Leverage Analysis of Kisan Mini Bank

Leverage Analysis YCMOU MBA
CHAPTER 1
INTRODUCTION TO THE STUDY
1. INTRODUCTION:
All financial decisions taken by the company have financial implication on the
functions of the organization and it will affect various departments of organizations.
Financial management is making decision on the financial matters, implementations
of the decision and review of the implementation. It is the process of managing
financial functions. The foremost objective of financial management is to increase the
shareholder’s wealth; in other words it can be called as increasing the profitability of
the shareholders. The achievement of this objective is based on three major decisions.
They are the financing decision are capital structure decision, the in-vestment decision
or capital expenditure decision and dividend decision. The investment decision relates
to the selection of assets in which funds will be invested by a firm. The dividend
decision is related to the distributions of surpluses. The dividend decision will be
made based on the success of both investment and financial decision. Among the
three decisions, the financing or the capital structure which is having an impact over
the profitability of the firm is a very important decision as it influences the debt-
equity mix of the company, which ultimately affects the shareholders return and risks.
For instance, if the borrowed funds are more than the shareholders funds, there will be
increase in shareholders earning as well as in shareholders risk. The risk of
shareholders increase because the borrowed funds carry a fixed interest, which has to
be paid whether the company earns profit or not. Thus, the earnings and the risks of
the shareholders increase when there is a high proportions of borrowed funds as
compared to owned funds in the capital structure of company.
2. IMPORTANCE AND SIGNIFICANT OF STUDY:
Leverage means use of funds or employment of assets in the capital structure

of the firm for which the firm has to pay fixed cost or fixed return. Employment of
such fund will help the firm to increase its profitability. If the firm uses higher
leverage it will be riskier for the firm if its earning gets decreased gradually because it
Shivraj College, Gadhinglaj Page 1

has to pay fixed interest for the amount borrowed. In other words the lever-age effect
will be favorable for the firm if it is able to earn more than the amount borrowed.
3. RATIONALE OF THE STUDY :
Investors use leverage to multiply their buying power in the market.

Companies use leverage to finance their assets—instead of issuing stock to raise
capital, companies can use debt to invest in business operations in an attempt to
increase shareholder value.
Leverage is the strategy of using borrowed money to increase return on an

investment. If the return on the total value invested in the security (your own cash
plus borrowed funds) is higher than the interest you pay on the borrowed funds, you
can make significant profit.
 TYPES OF LEVERAGES
Financial leverage:
The employment of fixed source of funds such as debt and performance share
in the capital structure of the firm along with owners equity is called financial
leverage or trading on equity. Financial leverage may be favorable or unfavorable. If a
company is able to earn more return than the cost of borrowing, then the leverage is
said to be favorable. On the other hand, if the company earns a return which is less
than the cost borrowing than the leverage said to be unfavorable.
Operating leverage:
Operating leverage refers to the use of fixed cost in the operations of the firm.
A firm has to bear the fixed cost expenses irrespective of output. Even if there are
zero sales, the firm has to incur those expenses. The firm can use higher amount of the
operating leverage.
Combined leverage:
Composite leverage is a use of operating leverage and financial leverage in an

appropriate proportion in the business. Operating leverage affects the firms operating
profit and financial leverage affects the earnings of the shareholders or EPS.

4. STATEMENT OF PROBLEM:
The statement of problem is as under:
A study of leverage analysis with special reference to KISAN MINI BANK,

GIJAVNE, TAL-GADHINGLAJ, DIST-KOLHAPUR MAHARASHTRA.
5. OBJECTIVES OF THE STUDY:

1 To study the concept of leverages of KISAN MINI BANK.
2 To study the leverage aspects followed by the KISAN MINI BANK.
3 To enhance the profitability (EPS) of shareholders through positive financial
leverage KISAN MINI BANK.
4 To enhance the Profitability (EBIT) through enhancing sales and optimizing the
fixed cost of the KISAN MINI BANK.
5 To give suggestions, if necessary to the KISAN MINI BANK.
6. RESEARCH METHODOLOGY:
 Research methodology :
Research methodology is the specific procedures or techniques used to identify,

select, process, and analyze information about a topic. In a research paper, the
methodology section allows the reader to critically evaluate a study's overall validity
and reliability.
 Data collection :
Data collection is the systematic approach to gathering and measuring information

from a variety of sources to get a complete and accurate picture of an area of interest.
... Accurate data collection is essential to maintaining the integrity of research,
making informed business decisions and ensuring quality assurance.
1. Primary Data :
The primary data will collected through the observation, interviews & discuss
with the manager, financial staff & directors body. Primary data is a type of data that
is collected by researchers directly from main sources through interviews.
Primary data are usually collected from the source—where the data originally
originates from and are regarded as the best kind of data in research.

