Submitted By: KAAT RAFIK O. (Batch 2008-09)

Guided By: Prof.R.GANESHAN


This is certify that KAAT RAFIK OSMAN BHAI student of PAI international centre for management excellence, Maharashtra Cosmopolitan Education society, Pune has completed his field work report on the topic of COMPARATIVE STUDY OF FINANCIAL REPORT OF TOP THREE BANKS OF INDIA and has submitted the field work report in partial fulfillment of MBA of the college for the academic year 2008-2009.

He has worked under our guidance and direction. The said report is based on bonafide information.

Project guide name

Prof. R Ganesan






I hereby declare that project titled “COMPARATIVE STUDY OF FINANCIAL REPORT OF TOP THREE BANKS OF INDIA” is an original piece of research work carried out by me under the guidance and supervision of prof. R Ganesan. The information has been collected from genuine &authentic sources. The work has been submitted in partial fulfillment of the requirement of MBA to our college.




Name of the students:


ACKNOWLEDGEMENT “Perseverance inspiration and motivation have always played a key role in success of any venture”. KAAT RAFIK O. However. I accept the sole responsibility for any possible errors of omission and would be extremely grateful to the readers of this project report if they bring such mistakes to my notice.R. I would thank to God for their blessing and my parents also for their valuable suggestion and support in my project report.GANESAN who has always been a source of guidance. 4 . I would also like to thank our friends and those who have helped us during this project directly or indirectly. Last but not the least. I would like to express my sincere gratitude to all the faculty members who have taught me in my entire MBA curriculum and our Director Prof. I hereby express my deep sense of gratitude to all the personalities involved directly and indirectly in my project work. inspiration and motivation.

Objectives 6 2 7. PNB 1 7 3.INDEX Sr. Balance Sheet 3 6 5. Importance 6 4 8. Bank Profile 1 0 i. Subjects Page No 7 Introduction 2. ICICI 1 4 iii. Products & Services 2 1 4.No 1. Limitations 5 . Advantages. Ratio Analysis 4 0 6. SBI 1 1 ii.

6 6 9. Conclusion 6 9 10 Bibliography . 7 1 INTRODUCTION 6 .

e. This can be done by analyzing the financial statement with the help of different tools of analysis such as ratio analysis. Practitioners use financial ratios.  The income statement presents the summary of the income earned and the expenses incurred during a financial year. a meaningful relationship is established between two or more accounting figures for comparison. like the owners. and they do not necessarily coincide with what theoretically might be the best founded areas. Many distinct areas of research involving financial ratios can be discerned. competitors. etc. comparative statement analysis. i. profit & loss a/c or income statement and balance sheet or position statement. Position statement presents the financial position of the business at the end of the year. customers.. while the researchers' main interest has been to develop models exploiting these ratios. 7 . one may be interested in knowing the position of an enterprise from different points of view. cash flow analysis. regulatory agencies. suppliers. management.  Financial ratios are widely used for modeling purposes both by practitioners and researchers. and academics.  Financial statements are those statements which provide information about profitability and financial position of a business. Historically one can observe several major themes in the financial analysis literature. funds flow analysis. In this process.INRTODUCTION  After preparation of the financial statements. personnel. The firm involves many interested parties. It includes two statements. to forecast the future success of companies. There is overlapping in the observable themes. each having their views in applying financial statement analysis in their evaluations. for instance. Here I have done financial analysis by ratios.

 Thus. The various persons interested in the analysis of financial statements are: Short.(1) profit & loss a/c (2) balance sheet. By financial statements. Before understanding the meaning of analysis of financial statements. it is necessary to understand the meaning of „analysis‟ and „financial statements‟. These are prepared at the end of a given period of time.  Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. return and capital appreciation. i. 8 .  Long –term creditors They are interested in knowing whether the principal amount and interest thereon will be paid on time or not.term creditors They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not.e.. They are indicators of profitability and financial soundness of the business concern.  Shareholders They are interested in profitability.  Management The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions. income statement and position statement  Parties interested in analysis of financial statements Analysis of financial statement has become very significant due to widespread interest of various parties in the financial result of a business unit.  Trade unions They are interested in financial statements for negotiating the wages or salaries or bonus agreement with management. analysis of financial statements means establishing meaningful relationship between various items of the two financial statements. we mean two statements.

 Employees They are interested as it enables them to justify their demands for bonus and increase in remuneration. Taxation authorities These authorities are interested in financial statements for determining the tax liability. 9 . You have seen that different parties are interested in the results reported in the financial statements. These results are reported by analyzing financial statements through the use of ratio analysis.  Researchers They are interested in the financial statements in undertaking research in business affairs and practices.

10 .


the Government took over the stake held by the Reserve Bank of India. 12 . STATE BANK OF INDIA Type- Public (BSE. With an asset base of $126 billion and its reach. it is a regional banking behemoth. The State Bank Group. The Government of India nationalized the Imperial Bank of India in 1955. the second largest bank in the world. measured by the number of branch offices and employees. Chairman State Bank of India (SBI) (LSE: SBID) is the largest bank in India. including products aimed at NRIs. In 2008. SBI has laid emphasis on reducing the huge manpower through Golden handshake schemes and computerizing its operations. SBI provides a range of banking products through its vast network in India and overseas. The bank traces its ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta. with over 16000 branches. NSE:SBI) & (LSE:SBID) Founded- Calcutta. with the Reserve Bank of India taking a 60% stake. has the largest branch network in India. It is also. Headquarters. It has a market share among Indian commercial banks of about 20% in deposits and advances. making it the oldest commercial bank in the Indian Subcontinent. and renamed it the State Bank of India. Mumbai 400 021 India Key peopleOm Prakash Bhatt. 1806 (as Bank of Calcutta) Corporate Centre.Madam Cama Road.1.

