waseem project

MYSORE CHAMARAJANAGAR AND MANDYA DISTRICT KSRTC EMPLOYEES CREDIT CO-OPERATIVE SOCIETY

“STUDY ON FINANCIAL PERFORMANCE THROUGH FINANCIAL

STATEMENT ANALYSIS”

BY

WASEEM AHMED S

USN NO: 4GX12MBA57

Internal Guide External GuideMr.kottresh patil. Azra banu ASSISTANT PROFESSOR Accountant GSSSIETW MCMSMysore Mysore

A Report Submitted to VISHVESVARAYA TECHNOLOGICAL UNIVERSITY,

BELGAUM, KARNATAKAIn partial fulfillment of MBA programme.

Geetha Shishu Shikshana Sangha (Regd.)

G.S.S.S.INSTITUTE OF ENGINEERING & TECHNOLOGY FOR WOMEN

(Affiliated to VTU, Belgaum, Approved by AICTE, New Delhi & Govt. of Karnataka)

Department of Management Studies and Research (MBA, Co-Education)K.R.S. ROAD, METAGALLI, MYSORE-570016, KARNATAKA


Geetha Shishu Shikshana Sangha (Regd.)

G.S.S.S.INSTITUT OF ENGINEERING & TECHNOLOGY FOR WOMEN

(Affiliated to VTU, Belgaum, Approved by AICTE, New Delhi & Govt. of Karnataka)

Department of Management Studies and Research K.R.S. Road, Metagalli, Mysore-570016, Karnataka.

__________________________________________________________________________________

CERTIFICATE

This is to certify that WASEEM AHMED S USN.NO. 4GX12MBA57, is a

bonafide student of Master of Business Administration course of the Institute (2012-2014),

affiliated to Visvesvaraya Technological University, Belgaum. Internship report on

“STUDY ON FINANCIAL PERFORMANCE THROUGH FINANCIAL

STATEMENT ANALYSIS” is prepared by him/her under the guidance of AZRA

BANU, in partial fulfillment of the requirements for the award of the degree of Master of

Business Administration of Visvesvaraya Technological University, Belgaum Karnataka.

______________________ ___________________ ________________

mr .KOTRESH PATIL Prof NANDINI SHEKAR DR. PRAKASH

Internal guide HOD Principal


DECLARATION

I hereby declare that the Project work undergone “A Study on FINANCIAL

PERFORMANCE THROUGH FINANCIAL STATEMENT ANALYSIS”

at Karnataka sandalwood and detergent ltd, Mysore has been prepared under the internal

guidance of Prof. mr. kotresh patil of marketing Dept of Management Studies, GSSSIETW,

Mysore and under the external guidance of Azra banu.

This report has been submitted in partial fulfillment of the requirement for the award

of degree in MASTER OF BUSINESS ADMINISTRATION to the VISHVESVARAYA

TECHNOLOGICAL UNIVERSITY, BELGAUM and not been submitted to any

institutions, board of universities previously as a basis for the award of any degree, diploma,

associate ships, fellowship or any similar titles.

Place: (WASEEM AHMED S )

Date : USN NO. 4GX12MBA57


GENERAL INTRODUCTON

Finance is the life-blood of business .it is rightly termed as the science of money. Finance is

very essential for the smooth running of the business .Finance controls the policies, activities

and decision of every business.

Based on this reasoning, this project is an attempt to analyze the performance of MDMS

credit co operative society. In the financial analysis a ratio is used as an index for evaluating

the financial position and performance of the firm.

Finance is a key in part of all round development of a concern. Finance is described as

“Lifeblood” of an industry and pre-requisite for accelerating the process of development.

Financial analysis is the process of determining the significant operation and financial

characteristics of a firm from accounting data and financial statements. Financial analysis is

an examination of the organizations financial statements and the various ratios derived from

information on its balance sheet and income statement.

The term analysis means methodical classification of the data given in the financial

statements; financial analysis involves the division of facts on the basis of some definite

plans, classifying them into definite classes on the basis of certain conditions and presenting

them in most convenient simple and understandable form.

The interpretation means explaining the meaning and significance of the data so simplified

financial statements are indicators of the 2 significant factors.

1. Profitability

2. Financial statements

Financial analysis is the starting point for making plans, before using any sophisticated

forecasting and planning procedures. Understanding the past is a prerequisite for anticipating

the future.


The basic limitation of traditional financial statements comprising the Balance sheet and the

profit and loss account is that they do not give all the information relating to the financial

operations of a firm.

STATEMENT OF THE PROBLEM

The main problem analyzed here is as follows:

1) Analysis of the relationship between liabilities and assets.

2) Detection of reason for variability of profit .

OBJECTIVES OF THE STUDY

The study of financial statement analysis of “KSRTC EMPLOYEES CREDIT CO-OPERATIVE

SOCIETY”( MDMS) has the following objectives.

1) To obtain a true insight into financial position of the company.

2) To make comparative study of financial statements of different years.

3) To draw the correct picture of the financial operations of the company in terms of

liquidity, solvency, turnover etc.

SCOPE OF THE STUDY

Techniques of financial analysis is perhaps the financial tools developed to analyses and

interpret the financial statements and is still used widely for this purpose .financial

performance analysis is a well-researched area and innumerable studies have proved the

utility and usefulness of this analytical techniques.

METHODOLOGY

Methodology consists of different technique adopted in data collection. much needed

information for the study was collected through various means.

Methods of Data collection or sources of Data are,

Internal source

1) personal observation of the activities of the organization,


2) Interview with the account staff members.

External sources

1) Annual reports and financial statements.

2) Past records and files of the organizations

LIMITATIONS

The following are some of the limitations of the study

1) Financial statements relates to a period analysis based and such statement would

relate to that period, but not necessarily a true representation of the period .

2) Financial statement contains only financial data and exclude from their preview the

qualitative information.

3) The study is primarily based on secondary data.

4) It is a general study of financial aspects and analysis of 7years only.

Literature review

Financial statement analysis is an important tool to analyze the financial performance of a

business establishment. It involves preparation of concise statement

The financial statements provide some extremely useful information to the extent that the balance

sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities

and owners’ equity, and so on and the profit an loss account shows the results of operations during a

certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus,

the financial statements provide a summarized view of the financial position and operations of a firm.

Therefore, much an be learnt about a firm from a careful examination of its financial statements as

invaluable documents performance reports. The analysis of financial statements is thus, an important

aid to financial analysis.

The focus of financial analysis is on key figures in the financial statements and the significant

relationship that exists between them. 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. The first task of the financial analyst is to select the information

relevant to the decision under consideration from the total information contained in the financial

statements. The second step is to arrange the information in a way to highlight significant

relationships. The final step is interpretation and drawing of inferences and conclusion. In brief, the

financial analysis is the process of selection, relation and evaluation.

Chundawat and Bhanawat2 (2000)

analyzed the working capital management practices in

IDBI assisted tube and type companies for the period 1994-1998 by using some relevant

ratios and concluded that the working capital management ;of IDBI assisted companies was

more effective than the industry as a whole.

Larcker (1998), Simons (1987), and Dess and Robinson (1984).

They used return on assets (ROA) to examine current and future accounting performance.

Ittner and Larcker applied accounting book values such as revenues, expenses, margins and

return on sales. Simons studied performance in terms of the business unit’s mean absolute

three-year return on investment (ROI).

Jayaraj (2004) pointed out in her analysis that the financing chargers, depreciation, provisions

and other charges decreased slightly over the years, and companies need to see where the

charges increase so that there will be a greater demand for the share of the company.

.

Eijelly9, 2004 elucidated that efficient liquidity management involves planning and

controlling current assets and liabilities. The relation between profitability and liquidity was

examined, as measured by current ratio and cash gap (cash conversion cycle) on a sample of

joint stock companies using correlation and regression analysis. The study found that the

the cash conversion cycle was of more importance as a measure of liquidity than the current

ratio that affects profitability.