Primary data collection methods: Interview, questionnaires, observation, focus

group, etc
2. Secondary Data:
Secondary research or desk research is a research method that involves
using already existing data. Existing data is summarized the purpose of collection of
data for the present study of following methods are used he research synopsis is the
plan for your research project. It provides the rationale for the research, the research
objectives, the proposed methods for data collection and recording formats and
collated to increase the overall effectiveness of research. Secondary research includes
research material published in research reports and similar documents.
Collection of the secondary data by using the following ways:
1. Annual reports.
2. Printed & published material.
3. Path Sanstha profile.
4. Web source.
7. HYPOTHESIS
Investment expenditure creates an equal amount of profit within the firms sector
which in turns impact the sectors cash flow. When financed by debt, investment
expends further liquid assets within the firm sector, through its effect on cash
flow.
Purpose of this hypothesis a leverage ratio is anyone of several financial

measurement assesses the ability of the company to meet its financial obligations
8. SCOPE OF THE STUDY:
The leverage analysis is useful for analyzing the leverage of different

products and find out the contributions and profitability of each product.
The study of leverage analysis to leverage aspect of the KISAN MINI

BANK to the leverage of each product in total leverage of contribution of each
brand and how the leverage are developed by the different areas in different ways
like the place to place, time to time, & season to season.

9. EXPECTED CONTRIBUTION:
1. The study will help to understand the leverages.
2. The study will help to understand types of leverages.
3. The study will help to understand strength about liquidity, profitability and
solvency.
10.LIMITATION OF THE STUDY:
 The project is confine to the annual report of the company.
 Time period of the study will limited to 4 years i.e 2018-19, 2019-20,
2020-21 and 2021-22 of the KISAN MINI BANK.
 This study will limited to financial management of the KISAN MINI
BANK.
 This financial analysis is using criteria leverages.

CHAPTER 2
COMPANY PROFILE
2.1 INTRODUCTION
The Gijavane Mini Bank Ltd, is the first bank which was estblished on 21
january 1944 for developing the financial position of the common people in an around
Gijavane.
The bank has developed very rapidly and has a satisfactory performance since
1944, because of mini bank of local peopl. This bank won the confidence of the
people and helped to increase the standard of living of artisan .
2.2 HISTORY OF THE BANK
The bank was established by shri.R.S.PATIL, the founder of the bank. It

continued under the chairmanship of R.S.PATIL,and others.
The bank was formed with initial capital of Rs.1500/- divided into shares of Rs.10/-
each contributed by 2 members,the authorized capital consisted of 1000 shares of
Rs.10/- each.
Now, the bank provides online computer and other services to its more than
7000 members under the leadership of
shri.M.V.PATIL,Shri.U.M.PATIL,Shri.K.N.PATIL,and other directors and staff.
 BIRD VIEW OF THE GIJAVANE MINI BANK LIMITED

Name of the bank : The Gijavane Mini Bank Ltd Gijavane.
Address : Ajara-road,Gijavane.
Date of registration and no : 21-1-1944(14102)
2.3 VISION AND MISSION
1) Vision statement of the Gijavane Mini Bank Ltd.

Providing need based quality customer service by committed and
dedicated workforce,by introducing innvoative banking products using state of the art

technology and there by stregthening the banking sector in general and co-operative
banking sector in particular.
2)Mission statement of the Gijavane Mini Bank Ltd.
To be an ethnically based, efficiently managed, financially sound mini

bank.
2.4 MANAGEMENT OF THE BANK
The Gijavane Kisan Mini Bank Ltd, is organized by the middle class people
with small means, the democratic management is important feature of this bank. Bank
has ageneral body of all members.The meeting of the general body is held every year.
For informing and supplying data about the bank and making the decision about
future plane effectively.
2.5 OBJECTIVES OF THE BANK
1. To provide finance to the members for their need.

2. To perform social responsibility towards society.
3. To develop banking credit among the people in town area.
4. To promote habits of saving among the people and to encourage them to make
savings and utilize funds.
5. To solve financial problems of weaker section of community by giving them small
loans on securities.

2.6 BOARD OF DIRECTORS
Chairman Shree Y. R. Patil.

Vice – chairman Shree A. A. Kamte.
Director Shree V. M. Patil.
Director Shree U. M. Patil.
Director Shree V. A. Kadukar.
Director Shree K. N. Patil.
Director Shree R. S. Kadukar.
Director Shree A. S. Kamte.
Director Shree N. B. Kamble.
Director Shree N. R. Banne.
Director Shree D. D. Chavan.
Director Shree M. B. Dalve.
Director Smt. S. B.Gaikwad.
Director Sou. A. J. Kale.
2.7 NATURE OF THE BUSINESS CARRIED
The Gijavane Kisan Mini Bank Ltd. Gijavane. is a leading bank in co-
opertive sector functioning in the vicinity of Gijavane having, its registered office, of
Gijavane. The bank has achieved greater success by lending loan to all needy people
vesting special interest an enconomically backward community and down trodden.
The bank has dispersed loan to small business ,small scale industries,
cottage indutries, agriculture and allied activities, artisans, self employed persons
etc.and assisted to improve standard of living.

