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A

Summer Training Project Report

On

FINANCIAL ANALYSISI

OF

HDFC BANK

Submitted to : Kurukshetra University Kurukshetra

In the partial fulfillment of the requirement of the degree of

B.B.A

Under the Supervision of: Submitted by:

M ! Ramneet Kaur Sangeeta

Lecturer BBA "ina# $ear

Deptt! O" Commerce Ro## No! %&&&&&'()*+

GA !"I #$#%&IA' A(I% A' )*G+ ,%''$G$

A#BA'A ,A ((



*&$-A,$T,i project report pertain to t,e ma-ing o" a *&% $,( of B.B.A. /urri/ulum.

T,e purpo e o" t,i project i to ma-e t,e tu.ent to ,a/e t,oroug, -no0#e.ge o" t,e topic

gi/en to t,em! I #earne. a #ot "rom t,e ,ar. 0or- I put in to co##ect in"ormation regar.ing t,e

ame1 0,ic, 0ou#. 2e o" great u e in m$ near "uture a a pro"e iona#!

3u ti"ication cannot 2e .one to 0,ate/er I ,a/e #earnt 0it,in a "e0 page 2ut I ,a/e ti## trie.

m$ 2e t to co/er a muc, a po i2#e a2out 0Investors *er/eption &egarding 1arious

Investment Avenues Available at -inan/ial #arket2 in t,i report!

Being tu.ent o" Ma ter in Bu ine A.mini tration1 0e nee. to 2e a0are o" t,e

organi4ationa# interna# en/ironment!



,$&(I-I,A($

Certi"ie. t,at t,e training report project entit#e. 0-inan/ial Analysis of "!-,

Bank2 i an origina# piece o" re earc, 0or- .one 2$ #s. Sangeeta 1 Ro## No!

&&&&&'()*+ .uring t,e perio. o" ,er tu.$ un.er m$ gui.ance "or t,e a0ar. o"

t,e .egree o" Ba/helor of Business Administration )BBA+ !

Date5 M !Ramneet Kaur

P#ace5 Lecturer

Deptt! O" Commerce!



A,K %3'$!G$#$ (

Man$ #i/e 6 .e tinie are .e tro$e. .ue to t,e #ac- o" proper gui.ance1

.irection 6 opportunitie ! It i in t,i re pect I "ee# t,at I am in muc, 2etter

con.ition to.a$ .ue to continuou proce o" moti/ation 6 "ocu pro/i.e. 2$

our parent 1 "rien. 6 teac,er in genera#! T,e proce o" comp#etion o" t,i

project 0a a te.iou jo2 6 re7uire care"u# 6 upport at a## tage ! I 0ou#. #i-e

to ,ig,#ig,t t,e ro#e p#a$e. 2$ in.i/i.ua# to0ar. t,i !

Fir t#$ I am /er$ t,an-"u# to m$ parent an. "ami#$ mem2er "or pro/i.ing me upport in ma-ing t,i project report! I am eterna##$ grate"u# to

#r. asbir )"!-, Bank+ and #s &amneet Kaur )'e/turer4 G# )*G+

,ol

lege+ "or t,eir -in. upport! T,e$ 0ere m$ gui.ing "orce t,roug,out t,e

ma-ing o" t,i report!

Sangeeta



!$,'A&A(I%

I ,ere2$ .ec#are t,at t,e .i ertation entit#e. 0 ob Satisfa/tion2 u2mitte. "or

t,e B!B!A i m$ origina# 0or- an. t,e .i ertation ,a not "orme. t,e 2a i "or

t,e a0ar. o" an$ .egree1 .ip#oma1 a ociate ,ip1 "e##o0 ,ip or imi#ar ot,er

tit#e ! It ,a not 2een u2mitte. to an$ ot,er 8ni/er it$ or In titution "or t,e

a0ar. o" an$ .egree or .ip#oma!

Date5 Name5Sangeeta

P#ace5 Ro## No! 5&&&&&'()*+



,% ($ (S



,"A*($&56

I (&%!U,(I%



I (&%!U,(I%

Financia# tatement pre ent a ma comp#e9 .ata in a2 o#ute monetar$ term

an. re/ea# #itt#e a2out t,e #i7ui.it$1 o#/enc$ an. pro"ita2i#it$ o" t,e 2u ine ! In

"inancia# ana#$ i 1 t,e .ata gi/en in "inancia# tatement i c#a i"ie. into

imp#er group an. a compari on o" /ariou i ma.e 0it, one anot,er to pin

point t,e trong point in one group 0,i#e a## item re#ating to t,e current

#ia2i#itie are p#ace. in anot,er group1 t,e compari on 2et0een t,e t0o group

0i## pro/i.e u e"u# in"ormation

In the 7ords of -inney and #iller :

: Financia# ana#$ i con i t in eparating "act accor.ing to ome .e"inite p#an1

arranging t,em in group accor.ing to certain circum tance an. t,en pre enting t,em in a con/enient an. ea i#$ rea. an. un.er tan.a2#e "orm;!



*&%,$SS %- -I A ,IA' A A'8SIS

T,e "o##o0ing proce.ure i a.opte. "or t,e ana#$ i o" "inancia# tatement 5<

&= D>T>RMINATION OF >?T>NT OF ANALYSIS 5< Fir t o" a## an

ana#$ i ,a to .etermine t,e e9tent or cope o" ,i ana#$ i ! T,e e9tent o"

ana#$ i .epen. upon t,e o2ject o" ana#$ i ! T,e o2ject ma$ 2e t,e

a certainment o" "irm@ "inancia# po ition! >arning capacit$1 #i7ui.it$1

intere t1 pa$ing capacit$ etc! I" t,e o2ject i to a certain t,e earning

capacit$ o" t,e "irm t,e .ata or Pro"it an. #o Account 0i## 2e u e. an. i"

t,e o2ject i to a certain t,e "inancia# po ition or #i7ui.it$ o" t,e "irm1 t,e

.ata o" Ba#ance S,eet 0i## 2e u e.!

+= ST8DY OF FINANCIAL STAT>M>NTS 5< Be"ore ana#$4ing1 t,e

ana#$ t ,ou#. go t,roug, t,e /ariou "inancia# tatement o" t,e "irmcare"u##$! He ,ou#. a# o ac7uaint ,im e#" 0it, princip#e a.opte. 2$ t,e

"irm "or preparing t,e e tatement !

(= COLL>CTION OF OTH>R IMPORTANT INFORMATION 5< T,e

ana#$ t ,ou#. co##ect ot,er important in"ormation "rom t,e management1

0,ic, i u e"u#1 "or "inancia# tatement .o not re/ea# ana#$ i an. 0,ic,!

*= R>ARRAN >M>NT OF FI 8R>S 5< T,e ne9t tep i to rearrange an.c#a i"$ ot,er important "inancia# tatement in u e"u# manner! Item o"

imi#ar nature are groupe. at one p#ace! For e9amp#e a et are .i/i.e.

into "i9e. an. current a et an. #ia2i#itie are .i/i.e. into ,ort term an.

#ong term #ia2i#itie !

= APPRO?IMATION OF FI 8R>S 5< In or.er to "aci#itate ana#$ i 1 #arge

"igure are umme. up an. e9pre e. in appro9imate num2er at,ou an. 1 #ac 1 crore etc!



= COMPARISON 5< T,e ne9t tep i to compare t,e re#ate. c#a e o"

"igure ! For e9amp#e5 < current a et ma$ 2e compare. 0it, current

#ia2i#itie 1 "i9e. a et 0it, #ong term ource o" "un. 1 .e2t 0it, e7uit$

an. o on! Suc, compari on can a# o 2e ma.e on t,e 2a i o" "inancia#

tatement o" t,e "irm "or e/era# $ear !

Financia# tatement o" a "irm ma$ a# o 2e compare. 0it, t,e "inancia#

tatement o" t,e ot,er "irm o" imi#ar t$pe! For e""ecti/e ana#$ i o"

"inancia# tatement an$ o" t,e too# o" ana#$ i #i-e ratio ana#$ i 1 tren.

ana#$ i 1 common i4e tatement 1 "un. "#o0 tatement etc can 2e u e.!

'= ST8DY OF TR>NDS 5< On t,e 2a i o" compari on o" "inancia#tatement "or e/era# $ear 1 t,e "uture tren. o" important item are

e ta2#i ,e.! It can 2e a certaine. 0,et,er t,e a#e 1 pro"it 1 current a et 1

current #ia21 ,ort term 2orro0ing an. #ong term 2orro0ing etc are

increa ing or .ecrea ing! B$ a tu.$ o" tren. o" t,e e item 1 it can 2e

e timate. 0,et,er t,e 2u ine i progre ing u""icient#$ or not!

= INT>RPR>TATION 5< It re"er to .ra0ing conc#u ion on t,e 2a i o"a2o/e<mentione. proce.ure! Conc#u ion are .ra0n a2out t,e "inancia#

po ition1 pro"ita2i#it$1 e""icienc$ an. uc, ot,er a pect o" t,e

un.erta-ing!



