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INTRODUCTION
Empirical observations show that the financial managers have to spend
much of their time to the daily internal operations relating to current assets
and current liabilities of the firms. As the largest portion of the managers
time is devoted to working problems, it is necessary to manage working in
the best possible way to get maximum benefit. The effective management
of the business, among other things primarily depends upon the manner in
which the short-term assets and short term sources of financing are
managed. The management of current assets consists of inventories,
accounts receivable and cash & bank balances as the major components.
There is a difference between current assets and fixed assets in terms of
their liquidity. A firm requires many years to recover the initial investments
in fixed assets such as plant and machinery and land and buildings. On the
contrary, investments in current assets are turned over many times a year.
Investments in current assets such as inventories and book debts are
realized during the firms working capital cycle, which is usually less than a
year. Working capital is that proportion of a companys total capital, which
is employed in short- term operations.
Management is an art of anticipating and preparing for risks, Uncertainties
and overcoming obstacles. An essential precondition for sound and
consistent assets management is establishing the sound and Consistent
assets management policies covering fixed as well as current assets. In
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modern financial management, efficient allocation of funds has a great
scope, in finance and profit planning, for
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the most effective utilization of enterprise resources, the fixed and current
assets have to be combined in optimum proportions.
DEFINITIONS OF WORKING CAPITAL:
Working Capitalis the difference between in the inflow and outflow of
funds. In other words, it is the net cash inflow. It is defined as the excess of
the current assets over current liabilities and provisions.
CONCEPTS OF WORKING CAPITAL:
Conceptually, working capital is either explained as: - Net Working Capital or
Gross Working Capital. These concepts are not exclusive; rather they have
equal significance from management viewpoint. Gross working capital refers
to the firms investment in current assets. Net working capital refers to the
difference between current assets and current liabilities.
Working capital in simple terms means the amount of funds that a company
requires for financing its day-to-day operations. Finance manager should
develop sound techniques of managing current assets.
Composition of working capital
Constituents of Current Assets
1.Cash-in-Hand and Bank
2.Bill Receivable
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3.Sundry Debtors
4.Short-term investments
5.Prepaid expenses
6.Outstanding income
7.Inventories or stock as
Raw materials
Work-in-progress
Stores & Spares
Finished Goods
Constituent of Current Liabilities
1.Bills Payable
2.Sundry Creditors
3.Outstanding Expenses
4.Short-term Loans, Advances and Deposits
5.Dividend Payable
6.Bank Overdraft
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SOURCES
The major sources of working capital are:
1.Funds from business operations
2.Other incomes
3.Sales of non-current assets
4.Long-term borrowings
5.Issue of additional equity capital or preference share capital
USES OF WORKING CAPITAL:
1.Losses from business operations
2.Purchases of non-current assets
3.Redemption of debentures and preference shares
4.Dividends to shareholders
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Equation of Net Working C apital:
It is the excess of current assets over current liabilities.
Net Working Current Current
Captial Assets Liabilitie s
IMPORTANCE OF WORKIN G CAPITAL
Working capital may be r egarded as the lifeblood of the business. Without
Insufficient working capital, any business organization cannot ru n smoothly
or successfully.
In the business the Worki ng capital is comparable to the blood of the
human body. Therefore the study of working capital is of major importance
to the internal and external analysis because of its close relationship with
the current day to day operations of a business. The inadequacy or
mismanagement of working capital is the leadin g cause of business failures.
Solvency of the Business: Adequate working capital helps in maintaining the
solvency of the business by providing uninterrupted of production.
Goodwill: Sufficient amoun t of working capital enables a firm to make
prompt payments and makes and m aintain the goodwill.
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Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable
terms.
Cash Discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
Regular Supply of Raw Material: Sufficient working capital ensures regular
supply of raw material and continuous production.
Regular Payment of Salaries, Wages and Other Day TO Day
Commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage and
costs and enhances production and profits.
Exploitation of Favorable market conditions: If a firm is having adequate
working capital then it can exploit the favorable market conditions such as
purchasing its requirements in bulk when the prices are lower and holdings
its inventories for higher prices.
Ability to Face Crises: A concern can face the situation during the
depression.
Quick And Regular Return On Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and
gains confidence of the investors and can raise more funds in future.
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ADEQUATE WORKING CAPITAL
1.Adequate working helps in maintaining solvency of the business by
providing uninterrupted flow of production.
2.Sufficient working capital ensures regular supply of raw materials and
continuous production.
3.A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and others on easy and favorable
terms.
4.Sufficient capital enables a business concern to make prompt payments
and hence helps in creating and maintaining goodwill.
5.Adequate working capital also enables a concern to avail cash discounts on
the purchases and hence it reduces cost.
6.Only concerns with adequate working capital exploit favorable market
conditions such as purchasing its requirements in bulk when the prices are
lower and by holding its inventories for higher prices.
7.A company which has ample working capital can make regular payment of
salaries, wages and day-to-day commitments which raises the morale of its
employees, increases their efficiency, reduces wastage cost and enhances
production and profits.
8.Adequate working capital enables a concern to face business crises in
emergencies such as depression because during such periods, generally,
there is much pressure on working capital.
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9.Sufficiency of working capital enables a concern to pay quick and regular
dividends to its investors, as there may not be much pressure to plough
back profits. This gains the confidence of its investors and creates a
favorable market to raise additional funds in the future.
10.Adequacy of working capital creates an environment of security,
confidence, and high morale and creates overall efficiency in a business.
EXCESS OR INADEQUATE WORKING CAPITAL
Every business concern should have adequate amount of working capital to
run its business operations. It should have neither redundant or excess
working capital nor inadequate nor shortages of working capital. Both
excess as well as short working capital positions are bad for any business.
However, it is the inadequate working capital which is more dangerous from
the point of view of the firm.
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL
Excessive working capital means ideal funds which earn no profit for the
firm and business cannot earn the required rate of return on its
investments.
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Redundant working capital leads to unnecessary purchasing and
accumulation of inventories.
Excessive working capital implies excessive debtors and defective credit
policy which causes higher incidence of bad debts.
It may reduce the overall efficiency of the business.
If a firm is having excessive working capital then the relations with banksand other financial institution may not be maintained.
Due to lower rate of return n investments, the values of shares may also fall.
The redundant working capital gives rise to speculative transactions.
INADEQUATE WORKING CAPITAL:
A concern, which has inadequate working capital, pays its short-
termliabilities in time. Thus, it will lose its reputation and shall not be able to
get good credit facilities.
It cannot buy its requirements in bulk and cannot avail discounts, etc., it
becomes difficult for the firm to exploit favorable market conditions and
undertake profitable projects due to lack of working capital.
The firm cannot pay day-to-day expenses of operations, creates
inefficiencies, increases costs, and reduces the profits of the business.
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It becomes impossible to utilize efficiently the fixed assets due to non-
availability of liquid funds.
