TERM PAPER ON

FINANCIAL MANAGEMENT

Topic- Comparative working capital analysis of ICICI bank and IDBI bank

Submitted to:-

Mr. Amarjeet saini

Submitted by:- Name - Deepak Sharma Roll no: - RS (1901) B-38

Registration no: - 10906112

MBA 193(LSM)

ACKNOWLEDGEMENT

First of all I would like to take this opportunity to express my gratitude towards all

those people who have helped me in the successful completion of this term paper,

directly or indirectly. I would also like to express my sincere gratitude towards “Mr.

Amarjeet sir” (my term paper guide) for his guidance and help which she willingly

provided at every step of my term paper.

Next, I would like to express my sincere ineptness to Wikipedia.org, and Google for

providing us with all necessary information for completion of this term paper.

Finally, I would like to thank all my family and friends for their encouragement,

support and good wishes

Index-

Introduction of working capital.Cycle of working capital management.

Introduction of ICICI bank.Balance sheet of ICICI bank.Financial ratios of ICICI bank.Working capital analysis of ICICI bank.Introduction of IDBI bank.Balance sheet of IDBI bank.Financial ratios of IDBI bank.Working capital analysis of IDBI bank.Comparative analysis between ICICI bank and IDBI

bank.Conclusion.Bibliography.

INTRODUCTION OF WORKING CAPITAL-

Working capital, also known as net working capital or NWC, is a financial metric which

represents operating liquidity available to a business. Along with fixed assets such as plant and

equipment, working capital is considered a part of operating capital. It is calculated as current

assets minus current liabilities. If current assets are less than current liabilities, an entity has

a working capital deficiency, also called a working capital deficit.

Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its assets cannot

readily be converted into cash. Positive working capital is required to ensure that a firm is able to

continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and

upcoming operational expenses. The management of working capital involves managing

inventories, accounts receivable and payable and cash.

Current assets and current liabilities include three accounts which are of special importance. These

accounts represent the areas of the business where managers have the most direct impact:

accounts receivable (current asset)

inventory (current assets), and

accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-

term claim to current assets and is often secured by long term assets. Common types of short-term

debt are bank loans and lines of credit.

An increase in working capital indicates that the business has either increased current assets (that is

received cash, or other current assets) or has decreased current liabilities, for example has paid off

some short-term creditors.

By definition, working capital management entails short term decisions - generally, relating to the

next one year period - which is "reversible". These decisions are therefore not taken on the same

basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash

flows and / or profitability.

One measure of cash flow is provided by the cash conversion cycle - the net number of days

from the outlay of cash for raw material to receiving payment from the customer. As a

management tool, this metric makes explicit the inter-relatedness of decisions relating to

inventories, accounts receivable and payable, and cash. Because this number effectively

corresponds to the time that the firm's cash is tied up in operations and unavailable for other

activities, management generally aims at a low net count.

In this context, the most useful measure of profitability is Return on capital (ROC). The result

is shown as a percentage, determined by dividing relevant income for the 12 months by capital

employed; Return on equity (ROE) shows this result for the firm's shareholders. Firm value is

enhanced when, and if, the return on capital, which results from working capital management,

exceeds the cost of capital, which results from capital investment decisions as above. ROC

measures are therefore useful as a management tool, in that they link short-term policy with

long-term decision making. See Economic value added (EVA).

Cycle of working capital-

Management of working capital Guided by the above criteria, management will use a combination

of policies and techniques for the management of working capital. These policies aim at managing

the current assets(generally cash and cash equivalents, inventories and debtors) and the short term

financing, such that cash flows and returns are acceptable.

Cash management. Identify the cash balance which allows for the business to meet day to day

expenses, but reduces cash holding costs.

Inventory management. Identify the level of inventory which allows for uninterrupted

production but reduces the investment in raw materials - and minimizes reordering costs - and

hence increases cash flow; see Supply chain management; Just In Time (JIT); Economic order

quantity (EOQ); Economic production quantity

Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract

customers, such that any impact on cash flows and the cash conversion cycle will be offset by

increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances.

Short term financing. Identify the appropriate source of financing, given the cash conversion

cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be

necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash" through

"factoring".

Key Working Capital Ratios

There are the following ratios through which we can easily calculate the working capital utilization of any organization. The following, easily calculated, ratios are important measures of working capital utilization.

