PACS FIN PERFORMANCE

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CHAPTER 1

INTRODUCTION

Finance is the foundation stone of every business. No business can manage without finance.

The success of business depends on availability of finance and its effective utilisation.

Financial Perfomance measuring the result of a firm policies and operations in monetary

terms. These results are reflected in the firms return on investment, return on asset etc..

It is also used as a ganeral measure of a firms over all financial health over a given period of

time, and can be used to compare similar firms across the same industry or to compare industries or

sectors in aggregation.

Co-operative bank has been defined as, a mutual society formed, composed and governed

by working people themselves for encouraging regular savings and granting small loans easy terms of

interest and payments.

A co-operative bank promote economic activity and provides banking facilities and services

to the rural people. Service rather than profitis the moto of co-operative banks. The co-operative banks

generally formed a 3 tier structure and are, thus federal in charactor.

Statement of the Problem

A service co-operative bank is an organisation established for mutual help and is intended

to protect the interest of the members. It protects the agricultural and other activities rendered by the

people within the area. This study attends to evaluate the performance of Kothavara Service Co-operative

Bank. So, the problem is stated as analysis of financial performance of Kothavara Service Co-operative

Bank Ltd.

Scope of the Study

The study is about the financial aspects of Kothavara Service Co-operative Bank Ltd

No.1359 for the period of five years from 2006-2007 to 2010-2011.

Objectives of the Study

1) To find out the financial performance of the bank.2) To analyse the liquidity posiion of Kothavara Service Co operative Bank Ltd.3) To give suggestion based on the study.4)

To analyse the profitability of theBank.

Methodology

The study is undertaken to evaluate the financial performance of Kothavara Service Co

operative Bank. Secondary data have been used for this society. Secondary data were collected

from the annual reports, documents etc.Ratio analysis is used to study the financial performance.


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Limitations of the Study

1) Most of the informations are based on the published annual report which may notrepresent the true financial position.

2) Non availability of sufficient data.3) Time constraints are another limitations of the study.4) The study covers only the financial aspects.


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CHAPTER 2

INTRODUCTION

Kothavara Service Co-operative Bank Ltd No.1359 was Registered on 10/08/1926 under the Kerala Co-

operative societies Act 1969.The registered address of the bank is the Kothavara Service Co-operative

Bank Ltd no. 1359, Kothavara P.o Vaikom Taluk, Kottayam District, Thalayazham village. The society

started its business on 19/09/1926 Karuvelikadathu.After that it shifted to Kothavara on 26/3/1973.

Objectives

The main objectives of Kothavara Service Co-operative Bank are :

To help the member to have new and better needs. To distribute new and imporoved tool to members. To provide short term ,medium term and long term loans to its members. To promote superior farming methods. To conduct various agricultural production programmes. To collect money from individuals and institutions for the running and maintanence of the

society.

The society will carry out all ordinary functions of abank permitted by law.

Members

Permenant residents who live within the area of operation and who have 18 years of age has

eligibility to get membership from Kothavara Service Co-operative Bank. Those who are eligible to

become members according to byelaws no.5, will be made member after the approval of Board ofDirectors. Now this Co-operative Bank has 4132 members.

Management

The management of Kothavara Service Co-operative Bank consist of Board of Directors,

President and Secretary.

Board of Directors

The Board has the control and responsibility over the fuctioning of the society. Board consist

of 11 members and the term of appointment of the members to the board is 3 years. The members

retired from the board have the eligibility to be re- elected. But no one can continue on the board for

more than two times without the permission of the Deputy Registrar.


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President

President is an official representative who manage and control the society. Both the president

and secretary have to sign the agreements above Rs.100.All the documets related to the society is on

the name of the president and he has the responsibility to maintain the bank account of the society.

The president has to sign the annual report after verifying the account and reserves.

Secretary

The secretary has the power to call and attend the general meeting under the supervision of

president .He has the responsibility to record all the accounts and registers according to the law and to

prepare the receipt ,vouchers,balancesheet and other document of the society .He also has to spend

and receive money as per the decisions of board of directors.

Organisational Structure

Board of Directores

President

Secretary

Working

The working of Kothavara Service Co-operative Society are raising fund through deposits and

provide loans to its members and some other services .

Deposits

One of the important objectives of co-operative society is promotion of thrift and savings habitsof the people in rural areas .The following are the various kinds of deposits collected by the society

from the members and non members.

Clerk Peon


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Savings Bank Account

In this account the bank collects smaller amounts from the people and allow only limited

interest.It promote the habit of savings as well as banking habits.By accepting savings deposits ,bank

mobilize scattered savings of the rural people and utilize them for productive purposes.

Current Account

Current account is a running account in which can be deposited and withdrawn any number

of times and without any limit during aworking day.This account is usually allowed to operate by

traders and merchants.Current account is also known as demand deposits as the banker is under an

obligation to repay the deposit whenever demanded by the account holder.