,"A*($&59

&$S$A&," #$("%'%G8



%B $,(I1$S %& *U&*%S$ %- A A'8SIS %-

-I A ,IA' S(A($#$ (S.

&= TO KNOE TH> >ARNIN CAPACITY OF TH> B8SIN>SS 5<

Accor.ing to Ro2ert Ant,on$ : T,e o/era## o2jecti/e o" 2u ine i to

earn a ati "actor$ return on t,e "un. in/e te. in it1 con i tent 0it,

maintaining a oun. "inancia# po ition!; Financia# ana#$ i ,e#p in

a certaining 0,et,er a.e7uate pro"it are 2eing earne. on capita#

in/e te. in t,e 2u ine ! It i a# o .i c#o e. 2$ t,e ana#$ i o" "inancia#

tatement 0,et,er t,e e pro"it are increa ing or .ecrea ing o/er t,e

$ear or not!

+= TO KNOE TH> SOL >NCY 5< It can 2e a certaine. "rom t,e ana#$ i

0,et,er t,e 2u ine i in po ition to pa$ it ,ort an. #ong term #ia2 in

time! For e9amp#e1 t,e #i7ui.it$ ratio Gcurrent an. 7uic-= are ca#cu#ate.

to a certain 0,et,er t,e 2u ine enterpri e ,a u""icient #i7ui. "un. to

meet it ,ort term #ia2 an. .e2t e7uit$ ratio i ca#cu#ate. to a certain

0,et,er t,e 2u ine enterpri e ,a got t,e a2i#it$ to repa$ t,e #ong<term

#ia2i#itie !

(= TO KNOE TH> FINANCIAL STR>N TH 5< An important purpo e o"

"inancia# ana#$ i i to a e t,e "inancia# trengt, o" t,e 2u ine !

Ana#$ i ,e#p in pro/i.ing an 0er to t,e "o##o0ing 7ue tion 5

i= Fun. re7uire. "or t,e purc,a e o" ne0 mac,iner$ an.

e7uipment 0i## 2e a/ai#a2#e "rom interna# ource o" t,e

2u ine or not



ii= Ba e. on t,e current reputation o" t,e 2u ine 1 ,o0 muc,

"un. can 2e rai e. "rom e9terna# ource

*= TO MAK> COMPARATI > ST8DY EITH OTH>R FIRMS 5<

Anot,er purpo e o" "inancia# ana#$ i i to ,e#p t,e management to ma-e

a comparati/e tu.$ o" t,e pro"ita2i#it$ o" /ariou "irm engage. in ame

in.u tr$! Suc, compari on ,e#p t,e management to tu.$ t,e po ition o"

t,eir "irm in re pect o" a#e 1 e9pen e 1 pro"ita2i#it$ an. 0or-ing capita#

etc1 in compari on to ot,er "irm !

= TO KNOE TH> CAPABILITY OF PAYM>NT OF INT>R>ST AND

DI ID>ND5 < T,e purpo e o" ana#$ i i to a e 0,et,er t,e "irm 0i##,a/e u""icient "un. to pa$ amount o" intere t in time an. 0,et,er it ,a

t,e capacit$ to pa$ t,e .i/i.en. in 0,ic, a 2u ine i mo/ing!

= TO KNOE TH> TR>ND OF TH> B8SIN>SS 5< E,en .ata a2out

a#e 1 co t o" pro.uction1 pro"it 1 etc are compare. "or t0o or more $ear

o" a "irm1 t,e$ in.icate t,e .irection in 0,ic, a 2u ine i mo/ing!

'= TO KNOE TH> >FFICI>NCY OF MANA >M>NT 5 < T,e purpo e o""inancia# ana#$ i i to ju.ge t,at t,e "inancia# po#icie a.opte. 2$ t,e

mgt! Are proper or not! For e9amp#e1 i" t,e actua# ratio ca#cu#ate. on

2a i o" tatement are in accor.ance 0it, t,eir tan.ar. ratio 1 t,e

po#icie o" t,e mgt! Ma$ 2e ai. to 2e proper an. e""icient!

= TO PRO ID> 8S>F8L INFORMATION TO TH> MANA >M>NT5 <

T,e o2ject o" ana#$ i i to "in. out t,e ,ortcoming o" t,e 2u ine !



SIG I-I,A ,$ %& I#*%&(A ( %- A A'8SIS

%- -I A ,IA' S(A($#$ (S

ariou partie are intere te. in t,e "inancia# tatement o" a 2u ine .ue to

/ariou rea on ! B$ ana#$4ing t,e tatement eac, part$ can a certain 0,et,er

,i intere t i a"e or not! For e95 < a ,are,o#.er 0ou#. 2e intere te. in t,e

pro"ita2i#it$ 0,erea 1 a ,ort<term cre.itor 0ou#. 2e concerne. a2out t,e

#i7ui.it$ t,at i t,e "irm a2i#it$ to pa$ it current #ia2i#itie in time!

&= Signi"icance "or management5 < Management o" a "irm i a#0a$ intere te. to

-no0 t,e o#/enc$1 pro"ita2i#it$1 an. t,e capita# tructure o" t,e "irm! T,e$ 0ant

to ma-e ure t,at t,e 2u ine mu t 2e in o#/ent po ition to pa$ t,e .e2t a

an. 0,en t,e$ "a## .ue! Simi#ar#$1 t,e$ are intere te. not on#$ in t,e current

$ear pro"it 2ut a# o in capacit$ o" t,e 2u ine to earn more pro"it in "uture!In t,e 0or. o" >RST>RNB>R 5

JT,e management can mea ure t,e e""ecti/ene o" it o0n po#icie an.

.eci ion 1 .etermine t,e a./i a2i#it$ o" a.opting ne0 po#icie an. proce.ure

an. .ocument to o0ner 1 t,e re u#t o" t,eir manageria# e""ort !J

+= Signi"icance "or in/e tor 5 < In/e tor an. ,are,o#.er o" t,e 2u ine are

intere te. in t,e earning capacit$ an. t,e a"et$ o" t,eir in/e tment in t,e 2u ine ! Eit, t,e ,e#p !o" "inancia# ana#$ i t,e$ can ma-e compari on

2et0een t,e .i/i.en. pai. 2$ t,e compan$ an. t,e mar-et /a#ue o" t,e ,are !

(= Signi"icance "or cre.itor 5 < T,ere are + t$pe o" cre.itor G&= S,ort<term G+=

Long<term cre.itor !

S,ort<term cre.itor 0ant to -no0 t,e #i7ui.it$ o" t,e 2u ine t,at i to

-no0 0,et,er t,e 0i## ,a/e u""icient current a et an. ca , to pa$ t,eir .e2t

or not!



Long<term cre.itor 0ant to -no0 + t,ing name#$ GI= E,et,er t,e

compan$ 0i## 2e a2#e to pa$ t,e intere t con i tent#$! G+= E,et,er t,e compan$

0i## 2e a2#e to pa$ t,eir .e2t 0,en t,e$ "a## .ue!

*= Signi"icance "or go/ernment5 < o/ernment can ju.ge1 on t,e 2a i o"

ana#$ i o" "inancia# tatement 1 0,ic, in.u tr$ i progre ing on .e ire. #ine

an. 0,ic, in.u tr$ nee. t,e "inancia# ,e#p! o/ernment can a e a to 0,ic,

are t,e in.u trie 0,ere t,e pro"it margin are #o0 in compari on to t,e co t o"

pro.uction an. on t,e 2a i it can ta-e .eci ion to re.uce t,e e9i e .ut$ in

t,o e in.u trie != Signi"icance "or "inancia# in titution 5 < A## t,e "inancia# in titute 1 0,ic,

pro/i.e "inance to t,e in.u trie uc, a 2an- 1 in urance companie ! 8nit Tru t

etc 0ant to -no0 t,e pro"it earning capacit$ o" t,e 2u ine an. it #ong<term

o#/enc$!

= Signi"icance "or >mp#o$ee 5 < Ana#$ i o" "inancia# tatement ,e#p t,e

emp#o$ee in .etermining t,e true pro"it o" t,e 2u ine ! On t,e 2a i t,e$ cana certain a to ,o0 muc, 2onu an. increa e in t,eir 0age i po i2#e "rom

pro"it ! Ana#$ i o" "inancia# tatement a# o ,e#p t,e #a2our union in

negotiating 0age agreement !

'= Signi"icance "or toc- e9c,ange aut,oritie 5 < T,e$ ana#$4e t,e "inancia#

tatement o" t,e compan$ to .etermine it price earning ratio an. earning per

,are G>PS=!= Signi"icance "or ta9ation aut,oritie 5 < T,e$ ana#$4e t,e "inancia# tatement

o" a compan$ to -no0 0,et,er t,e tatement ,a/e 2een prepare. in accor.ance

0it, t,e #ega# pro/i ion an. 0,et,er t,e "igure o" pro.uction1 a#e an. pro"it

are correct "or t,e purpo e o" a e ment o" e9ci e .utie 1 a#e ta9 re pecti/e#$!

= Signi"icance "or re earc,er 5 < Ana#$ i o" "inancia# tatement o" a compan$

i o" muc, importance to a re earc,er 0,o i con.ucting re earc, in re pect o"

t,at compan$!