2.8 PRODUCT/SERVICES PROFILE
The bank offers following products/services to its customers:
A. Loans:
 Short term loans
 Medium term loans
 Gold loans
 Deposits loans, loan against NSCs.
B. Cash credit:
 Secured cash credit
 business cash credit
 clan cash credit
 Deposit cash credit.
C. Deposits-deposits for individual and societies:
 Fixed deposits
 Saving bank deposits
 Current deposits
 Recurring deposits
2.9 AREA OF OPERATION:
Presently.the Gijavane Kisan Mini Bank Ltd., is having only 1 branch. Bank’s
objective was primarily to extend financial facility to the small business,small scale
industries, cottage industries agriculture, artisans, self employed persons etc.
2.10 COMPETITORS INFORMATION
The main competitors are as follow
 Ajara mini bank.,

 Gadhinglaj co-opeartive ltd.,

2.11 INFRASTRUCTURAL FACILITIES
Bank is situated at Ajara road,Gijavane,having 2 floor building. Bank has

good infrastucture separated with diffrerent coins, like managers cabin, loan recovery
cabin etc., bank has good and spacious meeting hall, systematic customer counters
and safe locker system.
Welfare facility –The Gijavne Kisan Mini Bank Ltd has provided good working
condition with perfect light and proper ventilation throughout the bank.The working
hours are fiexible.
Medical facility –The Gijavane Kisan Mini Bank Ltd has provided medical facilities
to the employees on major health problem.
2.12 EMPLOYEES IN THE BANK
The total numbers of staff in the bank.,
Sub-staff -4
other staff -6
Total staff -10
2.13 ACHIEVEMENTS
 Achievements –
The Gijavane Kisan Mini Bank Ltd., has completed 75 years of banking business
successfully and this is the one of the achievement to the bank.
2.14 FUTURE PLANNING
1. Increase branches.
2. increases dividend and loans in all branches.
3. To increases the level of district to state level.
4. To increse the profit.

2.15 ORGANIZATION STRUCTURE
President
Vice president
Board of directors
General manager
Sr.officer
Beanch Loan Junior Recovery Development Computer

manager officer officer officer officer in charge
Senior clerk
Junior clerk
Workers

CHAPTER 3
THEORETICAL BACKGROUND
3.1 MEANING AND DEFINITION OF LEVERAGES
 Meaning –
Leverage means to accomplish some purpose.The term leverage has been

borrowed from physics where as it refers to an object called fulcrum by means of
which heavy object can be lifted with a little force and strain.
 Defination –
According to chirsty and Roden,”Leverage as the tendency of profit to change

at a faster rate than the sales”
TYPES OF LEVERAGES:
1. Financial Leverage
2. Operating Leverage
3. Combined Leverage
1.Financial Leverage –
Financial Leverage is the one of the most important concepts of leverage. It

relates to the capital structure management of an enterprise. capital structure of a
company represents composition of total capital collected from different sources of
funds such as debentures, bonds,preference shares,equity shares, reseves and
surplus.Financial leverages is also called as interest charge leverage or fixed charge
leverage.
The financial leverage is calculated such under :
EBIT
EBT

 Features of financial leverage –

1. Financial leverage is related to capital structure of thefirm.If no debt capital is
employing, the financial leverage does not capital
2. It signifies the impact of employing debt capital in the capital structure of the
firm over the income of the equity shareholders. Therefore,it represents ratio
between EBIT and EBT.
 Importance Of Financial Leverage –
1.It helps in understanding the responsiveness of the change in earning per share to
the change in the earning before interest and tax.
2.Financial leverage is the yardstick of measuring the financial risk.
 Limitations of Financial Leverage –
1.Higher Rate of Interest-
A firm prefers to use borrowed funds along with the equity capital only
when the rate of interest on debt is low. Therefore,financial leverage can be favorably
employed, only when the debt capital is cheap.
2.Increased use of debt capital increases financial risk-
Even if the debt is available at a low rate of interest if earning capacity of the firm
declines due to some other reasons it may not be in a position to pay interest to the
regulat leanders.
3.It tends to increases the rate of interest-
If a firm borrows increasingly from the lenders, in order to enhance the earning of the
rate of interest to covers risk of insolvency.
2.Operating leverage-
Operating Leverage signifies the relationship between the changes in

sales volume and operating income. It indicates effect of changes in sales over
operating income. It emerges when changes in sales revenue produces greater changes
in earning of the company before interest and tax (EBIT).

