAGE RATIOS:

 Debt ratio  Debt equity ratio  Capital gearing ratio  Capital employed to net worth ratio
C TURNOVER/ACTIVITY RATIOS:

 Inventory turnover ratio  Net asset turnover ratio  Working capital turnover ratio  Debtors turnover ratio  Creditors turnover ratio 
Fixed asset turnover ratio D - PROFITABILITY RATIOS:
   

Gross profit margin ratio Net profit margin ratio Operating expenses ratio Return on Investment

    

Return on equity Earnings per share Dividends per share Dividend payout ratio Price earnings ratio

A. LIQUIDITY RATIOS:
y

Liquidity ratios measure the firms ability to meet current obligations. It is extremely essential for a firm to be able to meet its obligations as they become due liquidity ratio's measure. The ability of the firm to meet its current obligations. In fact analysis is of liquidity needs in the preparation of cash budgets and cash and funds flow statements, but liquidity ratios by establishing a relationship between cash and other current assets to current obligations provide a quick measure of liquidity. Main types of liquidity ratios are : 1. Current ratio 2. Acid Test Ratio/Quick ratio 3. Cash Ratio 4. Net Working Capital Ratio

A. 1.CURRENT RATIO
The ratio is worked out by dividing the current assets of the concern by its current liabilities.

CURRENT RATIO = CURRENT ASSETS/ LIABILITIES

Current ratios indicate the relation between current assets and current liabilities. Current liabilities represent the immediate financial obligations of the company. Current assets are the sources of repayment of current liabilities. Therefore, the ratio measures the capacity of the company to meet financial obligation as and when they arise.

A. 2. ACID TEST RATIO/QUICK RATIO :

Quick assets represent current assets excluding stock and prepaid expenses. Stock is excluded because it is not immediately realizable in cash. Prepaid expenses are excluded because they cannot be realized in cash.
QUICK RATIO= (CAINVENTORIES)/CURRENT LIABILITIES

One of the defects of current ratio is that it does not measure accurately to meet financial commitments as and when they arise. This is because the Current assets include also items that are not easily realizable, such as stock. The ACID TEST RATIO Is a refinement of current ratio and is calculated to measure the ability of the company to meet the liquidity requirements in the immediate future. A minimum of 1: 1 is expected which indicates that the concern can fully meet its financial obligations. This also called as LIQUID RATIO OR QUICK RATIO.

A.3. CASH RATIO:

Since cash is the most liquid asset, a financial analyst may examine cash ratio and its equivalent to of cash ratio.

CASH RATIO=CASH & BANK BALANCE/CURRENT A. 4 .NET WORKING CAPITAL RATIO:

The difference between current assets and current liabilities excluding short term bank borrowing is called net working capital or net current assets.

NET W.C RATIO = NET WORKING CAPITAL / NET ASSETS

The use of this ratio is twofold. First, it can be used to measure the efficiency of the use of working capital in the unit. Secondly, it can be used as a base for measuring the requirements of working capital for an expected increase in sales. B. LEVERAGE RATIOS: The short term creditors, like bankers and suppliers of raw material are more concerned with the firms current debt paying ability. On the other hand, long term creditors like debenture holders, financial institutions etc. are more concerned with firms long term financial strength. In fact a firm should have short as well as long term financial position. To judge the long term financial position of the firm, financial leverage or capital structure, ratios are calculated. These ratios indicate mix of funds provided by owners and lenders. As a general rule, there should be an appropriate mix of debt and owners equity in financing the firm's assets. Main types of leverage ratios are: 1. Debt Ratio 2. Debt Equity Ratio 3. Capital employed to net worth ratio

B. 1. DEBT RATIO: Several debt ratios may be used to analyse the long term solvency of the firm. It may therefore compute debt ratio by dividing total debt by capital employed or net assets.
DEBT RATIO = TOTAL DEBT / NET ASSETS

B.2. DEBT EQUITY RATIO:

It is computed by dividing long term borrowed capital or total debt by Share holders fund or net worth.

DEBT EQUITY RATIO = TOTAL DEBT / NET WORTH

B. 3. CAPITAL EMPLOYED TO NET WORTH RATIO:

There is an alternative way of expressing the basic relationship between debt and equity. It helps in knowing, how much funds are being contributed together by lenders and owners for each rupee of owner's contribution. This can be found out by calculating the ratio of capital employed or net assets to net worth. CAPITAL EMPLOYED TO NETWORTH RATIO = CA / NW

B. TURNOVER/ACTIVITY RATIOS:
Funds of creditors and owners are invested in various assets to generate sales and profits. The better the management of assets, the larger is an amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets these ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. Activity ratios, thus, involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well.