G.Foster

In his study on financial analysis stated that “it is the process of identifying the financial strength and

weakness of the firm by properly establishing relationship between the item in the balance sheet and

the profit and loss account. Financial analysis can be under taken by management of the firms, or by

parties outside the firm , owners, creditors, investors and others.


Dr. Hamandou Boubacar

(2011) in their paper “The financial performance of foreign Bank

subsidiaries” discuss about the relationship between the performance of bank foreign

Subsidiaries and the degree of the implication of the present banks in the organization and

the management of their activities abroad. The result were found that ownership means

share of the capital held by the parent bank.

Deloof ( 2003)

Discussed that most of the firms had a large amount of each invested in working capital. It can

therefore be expected that the way in which working capital is International Journal of Advanced

Research in Management and Social Sciences.

Dheenadayalan V. and Mrs. R. Deviananbrasi4

(2007) he had suggested that the “Z” score of the sample units remain below the grey area

from 1997-07 but in the year 2001-02, the “Z” score is -0.29. After 2001-02, the decreases in

the score indicate that the sample unit is not financially sound and healthy. The sample

units need to put in efforts to increases the score. This will help the sample unit to avoid any

damage to its liquidity and solvency positions, thereby avoiding financial distress and

bankruptcy.


INDUSTRY PROFILE

RESERVE BANK OF INDIA

Introduction

Though the need for the Central bank in India was felt in 19th century. Its importance actually

gained essence in the beginning of the 20th century.

The major event in the evolution of the central banking in India was the amalgamation of the

three presidency banks of Bombay, Bengal and Madras in 1921. In 1925, Hilton young

commission recommended for the establishment of the central bank of India. The reseve bank

of India was formally inaugurated in April 1935.

NEED FOR A CENTRAL BANK

Before the establishment of the reserve bank, the currency and credit system of the country

was operated by the two different authorities; namely , the government and the imperial bank

of India. The establishment of the central bank was found necessary in view of establishing

the value of money, neither internally nor externally.

The reserve bank of India was established with a view to secure monetary stability by means

of functioning as the other commercial bank.

MANAGEMENT

The management is vested with the board of directors consisting of 15 members, the central

board consists of:

One governor and deputy governor appointed by the central government.

Four directors nominated by the central government, one each from the four

local boards.


Six directors nominated by the central government, one government officer

nominated by the central government.

FUNCTIONS OF RBI

Monopoly of note issue

Banker to government

Banker’s to bank

Credit control

Bank rate policy

Clearing agent

CLASSIFICATION OF A BANK

Banks are classified in to several types, based on the functions they perform.

Commercial banks

Investment or industrial bank

Exchange banks

Cooperative banks

Land development banks

Saving banks

Central banks

The important among the classification of banks to my topic is restricted to only the

cooperative bank and credit society.

Head office of the bank

Zonal office

Regional office

Branches


COMPANY PROFILE

COOPERATIVE BANK AND CREDIT SOCIETY

INTRODUCTION AND MEANING

The cooperative banks and societies perform an important role in meeting the requirement of

the people in the rural areas. The cooperative banks are organized on a cooperative basis and

governed by their members according to the cooperative laws. Certain provisions of the

banking regulation act also apply to the cooperative banks. At the lower ladder, there are

primary cooperative societies and on top, there is a state cooperative bank.

The main strategy is t o provide finance for development. Primary agricultural credit

cooperatives provide short term loans to farmers to buy seeds, fertilizers, implements etc.

The agricultural marketing societies take great interest in getting the good prices for the

products produced by the farmers. Most of the cooperative societies obtain funds from share

capitals, deposits, loans from district central banks, apex, commercial banks or RRB’s. the

locality may comprise a cluster of 4-5vil.

COOPERATIVE MOVEMENTS AND BANK PROFILE

COOPERATIVE MOVEMENT IN INDIA

Cooperative movement was first started in Germany in 1896. Then provisional government in

Madras deputed one its officer. Nicholson to study the experience of the land banks in

Germany, so as to explore the possibility of adopting the system in Indian conditions. He

recommended the cooperative credit society of raiffesnen type of cooperative societies as a

solution for the problem in the Indian context.

The madras province provided an ideal ground for the experiment with its long tradition even

of indigenous societies known as NIDHIS. Around this time another civil servant in the

united provinces Mr .Dupurnex published the results of his study in the province and

recommended establishment of people banks of northern India as the most hopeful solution to

the problem of indebtedness usury and stagnant rural economy, with usage pleasantly


drawing inspiration from these two studies several societies came to be organized in the

various parts of the country.

It was realized very early that any significant advances in the cooperative credit society of the

cooperative societies was possible only with the necessary legislature support. Accordingly

government of India appointed a committee under Sir. Edward law, to examine the issue.

This committee drew up ma model scheme of management of both rural and urban

cooperative and framework of the legislation needed to provide to the societies the required

privileges for their effective functioning. Sir. Edward recommendations provided the basis

for the bill which was passed in 1904 in to law as the cooperative credit societies act system

soon emerged as the premier institutional agency for provision of agricultural credit in the

country.

In 1912 some major amendments were brought about in the act with a view to board

balancing it to enable. Cooperative credit society of non-credit society as well as with

constitutional reforms popularly know as Montague helms ford reforms and the passing of

the act of 1919 for the purpose of cooperative, become a transferred subject. The own

legislation notable among there were Bombay, Madras, Orissa and Bihar which were

reputed, replaced the central act with their own legislations in 1925, 1932, 1935 and 1934

respectively

Provincial governments simultaneously initiated the number of other measures as well as for

the development of the cooperative movements. As consequences the cooperative credit

system at by the 20’s became the principal institutional agencies for the provision of

agriculture advances both on production and investment.

The royal commission on agriculture in 1928 observed that if cooperative fails there would

fail the best hope of rural India. It would make the cooperative structure commercially viable

and it with financial strength, so gained would be able to mobilize rural savings and meet the

bulk. If not entire credit needs of the rural sector other institutional measures recommended.

They were setting up national cooperation under the age of the central government. To extend

support for processing, marketing and storage facilities in the cooperative sector. Central and

state are housing cooperative national agriculture credit fund in the RBI provide medium

from loans for the event of crop failure on account of natural calamities banking personal as

well as the state levels were geared to development cooperatives as on exclusive institutional

agency for purely for agricultural credit .


The Indian cooperative banking system is a three tier system it consists of 3 sections.

Apex bank

Primary credit societies

A primary credit is as association of 10 or more persons residing in a particular

locality. Knowing one another intimately and showing interest in the welfare of one another.

Primary credit societies are two types

o Rural credit societies

o Urban credit societies

District central cooperative banks.

These are federations of primary credit societies operating in a specified area. Generally, they

are located in the district head quarters or some promonant towns of the district. They are

organized on the basis of limited liability.

State cooperative banks

Central co_operative Bank

Primary credit


Every state has cooperative bank at he top of the cooperative banking structure. It controls

and co-ordinates the working of all cooperative credit institutionin the capital city of the state.

EMERGING SCENARIO OF COOPERATIVE CREDIT INSTITUTION:

Cooperative credit institution continued to remain on important component of the

multiagency rural credit system in the country. As at the end of March 2001,68% dispensing

out lets as well as rural credit borrowable accounts was under the year 2000-2001. The share

of the cooperatives was about 42% in respect of production credit for agriculture largest

among all agencies.