The rate of return on investment also falls with the shortage of working
capital.
FACTORS DETERMINING THE WORKING CAPITAL:
1.Nature or character of business
2.Size of business or scale of operations
3.Production policy
4.Manufacturing process
5.Seasonal variables
6.Working capital cycle7.Rate of stock turnover
8.Credit policy
9.Business cycle
10.Rate of growth of business 11.Earning capacity and dividend policy
12.Price level changes
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Working capital management cycle
Cash flows in a cycle into, around and out of a business. It is the business's
life blood and every manager's primary task is to help keep it flowing and to
use the cash flow to generate profits. If a business is operating profitably,
then it should, in theory, generate cash surpluses. If it doesn't generate
surpluses, the business will eventually run out of cash and expire.
The faster a business expands the more cash it will need for working capital
and investment. The cheapest and best sources of cash exist as working
capital right within business. Good management of working capital will
generate cash will help improve profits and reduce risks. Bear in mind that
the cost of providing credit to customers and holding stocks can represent a
substantial proportion of a firm's total profits.
There are two elements in the business cycle that absorb cash -
Inventory (stocks and work-in-progress) and Receivables (debtors owing
you money). The main sources of cash are Payables (your creditors)
and Equity and Loans.
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Each component of working capital (namely inventory, receivables and
payables) has two dimensions ... TIM E and MONEY. When it comes to
managing working capital -TIME IS MONEY. If you can get money to move
faster aro und the cycle (e.g. collect dues from debtors more quickly)or
reduce the amount of money tied up (e.g. reduce inventory levels relative to
sales), the business will generate more cash or it will need to borrow less
money to fund working capital. As a consequence, you could re duce the
cost of bank interest or you'll h ave additional free money available to su
pport additional sales growth or investm ent. Similarly, if you can negotiate
improved terms with suppliers e.g. get longe r credit or an increased credit
limit; you effectively create free finance to help fund future sales.
It can be tempting to pay cash, if available, for fixed assets e.g. co mputers
plant, vehicles etc. If you do pay cash, remember that this is now longer
available for
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working capital. Therefore, if cash is tight, consider other ways of financing
capital investment - loans, equity, leasing etc.
Actions and their positive impact of some working capital management
decisions:
ACTIONS POSITIVE IMPACT
Collect receivables (debtors) faster You release cash from the cycle
Collect receivables (debtors) slower Your receivables soak up cash
Get better credit (in terms of duration You increase your cash resources
or amount) from suppliers
Shift inventory (stocks) faster You free up cash
Move inventory (stocks) slower You consume more cash
WORKING CAPITAL ANALYSIS
As we know working capital is the life blood and the center of a business.
Adequate amount of working capital is very much essential for the smooth
running of the business. And the most important part is the efficient
management of working capital in right time. The liquidity position of the
firm is totally effected by the management of working capital. So, a study of
changes in the uses and sources of working capital is necessary to evaluate
the efficiency with which the working capital is employed in a business. This
involves the need of working capital analysis.
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The analysis of working capital can be conducted through a number of
devices, such as:
1.Ratio analysis.
2.Fund flow analysis.
3.Budgeting.
1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The
technique of ratio analysis can be employed for measuring short-
term liquidity or working capital position of a firm. The following ratios can
be calculated for these purposes:
Current ratio.
Quick ratio
Absolute liquid ratio
Inventory turnover.
Receivables turnover.
Payable turnover ratio.
Working capital turnover ratio.
Working capital leverage
Ratio of current liabilities to tangible net worth.
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2. FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the source
from which additional funds were derived and the use to which these
sources were put. The fund flow analysis consists of:
a.Preparing schedule of changes of working capital
b.Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position
(working capital) business enterprise between beginning and ending of the
financial dates.
3. WORKING CAPITAL BUDGET
A budget is a financial and / or quantitative expression of business plans and
polices to be pursued in the future period time. Working capital budget as a
part of the total budge ting process of a business is prepared estimating
future long term and short term working capital needs and sources to
finance them, and then comparing the budgeted figures with actual
performance for calculating the variances, if any, so that corrective actions
may be taken in future. He objective working capital budget is to ensure
availability of funds as and needed, and to ensure effective utilization of
these resources. The successful implementation of working capital budget
involves the preparing of separate budget for each element of working
capital, such as, cash, inventories and receivables etc.
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INDUSTRY PROFILE
Meaning of Bank
According to banking regulation act of 1949 defines the term banking
as accepting for the purpose of lending or investment of deposits of moneyfrom the public, repay on demand or otherwise and withdraw by cheques,
draft or otherwise.
Kinds or types of bank: -
Commercial bank
Industrial bank
Foreign exchange bank
Co-operative bank
Agricultural bank
Development bank
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Commercial bank
These banks are also called as deposit banks as they accept deposits
from the public and lend them for short period. Commercial banks
encourage savings among general public and supply financial needs of
modern business. These banks are purely meant to finance traders and
others. Thus commercial bank accept deposits and lend to needy customers
from short terms.
Function of commercial banks
There are two functions namely primary and secondary function:
Primary function includes acceptance of deposits, advancing of loans.
Secondary function includes agency function, general utility services.
PRIMARY FUNCTIONS
Acceptance of deposits
Banks accept deposits from the public. People keep deposit of money
for safety, interest, easy to transfer cheques. So they accept following types
of deposit.
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Current Account Deposits
These deposits constitute major portion of banks circulating medium of
exchange. Normally business people keep money in his accounts as they can
withdraw and issues cheques any number of times. Banks does not pay any
interest for these deposits.
Saving Bank Account Deposits
People with steady and monthly income save their excess earning
through this account. There are certain restrictions in the withdrawals. Bankpays interest at a nominal rate. Small savings are encouraged in this
account.
Fixed Deposit Account
Money is accepted foe a fixed period it cannot be withdrawn before
expiry of fixed period. The interest rate is higher than other accounts. The
longer the period is the rate of interest
Advancing of Loans
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The deposits received are invested by advancing loans to needy
borrowers for higher rate of interest. This function is source of profit for
banks.
Overdrafts
This facility is extended to current account holders where they are
allowed to overdraw more than the credit standing in their account. Since
the facility is only for respectable and reliable customers, bank may not
insist on security. The security will also be taken in the form of fixed
deposits, NSCS, shares, LIC policy and so on.
Cash Credit
Under this account bank gives loans to borrowers against certain
security. The entire loan amount will not be given at one time. It will allow
the borrower to withdraw from time to time depending on the values of
stocks debt in the go- down. The interest rate is charged on the amount
withdrawn.
Discounting of the Bills of Exchange
This is a popular type of lending. If the holder of an exchange of bills
needs money immediately he can get it discounted by the bank.
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The bank pays the present price of bills after deducting commission and
when the bills mature the banks can receive the payment form the party
who accepted the bill.
