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---------------------------------------------------------------------Financial statement Analysis
A
Project Report
On
A study of Financial Statement Analysis
“SANGLI URBAN CO-OPERATIVE BANK LIMITED, SANGLI BRANCH-
TASGAON.”
Submitted to,
BHARATI VIDYAPEETH UNIVERSITY, PUNE
In partial fulfillment of the Requirement for
MASTER OF BUSINESS ADMINISTRATION
Submitted By,
Mr. Suryawanshi Vikas Vilas
(MBA-II)
Under the guidance of
Prof. Mr.Watwe sir
Through,
The Director
Institute of Management and Rural Development Administration, Sangli.
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
---------------------------------------------------------------------Financial statement Analysis
DECLARATION
To,
The Registrar,
Bharati Vidyapeeth University,
Pune.
Sir,
I the undersigned Mr. Suryawanshi Vikas Vilas hereby declare that the project
report returns and submitted by me to Bharati Vidyapeeth University as a partial
fulfillment of Master of
Business Administration course under the guidance of Prof. Mr. Watwe sir is my
original work.
The empirical findings and suggestions in this report are based on the data
collected by me.
I also hereby declare that this project of my own efforts and has not been
submitted earlier to any other university for the award of any degree or diploma.
Place – Sangli.
Date –
(Mr. Suryawanshi Vikas Vilas)
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
---------------------------------------------------------------------Financial statement Analysis
ACKNOWLEDGEMENT
I wish to express my deep sense of obligation to the management of “Sangli
Urban Co-operative Bank ltd, Sangli Branch-Tasgaon for their kind permission to
undertake this study in their industry and also extending to me all the guidance and co
– operation in completing the project work successfully.
I would like to offer my sincere thanks to Mr. Marathe sir Manager of
Tasgaon Branch for valuable advice and guidance given to me throughout my
research work.
Particularly I thanks to Mr.Shendage sir and Mr.Lele sir for providing me in
this study an extending their co – operation. They have provided me information
whenever required. I also thank to all staff members in bank of accounting department
who helped me inspire of their routine work.
Thank you very much.
Place – Sangli. (Mr. Suryawanshi Vikas Vilas)
Date –
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
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Chapter Particulars
Chapter – I INTRODUCTION
1.1 Introduction
1.2 History
1.3 Scope
1.4 Objectives
1.5 Limitations
1.6 Methodology
Chapter - II Company Profile
Chapter - III Theoretical Background
Chapter - IV Data Interpretation
Chapter - V Findings
Chapter – VI Suggestions
Chapter - VII Conclusion
Chapter - VIII Bibliography
Index
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CHAPTER – I
INTRODUCTION
Introduction to Study
Sangli Urban Co-operative Bank Limited, Sangli is oldest Bank of the Sangli
city and as well as in the area of Sangli District. In today’s modern time the banking
sector have a unique characteristic to maintain the good relations with customer,
especially in the Banking sector. It is therefore very difficult for modern banking
sector to stand in market. The market is not only expanding but it has global
approach.
In order to stand in business and global market, the bank should be examined
and thoroughly viewed seriously after certain period, to earn maximum of return and
to be able to cope the globe competition.
For this purpose, different techniques should be applied by the banking
services. One of these techniques is Ratio Analysis. Through this technique, we can
judge the financial position of the organization. The study of financial position is
important, because in today’s market there is a huge competition and to survive in this
competition an organization should know that where it can stand and thus to take a
competitive decision.
So it is necessary to make the qualitative judgment about the financial
performance.
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History of Bank
The Sangli Urban Co-operative Bank was formally registered Under the
Sangli Sansthan Co-operative Act on 4th November 1935. The actual work out of the
Bank was started in January 1936. The Bank was started by young Boy named
‘Mahadev Hari Godbole’. That time he collected the capital as an equity shares of Rs.
1100/- at 10/- Rs. Per share. The basic purpose to start the Bank with the help of
Sangli Sansthan was to improve the business sector and also people who are
connected with the large scale and small scale industry before 1935. The bank was
also established on the objective of to provide the loan and deposit facility to the high
level and middle level people of Sangli and their near places. The Tasgoan branch
was establish at 10-01-1977. That time the branch manager was Bhupendra
Ganapatrao Bhore.
First start at Panachand Theater on 1977-1984. Then bank transfer to Joshi
galli on 1984 to 1995. After 1996 onward start at in front of Hatkeshwar temple and
near of post office. The total staff member is fifteen in this branch.
