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SUMMER TRAINING

PROJECT REPORT

ON

CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPRATIVE BANK LTD.

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE DEGREE OFMASTER OF BUSINESS ADMINISTRATION

AWARDED BY

GUJRAT TECHNOLOGY UNIVERSITY

SUBMITTED BY

TRIVEDI DIMPY L.

MBA [SEM-2]

ROLL NO:[56-B]

UNDER THE GUIDANCE OF

MR.VIKAS PANDYA

SUBMITTED TO:

C.K.PITHAWALLA INSTITUTE OF MANAGEMENT

YEAR-(2010-2011)

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CERTIFICATE

This is to certify that Project Report entitled “CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPERATIVE LTD.” has been successfully

completed by, TRIVEDI DIMPY, based on her own work.

The Project Report incorporates the result of her study and analysis.

(MR. VIKAS PANDYA)

The Project is forwarded for further evaluation to Gujarat Technological

University , Ahmadabad.

Place: Signature:

Date: (Dr. G.N.Joshi)

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DECLARATION

I, the undersigned, Miss TRIVEDI DIMPY L. hereby declare that the project work

entitled “CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPERATIVE LTD.”, is based on my work. This is an original piece of work and

references whenever taken have been duly acknowledged. No part of the report

has been copied and without reference.

I further declare that the information collected from the organization has not been

shared with anyone and has been used only for academic purpose or not

submitted to any other university for the any other degree, diploma or

requirement course.

I declare that my training in PRIME CO-OPERATIVE BANK LTD. was good

experience for me & my career. My project report on “CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPERATIVE LTD.” is

acknowledged by me. The report is made by me as a part of my training which is

part of my Master degree in Business Administration.

Place: Surat Yours faithfully,

Date :

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ACKNOWLEDGEMENT

This Project Report is done in accordance with the Masters of Business

Administration(MBA),the study course prescribed by The Gujarat technological

university, consisting two months Industrial Training in the final year in any of the

esteemed organization, specialized in finance. I have pleasure in grabbing the

opportunity of expressing my gratitude to all those who have helped me directly

or indirectly during the competition of my entire project work. Let me grab this

opportunity to thank Principal Mr.G.N.JOSHI for giving me permission to

undertake the study in finance stream.

I would like to express my whole heartedly thanks to My Project Guide Mr.Vikas Pandya who has helped me in my study and their Guidance, suggestion &

Constant Encouragement throughout the Course of the Project and without his

support completion of the Project was not Possible.

To make anything successful, needs help and co-operation from people involved

directly or indirectly. I wish to thank to all the teaching and non-teaching staff of

B.M. college of BBA for their timely suggestion and guidance. I would like to

appreciate the RM of share khan ltd-Mr. Dharmesh Chorawala for spending his

precious time & helping me in getting information and also to other members of

share khan ltd for providing me the information, valuable data related to my

project & their wonderful suggestion &guidance in completing my project work.

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EXECUTIVE SUMMARY

As finance student, very curious to gather deep knowledge about Finance but

Finance is very broad and vast. In this, want to gather knowledge of Indian

banking system of especially cash operational cycle. That’s why want to get

deep knowledge about cash operational cycle.

The Project is on cash operational cycle where initially a brief Introduction about

the Introduction of banking system is given and then calculation of the

operational cycle is being done of last three year and then which cash

operational cycle is the best one to purchasing inventories in to cash sales is

suggested.

Ratio analysis is very useful for the marketing forecasting and planning purposes.

It is very useful in making intra comparison. One can know that at what point

banks is lagging behind from its rival in the market.

Thus find out and get practical knowledge from cash operational cycle through

the cash flow and the balance sheet and ratio analysis of the last tree year of

prime co-operative bank.

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CONTENT

P.NO:

1. Introduction to banking system 1-12

(1.1) Definition of bank 1

(1.2) Banking in India 4

(1.3) Types of co-operative bank in India 12

2. Company profile 15-25

(2.1) Introduction to the prime bank 15

(2.2) Board of directors 20

(2.3) Organization structure 21

(2.4) Service of the prime co-operative bank 25

3. Theoretical aspect of cash operational cycle 27-37

(3.1) What is cash? 27

(3.2) Motives of cash 27

(3.3) Reason for cash surplus 29

(3.4) Definition of cash and operating cycle 33

(3.5) Operating cycle formulas 34

(3.6) Important of cash operational cycle 36

(3.7) Sources of cash flow of prime co-operative bank 37

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4. Literature Review 40

5. Research methodology 42

(5.1) Objective 42

(5.2) Problem Definition 42

(5.3) Research Design 42

(5.4) Source of data 43

6. Calculation of the cash operational cycle 44

7. Data Analysis and Interpretation 48-55

8. Findings 56

9. Suggestion & Recommendation 58

10. Conclusion 59

11. Bibliography 70

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Definition of Bank:-

An organization, usually a corporation, chartered by a state or federal

government, which does most or all of the following: receives demand deposits

and time deposits, honors instruments drawn on them, and pays interest on

them; discounts notes, makes loans, and invests in securities; collects checks,

drafts, and notes; certifies depositor's checks; and issues drafts and cashier's

checks.

Banking in India

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Banking in India originated in the last decades of the 18th century. The oldest

bank in existence in India is the State Bank of India, a government-owned bank

that traces its origins back to June 1806 and that is the largest commercial bank

in the country. Central banking is the responsibility of the Reserve Bank of India,

which in 1935 formally took over these responsibilities from the then Imperial

Bank of India, relegating it to commercial banking functions. After India's

independence in 1947, the Reserve Bank was nationalized and given broader

powers. In 1969 the government nationalized the 14 largest commercial banks;

the government nationalized the six next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public

sector banks (that is with the Government of India holding a stake), 31 private

banks (these do not have government stake; they may be publicly listed and

traded on stock exchanges) and 38 foreign banks. They have a combined

network of over 53,000 branches and 17,000 ATMs. According to a report by

ICRA Limited, a rating agency, the public sector banks hold over 75 percent of

total assets of the banking industry, with the private and foreign banks holding

18.2% and 6.5% respectively.

Early history:-

Banking in India originated in the last decades of the 18th century. The

first banks were The General Bank of India which started in 1786, and the Bank

of Hindustan, both of which are now defunct. The oldest bank in existence in

India is the State Bank of India, which originated in the Bank of Calcutta in June

1806, which almost immediately became the Bank of Bengal. This was one of the

three presidency banks, the other two being the Bank of Bombay and the Bank of

Madras, all three of which were established under charters from the British East

India Company. For many years the Presidency banks acted as quasi-central

banks, as did their successors. The three banks merged in 1921 to form the

Imperial Bank of India, which, upon India's independence, became the State

Bank of India.

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Indian merchants in Calcutta established the Union Bank in 1839, but it

failed in 1848 as a consequence of the economic crisis of 1848-49. The

Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint

Stock bank in India. It was not the first though. That honor belongs to the Bank of

Upper India, which was established in 1863, and which survived until 1913, when

it failed, with some of its assets and liabilities being transferred to the Alliance

Bank of Simla.

When the American Civil War stopped the supply of cotton to Lancashire

from the Confederate States, promoters opened banks to finance trading in

Indian cotton. With large exposure to speculative ventures, most of the banks

opened in India during that period failed. The depositors lost money and lost

interest in keeping deposits with banks. Subsequently, banking in India remained

the exclusive domain of Europeans for next several decades until the beginning

of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s.

