gujjar singh

8/13/2019 Gujjar Singh

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A Financial Project ReportA Financial Project Report

OnOn

TREND ANALYSIS AND RATIOREND ANALYSIS AND RATIOANALYSISNALYSIS

offDharAti Co-Operative BankharAti Co-Operative BankLtd.td.

Prepared byPrepared by

RAHUL L.SINGHAHUL L.SINGH

ClassClass--Tybbaybba

Seat No.Seat No.

Guided byGuided by

MISS. ALPA JOSHIISS. ALPA JOSHICollegeCollege

GYANYAGNA COLLEGE OF SCIENCEYANYAGNA COLLEGE OF SCIENCEAND MANAGEMENT RAJKOT.ND MANAGEMENT RAJKOT.

Submitted toSubmitted to

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Saurashtra University Rajkot.aurashtra University Rajkot.

Declaration

I, undersigned Rahul L. Singh, a student of TYBBA, here by

declared that the project wor presented in this report is !y own wor

and has been carried out under the super"ision of #iss. Alpa $oshi of

%yanyagna &ollege of Science and #anage!ent, Rajot.

This wor has not been sub!itted pre"iously to any uni"ersityfor any other e'a!ination.

(ate)

Signature

*lace)

+Rahul L. Singh

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*reface

Indian !anage!ent scenario see!ed to be !i'ed of hopes at theco!!ence!ent of the nineties. #ost of the -ational as well as

#ultinational co!panies were ha"ing their focus on their inancial

#anage!ent. -ewly de"eloped inancial #anage!ent Syste!s were

co!ing into force / the co!panies welco!ed the!.

It is suggest to undergo such training to !anage business unit

efficiently right fro! its inspection and a"oid the losses. 0eeping in

"iew the central ideas objecti"es, Saurashtra 1ni"ersity has introducedthe subject of 2I-A-&IAL #A-A%3#3-T4. The !ain of this

subject is to de"elop the sill in proble! sol"ing and decision !aing

the inancial #anage!ent.

In light of abo"e objecti"es, the students are re5uired to prepare a

*roject Report on co!panies. So, I a! glad to sub!it a *roject Report

on 2(harati &o6operati"e ban Ltd.4

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A&0-78L3(%3#3-T

A !a!!oth project of this nature calls for the intellectual

nourish!ent, professional help and encourage!ent fro! !any

5uarters. I would lie to e'press !y gratitude to)

#iss Alpa $oshi who ha"e shaped !y understanding through their

rich and "aried contribution and #r.A.$. *ar!ar, chief !anager of

the ban and also the assistant !anager, (har!esh 9apalia for

generously sharing their insights and e'perience with !e.

I a! "ery grateful to !y fa!ily and friends for the specialinterest they e"inced in this project.

(ate)

*lace) Signature

+Rahul L. Singh

INDEX

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7"er"iew of Baning Industry

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The anti5uated Indian baning syste! has its roots in the nineteenth

century. The character and structure of the syste! has, howe"er, changed

substantially since :;green re"olution> depended on far!ers

finding substantial sources of credit to pay for fertili=ers and hybrid seeds.

India had a syste! of indigenous baning fro! "ery early ti!es,though it was not si!ilar to baning of !odern ti!es. There is e"idence to

show that !oney lending e'isted e"en during the ?edic period. 8ith the

ad"ent of the 3nglish traders in the :@ thcentury and the establish!ent of

trading centers by the 3ast India &o!pany, indigenous baners found their

position precarious.

In econo!ic de"elop!ent of a nation bans occupy an i!portant

place. Baning institutions for! an i!portant part of the !oney !aret and

are indispensable in a !odern de"eloping society. Indian !oney !aret

co!prises both organi=ed as well as unorgani=ed sectors. The unorgani=ed

sectors include !oneylenders and indigenous baners and largely cater to

the needs of persons li"ing in "illages and s!all towns. It is esti!ated that

about one6third of the total credit re5uire!ents of the country are !et by

the unorgani=ed sector.

ar!ers in India are scattered all o"er the country and need short6ter!

s!all borrowings for agricultural purposes. This need is not fulfilled by

co!!ercial bans which are unsuited for financing agriculture. Land which

these far!ers can offer to co"er ban ad"ances is not generally accepted as

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security by co!!ercial bans. Therefore, special types of bans are

necessary purpose. The objecti"e of co6operati"e bans is to offer baning

facilities to persons of li!ited !eans re5uiring credit for producti"e

purposes in the use of the land and labour at their disposal.