Features of Operating Leverage
1. Operating Leverage is inversely related to the margin of the safety. Higher

the operating leverage, lower will be the margin of the safety and greater
will be the business risk.
2. If the firm does have fixed cost in its cost structure, then the Operating
Leverage does arise.
At any level of activity below the break even volume, the Operating Leverage may be
deemed to be negative. It indicates decrease or increase in loss due to the change in
the sales volume.
 Importance of Operating Leverage
Operating Leverage measures impact of changes in sales on operating

income. It enables us to understand how earnings of the company change to the given
change of sales or output. The degree of Operating Leverage depends upon the
amount of fixed cost element contained in the cost structure. It explains, the way a
given change in the volume or value of sales affects the profit.
Operating Leverage also helps in measuring the business risks. Business

risks here means, variability of the profits. It consists of mainly two factors viz.,
variability of output or sales and degree of operating leverage. Any change in sales
and cost will definitely result in variability of profit and thereby business risk.
3 Combined Leverage
Combined Leverage is also known as total leverage or combined leverage. Combined
Leverage is the combination of Operating Leverage and Financial Leverage. Financial
Leverage measures the relationship between operating income and earnings per share
(EPS).Combined Leverage is obtained by multiplying Operating Leverage by
Financial Leverage. Combined Leverage is expressed as

Operating Leverage * Financial Leverage
 Importance of Composite Leverage
Composite Leverage helps in understanding the extent of change that take

place on profit before tax on account of change in sales value or quantity. Similarly,
Composite Leverage also helps in measuring the total risk. The total risk refers to the
variability of earning per share as a result of change in sales. Greater the degree of
total leverage greater is the variability of EPS. Fixed cost also is considered in this
leverage.
3.2 SIGNIFICANCE OF LEVERAGES
Financial Management is concerned with mainly collection and proper

application of funds. Finance Manager is interested in utilizing available financial
resources more effectively to increases the return on investment. He is often faced
with the problem of selecting an appropriate investment proposal, tapping of proper
sources of funds determining amount to be borrowed.
Leverage is an important technique that helps management in taking right type

of decision pertaining to the financial operation. Leverage plays an important role in
the field of financial operations.
1. Leverages help in increasing the Earning per Share

The primary object of using financial leverages by management is to
enhance the earnings of equity shareholders. When a company is capable of
earning more than the cost of debt, the earning per share increases.
2. It assists in the selection of best possible investment proposals.

Leverages helps immensely in the matter of choosing an appropriate
investment proposal that guarantees higher rate of earning per share. It
provides useful guidelines in determining maximum limit on the business
expansion diversification programmers.
3. It facilities suitable capital structure.

Leverages act as tool in the hands of the finance manger in designing
the capital structure of the company. Leverages techniques help in choosing

the best possible combination of different sources of funds to be used to

finance the investment proposals.
4. Leverages help in estimating business and financial risks.

Risks in investment proposal refer to possible variations in respect Of
the expected returns. Such investment risks arise due to many factors like
General Economic conditions, Competitions, Technological Development.
3.3 LIMITATIONS OF LEVERAGES
Leverages influence the operating profit of a firm resulting in the variation of EPS.
Composite Leverages magnifies the change in the EPS. Therefore, greater care has to
be taken to keep Composite Leverage within certain reasonable level. What is
reasonable level depends upon various factors such as Nature of Business, Practices
followed by rival business concerns etc. It is rather difficult to determine reasonable
level. Similarly, it is very difficult to control operating leverage, because this
leverage is influenced by amount of fixed cost incurred. But fixed costs are based on
nature of industry, Technological Development and cost of fixed capital used. Thus,
capital intensive industry like Iron and Steel may have heavy fixed costs, whereas
Beedi manufacturing industries may have fewer amounts of fixed costs and hence,
Operating Leverage of capital intensive is high.
There is less scope for managerial control over operating leverage although
financial leverage can be controlled to certain extent.
3.4 TYPES OF LEVERAGES
1. Operating Risk
2. Financial Risk
1. Operating Risk
Operating Risk is also known as Business risk. It signifies the fluctuations in

the earnings before interest and tax (EBIT) due to risk inherent in the
operational activities of the firm. EBIT vary according to the variations in
sales, and the sales vary due to the changes in the market conditions, General
Economic conditions, cost structure, changes in the price level etc. Therefore
EBIT depend upon the extent of the Business risk to which it is exposed.

2.Financial Risk
Financial Risk relates to the financial decision of the firm. This kind of
risk arises as a result of the use of debt in the capital structure of the company.
Since Debt capital is cheaper than any other source of finance, the capital
structure of a Company consists of debt capital. It has magnifying effect on the
earning of the Equity share holders. Debt carries fixed rate of interest that has
to be paid whether Company makes profit or not. Interest on debt capital is the
charge against profit And loss of a company. Therefore debt capital imposes
fixed liability on the part Of the company.