The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and

another in Bombay in 1862; branches in Madras and Pondicherry, then a French

colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the

most active trading port in India, mainly due to the trade of the British Empire,

and so became a banking center.

TYPES OF BANKING INSTITUTION:-

In India, there are two part of Banking

Organized Department: - Organized Department include Indian Joint Stock

Company, Foreign Exchange Bank, Co-operative Banks, Land

Mortgage Banks, Postal Savings Bank, SBI and RBI.

Unorganized Department: - Unorganized Department includes Sharif Firm,

Shroffs,

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Today organized money market is about more then 60.

HISTRY OF BANKING INDUSTRY

A bank is a financial institution that provides banking and other

financial services. By the term bank is generally understood an institution that

holds a Banking Licenses. Banking licenses are granted by financial supervision

authorities and provide rights to conduct the most fundamental banking services

such as accepting deposits and making loans. There are also financial

institutions that provide certain banking services without meeting the legal

definition of a bank, a so-called Non-bank. Banks are a subset of the financial

services industry.

The word bank is derived from the Italian banca, which is derived from

German and means bench. The terms bankrupt and "broke" are similarly derived

from banca rotta, which refers to an out of business bank, having its bench

physically broken. Moneylenders in Northern Italy originally did business in open

areas, or big open rooms, with each lender working from his own bench or table.

Typically, a bank generates profits from transaction fees on financial

services or the interest spread on resources it holds in trust for clients while

paying them interest on the asset. Development of banking industry in India

followed below stated steps.

Banking in India has its origin as early as the Vedic period. It is believed

that the transition from money lending to banking must have occurred

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even before Manu, the great Hindu Jurist, who has devoted a section of

his work to deposits and advances and laid down rules relating to rates of

interest.

Banking in India has an early origin where the indigenous bankers played

a very important role in lending money and financing foreign trade and

commerce. During the days of the East India Company, was the turn of

the agency houses to carry on the banking business. The General Bank of

India was first Joint Stock Bank to be established in the year 1786. The

others which followed were the Bank Hindustan and the Bengal Bank.

In the first half of the 19th century the East India Company established

three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and

the Bank of Madras in 1843. These three banks also known as Presidency

banks were amalgamated in 1920 and a new bank, the Imperial Bank of

India was established in 1921. With the passing of the State Bank of India

Act in 1955 the undertaking of the Imperial Bank of India was taken by the

newly constituted State Bank of India.

The Reserve Bank of India which is the Central Bank was created in 1935

by passing Reserve Bank of India Act, 1934 which was followed up with

the Banking Regulations in 1949. These acts bestowed Reserve Bank of

India (RBI) with wide ranging powers for licensing, supervision and control

of banks. Considering the proliferation of weak banks, RBI compulsorily

merged many of them with stronger banks in 1969.

The three decades after nationalization saw a phenomenal expansion in

the geographical coverage and financial spread of the banking system in

the country. As certain rigidities and weaknesses were found to have

developed in the system, during the late eighties the Government of India

felt that these had to be addressed to enable the financial system to play

its role in ushering in a more efficient and competitive economy.

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Accordingly, a high-level committee was set up on 14 August 1991 to

examine all aspects relating to the structure, organization, functions and

procedures of the financial system. Based on the recommendations of the

Committee (Chairman: Shri M. Narasimham), a comprehensive reform of

the banking system was introduced in 1992-93. The objective of the

reform measures was to ensure that the balance sheets of banks reflected

their actual financial health. One of the important measures related to

income recognition, asset classification and provisioning by banks, on the

basis of objective criteria was laid down by the Reserve Bank.

CURRENT SCENARIO

The banking industry in India is in a midst of transformation, thanks to the

economic liberalization of the country, which has changed business environment

in the country. During the pre-liberalization period, the industry was merely

focusing on deposit mobilization and branch expansion. But with liberalization, it

found many of its advances under the non-performing assets (NPA) list. More

importantly, the sector has become very competitive with the entry of many

foreign and private sector banks. The face of banking is changing rapidly. There

is no doubt that banking sector reforms have improved the profitability,

productivity and efficiency of banks, but in the days ahead banks will have to

prepare themselves to face new challenges.

For the first quarter ended June 2004, the banking sector recorded a

bottom line growth of 18% to Rs 4852.50 crores. Higher net interest

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income and lower provisioning were the main reasons for the profit growth

during the quarter. However, the above results were achieved despite

higher operating expenses and a lower rise in non-interest income.

Among banks, public sector banks outperformed private sector banks by

registering a 20% rise in the net profit compared to an 11% growth

reported by private sector banks. This was mainly due to a higher rise in

other income (OI) and a lower increase in operating expenses by public

sector banks compared to a fall in OI and higher operating expenses by

private sector banks. However, at the net interest level, private sector

banks outperformed public sector banks by registering a growth of 36%

compared to a 14% rise reported by public sector banks. .

The net interest income of the overall banking sector during the quarter

rose 17% to Rs 11962.53 crores, mainly due to low cost of funds. The

interest earned rose 4% to Rs 29747.88 crores, contributed mainly by

interest income from core operations (i.e., lending). The interest expenses

decreased by 4% to Rs 17785.35 crores. The interest spread of most

banks witnessed an increase over the corresponding previous quarter, as

the decline of yield on lending was lower than the cost of funds. In the

falling interest rate scenario, the rate on deposits for most banks fell faster

than advances. Thus, interest expenses came down faster to protect

profit.

The sound economic growth, soft interest rate regime, upward migration of

incomes and wider distribution to cover a larger proportion of the

population are expected to increase the demand for retail loans in a

significant manner. The retail credit as a percentage of GDP in India is

only around 5% as compared to levels of 30 - 50% in other Asian

economies and, therefore, offers significant growth opportunities. Also,

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favorable demographic profile like 69% of the population estimated to be

under 35 years and an increase in upper middle/high income households

are to be the main drivers for retail credit. In the medium term, stronger

demand for credit from the corporate sector is also expected consequent

to the resurgence of this sector. Earlier, banks were seeing lower credit off

take from corporate because of weak business sentiments and lower

credit requirement due to improved operational efficiency

Also, most banks are aggressively augmenting their fee incomes and have

embarked upon cross selling of products. They are also focusing on fuller

utilization of their IT investments such as ATMs by entering into sharing

arrangement with other banks to earn extra OI. Many banks are hopeful of

effecting significant NPA recoveries due to the Securitization Act.

Recoveries from NPAs, which have been provided for, add to OI.

The banking sector is poised to grow in line with the growth of the

economy. However, there are concerns that directed focus on lending to

agriculture and SSI sector may increase NPAs of banks. Further, volatility

and a sharp fall in g-sec prices may lead to trading losses or even

depreciation provision for some banks, going forward.

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RESERVE BANK OF INDIA

The Reserve Bank of India started function on April 1st, 1935 as a

shareholders bank with a paid up capital of Rs. 5 crores divided into 5 lakh share

of Rs. 100 each. Each share was fully paid up. The government of India also

contributes Rs. 5 crores worth of securities to form its reserve fund. It turned out

that the issue was oversubscribed by 100% through the act provided for the

setting up of an independent central board of directors. Though originally

privately owned, since nationalization in 1949, the Reserve Bank is fully owned

by the Government of India.

FUNCTION OF RBI:-

As a Bank of government, state government, commercial and Co-

operative banks.