The emerging scenario of cooperative credit institutions appeared to be the mixed one. While

the cooperative institutiona that were strong would be able to meet the challenges. The

survival were warrented besides action to overcome the weakness. There is a need for

coordination action by the government. The national bank, EBI and central government if the

cooperative credit institutions have ti become strong and survive in the emerging scenario.

short

PROFILE OF CREDIT SOCIETY

ORIGIN OF THE CREDIT SOCIETY:

State CO-Operative Bank (Apex Bank)

Non agricultural credit Agricultural credit

State level (apex) credit

State land bank

Primary land Development bank

District centralCo operative bank

Non credit

1. Housing banks2. Urban banks3. Employees credit

Socities

Primary co-operative bank

Grain bankMp-co-opsocities

fss

short term lending

Long term lending Industrial co-operative Consumer co -operative


This bank is situated near to KSRTC 1st DEPO, BANNIMANTAP, MYSORE. The bank

celebrates its 62nd year. MYSORE CHMRAJNAGR AND MANDYA DISTRICT KSRTC

EMPLOYEES CREDIT COOPERATIVE SOCIETY was established on 1949 by name late

H R Shashi and late Mr Subbana who started the society by collecting 25ps every day and

only 10 to 25 members were there and their transaction on those days was only few hundred

rupees but now they have grown to a greater extend with the turn over around 7cr and nearly

2320 members have become share holders of the society. The main object of this is to

provide loans and advances to KSRTC workers and they also provide children education and

other utilities. They provide loans with very low interest compare to other banks.

The society has its own building which is worth around 15 lacks.

An overview;

This credit society is rendering its services to all the KSRTC workers. It collects 300 to

500 rupees share from every member as thrift deposit from the salary. It provides loans up to

25000 to 150000 f or that the workers has to pay 130rs for becoming a member of the society

,then a fresh loan will be issued to the member. The rate of interest is 12% and on every loan

the member should pay 10%as share deposit for that, the society will pay 12% dividend every

year after general body meeting.

It provides loans and other benefit fund:

Utility and vehicle loan

Utility loan

Joint loan

Personal loan

- They have introduced DRBF(death relief benefit fund) for which they collect 100 Rs per

month and pay 100000 Rs at the time of death and also they pay 3000 Rs at the time of

funeral expenses.

- Merit certificate with momento with cash of 1500 to 2nd PU students and 1000 to SSLC

students to society member’s children.

- They honor retired member of the society by giving them memento.

-They also pay 7% interest on thrift amount and dividend will be given every year dividend

depend on the profit but nearly from 5 years they are regularly giving 12%.


The working hours of a bank :

The bank starts at 10:30 AM. The transaction begins with same time up to 2:00 pm ,2:00 to

3:00 as a lunch break and the bank closes on 5:30 pm. All government holding as per

negotiable instrument and Sunday is declared as a holiday to staff.

CO-OPERATIVE CREDIT SOCIETY STRUCTURE

Board of Directors

K.LOKESH

President,

M.D.MS

#63 chikka viranna road,

4th cross Bannimantap,

Mysore.

M.P Nagaprasad

Vice- president,

M.D.MS

#63, Chikka viranna road,

4th cross Bannimantap,

Mysore

PRESIDENT

VICE-PRESIDENT

Accountant Accountant Accountant Accountant


K.N SUKANYA

SECRETORY

M.D.MS

#63,Chikka viranna road,

4th cross Bannimantap, mysore.

DIRECTORS

1) Kamachanne Gowda

2) H P Raju

3) M. Shadakshari

4) B.K Dharmappa

5) Shankar

6) M Devrajkumar

7) M. Devraj

8) C.Madesh

9) Somshekhar

10) C.S Ramkrishna

11) K.G. Nagraj

12) S.Shivkumar

13) H.D Chandrakala

There are 15 members in the society; these members will be elected by the KSRTC workers

once in a 5 year. Among these members there are two main people on one is the president

name” K LOKESH” who has the control on the society and signs the entire document if he is

absent the vice president will look on his behalf.

There will be a meeting once in a month called board of directors meeting to go through all

the monthly transaction and every year there will be a meeting called annual general body

meeting in which an annual report will be send to every member of the society to know the

society transaction of the year and request them to attend the meeting and discuss society

transaction works of the next year to implement more new policies. For this annual general

body meeting before 15 days the society will send a notice to attend the meeting for members

if they have any complaint they can ask in the meeting.


Major competitors-

o Staff and workers credit society (mysore ksrtc).

o Credit co-operative society (BMTC branch,mysore).

Rural division Urban division Mandya division Chamarajanagar

division

Mysore bus stand City bus stand workshop Division office

k.r nagar depo city 1st depo mysore Division office Kolegala depo

Hunsur depo City 2 kuvempunagar Maddur depo Najangud depo

1st depo mysore City 3 satgalli Pandapur depo workshop

Workshops City4 depo vijaynagar Malwalli depo Gundalpet depo

2nd depo mysore Nagamangala depo

3rd depo mysore k.rpet depo

This society has 4 division in operational area ,they are-

Now they have started a new division in puttur, only 50 members.

Society transaction for the year 2007-08 to 2013-14

Sl.no 1Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

1. Net profit 1011892 1227241 1187437 1671383 1386788 1664058 2487486

2. The working

capital

Of the society

works on share

amount

3278089 3889229 4920000 5257000 6104369 7346367 8953967

3. The maximum

they issue loan

50000 50000 50000 100000 150000 150000 150000

4. The minimum 5000 5000 5000 10000 15000 15000 25000

5. The rate of

interest on

loan

14% 14% 13% 13% 13% 13% 12%


Recent year statistics table

Sl.no Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

1. No of

members

1543 1704 1835 2090 2280 2300 2480

2. No of shares 163904 38892 47200 52560 61043 73463 89539

3. Reserved

fund(25%)np

2040467 2293440 2714744 3011604 3429450 3778712 4194726

4. Bad debt

fund

334541 375017 436382 448256 509679 530065 566757

5. Other funds 813000 993663 3051000 3660555 1672161 1845806 1978907

6. Building

fund

1204774 1249579 1498859 1522938 1639644 1679429 1726885

7. Thrift

fund(savings

,rd)

1469053

0

16790670 19826226 23822309 27843562 3225018

3

38009825

8. Death relief

benefit fund

1913904 3747212 5080337

9. Joint loan 2143565

3

26129159 32684768 33620705 39567736 4869131

8

58009825

10. Personal

loan

248913 189184 329064 216856 373546 289964 328629

11. Staff

expenditure

505703 548851 598482 684498 778101 930316 1146699

12. Dividend 12% 12% 12% 12% 12% 12% 12%

No NPA account is maintained (non performing asset ) unless the member clear the

loan amount to the society, the society will not give the clearance to the member so

that the final claims of KSRTC will be held up .


Mckinsey’s 7S study

The 7-S frame work was developed by the consultant at the McKinney ’s company a very

well known management consultancy firm in the united states ,towards the end of the 7-S to

diagnose the course of credit society problem and to formulate programs for improvement.

The 7-S is the framework consists of major aspects, which are strategy structure,

skills ,shared value,staff and style.

To Better represent the challenge of service marketing McKineey’s developed a new frame

work for analyzing and improvement bank effectiveness, the 7S model

SOFT’Ss

The 4s across the bottom of the model are less tangible, more cultural in nature and where

termed " softs Ss "by McKinneyy's.

Skills : the capabilities and competencies that exist within the company.

Shared values : the values and beliefs of the company ultimately they guide employees

towards "valued behaviour".

Staff: the company's people resources and how they are developed ,trained and

motivated.

Sharedvalues

Structure

strategy

skills

Staff

style

System


Style : the leadership approach of top management and the company's operating

approach

Hard'Ss

The 3Ss across the top of model are described as 'HARD Ss'

Strategy : the direction and scope of the company over the long term.

Structure : the basic co-operative credit society of the company, it departments

reporting lines, area of experiences and responsibility.

System : formal and informal procedure that govern everyday activity. covering

everything from management information system, through to the systems at the point

of contact with the customer (retail system call centre system, online system).

STRUCTURE:

Bank structure is a critical task of the top management of a bank. it is the selection of

whole bank. it refers to bank management and relationships, it provides a formal relationship

among various position and activities. Arrangements about the reporting relationships, how

bank members is to communicate with other members, what role he has to perform and what

rule and procedure exist to guide the various activities performed by member as part of Bank.

This will help in the smooth functioning of the activities of the bank. the bank is having

president is in position to control the activities of the bank the general managers are

responsible for the activities done in their respective departments .the senior president and

vice president of respective departments come under top level management .all the

departments are interrelated with each other to maintain control over the bank.