Ratio Formulae Result Interpretation

Stock Turnover(in days)

Average Stock * 365/Cost of Goods Sold

= x days

On average, you turn over the value of your entire stock every x days. You may need to break this down into product groups for effective stock management.Obsolete stock, slow moving lines will extend overall stock turnover days. Faster production, fewer product lines, just in time ordering will reduce average days.

Receivables Ratio(in days)

Debtors * 365/Sales

= x days

It take you on average x days to collect monies due to you. If your official credit terms are 45 day and it takes you 65 days... why ?One or more large or slow debts can drag out the average days. Effective debtor management will minimize the days.

Payables Ratio(in days)

Creditors * 365/Cost of Sales (or Purchases)

= x days

On average, you pay your suppliers every x days. If you negotiate better credit terms this will increase. If you pay earlier, say, to get a discount this will decline. If you simply defer paying your suppliers (without agreement) this will also increase - but your reputation, the quality of service and any flexibility provided by your suppliers may suffer.

Current Ratio

Total Current Assets/Total Current Liabilities

= x times

Current Assets are assets that you can readily turn in to cash or will do so within 12 months in the course of business. Current Liabilities are amount you are due to pay within the coming 12 months. For example, 1.5 times means that you should be able to lay your hands on $1.50 for

every $1.00 you owe. Less than 1 times e.g. 0.75 means that you could have liquidity problems and be under pressure to generate sufficient cash to meet oncoming demands.

Quick Ratio

(Total Current Assets - Inventory)/Total Current Liabilities

= x times

Similar to the Current Ratio but takes account of the fact that it may take time to convert inventory into cash.

Working Capital Ratio

(Inventory + Receivables - Payables)/Sales

As % Sales

A high percentage means that working capital needs are high relative to your sales.

Other working capital measures include the following:

Bad debts expressed as a percentage of sales. Cost of bank loans, lines of credit, invoice discounting etc. Debtor concentration - degree of dependency on a limited number of customers.

INTRODUCTION OF ICICI BANK

ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment Corporation of

India) is India's largest private sector bank by market capitalization and second largest

overall in terms of assets. Total assets of Rs. 3,562.28 billion (US$ 77 billion) at December

31, 2009 and profit after tax Rs. 30.19 billion

(US$ 648.8 million) for the nine months ended December 31, 2009. The Bank also has a

network of 1,700+ branches (as on 31 March, 2010) and about 4,721 ATMs in India and

presence in 18 countries, as well as some 24 million customers (at the end of July 2007).

ICICI Bank offers a wide range of banking products and financial services to corporate and

retail customers through a variety of delivery channels and specialized subsidiaries and

affiliates in the areas of investment banking, life and non-life insurance, venture capital and

asset management. (These data are dynamic.) ICICI Bank is also the largest issuer of credit

cards in India. ICICI Bank has got its equity shares listed on the stock exchanges

at Kolkata and Vadodara, Mumbai and the National Stock Exchange of India Limited, and

its ADRs on the New York Stock Exchange (NYSE). The Bank is expanding in overseas

markets and has the largest international balance sheet among Indian banks. ICICI Bank

now has wholly-owned subsidiaries, branches and representatives offices in 18 countries,

including an offshore unit in Mumbai. This includes wholly owned subsidiaries in Canada,

Russia and the UK offshore banking units in Bahrain and Singapore, an advisory branch in

Dubai, branches in Belgium, Hong Kong and Sri Lanka, and representative offices in

Bangladesh, China, Malaysia, Indonesia, South Africa, Thailand, the United Arab Emirates

and USA. Overseas, the Bank is targeting the NRI (Non-Resident Indian) population in

particular.

ICICI reported a 1.15% rise in net profit to Rs. 1,014.21 crore on a 1.29% increase in

total income to Rs. 9,712.31 crore in Q2 September 2008 over Q2 September 2007.

The bank's current and savings account (CASA) ratio increased to 30% in 2008 from

25% in 2007.

ICICI Bank is one of the Big Four Banks of India with State Bank of India, Axis

Bank and HDFC Bank.