1. Rule currency notes greater than rupee.

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2. Monetary regulation.

3. Regulation on exchange value of rupee.

TYPES OF THE BANK

1. Central Bank:-Central Bank is a bank of bankers. This bank has given rights to

published currency notes. The central bank of our country is the Reserve Bank

of India. It’s established in 1934. It keeps supervision and controls the

activities of advances of the other commercial banks and financial incautious

of country. Their main objective is to make the country’s economy very strong

and well managed.

2. Commercial Banks:-

Commercial bank provides various types of services to the

people of country and businesses and industries. The main activity of

commercial bank is to get surplus money from the people as deposits and give

advances to the needy people for businesses and for other matters. It

provides facilities of various types’ accounts like saving accounts, current

account, fixed deposits accounts and recurring deposits accounts.

3. Co-operative Bank:-

The main aim of co-operative bank is develop the feeling of

safety in the common people. It was started in India after passing the Co-

operative credit society act in 1904. It is divided into three types:

State co-operative banks

District co-operative banks

Primary co-operative banks

4. Rural Banks:-

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This bank provides various advance facilities for manufacturing

activities such as business, industry and for the aim of rural economic

development. The rural bank act is passed in 1974. It has given major

contribution in the development of rural areas.

5. Land development Banks:-This bank act for buying heavy and expensive equipment for

agriculture for long term advances. This bank has given major contribution in

the development of the agriculture. These banks are mainly established on

the basis of co-operative sectors.

6. Exchange Banks:-The main activity of exchange bank is to provide money for

foreign trade. It also works as a normal banking. This bank is foreign

ownership, so it is called as foreign exchange bank. The head office of this

bank is out of India and its currency is in foreign money.

7. Indigenous Bank:-In many countries, traders do banking business with their business

form; there is a special position in Indian money market of indigenous banks

and traders.

8. Industrial Banks:-The main activities of this bank are to provide advances to the

industries. Commercial bank does such business based on the deposit

received from the customers. The working of this bank is such that Industrial

Development Bank of India, Industrial Financial Co-operation of India,

Industrial Credit and Development Corporation of India.

DEFINITION OF CO-OPRATIVE BANK:

Co-operative Bank is one type of organism in which people join willingly to

encourage their equal financial interest.

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- Hewitt

Kelwert

TYPES OF CO-OPERATIVE BANKS IN INDIA

There are mainly three types of co-operative banks in India.

1) State Co-operative Bank

2) Central Co-operative Bank

3) Primary Co-operative Bank

The explanation of these three types of co-operative banks can be explained as

follows:

1) State Co-operative Bank:-It is a federation of central co-operative banks and acts as a

watchdog of the co-operative banking structure in the state. Its funds are

obtains in the form of capital, deposits, loan and overdraft from the RBI and

State co-operative banks to lend money to central co-operative banks and

primary societies and no directly to farmers.

2) Central Co-operative Bank:-These are the federation of primary credit societies in a district and

are two types those having membership of primary societies as well as

individual. The funds of the bank consist of share capital, deposit loan and

overdraft from co-operative banks and joint stocks. These banks finance

member society within the limit of the borrowing capacity of the society.

3) Primary Co-operative Credit Societies:-It is an association of borrowers and non-borrowers residing in a

particular loyalty. The funds of the society are derived from the share capital

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and deposits of members and loan from some central co-operative bank.

The borrowing power of the members as well as of the society is fixed. The

loans are given to members for the purpose of the cattle, fertilizers and

practices etc.

Categories:-

There are two main categories of the co-operative banks.

(a) Short term lending oriented co-operative Banks:-

Within this category there are three sub categories of banks viz state co-

operative banks, District co-operative banks and Primary Agricultural co-

operative societies.

(b) Long term lending oriented co-operative Banks:-

Within the second category there are land development banks at three levels

state level, district level and village level.

The co-operative banking structure in India is divided into following main 5

categories:

1. Primary Urban Co-op Banks:

2. Primary Agricultural Credit Societies:

3. District Central Co-op Banks:

4. State Co-operative Banks:

5. Land Development Banks:

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Structure of Co-operative Bank:-

Reserve Bank of India

Urban Co-operative BanksDistrict Co-operative Banks

Non Scheduled Co-op. Bank

Scheduled Co-op. Bank

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LOGO OF THE PRIME CO-OPERATIVE BANK LTD

INTRODUCTION TO PRIME CO-OPERATIVE BANK

Prime is a name of the bank where the bank is ready to serve its banking

services to all customers under the slogan of “YOUR BANK FOR YOU”

The bank is governed by the Gujarat co-operative societies act, a

legislation enacted by the state of Gujarat in India.

Prime co-operative bank ltd was promoted by an experienced and

visionary entrepreneur named Mr. GOKUL BAKSHI; he is the Founder Chair

person of the bank and continues to supervise its growth and development.

The Bank started off with exemplary combination of talented Board &

potential staff team, stuffed with extreme professionalism and well designed

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contours of working method. The bank started as a paperless unit employing

tale-banking, remote banking, off-time banking, Sunday banking, holiday banking

and many more allied methodologies from the very beginning right from the D-

day.

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HISTORY OF THE PRIME BANK

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1994: Bank was incorporated under the chairmanship of Mr. Gokul Bakshi.

Bank commenced business from a rented location. Retail banking was

the initial activity of the bank. Focus of strategy was stability, market

penetration; resources build up and steady growth

1995: Product development strategy initiated. Bank started financing small

scale industries as recommended by RBI from Goiporia Committee and

Narsimha committee.

1996: “Customer is a king” approach initiated concept of information technology

was used like TELE Banking/Remote Banking with the advent of

computerized operations. Off time banking concept were introduced i.e.

evening 6:00 p.m. to 8:00 p.m. were provided for bank’s retail customer

to reduce their Cash risk and continue as on date.

1997: Branch Expansion Strategy initiated and bank started its first branch

Bhulka Bhavan Branch at Adajan in August 1997 within the very next

month i.e. Sept.97 bank had started another Branch at Katargam GIDC.

1998: Branch Expansion had continued during the year and 3rd branch was

opened in June 98 at M.G.Road, 4th branch was opened in oct-98 at

new sardar market & 5th branch was opened in Dec-98 at bhatar char

rasta.

1999: Bank has taken permission from RBI to accept the NRI deposits.

Introducing “smart cash”a smart alternative of cash named as “prime

purse”. It is useful at 143 places in the entire Surat area and response

encouraging received from valuable class of people of Surat.

2000: Bank started with opening of a new millennium branch at navsari

(millennium branch in feb.2000 first bank in south Gujarat to open its out

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city branch. Bank has opened another outstation branch at Bharuch in

September- 2000, starting to open D-MAT a/c in November 2000.

2004: Prime completed its 10th anniversary, and introduced schemes like Prime

Sarasvatee, Prime Health Card and Prime Citizen for its valued

customers.

2005: Prime joined its hands with Worlds Number 5 raked Insurance Provider

named AVIVA Insurance, providing Life Insurance and with IFFCO-

TOKIO for providing Marine Insurance and General Insurance to its

customers.

2006: Introduced Schemes like Loan for Gold in partnership with ICICI Bank.

Also opened a Bill Collection Centre at its Bharuch Branch for collecting

Gas Bills of Gujarat Gas Co. Ltd. To make payment system quicker RBI

has launched RTGS scheme for scheduled bank, Prime has joined

hands with Kalupur Commercial Bank to help its customers to have the

advantages of RTGS.