Scope of the study
The entire study is conducted in Sangli Urban Co-operative Bank Limited,
Tasgoan Branch. The scope of the study is limited to three years, commencing from
2006-2009 which is based on ratio analysis of Sangli Urban Co-operative Bank
Limited, Tasgoan Branch. The study is entirely based on data available from Bank
and financial statements. The project covers investigation, useful findings and positive
suggestions, which would be useful to the future planning.
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Limitations of the Study
1. The study is only for one particular bank, so the comparisonbetween two
companies was not possible due to non availability of data regarding other Bank.
Hence the ratio analysis is not a comparative study.
2. The period of the study was limited up to 3 years. (2006-2009)
3. The standard norm for the ratio analysis varies with industry to industry and hence
the interpretation could not be said with high degree of accuracy.
4. The collected data is based on past financial statements.
5. Only important ratios are used to study the Bank.
6. The analysis is supported by general accounting rules.
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
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Objectives of the Study
1) To study the profitability of an organization during study period.
2) To study the liquidity position of the origination.
3) To study the long term financial position of an organization.
4) To study the overall financial performance of the organization.
5) To find out strength and weaknesses of the society.
6) To present correct and actual financial position of the society.
7) To suggest remedies for better performance of the society.
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Period of Study:
The financial data has been collected from the financial records of “Sangli
urban co-operative bank, Tasgoan branch.” for the period of three years. i.e. 2006-07,
2007-08, 2008-2009.
Tools and Techniques:
The data drawn from the annual report of the bank. The various tools and
techniques are used for analyze of data. Such as ratio analysis, chart analysis, table
analysis etc.
For the purpose to ascertain the correct financial position I have used
various financial analysis techniques. Such as projected financial position, level of
risk, means of finance investment made by the bank is rational or not etc.
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Research Methodology of the Study
Methodology is the study of data collection, while preparing any thesis; the
researches will have to elaborate the matter related to the study.
The ratio analysis of the Bank necessitates accurate and reliable data, so
that the methodology used for the collection of data is divided into two parts, those
are as under-
1. Primary data collection
2. Secondary data collection
1. Primary data collection
Primary data collection includes observations, personal interviews and
discussions. So information is collected from Finance department and other personal
of the organization. But all the information and necessary data related to the study is
not collected through this method.
2. Secondary data collection
Secondary data is important because it is used for the actual study. It is collected
from the annual reports and other official records and related financial books.
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
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FUNCTION OF THE SOCIETY
The following functions are done by the co-operative society.
1. Acceptance of the deposits from the public:
It is the main function of the every co-operative credit society. The credit society
accepts deposits in the form of cash from its members and non – members. The
deposits accepted by public are refundable either on demand or after stipulated period.
2. Lending of money to the persons who need finance:
It is the function of society, which is done by co-operative society. For lending of
money to members its makes various scheme, plans etc. The society will have to
ensure itself that the money lend is adequately secured.
3. Payment of interest to Depositors:
The society makes different schemes for collecting deposit from depositors. And after
the stipulated period the deposit is return to the depositors with interest specified by
society.
4. Charging higher rate of interest for the loan that given:
Normally, the society charging the higher rate of interest for the loan given. It is the
way of income of the society.
5.Investment of Funds:
A society also invests its funds to District Central Co-operative Bank, Government
schemes, other co-operative banks and shares of the company etc. The organization
not only providers credit but also works in different sectors like educational, medical,
sports, social sectors. Which helps many needy persons. In this way organization
satisfied the co-operative principles.
Sr.No Name Designation
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.
1 Shri. Bapurao B. Pujari Mentor & Senior Director
2 Shri Pramod B. Pujari Chairman
3 Shri. Nabhiraj B. Pachore Vice Chairman
4 Shri. Shrikant D.Inamdar Director
5 Shri. Ramchandra D. Kamble Director
6 Shri. Anil V. Gadkari. Director
7 Shri. Balaji B. katkar. Director
8 Shri. Mahadev H. Deshmukh Director
9 Shri. Manju K. Kulkarni Director
10 Shri. Surekha D. Deshmukh. Director
11 Shri. Premkishor N. Mandhane Director
12 Shri. Vishram N. Bapat Director
13 Shri. Aanand P. Bhide Director
14 Shri. Anil s. Lokare Director
15 Shri.Arun J. Deol Director
16 Shri. Ashok S. Khot Director
17 Shri. Madhura s. Patil Honorary Director
18 Dr. Madhukar P. Machave. Technical Director
19 Sou. Vasant B. Jugale Technical Director
20 Shri. Yashavant N. Ujlambkar Technical Director
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21 Shri. Narayan R. Borgikar CEO
22 Shri. Sharad V. Brogikar Secretary
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2.1 COMPANY PROFILE
NAME : Sangli Urban Co-operative Bank
FOUNDER : Mahadev Hari Godbole’.