Direct/Term Loans
Bank also gives loans to individuals or firms against collateral security.
The amount sanctioned will be credited to his requirements. Normally,
industrialists, agriculturists and others borrow these loans to start industries
and for his working capital.
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SECONDARY FUNCTIONS
Agency function
Transfer of Funds
Banks help customers in transferring of funds from one place to the other
through drafts and other instruments, collect cheques, bills, salaries,
pensions, dividends, and rents on behalf of customers form other agencies.
Undertake the payments of subscription, insurance, premiums, rents, etc.
Undertake to buy and sell securities, acts as representative for customers in
other banks or financial institutions, acts as a trustee, execute and
administrator to manage trust.
Carry out deceased customers desire, signs, transfer forms anddocuments.
Banks give advice to customers on income tax matters.
General Utility Service
The banks will safe keep valuables and documents. It collects credit
information regarding customers, transfer of foreign exchange, providing
advisory services to industry, commerce, trade, project, prospectus, order
writing the issue of shares and debentures of companies.
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Banking History (Article)
Banking in India in the modern sense originated in the last decades of the
18th century. The first banks were The General Bank of India, which started
in 1786, and Bank of Hindustan, which started in 1770; both are now
defunct. The oldest bank still 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 in 1955.
Reserve Bank of India
Another breakthrough happened in this phase, which was Reserve Bank of
India. The Reserve Bank of India was set up on the recommendations Royal
Commission on Indian Currency and Finance also known as the Hilton-
YoungCommission. The commission submitted its report in the year 1926,though the bank was not set up for nine years. Reserve Bank of India (RBI)
was created with the central task of maintaining monetary stability in India.
The Government on December 20, 1934 issued a notification and on January
14, 1935, the RBI came into existence, though it was formally inaugurated
only on April 1, 1935.
Main functions of RBI were
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1. Regulate the issue of banknotes.
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2.Maintain reserves with a view to securing monetary stability.
3.To operate the credit and currency system of the country to its advantage.
The Bank began its operations by taking over from the Government the
functions so far being performed by the Controller of Currency and from the
Imperial Bank of India. Offices of the Banking Department were established
in Calcutta, Bombay, Madras, Delhi and Rangoon. Burma (Myanmar)
seceded from the Indian Union in 1937 but the Reserve Bank continued to
act as the Central Bank for Burma until Japanese Occupation of Burma and
later unto April 1947. After the partition of India, the Reserve Bank served
as the central bank of Pakistan up to June 1948 when the State Bank of
Pakistan commenced operations
Current Banking Structure
Banks in India can be categorized into Scheduled and Non-scheduled Banks
1. Scheduled Banks
Scheduled Banks in India constitute those banks, which have been included
in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn
includes only those banks in this schedule which satisfy the criteria laid
down vide section 42 (6) (a) of the Act. As on 30 th June 1999, there were 300
scheduled banks in India having a total network of 64,918 branches. The
scheduled commercial banks in India comprise of State bank of India and its
associates (8), nationalized banks (19), foreign banks (45), private sector
banks (32), co-operative banks and regional rural banks
2. Non-Schedule Banks
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Non-scheduled bank in India" means a banking company as defined in
clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949),
which is not a scheduled bank" .Banks in India can also be classified in a
different way.
Public Sector Banks
Private Sector Banks
Foreign Banks
Regional Rural Banks (RRBs)
The above mentioned classification overlaps with the previous one. Public
Sector, Private Sector and Foreign Banks fall the category of scheduled
banks. 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% of total assets of the banking industry, with the private
and foreign banks holding 18.2% and 6.5% respectively
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RESEARCH METHODOLOGY
Introduction:
Business organization get funds from various sources and apply them into
long term and short term assets. The funds applied to meet the short term
needs of the organization are generally referred to as working capital. A
study on working capital management enables us to understand short term
financial position and performance of the company.
Title of the Study:
A study on WorkingCapital Management with reference to Bank of
Baroda Ltd.
Statement of problem:
Working capital is considered as the life blood of the business. Its effective
provision can do much to ensure the success of a business enterprise. The
firm should maintain a sound working capital position and should have
adequate finds to run the business operations. A company with a favourable
working capital is always in a position to take advantage of any beneficialbusiness opportunity that may arise at any given point of time. Hence the
purpose of this study is to review the management of working capital of
Bank of Baroda, one of the fastest growing banks in the country.
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Objective of the study:
1.To study the working capital management of the company with respect to 5
years cash, inventory and receivables management.
2.To study the performance of the company for the given 5 years with the help
of ration analysis.
3.To identify liquidity of the bank.
4.To study the method of financing of working capital
5.To identify, understand and interpret the problems of working capital and put
forward suggestions.
Research methodology:
5 years of balance sheet and profit and loss account stated in the annual
reports were used for analysis. Working capital and concerned ratios were
used as tool of analysis. Based on the computation, the financial position
and performance of the business was evaluated and suggestions were
made. Regarding the financing of working capital both the methods wereevaluated by extracting information from the balance sheet of five years,
then the best alternative was chosen on which the banks position regarding
the financing of working capital was known.
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Reference period:
The study covered in this case study is for 5 financial years:
2011-12
2010-11
2009-10
2008-09
2007-08
Period of study: November 2012 to February 2013
Scope of study:
The study of working capital management of Bank of Baroda is wide as the
figures are taken pan-India. All the Rupees figures are in Crores.
Data Collection:
The requirement of data for the study was collected from the secondarysources of information. The secondary data has been obtained from the
financial statement of the Bank in the form of balance sheet and profit and
loss account. The analysis and interpretation has been thus derived with the
help of secondary data available.
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Tools of analysis:
Ratio analysis, Fund flow analysis (Schedule of changes), Trend Percentage
(Cash balances)
Limitation of the study:
1.The prime limitation is that the study used mainly secondary data for the
analysis of the performance of the company.
2.Limited time was also a hindrance in the detailed study as it is difficult for a
student to work in an organization as well as study.
3.The study also suffers from cost constraints.
CHAPTER SCHEME
SL
NO. CHAPTER DESCRIPTION
This chapter
explains the
different aspects
of the industry. It
1. Introductionalso gives the
theoretical
background of
the various
aspects of the
selected problem.
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This chapter
reveals the
statement of theproblem,
Researchobjectives, data
2. collectionDesign
methodology,
scope, limitations
of the study and
the chapter
scheme.
The history,
management,
policies, vision,
3.Company mission, purpose
Profile and other details
of the company is
mentioned in this
chapter.
This chapter is
concerned with
Analysis anddeducing results
4. from the analysisInterpretation
and thereby
drawing
inferences.
Summary of This chapter is
5.Findings concerned with
Suggestions singling out of the
and findings from the
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Conclusions project study.