Balance sheet of ICICI bank

Balance Sheet of ICICI Bank ------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 1,086.75 1,239.83 1,249.34 1,462.68 1,463.29

Equity Share Capital 736.75 889.83 899.34 1,112.68 1,113.29

Share Application Money 0.02 0.00 0.00 0.00 0.00

Preference Share Capital 350.00 350.00 350.00 350.00 350.00

Reserves 11,813.20 21,316.16 23,413.92 45,357.53 48,419.73

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net Worth 12,899.97 22,555.99 24,663.26 46,820.21 49,883.02

Deposits 99,818.78 165,083.17 230,510.19 244,431.05 218,347.82

Borrowings 33,544.50 38,521.91 51,256.03 65,648.43 67,323.69

Total Debt 133,363.28 203,605.08 281,766.22 310,079.48 285,671.51

Other Liabilities & Provisions 21,396.17 25,227.88 38,228.64 42,895.39 43,746.43

Total Liabilities 167,659.42 251,388.95 344,658.12 399,795.08 379,300.96

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Assets

Cash & Balances with RBI 6,344.90 8,934.37 18,706.88 29,377.53 17,536.33

Balance with Banks, Money at Call 6,585.07 8,105.85 18,414.45 8,663.60 12,430.23

Advances 91,405.15 146,163.11 195,865.60 225,616.08 218,310.85

Investments 50,487.35 71,547.39 91,257.84 111,454.34 103,058.31

Gross Block 5,525.65 5,968.57 6,298.56 7,036.00 7,443.71

Accumulated Depreciation 1,487.61 1,987.85 2,375.14 2,927.11 3,642.09

Net Block 4,038.04 3,980.72 3,923.42 4,108.89 3,801.62

Capital Work In Progress 96.30 147.94 189.66 0.00 0.00

Other Assets 8,702.59 12,509.57 16,300.26 20,574.63 24,163.62

Total Assets 167,659.42 251,388.95 344,658.11 399,795.07 379,300.96

Contingent Liabilities 97,507.79 119,895.78 177,054.18 371,737.36 803,991.92

Bills for collection 9,803.67 15,025.21 22,717.23 29,377.55 36,678.71

Book Value (Rs) 170.35 249.55 270.37 417.64 445.17

FINANCIAL RATIOS OF ICICI BANK

------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 8.50 8.50 10.00 11.00 11.00