CONSTITUTION : Co-operative Bank
REGISTRATION : Under the Sangli Sansthan Co-operative Act
on 4th November 1935
REGISTRATION OFFICE : Harbhat Road, Sangli. (Maharashtra)
PHONE NO. : 0233/2332506, 2331170
EMAIL : [email protected]
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Types of Loan
Cash Credit Term Loan
Clean Cash Credit Security Cash Credit
Security loan deposit
Security loan other
Clean Loan
Gold Loan
Real Estate Loan
Plant & machinery loan
Hypo Other Loan
Hypo Cash Credit Loan
Hypo Vehicle Loan
Industrial Term Loan
Indus Cash Credit loan
Crop Loan
Milch Cattle Loan
Decreed Loan
Book Debt Loan
---------------------------------------------------------------------Financial statement Analysis
III.Theoretical Background
Financial statement analysis is defined as the process of identifying financial
strengths and weaknesses of the firm by properly establishing relationship between
the items of the balance sheet and the profit and loss account.
There are various methods or techniques that are used in analyzing financial
statements, such as comparative statements, schedule of changes in working capital,
common size percentages, funds analysis, trend analysis, and ratios analysis.
Financial statements are prepared to meet external reporting obligations and
also for decision making purposes. They play a dominant role in setting the
framework of managerial decisions. But the information provided in the financial
statements is not an end in itself as no meaningful conclusions can be drawn from
these statements alone. However, the information provided in the financial statements
is of immense use in making decisions through analysis and interpretation of financial
statements.
Advantages of Financial Statement Analysis:
There are various advantages of financial statements analysis. The major
benefit is that the investors get enough idea to decide about the investments of their
funds in the specific company. Secondly, regulatory authorities like International
Accounting Standards Board can ensure whether the company is following accounting
standards or not. Thirdly, financial statements analysis can help the government
agencies to analyze the taxation due to the company. Moreover, company can analyze
its own performance over the period of time through financial statements analysis.
Purpose
The purpose of the bank financial-statement analysis is to provide an informed
opinion about the overall financial condition of the target bank. Using a modified
version of the I-B approach. It should be possible to address specific strengths,
weaknesses, opportunities, and targets at both the bank- and industry-level. The I-
bank analytical approach is divided into two major focus sections: the industry and
bank analysis. The desired outcome of the analysis is to learn how to link the
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
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economic analysis to the banking industry for the purpose of identifying whether the
bank under investigation is an investment-grade security.
Types of loan: -
A) Cash Credit:-
It is like a current account. In this cash is withdrawals as per the need
and when money comes it credit or fill in the bank.
I. Clean Cash credit:-
It is the first type of cash credit loan. In this transactions are going on
as like current account. In this interest is allowed on the day’s basis i.e.
how much day’s money withdrawals only for those days the interest
imposes.
II. Security Cash Credit:-
It is the second type of cash credit loan. In this type particular thing is
keep in the bank as security purpose. On that security bank gives loan
to persons.
It divides into two types as follows,
a. Security loan deposit:-
In this type the give the loan on the basis of deposits put in the
bank. That deposit may be receipt or any other security.
b. Security loan other:-
In this type loan given on the basis of deposits i.e. gold or any
other security.
B) Term Loan:-
This is the second main type of loan. In this installment of payment is
present.
It divides into following sub types as below,
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a) Clean Loan:-
It is regular type of loan. In this type particular security is taken
mortgage.
b) Gold Loan:-
It is second type of term loan. In this gold keep in the bank as
security or pledge.
c) Real Estate Loan:-
It is the 3rd type of term loan. In this the land, home, vehicle or any asset is keep as a
pledge in the bank.
d) Plant & machinery loan:-
It is the 4th type term loan. In this the any firm or any particular machinery is keep in
the bank as pledge.
e) Hypo Other Loan:-
It is the 5th type term loan. In this loan the particular security is keep in the bank as
pledge.
f) Hypo Cash Credit Loan:-
In this type of term loan the cash is withdraws money as current account
transactions.
g) Hypo Vehicle Loan:-
In this type of term loan any vehicle is keep as pledge for loan.
h) Industrial Term Loan:-
This type of loan is given for the industry purpose for their buying of things.