($," I U$S US$! -%& A A'8SIS

&= Comparati/e Financia# Statement

+= Common i4e

(= Tren. Ana#$ i !

*= Ratio Ana#$ i !

= Ca , F#o0 Statement

&= COMPARATI > FINANC#AL STAT>M>NT5

E,en "inancia# tatement "igure "or t0o or more $ear are p#ace. i.e 2$i.e to "aci#itate compari on1 t,e e are ca##e. Comparati/e Financia# Statement !

Suc, tatement not on#$ ,o0 t,e a2 o#ute "igure o" /ariou $ear 2ut a# o

pro/i.e "or co#umn to in.icate t,e increa e or .ecrea e in t,e e "igure "rom

one $ear to anot,er! In a..ition1 t,e e tatement ma$ a# o ,o0 t,e c,ange

"rom one $ear to anot,er in percentage "orm! Suc, comparati/e tatement are

o" great /a#ue in "orming t,e opinion regar.ing t,e progre o" t,e 2u ine

*urpose or utility or importan/e of ,omparative Statements.

&= TO MAK> TH> DATA SIMPL>R AND MOR> 8ND>RSTANDABL>5 <

T,e main aim o" preparing comparati/e "inancia# tatement i to put t,e .ata

"or t,e num2er o" $ear in imp#er an. compara2#e "orm! E,en .ata "or anum2er o" $ear are put i.e 2$ i.e in a comparati/e "orm it 2ecome ea ier to

un.er tan. t,em an. t,e conc#u ion regar.ing t,e pro"ita2i#it$ an. "inancia#

po ition o" t,e concern can 2e .ra0n /er$ ea i#$!

&=(% I !I,A($ ("$ (&$ ! : < Comparati/e "inancia# tatement

in.icate t,e tren. o" c,ange 2$ putting t,e "igure o" pro.uction1 a#e 1

e9pen e 1 pro"it 1 etc "or a no! O" $ear i.e 2$ i.e!



+= % I !I,A($ ("$ S(&% G *%I (S A ! 3$AK *%I (S %-

("$ ,% ,$& : 5 Compari on o" "inancia# tatement "or a num2er

o" $ear ma$ a# o in.icate t,e trong an. 0ea- point o" t,e "irm!

;+ (% ,%#*A&$ ("$ -I&#<S *$&-%&#A ,$ 3I(" ("$

A1$&AG$ *$&-%&#A ,$ %- ("$ I !US(&8:

Comparati/e "inancia# tatement ,e#p a 2u ine unit to compare

it per"ormance 0it, t,e a/erage per"ormance o" t,e in.u tr$!

*= (% "$'* I -%&$,AS(I G : 5 Comparati/e tu.$ o" t,e

c,ange in t,e -e$ "igure o/er a perio. ,e#p t,e management in"oreca ting t,e pro"ita2i#it$ an. "inancia# oun.ne o" t,e 2u ine

-%&#S %- *&$S$ (I G ,%#*A&A(I1$ S(A($#$ (S

In comparati/e tatement .ata ma$ 2e pre ente. in an$ o" t,e "o##o0ing "orm 5G&=To ,o0 on#$ t,e a2 o#ute .ata o" /ariou item or in ot,er 0or. to

,o0 on#$ rupee amount o" /ariou item ! For e9amp#e1 a#e in & +

0ere +)) )) an. & ( 0a + ))))! !

G+=To ,o0 t,e increa e an. .ecrea e in .ata in term o" mone$ /a#ue !

For e9amp#e1 in compari on to & + t,e a#e in & ( increa e. 2$

R ! ))))!G(=To ,o0 t,e increa e an. .ecrea e in .ata in term o" mone$ /a#ue !

For e9amp#e5 < in compari on to & + t,e a#e in & ( increa e. 2$

+ !

G*=COMPARISON >?PR>SS>D IN RATIO5 < Sometime an a..itiona#

co#umn i pro/i.e. in t,e comparati/e tatement to ,o0 t,e c,ange

o/er t,e $ear in term o" ratio! In or.er to ca#cu#ate "inancia#



tatement to ,o0 t,e c,ange o/er t,e $ear in term o" ratio! Ratio

o" more t,an I 0i## in.icate an increa e 0,i#e a ratio o" #e t,an &

$ear 0i## in.icate a .ecrea e in t,e current $ear in compari on to t,e

pre/iou $ear! For e9amp#e5< i" t,e a#e in & + are R ! +)) )) an.

a#e in & ( are R ! + )))) t,e ratio 0i## 2e5

+ )))) +)) )) &!+

G =8S> OF C8M8LATI > FI 8R>S AND A >RA >S5 < For

e9amp#e a#e in & )1 & &1 & + 6 & ( 0ere R +&))))1

& ))))1+)) ))1+ ))))!

A/erage Sa#e *))))) * +&))))!

,%#*A&A(I1$ BA'A ,$ S"$$(

T,e comparati/e 2a#ance ,eet a on t0o or more .i""erent .ate can 2e

prepare. to ,o0 t,e increa e or .ecrea e in /ariou a et 1 #ia2i#itie 1 an.

capita#!! Suc, a comparati/e 2a#ance ,eet i /er$ u e"u# in tu.$ing t,e tren.in a 2u ine enterpri e!

• A ing#e $ear 2a#ance ,eet ,o0 on#$ t,e 2a#ance o" account on a

particu#ar .ate 0,erea comparati/e 2a#ance ,eet ,o0 not on#$ t,e

2a#ance o" account on .i""erent .ate 2ut a# o t,e e9tent o" increa e or

.ecrea e in /ariou item o" 2a#ance ,eet!• In a ing#e $ear 2 t,e "ocu i on i4e or tatu o" /ariou item 0,erea in

a comparati/e 2 emp,a i i on c,ange in t,e i4e o" t,e e item !

• A comparati/e 2 ena2#e a "inancia# ana#$ t to tu.$ t,e nature1 i4e1 an.

.irection o" c,ange preci e#$ a compare. to ing#e $ear 2 !

• T,e comparati/e 2 i a connecting #in- 2et0een t,e income tatement an.

t,e 2 1 2ecau e t,e income tatement pre ent t,e re u#t o" operating



acti/itie o" a 2u ine 0,erea t,e comparati/e 2 ,o0 t,e e""ect o"

operating acti/itie on it a et 1 #ia2i#itie 1 an. capita#!

T,e increa e in current #ia2i#itie o" t,e ame amount 0i## not ,o0 an$

impro/ement in t,e ,ort<term "inancia# po ition! A tu.ent ,ou#. tu.$ t,e

increa e or .ecrea e in current a et an. current #ia2i#itie an. t,i 0i## ena2#e

,im to ana#$4e t,e current "inancia# po ition!

T,e econ. a pect1 0,ic, ,ou#. 2e tu.ie. in current "inancia# po ition1

i t,e #i7ui.it$ po ition o" t,e concern! I" #i7ui. a et #i-e ca , in ,an.1 ca , at

Ban-1 2i## recei/a2#e 1 .e2tor 1 etc! ,o0 an increa e in t,e econ. $ear o/er t,e

"ir t $ear1 t,i 0i## impro/e t,e r #i7ui.it$ po ition o" t,e concern! T,e increa ein in/entor$ can 2e on account o" accumu#ation o" toc- "or 0ant o" cu tomer 1

.ecrea e in .eman. or ina.e7uate a#e promotion e""ort ! An increa e in

in/entor$ ma$ increa e 0or-ing capita# o" t,e 2u ine 2ut it 0i## not 2e goo.

"or t,e 2u ine !

G+= T,e #ong<term "inancia# po ition o" t,e concern can 2e ana#$4e. 2$

tu.$ing t,e c,ange in "i9e. a et 1 #ong<term #ia2i#itie an. capita#! T,e proper "inancia# po#ic$ o" concern 0i## 2e to "inance "i9e. a et 2$ t,e i ue o"

eit,er #ong<term ecuritie uc, a .e2enture 1 2on. 1 #oan "rom "inancia#

in titution or i ue o" ,are capita#! An increa e in "i9e. a et ,ou#. 2e

compare. to t,e increa e in #ong<term #oan an. capita#! I" t,e increa e in "i9e.

a et i more t,an t,e increa e in #ong term ecuritie t,en part o" "i9e. a et

,a 2een "inance. "rom t,e 0or-ing capita#! In t,e ot,er ,an.1 i" t,e increa e in#ong<term ecuritie i more t,an t,e increa e in "i9e.<a et t,en "i9e. a et

,a/e not on#$ 2een "inance. "rom #ong<tern ource 2ut part o" 0or-ing capita#

,a a# o 2een "inance. "rom #ong<term ource ! A 0i e po#ic$ 0i## 2e "inance

"i9e. a et 2$ rai ing #ong<term "un. !

