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Liquidity ratios measure the liquidity of a company. They provide insight into a company’s ability
to repay its debts and other liabilities out of its liquid assets. Liquidity includes all assets that
can be converted into cash quickly and cheaply.
(a) Current Ratio:
Current ratio may be defined as the relationship between current assets and current liabilities.
This ratio also known as Working capital ratio is a measure of general liquidity and is most
widely used to make the analysis of a short-term financial position (or) liquidity of a firm. A
current ratio that is in line with the industry average or slightly higher is generally
considered acceptable. A current ratio that is lower than the industry average may
indicate a higher risk of distress or default. Similarly, if a company has a very high
current ratio compared with its peer group, it indicates that management may not be
using its assets efficiently.
Interpretation:
From the table 12.2.1(a) it is evident that the current ratio is higher in the year 2018-19
whereas it is lowest during the year 2019-20. The ideal Capital Ratio is 2.1, The company has
failed to meet it. Hence its short term financial position need to be improve .
Current Ratio
2.5
1.5
0.5
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.1(a) Bar graph depicting Current Ratio from 2017 to 2022
Interpretation:
From the table 12.2.1(b) the bank is having good liquidity position i.e.1.17 in the year of
2021 to 2022. The quick ratio of 1:1 indicates satisfactory position of the firm. The highest ratio
is 2.84 in 2018-19 and the lowest one is 0.64 in 2020-21.
Quick Ratio
3
2.5
1.5
0.5
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.1(b) Bar graph depicting Quick Ratio from 2017 to 2022
12.2.2 Leverage Ratios : The term ‘leverage ratio’ refers to a set of ratios that highlight a
business’s financial leverage in terms of its assets, liabilities, and equity. They show how much
of an organization’s capital comes from debt — a solid indication of whether a business can
make good on its financial obligations. A financial leverage ratio of less than 1 is usually
considered good by industry standards.
(a) Debt to equity Ratio:
Debt-to-equity ratio is the key financial ratio and is used as a standard for judging bank’s
financial standing. It is also a measure of a bank’s ability to repay its obligations When
examining the health of a bank, it is critical to pay attention to the debt/equity ratio if the ratio
is increasing, the bank is being financed by creditors rather than from its own financial sources
which may be a dangerous trend. Lenders and investors usually prefer low debt-to-equity ratios
because their interests are better protected in the event of a business decline. Thus, companies
with high debt-to-equity ratios may not be able to attract additional lending capital.
debt-to-equity ratio
0.6
0.5
0.4
0.3
0.2
0.1
0
2017-18 2018-19 2019-20 2020-21 2021-22
debt-to-equity ratio
Chart 12.2.1(a) Bar graph depicting Debt- Equity Ratio from 2017 to 2022
(b)Fixed asset to Long term funds Ratio:
A fixed asset to equity ratio measures the contribution of stockholders and the contribution of
debt sources in the fixed assets of the bank. It is computed by dividing the fixed assets by the
sri krishna artss and science college, department of commerce 36
CAPSTONE PROJECT REPORT-2023
stockholders’ equity. Other names of this ratio are fixed assets to net worth ratio and fixed
assets to proprietors fund ratio.
Interpretation:
Comparing this fixed-assets-to long term funds ratio against industry, high ratios can be
interpreted as liquidity problems, because it means the bank does not have immediate access
to cash. From the above table the bank can have an easy access to cash to meet financial
obligations in the year 20014-15, when compared to remaining years (2017-18,2018-19 2019-20
2020-22).
30
25
20
15
10
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.1(b) Bar graph depicting Fixed Assets to long term funds Ratio from 2017 to 2022
Interpretation:
In the years of 2017-18, 2019-20,2021-22 the interest expenses has incurred by bank is greater
than the earnings that bank have had to pay, but compare to remaining years However the bank
is easily able to meet the interest obligation from profits.
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.1(c) Bar graph depicting Interest Cover Ratio from 2017 to 2022
12.2.3 Turnover Ratios: Turnover ratio is a measurement of efficiency, indicating the length of
time it takes a business to sell the goods that it has spent money up front to acquire. In a
company or industry, turnover ratio is the percentage of employees who leave within a
year.