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
---------------------------------------------------------------------Financial statement Analysis
i) Industry Cash Credit loan:-
In this type of loan the particular firm can withdraws money as like current account
and credit or fill that in bank as per their need.
j) Crop Loan:-
This type of loan is given to the farmer for buying seeds or nursery.
k) Milch Cattle Loan:-
This type of loan is given for the buying of cattle or for their survival things.
l) Decreed Loan:-
Decreed loan means those loans go in the court cases for their recovery.
m) Book Debt Loan:-
This type of loan is given to those person in which the total process of product from
raw material to finish product.
Types of Deposits:-
There are main three types of deposits as follows,
1. Current Deposits:-
These types of deposits are most convenient to the trader. It places no restrictions on
the number of times of money is deposited or withdrawn, offers maximum banking
services and is necessary for obtaining an overdraft from the bank. Except scheduled
bank all other bank has started paying interest within the rates from 1% to 3% on the
balance amount of the depositor. Overdraft is facility offered by the bank to current
account holders.
2. Saving deposits:-
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This type of deposits is not suitable for businessman because of
restriction on the withdrawals from his account. Maximum 2 withdrawals per week
permitted. The rate of interest is varies from bank to bank.
There are various types included in this deposit.
a) Saving deposit
b) Staff saving
c) Pension deposit
d) Dead saving
e) Non operative saving
f) Zero balance saving.
3. Fixed Deposits:-
In this type of deposit certain lump sum amount is kept with the bank for
a specific period of time. Amount once deposited cannot be withdraws until
predetermined period is over. At the end deposit holder gets amount deposited with
interest amount. The bank pays highest rate of interest on the deposit than the rate of
interest payable on other type of deposit. Longer the period of deposit higher the rate
of interest payable.
There are various types of FD as follows,
a. Fixed deposit.
b. Pigmy deposit.
c. Samruddhi thev.
d. Nirantar thev.
e. Lakshyadhish thev.
f. Shubhavivah thev.
4. Recurring deposits:-
This type of deposit in which deposit holder is required to deposit with
the bank a specific amount of cash every after a specific interval for specific period
of time . At maturity deposit holder gets back amount of cash he has deposited with
accumulated interest. This type of deposit account is not suitable for businessman.
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
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1. Capital Adequacy Ratio:-
a. Capital Risk Adequacy Ratio:
CRAR = Capital/ Total Risk Weighted Asset
Year CRAR2006-07 6.86%2007-08 11.32%2008-0 11.12%
2006-07 2007-08 2008-090.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
CRAR
CRAR
Interpretation:
Reserve Bank of India prescribes Banks to maintain a minimum
Capital to risk-weighted Assets Ratio (CRAR) of 9 % with regard to credit risk,
market risk and operational risk on an ongoing basis, as against 8 % prescribed in
Basel documents.
The higher the CRAR, the stronger is considered a bank, as it ensures high
safety against bankruptcy. The CRAR is increasing from the year 2006 to 2009 so it is
higher safety against bankrupt.
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B. Total advance to Total asset:- Total Advances/ Total Asset
i. For 06-07
2337617468.98
= ------------------------
4318707518
= 0.54
ii. For 07-08
2360707966.02
= ------------------------
4610701381
= 0.5120
iii. For 08-09
2554632913.97
= ------------------------
4847782966
= 0.5269
Particular 2006-07 2007-08 2008-09
a. Total Advances 2337617468.98 2360707966.02 2554632913.97
b. Total Asset 4318707518 4610701381 4847782966
Total advance to Total asset 0.54 0.5120 0.5269
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2006-07 2007-08 2008-090.495
0.50.505
0.510.515
0.520.525
0.530.535
0.540.545
Total Advances to Total Assets
Total Advances to Total Assets
Interpretation:-
This ratio indicates banks aggressiveness in lending which ultimately results in
better profitability.
Higher ratio of advances of bank deposits (assets) is preferred to a lower one.
-------------------------------------------------------------------------------------- I.M.R.D.A, Sangli.
