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”. inspiration and motivation. 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.GANESAN who has always been a source of guidance.R. 4 . 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. However. 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. KAAT RAFIK O. I would thank to God for their blessing and my parents also for their valuable suggestion and support in my project report.

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

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

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

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

9 . Taxation authorities These authorities are interested in financial statements for determining the tax liability.  Employees They are interested as it enables them to justify their demands for bonus and increase in remuneration.  Researchers They are interested in the financial statements in undertaking research in business affairs and practices. 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.

10 .


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

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

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

15 . The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. along with its subsidiaries and other group companies. With the liberalization of the financial sector in India in the 1990s. In view of the benefits of transformation into a bank and the Reserve Bank of India‟s pronouncements on universal banking. ICICI Bank acquired Bank of Madura. and greater opportunities for earning nonfund based income in the form of banking fees and commissions.0% by SCICI Limited. INDUSTRIAL CREDIT & INVESTMENT CORPORATION OF INDIA (ICICI) ICICI was formed in 1955 at the initiative of the World Bank. had been discussed at length over the past several years. ICICI Bank‟s initial equity capital was contributed 75.0% by ICICI and 25. pursuant to the requirement stipulated by the Reserve Bank of India that ICICI dilute its ownership of ICICI Bank. in an all-stock merger. ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services provider that. providing long-term funds to a variety of industrial projects. Pursuant to the merger of SCICI into ICICI. As India‟s economy became more market-oriented and integrated with the world economy. ICICI capitalized on the new opportunities to provide a wider range of financial products and services to a broader spectrum of clients. the government of India and Indian industry representatives. ICICI Bank also considered various strategic alternatives in the context of the emerging competitive scenario in the Indian banking industry.9% at December 1996. ICICI and ICICI Bank decided to merge.2. which in the Indian context means the conversion of longterm lending institutions such as ICICI into commercial banks. The issue of universal banking. ICICI Bank became a wholly-owned subsidiary of ICICI. 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. Effective March 10. an old private sector bank. ICICI Bank was incorporated in 1994 as a part of the ICICI group. offered a wide variety of products and services. ICICI primarily focused its activities on project finance. ICICI‟s holding in ICICI Bank reduced due to additional capital raising by ICICI Bank and sale of shares by ICICI. 2001. ICICI Bank identified a large capital base and size and scale of operations as key success factors in the Indian banking industry. Until the late 1980s.

6billion (US$ 440 million). 2002. The amalgamation was approved by each of the boards of directors of ICICI. 2. 2002. The amalgamation was sanctioned by the High Court of Gujarat at Ahmedabad on March 7. 13. 16 .0 billion (US$ 50million). ICICI Personal Financial Services. 17.2 billion (US$ 330 million). respectively. 2002 and January 30. The amalgamation became effective on May 3. On the date of acquisition. ICICI Capital Services and ICICI Bank at their respective board meetings held on October 25. an unlisted private sector bank merged with ICICI Bank with effect from April 19. 2007. The date of the amalgamation for accounting purposes under Indian GAAP was March 30. 2002. 2002 and by the High Court of Judicature at Bombay on April 11. Sangli Bank had over 190 branches and extension counters. total assets of Rs. total deposits of Rs. The amalgamation was approved by ICICI Bank‟s and ICICI‟s shareholders at their extraordinary general meetings held on January 25. The Sangli Bank Limited. total loans of Rs.At the time of the merger. both ICICI Bank and ICICI were publicly listed in India and on the New York Stock Exchange. 2002. 2001.