T,e nature o" a et 1 0,ic, ,a/e increa e. or .ecrea e.1 ,ou#. a# o 2e

tu.ie. to "orm an. opinion a2out t,e "uture pro.uction po i2i#itie ! T,e

increa e in p#ant an. mac,iner$ 0i## increa e pro.uction capacit$ o" t,e



concern! On t,e #ia2i#itie i.e1 t,e increa e in #oane. "un. 0i## mean an

increa e in intere t #ia2i#it$ 0,erea an increa e in ,are capita# 0i## not

increa e an$ #ia2i#it$ "or pa$ing intere t! An opinion a2out t,e #ong<term

"inancia# po ition ,ou#. 2e "orme. a"ter ta-ing into con i.eration a2o/e<

mentione. a pect !

G(= T,e ne9t a pect to 2e tu.ie. in a comparati/e 2a#ance ,eet 7ue tion

i t,e pro"ita2i#it$ o" t,e concern! T,e tu.$ o" increa e or .ecrea e in

retaine. earning 1 /ariou re ource an. urp#u e 1 etc! 0i## ena2#e t,e

interpreter to ee 0,et,er t,e pro"ita2i#it$ ,a impro/e. or not! An

increa e in t,e 2a#ance o" Pro"it an. Lo Account an. ot,er re ourcecreate. "rom pro"it 0i## mean an increa e in pro"ita2i#it$ to t,e

concern! T,e .ecrea e in uc, account ma$ mean i ue o" .i/i.en.1

i ue o" 2onu ,are or .eterioration in pro"ita2i#it$ o" t,e concern!

G*= A"ter tu.$ing /ariou a et an. #ia2i#itie an opinion ,ou#. 2e

"orme. a2out t,e "inancia# po ition o" t,e concern! One cannot a$ i" ,ort<term

"inancia# po ition i goo. t,en #ong<term "inancia# po ition 0i## a# o 2e goo. or/ice</er a! A conc#u.ing 0or. a2out t,e o/era## "inancia# po ition mu t 2e

gi/en at t,e en.!

ui.e#ine "or interpretation o" Comparati/e Ba#ance S,eet5<

E,i#e interpreting o" Comparati/e Ba#ance S,eet t,e interpreter i

e9pecte. to tu.$ t,e "o##o0ing a pect 5

G&= Current "inancia# po ition an. #i7ui.it$ po ition!

G+= Long<term "inancia# po ition!

G(= Pro"ita2i#it$ o" t,e concern!

G&= For tu.$ing current "inancia# po ition or ,ort<term

"inancia# po ition o" t,e concern1 one ,ou#. ee t,e 0or-ing

capita# in 2ot, t,e $ear ! T,e e9ce o" current a et o/er



current #ia2i#itie 0i## gi/e t,e e9act "igure o" t,e 0or-ing

capita#! T,e increa e in 0or-ing capita# 0i## mean

impro/ement in t,e current "inancia# po ition o" t,e

2u ine ! Increa e in< current a et accompanie. 2$



,AS" -'%3 S(A($#$ (

A ca , "#o0 tatement i a tatement in"#o0 an. out"#o0 o" ca , .uring

a particu#ar perio.! In ot,er 0or. 1 it i a ummar$ o" ource an. app#ication

o" ca , .uring a particu#ar pan o" time! It ana#$4e t,e rea on "or c,ange in

2a#ance o" ca , 2et0een t,e t0o 2a#ance ,eet .ate ! T,e term ca , ,ere

tan. "or ca , an. ca , e7ui/a#ent !

A ca , "#o0 tatement i not /er$ muc, .i""erent to "un. "#o0 tatement!

T,e on#$ .i""erence i t,at in a "un. "#o0 tatement t,e term "un. i u e. to

mean t,e 0or-ing capita# 0,i#e preparing ca , "#o0 tatement i prepare. to

tu.$ t,e c,ange in 0or-ing capita# o" t,e "irm! It .oe not .i c#o e t,e ource1

0,ic, 2ring in ca a an. app#ication 1 0,ic, cau e out"#o0 o" ca ,! T,ere"ore1

a ca , "#o0 tatement i prepare. an. t,i e9p#ain t,e cau e o" c,ange in t,e

ca , 2a#ance o" t,e "irm 2$ ,o0ing t,e ource o" ca , receipt an. t,e

purpo e "or 0,ic, pa$ment 0ere ma.e! A uc, t,e ca , "#o0 tatement i a# oca##e. a J Statement o" c,ange in "inancia# po ition ca , 2a i or a "un. "#o0

tatement 2a i J!

A ca , "#o0 tatement can 2e "or t,e pa t or can 2e projecte. "or a "uture

perio.!



%B $,(S %& US$S %- ,AS" -'%3 S(A($#$ (

T,e main o2jecti/e 2e,in. preparing a ca , "#o0 tatement can 2e #ai.

.o0n a un.er5

G&= 8S>F8L FOR SHORT T>RM FINANCIAL PLANNIN 5 < A ca , "#o0

tatement pro/i.e in"ormation "or p#anning t,e ,ort<term "inancia# nee. o"

t,e "irm! Since it pro/i.e in"ormation regar.ing t,e ource an. t,e uti#i4ation

o" ca , .uring a perio.1 it 2ecome ea ier "or t,e management !&) a e

0,et,er it 0i## ,a/e a.e7uate ca , to meet .a$ + .a$ e9pen e an. pa$ t,e

cre.itor in time1 to pa$ #ong term #oan an. intere t t,ereon!

G+= 8S>F8L IN PR>PARIN CASH! B8D >T5 < A ca , "#o0 tatement

prepare. "or t,e "uture perio. i ,e#p"u# in preparing a ca , 2u.get! It in"orm

t,e management a2out t,e urp#u or .e"icit perio. o" ca ,1 t,at i 1 in 0,ic,

mont, t,e pa$ment 0i## 2e in e9ce o" receipt !

G(= COMPARISON EITH TH> CASH B8D >T5 < A ca , 2u.get i prepare.at t,e commencement o" t,e $ear 0,erea a ca , "#o0 tatement i prepare. at

t,e en. o" t,e $ear! A compari on 2et0een t,e t0o ,e#p in a certaining t,e

e9tent to 0,ic, t,e "inancia# re ource o" t,e "irm ,a/e 2een generate. an. u e.

accor.ing to t,e p#an!

G*= ST8DY OF TH> TR>ND OF CASH R>C>IPTS AND PAYM>NTS5 < A

ca , "#o0 tatement re/ea# t,e pee. at 0,ic, t,e ca , i 2eing generate. "rom.e2tor 1 toc- an. ot,er current a et at t,e pee. at 0,ic, t,e current

#ia2i#itie are<2eing pai.!!

G = IT >?PLAINS TH> D> IATIONS! OF TH> CASH FROM >ARNIN S5 <

A "irm1 ma$ earn ,uge pro"it $et it ma$ ,a/e paucit$ o" ca , or 0,en it

u""ere. a #o it ma$ ti## ,a/e p#ent$ o" ca ,!



G = H>LPF8L IN MAKIN DI ID>ND D>CISIONS5 <! Hence t,e

management ta-e t,e ,e#p o" ca , "#o0 tatement to a certain t,e po ition o"

ca , generate. "rom operation 1 0,ic, can 2e u e. "or pa$ment o" .i/i.en.!

'I#I(A(I% S %- ,AS" -'%3 S(A($#$ (

It .oe not pre ent t,e true picture o" t,e #i7ui.it$ o" t,e "irm 2ecau e t,e

#i7ui.it$ .oe not .epen. upon ca , a#one! Li7ui.it$ a# o .epen. upon

t,o e a et 1 0,ic, can 2e con/erte. into ca , ea i#$! >9c#u ion o" t,e e

a et o2 truct t,e true reporting o" t,e a2i#it$ o" t,e "irm to meet it

#ia2i#itie 0,en t,e$ 2ecome .ue "or pa$ment!

T,e po i2i#it$ o" 0in.o0 .re ing i ,ig,er in ca e o" ca , po ition in

compari on to t,e 0or-ing capita# po ition o" a "irm! T,e ca , 2a#ance

can 2e ea i#$ maneu/ere. 2$ po tponing purc,a e an. ot,er pa$ment

an. 2$ rapi.#$ co##ecting ca , "rom .e2tor 2e"ore t,e 2a#ance ,eet .ate!

Ca , "#o0 tatement ignore non<ca , c,arge ! Hence1 a ca , "#o0

tatement cannot ju.ge t,e true po ition o" an enterpri e!



,"A*($& 5;

I !US(&8 *&%-I'$



,"A*($&5=

,%#*A 8 *&%-I'$



*&%,$!U&$ %- *&$*A&I G ,AS" -'%3 S(A($#$ ( !

T,e In titute o" C,artere. Accountant o" In.ia ,a i ue. Accounting

tan.ar. GAS<(= Re/i e.1 "or preparing a ca , "#o0 tatement! T,i Accounting

Stan.ar. ,a 2een ma.e man.ator$ in re pect o" accounting perio.

commencing on or a"ter & t Apri# +))'1 "or a certain enterpri e! T,e e

enterpri e are5

&! >nterpri e 0,o e e7uit$ or .e2t ecuritie are #i te. on a recogni4e. toc-

e9c,ange in In.ia an. enterpri e t,at i in t,e proce o" i uing e7uit$ or .e2t

ecuritie t,at 0i## 2e #i te. on a recogni4e. toc- e9c,ange in In.ia!