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(efinition 7f Ban

According to Baning regulation Act :;; defines baning as 2Accepting for the purpose of

lending or in"est!ent of deposits of !oney fro! the public, repayable on de!and or

otherwise and withdrawals by che5ue, draft , order4.

According to %.&rowther in An 7utline of #oney, 2the baners business of other

people , to offer his own in e'change and thereby to create !oney4.

Types 7f ban

:RBI)

The RBI is the supre!e !onetary and baning authority in the country and has theresponsibility to control the baning syste! in the country. It eeps the reser"e of all

scheduled bans and hence is nown as the 2R3S3R?3 BA-04.

C*1BLI& S3&T7R BA-0S)

State Ban 7f India and its associates

-ationali=ed bans

Regional Rural bans Sponsored by *ublic Sector Bans.

D *ri"ate Sector Ban) *"t.bans in india.

oreign ban.

co6operati"e bans) State co6operati"e bans

&entral co6operati"e bans

Land (e"elop!ent bans

*ri!ary agricultural credit societies

E(e"elop!ent bans)

Industrial finance co6operation of India+I&I

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Industrial de"elop!ent ban of india+I(BI

Industrial in"est!ent ban of India

S!all industries de"elop!ent ban of India

-ational ban for agriculture and Rural de"elop!ent+-ABAR(.

3'port6I!port ban of India

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Role of co6operati"e bans

-ow a days co6operati"e bans are progressing "ery fast then any co!!ercial or

nationali=ed bans. The custo!er ser"ices, lending ser"ices and other baningfacilities gi"en to the society is being better than other bans. So people are also

being attracted and interested in co6operati"e bans.

The !ain ai! of theban is to e'tend credit facilities to the s!all

traders,wores and other !iddle class people. this ban deri"e their funds fro!

woring partly through share capital contributed by the !e!bers and partly

through deposits collected fro! !e!bers,general public and render usual

baning ser"ices. The liability of !e!ber is nor!ally unli!ited. This enables

the society to raise funds fro! outside agencies and also encourage !e!bers totae een interest in woring of the society.

A co6operati"e ban is a financial entity which belongs to its !e!bers,

who are at the sa!e ti!e the owners and the custo!er of their bans. &F6

operati"e bans are often created by personal belonging to the sa!e local or

professional co!!unity or sharing a co!!on interest.co6operati"e bans differ

fro! staeholder bans by their organi=ation, their goals, their "alues and heir

go"ernence.

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*roble!s And *rospects 7f Baning

Industry)

Problems of Banking Industry

Baning has played a "ery i!portant role in the econo!ic

de"elop!ent of the nations of the world. In fact, baning is the life blood of

!odern co!!erce. It !ay truly be said that !odern co!!erce is so

dependent upon baning that any cessation of a baning acti"ity, e"en for a

day, or two, would co!pletely paraly=e the econo!ic life of a nation. ro!

its original narrow scope and !odest purpose of taing care of other

peoples !oney and lending of it, baning has de"eloped to such e'tent

that there is hardly a business deal in which the assistance of a ban is

sought in one for! or another.

Indian baning syste! has achie"ed a re!arable all6round growth

during the last fifteen years, but so!e inherent weanesses and

shortco!ings re!ain there or ha"e cropped, and efforts should be !ade to

o"erco!e the! as early as possible. So!e of the weaer points of Indian

baning syste! are as under)

:. *oor capital base

C. Inefficient organi=ational structure

D. Institutional 7"erlapping

. *oor and (eclining &usto!er Ser"ice

E. (eclining *rofitability


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the !aret and, in contrast to the nationali=ed bans, do not recogni=e any

social responsibilities to s!all account holders or to a rural and se!i6urban

clientele.