Prime has done a remarkable job as Baroda District Industrial Co-

operative Bank’s merger with Prime Co-operative Bank, placing its

management on its 7 branches, which has increased area of its working

up to Chotta Udaipur in Gujarat just 72 km away from the MP border.

2007: Prime has done a remarkable job as Adajan Nagrik Co-Op.

Bank's merger with Prime Co operative Bank, placing its management on

it, which has increased area of its working in Surat city.

Prime Bank has started business of Mutual Funds on a referral basis.

Bank has tied with Principal PNB Mutual Fund, UTI, Benchmark, ICICI

Prudential, Reliance, SBI, Lotus, Birla, Kotak, and Sundaram ETC.

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2008: Prime Bank has received Category-2 License to carry out Foreign

Exchange Business

“Prime Bank had done Hat trick in Merger of weak Banks."

- In June 2006 Vadodara's 50 year old bank with its

7 branches, 'Baroda Industrial Co-Op. Bank.'

-  In June 2007 Surat's 'Adajan Nagrik Co-Op. Bank' an

- In June 2008 Nadiad's 38 year old bank with its 3 branches 'United

Mercantile Co-Op.Bank.

2009:Tie-up with Paul Merchants for foreign inward remittance facility

through Western Union Money Transfer.

Two branches opened on 1-06-2009 – one at Bodeli dist. Bodeli and

another one at Vyara District Tapi.

Fourth merger taken place on 22-09-09. Sanand Urban Co-op. Bank Ltd., Sanand taken into merger

2.3 BOARD OF DIRECTORS

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Sr. Position Name

1. Chairman Shri. Gokulbhai Bakshi.

2. Vice Chairman Shri. Mukeshbhai Bombaywala

3. Mg. Director Shri. Dharmeshbhai Chorawala

4. Director Shri. Kanubhai Tailor.

5. Director Shri. Radhykishan Ruchandani.

6. Director Smt. Champaben Makwana

7. Director Shri. Kishor Brahmbhatt

8. Director Shri Rajnikantbhai Kapadia

9. Director Shri Dhiraj Shah

10. Director Shri. Parimal Vyas

ORGANISATIONAL STRUCTURE

In Prime Co-operative Bank, organizational structure is not very

formal. In each department, there is an officer and under him, there are two

clerks helping him. The structure is given below.

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Chairman

Director

CEO

Administration Office

______________________________

GM Credit Administration Manager All Branches

The main branch has systematic hierarchy because it has various

responsibilities to be handled, so its own hierarchy, which is as under:

GM

Senior Manager

Manager

Assistant Manager

PRIME BANK ADMINISTRATIVE WING

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Sr. No. Wing Name with AddressPhone No.

1. Control Centre

2nd floor, Meridian Tower,

Udhna Darwaja, Ring Road,

Surat

0261-2369089

0261-2351485

2. Service Cell

Kailashdeep Complex,

Opp. Sub Jail, Ring Road,

Surat

0261–2345250

3. Central Gujarat Area Office

Prof Manekrao Road,

Dandia Bazaar,  

Vadodara – 390001

0265–2459198

MOTTO & VISION OF THE PRIME BANK

MOTTO OF THE BANK:-

“Operation stops in the evening

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What continues is………

OUR RELATIONSHIP”

VISION OF THE BANK:-

A fully equipped one stop high-tech “Banking Super Market.”

FUTURE PLANS OF THE BANK:-1) Branch Expansion To Ahmadabad To Vapi

2) ATM Installation

3) Core banking Solution

4) Schedule Status

ACHIEVEMENTS

BEST PERFORMING CO.OPERATIVE BANK

AWARD RECEIVED FOR SECURING 3RD

RANK IN GUJARAT AND 6TH RANK IN INDIA

BASED ON LAST THREE YEARS FINANCIAL

PERFORMANCE.

OTHER AWARDS

1St prize of non-schedule multiple branch Bank Award Received15th

November 2008.

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For dedicated and exemplary services rendered to the Citizens of Surat.

Award Received 18th October 2008.

National award winner for “Frontiers In Co-operative Banking Awards

2008” received three awards in different categories. National competition

arranged by “Banking Frontier” – National Magazines for banking.

Best performing co-operative bank award received at Bangkok- Thailand

in 17th international achievers summit.

My favorite bank award received on 18/05/2008 for the year 2008.

SERVICES OF THE BANK

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Life Insurance:  The Prime bank is first Co-operative Bank of South Gujarat Area

who has tie up & start Life Insurance Products Business with Aviva Life Insurance

Co. India Ltd. as a “Bank Assurance”. (Corporate Basis)

General Insurance: The Prime bank is first Co-operative Bank of South Gujarat

Area who has tie up & start Life Insurance Products Business with Iffco Tokyo

General Insurance Co. Ltd. as a “Bank Assurance”.

Stamp Franking Services: They provides stamp franking service at following

branches:

Main Branch, Kadodara, Surat.

Dandia Bazaar Branch, Baroda.

Sayajigunj Branch, Baroda.

Mutual Funds: They are first & only Co-operative bank of South Gujarat Area

who has been staring business of Mutual Funds as a referral basis.

Prime Lockers:  There is one & only Co-operative bank of the South Gujarat –

Prime Bank has been offered Rent Free Locker Facility to the customers since

the inception of the Prime Bank.

Prime Fore. Exch.: We can cater Foreign Exchange (Letter of Credit & Bank

Guarantee) through Inducing Bank. Now, we have been doing the business of

Money Exchange/Changing Business.

Prime Dmate: We can cater Dmate account facility through HDFC Bank.

Prime RTGS:  Now you can Transfer you fund or to receive the fund from any

City or place of India (RTGS-Real Time Gross Settlement).

Mobile Banking: They are a first & only Co-operative High Tech Banking Super

Market to cater your Bank’s inquiry on your finger tips in South Gujarat Area. You

62

can also get cheque status on your mobile phone. You can also get lass

three transactions on you cell.

Prime ABB:  They are a first & only Fully Equipped, High Tech, Professional

Banking Super Market of South Gujarat offered Any Branch Banking. You can

make Cash, Clearing & Transfer Transaction from any of Prime Bank’s Branch.

You can also get Statement of your account or pass book of your savings bank

account.  So you are not a Customer of specific Branch of Prime Bank but you

are Customer of Prime Bank.

Seven Day working our various branches working for 7 days.

1) Bhulka Bhavan, Branch

2) Bhatar Road, Branch.

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What is CASH?

According to Sydney Robbins ,

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“Cash what a strange commodity! A business wants to get hold of

it in shortest possible time but to keep the least possible quantity on hand.

Increased sophistication in the handling of cash has enabled companies to cut

down the balance needed to sustain any level of given operation.”

Sources and used of cash:

1) Sources:

Decrease in assets

Increase in liabilities

Sale proceeds from an ordinary or preference share issue.

2) Uses:

The less from operation

Increase in assets

Decrease in liabilities

Redemption of redeemable preference share

Cash dividend

MOTIVES OF CASH:

The main motives of maintaining cash balance are as under:

1) Transaction motive:-Business unit has to carry on a large number of day to day transactions.

Cash is needed for the payment of such transaction. Moreover, cash

balance is needed for the payment of wage, electricity bills, telephone bills,

maintenance expenses, interest, dividend, rent etc. If there is

synchronization between cash receipt and cash payment, cash management

is not of much importance. Therefore, maintenance of cash balance is highly

important so that necessary transactions can be carried on.