Departments of MC&M:

Has a cooperative credit society has the following department. It's smooth

functioning they are;

Finance department

marketing department

personnel department

President will control the entire above departmental head. this credit society and has adopted

centralized way of communication .

SUB STRUCTURE:


In society there are the 7 members who are working in department and among

them 1 is secretary. In the department each person have a different work because it is small

cooperative society.

Issuing loan section

cash section

loan posting section

deposit posting section

Functions of finance department:

The function deals with the procurement of funds at the time it is needed and its effective

utilization of finance in the bank. Funds are maintained as reserves in the bank, to provide

further loan. Maintenance of accounts ,budgeting, fund allocation, estimation of investments

in the, costing, raising funds, internal auditing, shares distribution, providing loans, Provide

taxations purchase of computer receipts and payments to the customer and suppliers.

Functions of marketing department:

Marketing is a process by which services are delivered to the customer .the word

synonymously used with marketing is selling services to the customer marketing is one of the

activities for maximization of profit and wealth, so marketing activity plays an important role

in the organization to achieve its objectives. It satisfies the customer needs it collects the

feedback from the customer and provide the proper service according to their needs, it work

for the customer satisfaction, it collects the information regarding current market condition

for your service, to maximize the awareness of the service it gives prominence to the

promotional activities.

Functions of HR department:

HR department is concerned with the people's dimensions in organisation hr management

involves the functions and principles applied to acquiring, developing, maintaining and

remunerating employees in organisation. The main function of this department is to develop

good coordination in the bank ,to create good working condition in the bank recruitment and

retirement of the employees provide facilities to workers ,giving training and development to

the non skilled employees manpower planning.

STRATEGY :


Strategy refers to a set of decision and action plan aims at gaining a sustainable competitive

advantage. strategy includes vision, mission and objectives.

VISION :

The credit cooperative society philosophy of top management is to use our specialised skills

and innovative technology to contribute to welfare of the society. It is our intention to grow

with our employees and encourage them to participate in our goals in order that they realize

their full potential. Our prosperity is linked to prosperity of our customers.

MISSION: To deliver superior value to our customers shareholders employs and society at

large.

SYSTEM:

System refers to organization method that are used for the following flow of information

from one department to others. MDMS has an adequate system of internal control designed to

provide reasonable assurance on the achievement of the objectives relating to efficiency and

effectiveness of operation. It includes obtaining of funds providing funds to various sectors of

economy and provide adequate dividend, issuing loan, cash management, loan

posting ,deposit posting are done in the department.

Process of all division :

In loan posting section they will issue the loans to the shareholder or members

of society.

In cash section they maintain cash and properly allocate cash and maintain

reserve both primary and secondary reserve .

Loan posting section will transfer the loans member.

Deposit posting section will transfer the deposit from member to management.

Recruitment , Tranning and Development:

Recruitment process starts with the identification of vacancies by the department head of

respective department. A firm requesting for the human resource is sent from the hr

department to various divisions this will be sent for the approval by management. If

approved sources are searched some sources of employment exchange include institutions or


ex-apprentices. Short listing of received application is done through interviews. The

management does the selection to required vacancies.

SKILL :

Skills refers to the fact that employees have skills needed to carry out credit society strategy.

Training and development and showing know how to do with their jobs and stay up to date

with the latest techniques.

Tranning:

The following training is conducted to the employees. The main training given in MC&M is

“on the job training”.

On The Job Taining :

The job instruction training method consist of four steps they are instructional process

involving preparation, presentation performance, and tryout and follow up. It is used

primarily to teach employees how to do their current jobs, a trainer acts as the coach. The

four steps followed in job instruction training methods are ,

The trainee receive overview of the job its purpose and its desired outcome with a clear focus

on relevance of training .

The trainer demonstrate s the job to give the employees of model to copy the training.

Next the employees are permitted to copy the trainer the way demonstration has been done

and practice by the trainer are repeated until the trainees know the right way to handle the

job.

Finally the employees does the job independently without supervision.

STYLE :

Style refers to how manager is collectively spend their time and how they used a symbolic

behavior , employees shared and common way of thinking and behaving unwritten norms of

behavior and thought. There are like leadership style organization culture etc.

The style adopted in the MC&M is top to down and authoritarian type of leadership and

decision making style are adopted in the society the top management takes the strategic


decisions and management decisions where as the departmental issues is undertaken by the

headed department manager.

STAFF:

Staff means that the society has hired able people train them well and send them to

the right job selection training, reward and recognition, retention ,motivation and other

important activities.

The society is accommodating various employee of the company most of the

employee from Mysore city the employees continue to have cordial and harmonious relations

with its employees. The society has not organized programs to be in line with changing

business environment several training programs structured to the need of the individual

employees.

Regular audit on safety and environment are done to provide a safe and clear work

environments Regular training programs for ones safety are conducted to increase awareness

and commitment for safety.

Different levels of employees are working in the company

president

vice president

officers

clerical level

Contract based workers.

SHARED VALUES:

Fair value refers to the commonly health belief mind set a examination that shape

how are organization behavior its corporate culture or in order to words shared value means

that the employees are aware of guiding values .In MC&M values are things that you would

strive for even if they where demonstrably not profitable values acts as an organization


conscience, providing guidance in times of crisis. Identifying corporate values is also the

first essential step in the organization role in the larger which community it functions.

As per the model "shared values" implies the value of that go beyond but might well include

simple goal statement in determining corporate destiny to fit the concept, this values must be

shared by most people in an organization.

Along with development it is having its own objective to be achieved such as marketing

department has its own benchmark sales, personnel department to reduce the labour related

problems employees at MC&M are committed to supply quality service ,loan and other

utilities on time to achieve fullest customer satisfaction. Credit society provides various

types of loans and other utilities like death relief fund ,merit certificate with memento with

cash and interest, credit society is committed to improve the standards of k s r t c workers

and to offer loan with low rate of interest.

Use of proper and efficient methods in operations with the aim to help the worker.

Compliance with applicable legislation and regulation.

Occupational health and safety performance

Providing the cash and prize how to increase the moral of workers children's.

S.w.o.t Analysis

Strength Weakness Opportunities Threats

Stratigic management is concerned with establishing a proper credit society environment fit.

It involves watching the credit society factor with the environment factor strategic

management therefore, involves analysis of credit society factor (ie.strength and weakness

of the credit society) and the environment factor (ie.the threats and opportunities in the

business Environment)

SWOT means analysis and assessment of competitive strength and weakness of a firm in

relation with your competitor and environmental opportunities and threats which a company

may likely to face. SWOT analysis is such a systematic study and identification of those

aspects and strategies that best suit the individual company position ia given situation. It

should be based on logic and rational thinking such that a proper strategy improve the

credit society business strength and opportunities at the same time reduces its weakness and

threats.


SWOT analysis on “MYSORE CHAMARAJANAGAR AND MANDYA DISTRICT

CREDIT CO OPERATIVE SOCIETY”.

STRENGTHS:

The following are the strength of bank.

Bank has four divisions they are rural urban mandya and chamarajanagar it is not at the bank

land loan and advances mainly and largely to ksrtc workers.

Bank provide assistance both in financial and non financial terms to self help group.

Current assets forms large portion of total earning assets of the bank.

Working capital of the bank form about half of the capital employed the bank has sufficient

working capital to meet the current obligation.

The net a set of bank is good it is of standard trend.

More than 2480 members have become shareholder of the society.

All the members are from ksrtc department so the society easily collect amount from the

salary itself.

Weakness:

The following are the weaknesses of the bank ,

Bank do not have any e-banking facilities atm etc.

Bank general financial performance in below satisfactory.

No use of advanced technology because they don't have much training to operate the

computer.

Infrastructure is not so good it is not computerized.

Limited number of person and workload is more.

The performance is not up to the mark and no power planning for maintenance of work.