C. 1. INVENTORY TURNOVER RATIO:

The ratio is usually expressed as number of times the stock has turned over. Inventory management forms the crucial part of working capital management. As a major portion of the bank advance is for the holding of inventory, a study of the adequacy of abundance of the stocks held by the company in relation to its production needs requires to be made carefully by the bank. A higher ratio may mean (higher turnover or less holding periods):
y

The stocks are moving well and there is efficient inventory management; or the stocks are purchased in small quantities. This may be harmful if sufficient quantities are not available for production needs; secondly, buying in small quantities may increase the cost.

Contrarily, a lower ratio (i.e. lower turnover of longer holding period may be an index of : y Accumulation of large stocks not commensurate with production requirements. y A reflection of inefficient inventory management or over-valuation of stocks for balance sheet purposes; or Stagnation in sales, if stocks comprise mostly finished goods Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. It is calculated by dividing Net Sales by average inventory. Average inventory consists of opening stock plus closing stock divided by 2.

INVENTORY TURNOVER RATIO = SALES / AVERAGE INVENTORY

C. 2. NET ASSETS TURNOVER RATIO:

A firm should manage its assets efficiently to maximise sales. The relationship between sales and (fixed or current) assets is called (fixed or current) assets turnover ratio. A lower ratio may indicate inefficiency of assets. It may also be indicative of under utilizations or non-utilization of certain assets. Thus with the help of this ratio, it is possible to identify such underlined or unutilised assets and arrange for their disposal.

y y

FA TURNOVER RATIO= SALES / FIXED ASSETS CATURNOVER RATIO= SALES/ CURRENT ASSETS

C. 3. WORKING CAPITAL TURNOVER RATIO:

A firm may also like to relate net current assets to sales. It may thus compute net working capital turnover by dividing sales by net working capital.

WORKING CAPITAL TURNOVER RATIO = SALES / NCA

It reflects lesser requirement of funds from bank borrowings and long term sources of funds.

C.4. DEBTORS TURNOVER RATIO

The Debtors Turnover measures the number of times Accounts Receivable was collected during the year. This is also a measure of how well the company collects sales on credit from its customers, just as Average Collection Period measures this in days.

This ratio is calculated by dividing sales by average debtors CREDIT SALES DEBTORS TURNOVER RATIO = --------------------------------AVERAGE DEBTORS + BILLS RECEIVABLE

C.5. CREDITORS TURNOVER RATIO

This indicates the payment to the creditor by the company. The ideal value depends on the terms and credit period provided by the creditors. But the higher the ratio, the better it is, since it indicates that the creditors are being paid more quickly which increases the credit worthiness of the firm.

Creditor turnover ratio =

Net credit purchase

Average creditor + Bills payable

AVERAGE CREDITORS + BILLS PAYABLE

D. PROFITABILITY RATIOS:

A company should earn profits to survive and grow over a long period of time. Profits are essential but it would be wrong to assume that every action initiated by management of a company should be aimed at maximizing profits, irrespective of social consequences. Profit is the difference between revenues and expenses over a period of time. Profit is the ultimate output of a company and it will have no future if it fails to make sufficient profits. Therefore, the financial manager should continuously evaluate the efficiency of the company in terms of profits. The Profitability ratios are calculated to measure the operating efficiency of the company. The major types of profitability ratios are:

1. Profitability in relation to sales 2. Profitability in relation to investment TYPE OF PROFITABILITY RAIOS

        

Gross profit margin ratio Net profit margin ratio Operating expenses ratio Return on Investment Return on equity Earning per share Dividends per share Dividend pay out ratio Price earning ratio

D.1. GROSS PROFIT RATIO:

It is calculated by dividing gross profit by sales. The gross profit margin reflects the efficiency with which management produces each unit of product. This ratio indicates the average spread between the cost of goods sold and the sales revenue. GROSS PROFIT RATIO = GROSS PROFIT * 100 NET SALES D.2. NET PROFIT RATIO: Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross profit. The net profit margin is measured by dividing profit after tax or net profit by sales.

D. 3. RETURN ON INVESTMENT (ROI) :

The ROI is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell the company, put the money in such a savings instrument, and avoid the daily struggles of small business management.

ROI can be calculated in three ways: Return on Investment = Return on Net worth = Return on Capital Employed = Return on Total Assets

Return on invested capital is an important indicator of a companys long term financial strength. It uses key summary features from both the income statement and

the balance sheet to assess profitability. It can effectively convey the return on invested capital from varying perspectives of different financing contributors.