State Bank of India already has a branch in Shanghai and plans to open one up in Tianjin. the bank established its California subsidiary. It now has five branches in Nigeria. Los Angeles. and three in British Columbia. Sydney. India's largest bank. and Tokyo. Frankfurt. Male in the Maldives. and Singapore. The bank has 52 branches. It has branches of the parent in Colombo. and State Bank of India (Canada). New York. Osaka.International presence Regional office of the State Bank of India (SBI). which has branches throughout the country. agencies or offices in 32 countries. Bahrain. with Canara Bank owning the rest. which now has seven branches. Johannesburg. State Bank of India (Mauritius). four in the greater Toronto area. It has offshore banking units in the Bahamas. SBI operates several foreign subsidiaries or affiliates. In Nepal SBI owns 50% of Nepal SBI Bank. in Mumbai. In 1990 it established an offshore bank. London and environs. State Bank of India (California). Muscat. This bank was established in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. In 1982. The Canadian subsidiary was also established in 1982 and also has seven branches. It has two subsidiaries in North America. and representative offices in Bhutan and Cape Town. Hong Kong. 13 . In Indonesia it owns 76% of PT Bank Indo Monex. In Moscow SBI owns 60% of Commercial Bank of India. The government of India is the largest shareholder in SBI. Dhakka. it operates as INMB Bank. In Nigeria.

Bhatt(Chairman) Shri S.) Vasantha Bharucha Shri Arun Ramanathan Smt. Bhattacharyya(MD & CC&RO) Shri Suman Kumar Bery Dr. Mohd. Ashok Jhunjhunwala Shri Dileep C. Deva Nand Balodhi Prof. Salahuddin Ansari Dr.P. Venkatachalam Dr. Choksi Shri S.K. Shyamala Gopinath 14 .BOARD OF DIRECTORS 1 2 3 4 5 6 7 8 9 10 11 Shri O.(Mrs.

the government of India and Indian industry representatives. had been discussed at length over the past several years. With the liberalization of the financial sector in India in the 1990s. an old private sector bank. As India‟s economy became more market-oriented and integrated with the world economy. In view of the benefits of transformation into a bank and the Reserve Bank of India‟s pronouncements on universal banking. Effective March 10. offered a wide variety of products and services. along with its subsidiaries and other group companies. ICICI Bank also considered various strategic alternatives in the context of the emerging competitive scenario in the Indian banking industry. Conversion into a bank offered ICICI the ability to accept low-cost demand deposits and offer a wider range of products and services. a diversified finance and shipping finance lender of which ICICI owned 19. ICICI primarily focused its activities on project finance. 2001. ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services provider that. which in the Indian context means the conversion of longterm lending institutions such as ICICI into commercial banks. ICICI capitalized on the new opportunities to provide a wider range of financial products and services to a broader spectrum of clients. and greater opportunities for earning nonfund based income in the form of banking fees and commissions. ICICI Bank identified a large capital base and size and scale of operations as key success factors in the Indian banking industry. ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI‟s holding in ICICI Bank reduced due to additional capital raising by ICICI Bank and sale of shares by ICICI. in an all-stock merger.0% by SCICI Limited. pursuant to the requirement stipulated by the Reserve Bank of India that ICICI dilute its ownership of ICICI Bank. ICICI and ICICI Bank decided to merge.9% at December 1996. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. Pursuant to the merger of SCICI into ICICI. INDUSTRIAL CREDIT & INVESTMENT CORPORATION OF INDIA (ICICI) ICICI was formed in 1955 at the initiative of the World Bank. The issue of universal banking. ICICI Bank‟s initial equity capital was contributed 75. ICICI Bank acquired Bank of Madura. 15 . providing long-term funds to a variety of industrial projects. Until the late 1980s.2. ICICI Bank became a wholly-owned subsidiary of ICICI.0% by ICICI and 25.

2001. 17. The amalgamation became effective on May 3. 2002.At the time of the merger. 2002 and January 30. 16 . ICICI Personal Financial Services. 2002. 13. 2. total assets of Rs. The Sangli Bank Limited. On the date of acquisition. 2007. The date of the amalgamation for accounting purposes under Indian GAAP was March 30. The amalgamation was approved by ICICI Bank‟s and ICICI‟s shareholders at their extraordinary general meetings held on January 25. 2002.0 billion (US$ 50million). both ICICI Bank and ICICI were publicly listed in India and on the New York Stock Exchange. total deposits of Rs. an unlisted private sector bank merged with ICICI Bank with effect from April 19. total loans of Rs. The amalgamation was approved by each of the boards of directors of ICICI.2 billion (US$ 330 million). ICICI Capital Services and ICICI Bank at their respective board meetings held on October 25. respectively. Sangli Bank had over 190 branches and extension counters. The amalgamation was sanctioned by the High Court of Gujarat at Ahmedabad on March 7. 2002.6billion (US$ 440 million). 2002 and by the High Court of Judicature at Bombay on April 11.

Narendra Murkumbi 5. Prem Watsa 12. M. Vijayan 11. Subrahmanyam 10. Sridar Iyengar 3. K. Vaghul. Sinha 9. V.BOARD OF DIRECTORS 1. K. Marti G. M. Managing Director & CEO 17 . Anupam Puri 6. Chairman 2. S. P. Mittal 4. N. L. V. N. T. Sharma 8. Kamath. Arun Ramanathan 7.

We also provide significant financing to other priority sectors including small scale industries. London. we manage our balance sheet. Our securities portfolio consists primarily of Government of India and state government securities. Our banking operations for corporate and commercial customers include a range of products and services for large corporations.500 branches across 764 cities. 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. is the second largest government-owned commercial bank in India with about 4. as well as branches in Hong Kong and Kabul. The Bank. Shanghai. retail and agricultural customers. We cater to the financing needs of the agricultural sector and have created innovative financing products for farmers. It serves over 37 million customers. including the maintenance of required regulatory reserves. Income on investments consists of interest and dividends from securities and our other investments and interest from interbank loan and cash deposits we keep with the RBI. which is referred to herein and in our financial statements as our income. and Dubai. founded by Dyal Singh Majithia and Lala Harkishen Lal. Our interest 18 . consists of interest income and other income. PUNJAB NATIONAL BANK (PNB) Punjab National Bank (PNB) was registered on May 19. and seek to maximize profits from our trading portfolio by taking advantage of market opportunities. offering banking products and services to corporate and commercial. The bank has been ranked 248th biggest bank in the world by Bankers Almanac. personal loans and automobile loans. and representative offices in Almaty. Total Business of the bank for financial year 2007 is estimated to be approximately US$60 billion. Interest income consists of interest on advances (including the discount on bills discounted) and income on investments. Our interest expense consists of our interest on deposits as well as borrowings. Through our treasury operations.3. We meet our statutory liquidity reserve ratio requirements through investments in these and other approved securities. as well as small and middle market businesses and government entities. We also hold debentures and bonds issued by public sector undertakings and other corporations. equity shares and mutual fund units. We offer a wide range of retail credit products including housing loans. We are a leading public sector commercial bank in India. It has a banking subsidiary in the UK. commercial paper. Our revenue.