&! A## ot,er commercia#1 in.u tria# an. 2u ine enterpri e 1 0,o e turno/er

"or t,e accounting perio. e9cee. R ! ) crore!

A Suc,1 t,e ca , "#o0 tatement ,a 2een prepare. accor.ing to AS<

( re/i e.!

Accor.ing to AS<( Re/i e.1 t,e ca , "#o0 tatement ummari4e t,e ca ,in"#o0 an. out"#o0 an. t,e net c,ange Gincrea e or .ecrea e = in ca ,

an. ca , e7ui/a#ent re u#ting "rom operating1 in/e ting1 an. "inancing

acti/itie o" a "irm .uring a perio.!

,AS": < It compri e ca , in ,an. an. .eman. .epo it 0it, 2an- !

,AS" $ UI1A'$ (S:. 5 T,e e are ,ort term1 ,ig,#$ #i7ui.

in/e tment t,at are rea.i#$ con/erti2#e into -no0n amount o" ca , an.

0,ic, pre ent in igni"icant ri - o" c,ange in t,eir /a#ue ! Norma##$ an

in/e tment 0i## 2e terme. a ca , e7ui/a#ent on#$ i" it ,a ,ort maturit$

perio.1 a$ t,ree mont, or #e 1 "rom t,e .ate o" it ac7ui ition ! For

e9amp#eTrea ur$ 2i## 1 commercia# paper etc!



,'ASSI-I,A(I% %- ,AS" -'%3S:5 accor.ing to AS<( Gre/i e.=1

a ca , "#o0 tatement ,ou#. 2e pre ente. in a manner t,at it report

in"#o0 an. out"#o0 o" ca , 2$ c#a i"$ing t,em into t,ree categorie 1

name#$5 operating1 in/e ting an. "inancing acti/itie ! c#a i"ication o" a##

acti/itie into t,e e t,ree categorie ,e#p t,e u er o" ca , "#o0

tatement to a e t,e e""ect o" t,e e! acti/itie on ca , an. ca ,

e7ui/a#ent o" t,e enterpri e! Suc, in"ormation 0i## 2e ,e#p"u# in

e/a#uating t,e re#ation ,ip among t,e e t,ree acti/itie ! t,e e t,ree

acti/itie are e9p#aine. a 2e#o05

6+ ,AS" -'%3S -&%# %*$&A(I G A,(I1I(I$S :

Operating acti/itie !are t,e main re/enue generating acti/itie o" an

enterpri e! a uc,1 t,e$ inc#u.e ca , "#o0 "rom t,o e tran action an.

e/ent 1 0,ic, enter into t,e a certainment o" net pro"it or #o o" t,e

enterpri e!e9am#e o" ca ,< "#o0 ari ing "rom operating acti/itie 1 are5a= Ca , receipt "rom t,e ate o" goa. an. ren.ering o" er/ice

2= Ca , receipt "rom #o$a#itie 1 "ee 1 commi ion an. ot,er re/enue

c= Ca , pa$ment to upp#ier "or goo. an. er/ice

.= Ca , pa$ment to an. on 2e,a#" o" emp#o$ee

e= Ca , receipt an. ca , pa$ment o" an in urance enterpri e "or

Premium an. c#aim 1 annuitie an. ot,er po#ic$ 2ene"it"= Ca , pa$ment or re"un. o" income ta9e un#e t,e$ can 2e

peci"ica##$ i.enti"ie. 0it, "inancing an. in/e ting acti/itie an.

g= Ca , receipt an. pa$ment re#ating to "uture contract 1 "or0ar.

contract 1 option contract an. 0ap contract 0,en t,e contract are

,e#. "or .ea#ing or tra.ing purpo e !



9+ ,AS" -'%3S -&%# I 1$S(I G A,(I1I(I$S :

In/e ting acti/itie inc#u.e t,e purpo e an. a#e o" #ong term a et uc,

a #an.1 2ui#.ing 1 p#ant an. mac,iner$ etc! not ,e#. "or re a#e! T,e e

acti/itie a# o inc#u.e t,e purc,a e an. a#e o" uc, in/e tment 1 0,ic,

are not inc#u.e. in ca , e7ui/a#ent ! Ca , "#o0 "rom in/e ting acti/itie

.i c#o e t,e e9pen.iture incurre. "or re ource inten.e. to generate

"uture income an. ca , "#o0 ! >9amp#e o" ca , "#o0 ari ing "rom

in/e ting acti/itie are5

a= Ca , pa$ment to ac7uire "i9e. a et Ginc#u.ing intangi2#e= an. a# o

pa$ment "or capita#i4e. re earc, an. .e/e#opment co t an. e#" "con tructe. "i9e. a et ! !

2= Ca , receipt "rom a#e o" "i9e. a et Ginc#u.ing intangi2#e =

c= Ca , pa$ment to ac7uire ,are 1 0arrant or .e2t in trument o" ot,er

enterpri e Got,er t,an pa$ment "or t,o e in trument con i.ere. to 2e

ca , e7ui/a#ent =

.= Ca , receipt "rom a#e o" ,are 1 0arrant or .e2t in trument o" ot,erenterpri e Got,er t,an pa$ment "or t,o e in trument con i.ere. to 2e

ca , e7ui/a#ent =

e= Ca , a./ance an. #oan ma.e to t,ir. partie Got,er t,an a./ance

an. #oan ma.e 2$ "inancia# enterpri e =

"= Ca , receipt "rom t,e repa$ment o" a./ance an. #oan ma.e to t,ir.

partie Got,er t,an a./ance an. #oan o" a "inancia# enterpri e=g= Ca , pa$ment "or "uture contract 1 "or0ar. contract 1 option contract

an. 0ap contract 0,en e9cept 0,en t,e contract are ,e#. "or .ea#ing

or tra.ing purpo e < or t,e pa$ment are c#a i"ie. a "inancia# acti/itie

G,= Ca , receipt "rom "uture contract 1 "or0ar. contract 1 option

contract an. 0ap contract e9cept 0,en t,e contract are ,e#. to

.ea#ing or tra.ing purpo e 1 or t,e pa$ment are c#a i"ie. a "inancia#

acti/itie



i= Ca , receipt o" in urance c#aim "or propert$ in/o#/e. in acci.ent an.

ii= Ca , receipt o" intere t an. .i/i.en.

);+ ,AS" -'%3S -&%# -I A ,I G A,(I1I(I$S:

Financing acti/itie are t,e acti/itie t,at re u#t in c,ange in capita# an.

2orro0ing o" t,e enterpri e ! >9amp#e o" ca , "#o0 ari ing "rom "inancing

acti/itie are5

a= Ca , receipt "rom i uing ,are ot ot,er imi#ar in trument

2= Ca , receipt "rom i uing .e2enture 1 #oan 1 note 1 2on. an. ot,er ,ortterm or #ong<term 2orro0ing

c= Ca , repa$ment o" amount 2orro0e.1 2u$<2ac- o" e7uit$ ,are 1

re.emption o" pre"erence ,are 1 De2enture 1 note 1 2on. etc!1 an.

G.= Ca , repa$ment o" intere t an. .i/i.en.!



S%#$ S*$,IA' I($#S:

)i+ I ($&$S( A ! !I1I!$ !S:5 Ca , in"#o0 "rom intere t an. .i/i.en.

an. ca , out"#o0 on account O" intere t an. .i/i.en. ,ou#. 2e .i c#o e.

eparate#$! Ca , in"#o0 ari ing "rom intere t an. .i/i.en. recei/e. ,ou#. 2e

,o0n a ca , "#o0 "rom in/e ting acti/itie 0,erea ca , out"#o0 on account

o" intere t an. .i/i.en. pai. ,ou#. 2e ,o0n a ca , "#o0 "rom "inancing

acti/it$!

)ii+ (A>$S % I ,%#$:5 Ta9 pai. on income i a part o" ca , "#o0 "rom

operating acti/it$! Hence1 ta9e pai. are ,o0n a a .e.uction un.er ca , "#o0"rom operating acti/itie !

)iii+ $>(&A%&!I A&8 I($#S:5 Ca , "#o0 re#ating to e9traor.inar$ item

uc, a 2a. .e2t reco/ere.1 c#aim recei/e. "rom in urance companie 1

0inning o" a #otter$ or a #a0 uit etc! ,ou#. 2e .i c#o e. eparate#$ a ari ing

"rom operating1 in/e ting or "inancing acti/itie ! For e9amp#e1 t,e amount

recei/e. "rom in urance compan$ on account o" #o o" toc- 2$ "ire1eart,7ua-e1 "#oo. etc! ,ou#. 2e reporte. a ca , "#o0 "rom operating

acti/itie !