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

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

On average. Our net interest income represents our total interest income (on advances and investments) net of total interest expense (on deposits and borrowings). These indicators are presented in tabular form in the section titled “Selected Statistical Information” on page [·].5%. We calculate average yield on the monthly average of advances and average yield on the monthly average of investments.30% of our gross and net advances. In the first six months of fiscal 2005 our total income was Rs. we have managed to continue to grow our business while maintaining a strong balance sheet. 11. our 19 .9 billion and our net profit was Rs. other administrative and other expenses. As of September 30. In our financial statements. For purposes of these averages and ratios only. 10. when we became a public sector bank. rent paid on premises. 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.5 billion and our net profit was Rs. 7. our total income grew at a compound annual rate of12. as well as the average cost of the monthly average of deposits and average cost of the monthly average of borrowings.8% of these deposits in the first six months of fiscal 2005. 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.Income and expense are affected by fluctuations in interest rates as well as the volume of activity. Provisioning for non-performing assets. respectively.65% and 0.1 billion before adjustment and Rs. Our non-interest expense consists principally of operating expenses such as expenses for wages and employee benefits. 2004.6billion after adjustment as part of the restatement of our financial statements for this Issue. these bonds are accounted for as “other liabilities and provisions” and their interest cost is accounted for under other interest expenses. In fiscal 2004 our total income was Rs. Between fiscal 2002 and 2004.These low-cost deposits led to an average cost of funds excluding equity for the first six months of fiscal 2005 of 4.7%. 96.4billion. depreciation on investments and income tax is included in provisions and contingencies We use a variety of indicators to measure our performance. postage and telecommunications expenses. Our interest expense is also affected by the extent to which we fund our activities with low interest or non-interest deposits. and the extent to which we rely on borrowings. interest free demand deposits and low interest savings deposits represented 43. insurance. 51. Our cost of funds is the weighted average of the average cost of the monthly average of interest bearing liabilities.9% of our total liabilities. our gross and net non-performing assets constituted 7. depreciation on fixed assets. Since 1969. Net interest margin represents the ratio of net interest income to the monthly average of total interest earning assets. our total deposits represented 85. printing and stationery. 2004. As of September 30.

respectively. We intend to grow by cross selling various financial products and services to our customers and by expanding geographically in India and internationally. respectively. 20 .1% and 17. 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 are committed to excellence in serving the public and also maintaining high standards of corporate responsibility.4% and37.2%. and our total deposits and total advances grew at a compound annual growth rate of 17. We intend to maintain our position as a cost efficient and customer friendly institution that Provides comprehensive financial and related services.4%. We seek to achieve this by continuing to adopt technology which will integrate our extensive branch network.

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


Accounts. SBI BANKING  Personal Banking  Agricultural & Rural Banking  NRI Services  International Banking  Corporate Banking  Services  Govt. Business Govt. 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.1. SME 23 .

Demat Services Public Provident Fund. The branch also has farmer's meet in villages to explain to farmers about various schemes offered by the bank. land development and reclamation. digging of wells. allied activities like dairy . sheep-goat. fisheries. forestry.  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. plantation crops. tube wells and irrigation projects. horticulture . 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 . Bank has also agri specialists in various disciplines to handle projects/ guide farmers in their agri 24 . processing of agri-products. finance to agri-input dealers. construction of cold storages and godowns.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. Our branches have covered a whole gamut of agricultural activities like crop production . To give special focus to agriculture lending Bank has set up agri business unit. poultry. farm mechanization. piggery and rearing of silk worms.

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

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

we focused on deepening our presence in existing overseas locations and expanding our operations in key markets. We also received approval for and commenced branch operations in the United States. We have established a strong franchise among NRIs by offering a comprehensive product suite. we have over 500. we launched innovative products like instant money transfer and enhanced our focus on customer relationship management and process automation. We offer a complete range of corporate banking products including rupee and foreign currency debt.000 NRI customers. 335. Through our international private banking services. private equity and products giving exposure to the real estate sector in India. In line with our strategy to establish a presence in large markets with significant savings pools. structured financing. technology enabled access. 31 . Currently. Total deposits of ICICI Bank UK PLC and ICICI Bank Canada increased by 76. 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.  CORPORATE BANKING Our corporate banking strategy is based on providing comprehensive and customised financial solutions to our corporate customers. we offer various products to mass affluent and high net worth clients based on their financial needs and risk appetite.28billion at March 31. syndication and transaction banking products and services. We continue to maintain a market share of 25% in inward remittances to India. We have undertaken significant brand-building initiatives in international markets and have emerged as a wellrecognised financial services brand for NRIs. During fiscal 2008. a wide distribution network in India and alliances with local banks in various markets.0% from Rs. 2007 to Rs. During fiscal 2008.Our international strategy is focused on building a retail deposit franchise. working capital credit. we entered into Germany through a branch established by ICICI Bank UK PLC. diverse wholesale funding sources and strong syndication capabilities to support our corporate and investment banking business. 2008. and expanding private banking operations for India-centric asset classes. The offerings range from simple deposits and loans to more sophisticated structured products.86 billion at March 31. 191. achieving the status of a non-resident Indian (NRI) community bank in key markets. We have been able to successfully leverage our technology advantage to create a growing international deposit base. Additionally.