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C. Debt Equity Ratio=Borrowings + deposit/ (Share Capital + reserves)
For 06-07
19854855.75+3334479835.87
= ----------------------------------------
150000000+489299970.08
335433491
= ------------------------
639299970
= 0.524
For 07-08
7353302.23+3521965093.51
= --------------------------------------
150000000+536112935.11
359548395.7
= ------------------------
686112935.1
= 5.2
For 08-09
No borrowing+3722049629.52
= -------------------------------------------
150000000+565969100.68
= 5.1
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Year CRAR2006-07 0.52%2007-08 0.52%2008-0 0.51%
2006-07 2007-08 2008-090.50%
0.52%
0.54%
Debt Equity Ratio
Debt Equity Ratio
Interpretation:-
It indicates how much of the bank business is financed through debt and how
much through equity Higher the ratio indicates less protection for the creditors and
depositors in the banking system.
The ratio is constant so it is beneficial to the creditors and depositors. In the
year 2008-09 no any borrowing from financial institute so it better news for the bank,
creditors and depositors.
c. Government Securities to Total Investments Ratio: -
For 06-07
885412528.10
= ------------------------
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902861028.10
= 0.981
For 07-08
991964849.10
= ------------------------
1009413349.10
= 0.9827
For 08-09
990570113.10
= ------------------------
1006797613.10
= 0.9838
Govt. Sec. to Total Invest. =Government Securities/ Total Investment
Year CRAR2006-07 0.9812007-08 0.98272008-09 0.9838
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2006-07 2007-08 2008-090.98%
0.98%
0.99%
Government Securities to Total In-vestments Ratio
Interpretation:-
The percentage of investment in government securities to total investment is a
very important indicator, which shows the risk taking ability of the bank. It indicates a
bank’s strategy as being high profit high risk or low profit low risk. The higher the
government security to investment ratio, the lower the risk involved in a bank’s
investments.
Here the ratio is increasing means bank is investing more in government
security.
D. NPA: Non-Performing Assets:-
a. Net NPA’s To Total Asset Ratio: - Net NPA”s/Total Assets
i. For 06-07
209600000.31
= ------------------------
4318707518
= 0.04853
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ii. For 07-08
165400000.44
= ------------------------
4610701381
= 0.03587
iii. For 08-09
83700000.33
= ------------------------
4847782966
= 0.01726
Year Net NPA’s To Total Asset Ratio
2006-07 0.048532007-08 0.035872008-09 0.01726
2006-07 2007-08 2008-090.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Net NPA’s To Total Asset Ratio
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Interpretation:-
This ratio is used to NET NPA’s are Gross NPA’s net of provisions on
NPA’s and interest in suspense account. Total Asset considered are net of revaluation
reserves.
The ratio is decreasing so this is great situation to the bank because
the NPA is decreasing.
b. Net NPA’s To Net Advances Ratio =Net NPA’s / Net
Advances
i. For 06-07
2096000.31
= ------------------------
2337617468.98
= 8.96
ii. For 07-08
1654000.44
= ------------------------
2360707966.02
= 7.0063
iii. For 08-09
837000.33
= ------------------------
2554632913.97
= 3.276
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Year Net NPA’s To Net Advances Ratio
2006-07 8.962007-08 7.00632008-09 3.276
2006-07 2007-08 2008-090.00%
100.00%
200.00%
300.00%
400.00%
500.00%
600.00%
700.00%
800.00%
900.00%
1000.00%
Net NPA’s To Net Advances Ratio
Interpretation:-
Here is also the better situation because the ratio is decreasing from
2006-09. The ratio is indicating that how much NPA is present on the given loan.
c. Total Invest. To Total Assets =Total Investments / Total Assets
i. For 06-07
902861028.10
= ------------------------
4318707518
= 0.209
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ii. For 07-08
1009413349.10
= ------------------------
4610701381
= 0.2189
iii. For 08-09
1006797613.10
= ------------------------
4847782966
= 0.2076
Year Total Invest. To Total Assets
2006-07 0.2092007-08 0.21892008-09 0.2076
2006-07 2007-08 2008-090.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Total Invest. To Total Assets
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---------------------------------------------------------------------Financial statement Analysis
Interpretation:-
This ratio is used as a tool to measure the percentage of total assets
locked up in investments. This ratio indicates that how much bank invests on the total
asset.
The ratio is constant so total investment of bank is increasing.
E. M – Management: -
a. Total Advance to Total Deposit Ratio: Total Advance/ Total
Deposit
i. For 06-07
2337617468.98
= ------------------------
3334479835.87
= 0.7010
ii. For 07-08
2360707966.02
= ------------------------
3521965093.51
= 0.670
iii. For 08-09
2554632913.97
= ------------------------
3722049629.52
= 0.686
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Year Total Advance to Total Deposit Ratio2006-07 0.70102007-08 0.6702008-09 0.686
2006-07 2007-08 2008-090.65%
0.66%
0.67%
0.68%
0.69%
0.70%
0.71%
Total Advance to Total Deposit Ratio
Interpretation:-
This ratio measures the efficiency and ability of the banks
management in converting the deposits available with the banks into high earning
advances.