D.3-1 Return on Net worth (RONW):

(Net after Tax Profit divided by Net Worth) is the 'final measure' of profitability to evaluate overall return. This ratio measures return relative to investment in the company. Return on Net Worth also indicates how well a company leverages the investment in it.

RONW = PAT / Net Worth*100

D.3-2 Return on Capital Employed (ROCE):

It is a ratio that indicates the efficiency and profitability of a company's capital investments. It is calculated as:

ROCE = PBIT / CAPITAL EMPLOYED

ROCE should ideally be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earning

D.4 .RETURN ON EQUITY (ROE OR RONW):

Ordinary share holders are entitled to the residual profits. A return on shareholders equity is calculated to see the profitability of owners investment. Return on equity indicates how well the firm has used the resources of owners. The earning of a satisfactory return is the most desirable objective of business

RETURN ON EQUITY = PAT / NET WORTH D.5. EARNINGS PER SHARE:

The earnings per share is calculated by dividing Profit After Tax (PAT) by total number of outstanding shares. EPS simply shows the profitability of the firm on a per share basis, it does not reflect how much is paid as dividend and how much is retained in business. EARNINGS PER SHARE=PAT/NO. OF OUTSTANDING SHARES

D.6. DIVIDENDS PER SHARE:

The net profits after taxes belong to shareholders. But the income which they really receive is the amount of earnings distributed as cash dividends. Therefore, a larger number of present and potential investors may be interested in DPS rather than EPS. DPS is the earnings distributed to ordinary shareholders divided by the number of ordinary shares outstanding.

DPS= EARNINGS PAID TO SHAREHOLDERS/NO. OF O/S SHARES

D.7. DIVIDEND PAY OUT RATIO:

The dividend payout ratio is simply the dividend per share divided by Earnings Per Share and used in business activities and the firm has been able to improve the growth in equity as well

DIVIDEND PAY OUT RATIO= DPS/EPS

SIGNIFICANCE OF RATIO ANALYSIS There significance OF RATIO ANALTSIS to the different parties these are as follows.

1. Management 2. Shareholder 3. Workers 4. Creditors 5. Government 6. Potential investor 7. Economist and researcher

ADVANTAGES OF RATIO ANALYSIS

Those RATIO ANALYSIS is advantageous to different parties general advantages of RATIO ANALYSIS are as under

1. RATIOS show financial position of the firm. this helps banks ,Insurance co. as well as other financial institution in assessing a firm before sanctioning any lone to those. 2. RATIO ANLYSIS are very useful in enter firm and intra firm comparison. Inter firm comparison is necessary to find out exact position of the firm as compared to other firms in same industry. 3. If accounting ratios are calculated for no. of year a trend can be established. This trend helps in setting future plan and forecasting. 4. RATIOS ANALYSIS are great assistance in locating in weak spots in the business

1.4 LIMITATION OF RATIO ANALYSIS

1. Ratios are calculated from the data drawn from the accounting records hence they are exposed to the well known weaknesses of the accounting system itself which is source of data.

2. Ratios cannot provide exact measure of financial performance, since they are based are financial statement which are prepared subject to the accounting conventions, personal judgements and recorded facts.

3. Ratios consider only those information which

can be expressed in terms of

monetary values, hence many non monetary factor which are vital for the survival and growth of the enterprises are ignored.

4. Meaningful inferences from ratios can be drawn on comparison. However this comparison would not reveal meaningful conclusion when there is differences in situation prevailing in two different companies or when different situation prevails over different years in the same company.

5. Ratios can be work out in different ways. There is no standardise formula for working out particular ratio. Hence ratio analysis exercise would yield no meaningful results when the ratios are calculated by adopting one particular standard formula.

6. Ratios are calculated based on past historical records, therefore they cannot be an indicator of futurity of any particular course of action. They just tell what happened in the past which may not necessarily happen or occur in the future.

7. Ratios only point out the existence of certain situations which need further investigation to conform whether a situation favourable or unfavourable does exist.