these bonds are accounted for as “other liabilities and provisions” and their interest cost is accounted for under other interest expenses.6billion after adjustment as part of the restatement of our financial statements for this Issue. 11. 2004. Between fiscal 2002 and 2004. 10. Provisioning for non-performing assets.Income and expense are affected by fluctuations in interest rates as well as the volume of activity. other administrative and other expenses. rent paid on premises. insurance. postage and telecommunications expenses. As of September 30. our 19 . For purposes of these averages and ratios only. the interest cost of the unsecured subordinated bonds that we issue for Tier 2 capital adequacy purposes (“Tier 2 bonds”) is included in our cost of interest bearing liabilities.4billion. our total income grew at a compound annual rate of12. These indicators are presented in tabular form in the section titled “Selected Statistical Information” on page [·]. Our non-interest expense consists principally of operating expenses such as expenses for wages and employee benefits. 7. On average. Our spread represents the difference between the yield on the monthly average of interest earning assets and the cost of the monthly average of interest bearing liabilities. printing and stationery. as well as the average cost of the monthly average of deposits and average cost of the monthly average of borrowings.9 billion and our net profit was Rs.5 billion and our net profit was Rs.30% of our gross and net advances. As of September 30.These low-cost deposits led to an average cost of funds excluding equity for the first six months of fiscal 2005 of 4. Our net interest income represents our total interest income (on advances and investments) net of total interest expense (on deposits and borrowings). Our interest expense is also affected by the extent to which we fund our activities with low interest or non-interest deposits. 51. our total deposits represented 85. when we became a public sector bank. we have managed to continue to grow our business while maintaining a strong balance sheet.1 billion before adjustment and Rs. depreciation on investments and income tax is included in provisions and contingencies We use a variety of indicators to measure our performance.5%. and the extent to which we rely on borrowings. Net interest margin represents the ratio of net interest income to the monthly average of total interest earning assets. Our cost of funds is the weighted average of the average cost of the monthly average of interest bearing liabilities.7%.9% of our total liabilities. respectively. In the first six months of fiscal 2005 our total income was Rs. interest free demand deposits and low interest savings deposits represented 43.65% and 0. We calculate average yield on the monthly average of advances and average yield on the monthly average of investments.8% of these deposits in the first six months of fiscal 2005. In fiscal 2004 our total income was Rs. 2004. our gross and net non-performing assets constituted 7. In our financial statements. depreciation on fixed assets. Since 1969. 96.

20 .2%. We seek to achieve this by continuing to adopt technology which will integrate our extensive branch network. In line with our philosophy of aiding India‟s development we have opened branches in many rural areas.unadjusted and adjusted net profit grew at a compound annual rate of 40. We intend to maintain our position as a cost efficient and customer friendly institution that Provides comprehensive financial and related services.1% and 17. We intend to grow by cross selling various financial products and services to our customers and by expanding geographically in India and internationally. respectively. respectively. and our total deposits and total advances grew at a compound annual growth rate of 17. We are committed to excellence in serving the public and also maintaining high standards of corporate responsibility.4% and37.4%.

Shri P. Ravneet Kaur 3.R. Khandelwal 9. Dr K. Shri Tribhuwan Nath Chaturvedi 11.K.Khurana 5.BOARD OF DIRECTORS 1. Shri Vinod Kumar Mishra 10. Shri Gautam P. Shri Mohan Lal Bagga 7. Shri Devinder Kumar Singla 21 . Shri L.Fonseca 4. Shri. Nayar 6. Shri G R Sundaravadivel 12. S. Shri Mushtaq A Antulay 8.M. Smt.C Chakrabarty 2.


Accounts. Business Govt. SME 23 . SBI BANKING  Personal Banking  Agricultural & Rural Banking  NRI Services  International Banking  Corporate Banking  Services  Govt.1. Business  SME Personal Banking Deposit Schemes Personal Finance Corp Salary Package Services International Trade Finance Merchant Banking Correspondent Banking Agricultural Agricultural Banking Micro Credit Regional Rural Banks NRI Services Type of Accounts Corporate Banking Corporate Accounts Mid Corporate Group Project Finance Products & Services Services Internet Banking Mobile Banking ATM Services Govt.

plantation crops. land development and reclamation. allied activities like dairy . fisheries. digging of wells. The branch also has farmer's meet in villages to explain to farmers about various schemes offered by the bank. There are 972 specialized branches which have been set up in different parts of the country exclusively for the development of agriculture through credit deployment . finance to agri-input dealers.Demat Services Public Provident Fund. sheep-goat. forestry. processing of agri-products. tube wells and irrigation projects. To give special focus to agriculture lending Bank has set up agri business unit. farm mechanization. poultry. Bank has also agri specialists in various disciplines to handle projects/ guide farmers in their agri 24 . construction of cold storages and godowns. horticulture . Our branches have covered a whole gamut of agricultural activities like crop production . piggery and rearing of silk worms.These branches include 427 Agricultural Development Branches (ADBs) and 547 branches with Development Banking Department (DBDs) which cater to agriculturists and 2 Agricultural Business Branches at Chennai and Hyderabad catering to the needs of hi tech commercial agricultural projects.  PERSONALBANKING SBI Term Deposits SBI Loan For Pensioners SBI Recurring Deposits Loan Against Mortgage Of Property SBI Housing Loan SBI Car Loan SBI Educational Loan SBI Personal Loan Loan Against Shares & Debentures Rent Plus Scheme Medi-Plus Scheme Rates Of Interest  L AGRICULTURA State Bank of India Caters to the needs of agriculturists and landless agricultural labourers through a network of 6600 rural and semi-urban branches.

handling Letters of Credit and Guarantees.ventures. The Bank has carved a niche for itself in the Euro land with branches located in Antwerp. Paris and Frankfurt. medium and small customers both domestic and international. loan syndications. The network is augmented by a cluster of Overseas and NRI branches within India and correspondent links with over 522 banks.  NRI SERVICES World Class Services from a Bank you can Trust Indians everywhere should become enlightened International citizens. whichever country you live. short-term financing. merchant banking. non-resident Indians. 18. India. Wherever you are. spread over all time zones. collection of clean and documentary credits and remittances. 25 .  INTERNATIONAL BANKING International banking services of State Bank of India are delivered for the benefit of its Indian customers. Bank's Joint Ventures and Subsidiaries abroad further underline the Bank's international presence. but also with your sweat knowledge and dignity since that is the tradition of the country from where you came. the world over. We are the leaders in agri finance in the country with a portfolio of Rs.  CORPORATE BANKING SBI is a one shop providing financial products / services of a wide range for large. not only in financial terms. At the same time. Indian banks and corporates are able to avail single-window Euro services from the Bank's Frankfurt branch. foreign entities and banks through a network of 84 offices/branches in 32 countries as on 31 March 2008. remember we have a common umbilical connectivity to our motherland. The services include corporate lending. Advances are given for very small activity covering poorest of the poor to hi-tech activities involving large fund outlays. enrich that nation.000 cars in agri advances to around 50 lac farmers.