Opportunities and future growth:

The following are the Opportunities and future growth of the bank The bank has an opportunity to provide credit card debit card atm facilities to the account

holders of the bank


The rate of interest will be competitive nature ie. it will compete with other cooperative

nationalized schedule and non scheduled banks.

The bank has opportunities to provide more and more advertisement in all the media so as to

general public knowing the policies and strategies of the bank.

The working capital should be located effectively and efficiently through proper planning.

The bank has an opportunity to open their branches both in village and semi urban area of the

district

The bank has an opportunity to give more rate of interest as deposits.

Threats:

The following are the threats towards bank

Improper and in effective management leads to loss for past few years.

Bank has to face competition with the private sector banks like icici ,hdfc ,cooperative

bank ,corporation bank ,vijaya bank etc.

The delay in recovery of loans and advances from the borrowers is another threat for bank.

The banks increased blockage of funds leads ineffective use of funds.

Theoretical background

Financial statements are summaries of of operating, financing and investment activities of a

business. financial statement should provide information which is useful to both investors

and creditor in making credit, investment and other business decisions .This usefulness

means that investor and creditors can use these statement of to predict, compare and evaluate

the amount. Timing and uncertainity of potential cash flows. In other words financial

statement provides the information needed to assess the company's future earnings went

therefore cash flow expected to result from those earning. In this chapter we discuss the four

basic financial statement, the balance sheet the income statement ,the statement of cash

flow ,statement of shareholder' equity.

Accounting principles and assumptions:

accounting data in financial statements are prepared by the firms of management according

to a set of standards ,referred to as" generally accepted accounting principles"(GAAP) the

financial statement of company whose stock is publicly traded much, be audited at least


annually by independent public accountant (accountant who are not an employees of the

firm). In such an audit , the the accounts examine the financial statements and the data from

which these statement are prepared and atleast for the published through auditor's opinion

that these statement have been prepaid according to the GAAP. Auditor's opinion focuses on

whether the statement confirm to GAAP and that there is adequate disclosure of any

material change in accounting principles.

The financial statements are created using several other options that affect how we use and

interpret the financial data :

Transactions are recorded a historical cost therefore the values shown in the

statements are not market or replacement values but rather reflect the original

cost( adjusted for depreciation in the case of the depreciable asset).

The appropriate unit of measurement in rupees .while this seems logical ,The effect

of inflation ,combined with the practice of recording values at historical cost may

cause problems in using and interpreting these values.

The statements are recorded for predefined of time generally ,statements are

produced to cover a chosen fiscal

year or quarter, with the income statement and the statement of cash flow spanning a

periods time and the balance sheet and the statement of shareholder equity as of the

end of the specified period. The end of the physical layer is generally chosen to

concede with the low point of activity in the firms operating cycle, the annual

balance sheet and statement of shareholders equity may not be representative of

values for the year

Statements are prepared using at accrual accounting and the matching principle. Most

businesses use accrual accounting, where income and revenue are matched in timing

such that income is recorded in the period in which it is earned and expenses are

reported in the period in which they are incurred to generate revenues the result of the

use of accrual accounting is that reported incomes does not necessarily concede with

cash flow. Because the financial analyst is concerned ultimately with cash flows ,he

or she often must understand how are reported incomes relates to a company's cash

flow.

It is assumed that the business will continue as a going concern. The assumption that

the business enterprise will continue, indefinitely justifies the appropriateness of using


historical cost instead of current market value because these are expected to be used

up over time.

Statements are prepaid assuming convictism .In cases in which more than one

interpretation of an even

possible, statements are prepared using the most conservative interpretation.

full disclosure is required for providing information beyond the financial statement.

The requirement that, full disclosure means that, in addition to accounting number for

the accounting items as revenues cost, expenses and assets narrative an additional

numerical disclosure are provided in notes accompanying the financial statements.

And analysis of financial statements is therefore not complete without this additional

information.

Financial statements and the auditor's findings are published in the firm annual and

quarterly report sent to shareholders and the 10k and 10Q filing with the securities

and exchange commission(SEC). Also includes in the report among other items is a

discussion by management, providing an overview of company events. The annual

reports are much more detailed and discloses more financial information than

quarterly reports.

There are 3 basic financial statements balance sheet:

income statement

cash flow statement

The balance sheet statement

The balance sheet :balance sheet a summary of assets, liabilities and equity of the

business at a particular point of time usually at the end of the firms fiscal year. The

balance sheet is also known as the statement of financial condition or the statement of

financial position. The values shown for the different accounts on the balance sheet or

not propose to reflect current market value, rather they reflect historical costs.

The income statement :

income statement is a summary of the revenues and expenses of a business over a

period of time usually one month , three months or one year, this statement is also

referred to as profit and loss statement. It shows the result of firms operating and

financing decisions during that particular point of time.


Cash flow statement :cash flow statement is a statement, which measure inflows

and outflows of cash ,on account of any type of business activity. The cash flow

statement also explain reasons for such inflows and outflows of cash so ,it is a report

on a company's cash flows activities, particularly its operating, investing and

financing activities.

FINANCIAL ANALYSIS:

Financial analysis financial analysis is a tool of financial management. It consists of

the evaluation of the financial condition and operating performance of a business

firm, and industry or even the economy and the forecasting of its future condition and

performance. It is, in other words, it is means for examine risk and expected return.

Data for financial analysis may come from other areas within the firm, such as

marketing and production department, own accounting data, or from financial

information vendor, such as financial markets, moodys investor service, standard and

poor corporation, fitch rating, and value line as well as from government publications

such as the federal reserve bulletin. Financial publications such as business week,

forbes, fortune and the wall street journal also publishes financial data( concerning

individual firm) and economic data (concerning industries market and economies)

much of which is now also available on the Internet.

Within the firm, financial analysis maybe used not only to evaluate the

performance of the firm, but also its divisions on department and its product line.

Analysis may be performed both. Periodically and as when needed, not only to enjoy

in firm investing and financing decisions, but also as an aid in implementing

personnel policies and reward system.

Outside the firm, financial analysis may be used to determine the credit worthiness of

a new customer, to evaluate the ability of a supplier to hold the good condition for a

long term contract, and evaluate the market performance of competitors. Firm and

investor which do not have the expertise, the time or the resources to perform

financial analysis on their own way, purchase analysis from companies that specialize

in providing this service. Such companies can provide report ranging from detailed

written analysis to simple credit worthiness rating for businesses. As an example dun

and bradstreet ,a financial services firm, evaluate the creditworthiness of many firms,

from small local businesses to major corporations. As another example, 3 companies

moody's investor service, standard and poor and fitch evaluate the credit quality of


debt obligations issued by the corporation and expresses the views in the form of a

rating that is published in the report available from this three credit society.

Who uses analysis?

Financial statements are used and analyzed by different groups of parties, this group

consist of people both inside and outside of a business. Generally, user are

Internal user : internal users consists of owner, manager, employees and other parties

who are directly connected with the company

Owners and managers: requires financial statements to make important business

decision that affect its continues operation . financial analysis is then performed on

the statement to provide the management with more detailed information .These

statements are also used as a part of management report to it shareholder, and its

forms apart of annual report of the company.

Employees :employees need these reports in making collective bargaining

agreement with the management, in that case of large or union or for individual in

discussing their compensation, promotion and ranking.

External user: potential investor, banks, government agencies and other parties who

are outside the business but need financial information about the business for number

of reasons.

Financial institutions : Financial institutions like banks and other lending companies

use them to decide whether to give a company with fresh loans or extend debt

securities (such as long term bank loan ).

Prospective investors : Prospective investors make use of financial statements to

assess the viability of investing in a business. Financial analysis are often used by

investors and is prepared by professionals (financial analyst), thus providing them

with the basis in making investment decision.

Government entities: Government entities like Tax authorities need financial

statements to ascertain the priority and accuracy of taxes and duties paid by a

company.

Media and general public : Media and general public are also interested in financial

statements of some companies for a variety of reasons.