Prospects of Banking Industry:

A healthy baning syste! is essential for any econo!y stri"ing to

achie"e good growth and yet re!ain stable in an increasingly global

business en"iron!ent. The Indian baning syste! has witnessed a series of

refor!s in the past, lie deregulation of interest rates, dilution of

go"ern!ent stae in *SBs, and increased participation of pri"ate sector

bans. It has also undergone rapid changes, reflecting a nu!ber of

underlying de"elop!ents. This trend has created new co!petiti"e threats as

well as new opportunities. This paper ai!s to foresee !ajor future baning

trends, based on these past and current !o"e!ents in the !aret.

I-(IA- BA-0I-% stands at the threshold of a !ega change in the

ne't fi"e years. #any new situations as co!pared to the present scenario

are predicted to e!erge.

%i"en the co!petiti"e !aret, baning will +and to a great e'tent already has beco!e a

process of choice and con"enience. The future of baning would be in ter!s of integration.

The future of baning will undoubtedly rest on ris !anage!ent dyna!ics. 7nly those bans

that ha"e efficient ris !anage!ent syste! will sur"i"e in the !aret in the long run. The effecti"e

!anage!ent of credit ris is a critical co!ponent of co!prehensi"e ris !anage!ent essential for

long6ter! success of a baning institution.

The future belongs to bigger banks alone, as well as to those which

have minimized their risks considerably.

1T1R3 &9ALL3-%3S / S1%%3STI7-S

&hallenges

G&o!petition

G&usto!er Retention

G%lobali=ation

GShrining #argin

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Suggestions

GStrong In6house research / !aret Intelligence

Gocused !areting6 ocus on region6specific ca!paigns rather than

national !edia ca!paigns

The growth of the retail financial ser"ices sector has been a ey

de"elop!ent on the !aret front. Indian bans +both public and pri"ate

will not only be een to tap the do!estic !aret but also to co!pete in the

global !aret place. -ew foreign bans will be e5ually een to gain a

foothold in the Indian !aret.

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%eneralInfor!ation of

Ban

Inde'

:. 9istory of (harati co6operati"e ban

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C. *rofile of ban

D. Board of directors

. ?ision and !ission

E.Awards

Brief 9istory 7f (harati &o67perati"e

Ban Ltd

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(harati co6operati"e ban ltd. Is a co!pletely co!puteri=ed ban. It

has been established under Baning Regulations Act, :;;. It has obtained

license fro! RBI.

Ban was established on :F th(ec. :;HC. It has started its woring byshare capital of just Rs. D,FF.FFF. The first chair!an of (harati co6

operati"e ban was (r. 9argo"indbhai Tila"at. Ban is also a !e!ber of

the Ban &learing 9ouse.

It pro"ides loans for purchase of fi'ed assets, housing loans, loans to

traders, "ehicle loans, loans for 0ishan ?ias *atra.

(ay by (ay, ban has progressed fro! the Year :;HC which can be

seen fro! the following figures)

Year -et profit Share

&apital

Reser"es (eposits Loans /

ad"ances

:;HC6HD 6C:E:C DF:@FF D:E@H @CFDC; CFED;

:;H;6;F E


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*R7IL3 7 BA-0-a!e ) Shree (harati &o6operati"e Ban Ltd.

Address ) 0uber, (hebarbhai road, 7pp, 0anta Stri"ias

%ruh, Rajot6D


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&oard '( )ire$tor!

-a!e *osition

Shri Rajendrabhai R. Bhanderi &hair!an

Shri (han"antbhai *. 0aad ?ice &hair!an

Shri Ranchhodbhai R. Bhanderi (irector

Shri.Shri 0. T. #a"adia (irector Shri Bipinbhai R. 0otecha (irector

Shri (r. $itendrabhai A. %ajera (irector

Shri 9areshbhai B. *arsana (irector

Shri ?i!leshbhai Shah (irector

Shri Bipinbhai *. 0ota +&.A. &o6op (irector

Shri Yash"antbhai 0. %oswa!i &o6op (irector

?ision And #ission

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?ision)

2Lets join our hands to !ae India shining4

The ban is co!!itted to !aintain the highest le"el of ethical

standards, professional integrity and regulatory co!pliance. 7ur

bans philosophy is based on core "alues)

:. 7perational 3'cellence

C. &usto!er ocus

D. Ser"ice Leadership

.8elfare of *eople

#ission)

:. The !ission of (harati Ban is to !aintain FJ -*A.