Working Capital Financing  Assistance extended both as Fund based and Non-Fund based facilities to Corporate, Partnership firms, Proprietary concerns 

Working Capital finance extended to all segments of industries and services sector such as IT Term Loans to support capital expenditures for setting up new ventures as also for expansion, renovation etc. Deferred Payment Guarantees to support purchase of capital equipments. Corporate Loans For a variety of business related purposes to corporate. Export Credit To Corporate / Non Corporate Strategic Business Units (i) Corporate Accounts Group (CAG) (ii)Project Finance (iii) Lease Finance

An exclusive unit providing one s shopping to Corporate A dedicated set up specialised in financing of infrastructure and other large projects Exclusive set up for handling large ticket leases. Pricing SBI's Prime Lending Rates (PLR) is among the lowest Presently Bank has two PLR's SBAR for loans payable on demand and up to one year for loans payable beyond one year.

Listed on the left are Services, SBI offers to its customers.
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State Bank of India's linkage with Government business is widespread. No wonder that out of 9315 branches in India, about 7000 branches are conducting Government Business. The large network of our branches provides easy access to the common man to deposit the following Government dues and pension payments.

 SME (small scale industries)
State Bank of India has been playing a vital role in the development of small scale industries since 1956.The Bank has financed over 8 lakhs SSI units in the country. It has 55 specialised SSI branches, 99 branches in industrial estates and more than 400 branches with SIB divisions. The Bank finances for Small Business activities which are of special significance to a large number of people as many of these activities can be started with relatively lower investment and with no special skills on the part of the entrepreneurs.



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Convenient!!! Convenience has always been synonymous with ICICI Bank and keeping in line we offer the facility of buying Insurance policies online. Secure. Reliable. 29 .World Class Service and Acceptance!!! A truly world class service as ICICI Bank cards have both national and international acceptance.

Shopping. Sri Lanka. Petersburg. China. insurance premium and lots more. Dubai International Finance Centre. Credit card.  INTERNATIONAL BANKING In 2001. ICICI Bank Eurasia LLC has six branches including three branches in Moscow and one in St. prepaid mobile recharge. Bangladesh. branches in Singapore. mobile bills. The Bank‟s wholly owned subsidiary ICICI Bank UK PLC has nine branches in the United Kingdom and a branch each in Belgium and Germany. Qatar Financial Centre and the United States and representative offices in the United Arab Emirates. We have made significant progress in the international business since we set up our first overseas branch in Singapore in 2003. Malaysia and Indonesia. South Africa. we identified international banking as a key opportunity. ICICI Bank currently has subsidiaries in the United Kingdom. ICICI Bank Canada has eight branches including three in Toronto.Banking at your fingertips!!! Why be inline when you can be online for paying your utility bills. 30 . Bahrain. Russia and Canada. aiming to cater to the cross-border needs of clients and leveraging our domestic banking strengths to offer products internationally. Hong Kong. Thailand.

a wide distribution network in India and alliances with local banks in various markets.  CORPORATE BANKING Our corporate banking strategy is based on providing comprehensive and customised financial solutions to our corporate customers. During fiscal 2008. We have undertaken significant brand-building initiatives in international markets and have emerged as a wellrecognised financial services brand for NRIs. Total deposits of ICICI Bank UK PLC and ICICI Bank Canada increased by 76.000 NRI customers.86 billion at March 31.0% from Rs. we launched innovative products like instant money transfer and enhanced our focus on customer relationship management and process automation. The offerings range from simple deposits and loans to more sophisticated structured products. During fiscal 2008. 31 . We have established a strong franchise among NRIs by offering a comprehensive product suite. we have over 500. and expanding private banking operations for India-centric asset classes. Additionally. achieving the status of a non-resident Indian (NRI) community bank in key markets. we focused on deepening our presence in existing overseas locations and expanding our operations in key markets.28billion at March 31. We offer a complete range of corporate banking products including rupee and foreign currency debt. structured financing. Through our international private banking services. working capital credit. we offer various products to mass affluent and high net worth clients based on their financial needs and risk appetite. technology enabled access. we also undertook the development of low cost remittance products in non-India geographies with correspondent tie-ups for disbursements in over 100 such geographies.Our international strategy is focused on building a retail deposit franchise. 191. syndication and transaction banking products and services. We have been able to successfully leverage our technology advantage to create a growing international deposit base. In line with our strategy to establish a presence in large markets with significant savings pools. 335. 2008. We also received approval for and commenced branch operations in the United States. We continue to maintain a market share of 25% in inward remittances to India. Currently. diverse wholesale funding sources and strong syndication capabilities to support our corporate and investment banking business. private equity and products giving exposure to the real estate sector in India. 2007 to Rs. we entered into Germany through a branch established by ICICI Bank UK PLC.