Bibliography Sources of the study
Annexure Documents referred
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Company Profile Bank of Baroda
Bank of Baroda (BOB) is a financial services company that provides banking
services. It offers personal banking, business banking, corporate banking,
merchant banking and treasury banking services. The bank primarily
operates in the US, the UK and Asia Pacific regions. It is headquartered in
Baroda, India and employs about 38,960 people. The company recorded
revenues of INR 87,458.4 million (approximately $1,943.3 million) in the
financial year ended March 2010 (FY2010), an increase of 11% over FY2009.
Operating profit was INR 49,352.6 million (approximately $1,096.6 million)
in FY2010, an increase of 14.6% over FY2009. Its net profit was INR 30, 583.3
million (approximately $679.6 million) in FY2010, an increase of 37.3% over
FY2009.
In 1908, Maharaja Sayajirao Gaekwad III Maratha of the Maratha Empire set
up Bank of Baroda (BOB). Two years later, BOB established its first branch in
Ahmedabad.
BOB grew domestically, until after World War II. Then in 1953 it crossed the
Indian Ocean to serve the communities of Indians in Kenya and Indians in
Uganda by establishing a branch each in Mombasa and Kampala. The nextyear it opened a second branch in Kenya, in Nairobi, and in 1956 it opened a
branch inDar-es- Salaam.
Then in 1957 BOB took a giant step abroad by establishing a branch in
London. London was not only the center of the British Commonwealth, but
also the most important international banking centre.
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Domestically, 1959 saw BOB complete its first domestic acquisition when it
took over Hind Bank.
Timeline of Bank of Baroda
1960s
1961: BOB merged in New Citizen Bank of India. This merger helped it
increase its branch network in Maharashtra.
BOB also opened a branch in Fiji.
1962: BOB opened a branch in Mauritius.
1963: BOB acquired Surat Banking Corporation in Surat, Gujarat.
1964: BOB acquired two banks, Umbergaon Peoples Bank in southern
Gujarat and Tamil Nadu Central Bank in Tamil Nadu state.
1964: BOB lost its branch in Narayanjanj (East Pakistan) due to the Indo-
Pakistanwar. It is unclear when BOB had opened the branch.
1965: BOB opened a branch in Guyana.
1967: The Tanzanian government nationalized BOBs three branches there
and transferred their operations to the Tanzanian government-
owned National Banking Corporation.
1969: The Government of India nationalized 14 top banks, including BOB.
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BOB incorporated its operations in Uganda as a 51% subsidiary, with the
government owning the rest.
1970s
1972: BOB acquired The Bank of Indias operations in Uganda.
1974: BOB opened a branch each in Dubai and Abu Dhabi.
1975: BOB acquired the majority shareholding and management control of
Bareilly Corporation Bank (est. 1928) and Nainital Bank (est. in 1954), both
in Uttar Pradesh. Since then, Nainital Bank has expanded to Uttarakhand
State.
1976: BOB opened a branch in Oman and another in Brussels. The Brussels branch
was aimed at Indian firms from Mumbai (Bombay) engaged in diamond cutting
and jewellery having business in Antwerp, a major center for diamond cutting.
1978: BOB opened a branch in New York and another in the Seychelles.
1979: BOB opened a branch in Nassau, the Bahamas.
1980s
BOB opened a branch in Bahrain and a representative office in Sydney,
Australia.
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BOB, Union Bank of India and Indian Bank established IUB International
Finance, a licensed deposit taker, in Hong Kong. Each of the three banks
took an equal share.
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1985: BOB (20%), Bank of India (20%), Central Bank of India (20%) and
ZIMCO (Zambian government; 40%) established Indo-Zambia Bank (Lusaka).
BOB also opened an Offshore Banking Unit (OBU) in Bahrain.
1988: BOB acquired Traders Bank, which had a branch network in Delhi.
1990s
1990: BOB opened an OBU in Mauritius, but closed its representative office
in Sydney.
1991: BOB took over the London branches of Union Bank of India and
Punjab & Sind Bank (P&S). P&Ss branch had been established before 1970
and Union Banks after 1980. The Reserve Bank of India ordered the
takeover of the two following the banks' involvement in the Sethia fraud in
1987 and subsequent losses.
1992 BOB incorporated its operations in Kenya into a local subsidiary with a
small tranche of shares quoted on the Nairobi Stock Exchange.
1993: BOB closed its OBU in Bahrain.
1996: BOB Bank entered the capital market in December with an Initial
Public Offering (IPO). The Government of India is still the largest
shareholder, owning 66% of the bank's equity.
1997: BOB opened a branch in Durban.
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1998: BOB bought out its partners in IUB International Finance in Hong
Kong. Apparently this was a response to regulatory changes following Hong
Kongs reversion to the Peoples Republic of China. The now wholly owned
subsidiary became Bank of Baroda (Hong Kong), a restricted license bank.
BOB also acquired Punjab Cooperative Bank in a rescue.
BOB also incorporate wholly owned subsidiary BOB Capital Markets Ltd.for
Broking Business.
1999: BOB merged in Bareilly Corporation Bank in another rescue. At the
time, Bareilly had 64 branches, including four in Delhi.
In Guyana, BOB incorporated its branch as a subsidiary, Bank of Baroda
Guyana.
BOB added a branch in Mauritius, but closed its Harrow Branch in London.
2000s
2000: BOB established Bank of Baroda (Botswana).
2002: BOB acquired Benares State Bank (BSB) at the Reserve Bank of Indias
request. BSB was established in 1946 but traced its origins back to 1871 and
its function as the treasury office of the Benares state. In 1964, BSB had
acquired Bareilly Bank (est. 1934), with seven branches; it also had taken
over Lucknow Bank in 1968. The acquisition of BSB brought BOB 105 new
branches.
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2002: Bank of Baroda (Uganda) was listed on the Uganda Securities
Exchange (USE).
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2003: BOB opened an OBU in Mumbai.
2004: BOB acquired the failed Gujarat Local Area Bank, and returned to
Tanzania by establishing a subsidiary in Dar-es-Salaam. BOB also opened a
representative office each in Kuala Lumpur, Malaysia, and Guangdong,
China.
2005: BOB built a Global Data Centre (DC) in Mumbai for running its
centralized banking solution (CBS) and other applications in more than 1,900
branches across India and 20 other counties where the bank operates. BOB
also opened a representative office in Thailand.
2006: BOB established an Offshore Banking Unit (OBU) in Singapore.
2007: In its centenary year, BOBs total business crossed 2.09 lakh crores, its
branches crossed 1000, and its global customer base 29 million people.
2008: BOB opened a branch in Guangzhou, China (02/08/2008) and in
Kenton, Harrow United Kingdom.
BOB opened a joint venture life insurance company with Andhra Bank and
Legal and General (UK) called Indias First Life Insurance Company
2010s
2010: Malaysia awarded a commercial banking license to a locally
incorporated bank to be jointly owned by Bank of Baroda, Indian Overseas
Bank and Andhra Bank. The new bank, India BIA Bank (Malaysia), will reside
in Kuala Lumpur, which has a large population of Indians. Andhra Bank will
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hold a 25% stake in the joint- venture; BOB will own 40% and IOB the
remaining 35%.