C. The Ban is planning to pro"ide AT# facilities to its !e!bers.

D. The Ban is also planning to open !ore branches in nearby cities

lie $a!nagar, $unagadh etc.

.

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S3R?I&3S AT BA-0)

:. &urrent (eposits

C. Sa"ing (epositsD. i'ed (eposit

. &ash &redit faclitiies

E. Recurring Account


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&onceptual fra!ewor of the topic

The financial perfor!ance of a fir! has a strong influence on the

beha"ior of its people. *erfor!ance !any ti!es relies hea"ily on financial

!easures. An e'cessi"e e!phasis on inancial results in a business is lie

an obsession with the sore card while playing &ricet. The score in a ga!e,

lie inancial results in a business, reflects the outco!e of past

perfor!ance.

In todays era, e"ery in"estor, analyst and other users of inancial

Reports would find "alue in !ore e'tensi"e disclosures of the co!panys

!aret and co!petiti"e position, !anage!ent goals and objecti"es and

business seg!ent data.

Analysis of inancial *erfor!ance !ay be done for a "ariety of

purposes, which range fro! a si!ple analysis of the short ter! li5uidity

position of the fir! to co!prehensi"e assess!ent of the strengths and

weanesses of the fir! in "arious areas.

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Approaches 7r Tools or

#easure!ent

The tools through which the inancial *erfor!ance of a &o!pany

can be analy=ed are as follows)

I-A-&IAL RATI7S

87R0I-% &A*ITAL

L3?3RA%3 A-ALYSIS

I-A-&IAL STAT3#3-TS

Rationale or The Study

7n the basis of Rationale Analysis inancial *erfor!ance can be

e"aluated, which pro"es helpful in taing se"eral i!portant inancial

(ecisions. #oreo"er the co!pany can !odify its policies / strategies

on the basis of study.

inancial *erfor!ance Analysis can be "ery useful tool for

understanding a fir!s perfor!ance and its condition.

The tool through which we are going to Analy=e inancial

*erfor!ance is Trend Analysis & atio Analysis.

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9ypothesis 7f Study

#y study is based upon following 9ypothesis)

+i The Bans Li5uidity position has i!pro"ed during last fi"e years.

+ii The Ban has started depending !ore on borrowed capital during last

fi"e years.

+iii The Ban has pro"ed successful in increasing its turno"er in last fi"e

years.

+i" The Bans financial perfor!ance in ter!s of *rofitability has

i!pro"ed.

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Analysis and Interpretation of

inancial (ata)

or our purpose, we will di"ide the analysis into to broad categories

:. Trend Analysis

C. Ratio Analysis

8e will go through the last financial annual reports of (harati &o6

operati"e Ban Ltd.

Year CFF


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Trend Analysis is the analysis of the trend of directions of the fir!s

progress whether it is fa"orable or unfa"orable. It gi"es the ideas about the

growth rates or decline rate of fir!. It is a tool for !onitoring the progress

of the fir!.Trend ratios in"ol"es a co!parison of ratios of a fir! o"er ti!e, i.e.

present ratios are co!pared with past ratios for the sa!e fir!. Trend ratios

indicate the direction of change in the perfor!ance K i!pro"e!ent,

deterioration or constancy K o"er the years.

ollowing are used category for trend analysis to analy=e the

financial perfor!ance of (harati &o6operati"e Ban Ltd. )

:. Loans and Ad"ances

C. (eposits

D. Interest inco!e

. 7ther Inco!e

E. -et *rofit


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Year A!ount

CFF


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Year J change

CFF


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0

50000000

100000000

150000000

200000000

250000000

300000000

350000000

400000000

450000000

500000000

Deposits

2006-2007

2007-2008

2008-2009

2009-2010

Percentage (ange in Deposits

Year J &hange

CFF


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0

5

10

15

20

25

2006-

2007

2007-

2008

2008-

2009

2009-

2010

deposits

Interpretation)

It could be interpreted fro! the abo"e graphs of deposits that there isconsiderable increase in the a!t of deposits during last fi"e years. The

increase during last three years is in increasing trend. The reason for this

increase could be the increase in the rates of the deposit interest.