The ratio is constant so the total advances are increasing as on the total
deposit.
b. Business per Employee Ratio: Total Advances+Deposits/ No. of
Employees
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i. For 06-07
2337617468.98+33344798353.87
= -------------------------------------------
50868
5672097303
= -------------------------------------------
50868
= 111506.2
ii. For 07-08
2360707966.02+3521965093.51
= -------------------------------------------
53257
5882673059
= -------------------------------------------
53257
= 110458.21
iii. For 08-09
2554632913.97+3722049629.52
= -------------------------------------------
54949
6276682542
= -------------------------------------------
54949
= 114227.42
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Year Business per Employee Ratio2006-07 111506.2
2007-08 110458.212008-09 114227.42
2006-07 2007-08 2008-09108000.00%
109000.00%
110000.00%
111000.00%
112000.00%
113000.00%
114000.00%
115000.00%
Business per Employee Ratio
Interpretation:-
Revenue per employee is a measure of how efficiently a particular
bank is utilizing its employees. Ideally, a bank wants the highest business per
employee possible, as it denotes higher productivity.
The rising ratio of business per employee from 2006-2009 is a positive sign
that suggests the bank is finding ways to squeeze more sales/revenues out of each of
its employee.
F. Profit per employees:- Profit after Tax/ No. of Employees
i. For 06-07
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No profit so loss.
ii. For 07-08
No profit so loss.
iii. For 08-09
5517746.13
= -----------------------
54949
= 100.415
Year Profit per employees2006-07 -
2007-08 -2008-09 100.415
2006-07 2007-08 2008-090.00%
2000.00%
4000.00%
6000.00%
8000.00%
10000.00%
12000.00%
Profit per Employees
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Interpretation:-
This ratio shows the surplus earned per employee. The higher the ratio shows
good efficiency of the management.
For the year 2006 to 2008 there is no profit but in the year 2009 it is
increasing so it shows good efficiency of management.
E – Earning & Profitability:
a. Dividend Payout Ratio: Dividend/ Net profit
i. For 06-07
Here no dividend is paid so loss.
ii. For 07-08
Here no dividend is paid so loss.
iii. For 08-09
Here no dividend is paid so loss.
Year Dividend Payout Ratio2006-07 -
2007-08 -2008-09 -
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2006-07 2007-08 2008-090.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Dividend Payout Ratio
Interpretation:-
Dividend payout ratio shows the percentage of profit shared with the
shareholders. The more the ratio will increase the goodwill of the bank in the share
market.
Here from the 2006 to 2009 no any dividend is paid to the
shareholders so it is bad situation to the bank.
b. Return on Asset Ratio: Net Profit/ Total Asset
i. For 06-07
No profit so loss.
ii. For 07-08
No profit so loss.
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iii. For 08-09
5517746.13
= -----------------------
4847782966
= 1.138
Year Return on Asset Ratio2006-07 -
2007-08 -2008-09 1.138
2006-07 2007-08 2008-090.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
Return on Asset Ratio
Interpretation:-
Net profit to total asset indicates the efficiency of the banks in
utilizing their assets in generating profits. A higher ratio indicates the better income
generating capacity of the assets and better efficiency of management in future .
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In the year 2006 to 2008 there was no profit so that time bank not
generating their profit, but in the 2009 the bank was in profit so it indicates better
efficiency of management in the bank.
c. Net Profit to Average Asset Ratio: Net Profit/ Average Asset
i. For 06-07
No profit so loss.
ii. For 07-08
No profit so loss.
iii. For 08-09
5517746.13
= -----------------------
4729242174
= 0.00116
Year Net Profit to Average Asset Ratio2006-07 -
2007-08 -
2008-09 0.00116
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2006-07 2007-08 2008-090.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
Net Profit to Average Asset Ratio
Interpretation:-
Net profit to average asset indicates the efficiency of the banks in utilizing
their assets in generating profits. A higher ratio indicates the Net profit to average
asset indicates the efficiency of the banks in utilizing their assets in generating profits.