8. A proper basis of comparison is difficult to decide upon.

9. Calculation of too many ratios would lead to confusion rather than to many full conclusions.

10. Ratios cannot in any way be a substitute for efficiency and decision making and cannot replace them.

JAMMU AND KASHMIR BANK LIMITED

JAMMU AND KASHMIR BANK PROFILE

BREIF HISTORY:
Jammu & Kashmir Bank was founded on October 1, 1938 and it commenced business from July 4, 1939. The Jammu & Kashmir Bank Limited has been the first of its nature and composition as a State owned bank in the country. The Bank was established as a semi State Bank with participation in capital by State and the public under the control of State Government. According to the extended Central laws of the state, Jammu & Kashmir Bank was defined as a govt. Company as per the provision of Indian companies act 1956. In the year 1971, the Bank received the status of scheduled bank. It was declared as "A" Class Bank by RBI in 1976. Today the bank has more than 570 branches across the country and has recently become a billion Dollar Company The Jammu and Kashmir Bank is one of the fastest growing banks in India with a network of more than 570 branches spread across the country offering world class banking products/services to its customers. Today the bank has status of value driven Organization and is always working towards building trust with shareholders, Employees, Customers, borrowers, regulators, and other diverse stakeholders for which it has adopted a strategy directed to developing a sound foundation of relationship and trust aimed at achieving excellence, which of course comes from the wombs of good corporate governance. Good governance is a source of competitive advantage and a critical input for achieving excellence in all pursuits. JK Bank considers good Corporate Governance as the SINE QUA NON of a good banking system and has adopted a policy based on all the four pillars of good governanceTRANSPARENCY, DISCLOSURE, ACCOUNTABILITY AND VALUE,

enabling it to practice trusteeship, transparency, fairness and control leading to stakeholder delight, enhanced share value and ethical corporate citizenship. It also ensures that bank is managed by an independent and highly qualified board following

best globally accepted practices, transparent disclosure and empowerment. Besides ensuring to meet shareholders aspirations and societal expectations, following the principles of management executive freedom to drive the bank forward without undue restraints but with the framework of effective accountability. The excellence achieved by bank in its operations stemming from the roots of voluntary governance has not gone unrecognized and bank has recently bagged three very prestigious awards for fair business practices and commitment to social obligations. The bank had to face serious problems at the time of independence when out of its total of ten branches two branches of Muzaffarabad and Mirpur fell to the other side of the line of control (now Pak Occupied Kashmir) along with cash and other assets. The Jammu and Kashmir Bank Limited Type -PRIVATE LIMITED Founded 1938 Headquarters M.A.ROAD SRINAGAR,INDIA No. of locations > 570 branches/offices Industry Financial, Commercial Banks Website http://www.jkbank.net

The aggregate business of the Bank crossed yet another psychological mark and stood at Rs. 53,934.51 crore at the end of the financial year 2008-09. The total business of the Bank increased by Rs. 6,458.64 crore from the previous years figure of Rs. 47,475.87 crore, registering a growth of 13.60%. The total deposits of the Bank have grown by Rs. 4,410.84 crore from Rs. 28,593.26 crore as on 31st March, 2008 to Rs. 33,004.10 crore as on 31st March, 2009,

registering growth of 15.43%. During the same period CASA deposits of the Bank have grown by more than 12% contrary to the declining trend in the industry. The Bank continued its prudent approach in expanding quality credit assets in line with its policy on Credit Risk Management. The net advances of the Bank increased by Rs. 2,047.80 crore from Rs. 18,882.61 crore as on 31st March, 2008 to Rs. 20,930.41 crore as on 31st March, 2009, registering growth of 10.84%. During the year, focused attention was given for accelerated lending under the agriculture sector which recorded a growth of 269%. The overall priority sector credit portfolio showed a growth of 40% during the same period. The Bank, in line with its policy stance, has recorded higher credit growth in J&K State than in rest of India. However, due to tumultuous situation in the state for some time as also the global economic turmoil, the overall credit growth has remained moderate. Moreover, with a view to maintain immunity against the financial sector meltdown, the Bank has reduced its exposure to Financial Markets by 54% and to the Real Estate sector by about 32%. The performance of the Bank in recovery of NPAs during the year continued to be good. During the year, the Bank effected cash recovery, up-gradation of NPAs and technical write-off of Rs. 327.85 crore compared to Rs. 244.53 crore in the previous year. Investment portfolio of the Bank increased by 22.59% from Rs. 8,757.66 crore as on 31st March 2008 to Rs. 10,736.33 crore as on 31st March, 2009. The investment book comprises of 71% SLR and 29% Non- SLR investments. Insurance Business The Bank earned an income of Rs. 26.80 crore from the Insurance Business, registering a growth of 25.2% over the last years income of Rs. 21.41 crore. In life insurance, the Bank mobilized a business of Rs. 101.10 crore, recording a growth of 28.33% over the last years business of Rs. 78.78 crore. In non-life