CHAPTER 4
DATA ANALYSIS AND INTERPRETATION
PROFIT AND LOSS A/C-2018.2019

PARTICULARS Amount PARTICULARS Amount
Interest
1. Deposit 1325191 Gross Profit 46212.17
2.Bank Loan 421426 Loan Interest Receivable 2566950.85
Salary 575660 Investment Interest Receivable 681345
Provident Funds ---- Rent Receivable 154400
Bonus ---- Bank Interest 263062
Pension ---- Other Fees 940
Management Expenditure 28515 Penalty Interest 2072
Rent 18875 Few Income ----
VAT Charges 36506 Deposit Interest 246
Insurance 5759 Extra Interest 10327
Dividend Provision ---- Share Transfer Fees 595
Telephone Expenses 4676 Pigmy ----
Printing And Stationary 35514
Audit Fees 69500
Travelling Expenses 6650
Donation 3500
Depreciation 11367
Other Expenses 15164
Rabbet 662253
Computer Charges 8026
Bank Charges 2261.40
Election Charges 10125
NPA Charges 65146
Profit 720035.62
Total 4026150.02 Total 4026150.02

BALANCESHEET-2018.2019
Liabilities Amount Assets Amount
1)Shares 5721875 1)Cash In Hand 1123.51
A) Personal 5711875 2)KDCC Bank Balance 5498432.43
B)Government 10000 A)Kdcc Balance 5498432.43
2)Funds 1076579.86 3)Investment 11186483.30
A) Reserve Funds 855607.25 1.Kdcc Shares 720100
B)Agriculture Funds 2000 2.Other Society Share 48515
C)Dividend Funds 16000.06 3.Reserve Funds 827947.65
D)Building Funds 100000.40 4.Deposit District Bank 9550000
E)Other Funds 102972.15 5.Kisan Development Funds 6000
3)Profit 830290.32 6.Other Funds 33920.65
4)Deposits 20158876.63 4)Loans And Advances 18640695
5)Bank Loan 5244585 A)Shoet Term Agriculture Loans 10671243
6)Other Liabilities 579631.10 B)Farming Loan 7969452
A)Unclaimed Dividend 35197.10 5)Last Balance 517903.39
B)Member Deposits 227260 6)Fixed Assets 513211.37
C)Payable Member Interest ---- A)Land And Building 297034.31
D)Other 317174 B)Furniture And Fixtures 215979.87
7)Provisions 2762506.09 C)Other 197.19
A)Payable Deposit Interest 1316317 7)Other Receivables 16495
B)Dividend Provision 200460.09 A)Receivable Member Interest ---
C)Other Provisions 1245729 B)Kerosene Back Balance 7500
This Provision Are Less C)Maha. Federation 8995
1)Standard Loan Provision 67786
2)Other Incoming Provision 38929
Total 36374344 Total 36374344

Table No. 1 2018.2019
Particulars Amount (Rs.)

EBIT 2503158.62
PBT 756541.62
Total asset 36374344
Financial leverage = Earnings Before Interest & Tax
Profit Before Tax
= 2503158.62
756541.62
= 3.30
Return on investment = Earnings Before Interest & Tax * 100

Total Asset
= 2503158.62*100
36374344
= 6.88%
Cash ratio = Cash in hand and bank + share capital

Other liabilities + provision
= 1123.51 + 5498432.43
579631.10 + 2762506.01
= 5499555.94
3342137.11
= 1.65:1
Equity ratio = Shareholders equity
Total capital employed
Where shareholders equity = equity shareholder capital + reserve and surplus
= 5721875.00 + 1076579.86
= 6798454.86

Total capital employed = Shareholder equity + Long term loan
= 6798454.86 + 5244585
= 12043034.86
= 6798454.86
12043039.86
= 0.56:1
Debt ratio = Total debt
i.e Total shareholders equity
= 5244585+579631.10
6798454.86
= 5824216.10
6798454.86
= 0.86:1

PROFIT AND LOSS A/C-2019-20

Interest
1. Deposit 1427538.97 Gross Profit 343459.89
2.Bank Loan 338407.29 Loan Interest Receivable 2340050.00
Investment Interest
Salary Receivable 554010.00
546640.00
Provident Funds Rent Receivable 54800.00
Bonus Bank Interest 182830.00
Pension -- Other Fees 200
Management
Expenditure 26457.00 Penalty Interest 370043.00
Rent 22056.00 Few Income 1339.00
VAT Charges 260 Deposit Interest --
Insurance 7304 Extra Interest --
Dividend Provision -- Share Transfer Fees 6340
Telephone Expenses 3343 Pigmy --
Printing And Stationary 25667 Entry fee 100
Audit Fees 49000
Travelling Expenses 5510
Donation 2300
Depreciation 36694
Other Expenses 17297
Rabbet 91733
Computer Charges 8000
Bank Charges 1484
Election Charges 20100
NPA Charges --
Profit 857080.40
Total 3486871.89 Total 3486871.89