Fixed Deposit

It is a type of deposit made with the bank for afixed period which is specified at the time of

making the deposit.The time period is normally from six months to more than five years or more.The

rate of interest is comparatively higher than any other deposits.Fixed Deposits certificates are issuedas evidence for money received under this deposit.

Recurring Deposits

Recurring deposits are those deposits in which the depositor deposits a fixed some of

money every month for an agreed period. the rates of interest of these deposits is almost the

same as that of fixed deposit.

Deposits

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

Savings 42.65 78.39 68.34 84.70 83.00

Fixed 219.23 302.97 370.02 468.86 569.4

Others 2.74 5.56 5.68 10.94 19.94

Total 264.62 386.92 444.05 563.66 672.40


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LOANS

Loans are given only to the members.This loan can be given on the security of the property of

its members.The following loans are given to the members:-

Short term Agricultural Loans

Short term agricultural loans can be given only to the farmers who is a member of the

society.Board of Directors have the right to decide the maximum credit limit for the members on the basis

of the rules and regulations of the District Co-operative Bank.

Medium term Loans

Medium term loans are given to members for the purchase of agricultural implements and to

buy bullocks and cow.These loans must be repaid within 3years.These loans have to begiven on the basis

of condition made by the Board of Directors which is agreed by the District Bank.

Surety Loans

Surety loans can be distributed among the members according to the following :-

The person having a fixed deposit can be given loan.Loan amount should not exceed 20% ofthe fixed deposit.

On the securities of government,promissory notes,debentures of the Central Land MortgageBank,10% of loans can be given.

50% of the loan can be given on the security of gold.

0

100

200

300

400

500

600

700

800

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

Savings

Fixed

Others

Total


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Other Services

Neethi Store

Co-operative bank conduct Neethi Store for providing goods at lowest price to itsmembers.It helps to prevent the increase in price of necessary goods.


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Chapter 3

FINANCIAL STATEMENTS

Financial statements are the end products of financial accounting .In order to

ascertain the financial status of the business every enterprise prepares certain

statements,known as financial statement.It is mainly prepared for decision making

purposes.But the information as its provided in the financial statements is not adequtely

helpful in drawing a meaningful conclusion.Thus ,an effective analysis and interpretation of

financial statements is required.

According to JohnN.MyerThe Financial Statements provide a summary of the

accounts of a business enterprise,the Balance sheet reflecting the assets and liabilities and the

Income Statement showing the results of operations during a certain period.

These are prepared at the end of a given period of time.They are the indicators of

profitability and financial soundness of the business concern.The term financial analysis is

also known as analysis and interpretation of financial statements.Analysis of financialstatements is an attempt to assess the efficiency of a firm.Thus,the analysis and interpretation

of financial statements is very essential to measure the efficiency,profitability,financial

soundness and future prospects of the business units.

OBJECTIVES OF FINANCIAL STATEMENTS

The following are the important objectives of financial statements;

To provide reliable information about changes in such economic resources and obligation. To provide information about changes in net resources arising out of business activity. To provide reliable financial information about economic resources and obligation of

business firm.

LIMITATIONS OF FINANCIAL STATEMENT

Financial statements suffers from the following limitations ;

It fails to disclose all informationIt fails to disclose the present valueIt fails to disclose vital changes within the organisation


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It provide insufficient information to investorsIt influence personal judgementIt gives only misleading figuresFINANCIAL ANALYSIS

Analysis of financial statement is the process of determinig the significant operating

and financial characteristics of a firm from the accounting data.It is a treatment of the

information contained in the financial statements to afford a full diagnosis of the profitability

and financial position of the firm.

According to Metcalf and Titard Analysis of financial statement is a process of

evaluating the relationship between component part of a financial statement to obtain a better

understanding of a firms position and performance.

External Analysis

External analysis of financial statement is made by those who do not have access to the

detailed accounting records of the company that is banks,creditors and general public.Themain objective of such analysis varies from party to party.

Internal Analysis

Such analysis is made by the finance and accounting department to help the top

management.These people have direct approach to the relevant financial records.Such

TYPES OF FINANCIAL ANALYSIS

According to material

used

According to modus operandi According to objectives of

analysis

External

analysis

Internal

analysis

Horizontal

analysis

Vertical

analysis

Long

term

analysis

Short

term

analysis


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analysis emphasises on the performance appraisal and assessing the profitability of different

activities.

Horizontal Analysis

When the financial statement for a number of years are reviewed and analysed,

the analysis are called horizontal analysis. As it is based on data from year to year, rather than

on one date or period or time as a whole, this is also known as Dynamic Analysis.