)!" Interest Income

Year A!ount

CFF


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0

1000000

2000000

3000000

4000000

5000000

6000000

Interest Income

2006-2007

2007-2008

2008-2009

2009-2010

Percentage cange in Interest Income

Year J changeCFF


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-10

-5

0

5

10

15

20

25

2006-

2007

2007-

2008

2008-

2009

2009-

2010

interest income

Interpretation

It could be interpreted fro! the abo"e graph and table that the

interest inco!e is has been decreased as co!pared fro! the year CFF:6FC.

But ban ha"e !anaged to increase its interest inco!e co!parati"elyduring last years.

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*!" +ter Income

Year A!ount

CFF


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Percentage cange in +ter Income

Year J change

CFF


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Year A!ount

CFF


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CFF@6CFFH :E


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.! Interest recei%ed to total income

Year J

CFF


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B!" atio Analysis

Ratio analysis is a widely used tool of financial analysis. It is defined

as the syste!atic use of ratio to interpret the financial state!ents so the

strengths and weanesses of a fir! as well as its historical perfor!ance and

current financial condition can be deter!ined. Ter! Mratio refers to the

nu!erical or 5uantitati"e relationship between two ite!sN"ariables.

Ratios can be classified, for purposes of e'position, into four broad

groups)

:. Li5uidity RatiosC. &apital structureNle"erage ratios

D. *rofitability ratios

. Acti"ity ratios

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/EANIN0 +1 ATI+ ANA$23I3

2Ratio is financial for! should the co!parison between two

financial ter!s4.

It relationship between "arious related ite!s in these financial

state!ents is established, they can pro"ide useful clues to judge

accurately the financial health and ability of business to !a'i!i=e the

profit. This relationship between related ite!s of financial is thus, one

nu!ber e'pressed in for! of return on paid up capital the net profit of

the business is di"idend by the paid up share capital. The figure so

obtain is the ratio. It the sa!e is !ultiplied by :FF a percentage rate of

return on paid up capital is obtained.

EXPE33I+N

Ratio can be e'pressed in three for!s6

In the for! of percentage

In the for! of proportion of the "alue

In the for! of nu!ber of ti!es

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I/P+TAN(E +1 ATI+ ANA$23I3

I/P+TAN(E +1 ATI+3

In application to studying the rupee a!ount shown in the financial

state!ents, relationships between different ite!s !ay be established by

co!puting "arious ratios. The relation between two related ite!s of

financial state!ent is nown as Ratio. A ratio is thus, one nu!ber

e'pressed in ter!s of other Ratios are particularly useful in co!paring one

years perfor!ance with other years, as well as one co!panys

perfor!ance with anothers. In !any cases the a"erageratios relating to

co!panies in particular industries are a"ailable, and an indi"idual

co!panys ratio !ay be co!pared with such an a"erage.

Ratios help to !ae 5ualitati"e judg!ents depending upon the

calculations !ade which are 5uantitati"e judg!ents. The ratio analysisin"ol"es co!parison for a useful interpretation of the financial state!ents.

A single ratio in itself does not indicate fa"ourable or unfa"ourable

condition. It should be co!pared with so!e standards. Standard of

co!parison !ay decided by the co!pany or fir! itself.

I/P+TAN(E45TI$IT2

#" Profitability:

1seful infor!ation about the trend of profitability is a"ailable fro!

profitability ratios. The gross profit ratio, net profit ratio of return on

in"est!ent gi"e a good idea of the profitability of business. 7n the basis

of these ratios, in"estors get an idea about the o"erall efficiency of

business, the !anage!ent gets an idea about the efficiency of !anagers

and ban as well as other creditors draws useful conclusions about

repaying capacity of the borrowers.

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'" $i6uidity:

In fact, the use of ratios was !ade initially to ascertain the li5uidity of

business. The current ratio, li5uid ratio and acid test ratio will tell whetherthe business will be able to !eet its current liabilities as and when they

!ature. Bans and other leaders will be able to conclude fro! these ratios

whether the fir! will be able to pay regularly the interest / loan

install!ents.