We have also put in place product specific teams with a view to focus on specific areas of expertise in designing financial solutions for clients. the SME CEO Knowledge Series . Through our relationship teams working in tandem with product solution teams. This has been done with the intent to increase our market share from transaction banking products. We have created an integrated Global Investment Banking Group. We have continued to focus on shaping the small and medium enterprises sphere in India through initiatives such as the Emerging India Awards”. During the year.  SME BANKING During fiscal 2008. which will translate into recurring fee income for the Bank. structuring and execution of investment banking mandates on a global basis. which is responsible for working with the relationship team in India and our international subsidiaries and branches. The relationship team is product agnostic and is responsible for managing banking relationships with clients. we have launched several new products and services like the SME toolkit – an online business and advisory resource for SMEs. We have also restructured our delivery team for transaction banking products by creating dedicated sales teams for trade services and transaction banking products.Our corporate and investment banking franchise is built around a core relationship team that has strong relationships with almost all of the country‟s corporate houses. increasing our coverage to over 1.a platform to mentor and assist SME entrepreneurs. We have introduced our service offerings in over 400 new branches. We have also focused on increasing market share in trade finance by leveraging and further strengthening correspondent banking relationships.1 million accounts. and the “SME Dialogue” . as compared to the previous year. we have focused on product specialisation including investment banking for SMEs. During the year. we have deepened our client relationships across our product portfolio or esulting in significant growth in income and wallet share among all our top corporate clients. our small enterprises customer base increased by 26% to about 1.a weekly feature in a leading financial newspaper sharing SME best practices and success stories. 32 . for origination.000 branches.

To enhance our service quality and product delivery capabilities we have developed a large network of rural branches which is further augmented by non-branch channels. We have put in place a robust risk management structure to Mitigate and manage credit. For example. 33 . purchase of farm equipment. In line with our learning from our rural banking operations. investment and insurance products. operational and fraud risks. commodity based finance as well as various savings. We have also focused on enhancing credit to farmers by leveraging on corporate partnerships. We also provide credit and banking services to SMEs active in the agricultural value chain. credit underwriting processes and account management systems. Through this. We also offer micro-finance and jewel loans. we aim to create a strong foundation for scaling up of our rural business. our suite of products and services is targeted to address the needs of both the farm and non-farm sectors. Our retail product suite encompasses loans for crop production. we have partnered with various dairies to provide financing to farmers for purchase of milch cattle. RURAL BANKING AND AGRI-BUSINESS We believe the rural economy has high growth potential and offers large credit growth opportunities. Rural banking in India is still at a nascent stage and the deployment of technology channels and modern banking methods for rural lending continues to be an evolving process. Towards this end. we undertook a comprehensive review of and realigned our channel architecture.

which offer benefits and concessions to NRIs and their relatives provided a minimum balance of Rs. we also provide housing loans to NRIs. The other public sector banks have large deposit bases and large branch networks. We have introduced our Global Foreign Currency Scheme and Global Rupee Deposit Scheme.3.. including the State Bank of India which has 13. We have also entered into an agreement with Times Online Money Ltd. We recently entered into an arrangement to facilitate money transfers through Western Union. 250. which is a global leader in money transfer services. We also offer various products for facilitating remittances from NRIs to India. with a view to establishing an internet based international remittance service.  RETAIL BANKING In retail banking.000 or US$5. We offer foreign currency accounts to NRIs under our Foreign Currency Non-Resident Scheme and rupee accounts for NRIs under our Non-Resident External and Non-Resident Ordinary Schemes. Private sector and foreign banks compete principally by offering a wider range of products as well as greater technological sophistication in some cases. a Times of India group company. We have established a branch in Kabul and Representative offices in other cities overseas in order to facilitate services being provided to NRIs. 34 .000 is maintained in the account. our principal competitors are the large public sector banks. In addition.593 branches. as well as existing and new private sector banks and foreign banks in the case of retail loan products.PNB BANKING  CORPORATE AND COMMERCIAL SECTOR LENDING ACTIVITIES  Term loans  Cash credit and other working capital facilities  Bill discounting  Export credits  Other credit and financing products  SERVICES TO NON-RESIDENT INDIANS We provide personal financial services for NRIs.

agricultural loans constituted 18. hand tools. processing and servicing businesses with up to Rs. has a significant presence among non-resident Indians and also competes for non-branch based products such as auto loans and credit cards. As of the last reporting Friday in September. SSIs are defined as manufacturing. In mutual fund sales and other investment related products.1%.8% of our net bank credit.Foreign banks. drugs and pharmaceuticals and stationery items and up to Rs.  PRODUCTS AND SERVICES FOR AGRICULTURE CUSTOMERS Agriculture contributes 22% to India‟s GDP and supports approximately two-thirds of India‟s population. while having a small market penetration overall. 57. 50 million invested in plant and machinery for certain industries such as hosiery.5 billion as of the last reporting Friday in September 2003. In fiscal 2004.  SMALL SCALE INDUSTRIES We provide financing to “small scale industries” or “SSIs”. auto and personal loan segments. SSI loans constituted 11. 48. As of the last reporting Friday in September 2004. foreign banks and new private sector banks. 2004 we had an outstanding loan portfolio of Rs. See the section titled “Business-Directed Lending” below.3 billion in this segment compared to Rs. representing growth of approximately 18. As of the last reporting Friday of September 2004.3% of our net bank credit. SSIs are also considered a priority sector for directed lending purposes. Our average credit growth rate in this segment has been 32. our principal competitors are brokers. 10 million invested in plant and machinery for other small scale industries. in the housing. 35 . for which we received an award from India‟s Finance Minister.2% over the last four years.We have also received awards and recognition from the Government of India relating to our efforts in financing SSI businesses. we surpassed the stated national goal that banks should provide at least18% of their net bank credit (which is gross credit minus Foreign Currency Non-Resident Bank deposits) to this segment. we face significant competition primarily from private sector banks and to a lesser degree from other public sector banks. In particular.


01 26.71 4167681.70 484011.46 0.41 517274.35 6.71 74.15 100.96 674663.1.35 443749.00 %BT 0.12 Rs(mn) 6314.26 57.84 7215263.47 %BT 0. STATE BANK OF INDIA BALANCE SHEET AS ON 31-MARCH-2008 Assets Net Own Assets Net Lease Assets(After Lease Adj A/c) Investment Advances Cash & Money at call Other Current Assets Balance Sheet Total(BT) Rs(mn) 33291.91 5374039.11 833622.87 13.17 11.48 7. Balance Sheet Total(BT) Non Performing Assets(NPA) % Capital Adequacy Ratio(CAR) % 37 .76 9.55 100.42 443.12 1.09 6.98 7215263.00 - Liabilities Equity Share Capital Reserves Deposits Borrowings Other Cash liab/prov.39 1895012.