)iv+ SIG I-I,A ,$ % 5,AS" (&A SA,(I% S:5 T,ere are ome

in/e ting an. "inancing acti/itie 0,ic, .o not re7uire t,e u e o" ca , or ca ,

e7ui/a#ent ! Suc, non<ca , acti/itie ,ou#. 2e e9c#u.e. "rom t,e ca , "#o0

tatement! >9amp#e are5 t,e ac7ui ition or a et 2$ i ue o" .e2enture or,are 1 con/er ion o" .e2enture into ,are etc! Suc, igni"icant non<ca ,

tran action ,ou#. 2e .i c#o e. out i.e t,e ca , "#o0 tatement!



Ca , F#o0 Statement "or t,e $ear

en.ing<<<<<<<<<<<<<<<

A! Ca , "#o0 "rom Operating Acti/itie 5

Net pro"it 2e"ore ta9 an. e9traor.inar$

Item 5

A.ju tment "or 5

Depreciation

Foreign e9c,ange

Lo on a#e o" "i9e. a et

ain on a#e o" "i9e. a et Intere t pai.

Intere t recei/e.

Operating pro"it 2e"ore 0or-ing capita#

C,ange

A.. 5 Decrea e in Current A et Increa e in Current Lia2i#itie

Le 5 Increa e in Current A et

Decrea e in Current Lia2i#itie

Ca , generate. "rom operatingacti/itie

Income Ta9 Pai.

Ca , "#o0 2e"ore e9traor.inar$

C! Ca , "#o0 "rom Financing

Acti/itie 5

Procee. "rom i ue o" ,are capita#

Procee. "rom #ong term 2orro0ing



Repa$ment o" #ong term 2orro0ing

Intere t pai.

Di/i.e. pai.

Net ca , "rom "inancing acti/itie

Net Increa e Gor .ecrea e= in ca , in

ca , an. ca , e7ui/a#ent

GA B C= Ca , an. ca , e7ui/a#ent at t,e

2eginning o" t,e perio. Ca , an. ca ,

e7ui/a#ent at t,e en. o" t,e perio.



Item

G = or G<= >9traor.inar$ item

Net ca , "rom Operating Acti/itie

B! Ca , "#o0 "rom In/e ting Acti/itie 5

Purc,a e o" "i9e. a et

Sa#e o" "i9e. a et

Purc,a e o" in/e tment G#ong<term=

Sa#e o" in/e tment G#ong term= In/e t recei/e.

Di/i.en. recei/e.

Net ca , "rom in/e ting acti/itie



(&$ ! A A'8SIS 5

T,e "inancia# tatement ma$ 2e ana#$ e. 2$ computing tren. o" erie

o" in"ormation! T,i met,o. .etermine t,e .irection up0ar. or .o0n0ar.

an. in/o#/e t,e computation o" t,e percentage re#ation ,ip t,at eac, tatement

item 2ear to t,e ame item in 2a e $ear! T,e in"ormation "or a num2er o" $ear

i ta-en up an. one $ear1 genera##$ t,e "ir t $ear1 i ta-en a a 2a e $ear! T,e

"igure o" t,e 2a e $ear are ta-en a &)) an. tren. ratio "or ot,er $ear are

ca#cu#ate. on t,e 2a i o" 2a e $ear! T,e ana#$ t i a2#e to ee t,e tren. o"

"igure 1 0,et,er up0ar. or .o0n0ar.! For e9amp#e1 i a#e "igure "or t,e $ear& to & ) are to 2e tu.ie.1 t,en a#e o" & 0i## 2e ta-en a &)) an. t,e

percentage o" a#e "or a## ot,er $ear 0i## 2e ca#cu#ate. in re#ation to t,e 2a e

$ear1 i!e!1 & ! Suppo e t,e "o##o0ing tren. are .etermine.!

& &))

& &+)& ' &&)

& &+

& &(

& ) &*)

T,e tren. o" a#e ,o0 t,at a#e ,a/e 2een more in a## t,e $ear ince& ! T,e a#e ,a/e ,o0n an up0ar. tren. e9cept in & ' 0,en a#e 0ere

#e t,an t,e pre/iou $ear i!e!1 & ! A minute tu.$ o" tren. ,o0 t,at rate o"

increa e in a#e i #e in t,e $ear & an. & )! T,e increa e in a#e i &

in & a compare. to & ' an. increa e i &) in & a compare. to &

an. in & ) a compare. to & ! T,oug, t,e a#e are more a compare. to

t,e 2a e $ear 2ut ti## t,e rate o" increa e ,a not 2een con tant an. re7uire t,e

tu.$ 2$ comparing t,e e tren. to ot,er item #i-e co t o" pro.uction1 etc!





,%##% 5SI?$ S(A($#$ (:

T,e common< i4e tatement 1 2a#ance ,eet an. income tatement1 are

,o0n in ana#$tica# percentage ! T,e "igure are ,o0n a percentage o" tota#

a et 1 tota# #ia2i#itie an. tota# a#e ! T,e tota# a et are ta-en a &)) an.

.i""erent a et are e9pre e. a a percentage o" t,e tota#! Simi#ar#$1 /ariou

#ia2i#itie are ta-en a a part o" tota# #ia2i#itie ! T,e e tatement are a# o -no0n

a component percentage or &)) per cent tatement 2ecau e e/er$ in.i/i.ua#

item i tate. a a percentage o" t,e tota# &))! T,e ,ortcoming in comparati/e

tatement an. tren. percentage 0,ere c,ange in item cou#. not 2e compare.

0it, t,e tota# ,a/e 2een co/ere. up! T,e ana#$ t i a2#e to a e t,e "igure inre#ation to tota# /a#ue ! T,e common i4e tatement ma$ 2e prepare. in t,e

"o##o0ing 0a$5

G&= T,e tota# o" a et or #ia2i#itie are ta-en a &))!

G+= T,e in.i/i.ua# a et are e9pre e. a a percentage o" tota# a et i!e!1 &))

an. .i""erent #ia2i#itie are ca#cu#ate. in re#ation to tota# #ia2i#itie ! For e9amp#e1i" tota# a et are R ! #ac an. in/entor$ /a#ue i R ! )1 )))1 t,en it 0i## 2e

&) o" t,e tota# a et

,%##% 5SI?$ BA'A ,$ S"$$(:

A tatement in 0,ic, 2a#ance ,eet item are e9pre e. a t,e ratio o" eac, a et

to tota# a et an. t,e ratio o" eac, #ia2i#it$ i e9pre e. a a ratio o" tota#

#ia2i#itie i ca##e. common i4e 2a#ance ,eet! For e9amp#e1 "o##o0ing a et

are ,o0n in a common< i4e 2a#ance ,eet5



R PercentageCa , in ,an. an. at 2an- 1))) +! )Sun.r$ .e2tor +)1))) &)!))Stoc- + 1))) &+! )

Lan. an. Bui#.ing )1))) + !))P#ant an. Mac,iner$ &1))1))) )!))Tota# A et +1))1))) &))!))

T,e tota# "igure o" a et R ! +1))1))) i ta-en a &)) an. a## ot,er a et

are e9pre e. a a percentage o" tota# a et ! T,e re#ation o" eac, a et to tota#

a et i e9pre e. in t,e tatement! T,e re#ation o" eac, #ia2i#it$ to tota#

#ia2i#itie i imi#ar#$ e9pre e.!

T,e common< i4e 2a#ance ,eet can 2e u e. to compare companie o".i""ering i4e! T,e compari on o" "igure in .i""erent perio. i not u e"u#

2ecau e tota# "igure ma$ 2e a""ecte. 2$ a num2er o" "actor ! It i not po i2#e

to e ta2#i , tan.ar. norm "or /ariou a et ! T,e tren. o" "igure "rom $ear to

$ear ma$ not 2e tu.ie. an. e/en t,e$ ma$ not gi/e proper re u#t !

,%##% SI?$ I ,%#$ S(A($#$ (:

T,e item in income tatement can 2e ,o0n a percentage o" a#e to

,o0 t,e re#ation o" eac, item to a#e ! A igni"icant re#ation ,ip can 2e

e ta2#i ,e. 2et0een item o" income tatement an. /o#ume o" a#e ! T,e

increa e in a#e 0i## certain#$ increa e e##ing e9pen e an. not a.mini trati/e

or "inancia# e9pen e ! In ca e t,e /o#ume o" a#e increa e to a con i.era2#e

e9tent1 a.mini trati/e an. "inancia# e9pen e ma$ go up! In ca e t,e a#e are

.ec#ining1 t,e e##ing e9pen e ,ou#. 2e re.uce. at once! So1 a re#ation ,ip i

e ta2#i ,e. 2et0een a#e an. ot,er item in income tatement an. t,i

re#ation ,ip i ,e#p"u# in e/a#uating operationa# acti/itie o" t,e enterpri e!