)" Efficiency:

The turno"er ratios are e'cellent guides to !easure the efficiency of

!anagers. e.g. the stoc turno"er will indicate how efficiently the sale is

being !ade, the debtors turno"er will indicate the efficiency of collection

depart!ent and assets turno"er shows the efficiency with which the assets

are used in business. All such ratios related to sales present a good picture

of the success or otherwise of the business.

Inter firm comparison)

The absolute ratios of a fir! are not of !uch use, unless they are

co!pared with si!ilar ratios of other fir!s belonging to the sa!e

industry. This is inter fir! co!parison, which shows the strength and

weaness of the fir! as co!pared to other fir!s and will indicate

correcti"e !easures.

," Indicate trend :7

The ratios of the last three to fi"e years will indicate the trend in the

respecti"e fields. or e'a!ple, the current ratio of a fir! is lower than the

industry a"erage, but if the ratios of last fi"e years show an i!pro"ing

trend, it is an encouraging trend. Re"erse !ay also be true. A particular

ratio of a co!pany for one year !ay co!pare fa"orably with industry

a"erage but, of its trend shows a deteriorating position, if is not desirable.

7nly ratio analysis will pro"ide this infor!ation.

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." 5seful for Budgetary (ontrol :7

Regular budgetary reports are prepared in a business where the syste! of

budgetary control is in use. If "arious ratios are presented in these reports,

if will gi"e a fairly good idea about "arious aspect of financial position.

8" 5seful for Decision making:7

Ratio guide the !anage!ent in !aing so!e of the i!portation show an

unsatisfactory position, the !anage!ent !ay decide to get additional

li5uid funds. 3"en for capital e'penditure decisions, the ratio of return on

in"est!ent will guide the !anage!ent can be judged on the basis and

efficiency of each depart!ent can thus be deter!ined.

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#" $i6uidity atios

The i!portance of ade5uate li5uidity in the sense of the ability of a

fir! to !eet currentNshort ter! obligations when they beco!e due for

pay!ent "ery hardly be o"er6stressed. In fact, li5uidity is a pre6re5uisite for

the "ery sur"i"al.

The li5uidity ratios which indicate the li5uidity of a fir! used for

financial perfor!ance analysis for our purpose are)

:. -et 8oring &apital

C. &urrent ratios

Net 9orking (apital

-et 8oring &apital +-8& represents the e'cess of current assets

o"er current liabilities. An enterprise should ha"e sufficient -8& in order

to be able to !eet the clai!s of the creditors and !eeting day6to6day needs

of business. The greater the a!ount of -8& , the greater the li5uidity of

the fir!. -8& is a !easure of li5uidity. Inade5uate woring capital is the

first sign of financial proble!s for a fir!.

-8& &urrent Assets6 &urrent Liabilities

Year CFF;6CF:F

-8&;FF;@DFF6;H;@FFH HFCFFC;C

Year CFF


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CFF;6CF:F HFCFFC;C

CFF


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ter!Ncurrent financial li5uidity, it indicates the rupees of current assets

a"ailable for each rupee of current liabilityNobligation.

The higher the current ratio, the larger the a!ount of rupees a"ailable

per rupee of current liability, the !ore the fir!s ability to !eet currentobligations and the greater the safety of funds of short6ter! creditors. The

fir! with the higher current ratio has better li5uidityNshort ter! sol"ency.

&urrent Ratio sLiabilitie&urrent

Assets&urrent

Year CFF;6CF:F

&urrent Ratio ;H;@FFH

;FF;@DFF;.:F ti!es

Year CFF


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Current Ratio (in times)

9.1

14.04

23.15

19.03

20.9

0

5

10

15

20

25

2001-02 2002-03 2003-04 2004-05 2005-06

"ear

%

&rrentRatio(inti

2001-02 2002-03 2003-04

2004-05 2005-06

InterpretationThe fir! with the higher current ratio has better

li5uidityNshort ter! sol"ency. The abo"e graph shows that the &urrent

Ratio has been increased to a greater e'tent which shows that the li5uidity

position of the ban is sound. The reason !ay be due to the decreasing

-*A.

ii Le"erageN&apital Structure Ratios

The second category of financial ratios is le"erage or capital structure

ratios. The long6ter! sol"ency of a fir! can be e'a!ined by using le"erage

or capital structure ratios. The le"erage or capital structure ratios !ay be

defined as financial ratios which throws light on the long ter! sol"ency of

a fir! reflected in its ability to assure the long ter! creditors with regard to

+i periodic pay!ent of interest during the period of the loan and +ii

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repay!ent of principal on !aturity or in pre6deter!ined install!ents at due

dates.

or our purpose, we ha"e used only interest co"erage ratio to analy=e

the perfor!ance of the ban.