BALANCESHEET-2019-20
1)Shares 5991665.00 1)Cash In Hand 154309.32
A) Personal 5991665.00 2)KDCC Bank Balance 8743550.85
B)Government 10000.00 A)KDCC Balance 8743550.85
A) Reserve Funds 1035615.25 1.Kdcc Shares 920100.00
B)Agriculture Funds 2000 2.Other Society Share 48515.00
C)Dividend Funds 16000.06 3.Reserve Funds 855947.65
D)Building Funds 121000.40 4.Deposit District Bank 8650000.00
E)Other Funds 133179.15 5.Kisan Development Funds 6000.00
4)Deposits 27380649.63 4)Loans And Advances 22284325.00
5)Bank Loan 3848439.00 A)Short Term Agriculture Loans 11501999.00
6)Other Liabilities 636955.15 B)Farming Loan 10782326.00
B)Member Deposits 227260.00 6)Fixed Assets 481517.34
C)Payable Member Interest -- A)Land And Building 277931.04
D)Other 374498.85 B)Furniture And Fixtures 203399.11
A)Payable Deposit Interest 1975124.90 7)Other Receivables 314495.00
B)Dividend Provision 208191.00 A)Receivable Member Interest 297000.00
C)Other Provisions 548718.15 B)Kerosene Back Balance 7500.00
This Provision Are Less C)Maha. Federation 8995.00
1)Standard Loan Provision 67786.00
2)Other Incoming Provision 38929.00
Total 428881982.28 Total 42888192.28

Table No. 2 2019-20

EBIT 2623286.66
PBT 857.340.4
Total asset 42888182.28

Profit Before Tax
= 2623286.66
857340.4
= 3.05

Total Asset
= 2623286.66*100
4288182.28
= 6.11%

= 154309.32 + 8743550.85
636955.95 + 548718.15
= 8897860.17
1185674.1
= 7.50:1


= 5991665 + 1307794.86
= 7299459.86
= 7299459.86 + 3848439
= 10947898.9
= 7299459.86
10947898.9
= 0.66:1
= 3848439 + 636955.95
7299459.86
= 4485394.95
7299459.86
= 0.61:1


Interest
Investment Interest
641730.00
Pension -- Other Fees 180
Management
Rent 16726.00 Few Income 179332.00
VAT Charges -- Deposit Interest --
Insurance 7304.00 Extra Interest --
Dividend Provision -- Share Transfer Fees 5182.00
Telephone Expenses 2504.00 Deposit mortgage interest 1951.00
Printing And Stationary 35734.00 Entry fee 1350.00
Audit Fees --
Travelling Expenses 6070.00
Donation 800.00
Depreciation 259116.00
Other Expenses 80516.00
Salesman commission --
Rabbet --
Computer Charges 7000.00
Bank Charges 1621.80
Election Charges 25000.00
Pigmy 29850.00
NPA Charges ---
Profit 825918.79
Total 3616179.59 Total 3616179.59

B)Agriculture Funds -- 2.Other Society Share 48515.00
C)Dividend Funds -- 3.Reserve Funds 1249947.65
E)Other Funds 147001.15 5.Kisan Development Funds 6000
C)Payable Member Interest A)Land And Building 272373.04
Total 48819433.22 Total 48819433.22

Table No. 3 2020-21

EBIT 2708633.79
PBT 825918.79

Profit Before Tax
= 2708633.79
825918.79
= 3.27

Total Asset
= 2708633.79*100
48819433.22
= 5.54%

= 172462.07 + 2439729.45
714266.35 + 2970486.12
= 2612191.51
3684752.47
= 0.70:1


= 6408195 + 1577065.26
= 7985260.26
= 7985260.26 + 7975320
= 15960580.3
= 7985260.26
15960580.3
= 0.48:1
= 7975320 + 714266.35
7985260.26
= 8689586.35
7985260.26
= 1.08:1


Interest
Investment Interest
711370.00
Pension -- Other Fees --
Management
Rent 20827.00 Few Income 110200.60
VAT Charges -- Deposit Interest --
Insurance 7304.00 Extra Interest --
Dividend Provision -- Share Transfer Fees 5565.00
Telephone Expenses 2835.00 Deposit mortgage interest --
Printing And Stationary 38416.00 Entry fee 1200.00
Audit Fees --
Travelling Expenses 8420.00
Donation 8530.00
Depreciation 35092.19
Other Expenses 110454.00
Salesman commission --
Rabbet --
Computer Charges 12900.00
Bank Charges 545.00
Election Charges 9900.00
Pigmy --
NPA Charges --
Profit 1306478.79
Total 6055098.18 Total 6055098.18