a weekly feature in a leading financial newspaper sharing SME best practices and success stories. During the year. 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. we have launched several new products and services like the SME toolkit – an online business and advisory resource for SMEs. 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. for origination. 32 .a platform to mentor and assist SME entrepreneurs.1 million accounts. We have also focused on increasing market share in trade finance by leveraging and further strengthening correspondent banking relationships.  SME BANKING During fiscal 2008. We have introduced our service offerings in over 400 new branches. We have continued to focus on shaping the small and medium enterprises sphere in India through initiatives such as the Emerging India Awards”. We have created an integrated Global Investment Banking Group. which will translate into recurring fee income for the Bank. as compared to the previous year. and the “SME Dialogue” . our small enterprises customer base increased by 26% to about 1. which is responsible for working with the relationship team in India and our international subsidiaries and branches. we have focused on product specialisation including investment banking for SMEs. During the year. structuring and execution of investment banking mandates on a global basis. the SME CEO Knowledge Series .000 branches. increasing our coverage to over 1. This has been done with the intent to increase our market share from transaction banking products. Through our relationship teams working in tandem with product solution teams. 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 relationship team is product agnostic and is responsible for managing banking relationships with clients.

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

In addition. We also offer various products for facilitating remittances from NRIs to India. including the State Bank of India which has 13.. We have established a branch in Kabul and Representative offices in other cities overseas in order to facilitate services being provided to NRIs. We have introduced our Global Foreign Currency Scheme and Global Rupee Deposit Scheme. which offer benefits and concessions to NRIs and their relatives provided a minimum balance of Rs. 34 . We have also entered into an agreement with Times Online Money Ltd. with a view to establishing an internet based international remittance service.000 or US$5. We recently entered into an arrangement to facilitate money transfers through Western Union. 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. a Times of India group company.3. The other public sector banks have large deposit bases and large branch networks.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. 250. we also provide housing loans to NRIs. as well as existing and new private sector banks and foreign banks in the case of retail loan products.593 branches. Private sector and foreign banks compete principally by offering a wider range of products as well as greater technological sophistication in some cases.000 is maintained in the account. our principal competitors are the large public sector banks.  RETAIL BANKING In retail banking. which is a global leader in money transfer services.

2004 we had an outstanding loan portfolio of Rs. representing growth of approximately 18. In mutual fund sales and other investment related products. 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. 48. 50 million invested in plant and machinery for certain industries such as hosiery. In fiscal 2004. 10 million invested in plant and machinery for other small scale industries.3% of our net bank credit. processing and servicing businesses with up to Rs. Our average credit growth rate in this segment has been 32.We have also received awards and recognition from the Government of India relating to our efforts in financing SSI businesses. As of the last reporting Friday in September.  SMALL SCALE INDUSTRIES We provide financing to “small scale industries” or “SSIs”. As of the last reporting Friday in September 2004. foreign banks and new private sector banks. SSIs are also considered a priority sector for directed lending purposes. See the section titled “Business-Directed Lending” below.1%. we face significant competition primarily from private sector banks and to a lesser degree from other public sector banks. auto and personal loan segments.5 billion as of the last reporting Friday in September 2003. As of the last reporting Friday of September 2004. while having a small market penetration overall. SSI loans constituted 11.8% of our net bank credit. SSIs are defined as manufacturing. agricultural loans constituted 18.3 billion in this segment compared to Rs. 57. in the housing. for which we received an award from India‟s Finance Minister.  PRODUCTS AND SERVICES FOR AGRICULTURE CUSTOMERS Agriculture contributes 22% to India‟s GDP and supports approximately two-thirds of India‟s population. has a significant presence among non-resident Indians and also competes for non-branch based products such as auto loans and credit cards. hand tools. 35 . our principal competitors are brokers.2% over the last four years.Foreign banks. In particular. drugs and pharmaceuticals and stationery items and up to Rs.


41 517274.71 4167681. 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) 33291.48 7.11 833622.55 100.12 Rs(mn) 6314.01 26.76 9.70 484011.98 7215263.96 674663.12 1.47 %BT 0.1.09 6.84 7215263.87 13.35 6.91 5374039.46 0.71 74.00 - Liabilities Equity Share Capital Reserves Deposits Borrowings Other Cash liab/prov.26 57.17 11. Balance Sheet Total(BT) Non Performing Assets(NPA) % Capital Adequacy Ratio(CAR) % 37 .39 1895012.15 100.00 %BT 0.35 443749.42 443.

83 0.79 453575.83 3997950.76 Rs(mn) 11126.34 432453.26 7970.2.83 380411.73 100.14 16.88 56.28 11.72 1114543. Balance Sheet Total(BT) Non Performing Assets(NPA) % Capital Adequacy Ratio(CAR) % 38 .15 100.52 5.31 2444310.92 %BT 0.42 2256160.35 61.76 1.26 3997950.20 27.49 14. 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) 33118.50 656484.00 %BT 0.42 10.43 9.00 - Liabilities Equity Share Capital Reserves Deposits Borrowings Other Cash liab/prov.29 205746.