business, the Bank mobilized a business of Rs. 40.53 crore as against Rs. 36.72 crore mobilized during the preceding year. Income Analysis Interest income of the Bank recorded a growth of Rs. 553.89 crore from Rs. 2,434.23 crore in the year 2007- 08 to Rs. 2,988.12 crore [+22.75%] in the year 2008-09, as against the interest expenses which grew by 22.42% from Rs. 1,623.79 crore during the year 2007-08 to Rs. 1,987.86 crore during the year 2008-09. The Net Interest Income recorded a growth of Rs. 189.82 crore [+23.42%] during the same period. The Net Income from operations [Interest Spread plus Non-interest Income] increased to Rs. 1,245.31 crore in the financial year 2008-09 from Rs. 1,055.45 crore in the financial year 2007-08 recording a growth of 17.99%. The Operating Expenses showed an increase of 16.66%during the financial year 2008-09 and stood at Rs. 470.86crore as compared to Rs. 403.61 crore in 200708.The Cost to Income ratio [operating expenses to Net Operating Income] improved marginally from 38.24% in the financial year 2007-08 to 37.81% in the financial year 2008-09. Gross Profit The Gross Profit for the financial year 2008-09 stood at Rs. 774.45 crore as compared to Rs. 651.84 crore in the financial year 2007-08 registering an increase of Rs. 122.61 crore [+18.81%]. The Asset Utilization Ratio [percentage of Gross Profit to Average Working Funds] stood at 2.27% in the financial year 2008-09 [previous year 2.23%]. Provisions The Provision for Loan Losses, Provision on Standard Assets, Taxation and others aggregated to Rs. 364.62 crore in the financial year 2008-09 as compared to Rs. 291.83 crore in the financial year 2007-08. Net Profit and Dividend

The Bank registered a Net Profit of Rs. 409.84 crore for the financial year 2008-09 compared to Rs. 360 crore in the financial year 2007-08 recording growth of 14%. The Board of Directors have recommended dividend of 169% for the financial year 2008-09. In terms of extant guidelines, the Bank will pay the dividend distribution tax for the financial year 2008-09. Accordingly the total outflow on account of Dividend for the year 2008-09 will be Rs. 95.90 crore including the dividend distribution tax. Net Worth and CRAR The Net Worth of the Bank improved to Rs. 2,622.86 crore as on 31st March 2009 from Rs. 2,308.92 crore as on 31st March, 2008. The Capital to Risk Adjusted Assets Ratio [CRAR] stood at 13.46% as on 31st March, 2009 as against 12.80% as on 31st March, 2008 which is well above the norm of 9% stipulated by the Reserve Bank of India. The Tier I component of CRAR is 12.77% as on 31st March, 2009 Compared to 12.14% as on 31st March, 2008. The Bank has implemented new capital adequacy framework w.e.f. 31st March 2009. Under new norms, Banks CRAR works out to 14.48%, which is higher than the CRAR as computed under BASEL I norms. The advantage has stemmed mainly from higher rated Investment / Credit portfolios. The Tier I component of CRAR under new norms is 13.80% as against 12.77% under BASEL I. Tier I leverage ratio of the Bank stands at 6.96% as on 31 March, 2009 against 7.05% as on 31 March, 2008. The Return on Net Worth, Earnings Per Share and Book Value per Share for the financial year 2008-09 stood at 16.62%, Rs. 84.54 and Rs. 541.04 respectively, against 16.68%, Rs.74.27 and Rs.476.29 respectively for the previous year.

Branch Network During the financial year 2008-09, 22 branches were added, thereby taking the number of branches to 530 as on 31-03-2009, spread over 20 states and 1 union territory. The area-wise breakup of the branch network (excluding Extension counters) is as under: Area Branches Metro 041 Urban 166 Semi-Urban 119 Rural 204 During the year, the Bank was entrusted with management of Bankers Clearing House at Budgam and it stands established with seven members / submembers. CORPORATE GOVERNANCE: J&K bank has established a tradition of best practice in corporate governance. The corporate governance philosophy encompasses not only regulatory and legal requirement, such as terms of listing agreement with stock exchanges, but also several voluntary practices aimed at a high level of business ethics, effective supervision and enhancement of value to all stakeholders.