Techniques of financial statement analysis : Financial statements give complete

information about acid, liabilities, equity, reserve expenses and profit and loss of an

enterprise they are not readily understandable to interested parties like creditors,

shareholders, investor etc thus, various techniques are employed for analyzing and

interpreting the financial statements. Techniques of financial analysis of financial

statements are mainly classified into 3 categories

Cross sectional analysis : Cross sectional analysis is also known as inter firm

comparison. This analysis help in analyzing financial characteristics of an enterprise

with financial characteristics of another similar enterprise in that accounting.. For

example, if company yea has earned 15 percent profit on capital invested. This does

not say whether it is required or not. If we analyze for the and find that a similar

company has a 16 percent during the same period. Then only we can make a

conclusion that .Company b is better. Thus, it turns into a meaningful analysis.

Time series analysis: Time series analysis it is also called as intra firm comparison.

According to this method, the relationship between different items of financial

statement is established, comparison are made and result obtained .

The basis of comparison may be :

Comparison of financial statements of different year of the same business unit.

Comparison of financial statement of a particular year of different business units.

Cross sectional come time series analysis :

Cross sectional come time series analysis analysis is intended to

compare the financial characteristics of two or more enterprises for a define period. It

is possible to extend such and comparison over the year. This approach is most

effective in analyzing of financial statement.

The analysis and interpretation of financial statement is used to determine the

financial position. A number of tools or method or devises are used to study the

relationship between financial statements. However, the following are the important

tools which are commonly used for analysing and interpreting financial statements .

Comparative statements

common size statements


trend analysis

ratio analysis

fund flow statement

Cash flow statement

cost volume profit analysis

Fund flow statement

Meaning:

fund flow statement is a method by which we study changes in financial position of a

business enterprise between beginning and ending financial statement date. It is a

statement showing sources and uses of funds for a period of time.

In the words of anthony "The funds flow statement describes the sources from which

the additional funds where is derived and the use of which of these sources are put".

Thus fund flow statement is a statement, which indicates various means by which the

funds have been used during the period. The term funds means working capital i.e the

excess current assets over current liabilities.

Importance :

Fund flow statement is an essential tool for the financial analysis and is of

primary importance to the financial management. Nowadays, it is being widely used

by financial analysis, credit guarantee institutions and financial manager,. The basic

purpose of fund flow statement is to reveal the changes in the working capital in the

two balance sheet dates. It also describes the sources from which additional working

capital has been financed and the uses of which working capital have been applied.

Such a statement is particularly useful in assessing the growth of the firm, its

resulting financial needs and in determining the best way of financing this needs. By

making use of projected fund flow statement, the management can come to know the

adequacy or in adequacy of working capital even in advance. One can play the

immediate and long term financing of the firm, repayment of long term debt ,

expansion of the business, allocation of resources etc.

Limitations :


The fund flow statement has a number of users, however, it has certain

limitations also, which are listed below

It should be remembered that a fund flow statement is not a substitute of an income

statement or a balance sheet.

It provides only some additional information as regards changes in working capital .it

cannot reveal continuous changes.

It is not an original statement but simply and rearrangement of data given in the

financial statement.

It is essentially historic in nature and projected fund flow statement cannot be

prepared with much accuracy. Changes in cash are more important and relevant for

financial management then the working capital.

Cash flow statement:

cash flow statement is a statement which describes the inflow and outflow

of cash equivalent in enterprise during a specific period of time. Such statements

enumerate net effect of the various business transaction on cash and its equivalent and

take into account the receipts and disbursement of cash .A cash flow statement

summarizes the course of changes in cash position of a few enterprises between dates

of to balance sheets. According to AS. 3 : An enterprise should prepare a cash flow

statement and should present it for each period for which financial statement is

prepared.

Uses of cash flow

It is very useful in the evaluation of cash position of a firm .

Cash flow statement can be prepared in order to know the future cash position

of a concern.

Comparison of the historical and projected cash flow statement can be made

so as to find the variations and deficiency in the performance.

It is more useful for the short term analysis and cash planning for the business.

Cash flow statement help in the planning the repayment of loans and fixed

assets and the long term planning. Cash flow statement explains the causes for

work cash position.

Cash flow statement provides information of all activities classified under

operating investment and financial activities.


Ways of improving cash flow in a bank :

Once the cash flow projections have been prepared they should be critically examine

and used as a management tool and control to improve the business expected cash

position. Issues which might be examined includes the following:

Increase sales.

Reduce direct and indirect cost and overhead expenses.

Defer discriminatory projects, which cannot achieve acceptable cash payback .

Increase prices specially too slow payer's.

Deferred dividend payment.

Raise additional equity.

Convert debt into equity.

Medium and short term cash flow forecast.

Improve systems for paying suppliers.

Utilize factoring and discounting facilities, to accelerate recipts from sales.

Generate regular report on receivables ratios and aging.

Add late payment charges or fees where possible

Ratio analysis :A ratio is defined as the indication of quotient of two

mathematical expressions and as the relationship between two quantitative

terms between figure which have a cause and effect relationship or which are

connected with each other in some manner or the other. Are noticeable point Is

that a ratio reflecting quantitative relationship help to perform a qualitative

judgement. Such is the nature of all financial ratios.

Ratio analysis is a widely used technique in financial analysis. It is defined as

systematic use of ratio to interpret the financial statements so that the strengths

and weaknesses of the credit society, its historical performance and current

financial condition, can be determined.

Classification of ratios :

The use of ratio analysis is not confined only to the financial manager.

There are different parties interested in the ratio analysis for knowing the

financial position of the form for different purposes. In view of the various


uses of ratio, there are many types of ratios, which can be calculated for the

given information in the financial statement.

Following is the classification of ratios

Liquidated ratio.

Leverage ratio.

Profitability ratio.

Activity

Guidelines of reconnaissance for the use of ratios :

Accuracy of financial statement :

Ratios are calculated from the data available in financial statements. The reliability of

the ratios is linked to the accuracy of information in this statement. Before calculating

ratios one should see whether proper concepts and conventions have been used for

preparing financial statements. This statement should also be properly audited by the

competent auditors.

Objective of purpose of analysis: The type of ratios to be calculated will depend

upon the purpose for which these are required to study current financial position then

resource relating to current assets and current liabilities.

Selection of ratios: Another precaution in the ratio analysis is the proper selection of

appropriate ratios. The ratio should not match the purpose for which of these are

required. Translation of large number of ways work without determining there need in

the present context make confuse things instead of solving them.

Use of standards: The ratios will keep an indication of financial position only when i

discussed with reference to certain standard. Please read shows are compared with

certain standard one will not be able to reach what conclusion this standard may be

rule of thumb as in case of current ratio (2:1) and acid test ratio(1:1)may be budgeted

or projected ratios.

Significance of ratio analysis ratio analysis:

Ratio analysis is an important technique of analyzing the financial statements and it

helps the analyst to make a quantitative judgment with regards to concern financial

position and performance.

The following are the main points of importance of ratio analysis:

Managerial use of ratio analysis :

Help in decision making.


Help in financial forecasting and planning.

Help in communication.

Helps in coordinating.

Help in control.

Other important uses of ratio analysis:

I want to evaluate performance, compared to previous year do competitor and

the industry.

To set benchmarks for standard for performance.

To highlight areas that need to be improved, or areas that offers the most

promising future potential.

Current ratios : Current ratios this resource explain the relationship between current

assets and current liabilities of business .

Formula:

CURRENT RATIO= CURRENT ASSETS

CURRENT LIABILITIES

Current liability: current liabilities include those liabilities with a payable in a year time.

Quick ratio: Quick ratio indicates whether the firm is in position to pay is current

liabilities with in a month or immediately.

Formula:

Quick ratio=liquid assets/current liabilities.

Liquid assets means those assets, which will yield cash very shortly.

Liquid assets=current assets- stock-prepaid expenses.

Debt equity ratio: This ratio can be expressed on two ways;

First approach: According to this approach, this ratio expresses the relationship

between long term debts and shareholders funds.