3.49 100. Balance Sheet Total(BT) Non Performing Assets(NPA) % Capital Adequacy Ratio(CAR) % 39 .34 60.03 6.60 147982.21 1974846.26 54465.19 539917.96 %BT 1.29 1974846.64 12.49 1664572.10 100.17 0.29 2.24 41525.66 188307.51 9.00 - Liabilities Equity Share Capital Reserves Deposits Borrowings Other Cash liab/prov.16 5.00 %BT 0.65 Rs(mn) 3153.03 104673.30 84.76 7. 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) 23149.54 2.65 0.00 27.05 1195015.


typically experiences higher revenues and earnings for the Christmas season. The retail industry. It Is Also known as "operating profit margin. For instances. etc. for example. A healthy operating margin is required for a company to be able to pay for its fixed costs. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios. 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. such as interest on debt." Calculated as: 41 . 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. 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.  OPERATING MARGIN A ratio used to measure a company's pricing strategy and operating efficiency. Therefore. Some examples of profitability ratios are profit margin. raw materials. 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 most of these ratios. 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.

RATIO AT 31-MARCH 2008 Sr.69 % 2 ICICI 14. Name of Bank Percentage 1 SBI 22. such as cash paid out in a lawsuit settlement. nonrecurring cash flows.Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. this means that it makes $0. it is earning more per dollar of sales. If a company's margin is increasing.No.45 % 3 PNB 21.12 (before interest and taxes) for every dollar of sales. The higher the margin. 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. When looking at operating margin to determine the quality of a company.47 % 42 . For example. are excluded from the operating margin calculation because they don't represent a company's true operating performance. if a company has an operating margin of 12%. Often. the better.

Gross profit margin serves as the source for paying additional expenses and future savings. It is also known as "gross margin".BAR-GRAPH  INTERPRETATION It shows that operating efficiency of SBI is better than PNB and ICICI.  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. While operating efficiency of ICICI is lower than PNB and SBI. PNB and ICICI. So rank of operating efficiency of banks can be given as SBI. Calculated as: 43 .

it really has only $0.No. More efficient companies will usually see higher profit margins. ABC's gross profit margin would be 50%.For example. Name of Bank Percentage 1 SBI 21. This means that for every dollar that ABC earns on widgets. This metric can be used to compare a company with its competitors. RATIO AT 31-MARCH 2008 Sr.50 at the end of the day. suppose that ABC Corp.67% 44 . earned $20 million in revenue from producing widgets and incurred $10 million in COGS-related expense.49 % 2 ICICI 12.99 % 3 PNB 20.

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

51 % 3 PNB 12. Name of Bank Percentage 1 SBI 11.No.68 % 46 .The calculation used to obtain the ratio is: Net Profit Margin = Net Profit Sales x 100 RATIO AT 31-MARCH 2008 Sr.67 % 2 ICICI 10.

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.BAR-GRAPH  INTERPRETATION This ratio is key performance indicators for business.The denominator excludes preference X 100 47 .  RETURN ON NETWORTH Return on Net worth (RONW) is used in finance as a measure of a company‟s profitability. Therefore. 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. It reveals how much profit a company generates with the money that the equity shareholders have invested.

Name of Bank Percentage 1 SBI 13. RONW is a measure for judging the returns that a shareholder gets on his investment as a shareholder.72 % 2 ICICI 8. RONW measures how much return the company management can generate for its equity shareholders.00 % BAR-GRAPH 48 . So.shares and considers only the equity shareholding. RATIO AT 31-MARCH 2008 Sr.No.94 % 3 PNB 19. equity represents your money and so it makes good sense to know how well management is doing with it.

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

RATIO AT 31-MARCH 2008 Sr.96 % 2 ICICI 5.44 % 50 . For example. The debt/equity ratio also depends on the industry in which the company operates. this ratio can be applied to personal financial statements as well as companies'. capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2. However. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt.27 % 3 PNB 15.No. 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. the company could potentially generate more earnings than it would have without this outside financing.5.Note: Sometimes only interest-bearing. while personal computer companies have a debt/equity of under 0. which would leave shareholders with nothing. If a lot of debt is used to finance increased operations (high debt to equity). Name of Bank Percentage 1 SBI 10. It is also known as the Personal Debt/Equity Ratio. then the shareholders benefit as more earnings are being spread among the same amount of shareholders. If this were to increase earnings by a greater amount than the debt cost (interest). This can lead to bankruptcy. long-term debt is used instead of total liabilities in the calculation. This can result in volatile earnings as a result of the additional interest expense.