BOARD OF DIRECTORS
1. Haseeb A drabu 2. M S Verma 3. G P Gupta 4. B B Vyas, IAS 5. A. K. Mehta 6. Abdul Majid Mir 7. B L Dogra Chiarman & CEO Director Director Director Executive Director Executive Director Director

NEW PRODUCTS LANCHED DURING 2008-2009 In synchronization with the banks new strategy focus on increasing lending and financial deepening of economy in J&K state, a host of new products customized and tailored to the requirements of customers were designed and launched. Some of these products are: 1. Budshah primary education finance 2. JK Bank Zafran finance 3. JK Bank Khatamband finance 4. JK Bank Craft Development finance 5. JK Bank Dastakar finance 6 .JK Bank Giri finance 7. JK Bank commercial premises finance

CORPORATE VISION To catalyse economic transformation and capitalize on growth. Our vision is to engender and catalyse economic transformation of Jammu and Kashmir and capitalize from the growth induced financial prosperity thus engineered. The Bank aspires to make Jammu and Kashmir the most prosperous state in the country, by helping create a new financial architecture for the J &K economy at the centre of which will be the J & K Bank. CORPORATE MISSION Their vision is two- fold: To provide the provide the people of J& K international quality financial service and solutions and to be a super specialist bank in the rest of the country. The two together will make us the most profitable bank in the country.

DATA ANALYSIS & LEGEND

A. LIQUIDITY RATIOS:

Liquidity ratios measure the firms ability to meet current obligations. It is extremely essential for a firm to be able to meet its obligations as they become due liquidity ratio's measure. The ability of the firm to meet its current obligations. In fact analysis is of liquidity needs in the preparation of cash budgets and cash and funds flow statements, but liquidity ratios by establishing a relationship between cash and other current assets to current obligations provide a quick measure of liquidity. Main types of liquidity ratios are : 1. CURRENT RATIO : The Current Ratio of a company shows the ability pay Short Term creditors from Current Assets. It represents the to

margin of

safety; higher the ratio higher is the margin of safety. But higher ratio show the unnecessarily blockage of funds in assets. Thus satisfactory. CURRENT RATIO = CURRENT ASSETS/ LIABILITIES ratio of 2:1 is considered

1. CURRENT RATIOS STATEMENT

(Rs. 000 ommited) YEAR CURRENT ASSETS 2007-08 2008-09 2009-10 17589922 12172743 29718115 CURRENT LIABILITIES 8233100 11020157 10696711 CURRENT RATIOS 2.13 1.10 2.77

3 2.5 2 2007-08 1.5 2008-09 1 0.5 0 2007-08 2008-09 2009-10 2009-10

Interpretation: From the above table and graph we can see that current ratio for 200708 is 2.13, for 2008-09 is 1.10 and for 2009-10 is 2.77. We interpret that there is increase in current ratio in every year from 2007 to 2009. The ideal current ratio is considered to be 2:1. Suggest that the availability of current assets in rupees for every one rupee of current liability is increasing. Still the ratio being greater than one means that the firm has more current assets than current claims against them.

2. Cash Ratio statement

(Rs. In millions) YEAR 2008 2009 2010 Liquid Assets 18547684 32199667 23029505 Liquid liability 8233100 11020157 10696711 Liquid Ratios 2.25 2.92 2.15

3.5 3 2.5 2 2008 1.5 1 0.5 0 2008 2009 2010 2009 2010

Interpretation: From the above table and graph we Interpretate that there is a decrease in Liquid ratio in every year from 2007 to 2009. It indicates that the companys liquidity position has deterioted as compared to the financial year 200708. It shows that company has unnecessary liquidity which is not utilized properly. The company needs to revise its policies so as to reach the desired state of 1:1.

B. LEVERAGE RATIOS:
The short term creditors, like bankers and suppliers of raw material are more concerned with the firms current debt paying ability. On the other hand, long term creditors like debenture holders, financial institutions etc. are more concerned with firms long term financial strength. In fact a firm should have short as well as long term financial position.

- 1. DEBT RATIO: Several debt ratios may be used to analyse the long term solvency of the firm. It may therefore compute debt ratio by dividing total debt by capital employed or net assets.
DEBT RATIO = TOTAL DEBT / NET ASSETS

DEBT RATIO STATMENT:

(Rs. In millions) YEAR 2008 2009 2010 TOTAL DEBT 6201895 7517861 9966265 NET ASSESTS 266083145 293440189 351908970 DEBT RATIO 0.23 0.25 0.28

0.3 0.25 0.2 2008 0.15 2009 0.1 0.05 0 2008 2009 2010 2010

Interpretation: From above table and graph it shows that debt ratio is being increased over the period of time. It has been increased from 0.23 in 2007-08 to 0.25 in 2008-09 and 0.28 in 2009-10. It shows the solvency of the company.