Operating Profit Per Share (Rs) 36.37 36.75 42.19 51.29 48.58

Net Operating Profit Per Share (Rs) 160.69 196.87 316.45 354.71 343.59

Free Reserves Per Share (Rs) 110.70 193.24 199.52 346.21 351.04

Bonus in Equity Capital -- -- -- -- --

Profitability Ratios

Interest Spread 3.56 2.67 3.43 3.51 3.66

Adjusted Cash Margin(%) 21.14 17.55 12.30 11.81 11.45

Net Profit Margin 16.32 14.12 10.81 10.51 9.74

Return on Long Term Fund(%) 70.54 56.24 82.46 62.34 56.72

Return on Net Worth(%) 18.86 14.33 13.17 8.94 7.58

Adjusted Return on Net Worth(%) 15.99 11.40 12.31 8.80 7.55

Return on Assets Excluding Revaluations 1.20 1.01 0.90 1.04 444.94

Return on Assets Including Revaluations 1.20 1.01 0.90 1.04 444.94

Management Efficiency Ratios

Interest Income / Total Funds 8.08 8.36 9.55 10.60 9.82

Net Interest Income / Total Funds 3.60 3.78 4.06 4.29 3.99

Non Interest Income / Total Funds 0.31 0.22 0.10 0.02 0.08

Interest Expended / Total Funds 4.49 4.58 5.49 6.31 5.83

Operating Expense / Total Funds 1.77 2.22 2.79 2.76 2.60

Profit Before Provisions / Total Funds 1.73 1.49 1.19 1.40 1.30

Net Profit / Total Funds 1.37 1.21 1.04 1.12 0.96

Loans Turnover 0.16 0.15 0.17 0.20 0.18

Total Income / Capital Employed (%) 8.39 8.58 9.65 10.62 9.90

Interest Expended / Capital Employed (%) 4.49 4.58 5.49 6.31 5.83

Total Assets Turnover Ratios 0.08 0.08 0.10 0.11 0.10

Asset Turnover Ratio 2.14 2.94 4.52 5.61 5.14

Profit And Loss Account Ratios

Interest Expended / Interest Earned 69.83 69.62 71.14 76.28 73.09

Other Income / Total Income 3.65 2.59 1.07 0.17 0.86

Operating Expense / Total Income 21.06 25.86 28.87 26.00 26.22

Selling Distribution Cost Composition 5.08 4.80 6.12 4.43 1.74

Balance Sheet Ratios

Capital Adequacy Ratio 11.78 13.35 11.69 13.97 15.53

Advances / Loans Funds (%) 76.65 84.89 77.72 72.67 69.86

Debt Coverage Ratios

Credit Deposit Ratio 89.17 87.59 83.83 84.99 91.44

Investment Deposit Ratio 55.52 46.07 41.15 42.68 46.35

Cash Deposit Ratio 7.00 5.77 6.99 10.12 10.14

Total Debt to Owners Fund 7.98 7.45 9.50 5.27 4.42

Financial Charges Coverage Ratio 1.48 1.39 1.25 1.25 1.25

Financial Charges Coverage Ratio Post Tax 1.40 1.33 1.22 1.20 1.20

Leverage Ratios

Current Ratio 0.09 0.08 0.09 0.11 0.13

Quick Ratio 4.98 6.64 6.04 6.42 5.94

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 36.05 34.08 33.89 33.12 36.60

Dividend Payout Ratio Cash Profit 27.85 27.36 28.84 29.08 31.00

Earning Retention Ratio 63.98 65.82 64.80 66.35 63.23

Cash Earning Retention Ratio 72.17 72.58 70.22 70.51 68.87

Adjusted Cash Flow Times 38.43 52.30 65.12 52.34 49.41

Working capital analysis report of ICICI bank

Working capital is the difference between current assets and current liabilities of the company. Through the balance sheet of the icici bank we calculate the following things.

In 2005 the total current assets of the company is 154822.47 crore, and in 2009 it is 351335.72 crore, means there are 226.92% increase in current assets during the five years of time.

In 2005 the total liabilities of icici is 133363.28 crore and in 2009 it is 285671.51 crore which show that there are 214.20% increase in current liabilities.In this we consider the deposits and borrowing are the short terms.

In 2005 the capital adequacy ratio is 11.78% and in 2009 it is increased by 3.95%

means it is 15.53%. The advances and loans funds are decreased during the period of time, in 2005 it is

76.65% but in 2009 it is 69.86%.the advances and loans are affected the working capital of the company,

The credit depositary ratio is increased as compare to the last year in last year it is 84.99%and in 2009 it is 91.44%.

Investment depository ratio is decreased during the given period of time. The current ratio of icici bank is continuously increased, in 2005 it is 0.09, and in 2009

it is 0.13.so increase the current ratio show that the position of the company is increased.

In 2005 the quick ratio is 4.98 and in 2009 it is increased .96, means it is 5.94.

Introduction of IDBI bank-

The Industrial Development Bank of India Limited commonly known by its acronym IDBI is one of India's leading public sector banks and 4th largest Bank in overall ratings. RBI categorized IDBI as an "other public sector bank". It was established in 1964 by an Act of Parliament to provide credit and other facilities for the development of the fledgling Indian industry. It is currently the tenth largest development bank in the world in terms of reach with 1162 ATMs, 710 branches and 474 centers.[1] Some of the institutions built by IDBI are the National Stock Exchange of India (NSE), the National Securities Depository Services Ltd (NSDL), the Stock Holding Corporation of India (SHCIL), and IDBI BANK, which today is owned by the Indian Government, though for a brief period it was a private scheduled bank.

The Industrial Development Bank of India (IDBI) was established on July 1, 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 16 February 1976, the ownership of IDBI was transferred to the Government of India and it was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in the country. Although Government shareholding in the Bank came down below 100% following IDBI’s public issue in July 1995, the former continues to be the major shareholder (current shareholding: 52.3%). During the four decades of its existence, IDBI has been instrumental not only in establishing a well-developed, diversified and efficient industrial

and institutional structure but also adding a qualitative dimension to the process of industrial development in the country. IDBI has played a pioneering role in fulfilling its mission of promoting industrial growth through financing of medium and long-term projects, in consonance with national plans and priorities. Over the years, IDBI has enlarged its basket of products and services, covering almost the entire spectrum of industrial activities, including manufacturing and services. IDBI provides financial assistance, both in rupee and foreign currencies, for green-field projects as also for expansion, modernization and diversification purposes. In the wake of financial sector reforms unveiled by the government since 1992, IDBI evolved an array of fund and fee-based services with a view to providing an integrated solution to meet the entire demand of financial and corporate advisory requirements of its clients. IDBI also provides indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms.