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

RATIO AT 31-MARCH 2008 Sr. Name of Bank Percentage 1 SBI 6.No.35 % BAR-GRAPH 52 .61 % 3 PNB 4.31 % 2 ICICI 5.

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

02 % BAR-GRAPH 54 .No.07 % 2 ICICI 0.RATIO AT 31-MARCH 2008 Sr.10 % 3 PNB 0. Name of Bank Percentage 1 SBI 0.

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

15 % 2 ICICI 6.Sr.42 % 3 PNB 9.40 % BAR-GRAPH  INTERPRETATION 56 . Name of Bank Percentage 1 SBI 6.No.

a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends.PNB has a high quick ratio means it has enough current assets to cover its current liabilities.  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. However investors seeking capital growth may prefer lower payout ratio because capital gains are taxed at a lower rate. while SBI and ICICI have a low quick ratio in comparison with PNB. Calculated as: For example. they tend to return more of the earnings back to investors. Note that dividend payout ratio is a reciprocate ratio to dividend cover.No. Investors can use the payout ratio to determine what companies are doing with their earnings. High growth firms in early life generally have low or zero payout ratios.  PAYOUT RATIOS The amount of earnings paid out in dividends to shareholders. As they mature. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. which is calculated as EPS/DPS. RATIO AT 31-MARCH 2008 Sr. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio. the more secure the dividend because smaller dividends are easier to pay out than larger dividends. Name of Bank Percentage 57 .

PNB and SBI have a low dividend payout ratio. so investors who are seeking capital growth should be invest in PNB and SBI because capital gains are taxed at a lower rate.64 % 1 SBI 2 ICICI 33.22.40 % BAR-GRAPH  INTERPRETATION ICICI has a high dividend payout ratio. so the Investors who are seeking high current income and limited capital growth should be invest in ICICI bank.12 % 3 PNB 23. 58 .

35 % 3 PNB 76.33 % 2 ICICI 66. the proportion of net income that is not paid out as dividends.No. RATIO AT 31-MARCH 2008 Sr. Name of Bank Percentage 1 SBI 77. EARNING RETENTION RATIO The percent of earnings credited to retained earnings. In other words.59 % BAR-GRAPH 59 . Calculated as: It can also be calculated as one minus the dividend payout ratio.

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

It is also a major component used to calculate the price-to-earnings valuation ratio.No. but to use it in conjunction with statement analysis and other measures.33 % 2 ICICI 42.Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. the EPS would be $1. but one could do so with less equity (investment) .56 % 61 . Two companies could generate the same EPS number. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number.5).5M).that company would be more efficient at using its capital to generate income and.5 x 10M+ 0. would be a "better" company.92 (24/12. For example. assume that a company has a net income of $25 million. the $1 million is deducted from the net income to get $24 million. An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. RATIO AT 31-MARCH 2008 Sr. 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. all other things being equal. Earnings per share are generally considered to be the single most important variable in determining a share's price. Name of Bank Percentage 1 SBI 117. 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.5 x 15M = 12. First.

From above graph we can say that SBI has a high profitability than PNB and ICICI.3 PNB 70.38 % BAR GRAPH  INTERPRETATION This ratio is an indicator of a company's profitability. 62 . So. PNB comes at second position and ICICI comes at third position in profitability.

For that there are some objectives which are described as under. Such 63 .OBJECTIVES OBJECTIVES Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. 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. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. It also helps in knowing the capacity to pay the interest and dividend. 2. 1. EARNING CAPACITY OR PROFITABILITY The overall objective of a business is to earn a satisfactory return on the funds invested in it.

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


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


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

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

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

Decisions affecting product prices. are not of much use.  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 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. ratios are relative figures reflecting the relationship between related variables.  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. which give the decision-maker insights into the financial performance of a company. A single figure by itself has no meaning. like absolute figures. Their use as tools of financial analysis involves their comparison as single ratios. The reliability and significance 71 .  Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. per unit costs. In brief. 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. Thus. it yields significant interferences. relation and evaluation.CONCLUSION  Ratios make the related information comparable. The final step is interpretation and drawing of inferences and conclusions. The second step is to arrange the information in a way to highlight significant relationships. but when expressed in terms of a related figure. financial analysis is the process of selection.

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

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

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