Interest (o%erage atio

This ratio !easures the debt ser"icing capacity of a fir! in so far as

fi'ed interest on long ter! loan is concerned.

ro! the point of "iew of the creditors, the larger the co"erage, the

greater the ability of the fir! to handle fi'ed6charge liabilities and the !oreassured the pay!ent of interest to the creditors. 9owe"er, too high a ratio

!ay i!ply unused debt capacity. In contrast, a low ratio is a danger signal

that the fir! is using e'cessi"e debt and does not ha"e the ability to offer

assured pay!ent of interest to the creditors.

Int. &o"erage Ratio Interest

EBIT

Year CFF;6CF:FInt. &o"erage Ratio

:D@HH;DF

:H;DF@D; :.D@ ti!es

Year CFF


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ti!es

CFF;6CF:F :.D@

CFF


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iii" Profitability atios

Apart fro! the creditors, both short6ter! and long ter!, also

interested in the financial soundness of a fir! are the owners and

!anage!ent or the co!pany itself.

*rofitability is a !easure of efficiency and the search for it pro"ides

an incenti"e to achie"e efficiency. The profitability of a fir! can be

!easured by its profitability ratios.

or our purpose, we ha"e use ratios such as

:. 3arnings *er Share

C. *rice 3arnings ratio

D. (i"idend ratio

. Int. paid on deposit to total inco!e ratio

E. Total loans to total deposits ratio

Earning Per 3are

Apart fro! the rates of return, the profitability of a fir! fro! the

point of "iew of the ordinary shareholders is the 3*S. It !easures the profit

a"ailable to the e5uity holders on a per share basis, i.e., the a!ount that

they can get on e"ery share held. It is calculated di"iding the profits

a"ailable to the shareholders by the nu!ber of the outstanding shares.

3*S represents what the owners are theoretically entitled to recei"e

fro! the fir!.

3arnings *er Share aresofeuitysh!o

oldersitysharehailabletoeEarningsav

.

Year CFF;6CF:F

3*S FFFFF

E::;FH :C.HE Rs. *er share

Year CFF


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3*S FFFFF

:DCE;< D.D: Rs. *er share

Year CFF@6CFFH

3*S FFFFF

CFFF@E E.FF Rs. *er share

Year CFFH6CFF;

3*S FFFFF

:@D


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EPS (in Rs. Per share)

12.85

3.31

5

3.68 4.19

0

2

4

6

8

10

12

14

2001-02 2002-03 2003-04 2004-05 2005-06

"ear

'P

(inR

2001-02 2002-03 2003-04

2004-05 2005-06

Interpretation

The abo"e graph shows that the 3*S is the highest in the Year CFF:6

FC. The higher the 3*S higher will be the profitability of the ban. There is

continuous decrease in the 3*S during the last fi"e years. The reason could

be the decrease in the -et *rofit of the ban during the last fi"e year.

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Price Earnings atio

The *N3 ratio reflects the price currently being paid by the !aret for

each rupee of currently reported 3*S. In other words, the *N3 ratio

!easures in"estors. 3'pectations and the !aret appraisal of the

perfor!ance of a fir!.

The higher the *N3 ratio, the better it is for the owners. This ratio is

popularly used by security analysts to assess a fir!s perfor!ance as

e'pected by the in"estors.

*rice 3arning Ratio E"#

eice"er#har$arket*r

Year CFF:6FC

*N3 Ratio H


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CFF@6CFFH E.FF

CFFH6CFF;


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Di%idend 2ield +n E6uity 3ares

(i"idend Yield on 35uity Shares eice"er#har$arket

r#hare%ividend"e

*r' :FF

Year CFF:6FC

(i"idend Yield CE

E.:' :FF


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2001-02

2002-03

2003-04

2004-05

2005-06

0

1

2

3

4

5

6

Dividen

dYield(in%)

Year

Dividend Yield

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

Interpretation

The abo"e table and graph shows that there stable di"idend yield in

the ban. This shows that the profitability of the ban is !aintained during

the years. The reason for this stability could be the stable rate of di"idend

to the shareholders.