ICICI BALANCE SHEET AS ON 31-MARCH-2008 Assets Net Own Assets Net Lease Assets(After Lease Adj A/c) Investment Advances Cash & Money at call Other Current Assets Balance Sheet Total(BT) Rs(mn) 33118.52 5.42 2256160.83 0.73 100.50 656484.49 14.26 7970.28 11.43 9.35 61.29 205746.88 56.00 %BT 0.79 453575.83 380411.34 432453.42 10.72 1114543.00 - Liabilities Equity Share Capital Reserves Deposits Borrowings Other Cash liab/prov.76 1.15 100.20 27.76 Rs(mn) 11126.14 16.2.31 2444310.83 3997950.26 3997950. Balance Sheet Total(BT) Non Performing Assets(NPA) % Capital Adequacy Ratio(CAR) % 38 .92 %BT 0.

21 1974846.30 84.00 - Liabilities Equity Share Capital Reserves Deposits Borrowings Other Cash liab/prov.17 0.60 147982.34 60.3.54 2.66 188307.16 5.10 100.00 %BT 0.76 7.64 12.03 6.26 54465.49 100.49 1664572.24 41525. Balance Sheet Total(BT) Non Performing Assets(NPA) % Capital Adequacy Ratio(CAR) % 39 .65 Rs(mn) 3153.96 %BT 1. PUNJAB NATIONAL BANK BALANCE SHEET AS ON 31-MARCH-2008 Assets Net Own Assets Net Lease Assets(After Lease Adj A/c) Investment Advances Cash & Money at call Other Current Assets Balance Sheet Total(BT) Rs(mn) 23149.19 539917.05 1195015.03 104673.29 1974846.51 9.00 27.29 2.65 0.


Therefore.  OPERATING MARGIN A ratio used to measure a company's pricing strategy and operating efficiency. etc. some industries experience seasonality in their operations. PROFITABILITY RATIO A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. A healthy operating margin is required for a company to be able to pay for its fixed costs. For most of these ratios. typically experiences higher revenues and earnings for the Christmas season. having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. For instances. It Is Also known as "operating profit margin. The retail industry. On the other hand. it would not be too useful to compare a retailer's fourth-quarter profit margin with its first-quarter profit margin. Some examples of profitability ratios are profit margin. such as interest on debt. comparing a retailer's fourth-quarter profit margin with the profit margin from the same period a year before would be far more informative. for example. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios. raw materials. return on assets and return on equity. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages." Calculated as: 41 .

If a company's margin is increasing.No. the better. it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. Often.69 % 2 ICICI 14.45 % 3 PNB 21.47 % 42 . if a company has an operating margin of 12%. it is earning more per dollar of sales. RATIO AT 31-MARCH 2008 Sr. are excluded from the operating margin calculation because they don't represent a company's true operating performance.12 (before interest and taxes) for every dollar of sales. Name of Bank Percentage 1 SBI 22. When looking at operating margin to determine the quality of a company. this means that it makes $0.Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. nonrecurring cash flows. The higher the margin. For example. such as cash paid out in a lawsuit settlement.

Calculated as: 43 . So rank of operating efficiency of banks can be given as SBI. Gross profit margin serves as the source for paying additional expenses and future savings. It is also known as "gross margin".  GROSS PROFIT MARGIN A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. PNB and ICICI.BAR-GRAPH  INTERPRETATION It shows that operating efficiency of SBI is better than PNB and ICICI. While operating efficiency of ICICI is lower than PNB and SBI.

No. More efficient companies will usually see higher profit margins. earned $20 million in revenue from producing widgets and incurred $10 million in COGS-related expense. This metric can be used to compare a company with its competitors.67% 44 . This means that for every dollar that ABC earns on widgets.50 at the end of the day.99 % 3 PNB 20. it really has only $0. Name of Bank Percentage 1 SBI 21.For example. ABC's gross profit margin would be 50%.49 % 2 ICICI 12. suppose that ABC Corp. RATIO AT 31-MARCH 2008 Sr.

In some cases.BAR-GRAPH  INTERPRETATION This ratio shows financial position of company. So SBI is at first rank by its financial position than PNB and ICICI. It is worth analysing the ratio over time.  NET PROFIT MARGIN For a business to survive in the long term it must generate profit. The net profit margin ratio indicates profit levels of a business after all costs have been taken into account. Here. the costs of such improvements may lead to a further drop in the ratio or even losses before increased profitability is achieved. 45 . financial position of SBI is better than PNB and ICICI. A variation in the ratio from year to year may be due to abnormal conditions or expenses. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. Therefore the net profit margin ratio is one of the key performance indicators for your business. Variations may also indicate cost blowouts which need to be addressed.

Name of Bank Percentage 1 SBI 11.67 % 2 ICICI 10.No.51 % 3 PNB 12.68 % 46 .The calculation used to obtain the ratio is: Net Profit Margin = Net Profit Sales x 100 RATIO AT 31-MARCH 2008 Sr.

BAR-GRAPH  INTERPRETATION This ratio is key performance indicators for business.The denominator excludes preference X 100 47 . it is also called „Return on Equity‟ (ROE)  It is expressed as:Net Income RONW = ------------------------------------------Shareholder‟s Equity The numerator is equal to a fiscal year‟s net income (after payment of preference share dividends but before payment of equity share dividends). Key performance means the profit level of company. So profit level of PNB is at first rank than comes SBI and ICICI. from above graph we can say that performance of PNB is better than SBI and ICICI. Therefore. It reveals how much profit a company generates with the money that the equity shareholders have invested.  RETURN ON NETWORTH Return on Net worth (RONW) is used in finance as a measure of a company‟s profitability.

equity represents your money and so it makes good sense to know how well management is doing with it. RATIO AT 31-MARCH 2008 Sr.72 % 2 ICICI 8.00 % BAR-GRAPH 48 .94 % 3 PNB 19. RONW is a measure for judging the returns that a shareholder gets on his investment as a shareholder.shares and considers only the equity shareholding. So.No. Name of Bank Percentage 1 SBI 13. RONW measures how much return the company management can generate for its equity shareholders.

On the other hand. the mix will differ. For example. Companies with high fixed costs. depending on the company and the industry. A ratio used to measure a company's mix of operating costs. 49 . Fixed and variable costs are the two types of operating costs. Here.  LEVERAGE RATIO Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios. The degree of operating leverage is the ratio used to calculate this mix and its effects on operating income.  DEBT-EQUITY RATIO A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. see a greater increase in operating revenue when output is increased compared to companies with high variable costs. so every sale after the breakeven transfers to the operating income. but the main factors looked at include debt. So we can say that PNB is at first rank by its profitability than comes SBI and ICICI. after reaching the breakeven point. profitability of PNB is more than SBI and PNB. assets and interest expenses. equity. giving an idea of how changes in output will affect operating income.5 ($10M/$20M). it has a debt-to-equity ratio of 0. a high variable cost company sees little increase in operating income with additional output. because costs continue to be imputed into the outputs. The most well known financial leverage ratio is the debt-to-equity ratio. if a company has $10M in debt and $20M in equity. The reason for this is that the costs have already been incurred. INTERPRETATION This ratio is useful for comparing the profitability of a company to that of other firms in the same industry.