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BOB opened a branch in New Zealand
2011s
2011: BOB opened an Electronic Banking Service Unit (EBSU) was opened at
Hamriya Free Zone, Sharjah (UAE). It also opened four new branches in
existing operations in Uganda, Kenya (2), and Guyana. BOB closed its
representative office in Malaysia in anticipation of the opening of its
consortium bank there. BOB received In Principle approval for the
upgrading of its representative office in Australia to a branch.
The Malaysian consortium bank, India International Bank Malaysia (IIBM),
finally opened in Kuala Lumpur, which has a large population of Indians.
BOB owns 40%, Andhra Bank owns 25%, and IOB the remaining 35% of the
share capital. IIBM seeks to open five branches within its first year of
operations in Malaysia, and intends to grow to 15 branches within the next
three years.
Bank of Barodas Customers
Individual
Stock Broking Entities
HUF (Hindu Undivided Family)
Proprietorship Concerns
Public Limited Companies
Private Limited Companies
Corporate Partnership Firms
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BRANCH NETWORK
Branch Network (as of 2/2/2013)
Area No. of Branches
Metro 885
Urban 751
Semi-Urban 1125
Rural 1385
Total (Indian) 4146
Foreign (Overseas) 93
Total (Global) 4239
Controlling Offices
Zonal Offices 13
Regional Offices 56
Human Resources (Staff as of 01.04.2011)
Officers 15725
Clerks 15602
Sub Staff 7986
On Contract 3
Total 39313
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Global PresenceBRANCHES
Australia
Bahamas
Bahrain
Belgium
China
Fiji Islands
Hong Kong
Mauritius
Republic of South
Africa
Seychelles
Singapore
Sultanate of Oman
United Arab Emirates
United Kingdom
SUBSIDIARIES
Botswana
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Ghana
Guyana
Kenya
New Zealand
Tanzania
Trinidad &
Tobago
Uganda
JOINT VENTURE
Zambia
Malaysia
REPRESENTATIVE OFFICES
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About Bank of Baroda
The heritage
It all started with a visionary Maharaja's uncanny foresight into the future of
trade and enterprising in his country. On 20th July 1908, under the
Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the
legend that has now translated into a strong, trustworthy financial body,
THE BANK OF BARODA.
It has been a wisely orchestrated growth, involving corporate wisdom, social
pride and the vision of helping others grow, and growing itself in turn.
The founder, Maharaja Sayajirao Gaekwad, with his insight into the future,
saw "a bank of this nature will prove a beneficial agency for lending,
transmission, and deposit of money and will be a powerful factor in thedevelopment of art, industries and commerce of the State and adjoining
territories."
The ethics
Between 1913 and 1917, as many as 87 banks failed in India. Bank of Baroda
survived the crisis, mainly due to its honest and prudent leadership. This
financial integrity, business prudence, caution and an abiding care and
concern for the hard earned savings of hard working people, were to
become the central philosophy around which business decisions would be
effected. This cardinal philosophy was over years of its existence, to become
its biggest asset. It ensured that the Bank survived the Great War years. It
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ensured survival during the Great Depression. Even while big names were
dragged into the Stock Market scam and
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the Capital Market scam, the Bank of Baroda continued its triumphant
march along the best ethical practices.
The Heroes
No history is complete without mention of its heroes, mostly ordinary
people, who turn in extra-ordinary performances and contribute to building
an institution. Over the years, there have been thousands of such people.
The Bank salutes these "unknown soldiers" who passionately helped to
create the legend of Bank of Baroda.
There were also the leaders, both corporate and royal, who provided the
vision and guided the Bank through trail blazing years, and departing, left
behind footprints on the sands of time. This Roll of Honor will be incomplete
without mention of men, of the stature of Maharaja Sayajirao Gaekwad,
Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey, Tulsidas
Kilachand and NM Chokshi.
Bank of Baroda salutes these leaders whose vision helped to create an
institution.
People Initiatives
Bank is endowed with a competent and motivated employee base which is
engaged in handling the extensive business operations of the Bank across
the globe. Strategic HR interventions like, according cross border and crosscultural
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work exposure to its managers, hiring diverse functional specialists to
support line functionaries and complementing the technical competencies
of its people by imparting conceptual, managerial and leadership skills, gave
the Bank competitive advantage. People initiatives were blended with IR
initiatives to create an effectively harmonious workplace, where everyone
prospered.
Bank launched a comprehensive leadership development program Project
UDAAN during 2010-11 with the prime objective of creating leaders for the
future. Such a massive and comprehensive leadership development effort is
unparalleled in the Indian banking industry and first of its kind for any
Indianstate-owned Bank. These kinds of elaborate man management
policies have made the Bank a breeding ground for business leaders. The
Bank provided several leaders to the industry- men who went on to build
other great institutions.
New Technology Platform
Bank has made substantial progress in its end-to-end business and IT
strategy project covering the Banks domestic, overseas and subsidiary
operations. All Branches, Extension Counters in India, overseas business and
five sponsored Regional Rural Banks are on the Core Banking Solution (CBS)
platform.
Bank has been providing to its customers Internet Banking, viz., Baroda
Connect and other facilities such as online payment of direct and indirect
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taxes and certain State Government taxes, utility bills, rail tickets, online
shopping, donation to temples and institutional fee payment. Bank has a
wide network of ATMs across the country and has also launched mobile
ATMs in select cities. Initiatives have
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been taken to provide corporate customers with facilities like direct salary
upload, trade finance and State Tax payments etc. Bank has introduced
Mobile Banking (Baroda M-connect) and prepaid gift cards.
Bank has implemented the Global Treasury Solution in its key territories like
UK, UAE, Bahamas, Bahrain, Hong Kong, Singapore and Belgium. Bank has
taken various technological initiatives in overseas operations such as
implementation of Centralized SWIFT activity through Data Centre in
Mumbai, Payment Messaging System with Anti Money Laundering check,
Anti Money laundering Compliance and Online List Matching solution. While
Bank implemented Transaction-basedInternet Banking facility for its
customers in Uganda, Botswana, UAE, New Zealand, Kenya, Mauritius and
Seychelles, a Viewbased e-banking facility was made available in Fiji, Oman,
Tanzania and UK.
Marketing Initiatives
Ever since its rebranding in 2005, Bank has consistently promoted its major
strengths viz. large international presence; technological advancement and
superior customer service etc. Bank had introduced the sub brand BARODA
NEXT- State of the Art-Straight from the Heart to showcase how it has
utilized technology to nurture long term relationships for superior customer
experience. The sub brand has been reinforced by alternate delivery
channels such as internet banking, ATMs, mobile banking etc and robust
delivery outfits like Retail Loan Factories, SME Loan Factories, and City Sales
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Office etc. Banks constant endeavor to strengthen its branch/ATM network
combined with well informed staff offering
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personalized service at its various touch points have enhanced customer
interactions and satisfaction. Thus the Bank has firmly positioned itself as a
technologically advanced customer-centric bank.