Balance sheet of IDBI bank ...................in. Rs. crore……………

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 652.88 723.79 724.35 724.76 724.78

Equity Share Capital 652.88 723.79 724.35 724.76 724.78

Share Application Money 68.89 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 5,206.63 5,648.26 5,511.60 6,075.13 6,719.52

Revaluation Reserves 0.00 0.00 2,063.91 2,022.07 1,979.56

Net Worth 5,928.40 6,372.05 8,299.86 8,821.96 9,423.86

Deposits15,102.6

426,000.92 43,354.04 72,997.98

112,401.01

Borrowings50,005.5

447,530.21 42,404.38 38,612.55 44,417.04

Total Debt65,108.1

873,531.13 85,758.42 111,610.53

156,818.05

Other Liabilities & Provisions10,323.6

68,661.60 9,781.05 10,261.89 6,160.41

Total Liabilities81,360.2

488,564.78 103,839.33 130,694.38

172,402.32

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Assets

Cash & Balances with RBI 2,375.90 2,680.09 5,406.47 6,694.83 8,590.82

Balance with Banks, Money at Call 3,277.27 2,682.69 1,504.62 2,063.94 2,628.50

Advances45,413.5

752,739.07 62,470.82 82,212.69

103,428.34

Investments25,054.6

925,350.53 25,675.31 32,802.93 50,047.60

Gross Block 2,456.28 2,306.30 3,856.40 3,894.76 3,873.95

Accumulated Depreciation 1,573.93 1,503.79 1,089.08 1,173.59 1,127.40

Net Block 882.35 802.51 2,767.32 2,721.17 2,746.55

Capital Work In Progress 7.06 8.40 11.05 44.80 77.56

Other Assets 4,349.41 4,301.50 6,003.73 4,154.02 4,882.96

Total Assets81,360.2

588,564.79 103,839.32 130,694.38

172,402.33

Contingent Liabilities57,725.5

971,190.85 100,300.28 89,811.14 96,523.34

Bills for collection 3,531.71 7,348.64 8,227.54 14,226.75 20,053.80

Book Value (Rs) 89.75 88.04 86.09 93.82 102.71

Financial ratios of IDBI bank ……in.Rs.crore………..

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 0.75 1.50 1.50 2.00 2.50

Operating Profit Per Share (Rs) 5.35 7.02 5.73 10.85 12.88

Net Operating Profit Per Share (Rs) 48.29 88.41 96.56 126.38 174.79

Free Reserves Per Share (Rs) 64.87 67.38 62.47 66.69 70.83

Bonus in Equity Capital 37.49 33.82 33.79 33.77 33.77

Profitability Ratios

Interest Spread 1.44 2.15 2.25 1.76 2.88

Adjusted Cash Margin(%) 14.87 10.55 7.96 8.73 7.02

Net Profit Margin 9.39 8.47 8.74 7.84 6.71

Return on Long Term Fund(%) 46.82 87.61 99.28 120.38 151.49

Return on Net Worth(%) 7.06 9.12 10.00 10.72 11.53

Adjusted Return on Net Worth(%) 5.02 8.70 7.24 10.71 11.35

Return on Assets Excluding Revaluations

0.51 0.63 0.61 0.56 0.50

Return on Assets Including Revaluations

0.51 0.63 0.62 0.57 0.50

Management Efficiency Ratios

Interest Income / Total Funds 4.34 7.53 7.35 7.95 8.47

Net Interest Income / Total Funds 0.94 1.65 1.37 1.56 1.58

Non Interest Income / Total Funds 0.16 0.26 0.22 0.12 0.08

Interest Expended / Total Funds 3.40 5.89 5.98 6.39 6.89

Operating Expense / Total Funds 0.46 1.05 0.94 0.88 0.96

Profit Before Provisions / Total Funds 0.38 0.69 0.53 0.73 0.67

Net Profit / Total Funds 0.57 0.66 0.66 0.63 0.57

Loans Turnover 0.14 0.13 0.12 0.13 0.14

Total Income / Capital Employed (%) 4.51 7.79 7.57 8.07 8.55

Interest Expended / Capital Employed (%)