B)Agriculture Funds -- 2.Other Society Share 48515.00
C)Dividend Funds -- 3.Reserve Funds 1479947.65
E)Other Funds 158273.94 5.Kisan Development Funds 6000.00
A)Unclaimed Dividend 5)Last Balance 270795.22
C)Payable Member Interest A)Land And Building 255755.04
7)Provisions 4726769.12 C)Other --
Total 68255090.56 Total 68255090.56

Table No. 4 2021-22

EBIT 5004884.79
PBT 1271386.60

Profit Before Tax
= 5004884.79
1271386.60
= 3.94

Total Asset
= 5004884.79*100
68255090.56
= 7.33%

= 113927.59 + 4168010.32
757939.65 + 4726769.12
= 4281937.91
5484708.77
= 0.78:1


= 6818440.00 + 1840015.15
= 8658455.15
= 8658455.15 + 10584035.00
= 192424 90.15
= 8658455.15
19242490.15
= 0.44:1
= 10584035.00 + 757939.65
8658455.15
= 11341974.65
8658455.15
= 1.30:1

leverage 2018-19 2019-20 2020-21 2021-22

Financial leverage 3.30 3.05 3.27 3.94
Financial leverage
4.5
3.94
4
3.5 3.3 3.27
3.05
3
2.5
2 Financial leverage
1.5
1
0.5
0
2018-19 2019-20 2020-21 2021-22
INTERPRETATION:
This graph shows that the financial leverage of the particular mini Bank. In year
2018-19 the financial leverage is increase in compared to other years. In the year
2019-20 the financial leverage decrease as compared to other years. In year 2018-19
is 3.30, for the year 2019-20 is 3.05, for the year 2020-21 is 3.27 and for the year
2021-22 is 3.94.

Year 2018-19 2019-20 2020-21 2021-22

Return on 6.88% 6.11% 5.54% 7.33%
investment
Return on investment
8.00% 7.33%
6.88%
7.00%
6.11%
6.00% 5.54%
5.00%
4.00%
Return on investment
3.00%
2.00%
1.00%
0.00%
2018-19 2019-20 2020-21 2021-22
INTERPRETATION:
This graph shows that the return on investment of the particular mini Bank. In
the year 2018-19 the return on investment is high and compared to other years this is
increase. In the year 2020-21 the return on investment is low that other years. In the
year 2018-19 is 6.88%, for the 2019-20 is 6.11%, for the year 2020-21 is 5.54% and
for the year 2021-22 is 7.33%.

Year 2018-19 2019-20 2020-21 2021-22

Cash ratio 1.65:1 7.50:1 0.70:1 0.78:1
Cash ratio
8 7.5
7
6
5
4
Cash ratio
3
2 1.65
0.7 0.78
1
0
2018-19 2019-20 2020-21 2021-22
This graph shows that the cash ratio of the particular mini Bank. In the year
2019-20 the cash ratio is high and compared to other years this is increase. In the year
2020-21 the cash ratio is low that other years. In the year 2018-19 is 1.65:1 for the
2019-20 is 7.50:1, for the year 2020-21 is 0.70:1and for the year 2021-22 is 0.78:1.

Year 2018-19 2019-20 2020-21 2021-22

Equity ratio 0.56:1 0.66:1 0.48:1 0.44:1
Equity ratio
0.7 0.66
0.6 0.56
0.48
0.5 0.44
0.4
0.3 Equity ratio
0.2
0.1
0
2018-19 2019-20 2020-21 2021-22
This graph shows that the equity ratio of the particular mini Bank. In the year
2019-20 the equity ratio is high and compared to other years this is increase. In the
year 2020-21 the equity ratio is low that other years. In the year 2018-19 is 0.56:1 for
the 2019-20 is 0.66:1, for the year 2020-21 is 0.48:1 and for the year 2021-22 is
0.44:1.

Year 2018-19 2019-20 2020-21 2021-22

Debt ratio 0.86:1 0.61:1 1.08:1 1.30:1
Debt ratio
1.4 1.3
1.2 1.08
1 0.86
0.8
0.61
0.6 Debt ratio
0.4
0.2
0
2018-19 2019-20 2020-21 2021-22
This graph shows that the debt ratio of the particular mini Bank. In the year
2020-21 the debt ratio is high and compared to other years this is increase. In the year
2019-20 the return on investment is low that other years. In the year 2018-19 is 0.86:1
for the 2019-20 is 0.61:1, for the year 2020-21 is 1.08:1 and for the year 2021-22 is
1.30:1.