Formula:

Debt equity ratio= long term loans/ shareholders fund or Net worth .


Long term loans : long term loans refer to long term, liabilities which mature after

one year. These includes debentures, mortgage loan, bank loan, loan form financial

institutions and public deposits etc.

Shareholders’ funds: Shareholders funds include equity share capital, Preference

share capital, share premium, general reserve, other reserve and credit balance of

profit and loss accounts.

Second approach: according to this approach the ratio is calculated as follows.

Formula:

Debt equity ratio=external equities/internal equities.

Debt equity ratio calculated for using second approach .

Significance: This ratio is calculated to assess the ability of firm to meet its long term

liabilities. Generally, debt equity ratio of its considered safe.

If the dept equity ratio is more than that, it shows rather risky financial position from

the long-term point of view, as it indicates that more and more funds invested in the

business are provided by long term lenders . The lower the ratio, the better it is for

long time lender because they are most secure in that case. Lower than 2:1 dept

equity ratio provide sufficient protection to long-term lenders.

Proprietary ratio : Proprietary ratio indicates the proportion of total funds provided

that by owner of shareholder .

proprietary ratio = shareholders fund + long term loans

Significance this ratio should be 33% or more than that in other words,

The proportion of shareholders funds to total fund should be 33%or more. Higher

profit ratio is generally treated and indicator of sound financial position from long

time point of view, because it means that the firm is less dependent on external

sources of finance

. If the ratio is no it indicate that long term loans and unsecured and this is the risk

of losing their money.

Fixed assets to proprietor firm ratio : This is a show is also known as

fixed assets ratio to net worth ratio.


Formula :

fixed assets to proprietors fund ratio fixed asset

Proprietors fund (net worth).

Significance of the ratio indicates the extent to which proprietor (shareholders) fund

are sunk into fixed. Normally, the purchase of fixed assets should be financed by

proprietor’s fund. It if this ratio is less than 100 %, it would mean that proprietors

fund are more than fixed assets and a part of working capital is provided by the

proprietor. This will indicate the long term financial soundness of business.

cash is the most liquid item. Although receivables, data and bills receivable are

generally more liquid then the inventories yet there may be . Regarding there

realization into cash immediately or in time.

Cash ratio= absolute liquid assets

Current liabilities

Solvency ratio this ratio is small variant of equity ratio and can be simply calculated

as

Solvency ratio= total liabilities to outsiders fund

Total assets.

Credit deposit ratio:

Credit deposit ratio indicates extent to which amount of deposit received for

word for purpose of landing. It is calculated by dividing deposits and other accounts by loan

and advances it should be as high as possible

credit deposit ratio = total deposits

Total loans

Debt service ratio :

Net income product service or simply debt service ratio is used to test the depth

servicing capacity of the firm .


debt service ratio = net profit before interest

fixed interest charges.

Net profit ratio :

net profit ratio establishes a relationship between net profit after tax and sales and

net indicates the efficiency of management in manufacturing, selling, administrative and

other activities of the firm

Net profit ratio= net profit after tax

Total turnover ×100

Fixed asset to net worth ratio : The ratio establishes the relationship between fixed assets

and shareholders fund .

fixed assets to net worth ratio= fixed assets after depreciation

shareholders fund.

Return on equity capital :The return On shareholders equity is net profit after tax. By

shareholder equity.

Return on equity capital ratio= net profit(tax rate)

equity share capital(paid up)×100

Earnings per share :

Earning per share is a small variation of return on equity capital and is calculated by dividing

the net profit after tax and preference shares divided by the total number of equity shares.

Earning per share = net profit after tax

no of equity shares

Trend analysis:

Trend analysis in financial analysis the direction of changes over a period of year is very

important. time serves or trend analysis of ratio indicates the direction of changes. Time kind

of analysis is particularly applicable to the items of profit and loss account it is advisable that

trend of sales and net income may be studied in the growth of business and the general price

level. It might be founded in practice that a number of firms would show a persistent growth

over a period of time. But to get true of growth, the sales figures should be adjusted by a

suitable index of general prices. For trend analysis, the use of index number is generally


advocated. The procedure followed into assigning the number 100 items of the base

year ,this procedure maybe called" trend percentage model"

Common size statements :

The common size statement balance sheet and income statement are shown in analytical

percentage. The figures of this statement as soon as percentage of total assets, total liabilities

and total sales respectively. Take the examples of balance sheet. The total assets are taken as

a hundred and different acids are expressed as a percentage of total. Similarly, where is

liabilities are taken as a part of total liabilities.

Common size balance sheet statement :

where is balance sheet items are expressed in the ratio of each are set to total assets and

the ratio of each liability is expressed in the ratio of total liabilities is called common size

balance sheet.

Comparative financial statements:

In brief, comparative study of financial statement is the comparison of the

financial statements of the business with the previous year’s financial statements. It enables

identification of weak points And applying corrective measures.Practically, two financial

statements (balance sheet and income statement ) are prepared in comparative form for

analysis purpose.

Comparative balance sheet: :

The comparative balance sheet shows the different assets and liabilities of a firm on different

dates to make comparison of balances from one day to another .the comparative balance sheet

has two columns for the data of original balance sheet. Third column is used to show change

increase or decrease in figures. The fourth column may be added for giving percentage of

increase or decrease. Interpreting comparative balance sheet ,the interpreter is expected to

study the following aspects.


Current financial position and liquidity

position long term financial position

profitability of the concern

1) For studying current financial position of liquidity position of a concern one should

examine the working capital in both the year. Working capital is the excess of current

assets over current liabilities.

2) For studying the long term financial position of the concern, one should examine the

change in fixed assets, long term liabilities and capital.

3) The next aspect to be studied in comparative balance sheet is the profitability of the

concern. The study of increase or decrease in profit will help the interpreter to observe

weather the profitability has improved or not.

After studying various assets and liabilities, and opinion should be formed about the

financial position of the concern.

Comparative income statement: :

The comparative income statement provides the result of the operation of a

business. This statement traditional is known as trading and profit and loss account.

Important components of income statements are net sales, cost of goods sold, selling

expenses, office expenses. The figure of about components are matched with their

corresponding figure of previous years individually and changes are noted.

Comparative income statement give an idea of the progress of a business over a

period of time. The change in money value and Percentage can be determined to

analyze the profitability of the business. Like comparative balance sheet, income

statement also has the four columns. The first two columns are sown figures of

various items for two years third and fourth columns are used to show increase or

decrease in figure in absolute amount and percentage respectively.

The analysis and interpretation of income statement will involve the following:

The increase or decrease in sales should be compared with the increase or

decrease in cost of goods sold .

To study the operating profits.


the increase or decrease in net profit is calculated that will give an idea about

overall profitability of the concern.

Table :showing banks Net Profit

Years Amount

Difference in percentage

years Perctange

2007-08 1011892 2007-0 100

2008-09 1227241 2008-09 121.28

2009-10 1187437 2009-10 117.34

2010-11 1671383 2010-11 165.17

2011-12 1386788 2011-12 137.04

2012-13 1664058 2012-13 164.45

2013-14 2487486 2013-14 245.85

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

2013-

14

0

50

100

150

200

250

300

Net Profit

percentage


Interpretation

The net profit of the society has increased since 2007-2014 continuously, net profit of 2007-08 was 100 percent ,and taken it as a base year for calculations and it has become 245.82 in 2013-14

Table :showing working capital of society

years

2007-08

Amount(Share amt+ thrift fund)

17968619

Years 2007-08

Difference 100

2008-09 20679899 2008-09 115.08

2009-10 24746226 2009-10 137.71

2010-11 29079309 2010-11 161.83

2011-12 33947931 2011-12 188.92

2012-13 39596550 2012-13 220.36

2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

50

100

150

200

250

Series1Series2

Interpretation:

By seeing the above figures and chart we can say that the companies working capital is


increased since 2007-08 to 2013-14 . company has an adequate capital since its keep on increasing since past 7 yrs.