2) Precautionary motive:-

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Explosion in the factory, breakdown of machines, fire, flood, earthquake etc

create need for cash. Such events happen very rarely, however, as a

precaution the company has to maintain sufficient cash balance to meet

contingency expenses.

3) Speculative Motive:-Speculative Motive is the motive of earning profit from price fluctuations.

When the company makes purchasing of raw materials at current low prices

in anticipation of rise price in the near future, it is speculative purchasing.

Such opportunities of speculative gains do come in the life of company. But

its advantages can be only when the company has enough cash balance to

make speculative cash buying.

4) Compensatory Motive:-Commercial banks provide services to their customers free of charge. In

order to compensate the cost of free services they desire that every

customer should maintain minimum cash balance with the bank. Generally,

minimum cash balance is prescribed by the bank for saving and current

accounts. If that minimum balance is not maintained the bank levies charge

certain amount. Therefore, a bank customer is required to maintain minimum

cash balance.

REASON FOR CASH SURPLUS:-

Cash surplus arise for many reasons and for last varying time period. Some of

the reasons are:

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1) Low capital expenditure

2) Absence of profitable avenues

3) Sale of a part of business

4) Conservative dividend distribution policy

The firm may keep surplus fund in liquid form for the following reasons:

1) To buy back shares in near future

2) To enhance the dividend payment to shareholders

3) Waiting for strategic opportunities to arise like acquisition and takeover of

weak unit.

REASON FOR CASH FLOW PROBLEMS:-

The continuous deficit in cash flow will show the signal for forthcoming situation

of financial distress. The cash flow problems may arise from the following

reasons:

1) Continuous operating losses will cause deficit in cash flows. A bank which

cannot able to cover the depreciation charge but is in the surplus state of

cash is the potential unit for cash starvation.

2) When the rate of inflation is higher, the need for cash also increase and it will

cause excessive outflow of cash than inflow.

3) Non recurring expense or payments may cause cash flow problems.

4) Over trading is one of the reasons which cause cash flow problems. A firm

which do business more than its working capital can absorb, will create cash

flow problems

5) Usiness growth of a firm may lead to continuous cash requirements to

support its production and working capital shortage.

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CASH FORECAST:-

1) SHORT TERM CASH FORECAST:

Methods for short term cash forecast are as follows:

I. Receipts and Disbursement Method: This method is essential a projection of the cash records

wherein the forecast includes detailed listing of the sources of cash

receipts and the nature of cash disbursements. This method is by

companies exercise a close control over cash because it traces the

movement of cash through each item of income and expenditure. Receipts

and disbursements forecasts are often short range forecast.

II. Adjusted Income Method:

This method is consists of a forecast of net income and correction of this

figure by any other transactions that are necessary in order to adjust it to

cash basis. The profit and loss budget constitutes the primary basis for the

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forecast; the data are supplements by forecasts of balance sheet items.

This method involves the establishment of expected net income over some

future period and then adjusted of this figure to a cash basis by various

addition and deductions. This method is best suited for those have stable

business volume and earning power. Since this method is based on

difference between income and expenditure rather than on aggregate

transactions. The main advantage of this method is that it provides a very

accurate estimate of cash position at a given point of time, because it takes

in to account the effect of cash on changes of working capital and other

non-operating balance sheet items. It does not offer much day to day

control over cash, for it does not trace the actual flow of monies. For this

reason, it is unsatisfactory for companies in which operating cash is tight

for those which are rigorously investing surplus cash.

2) LONG TERM CASH FORECAST:

It attempts only to give a rough sketch of a company’s distance financing

requirements. It pinpoints a company’s future money needs’ especially in

working capital requirements. If a firm experience a serious cash drain, the

forecast will give it some idea of how rapidly this is happening and why.

Another use of it is that it enables a firm to appraise its proposed capital

projects.

The method of long term cash forecast is as follow:

The Cash Book Method of Analysis:

It is designed to measure the cash flow on the basis of the classified entries which

appear in cash book. When a firm receives or pays out cash or cheques in the

course of the daily conduct of its business affairs, each receipts or payment is

recorded in the cash book. The receipts may be:

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a) From customers or debtors

b) For cash sales

c) For miscellaneous, repetitive and non-repetitive sources.

The payment may be related:

a) Suppliers of materials

b) Employee payments

c) For miscellaneous, repetitive and non-repetitive payments

d) Tax liabilities

e) Capital expenditure

f) Financial obligations such as interest or dividend payments.

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DEFINATION OF OPERATING AND CASH CYCLE:

Operating cycle and cash cycle are two important component of working capital

management.

Cash cycle: cash cycle is the time period from when cash is paid out to when

cash is received,

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Operational cycle: it refers the delay between the buying of raw material

and the receipt of cash from sales proceeds. In other words, operational cycle

refers to the number of days taken for the conversion of cash to inventory which

cash is engaged in inventory and account receivable. If an operational cycle is

long then there is lower accessibility to cash for satisfying liabilities for the short

term.

Cash operating cycle is the length of time between company’s outflow of

material, wages and other expenditure and inflow of cash from the sales of

goods. It reflects a company’s investment in working capital. The faster the cycle,

lower is the investment in working capital. The investment increases from raw

material to labour, OH, WIP up to final collection of cash from trade receivables.

The length of cycle depends upon balancing liquidity and profitability.

Shortening cash cycle may have an adverse effect on sales because customers

buy from that supplier who gives more credit period so there should be an

optimum level of cash operating cycle.

He Operating cycle definition, also known as cash operating cycle or cash

conversion cycle or asset conversion cycle, establishes how many days it takes

for a company to turn purchases of inventory into cash receipts from its eventual

sale. Operating cycle has three components of payable turnover days, inventory

turnover days and accounts receivable turnover days. These come together to

form the complete measurement operating cycle days. The operating cycle

formula and operating cycle analysis stems logically from these.

OPERATING CYCLE FORMULA:

Operating cycle calculations are completed simply with this formula:

Operating cycle = DIO + DSO - DPO

Where,

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DIO represents days inventory outstanding

DSO represents day sales outstanding

DPO represents days payable outstanding

Operating Cycle Calculation:

Calculating operating cycle may seem daunting but results in extremely valuable

information.

DIO = (Average inventories / cost of sales) * 365

DSO = (Average accounts receivables / net sales) * 365

DPO = (Average accounts payables / cost sales) * 365

Example: What is the operating cycle of a business? A company has 90

days in day’s inventory outstanding, 60 days in days sales outstanding

and 70 in days payable outstanding.

Operating cycle = 90 + 60 - 70 = 80

This means that on average it takes 80 days for a company to turn

purchasing inventories into cash sales. In regards to accounting, operating

cycles are essential to maintaining levels of cash necessary to survive.

Maintaining a beneficial net operating cycle ratio is a life or death matter.

Cash outflow for operating charges:

This expenditure is simple: we count the cash operating charges (if we pay them

entirely with cash & bank) and, of course, we don't have to worry about the

amortization which is a "non-cash" operating charge (the cash of the investment

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was paid at another time, or perhaps even not yet paid, but it's not taken into

account here).

Salary + fringes = 150

Rent = 50

other cash charges = 50

So the cash outflow for operating charges is 250.

(Remember that all these were, simply enough, credits in the cash &Bank

account)

 Outflow for interest charges, taxes and dividends.