3.40 5.89 5.98 6.39 6.89

Total Assets Turnover Ratios 0.04 0.08 0.07 0.08 0.08

Asset Turnover Ratio 1.28 2.77 1.81 2.35 3.27

Profit And Loss Account Ratios

Interest Expended / Interest Earned 92.93 92.94 89.63 91.82 88.60

Other Income / Total Income 3.63 3.28 2.93 1.49 0.89

Operating Expense / Total Income 10.26 13.45 12.38 10.85 11.18

Selling Distribution Cost Composition 0.51 0.26 0.15 0.27 0.38

Balance Sheet Ratios

Capital Adequacy Ratio 15.50 14.80 13.73 11.95 11.57

Advances / Loans Funds (%) 77.39 76.08 78.44 83.31 77.06

Debt Coverage Ratios

Credit Deposit Ratio 73.10 238.79 166.12 124.35 100.13

Investment Deposit Ratio 78.60 122.63 73.57 50.26 44.69

Cash Deposit Ratio 3.81 12.30 11.66 10.40 8.24

Total Debt to Owners Fund 2.58 4.08 6.95 10.74 15.10

Financial Charges Coverage Ratio 1.19 1.15 1.11 1.13 1.10

Financial Charges Coverage Ratio Post Tax

1.20 1.14 1.13 1.11 1.09

Leverage Ratios

Current Ratio 0.17 0.12 0.11 0.05 0.04

Quick Ratio 5.05 6.89 7.55 9.07 18.98

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 20.08 22.07 20.16 22.92 24.69

Dividend Payout Ratio Cash Profit 12.35 17.57 16.89 20.56 23.26

Earning Retention Ratio 79.04 77.68 71.86 77.06 74.93

Cash Earning Retention Ratio 87.32 82.27 77.85 79.42 76.40

Adjusted Cash Flow Times 31.03 37.25 75.57 89.88 125.17

Financial ratios analysis of IDBI bank

In 2005 the assets turnover ratio of idbi bank was 1.28, and in 2009, it is 3.27, means that there are increase in the assets turnover during the period of time.

Capital adequacy ratio is the part of balance sheet ratio, in 2005 it is 15.50, and it is continuously decreased till the current period. Now it is 11.57.

The cash deposit ratio of the bank is in the flexible position, in 2005 it was 3.81, and in 2006 it was 12.30,2007 it was 11.66,in 2008 it was 10.40,and in 2009 it was 8.24.

The investment deposit ratio of IDBI bank in 2005 was 78.60, and in 2006 it was 122.63, and in 2007 it was 73.57, and in 2008 it was 50.26 and in 2009 it is 44.69.

Working capital ratios of IDBI bank-

The current ratio of idbi in 2005 was 0.17, and in 2006 it was 0.12,in 2007,it was 0.11,in 2008 it was 0.05,and in 2009 it is 0.04,which show that the current ratio of the bank is continuously decreased. We calculate the current ratio through current assets and current liabilities.

The Quick ratio of the idbi bank is increased as compare to the last year, in 2005 it was 5.05,and in 2009 it was 18.98, which shows that the company is in the better position as compare to the last years.

The total investment of IDBI bank is increased as compare to the previous years, the total investment increased from2005 to 2009 is 199.75%.

The bills of collection is increased by 567.82%.in 2005 it was 3531.71,and in 2009 it was 20053.8,which show that the financial position of the IDBI bank is increased during the period of time.

The total cash balance of IDBI bank is also increased from 2375.90 crore to 8590.82 crore.

Comparative analysis between ICICI bank and IDBI bank

In 2005 the short term borrowing of IDBI was 50005.54crore, and in 2009 it is 44417.04, which shows that the current liabilities of the bank is decreased by 11.18%.and the short term borrowing of ICICI bank was 33544.50 crore and in 2009 it is 67323.69crore, which show that the current liabilities of the bank is increased which is not good for the financial point of view of the company, the liabilities of the icici bank is approximately double in the given period of time.

The total cash balance of IDBI was 2375.90crore in 2005, and it is reached on 8590.82 crore in 2010, means the cash balance of idbi bank is nearly increased by 276%. And the cash balance of ICICI bank was 6344.90 crore in 2005 which is increased in 17536.33 crore in 2010 which is also increased by 276% in the same period of time.

The total advances of ICICI bank was 91405.15 in 2005, 225616.08, and in 2010 it is 218310.8 means it is decreased as compare to the previous year. And the total advance of IDBI bank in 2005 was 45413.57, and it is increased in 2010 and reached on 103428.34crore.