(a) Inventory turnover ratio:
Inventory turnover is a measure of the number of times inventory is sold or used in a given time
period such as one year. It is a good indicator of inventory quality (whether the inventory is
obsolete or not), efficient buying practices, and inventory management. This ratio is important
because gross profit is earned each time inventory is turned over it is also called as stock
turnover.
Interpretation:
From the table 12.2.2(b) the Inventory Turnover Ratio of the bank is satisfactory because
the ratio on increasing year by year from 2017-2018 to 2021-2022.the ideal inventory turnover
ratio will be between 5 and 10
60
50
40
30
20
10
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.3(a) Bar graph depicting Inventory Turnover Ratio from 2017 to 2022
Interpretation:
From the table 12.2.3(b) the Debtors turnover ratio increases in the year 2017-18 is at 6.50,
which decreases to 6.20 in the year 2021-22. But in the year 2018-19 to 2020-21, it decreases to
4.35, 3.85,4.49 It indicates that debts are being collected more promptly.
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.3(b) Bar graph depicting Debtors Turnover Ratio from 2017 to 2022
Interpretation:
From the table 12.2.3(c) creditor’s turnover ratio is likely down in 2019-210 and 2020-21. It
shows the payment of creditor’s is slow compare with other years. A high ratio implies velocity
of payment to creditors and low the other side.
0
2017-18 2018-19 2019-20 2020-21 2021-22
Chart 12.2.3(c) Bar graph depicting Creditors Turnover Ratio from 2017 to 2022
Suggestions:
1. From the study it is found that there is lack of periodic review & analysis which is
leading to inefficient utilization of resources &its leads to loss when its compare to
previous years apart from current year. So the firm should conduct quarterly analysis.
Hence the problems can be amended in time.
2. Liquidity refers to the ability of the concern to meet its current obligation as and when
these become due. The bank should improve its liquidity position.
3. After the analysis of Financial Statements, the bank status is better, because the Net
working capital of the bank is doubled from the last year’s position.
4.The bank profits are huge in the current year; it is better to declare the dividend to
shareholders.
5.The bank is utilizing the fixed assets, which majorly help to the growth of the
organization. The bank should maintain that perfectly
6. The bank fixed deposits are raised from the inception, it gives the other income i.e.,
Interest on fixed deposits.
7.Bank needs to have stringent credit policy, to reduce the funds required for working
capital.
8. The bank must do efficient utilization of shareholders fund to improve its ROI and ROE
to maintain its goodwill in investors mind. The bank can go for some debt borrowing to
increase E.P.S for shareholders.
Conclusion :
Finance is the life blood of every business. Without effective financial management a
bank cannot survive in this competitive world. A Prudent financial Manager has to
measure the working capital policy followed by the bank
The bank’s overall position is at a good position. Particularly the current year’s position is
well due to raise in the profit level from the last year position. It is better for the
organization to diversify the funds to different sectors in the present market scenario.
Higher demand for seating system can be expected in the next decade, once
investments in ports and port development have started to reach fruition. As India is
hopeful of competing with other established shipbuilding nations, the multinationals are
likely to find plentiful opportunity in India, given the compliance requirements imposed
by effects of international legislation on seating systems.
Also other segments are showing promising opportunities to grow. With these many
opportunities at hand along with the potential player who would be able to make use of
the situation well, researcher would rather start looking at a career in Axis. So from this
researcher can conclude that there is a better opportunities for investors to invest in this
bank.
Ratio analysis of financial statement shows that bank’s current ratio is better than the
quick ratio and fixed/worth ratio. It means bank has invested more in current assets than
the fixed assets and liquid assets. The cash flow statement shows that net
increase in cash generated from operating and financing activities is much more
than the previous year but cash generated from investing activities is negative in both
years. Therefore analysis of cash flow statement shows that cash inflow is more than the
cash outflow in AXIS Bank.
Thus, the ratio analysis and trend analysis and analysis of cash flow statement show that AXIS
Bank’s financial position is good. Bank’s profitability is increasing but not at high rate. Bank’s
liquidity position is fair but not good because bank invests more in current assets than the liquid
assets. As we all know that AXIS Bank is on the first position among the entire private sector
bank of India in all areas but it should pay attention on its profitability and liquidity. Bank’s
position is stable.