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Interest Paid +n Deposit To Total Income atio

Ratio eTotalIncom

idInterest"a' :FF

Year CFF:6FC

Ratio C@


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2001-02

2002-03

2003-04

2004-05

2005-06

0

10

20

30

40

50

60

70

Ra

tio(in%)

Year

Int. paid on deposit to total income Ratio

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

Interpretation

Interest paid on deposit to total inco!e ratio should be always be

less. The abo"e graph shows that the ratio is increasing that the last years.

This interprets that out of the total inco!e the co!es !ore pay!ent to the

int. on deposits during the last fi"e years. The reason for this increase !ay

be due to the increase in the rates of the interest on deposits.

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Total $oans to Total Deposits atio

Ratio itsTotal%e&osTotal'oans

' :FF

Year CFF:6FC

Ratio :;@@:


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2001-02

2002-03

2003-04

2004-05

2005-06

0

10

20

30

40

50

60

70

Ra

tio(in%)

Year

Total Loans to total Deposits Ratio

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

Interpretation

9igher the total loans to total deposits ratio higher the ris to

profitability of the ban. This graph interprets that the deposits of the fir!

is less than the loans and ad"ances pro"ided by it. It can be said that the

ratio has decreased o"er periods of last fi"e years which is a good sign.

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indings

7n the basis of analysis and interpretation of financial data, the

co!!on findings can be listed as follows)

:. The trend analysisshows that the loans and ad"ances gi"en has been

increased fro! last fi"e years which shows that the ban has grown and

e'panded its acti"ities.

3"en the deposits shows the increasing trend which interprets that the

ban has attained the trust of the general public that it is safe to deposit

their sa"ings in this ban.

The interest inco!e, which is the !ain inco!e source of any ban,

shows the increasing trend which interprets that the ban has earned

enough inco!e in the years.

C. 7n the basis of the atio Analysis, we ha"e found the following

findings)

i. The Li5uidity Ratio shows that the li5uidity position of the banhas increased years after years. It !ay put ban into a "ery

pleasant position.

ii. ro! the Le"erage Ratio we can see that e5uity capital is the

!ost preferred source of finance for this co!pany. #ore and

!ore pro"iding of the loans and ad"ances has pro"ed beneficial

for the ban, which is reflected in its Interest &o"erage Ratio.

iii. The *rofitability Ratio shows the ban had not earned sufficientprofitability which is reflected in the 3*S. The net profit has

also been deteriorated which shows decreased profitability.

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Suggestions

In the recent years, there has been fall in the net profit of ban. Theban should try to increase its net profit so that the profitability of the ban

beco!es fa"ourable.

According to our study, the ban is has been on the path of achie"ing

the -*A at =ero percent which shows that the co!pany has "ery less -on6

*erfor!ing Assets which indicates the soundness of the fir!.

The *rice 3arning Ratio of the ban has been decreasing years after

years. 9ence the ban should !ae efforts to increase the price earning

ratio. The 3*S also shows a decreasing trend which will pro"e har!ful for

the ban as the ordinary share holders will be dissatisfied. So the ban

should try to increase its 3*S by increasing !ore profit and also creating

less reser"es co!parati"ely or plough bac less profit.

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&onclusions

I conclude !y project of analy=ing the financial perfor!ance of the

(harati &o6operati"e Ban Ltd., indicating future e'pansion and

de"elop!ent of the Ban. According to this project, the ban has better

prospects in the future.

At last it can be said that future of the (harati Ban is "ery bright

with the e'pectation of high profitability and good returns with the

increased trust of the general public.

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Bibliography

:. inancial #anage!ent 6 0han and $ain

C. inancial #anage!ent 6 *rashanachandra

D. 8ebsite) www.google.co!

. Annual Reports of (harati &ooperati"e Ban

E. www.dharatiban.co!
http://www.google.com/http://www.dharatibank.com/http://www.google.com/http://www.dharatibank.com/

gujjar singh

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