The short term investment of IDBI bank was 25054.69 in 2005,and it is increased in 2010 and reached on 50047.60 crore increased by 199.75%. The comparison between current liabilities and current assets show the working capital position of ICICI and IDBI bank, as we compare both the banks we analyze that the position of IDBI bank is better then ICICI bank, because the current liabilities of the ICICI bank is increased as compare to the IDBI bank, and there are same increasement in the current assets. Through this we evaluate that the current position of IDBI bank is better than ICICI bank as compare to the working capital management.

Ratios comparison between ICICI bank and IDBI bank

The total return on assets if IDBI bank in 2005 was 0.51% which is increased in 2006, 07, 08 but in 2009 it is decreased and reached on 0.50%. and the return of assets of ICICI bank was 1.20 in 2005 and it is increased in 444.94 in 2009.

The loan turnover ratio of IDBI bank was 0.14% in 2005,it is decreased in 2006 on 13% but in 2009 it remain 0.14%.and the ICICI bank the ratio is 0.16 in 2005 and in 2009 it is 0.18.which show that the loan turnover ratio of ICICI bank is increased as compare to the IDBI bank.

The assets turnover ratio of ICICI bank was 2.14 in 2005, in 2006 it was 2.94, in 2008 it was 5.61% and it decreased by approximately 8.4%. And the assets turnover ratio of IDBI bank was 1.28 in 2005, and is increased in 2010 and reached on 3.27%.

The credit deposit ratio of IDBI bank was 73.10% in 2005 and it increased by 27.03% in 2009.and reached on 100.13%, on the other hand the credit deposit ratio

of ICICI bank was 89.17% in 2005, 87.595 in 2006, and keep on fluctuating position and 91.44% in 2009.

The cash deposit ratio of IDBI bank was 3.81 in 2005, and which in increased by 216.27% and reached on 8.24% in 2009, the ratio of ICICI bank was 7% in 2005, and after this it was decreased for 2 years and in 2009 it is 10.14%.

The current ratio of ICICI bank was 0.09% in 2005,in 06 it was 0.08%,in 07 it was 0.09%,and in 2009 it was 0.13,which show that the current ratio of ICICI bank is increased as compare to the last year, the current ratio of IDBI bank was 0.17% in 2005,in 2008 it was 0.05% and in 2009 it is 0.04%,means which show that the current ratio of IDBI bank is continuously decreased as compare to the ICICI bank.

The quick ratio of IDBI bank was 5.05% in 2005 and it was continuously increased and in 2009 it is reached on 18.98%, and the quick ratio of ICICI bank was 4.98% in 2005,and in 2006 it was 6.64%,in 2008 it was 6.42%,and in 2009 it is 5.94%.which show that the quick ratio of IDBI bank was decreased as compare to the last years,

Conclusion

For investors, the strength of a company's balance sheet can be evaluated by examining three broad categories of investment quality: working capital adequacy, asset performance and capitalization structure. In this analysis, we'll start with a comprehensive look at how best to evaluate the investment quality of a company's working capital position. In simple terms, this entails measuring the liquidity and managerial efficiency related to a company's current position. The analytical tool employed to accomplish this task will be a company's cash conversion cycle.  Views on a company's current position, which simply consists of the relationship between its current assets and its current liabilities. Working capital is the difference between these two broad categories of financial figures

Despite conventional wisdom, as a stand-alone number, a company's current position has little or no relevance to an assessment of its liquidity. Nevertheless, this number is prominently reported in corporate financial communications such as the annual report and also by investment research services.

Another piece of conventional wisdom that needs correcting is the use of the current ratioand, its close relative, the acid test or quick ratio. Contrary to popular perception, these analytical tools don't convey the evaluative information about a company's liquidity that an investor needs to know. The ubiquitous current ratio, as an indicator of liquidity, is seriously flawed because it's conceptually based on a company's liquidation of all its current assets to meet all of its current liabilities. In reality, this is not likely to occur. Investors have to look at a company as a going concern. It's the time it takes to convert a company's working capital assets into cash to pay its current obligations that is the key to its liquidity

Bibliography-

www.money control.com www.wikipedia.com

www.capitaline.com www.icici.com www.idbi.com www.money.rediff.com www.investopedia.com www.capitaline.co www.moneybhai.com www.planware.org www.workingcapital.htm