Corporate Social Responsibility (CSR) Initiatives
Bank has always upheld inclusive growth high on its agenda. Bank has
established 36 Baroda Swarojgar Vikas Sansthan (Baroda R-SETI) for
imparting training to unemployed youth, free of cost for gainful self
employment & entrepreneurship skill development and 52 Baroda Gramin
Paramarsh Kendra and for knowledge sharing, problem solving and credit
counseling for rural masses across the country, as on 31.03.2011. Bank has
also established 18 Financial Literacy and Credit Counseling Centres (FLCC)
in order to spread awareness among the rural masses on various financial
and banking services and to speed up the process of Financial Inclusion, as
on 31.03.2011.
The Future
Revolutionary and discontinuous changes in the operating environment are
stark reminders that business success is 'impermanent'. Bank has achieved
substantial progress in technology and is continuously integrating multiple
platforms of technology to generate synergies. Bank continuously attempts
to adapt to the dynamic economic environment while engaging in long term
relationships to provide superior customer service.
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Banks constant endeavor to delight its customers, which is built on its
strong fundamentals will make it stronger, more resilient and enable to
achieve its vision of to be the Most Admired Bank.
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4.1 CURRENT RATIO
It may be defined as the relationship between the current assets and
current liabilities. The ratio is a measure of general Liquidity of the firm for a
short period of time. A ratio of 2: 1 is considered ideal.
The formula is
Current Ratio = Current Assets
Current Liabilities
Significance
1.Current ratio indicates liquidity or the short-term solvency (i.e., short term
financial position) of a concern. In other words, it indicates the ability of a
concern to meet its current liabilities (short term obligations).
2.It is also a measure of the available working capital in a concern at any time.
Therefore, it is also known as working capital ratio.
3.A relatively high current ratio is an indication that the firm is liquid and has
the ability to pay its current obligations in time as and when they become
due. On the other hand, a relatively low current ratio represents that theliquidity position of the firm is not good and the firm shall not be able to pay
its current liabilities in time without facing difficulties.
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TABLE 4.1 SHOWING CURRENT RATIO OF THE BANK
Year Current Assets Current Liabilities Current Ratio
2012 64,168.54 11,400.46 5.629
2011 49,934.07 9,656.73 5.171
2010 35,467.06 8,815.97 4.023
2009 24,087.11 16,538.15 1.456
2008 22,299.28 12,594.41 1.771
Data Analysis
The ideal current ratio is 2:1. Bank of Baroda has an improving current ratio
from March 2008 to March 2012. In year, March 2008, the CR is 0.1.771. In
year, March 2009, the CR is 1.456. In year, March 2010, the CR is 4.023. In
year, March 2011, the CR is 5.171. In year, March 2012, the CR is 5.629.
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GRAPH 4.1 SHOWING CURRENT RATIO OF THE BANK
Current Ratio
6
5
4
35.629
Current Ratio
2 4.023
5.171
1 1.771 1.456
0
2008 2009 2010 2011 2012
Interpretation
Bank of Barodas current ratio is increasing every year since 2009. There has
been seen a major growth between Year 2009 and 2010. The company has a
high Current ratio which shows Bank of Baroda is in a good position to pay
off its current liabilities. It can be also inferred that Bank of Baroda has lot of
Cash Idle.
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4.2 ABSOLUTE LIQUID RATIO
It may be defined as the relationship between absolute Liquid assets and
current Liabilities. Absolute Liquid assets include cash in hand and at bank
and marketable securities or temporary investments.
Significance
The Absolute liquid ratio is very useful in measuring the liquidity position of
a firm. It measures the firms capacity to pay off current obligations
immediately and is a more rigorous test of liquidity than the current ratio. It
is used as a complementary ratio to the current ratio.
A ratio of 1: 1 is considered to be good. Such a ratio will imply that the firm
has enough Liquid assets to meet all current Liabilities of the firm.
The formula is
Absolute Liquid Ratio = Cash + Marketable Securities
Current Liabilities
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TABLE 4.2 SHOWING ABSOLUTE LIQUID RATIO OF THE BANK
Year Cash Current Liabilities Absolute Liquid Ratio
2012 21,651.46 11,400.46 1.899
2011 19,868.18 9,656.73 2.057
2010 13,539.97 8,815.97 1.536
2009 10,596.34 16,538.15 0.641
2008 9,369.72 12,594.41 0.744
Data Analysis
In year 2008, Absolute Liquid Ratio is 0.744. In year 2009, Absolute Liquid
Ratio is 0.641. In year 2010, Absolute Liquid Ratio is 1.536. In year 2011,
Absolute Liquid Ratio is 2.057. In year 2012, Absolute Liquid Ratio is 1.899.
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GRAPH 4.2 SHOWING ABSOLUTE LIQUID RATIO OF THE BANK
Absolute Liquid Ratio2.5
2
1.5
1 2.057 1.899Absolute Liquid Ratio
1.536
0.50.744 0.641
0
2008 2009 2010 2011 2012
Interpretation
The company has improving current ratio since 2009. This means the
company is getting better and better every year and is in a strong liquidity
position. The company has enough cash resources to meet its immediate
current liabilities.
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LONG TERMS SOLVENCY RATIOS
Long-term solvency ratio conveys a firms ability to meet the interest cost
and repayment schedule of its Long-term obligations.
These ratios are helpful to management in proper administration of capital.
It also helps the creditors to know the capacity of a business concern to pay
debt in future.
The various ratios are:
Proprietary Ratio
Solvency Ratio
Fixed asset to net worth Ratio
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4.3 PROPRIETARY RATIO
This ratio establishes the relationship between the shareholders funds and
the total assets of the firm. It establishes the claims of the shareholders on
the firms assets. This ratio indicates the extent to which the assets of the
company can be lost without affecting the interest of creditors of the
company. It usually is expressed as an Equity ratio.
Proprietary Ratio = Shareholders Funds
Total Assets
Significance
Proprietary ratio shows the extent to which shareholders own the business
and thus indicates the general financial strength of the business. The higher
the proprietary ratio, the greater is the long stability of the company and
consequently greater protection to creditors. However, a very high
proprietary ratio may not necessarily be good as if funds of outsiders are not
used for long +term financing, and may not be able to take advantage of
trading on equity.