Here we take into account the "buffering" liability account "other creditors". The

variation of the "other creditors" is 90 - 50 = 40.

So the cash outlay for interest charges, taxes and dividends is 10 + 20 + 30 - 40

= 20.

IMPORTANCE OF CASH OPRATING CYCLE:

Cash cycle is very important for the health of business.

62

A powerful tool for assessing how well a company is managing its working

capital.

To determine more easily why and when the business needs more ash to

operate.

When and how it will be able to repay the cash.

The measure illustrates.

How quickly a company can convert its product to cash through sales.

The shorter the cycle, the less time capital is tied up in the business

process.

It allows the company to take advantage of the working capital sooner.

Longer operational cycle causes cash crunches.

An upward trend is a negative signal.

A downward trend shows increase in efficiency.

SOURCES OF THE CASH FLOW FROM PRIME CO-OPRATIVE BANK: -

Current Account

Saving Account

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Locker With the reliance gold policy for marketing strategies.

Fixed deposit

various types of loan

How can used making an efficient cash flow in prime co-operative bank?

-To provide customer service.

-Increase the cash by opening bank account.

-Increase cash by short and long term fixed deposit.

-Increase loan with higher rate and earn interest.

WHAT IS THE CASF FLOW?

Revenue or expense stream that changes a cash account over a given period. Cash

inflows usually arise from one of three activities - financing, operations or investing -

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although this also occurs as a result of donations or gifts in the case of personal finance.

Cash outflows result from expenses.

INVESTMENT OF CASH:-

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The Prime Co-operative Bank Ltd invest their cash in various banks such as

nationalized bank, State co-operative banks, District co-operative bank, Sate

Government Security, Central Government Security.

Guidelines of RBI for the Investment:-

1. The Total amount of funds placed as inter-bank deposits shall not

exceed 10% of DTL as on March 31 of the previous year.

2. Non SLR investment (except Inter-bank deposits) not to exceed 10%

of total deposits as on March 31 of the previous year.

3. Exposure to any single bank or to any single PSU/FI should not

exceed 2% of NDTL as on March 31 of the previous year.

4. Total investment in Bonds/Debenture/MF products not to exceed 10%

of total deposits as on March 31 of the previous year.

Objectives of the cash flow and fund flow statement:

After you have studied this unit, you should be able to:

Understand the idea of funds flowing through a business in a dynamic situation

Appreciate the role of working capital in the operations of a business

Understand the sources and uses of working capital as well as cash during an

accounting period from the financial statements

Understand and interpret changes in working capital identifying the causes of

these changes

Use the funds flow statement and the cash flow statement as analytical tools

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(1)

62

AutoZone Cash Conversion Cycle: A Competitive Advantage?

Source:-http://www.oppapers.com/essays/Literature-Review/710859

According to, Shin & Soenen, 1998

In intention to discover the relationship between efficient working capital

management and firm’s profitability(Shin & Soenen, 1998) used net-trade cycle

(NTC) as a measure of working capital management. NTC is basically equal to

the CCC whereby all three components are expressed as a percentage of sales.

The reason by using NTC because it can be an easy device to estimate for

additional financing needs with regard to working capital expressed as a function

of the projected sales growth. This relationship is examined using correlation and

regression analysis, by industry and working capital intensity. Using a Compustat

sample of 58,985 firm years covering the period 1975-1994, in all cases, they

found, a strong negative relation between the length of the firm's net-trade cycle

and its profitability. In addition, shorter NTC are associated with higher risk-

adjusted stock returns. In other word,   (Shin & Soenen, 1998) suggest that one

possible way the firm to create shareholder value is by reducing firm’s NTC.

The study of (Shin & Soenen, 1998) consistent with later study on the same

objective that done by (Deloof, 2003) by using sample of 1009 large Belgian non-

financial firms for the period of 1992-1996. However, (Deloof, 2003) used trade

credit policy and inventory policy are measured by number of days accounts

receivable, accounts payable and inventories, and the cash conversion cycle as

a comprehensive measure of working capital management. He founds a

significant negative relation between gross operating income and the number of

days accounts receivable, inventories and accounts payable. Thus, he suggests

62

that managers can create value for their shareholders by reducing the number of

days accounts receivable and inventories to a reasonable minimum. He also

suggests that less profitable firms wait longer to pay their bills.

(2)

ACCORDING TO, Timo SalmiProfessor of Accounting and Business Finance

Teppo MartikainenAssociate Professor of Accounting and Business Finance

A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis

Abstract

This paper provides a critical review of the theoretical and empirical basis of four

central areas of financial ratio analysis. The research areas reviewed are the

functional form of the financial ratios, distributional characteristics of financial

ratios, classification of financial ratios, and the estimation of the internal rate of

return from financial statements. It is observed that it is typical of financial ratio

analysis research that there are several unexpectedly distinct lines with research

traditions of their own. A common feature of all the areas of financial ratio

analysis research seems to be that while significant regularities can be observed,

they are not necessarily stable across the different ratios, industries, and time

periods. This leaves much space for the development of a more robust

theoretical basis and for further empirical research.

62

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Research Methodology

PROBLEM STATEMENT:

The research problem is to know the “CASH OPERATIONAL CYCLE

OF PRIME CO-OPERATIVE BANK LIMITED”.

OBJECTIVE OF STUDY: To know the cash retention limit of bank.

To know the cash flow of prime bank.

To know the loans and deposit of bank.

To know the liquidity level of the bank.

To find out the days in inventory outstanding in prime co-operative

bank.

To find out the days sales outstanding in prime co-operative bank.

To find out the days payables outstanding in prime co-operative bank.

To know the days of operating cycle.

To know the ratio analysis.

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RESEARCH DESIGN:

The nature of research design is the descriptive research design.

DATA COLLECTION:

There are two types of data:

a. Primary Data

b. Secondary Data

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[1] DAYS IN INVENTORY OUTSTANDING:-

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Day’s inventory outstanding ratio, explained as an indicator of inventory turns, is

an important financial ratio for any company with inventory. It shows how quickly

management can turn inventories into cash. In general, a decrease in day’s

inventory outstanding (DIO) is an improvement to working capital, and an

increase is deterioration.

Also known as days inventory outstanding (DIO). It is calculated by this formula:

DIO = AVRAGE INVENTORY/COST OF SALES*365

YEAR AVRAGE INVENTOY COST OF SALES DIO

2008-2009 944360.79 146556743.1 2.35

2009-2010 1140868.73 178587974.3 2.33

2010-2011 1529274.44 322673109.4 1.73

Interpretation: This means that on average it takes in 2009, 2.35 and 2010,

2.33 and 2011, 1.73 for a bank to turn purchasing inventories into cash sales.

[2] DAYS SALES OUTSTANDING:

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A measure of the average of days that a company takes to collect revenue after

a sale has made. A low DSO number means that a company Fewer Days to

collect its account receivable high DSO number shows that a Company is selling

its product to customer on credit and taking longer to collect money.

Days sales outstanding are calculated as:

DSO =AVERAGE ACCOUNT RECEIVABLE/NET SALES*365

YEAR AVRAGE ACCOUNT RECEIVABE

NET SALES DSO

2008-2009 37623740.11 30485609 450.46

2009-2010 36830676.35 38790565 346.56

2010-2011 28873037.65 34027774 309.71

Interpretation: This means that on average it takes in 2009,450 days and

2010,346 days and 2011,310 days for a bank to turn days in outstanding into

cash sales.