&A(I% A A'8SIS

I (&%!U,(I%





A "inancia# ratio i t,e re#ation ,ip 2et0een t0o accounting "igure

e9pre e. mat,ematica##$! A ratio can a# o 2e e9pre e. a percentage 2$

imp#$ mu#tip#$ing t,e ratio 2$ &))! A in t,e a2o/e e9amp#e1 t,e ratio + 9 &))

or +)) or a$ current a et are +)) o" current #ia2i#itie ! It i a# o e9pre e.

a a proportion "or e9amp#e ratio o" current a et to current #ia2i#itie i a$1

))))) 5 + )))) or + 5 &! Some ana#$ t a# o e9pre ratio a a rate or time! For

e9amp#e1 t,e ratio o" toc- turn<o/er i a$ )1))) &)1))) or time 0,ic,

imp#$ con/e$ t,at t,e toc- ,a 2een turne. o/er time ! In t,e e9amp#e

gi/en a2o/e current a et R ! 1))1))) an. t,e current #ia2i#itie R ! +1 )1)))

0e can a$ t,at t,e ratio i t0o time !

T,u t,e ratio o" t0o "igure +)) an. &)) ma$ 2e e9pre e. in an$ o" t,e

"o##o0ing 0a$ 5

Ga= +5 I G2= + Gc= + & G.= + to & Ge= +))

In a## t,e e ca e t,e in"erence i t,at t,e "ir t "igure i .ou2#e1 +)) or + time

t,an t,at o" t,e econ.!Ratio pro/i.e c#ue to t,e "inancia# po ition o" concern! T,e e are t,e

pointer or in.icator o" "inancia# trengt,1 po ition or 0ea-ne o" an

enterpri e! One can .ra0 conc#u ion a2out t,e e9act "inancia# po ition o" a

concern 0it, t,e ,e#p o" ratio !

A(U&$ %- &A(I% A A'8SIS

Ratio ana#$ i i a tec,ni7ue o" ana#$ i an. interoperation o" "inancia#

tatement ! It i t,e proce o" e ta2#i ,ing an. interpreting /ariou ratio "or

,e#ping in ma-ing certain .eci ion! Ho0e/er ratio ana#$ i i not an en. in

it e#"! It i on#$ mean o" 2etter un.er tan.ing o" "inancia# trengt, an.

0ea-ne o" a "irm! Ca#cu#ation o" mere ratio .oe not er/e an$ purpo e un#e

e/era# appropriate ratio 0,ic, can 2e ca#cu#ate. "rom t,e in"ormation gi/en in



t,e "inancia# tatement 1 2ut t,e ana#$ t ,a to e#ect t,e in"ormation gi/en in

t,e "inancia# tatement 1 2ut t,e ana#$ t ,a to e#ect t,e appropriate an.

ca#cu#ate on#$ a "e0 appropriate ratio "rom t,e ame -eeping in min. t,e

o2jecti/e< o" ana#$ i ! T,e ratio ma$ 2e u e. a a $mptom #i-e 2#oo.

pre ure1@ t,e pu# e rate or t,e 2o.$ temperature an. t,eir interpretation

.epen. upon t,e ca#i2er an. competence o" t,e ana#$ t! T,e "o##o0ing are t,e

"our tep in/o#/e. in t,e5 ratio ana#$ i 5

&! Se#ection o" re#e/ant .ata "rom t,e "inancia# tatement .epen.ing upon t,e

o2jecti/e o" t,e ana#$ i !

+! Ca#cu#ation o" appropriate ratio "rom t,e a2o/e .ata!(! Compari on o" t,e ca#cu#ate. ratio 0it, t,e ratio o" t,e ame "irm in t,e pa t1

or t,e ratio .e/e#ope. "rom projecte. "inancia# tatement or t,e ratio o" t,e

ome ot,er "irm or t,e compari on 0it, t,e ratio o" t,e in.u tr$ to 0,ic, t,e

"irm 2e#ong !

*! Interpretation o" ratio !

%B $,(I1$S %- &A(I% A A'8SIS• To ca#cu#ate t,e /ariou ratio o" t,e organi4ation!

• To -no0 t,e "inancia# trengt, o" t,e enterpri e

I ($&*&$(A(I% %- ("$ &A(I%S

T,e interpretation o" t,e ratio i an important "actor! T,oug, ca#cu#ation

o" ratio i a# o important 2ut it i on#$ a c#erica# ta - 0,erea interpretation



nee. -i## inte##igence an. "ore ig,te.ne ! T,e in,erent #imitation o" ratio

ana#$ i ,ou#. 2e -ept in min. 0,i#e interpreting t,em! T,e impact o" "actor

uc, a price #e/e# c,ange c,ange in accounting po#icie 0in.o0 .re ing etc!

,ou#. a# o 2e -ept in1 min. 0,en attempting to interpret ratio !

A ing#e ratio in it e#" .oe not con/e$ muc, o" t,e en e! To ma-e ratio

u e"u# t,e$ ,a/e to 2e "urt,er interprete.! For e9amp#e a$ t,e current ratio o" (5

& .oe not con/e$ an$ en e un#e it i interprete. an. conc#u ion i .ra0n

"rom it regar.ing t,e "inancia# con.ition o" t,e "irm a to 0,et,er it i /er$

trong1 goo.1 7ue tiona2#e or poor! T,e interoperation o" t,e ratio can 2e ma.e

in t,e "o##o0ing 0a$ 5

SI G'$ ABS%'U($ &A(I%: < genera##$ pea-ing one cannot .ra0 an$

meaning"u# conc#u ion 0,en a ing#e ratio i con i.ere. in i o#ation! But ing#e

ratio ma$ 2e tu.ie. in re#ation to certain ru#e o" t,um2 0,ic, are 2a e. upon

0e## pro/en con/ention a "or e9amp#e +5 & i con i.ere. to 2e a goo. ratio "or

current a et to current #ia2i#itie !G&%U* %- &A(I% 5< ratio ma$ 2e interprete. 2$ ca#cu#ating a group o"

re#ate. ratio! A ing#e ratio upporte. 2$ t,e ot,er re#ate. a..itiona# ratio

2ecome more un.er ta2#e an. meaning"u#! For e9amp#e t,e ratio o" current

a et to current #ia2i#itie ma$ 2e upporte. 2$ t,e ratio o" #i7ui. a et to

#i7ui. #ia2i#itie to .ra0 more .epen.a2#e conc#u ion !

"IS(%&I,A' ,%#*A&lS% : < one o" t,e ea ie t an. mo t popu#ar 0a$ o"e/a#uating t,e per"ormance o" t,e "irm i to compare it pre ent ratio 0it, t,e

pa t ratio ca##e. compari on o/ertime! E,en "inancia# ratio i compare. o/er a

perio. o" time it gi/e an in.ication o" t,e .irection o" c,ange an. re"#ect

0,et,er t,e "irm per"ormance an. "inancia# po ition ,a impro/e. .eteriorate.

or remaine. con tant o/er a perio. o" time! But 0,i#e interpreting ratio "rom

compari on o/er time one ,a to 2e care"u# a2out t,e c,ange i" an$ in t,e "irm

po#icie an. accounting proce.ure !



*&% $,( &A(I%: 5 ratio can a# o 2e ca#cu#ate. "or "uture tan.ar. 2a e.

upon t,e projecte. or Per"orma "inancia# tatement ! T,e e "uture ratio ma$ 2e

ta-en a tan.ar. "or compari on an. t,e ratio ca#cu#ate. on actua# "inancia#

tatement can 2e compare. 0it, t,e tan.ar. ratio to "in. out /ariance i" an$

uc, /ariance ,e#p in interpreting an. ta-ing correcti/e action "or impro/ement

in "uture!

I ($&5-I&# ,%#*A&IS% : < ratio o" one "irm can a# o 2e compare.

0it,1 t,e ratio o" ome ot,er e#ecte. "irm in t,e ame in.u tr$ at t,e ame

point o" time! T,i -in. o" compari on ,e#p in e/a#uating re#ati/e "inancia#

po ition an. per"ormance o" t,e "irm! But 0,i#e ma-ing u e o" uc, compari onone ,a to 2e /er$ care"u# regar.ing t,e .i""erent accounting met,o. po#icie

an. proce.ure a.opte. 2$ .i""erent "irm !

GUI!$'I $S %& *&$,AU(I% S -%& US$ &A(I%S:

T,e ca#cu#ation o" ratio ma$ not 2e .i""icu#t ta - 2ut t,ere u e i not ea $!

T,e in"ormation on 0,ic, t,e e are 2a e. t,e con traint o" "inancia# tatemento2jecti/e "or u ing t,em t,e ca#i2er o" t,e ana#$ t etc! ate important "actor

0,ic, in"#uence t,e u e o" ratio ! Fo##o0ing gui.ance or "actor ma$ 2e -ept in

min. 0,i#e interpreting /ariou ratio 5

6. A,,U&A,8 %- -I A ,IA' S(A($#$ (S:T,e ratio are ca#cu#ate. "rom t,e .ata a/ai#a2#e in "inancia# tatement !

T,e re#ia2i#it$ o" ratio i #in-e. to t,e accurac$ o" in"ormation in t,e e

tatement ! Be"ore ca#cu#ating ratio one ,ou#. ee 0,et,er proper concept

an. con/ention ,a/e 2een u e. "or preparing "inancia# tatement or not! T,e e

tatement ,ou#. a# o 2e proper#$ au.ite. 2$ competent au.itor ! T,e

precaution 0i## e ta2#i , t,e re#ia2i#it$ o" .ata gi/en in "inancia# tatement!