For example.No. This can result in volatile earnings as a result of the additional interest expense. long-term debt is used instead of total liabilities in the calculation. This can lead to bankruptcy. If this were to increase earnings by a greater amount than the debt cost (interest).44 % 50 . this ratio can be applied to personal financial statements as well as companies'. It is also known as the Personal Debt/Equity Ratio. The debt/equity ratio also depends on the industry in which the company operates. Name of Bank Percentage 1 SBI 10.Note: Sometimes only interest-bearing.5. which would leave shareholders with nothing. while personal computer companies have a debt/equity of under 0. If a lot of debt is used to finance increased operations (high debt to equity).96 % 2 ICICI 5. RATIO AT 31-MARCH 2008 Sr. capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2. then the shareholders benefit as more earnings are being spread among the same amount of shareholders.27 % 3 PNB 15. the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. the company could potentially generate more earnings than it would have without this outside financing. However.

 FIXED ASSETS TURNOVER RATIO Measure of the productivity of a firm. it indicates the amount of sales generated by each dollar spent on fixed assets. From above diagram we can say that PNB has a high debt-equity ratio means it is aggressive in financing its growth with debt.BAR-GRAPH  INTERPRETATION This ratio indicates what proportion of equity and debt the company is using to finance its assets. and the amount of fixed assets required to generate a specific level of revenue. Than after SBI has a low debt-equity ratio as comparison with PNB and ICICI comes at third rank in debt-equity ratio. Changes in the ratio over time reflect whether or not the firm is becoming more efficient in the use of its fixed assets. Formula: Sales revenue ÷ average fixed assets. 51 .

31 % 2 ICICI 5. Name of Bank Percentage 1 SBI 6.RATIO AT 31-MARCH 2008 Sr.61 % 3 PNB 4.No.35 % BAR-GRAPH 52 .

ICICI has a high level of revenue and than comes PNB at last. Generally. 53 . the higher the current ratio. and would be the most likely to be used to cover short-term debts in an emergency. the larger the margin of safety that the company possesses to cover short-term debts. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. the higher the value of the ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets. Common liquidity ratios include the current ratio. Generally. After SBI. INTERPRETATION This ratio shows specific level of revenue by the amount of fixed assets. the quick ratio and the operating cash flow ratio. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.  CURRENT RATIO This ratio is a rough indication of a firm's ability to service its current obligations. SBI has a high level of revenue in comparison with ICICI and PNB. the greater the "cushion" between current obligations and your Company's ability to pay them. The composition and quality of current assets is a critical factor in the analysis of your Company's liquidity.  LIQUIDITY RATIO A class of financial metrics that is used to determine a company's ability to pay off its shortterms debts obligations. It is calculated as Total current assets divided by total current liabilities.

RATIO AT 31-MARCH 2008 Sr.10 % 3 PNB 0.07 % 2 ICICI 0.02 % BAR-GRAPH 54 . Name of Bank Percentage 1 SBI 0.No.

and than secondly comes SBI and PNB has a low ability to pay for liabilities in comparison with ICICI and PNB. means ICICI has a high ability to pay for its liabilities.  QUICK RATIO It is also known as the "Acid Test" ratio. The ratio expresses the degree to which your current Company's current liabilities are covered by the most liquid current assets. any value of less than 1 to 1 implies a "dependency" on inventory or other current assets to liquidate short-term debt. It is calculated as Cash plus trade receivables divided by total current liabilities. it is a refinement of the current ratio and is a more conservative measure of liquidity. RATIO AT 31-MARCH 2008 55 . Generally. INTERPRETATION Current ratio of ICICI is higher than SBI and PNB.

15 % 2 ICICI 6.Sr. Name of Bank Percentage 1 SBI 6.42 % 3 PNB 9.No.40 % BAR-GRAPH  INTERPRETATION 56 .

PNB has a high quick ratio means it has enough current assets to cover its current liabilities. As they mature. a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends. which is calculated as EPS/DPS. Note that dividend payout ratio is a reciprocate ratio to dividend cover. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. Investors can use the payout ratio to determine what companies are doing with their earnings. However investors seeking capital growth may prefer lower payout ratio because capital gains are taxed at a lower rate. Name of Bank Percentage 57 . the more secure the dividend because smaller dividends are easier to pay out than larger dividends.  PAYOUT RATIOS The amount of earnings paid out in dividends to shareholders.  DIVIDEND PAYOUT RATIO Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends: The part of the earnings not paid to investors is left for investment to provide for future earnings growth. RATIO AT 31-MARCH 2008 Sr. Calculated as: For example.No. while SBI and ICICI have a low quick ratio in comparison with PNB. they tend to return more of the earnings back to investors. High growth firms in early life generally have low or zero payout ratios. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio.

64 % 1 SBI 2 ICICI 33. PNB and SBI have a low dividend payout ratio.22. so the Investors who are seeking high current income and limited capital growth should be invest in ICICI bank.40 % BAR-GRAPH  INTERPRETATION ICICI has a high dividend payout ratio. 58 . so investors who are seeking capital growth should be invest in PNB and SBI because capital gains are taxed at a lower rate.12 % 3 PNB 23.

59 % BAR-GRAPH 59 . Calculated as: It can also be calculated as one minus the dividend payout ratio. EARNING RETENTION RATIO The percent of earnings credited to retained earnings. In other words. RATIO AT 31-MARCH 2008 Sr. the proportion of net income that is not paid out as dividends.33 % 2 ICICI 66. Name of Bank Percentage 1 SBI 77.No.35 % 3 PNB 76.