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TABLE 4.3 SHOWING PROPRIETARY RATIO OF THE BANK
Year Shareholders Funds Total Assets Proprietary Ratio
Mar-12 412.38 447,321.47 0.00092
Mar-11 392.81 358,397.17 0.00110
Mar-10 365.53 278,316.71 0.00131
Mar-09 365.53 227,406.73 0.00161
Mar-08 365.53 179,599.52 0.00204
Data Analysis
In year 2008, The Proprietary ratio is 0.00204. In year 2009, The Proprietary
ratio is 0.00161. In year 2010, The Proprietary ratio is 0.00131. In year 2011,
The Proprietary ratio is 0.00110. In year 2012, The Proprietary ratio is
0.00092.
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GRAPH NO. 4.3 SHOWING PROPRIETARY RATIO OF THE BANK
P roprietary Ratio
0.00204
0.0025 0.00161
0.002 0.0011 0.00131
0.00150.00092
0.001
0.0005
0
Proprietary Ratio
Mar-12 Mar-11 Mar-10 Mar-09 Mar-08
Interpretation
As Proprietary ratio repres ents the relationship of owners funds to total
assets, higher the ratio or the sh are of the shareholders in the total capital
of the company, better the long t erm solvency position of the company.
The proprietary ratio is falling continuously. In year ending March 2008, the
ratio w as 0.0204 and in year ending March 20 12, the ratio has become
0.00092. T his shows the companys long term solv ency position is not good
enough and the company should raise more money th rough equity shares
to improve the situation.
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4.4 SOLVENCY RATIO
It can be defined as the relationship between total liabilities to
outsiders and total assets of a firm.
Solvency Ratio = Total Liabilities to outsiders
Total Assets
Generally lower the solvency ratio, more satisfactory or stable is thelong-
term solvency position of a firm.
TABLE 4.4 SHOWING SOLVENCY RATIO OF THE BANK
Total Liabilities to
Year outsiders Total Assets Solvency Ratio
Mar-12 4,08,444.16 4,47,321.47 0.913
Mar-11 3,27,747.33 3,58,397.17 0.914
Mar-10 2,54,394.35 2,78,316.71 0.914
Mar-09 1,98,033.04 2,27,406.73 0.871
Mar-08 1,55,961.18 1,79,599.52 0.868
Data Analysis
In year 2008, The Solvency ratio is 0.868. In year 2009, The Solvency ratio is
0.871. In year 2010, The Solvency ratio is 0.914. In year 2011, The Solvency
ratio is 0.914. In year 2012, The Solvency ratio is 0.913.
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Graph no. 4.4 SHOWING SOLVENCY RATIO OF THE BANK
Solvency Ratio
0.92
0.91
0.9
0.89
0.88
Solvency Ratio
0.87
0.86
0.85
0.84
2008 2009 2010 2011 2012
Interpretation
Generally, lower the ratio of total liabilities to total assets, more satisfactory
or stable is the long term position of a firm. The solvency ratio of Bank of
Baroda is also going in adverse direction. In year ending March 2008, the
ratio was 0.868 and in year 2012, the ratio has become 0.913. The company
should make effective measures to reduce the long term debt and instead
focus on issuing more of equity shares to improve the solvency position of
the business.
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4.5 FIXED ASSET TO NET WORTH RATIO
This ratio establishes the relationship between fixed asset and shareholders
fund. This ratio indicates the extent to which shareholders funds are sunk in
the fixed asset. Generally, the purchase of fixed assets should be financed
by the shareholders equity, which includes reserve, surpluses and retained
earnings.
Fixed Asset to Net worth Ratio = Fixed Assets (After Depreciation)
Net Worth Ratio
TABLE 4.5 SHOWING FIXED ASSET TO NET WORTH RATIO OF THE BANK
Year Fixed Asset Net Worth Fixed Asset to Net Worth Rati
Mar-12 2,341.50 27,476.85 0.085Mar-11 2,299.72 20,993.11 0.110
Mar-10 2,284.76 15,106.39 0.151
Mar-09 2,309.76 12,835.54 0.180
Mar-08 2,427.00 11,043.93 0.220
Data Analysis
In year 2008, the Fixed Asset to Net worth Ratio is 0.220. In year 2009, the
Fixed Asset to Net worth Ratio is 0.180. In year 2010, the Fixed Asset to Net
worth Ratio is 0.151. In year 2011, the Fixed Asset to Net worth Ratio is
0.110. In year 2012, the Fixed Asset to Net worth Ratio is 0.085.
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GRAPH NO. 4.5 SHOWING FIXED ASSET TO NET WORTH RATIO OF THE
BANK
Fixed Asset to Net Worth Ratio
0.250.22
0.2 0.18
0.151
0.15
0.11
Fixed Asset to N et Worth Ratio
0.1 0.085
0.05
0
2008 2009 20 10 2011 2012
Interpretation
If the ratio is less than 1, it implies that owners funds are more than total
fixed assets and a part of workingg capital is provided by the shareholders. If
the ratio is more than 1, it implies that owners funds are not sufficient to
finance the fixed assets and the firm has to depend upon outsiders to
finance the fixe d assets. Bank of Baroda has its Fixed Asset to Net Worth
ratio ranging from 0.22 i n year 2008 to 0.085 in year 2012. This sho ws that
the company is capable enough to finance its fixed assets and dont have to
rely on outsiders.
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4.6 CURRENT ASSET TO TOTAL ASSET RATIO
Current asset to total asset ratio reveals the part of current asset to the
total asset. It helps in determining what part of the total assets is utilized for
fixed capital and for current asset.
Current Asset to total asset Ratio = Current Asset
Total Asset
TABLE 4.6 SHOWING CURRENT ASSETS TO TOTAL ASSET RATIO OF THE
BANK
Year Current Assets Total Asset Current Assets to total Assets ratio
2012 64,168.54 4,47,321.46 0.143
2011 49,934.07 3,58,397.17 0.139
2010 35,467.06 2,78,316.71 0.127
2009 24,087.11 2,27,406.73 0.106
2008 22,299.28 1,79,599.52 0.124
Data Analysis
In year 2008, the Current Assets to Total Assets ratio is 0.124. In year 2009,
the Current Assets to Total Assets ratio is 0.106. In year 2010, the Current
Assets to Total Assets ratio is 0.127. In year 2011, the Current Assets to
Total Assets ratio is 0.139. In year 2012, the Current Assets to Total Assets
ratio is 0.143.
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GRAPH 4.6 SHOWING CUR RENT ASSETS TO TOTAL ASSET RATIO OF THE
BANK
Current Assets to Total Assets Ratio
0.160.139 0.143
0.14 0.124 0.127
0.12 0.106
0.1
0.08 Current Assets to Total Assets
0.06Ratio
0.04
0.02
0
2008 2009 2010 2011 2012
Interpretation
Current assets to total asse ts ratio is quite low but improving every year. Though
it is a good industry average , the company should have more current assets
which would help them to be in a better position to meet its short-term ob
ligations.
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4.7 CASH TO CURRENT ASSET RATIO
The proportion of cash to current assets directly indicates the level of cash
maintained by the company. Lower the ratio, greater may be the
profitability of the concern. A downward trend in the ratio over a period of
time indicates a better control of cash whereas an upward trend reveals a
slack control over cash resources.