2. DEBT EQUITY RATIO: It is computed by dividing long term borrowed capital or total debt by Share holders fund or net worth.
DEBT EQUITY RATIO = TOTAL DEBT / NET WORTH

DEBT EQUITY RATIO STATEMENT: (Rs. In millions) YEAR 2008 2009 2010 TOTAL DEBT 6201895 7517861 9966265 NET WORTH 272030285 308740903 356269642 DEBT RATIOS 0.022 0.024 0.027

0.03 0.025 0.02 2008 0.015 2009 0.01 0.005 0 2008 2009 2010 2010

Interpretation: From the above table and graph we Interpretate that there is increase in Ratios of debt equity. It indicates that the firm trying to use fund also through borrowing which is good decision for taking tax exemption.

C.TURNOVER/ACTIVITY RATIOS:
Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets these ratios are also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. Activity ratios, thus, involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well. WORKING CAPITAL TURNOVER RATIO: A firm may also like to relate net current assets to sales. It may thus compute net working capital turnover by dividing sales by net working capital.

WORKING CAPITAL TURNOVER RATIO = SALES / NCA

YEAR

NET SALES

NET WORKING CAPITAL 180156243 189978704 228325517

2008 2009 2010

20595369 26792437 32331736

WORKING CAPITAL TURNOVER RATIOS 11.43 14.10 14.16

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

Interpretation: From the above table and graph we Interpretate that Over the three years J & K Bank has improved the Working Capital Turnover Ratio. The reciprocal of the ratios for year ended 2008, 09, and10 are 11.43, 14.10 and 14.16 Respectively. It indicates Increase in working capital year by year as per increase in turnover of bank.

D.PROFITABILITY RATIOS:

Profitability ratios measure the operating efficiency of the company. These ratios are calculated in relation to sales or investment.

NET PROFIT RATIO

The net profit Margin measures the net earnings in relation to the net sales. After all the bills are paid and expenses covered, this ratio measures how much net profit remains out of total sales. This ratio is important to calculate Net profit Net Profit ratio = -----------------* 100 Net sales
STATEMENT OF NET PROFIT RATIOS

(Rs. In millions) YEAR NET PROFIT SALES NET PROFIT RATIOS 2008 2009 2010 2744863 3600042 4098355 20595369 26792437 32331736 13.32% 13.43% 12.67%

20.00% 18.00% 16.00% 14.00% 12.00% 2008 10.00% 2009 8.00% 6.00% 4.00% 2.00% 0.00% 2008 2009 2010 2010

Interpretation: From the above table and graph we Interpretate that the net profit ratio has decreased considerably from 13.32% in 2007-08 to 12.67% in the year 2009-10. Decrease in Percentage of net profit is negative improvement in net profit ratio. OPERATING PROFIT RATIO: The operating profit refers to the pure operating profit of the firm i.e. the profit generated by the operation of the firm and hence is calculated before considering any financial charge, non-operating income/loss and tax liability etc.The Operating profit ratio may be calculated as follows:

Net operating profit Operating Profit Ratio = --------------------------- *100 Net Sales

STAMENT OF OPERATING PROFIT RATIO

Year

2008 2009 2010

NET OPERATING PROFIT 3724403 4036141 4708607

NET Sales

Operating Profit Ratio 18.06 15.08 14.56

20595369 26792437 32331736

1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 2008 2009 2010 2008 2009 2010

Interpretation: From the above table and graph we Interpretate that the net operating profit ratio is decreasing from 18.06 in2007-08 to 14.56 in the year 2009-10, which shows good management of expenses by the company.

EARNINGS PER SHARE:

The earnings per share is calculated by dividing Profit After Tax (PAT) by total number of outstanding shares. EPS simply shows the profitability of the firm on a per share basis, it does not reflect how much is paid as dividend and how much is retained in business. Earnings Per Share = PAT - Preference Dividend Number of Equity Share

* 100

STATEMENT OF EARNING PER SHARE

(Rs. In millions) YEAR 2008 2009 2010 PAT 2744863 3600042 4098355
NO. OF EQUITY SHARES

EPS 5.66 7.42 8.45

48477802 48477802 48477802

1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 2008 2009 2010 2008 2009 2010

Interpretation:

The increasing EPS (5.66 : 7.42 : 8.45) indicates J&K Bank higher earning potential per share. It also signifies that the earnings are being invested in much better operations/opportunities for further improved EPS.