Earnings per share serve as an indicator of a company's profitability. it is more accurate to use a weighted average number of shares outstanding over the reporting term. so the Investors who are seeking high current income and limited capital growth should be invest in SBI and PNB. because the number of shares outstanding can change over time. ICICI has a low earning retention ratio. INTERPRETATION Earning retention ratio is the opposite of the dividend payout ratio. SBI and PNB have a high earning retention ratio. 60 . Calculated as: When calculating. However. so the investors who are seeking capital growth should be invest in ICICI BANK. data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.  PERSHARE RATIOS  EARNIG PER SHARE The portion of a company's profit allocated to each outstanding share of common stock.

all other things being equal.92 (24/12. Name of Bank Percentage 1 SBI 117. An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. the EPS would be $1.No.33 % 2 ICICI 42. but one could do so with less equity (investment) . the $1 million is deducted from the net income to get $24 million.Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. Two companies could generate the same EPS number. assume that a company has a net income of $25 million. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half. but to use it in conjunction with statement analysis and other measures. and then a weighted average is taken to find the number of shares outstanding (0. It is important not to rely on any one financial measure. For example.5M). It is also a major component used to calculate the price-to-earnings valuation ratio.5). Earnings per share are generally considered to be the single most important variable in determining a share's price.5 x 10M+ 0. RATIO AT 31-MARCH 2008 Sr. First.56 % 61 .5 x 15M = 12.that company would be more efficient at using its capital to generate income and. would be a "better" company.

From above graph we can say that SBI has a high profitability than PNB and ICICI. 62 .38 % BAR GRAPH  INTERPRETATION This ratio is an indicator of a company's profitability.3 PNB 70. PNB comes at second position and ICICI comes at third position in profitability. So.

Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. Such 63 . For that there are some objectives which are described as under. EARNING CAPACITY OR PROFITABILITY The overall objective of a business is to earn a satisfactory return on the funds invested in it. 1. 2. It also helps in knowing the capacity to pay the interest and dividend. COMPARATIVE POSITION IN RELATION TO OTHER FIRMS The purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms engaged in similar business.OBJECTIVES OBJECTIVES Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise.

3. It also helps the management to find out shortcomings of the business so that remedial measures can be taken to remove these shortcomings. EFFICIENCY OF MANAGEMENT The purpose of financial statement analysis is to know that the financial policies adopted by the management are efficient or not. (a) Whether funds required for the purchase of new machinery and equipments are provided from internal resources of business or not. 64 . (b) How much funds have been raised from external sources.SOLVECNY OF THE FIRM The different tools of analysis tells us whether the firm has suffucient funds to meet its shortterm and long-term liabilities or not. 4. 5. Analysis also helps the management in preparing budgets by forecasting next year‟s profit on the basis of past earnings.etc. FINANCIAL STRENGTH The purpose of financial analysis is to assess the financial potential of business. Analysis also helps in taking decisions.comparison also helps the management to study the position of their firm in respect of sales expenses. profitability and using capital.


sales. with the help of such a study. can be set as standards for judging actual performance of a business. It determines and interprets the liquidity. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily. comparision of profitability and financial soundness can be made between one industry and another. sumarise. of a business enterprise. profitability viewpoint. if owners of a business aim at earning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. remidial masures are taken to correct them.profitability.  With the help of raito analysis. etc. they will reveal the trend of costs.etc.  It becomes simple to understand various figures in the financial statements through the use of different ratios.solvency. solvency view point.  If accounting ratios are calculated for a number of years. 66 . It discloses the position of business with liquidity viewpoint. Financial ratios simplify. we can draw conclusion regardings the financial health of business enterprise. For example. Such trends are useful for planning. based on a desired level of activities. profits and other important facts. It is a means for judging the financial health of a business enterprise. Similarly comparision of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located.  Ratio analysis discloses the position of business with different viewpoint. and systemise the accounting figures presented in financial statements.IMPORTANCE Ratio analysis is an important technique of financial analysis.  Financial ratios.


68 . The following are some of the advantages of ratio analysis: 1. Helps in planning: It helps in planning and forecasting. They also reveal strong firms and weak firms. overvalued and undervalued firms. Facilitates inter-firm comparison: It provides data for inter-firm comparison. 3. Planning. 2.ADVANTAGES Ratio analysis is an important and age-old technique of financial analysis. Ratios tell the whole story of changes in the financial condition of the business. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. co-ordination. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. 5. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios highlight the factors associated with with successful and unsuccessful firm. in its basic functions of forecasting. control and communications. Ratios can assist management. 4.

Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. Limited use of single ratios: A single ratio. such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions. therefore. may affect the future operations. be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. Though ratios are simple to calculate and easy to understand. Financial statements are affected to a very great extent by accounting conventions and concepts. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. It renders interpretation of the ratios difficult. a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. 6. To make a better interpretation. management policies. Personal judgment plays a great part in determining the figures for financial statements. non-financial changes though important for the business are not relevant by the financial statements. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. For example. usually. Personal bias: Ratios are only means of financial analysis and not an end in itself. 2. Thus ratios derived. 69 . 5. Financial statements themselves are subject to several limitations.LIMITATIONS The ratios analysis is one of the most powerful tools of financial management. they suffer from serious limitations. The financial statements. 4. 1. etc. there from. Ratios have to interpret and different people may interpret the same ratio in different way. 3. does not convey much of a sense. are also subject to those limitations. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. However. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm.

Incomparable: Not only industries differ in their nature. CONCLUSION 70 . but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading.7.

 The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The reliability and significance 71 . it yields significant interferences. but when expressed in terms of a related figure. Their use as tools of financial analysis involves their comparison as single ratios. like absolute figures.  Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The second step is to arrange the information in a way to highlight significant relationships. A single figure by itself has no meaning. ratios are relative figures reflecting the relationship between related variables. per unit costs. In brief. are not of much use. volume or efficiency have an impact on the profit margin or turnover ratios of a company.  Financial ratios are essentially concerned with the identification of significant accounting data relationships. relation and evaluation.  The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm‟s position and performance. Thus. financial analysis is the process of selection.CONCLUSION  Ratios make the related information comparable.  Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. which give the decision-maker insights into the financial performance of a company. The final step is interpretation and drawing of inferences and conclusions. Decisions affecting product prices.

Nevertheless.attached to ratios will largely hinge upon the quality of data on which they are based. BIBLIOGRAPHY 72 . they are an important tool of financial analysis. They are as good or as bad as the data itself.

BIBLIOGRAPHY     Web sites: www.pnb.com    Books referred: “Basic Financial Management”.com www.com www.M Y Khan P K Jain “Financial Management”-Prasanna Chandra 73 .icici.sbi.

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