[3] DAYS PAYABLE OUTSTANDING:-

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Days payable outstanding (DPO), defined also as days purchase outstanding,

indicates how many days on average a company pay off its accounts payables

during an accounting period. A useful tool to measure and manage DPO is a

Flash Report.

Day’s payable outstanding means the activity ratio that measures how well a

business is managing its accounts payable. The lower the ratio, the quicker the

business pays its liabilities. It also shows the average payment terms granted to

a company by its suppliers. The higher the ratio, the better credit terms a

company gets from its suppliers. From a company’s prospective, an increase in

DPO is an improvement and a decrease is deterioration. It is the calculated as

below:

DPO = AVRAGE ACCOUNT PAYABLE/COST OF SALES*365

YEAR AVRAGE ACCOUNT PAYABLE

COST OF SALES DPO

2008-2009 3233956.87 146556743.1 8.05

2009-2010 4477607.25 178587974.3 9.15

2010-2011 1590630.04 322673109.4 1.79

Interpretation: This means that on average it takes in 2009, 8.05 and 2010,

9.15 and 2011, 1.79 for a bank to account payable.

CASH OPEARTIONAL CYCLE:

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OPERATING CYCLE= DIO + DSO – DPO

YEAR: DIO DSO DPO COC:

2008-2009 2.35 450.46 8.05 444.8

2009-2010 2.33 346.56 9.15 339.7

2010-2011 1.73 309.71 1.79 309.6

Interpretation:

This means that on average it takes 2008, 445.days & 2009, 339 days &

2010, 309 days for a bank to turn purchasing inventories into cash sales. In

regards to accounting, operating cycles are essential to maintaining levels of

cash necessary to survive.

RATIO RELATING TO CASH CYCLE:-

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1) LOAN TO DEPOSITS RATIO: - This ratio is a comparison of funds

generation and its funds mobilization indicates the total loans sanctioned by

the bank in relation to total amount of money deposited with the bank.

Loan to Deposits ratio =

2008-2009 = = 36.89%

2009-2010 = = 52.84%

2010-2011 = = 45.25%

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Interpretation:-As per this ratio bank has grow over the year continuously. In

2008-09 is 36.89 % and in 2009-10 is 53.64% and 2010-11 is 45.25%.2009-10 is

the beneficial for bank.

2) LOAN TO ASSET RATIO:- The loan to assets ratio measures the total loans outstanding as a

percentage of total assets.

Loan to Assets Ratio =

2008-2009 = = 42.58%

2009-2010 = = 42.67%

2010-2011 = = 46.19%

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Interpretation:-

The higher the ratio, the more risky a bank may be to higher defaults.

As the ratio is high, it is not good for the bank and collection activity should

increase to maintain the liquidity. In 2008-09 is 42.58 %. In 2009-10 is

42.67% & 2010-11 is 46.19%.

3) RETURN ON AVERAGE ASSETS RATIO:- This ratio measures how effectively a company has generated profit

from its available assets.

Return on Average Asset Ratio=

2008-2009 = = 7.81%

2009-2010 = =7.64%

2010-2011 = =7.53%

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Interpretation:-

From this ratio, we can know that what % are getting on return on Assets.

But here the (%) is decreasing next year so it isnot in favour of bank. In 2008-09it

is 7.81%, in 2009-10 it is 7.64% & 2010-11 it is 7.53%.

4) CASH RATIO:- From the cash ratio it is easy to know that out of total deposits that

bank gets from public, what (%) bank keep as cash in hand and cash

at other bank.

Cash Ratio =

2008-2009 = = 8.19 %

2009-2010 = = 7.69 %

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2010-2011 = = 6.53 %

Interpretation:-

In 2008-09, out of total deposit, Prime Bank has cash in hand & at bank is

of 8.09%. But in next year 2009-010, it is decreasing to 7.69% & 2010-11 is

6.53%.

5) INTEREST EXPENSE TO INTEREST EARNED RATIO:-

This ratio shows the picture of interest paid and interest earned for the

period.

Interest Expense to Interest Earned Ratio =

2008-2009 = = 53.55 %

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2009-2010 = = 59.84 %

2010-2011 = = 64.53 %

Interpretation:-

Interest paid is increasing over the years. Percentage is going up

every year.

In 2008-09 is 53.55%. In 2009-10 is 59.84% & 2010-11 is 64.53%.

Interest paid over the interest earned is high every year.

6) OTHER INCOME TO TOTAL INCOME RATIO:- This ratio gives the sign of part other income in the total income. It

means that what percentage part of other income included in total income.

Other Income to Total Income =

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2008-2009 = = 9.81%

2009-2010 = = 8.71%

2010-2011 = = 8.38%

Interpretation:-

Around 9% is the other income in total income. So the bank is earning

other income apart from the interest income. In 2008-09 is 9.81%. In 2009-10 , it

decreases and became 8.71%and 2010-11 is 8.38%.

(7)NET INTEREST INCOME TO TOTAL ASSETS:-It is the ratio of net interest income with total assets. On total assets

what are rate of net interest income is received.

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Net interest income to total assets=

2008-2009 = = 3.49%

2009-2010 = = 2.98%

2010-2011 = = 2.50%

Interpretation:-

In 2008-09, the Prime bank has earned 3.49% of net interest income out

of total assets, it is decreasing every year. & in 2009-10 the rate is 2.98%&

2010-11 is 2.50%.

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(8)NON INTEREST INCOME TO TOTAL ASSETS:-This ratio indicates the bank able to manage few non interests

earning compare to its Non operating income.

Non Interest Income to Total Assets=

2008-2009 = = 0.82 %

2009-2010 = = 0.71 %

2010-2011 = = 0.64 %

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Interpretation:-

In 2008-09, this ratio is highest as compare to the 2009-10 & 2010-

11. But it is not adequate from the banking perspective. Therefore the bank

should increase more noninterest revenue from additional sources.

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FINDINGS

COMPARISION OF THREE YEARS CASH OPERATING CYCLE OF PRIME CO-

OPERATIVE BANK:

YEAR: OPERATING CYCLE:

2008-2009 445 days

2009-2010 340 days

2010-2011 310 days

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Days inventory outstanding that on average it takes in 2009,

2.35 and 2010, 2.33 and 2011, 1.73 for a bank to turn purchasing

inventories into cash sales.

Days sales(advances) outstanding that on average it takes in

2009,450 days and 2010,346 days and 2011,310 days for a bank

to turn days in outstanding into cash sales.

Days payables outstanding that on average it takes in 2009, 8.05

and 2010, 9.15 and 2011, 1.79 for a bank to account payable.

Cash operational cycle means that on average it takes 2008,

445.days & 2009, 339 days & 2010, 309 days for a bank to turn

purchasing inventories into cash sales. In regards to accounting,

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operating cycles are essential to maintaining levels of cash

necessary to survive.

COMPARISION OF THREE YEARS RATIO ANALYSIS OF PRIME CO-OPERATIVE BANK:

1) I have done ratio analysis relating to the cash management of The Prime Co-

operative Bank Ltd.

2) Loan to Deposit ratio of the bank has increased over the years and decrease

for 2010-11. It has gone from the 36.89% to 52.84%. It jumped almost 16% in

just 2 years.it has decrease for 45.25%.

3) Loan to Assets ratio is also incresaes from 42.58% to 42.67% and 46.19%.