RETURN ON EQUITY (ROE OR RONW): Ordinary share holders are entitled to the residual profits. A return on shareholders equity is calculated to see the profitability of owners investment. Return on equity

indicates how well the firm has used the resources of owners. The earning of a satisfactory return is the most desirable objective of business

Return on Equity =

PAT - Preference Dividend Equity Shareholders Fund PAT 2744863 3600042 4098355 NET WORTH 272030285 308740903 356269642

* 100 Rs. In millions) ROI 1.00 1.16 1.15

YEAR 2008 2009 2010

1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 2008 2009 2010 2008 2009 2010

Interpretation: From the above table and graph it can interpret that the Return on net worth is goes to increase from 1.00 in 2007-08-. to 1.16 in 2008-09 and 1.15. Its dedication for maximizing its shareholders welfare. But the growth should be constant.

RETURN ON TOTAL ASSETS (ROTA): It is a measure of how effectively a company uses its assets. It is calculated by dividing PBIT BY THE Total assets It is also an indicator of how profitable a company is relative to its total assets. ROTA gives an idea as to how efficient management is at using its assets to generate earnings.

Return on Total Asset

Net Profit After Tax * 100 Total Assets

STATEMENT OF RETURN ON TOTAL ASSETS

Rs. In millions) Year 2008 2009 2010 PBIT 2744863 3600042 4098355 Total assets 266083145 293440189 351908970 ROTA 1.03 1.22 1.16

1.25 1.2 1.15 1.1 1.05 1 0.95 0.9 2008 2009 2010 2008 2009 2010

Interpretation: From the above table and graph we Interpretate that the Return on total assets was 1.03 in 2007-08 which increases to 1.22 in 2008- 09 and drastically show decrease at 1.16 in 2009-10, which is not good sign for the prospect of bank.

OBSERVATION

y The current ratio of bank was 2.13 in 2007-08 which decreases to 1.10 in 200809 and increase to 2.77 in 2009-10.

y The cash ratio of bank was 2.25 in 2007-08, to 2.92 in 2008-09 and decrease to 2.15 in 2009-10.

y The debt ratio of bank was 0.23 in 2007-08, 0.25 in 2008-09 and increase to 0.28 in 2009-10.

y The debt equity ratio of bank was 0.022 in 2007-08, 0.024 in 2008-09 and increase to 0.027 in 2009-10.

y The working capital ratio of bank was 11.43 in 2007-08 which decreases to 14.10 in 2008-09 and increase to 14.16 in 2009-10.

y The net profit ratio of bank was 13.32% in 2007-08 which increases to 13.43 in 2008-09 and decrease to 12.67% in 2009-10.

y The net operating profit ratio of bank was 18.6% in 2007-08 which increases to 15.08 in 2008-09 and decrease to 14.56% in 2009-10. y Earnings per share ratio of bank was 5.66 in 2007-08 which increases to 7.42 in 2008-09 and increase to 8.55 in 2009-10. y Return on equity ratio of bank was 1.00 in 2007-08 which increases to 1.16 in 2008-09 and decrease to 1.15 in 2009-10.

y Return on total asset ratio of bank was 1.00 in 2007-08 which increases to 1.16 in 2008-09 and decrease to 1.15 in 2009-10.

CONCLUSION & SUGGESTION

y Standard current ratio is 2:1, but the banks current ratio is fluctuating, which not good in respect of future of organization. Management must focus on maintaining the ratio at standard level. y Banks liquidity ratio is too high which shows that bank is maintaining very high liquidity but it is bad from the prospective of bank but by keeping high money in liquid form means bank is not utilizing opportunities in the market. Bank can earn some more income by lending money in call money market.

y Debt equity ratio of bank is 0.022 in 2007-08, 0.024 in 2008-09, 0.027 in 2009-10. Debt equity of 2:1 is the norm accepted by financial institutions for financing of project. But ratio of bank is very less. Management have to focus on this issue because it very important from the point of view of prospect of the bank. y Net profit was 13.43% in 2008-09 which decrease12.67% in 2009-10. Management have to take proper action to maintain the ratio at same level. y Banks earning per share was 5.66 in 2007-08, which increase to 2008-09 7.42, and 8.45 in 2009-10, which is good but firm have to work on maintaining and increasing same. y Banks return on equity is increasing but at very low rate which is not good from the point of view of shareholders and prospective shareholder.

BIBLIOGRAPHY
y WEBSITES: www.en.wikipedia.org
www.en.wikipedia.org/wiki/Solvency www.jkbank.net www.rbi.com

y ANNUAL REPORTS OF J & K BANK:

y Report 2007-08 y Report 2008-09 y Report 2009-10

BOOKS:
Financial Management - Chandra Prasannas - Kishore Ravi.

Financial Management

ANNEXURE