Higher ratio indicates better earning potential in the future. From 2006 to 2008
there was no profit so bank was in loss, but in 2009 bank was in profit so it indicates
the better income generating capacity of the assets and better efficiency of
management.
d. Interest Income to Total Income Ratio: Interest Income/ Total
Income
i. For 06-07
363120138.59
= -----------------------
447944188.32
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= 0.8106
ii. For 07-08
358005318.42
= -----------------------
391571960.70
= 0.91427
iii. For 08-09
381819020.21
= -----------------------
410025574.15
= 0.931
Year Interest Income to Total Income Ratio
2006-07 0.8106
2007-08 0.914272008-09 0.931
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2006-07 2007-08 2008-090.75%
0.80%
0.85%
0.90%
0.95%
Interest Income to Total Income Ratio
Interpretation:-
The interest income total income indicates the ability of the bank in generating
income from its lending.
This ratio measures the income from lending operations as a percentage of the
total income generated by the bank in a year. The ratio is increasing so bank is
generating income.
e. Other Income to Total Income Ratio: Other Income/ Total
Income
i. For 06-07
47496002.75
= -----------------------
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447944188.32
= 0.106
ii. For 07-08
26147904.66
= -----------------------
391571960.70
= 0.0667
iii. For 08-09
21078603.21
= -----------------------
410025574.15
= 0.0514
Year Other Income to Total Income Ratio
2006-07 0.106
2007-08 0.06672008-09 0.0514
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2006-07 2007-08 2008-090.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
Other Income to Total Income Ratio
Interpretation:-
The bank generates higher fee income through innovative products and
adapting the technology for sustained service levels. The higher ratio indicates
increasing proportion of fee-based income.
The ratio is decreasing from 2006 to 2009 so proportion of fee based
income is decreased.
G. L – Liquidity:
a. Liquid Asset to Total Asset Ratio: - Liquid Asset/ Total
Asset
i. For 06-07
256258471.34+211966790.01
= ------------------------------------------------------
4318707518
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468225261.3
= -----------------------
4318707518
= 0.1084
ii. For 07-08
367388754.16+217151668.04+30000000
= ------------------------------------------------------
4610701381
614540422.1
= -----------------------
4610701381
= 0.1332
iii. For 08-09
286860968+273172610+70000000
= ----------------------------------------------
4847782966
630033578
= -----------------------
4847782966
= 0.1299
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Year Liquid Asset to Total Asset Ratio2006-07 0.1084
2007-08 0.13322008-09 0.1299
2006-07 2007-08 2008-090.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
Liquid Asset to Total Asset Ratio
Interpretation:-
The proportion of liquid asset to total asset indicates the overall
liquidity position of the bank so the ratio is constant means bank has greater liquid
position.
b. Government Securities to Total Asset: Government
Securities/ Total Asset
i. For 06-07
885412528.10
= -----------------------
4318707518
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= 0.2050
ii. For 07-08
991964849.10
= -----------------------
4610701381
= 0.2151
iii. For 08-09
990570113.10
= -----------------------
4847782966
= 0.2043
Year Government Securities to Total Asset
2006-07 0.2050
2007-08 0.21512008-09 0.2043
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2006-07 2007-08 2008-090.18%
0.20%
0.22%
Government Securities to Total Asset
Interpretation:-
Government Securities are the most liquid and safe investments. This ratio
measures the government securities as a proportion of total assets.
This ratio measures the risk involved in the assets hand by a bank . So the ratio
is constant within three years means risk is also same in three years.
c. Approved Securities to Total Asset Ratio: Approved
Securities/ Total Asset
i. For 06-07
9000000+8448500
= -----------------------
4318707518
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17448500
= -----------------------
4318707518
= 4.0402
ii. For 07-08
9000000+8448500
= -----------------------
4610701381
17448500
= -----------------------
4610701381
= 3.7843
iii. For 08-09
9000000+7227500
= -----------------------
4847782966
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16227500
= -----------------------
4847782966
= 3.347
Year Approved Securities to Total Asset Ratio
2006-07 4.040
2007-08 3.7843
2008-09 3.347
2006-07 2007-08 2008-090.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
Approved Securities to Total Asset Ratio
Interpretation:-
Approved securities include securities other than government securities. This
ratio measures the Approved Securities as a proportion of Total Assets.