4) Here the Cash Ratio is decreasing from 8.19% to 7.69% and 6.93% which is

not in the favor of the bank.

5) The Prime Bank’s net interest income over the total assets is decreasing from

3.49% to 2.98% & 2.50% which is very less for the bank.

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SUGGESTION

The prime bank should increase their cash limits for each bank because

in main branch it is very higher as compare to other branch.

Bank should increase the efforts to give the loans, in investible

instrument. So interest earning is increase.

HOW CAN IMPROVE CASH OPERATINAL CYCLE IN CO-OPERATIVE BANK:

1. Increase the deposit of interest in current account.

2. Proper cash management in every day.

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3. Fast Loan recovery.

4. Proper loan given by the bank to their customer so that customer gives

more loans in bank.

5. Bank’s every days expense like light bills, salary of staff, director

recommendations etc.

6. Use latest computerized system so that every transaction would be

transparent.

7. Un-requirement stationary stocks don’t purchase.

8. Repairing maintenance will be used easily, beneficial, and others

expenses without any other expense.

9. Director and staff can work their work very nicely so bank reputation would

be high on their customer.

10. Unless staff would not be recruited.

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CONCLUTION

During my training in prime co-operative bank. I want to conclude that the

operating cycle of the cash is better way because they are investing their cash in

many banks like state co-operative bank, district co-operative bank, nationalized bank

etc. ssssAll employees give good response during my training. where I ask question

that give answer with respect. Managers also give guidance for preparing the report.

Thus my experience during training period was very good.

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GROWTH GRAPHICS OF LAST THREE YEAR:

GROSS NPA:

62

GROSS PROFIT AND NET PROFIT:

DEPOSITS:

62

ADVANCES:

62

ANNEXURE

Performance for the period ended March 2011 (RS. IN LACS)

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Quarter ended  Year ended

Audited Unaudited Audited Unaudited

Mar. 10 Mar. 11 Mar. 10 Mar.11

Interest on advances 552.72 675.10 2097.34 2543.46

Interest on investment 386.53 527.00 1541.49 1907.86

Commission & Exchange 29.09 30.77 88.92 97.73

Other Income 38.03 41.88 127.78 126.95

Profit on sale of security 6.35 - 9.94 16.26

Total Income 1012.72 1,274.75 3,865.47 4,692.25

Interest on deposits 687.63 865.42 2350.09 2937.67

Interest on borrowing 0.41 7.50 1.82 11.33

Other expenses 226.96 244.81 839.55 1016.30

Service Tax 8.21 11.79 26.57 29.76

Fringe Benefit Tax 0.00 - 0.13 0

Total Expenses 923.21 1,129,52 3218.16 3,995.06

Interest Spread 251.21 329.18 1286.92 1,502.31

Profit before dep.& Provision 89.51 145.23 647.31 697.19

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Provision 60.00 45.51 60.00 45.51

Depreciation 56.63 83.19 56.64 83.28

Loss/profit (-) on sale of assets 0.00 5.10 -57.21 -1.98

Capital expenses written off 0.33 1.07 -0.42 1.07

Excess provisions written back 0.00 - 0.00 0.00

BDIC/Adajan Loss written off 93.34 94.74 93.34 94.74

Profit after dep.& Provision -120.79 (84.38) 494.12 474.57

Income Tax 50.00 92.64 154.00 177.64

Net Profit -170.97 (177.02) 340.12 296.93

Deposits     40245.14 50059.26

Advances     20850.07 25514.91

Investment     2191.64 27119.27

Gross NPA     507.62 392.91

Gross NPA %     2.46% 1.54%

Net NPA     0.0% 0.00%

CASH FLOW STAEMENT OF PRIME CO-op. BANK Ltd FOR THE YEAR ENDED 31 st MARCH 2009

62

PARTICULARS AMOUNT

Net interest earned during the year 1170

Add: other income 134

1305

Less:

Operating expense 645

Income tax, service tax and fringe benefit 214

Cash profit generated from operation 446

Increase in deposit 7331.84

Decrease (+) increase (-) fixed assets -99.81

Decrease (+) increase (-) other assets -198.8

Increase (-) in advance -4072.67

increase (+) decrease (-) in other liabilities 1910.62

Net cash flow from banking operation 4527.91

Cash flow from investing activities:

increase (-) decrease (+) government securities investment -3946.93

Profit from sale of government security 60.65

Net cash flow from investing activities 3886.29

Cash flow from financing activity

increase in share capital 127

Dividend provided last year 54.41

62

Increase in borrowing -303.79

Reserve utilized (net) -208.51

Net cash used in financing activities -330.75

Net increase in cash and cash equivalent 443.25

Cash and cash equivalents as on 1st April 2009 1995.90

Cash and cash equivalents as on 31- 03- 2009 2439.15

CASH FLOW STAEMENT OF PRIME CO-op. BANK Ltd FORTHE YEAR ENDED 31 st MARCH 2010

62

PARTICULARS AMOUNT

Net Interest earned during the year 1038.85

Other income (excluding Security trading) 216.59

1255.44

Less:-

Operating expense 561.30

Income Tax, Service Tax and Fringe Benefit tax 226.58

Cash Profit generated from operations 467.56

Increase in deposits 4436.87

Decrease(+)/increase(-) in fixed assets -20.35

Decrease(+)/increase(-) in other assets -825.41

Increase(-) in advances -2344.80

Increase(+)/decrease(-) in other liabilities 814.80

Net Cash Flow from banking operation 2528.67

Cash flows from investing activities:-

Increase(-) / decrease(+) in Government securities /

investment

-2329.67

Profit from sale of Government securities 26.79

Net cash from investing activities -2302.88

Cash flows from financing activities

62

Increase in share capital 63.93

Dividend provided last year -44.89

Increase in borrowing 69.04

Reserve utilized (net) -2.27

Net cash used in financing activities -52.27

Net increase in cash and cash equivalent 173.52

Cash and cash equivalents as on 1st April 2009 1822.38

Cash and cash equivalents as on 31- 03- 2009 1995.90

Fund flow statement of prime co-operative bank year 2010:-

DETAILS OCT (2010) NOV (2010) DEC (2010)

62

(a) cash receipts

commission 49216.86 51647.86 56489.86

Other receipts 402932.65 435106.10 554690.20

Interest 12789264.25 15045393.35 17512814.25

(a)total income 13241411.76 15532147.31 18123994.31

(b)cash payments

Current account 18460 18460 23905

Salaries 1132095 1280847 1489162

Rent and taxes 220434 253942 304747

Postage and

telecom

17640 17970 26242

Repairing 41970 48972 56110

Other expenditure 296419.50 325023.50 345406.50

Interest 1673462.13 16949219.30 2485207.81

Printing and

stationary

6241 6106 8079

Other payment 6064797 6064797 6064797

(b)total payment 9471524.63 9711646.85 10806656.31

Total cash

balance(a-b)

3769887.13 5821100.5 7317338

Add: opening 2448387.20 6218274.33 12039374.83

62

balance

Closing balance 6218274.33 12039374.83 19356712.83

62

62

Website

http://www.primebankindia.com/

http://www.investopedia.com/terms/c/cashconversioncycle.asp

http://www.investopedia.com/terms/c/cashflow.asp

http://finance.mapsofworld.com/corporate-finance/management/operating-

cycle-and-cash-cycle.html

REPORT:-

Bank annual report 2008, 2009 , 2010 , 2011