Vertical Analysis

Vertical analysis is also known as Static Analysis. When ratios are calculated from

the Balance Sheet of one year, it is called vertical analysis. It is not very useful for long-term

planning as it does not include the trend study for future.

Long-term Analysis

In the long-term the company must earn a minimum amount sufficient to maintain a

suitable rate of return on the investment to provide for the necessary growth and development

of the company and to meet the cost of capital. In long term analysis the fixed assets, long

term debt structure and the ownership interest is analysed.

Short-term Analysis

The short-term analysis of financial statement is mainly concerned with the working

capital analysis. In the short run a company must have ample funds readly available to meet

its current needs and sufficient borrowing capacity to meet the contingencies.

METHODS OF FINANCIAL ANALYSIS

The analysis of finacial statements consists of a study of relationship and trends to

determine whether or not financial position of the concerned and its operating efficiency has

been satisfactory. In the process of these analysis various methods are used, they are listed

below:

Comparative Financial Statement Common Size Financial Statement Trend Ratio Average Analysis Statement of Changes in Working Capital Fund Flow and Cash Flow Analysis Ratio Analysis


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Comparative Financial Statement

The preperation of Comparative Financial Statement is an important device of

horizontal analysis. Statements prepared in a form that reflects financial data of two or more

period or a number of prior periods.

Comaparative statements may show:

1. Absolute figures2. Change in the absolute figures3. Absolute data in terms in percentage4. Increase or decrease in terms in percentage

Comparative Statements can be of two types. They are Comparative Balance Sheet and

Comparative Income Statement.

Comparative Balance Sheet :

The Comparative Balance Sheet analysis is the study of the trend of the same item or

group of items of two or more Balance Sheets of the same business enterprise on different

dates.

Comparative Income Statement:

The Comparative Income Statement is a statement prepared to get an idea of the progress of

a business over a period of time.

Common Size Financial Statement

These are statements prepared to show the relationship of different individual items with

some common items. They are also known as 100% statements. It is useful in vertical

financial analysis and comparison of two business enterprises at certain date. It includes

Commom Size Balance Sheet and Common Size Income Statement.

Commom Size Balance Sheet:

A statement in which Balance Sheet items are expressed as percentage of each assets to

total of assets and percentage of each liability to total of liabilities is called Commom Size

Balance Sheet.

Common Size Income Statement

A Common Size Income Statement is a statement in which each items of expense is shown

as percentage of net sales.

Trend Ratio


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Trend ratio is an important tool of horizontal analysis. Under this analysis, the ratio

ofdifferent iitems for various periods are calculated and then a comparison is made. It is a

useful analytical device for the management since by substituting percentages of large

amounts , the brevity and readability are achieved.

Average Analysis

It is an improvement over trend analysis method. When trend ratios have been determined

for the concerned , these figures are compared with average trend of the industry. Both these

trends can be presented on the graph paper also in the shape of curves.

Fund Flow and Cash Flow Analysis

Fund flow analysis is a valuable aid to the finacial executives and creditors for evaluating

the uses of funds by the firm and in determining how these uses were financed. A fund flow

statement Indicates where funds came from and where they were used during the period

under review.

Cash Flow Statement reveals the sources of cash and its application. These statements can

be prepared separately as funds flow statement and cash flow statement.These are important

tools of communication and very helpful for financial executives in planning the intermediate

and long -term financing of the firm

Ratio Analysis

These analysis is an important and widely used tool of analysis of finacial statements.It is

essentially an attempt to develop meaningful relationship between individual items or group

of items in the Balance Sheet or Profit and Loss Account.The object and utility of ratio

analysis as a technique of financial analysis is confined not only to the internal parties but tothe trade creditors , Banks and lending institutions also.

Parties Interested Analysis of Financial Statements

Analysis of financial statements has become very significant due to widespread

interests of various parties in the financial result of a business unit. The various parties

interested in the analysis of financial statements are;

Investors

Investors, shareholders or proprietors of the business are interested in the well being of

the business. They like to know the earning capacity of the business and its prospects of

future growth.

Management


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The management is interested in the financial position and performance of the

enterprise as a whole and of its various divisions. It helps them in preparing budgets and

assessing the performance of various department heads.

Trade Creditors

Trade creditors are interested in firms ability to meet their claims over a very short

period of time. Their analysis will, therefore, confined to the evaluation of the firms liquidity

position.

Suppliers of Long-term Debt

Suppliers of long-term debt are concerned with the firms long-term solvency and

survival. They analyse the firms profitability over time, its ability generate cash to be able to

pay interest and repay principal and the relationship between various sources of funds.

Government

Government and their agencies need financial information to regulate the activities

of the enterprises/industries and determine taxation policy.

Employees

They are interested to know the growth of profit. As a result of which they can

demand better remunaration and congenial working environment.

Documents

PACS FIN PERFORMANCE