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This ratio measures the risk involved in the assets as compare to the
government security. The ratio is decreasing means the risk is also decreasing in the
bank.
d. Liquid Asset to Demand Deposit Ratio: Liquidity Asset/ demand
Deposit
i. For 06-07
256258471.34+211966790.01
= -----------------------
73542074949.11+97814596.11
468225261.3
= -----------------------
831579713.2
= 0.56305
ii. For 07-08
367388754.16+217151668.04+30000000
= ---------------------------------------------------
907652901.14+129168715.73
614540422.1
= -----------------------
1036821617
= 0.5927
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iii. For 08-09
286860968.06+273172610.80+70000000
= ---------------------------------------------------
966820482.49+161640170.80
630033578.8
= -----------------------
1128469653
= 0.5583
Year Liquid Asset to Demand Deposit Ratio
2006-07 0.56305
2007-08 0.5927
2008-09 0.5583
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2006-07 2007-08 2008-090.54%
0.55%
0.56%
0.57%
0.58%
0.59%
0.60%
Liquid Asset to Demand Deposit Ratio
Interpretation:-
This ratio measures the ability of a bank to meet the demand from
deposits in a particular year. Demand deposits offer high liquidity to the depositor and
hence banks have to invest these assets in a highly liquid form.
The ratio within three years i.e. 2006 to 2009 is same so same liquid
position.
e. Liquid Asset to Total Deposit Ratio:
Liquid Asset
Liquid Asset to Total Deposit = _________________
Total Deposit
I. For 06-07
468225261.3
= -----------------------
3334479835.87
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= 0.1404
II. For 07-08
614540422.1
= -----------------------
3521965093.51
= 0.1744
III. For 08-09
630033578.8
= -----------------------
3722049629.52
= 0.1692
Year Liquid Asset to Total Deposit Ratio
2006-07 0.1404
2007-08 0.1744
2008-09 0.1692
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2006-07 2007-08 2008-090.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
0.16%
0.18%
0.20%
Liquid Asset to Total Deposit Ratio
Interpretation:-
This ratio measures the liquidity available to the deposits of a bank. As
per the ratio the values calculated are the same within last three year.
Ratio analysis is an important quantitative technique, which is widely in
use for interpreting financial statements. The technique serves as a tool for assessing
the current and long- term financial soundness of a concern. It is also used to analyze
various aspects of operational efficiency and the degree of profitability. It is an
instrument for diagnosis of the overall financial health of enterprises. It functions as
a sort of health test.
The current ratio of the bank is 2:1. This ratio indicates that for every Rs.1
of current liabilities, there is Rs.2 of the current assets available for meeting its
obligations. The current assets are two times the current liabilities this signifies the
society’s ability to meet its current obligations.
Rule of thumb is 1:1 for the quick ratio so that, if a business has quick ratio
of at least 100 percent, it is considered to be in a fairly good current financial
position. This ratio is the true test of a business. If the quick assets exceeds of equal
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to quick liabilities, it indicate that the financial position of the business is very
satisfactory. It is a measure of the extent to which the liquid assets are available to
meet the quick or immediate liabilities. It indicates ability of the business to meet its
commitment without delay.
Return on capital employed is the overall profitability ration. This ratio
judges the overall performance of the concern. This ratio establishes relationship
between profit earned and capital employed. During the current year the society
return on capital employed is going on decreases.
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Findings:-
1. From the last three years dividend not paid.
2. Bank was not in profit from 2006-08 & in profit 2009.
3. Working capital of bank is increasing continuously from last three years.
4. Liquid position of bank is same.
5. Risk is same or slightly decreasing.
6. The banks fixed asset ratio is above 100% for last three year. It is a negative sign for a
bank.
7. The portion of proprietor fund acquiring current asset is coming down from 2006 to
2009.
8. After the deep observation we comes to know that the share capital as on 31.03.2007
was Rs.8,33,60,030/- & on 31.03.2009 is as on 31.03.2008 Rs. 7,82,29,250.00/- . The
provision made for reserve and other fund is also in increasing trend.
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SUGGESTIONS.
1. The bank must control expenses for its good financial position.
2. No loan should give to the relatives of the directors without adequate security.
3. It appears that bank is taking some steps to improving profitability. It is suggested
that bank should continue to its efforts in this direction in future.
4. The recovery performance should be further improve so that bank will able to
consolidate its position.
5. Bank should try to increase the per employee business to improve profitability.
6. Bank should also take majors for cash management so profitability should be
improve.
7. Strict control over cost should be maintained in future also.
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CONCLUSIONS
After analyzing and interpreting the data with close observation of “Sangli
Urban Co-operative Bank ltd, Sangli Branch-Tasgoan” following conclusions can be
drawn.
The management of the bank is efficient. It uses various tools and techniques
for proper working of the bank. The position of bank appears to be increasing.
Therefore bank should continue its efforts in this direction. There is proper internal
control in the bank.
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