COMMON SIZE STATEMENTS: OF EQUITY CAPITAL

= EQUITY CAPITAL * 100

Total assets

YEARS EQUITY CAPITAL TOTAL ASSETS

RATIO (%)

2007-08 3278089 27024332.94 12.1

2008-09 3889229 31703244 12.26

2009-10 4920000 37924281 12.44

2010-11 5257000 42658145 12.32

2011-12 6104369 49241894.84 12,39

2012-13 7346367 58324778.58 12.59

2013-14 8953967

2007-08 2008-09 2009-10 2010-11 2011-12 2012-1311.811.9

1212.112.212.312.412.512.612.7

Equity Capital

ratio (%)

I interpretation: Common size statement of equity capital shows equity capital in relation to total assets. IIt expresses as ratio of equity capital to total assets . here society has the following ratios shown in


above figure.

Common size statement of fixed deposits:

= fixed deposits *100

Total assets

years Fixed deposits Total assets Ratio in (%)

2007-08 2528345 27024332.94 9.35

2008-09 2528345 31703244 7.96

2009-10 2528345 37924281 6.65

2010-11 2528345 42658145 5.90

2011-12 2528345 49241894.84 5.13

2012-13 2528345 58324778.58 4.35

2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

1

2

3

4

5

6

7

8

9

10

Series1

Interpretation :

Common size statement of fixed deposits shows fixed deposits relation to total

assets. It expresses as ratio of fixed deposits of total assets ,as shown in the above figure.


Ratio analysis

Current Ratio :

Current ratio = current assets

Current liability

years Current assets Current liabilities Ratio (%)

2007-08 23102492.09 142419.50 162.21

2008-09 27725450.92 181151.5 153.05

2009-10 33936068.11 340397 99.69

2010-11 38658182.15 205634 187.99

2011-12 43685077.19 181242 241.03

2012-13 52201436.15 181242 288.02

2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

50

100

150

200

250

Current Ratio

Trend (%)

Interpretation:

The current assets of the society is more than current liabilities so the ratio is fluctuating

and it is increasing from past 3 yrs respectively.

Debt Equity Ratio :

Debt equity ratio = outsiders fund


Share holder fund

years Outsider fund Share holder fund Ratio (%)

2007-08 142419 3278089 0.0434

2008-09 681151 3889229 0.175

2009-10 1765266 4920000 0.35

2010-11 205634 5257000 0.039

2011-12 181242 6104369 0.029

2012-13 181242 7346367 0.0246

2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

0.0050.01

0.0150.02

0.0250.03

0.0350.04

0.0450.05

Series1Ratio (%)

Interpretation:

The society has debt equity ratio as above .this low debt equity ratio indicates society is

over independent not dependent on outsider funds.

Proprietary Ratio:

Proprietary Ratio = share holders fund

Total assets

years Share holder fund Total assets Ratio (%)

2007-08 5318556 27024332.94 0.196


2008-09 6182669 31703244 0.195

2009-10 7634744 37924281 0.201

2010-11 8268604 42658145 0.193

2011-12 9883081 49241894.84 0,201

2012-13 11125079 58324778.58 0.191

years2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

0 0

100 127.1

239.01

144.38127.25 127.25

proprietary ratio

Series1 Series2

Interpretation :

The society has the above proprietary ratio for the years 2007 to 2013

respectively it has been continuously fluctuating , it indicates society long term solvency

position is not good as it fluctuates year by year.

Credit deposit ratio:

Credit deposit ratio = Total Deposits *100

Total loans

years Total deposits Total loans Ratio (%)

2007-08 2531400 22177849.5 11.41

2008-09 2531400 26696205.7 9.48

2009-10 2531400 33443521 7.57

2010-11 2531400 34253699 7.39

2011-12 3822855 40624124 9.41

2012-13 4389378.03 49645590.7 8.84


years2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

0 0

100127.1

239.01

144.38127.25 127.25

Credit Deposit Ratio

Series1 Series2

Interpretation:

The societies credit deposits ratio is decreasing year by year, but from last 2years its being

unchanged. It indicates stability in last 2years, but still seeing the ratios of past years we can say that

credit deposits position is not good.

Solvency Ratio:

Solvency Ratio = outsiders fund

Total assets

years Outsiders funds Total assets Ratio (%)

2007-08 142419 27024332.94 0.0052

2008-09 681151 31703244 0.021

2009-10 1765266 37924281 0.046

2010-11 205634 42658145 0.0048

2011-12 181242 49241894.84 0.0036

2012-13 181242 58324778.58 0.0031


2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

0.045

0.05

Ratio (%)Series1

Interpretation :

The societies solvency ratio is continuously fluctuating year after year ,it indicates society

long term solvency position is not so good .

Return on equity capital ratio:

Return on equity capital ratio = net profit *100

Share capital

years Net profit Share capital Ratio (%)

2007-08 1011892 5318556 19.02

2008-09 1227241 6182669 19.84

2009-10 1187437 7634744 15.55

2010-11 1671383 8686450 19.24

2011-12 1386788 9533819 14.55

2012-13 1664058 11125079 14.95


years2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

0 0

100127.1

239.01

144.38127.25 127.25

return on equity capital ratio

Series1 Series2

Interpretation :

This indicates returns paid by the banks on equity share capital and it is in above

figure, there is a slight decrease in the year 2009-10 and 2011-12 as compared to other years.

Its net profit and returns on equity capital has left increased in 3years.

Trend analysis

Current assets :

Years Amount Trend (%)

2007-08 23102492.09 100

2008-09 27725450.92 120.01

2009-10 33936068.11 146.89

2010-11 38658182.15 167.33

2011-12 43685077.19 189.09

2012-13 52201436.15 225.95


years2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

0 0

100127.1

239.01

144.38127.25 127.25

Trend of current assets

Series1 Series2

Interpretation:

The table above consists of trend percentage of current assets in different

years .(i.e from 2007 to 2013) respectively and 2007 has taken as base year for

comparison. we can say that current assets of the society is increased during this period

as shown above.


Current liability:

Years Amount Trend (%)

2007-08 142419.50 100

2008-09 181151.5 127.1

2009-10 340397 239.01

2010-11 205634 144.38

2011-12 181242 127.25

2012-13 181242 127.25

years2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

0 0

100127.1

239.01

144.38127.25 127.25

Trend of current liability

Series1 Series2

Interpretation :

The above table and trend shows the comparison of current liabilities and

2007-08 has been taken as a base year for comparison. The society had taken bank loan I

the year 2009-10 as a result liability increased compared to others hence society is

making good come back as a results it is reducing liability.


Net Assets:

2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

50

100

150

200

250

Net Assets

Trend (%)

Interpretation :

years Total assets Trend (%)

2007-08 27024332.94 100

2008-09 31703244 117.31

2009-10 37924281 140.33

2010-11 42658145 157.85

2011-12 49241894.84 182.21

2012-13 58324778.58 215.82


The above table indicates that there is increase in trend of net assets every year when compared and analyzed. 2007-08 has been taken as the base year for calculation.

Working Capital :

2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

50

100

150

200

250

working capital

Trend (%)

Here working capital of the society has been increasing from last 6 years. The trend percentage has been increasing year after year, hence we can suggest that society is doing good .

years Working Capital Trend (%)

2007-08 17968619 100

2008-09 20679899 115.08

2009-10 24746226 137.71

2010-11 29079309 161.83

2011-12 33947931 188.92

2012-13 39596550 220.36


Findings:

The society has a good track record of performance from past 6 years.

Society’s current assets are more than the current liabilities.

The working capital of the society is higher in 2012-13 and it is increasing

year by year.

The long term solvency position is not good.

Total deposits was constant from 2007 to 2011 , but now it has been increased

since 2012-2014 because of introduction of DBRF(Death benefits relief

fund).

Net profit of the society is increased every year.

The society is using equity capital more than debt .

Credit deposits position is not good.

No proper utilization of current assets.

Fixed assets are decreasing year by year.

Societies is providing 12% dividend from last 6 years.

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