Cash to Current Asset = CashCurrent Asset
TABLE 4.7 SHOWING CASH TO CURRENT ASSETS RATIO OF THE BANK
Year Cash Current Assets Cash to Current Assets ratio
2012 21,651.46 64,168.54 0.337
2011 19,868.18 49,934.07 0.398
2010 13,539.97 35,467.06 0.382
2009 10,596.34 24,087.11 0.440
2008 9,369.72 22,299.28 0.420
Data Analysis
In year 2008, the Cash to Current assets ratio is 0.420. In year 2009, the
Cash to Current assets ratio is 0.440. In year 2010, the Cash to Current
assets ratio is 0.382. In year 2011, the Cash to Current assets ratio is 0.398.
In year 2012, the Cash to Current assets ratio is 0.337.
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GRAPH 4.7 SHOWING CASH TO CURRENT ASSETS RATIO OF THE BANK
Cash to Current Asset ratio
0.450.42 0.44
0.3980.382
0.4 0.337
0.35
0.3
0.25
0.2Cash to Current Asset ratio
0.15
0.1
0.05
0
2008 2009 2010 2011 2012
Interpretation
The Cash to Current Asset ratio is falling. The current assets have inc reased
proportionately every year but the Cash has not increased in the sa me
proportion. The composition of cash resources in the current assets should
be increased.
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4.8 NET PROFIT TO TOTAL INCOME RATIO
Net profit to Total Income ratio shows the relationship between the total
incomes earned and net profit of the year. The presence of expenditures in
the business leads to such low Net Profits.
Net Profit to Total income ratio = Net Profit
Total income
TABLE 4.8 SHOWING NET PROFIT TO TOTAL INCOME RATIO OF THE BANK
Year Net Profit Total Income Net profit to Total income ratio
Mar-12 5006.96 33096.05 0.151
Mar-11 4241.68 24695.11 0.172
Mar-10 3058.33 19504.70 0.157
Mar-09 2227.20 17849.24 0.125
Mar-08 1435.52 13864.52 0.104
Data Analysis
In year 2008, Net Profit to Total income ratio is 0.104. In year 2009, Net
Profit to Total income ratio is 0.125. In year 2010, Net Profit to Total income
ratio is 0.157. In year 2011, Net Profit to Total income ratio is 0.172. In year
2012, Net Profit to Total income ratio is 0.151.
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GRAPH 4.8 SHOWING NET PROFITS TO TOTAL INCOME RATIO OF THE
BANK
Net Profit to total Income Ratio
0.2
0.180.172
0.1570.16
0.151
0.14 0.125
0.120.104
0.1Net Profit to total Income Ratio
0.08
0.06
0.04
0.02
0
2008 2009 2010 2011 2012
Interpretation
The lower the Net profit to total income ratio, the lower is the profitability
and vice versa. In year ending March 2008, the ratio is 0.104 and in year
2012, the ratio is 0.151. Bank of Baroda has low ratio due to high presence
of expenses in the income statement.
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4.9 TOTAL EXPENSES TO TOTAL INCOME RATIO
Total expenses to total income ratio = Total expenses
Total income
TABLE 4.9 SHOWING TOTAL EXPENSES TO TOTAL INCOME RATIO
Total
Year Expenses Total Income Total Expenses to Total Income ratio
Mar-12 28089.10 33096.05 0.84
Mar-11 20453.42 24695.11 0.82
Mar-10 16446.37 19504.70 0.84
Mar-09 15622.03 17849.24 0.87
Mar-08 12428.99 13864.52 0.89
Data Analysis
In year 2008, the Total expenses to total income ratio is 0.896. In year 2009,
the Total expenses to total income ratio is 0.875. In year 2010, the Total
expenses to total income ratio is 0.843. In year 2011, the Total expenses to
total income ratio is 0.828. In year 2012, the Total expenses to total income
ratio is 0.849.
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GRAPH NO. 4.9 SHOWING TOTAL EXPENSES TO TOTAL INCOME RATIO
Total Expe nses to Total Income ratio
0.896
0.9
0.875
0.88
0.86 0.84 3 0.849
0.84 0.828 Total Expenses to Tot al Income
ratio
0.82
0.8
0.78
2008 2009 2010 2011 2012
Interpretation
The higher the Total expenses to total income ratio, the lower is th e
profitability. Bank of Barodas ratio is quite high which shows that the
company has high presence of expenses in the income statement.
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4.10 PAID-UP CAPITAL OF THE BANK OF BARODA
TABLE 4.10 SHOWING PAID-UP CAPITAL OF THE BANK
Year Paid Up capital
Mar-12 411.12
Mar-11 391.55
Mar-10 364.27
Mar-09 364.27
Mar-08 364.27
Data Analysis
In year 2008, the paid-up capital is Rs 364.27 Cr. In year 2009, the paid-up capital
is Rs 364.27 Cr. In year 2010, the paid-up capital is Rs 364.27 Cr. In year 2011,
thepaid-up capital is Rs 391.55 Cr. In year 2012, the paid-up capital is Rs 411.12
Cr.
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GRAPH NO. 4.10 SHOWING PAID-UP CAPITAL OF THE BANK
Paid-up Capital
420411.12
410
400391.55
390
380
Paid-up Capital
370 364.27 364.27 364.27
360
350
340
2008 2009 2010 2011 2012
Interpretation
In year ending March 2012, the paid up capital is highest. The company has high
debt content in the capital structure. Though the companys equity is increasing
year by year, Bank of Baroda should increase the equity content in manifolds.
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CASH MANAGEMENT:
Cash is your businesss lifeblood. Managed well, your company remains
healthy and strong. Managed poorly, your company goes into cardiac arrest.
Poor cash management will probably undermine your businesss short-
term stability and itslong-term survival.
Cash management is concerned with the managing of:
Cash flows into and out of the firm.
Cash flows within the firm and
Cash balance held by the firm is used to finance deficit or invest surplus cash.
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4.11 CASH BALANCES
TABLE 4.11 SHOWING CASH BALANCES OF THE BANK
Year Cash
March 31, 2012 21651.46
March 31, 2011 19868.18
March 31, 2010 13539.97
March 31, 2009 10596.34
March 31, 2008 9369.72
Data Analysis
In year 2008, the Cash balance is Rs 9369.72. In year 2009, the Cash balance
is Rs 10596.34. In year 2010, the Cash balance is Rs 13539.97. In year 2011,
the Cash balance is Rs 19868.18. In year 2012, the Cash balance is Rs
21651.46.
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Graph no. 4.11 SHOWING C ASH BALANCES OF THE BANK
Cash Balances
25000 21651.46
19868.18
20000
1500013539.97
10596.3 49369.72
Cash Balances
10000
5000