CHAPTER 5
FINDINGS AND SUGGESTION
FINDINGS:
1. It is to be found that the financial leverage is more in 2021-22.
2. It is to be observed that financial leverage of 2019-20 is 3.05 it is lowest financial

leverage
3. The ROI are in increased in year 2021-22.
4. It is to be found that ROI is in decreased in 2020-21.
5. It has been found that in the year 2019-20 the cash ratio is high and compared to
other years.
6. It has been found that in the year 2019-20 the equity ratio is high and compared to
other years.
7. It has been found that in the year 2020-21 the debt ratio is high and compared to
other years.

SUGGESTIONS:
1. The organization should maintain their leverage continues.
2. The organization need to raise their ROI.
3. The organization should concentrate at list to maintain their ROI constantly.
4. The organization also should focus on raise the flow of cash.

CHAPTER 6
CONCLUSION
The leverages are an important tool & techniques to know the financial
position of the organization. In this organization there is a proper flow of cash as well
as the company have a good return on investment. Leverage is an important technique
that helps management in taking right type of decision pertaining to the financial
operation. Leverage plays an important role in the field of financial operations in this
organization.

BIBLIOGRAPHY
1. Management Accounting
M. G. Pathkar
Phadke Publication, Kolhapur.
2nd edition – 2008
2. Management Accounting
Shashi. K. Gupta
Kalyani Publication, Ludhiana.
10th edition -2005
3. Management Accounting & Financial Analysis
M. Y. Khan & P. K. Jain.
Tata McGraw Hill Publication Co. Ltd.
6th edition – 2005
4. Annual Reports.
5. ICT Sources.

Leverage Analysis of Kisan Mini Bank

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Leverage Analysis of Kisan Mini Bank

Uploaded by

Copyright:

Available Formats

Leverage Analysis YCMOU MBA

INTRODUCTION TO THE STUDY

2. IMPORTANCE AND SIGNIFICANT OF STUDY:

Leverage means use of funds or employment of assets in the capital structure

Shivraj College, Gadhinglaj Page 1

3. RATIONALE OF THE STUDY :

Investors use leverage to multiply their buying power in the market.

Leverage is the strategy of using borrowed money to increase return on an

Composite leverage is a use of operating leverage and financial leverage in an

Shivraj College, Gadhinglaj Page 2

The statement of problem is as under:

A study of leverage analysis with special reference to KISAN MINI BANK,

5. OBJECTIVES OF THE STUDY:

Research methodology is the specific procedures or techniques used to identify,

Data collection is the systematic approach to gathering and measuring information

Shivraj College, Gadhinglaj Page 3

Primary data collection methods: Interview, questionnaires, observation, focus

Purpose of this hypothesis a leverage ratio is anyone of several financial

8. SCOPE OF THE STUDY:

The leverage analysis is useful for analyzing the leverage of different

The study of leverage analysis to leverage aspect of the KISAN MINI

Shivraj College, Gadhinglaj Page 4

Shivraj College, Gadhinglaj Page 5

2.2 HISTORY OF THE BANK

The bank was established by shri.R.S.PATIL, the founder of the bank. It

 BIRD VIEW OF THE GIJAVANE MINI BANK LIMITED

2.3 VISION AND MISSION

1) Vision statement of the Gijavane Mini Bank Ltd.

Shivraj College, Gadhinglaj Page 6

2)Mission statement of the Gijavane Mini Bank Ltd.

To be an ethnically based, efficiently managed, financially sound mini

2.4 MANAGEMENT OF THE BANK

2.5 OBJECTIVES OF THE BANK

1. To provide finance to the members for their need.

Shivraj College, Gadhinglaj Page 7

2.6 BOARD OF DIRECTORS

Chairman Shree Y. R. Patil.

2.7 NATURE OF THE BUSINESS CARRIED

Shivraj College, Gadhinglaj Page 8

2.8 PRODUCT/SERVICES PROFILE

The bank offers following products/services to its customers:

2.9 AREA OF OPERATION:

2.10 COMPETITORS INFORMATION

The main competitors are as follow

 Ajara mini bank.,

Shivraj College, Gadhinglaj Page 9

2.11 INFRASTRUCTURAL FACILITIES

Bank is situated at Ajara road,Gijavane,having 2 floor building. Bank has

2.12 EMPLOYEES IN THE BANK

The total numbers of staff in the bank.,

Total staff -10

2.14 FUTURE PLANNING

Shivraj College, Gadhinglaj Page 10

2.15 ORGANIZATION STRUCTURE

Beanch Loan Junior Recovery Development Computer

Shivraj College, Gadhinglaj Page 11

3.1 MEANING AND DEFINITION OF LEVERAGES

Leverage means to accomplish some purpose.The term leverage has been

According to chirsty and Roden,”Leverage as the tendency of profit to change

Financial Leverage is the one of the most important concepts of leverage. It

The financial leverage is calculated such under :

Shivraj College, Gadhinglaj Page 12