9. %B $,(I1$S %& *U&*%S$ %- A A'8SIS:





. &A(I% *&%1I!$ % '8 A BAS$:

T,e ratio are on#$ gui.ance "or t,e ana#$ t1 ,e ,ou#. not 2a e ,i

.eci ion entire#$ on t,em! He ,ou#. tu.$ an$ ot,er re#e/ant in"ormation1

ituation in t,e concern genera# economic en/ironment1 etc! 2e"ore reac,ing

"ina# conc#u ion ! T,e tu.$ o" ratio in i o#ation ma$ not a#0a$ pro/e u e"u#! A

2u ine man 0i## not a""or. a ing#e 0rong .eci ion 2ecau e i" an$ ,a/e "ar<

reac,ing con e7uence! T,e interpreter ,ou#. u e t,e ratio a gui.e an. ma$ tr$

to o#icit an$ ot,er re#e/ant in"ormation1 0,ic, ,e#p in reac,ing a correct

.eci ion!

US$ A ! SIG I-I,A ,$ %- &A(I% A A'8SIS

T,e ratio i one o" t,e mo t po0er"u# too# i" "inancia# ana#$ i ! It i u e.

a a .e/ice to ana#$4e an. interpret t,e "inancia# ,ea#t, o" enterpri e! 3u t #i-e a.octor e9amine ,i patient 2$ recor.ing ,i 2o.$ temperature1 2#oo. pre ure

etc! 2e"ore ma-ing ,i conc#u ion regar.ing t,e i##ne an. 2e"ore gi/ing ,i

treatment a "inancia# ana#$ t ana#$ e t,e "inancia# tatement 0it, /ariou too#

o" ana#$ i 2e"ore commenting upon t,e "inancia# ,ea#t, or 0ea-ne o" an

enterpri e! A ratio i -no0n a a $mptom #i-e 2#oo. pre ure t,e pu# e rate or

t,e temperature o" an in.i/i.ua#! It i 0it, ,e#p o" ratio t,at t,e "inancia#tatement can 2e ana#$4e. more c#ear#$ an. .eci ion ma.e "rom uc, ana#$ i !

T,u u e o" ratio i not con"ine. to "inancia# manager on#$! A

.i cu e. ear#ier t,ere are .i""erent partie intere te. in t,e ratio ana#$ i "or

-no0ing t,e "inancia# po ition o" a "irm "or .i""erent purpo e! T,e upp#ier p"

goo. on cre.it1 2an- 1 "inancia# in titution1 in/e tor 1 ,are,o#.er an.

management a## ma-e u e o" ratio ana#$ i a a too# in e/a#uating t,e "inancia#





9. "$'*S I -I A ,IA' -%&$,AS(I G A ! *'A I G

Ratio ana#$ i i o" muc, *e#p in "inancia# "oreca ting an. p#anning!

P#anning i #oo-ing a,ea. an. t,e ratio ca#cu#ate. "or a num2er o" $ear 0or- a

a gui.e "or t,e "uture! Meaning"u# conc#u ion can 2e .ra0n "or "uture "rom

t,e e ratio ! T,u ratio ana#$ i ,e#p in "oreca ting an. p#anning!

;. "$'*S I ,%##U I,A(I% :

T,e "inancia# trengt, an. 0ea-ne o" a "irm are communicate. in a

more ea $ an. un.er tan.a2#e manner 2$ t,e u e o" ratio ! T,e in"ormation

containe. in t,e "inancia# tatement i con/e$e. in a meaning"u# manner to t,e

one "or 0,om it i meant! T,u ratio ,e#p in communicating an. en,ance t,e/a#ue o" t,e "inancia# tatement !

He#p in Co<or.ination! Ra.io e/en ,e#p in co<or.inate1 0,ic, i o" utmo t

importance in e""ecti/e 2u ine management! Better communication o"

e""icienc$ an. 0ea-ne o" an enterpri e re u#t in 2etter co<or.ination in t,e

enterpri e!

=. "$'* (% ,% (&%': 5

Ratio ana#$ i e/en ,e#p in ma-ing e""ecti/e contro# o" t,e 2u ine !

Stan.ar. ratio can 2e 2a e. upon t,e Per"orma o" "inancia# tatement an./ariance o" .e/iation! I" an$1 can 2e "oun. 2$ comparing t,e actua# 0it, t,e

tan.ar. o a to ta-e a correcti/e action at t,e rig,t time! T,e 0ea-ne or

ot,er0i e1 i" an$1 come to t,e -no0#e.ge o" t,e management 0,ic, ,e#p in

e""ecti/e contro# o" t,e 2u ine !

@. %("$& US$S:

T,e e are o man$ ot,er u e o" t,e ratio ana#$ i ! It i an e entia# part o"

t,e 2u.getar$ contro# an. tan.ar. co ting! Ratio are o" immen e important in



t,e ana#$ i an. interpretation o" "inancia# tatement a t,e$ 2ring t,e trengt,

or 0ea-ne o" a "irm!

)B+ U(I'I(8 (% S"A&$"%'!$&S I 1$S(%&S:

An in/e tor in t,e compan$ 0i## #i-e to a e t,e "inancia# po ition o" t,e

concern 0,ere ,e i going to in/e t! Hi "ir t intere t 0i## De t,e ecurit$ o" ,i

in/e tment an. t,en a return in t,e "orm o" .i/i.en. or intere t! For t,e "ir t

purpo e ,e 0i## tr$ to a e t,e /a#ue o" "i9e. a et an. t,e #oan rai e.

again t t,em! T,e in/e tor 0i## "ee# ati "ie. on#$ i" t,e concern ,a u""icient

amount o" a et ! Long<term o#/enc$ ratio 0i## ,e#p ,im in a e ing "inancia# po ition o" t,e concern! Pro2a2i#it$ ratio 1 on t,e ot,er ,an.1 0i## 2e u e"u# to

t,e in/e tor in ma-ing up ,i min. 0,et,er pre ent "inancia# po ition o" t,e

concern 0arrant "urt,er in/e tment or not!

),+ U(I'I(8 (% ,&$!I(%&S:5

T,e cre.itor or upp#ier e9ten. ,ort<term cre.it to t,e concern! T,e$are intere te. to -no0 0,et,er "inancia# po ition o" t,e concern 0arrant t,eir

pa$ment at a peci"ie. time or not! T,e concern pa$ ,ort<term cre.itor out o"

it current a et ! I" t,e current a et are 7uite u""icient to meet current

#ia2i#itie t,e cre.itor 0i## not ,e itate in e9ten.ing cre.it "aci#itie ! Current an.

aci. te t ratio 0i## gi/e an i.ea a2out t,e current "inancia# po ition o" t,e

concern!)!+ U(I'I(8 %- $#*'%8$$S:

T,e emp#o$ee are a# o intere te. in t,e "inancia# po ition o" t,e concern

e pecia##$ pro"ita2i#it$! T,eir 0age increa e an. amount o" "ringe 2ene"it are

re#ate. to t,e /o#ume o" pro"it earne. 2$ t,e concern! T,e emp#o$ee ma-e u e

o" in"ormation a/ai#a2#e in "inancia# tatement ! ariou pro"ita2i#it$ ratio

re#ating to gro pro"it! Operating pro"it1 net pro"it1 etc! ena2#e emp#o$ee to put

"or0ar. t,eir /ie0point "or t,e increa e o" 0age an. ot,er 2ene"it !



$+ U(I'I(8 %- G%1$& #$ (

o/ernment i intere te. to -no0 t,e o/era## trengt, o" t,e in.u tr$!

ariou "inancia# tatement pu2#i ,e. 2$ in.u tria# unit are u e. to ca#cu#ate

ratio "or .etermining ,ort<term #ong<term an. o/era## "inancia# po ition o"

concern ! Pro"ita2i#it$ in.e9e can a# o 2e prepare. 0it, t,e ,e#p o" ratio !

o/ernment ma$ 2a e it "uture po#icie on 2a i o" in.u tria# in"ormation

a/ai#a2#e "rom /ariou unit 5 T,e ratio ma$ 2e u e. < a in.icator o" o/era##

"inancia# trengt, o" pu2#ic a 0e## a pri/ate ector! In t,e a2 ence o" t,e

re#ia2#e economic in"ormation1 go/ernmenta# p#an an. po#icie ma$ not pro/eucce "u#!

'I#I(A(I% S %- &A(I% A A'8SIS

T,e ratio ana#$ i i one o" t,e mo t po0er"u# too# o" "inancia#

management! T,oug, ratio are imp#e to ca#cu#ate an. ea $ to un.er tan.1 t,e$

u""er "rom ome eriou #imitation 5

6. 'I#I($! US$ %- A SI G'$ &A(I%:

A ing#e ratio u ua##$ .oe not con/e$ muc, o" a en e! To ma-e a 2etter

Interpretation a num2er o" ratio ,a/e to 2e ca#cu#ate. 0,ic, i #i-e#$ to con"u et,e ana#$ t t,an ,e#p ,im in ma-ing a meaning"u# conc#u ion

9. 'A,K %- A!$ UA($ S(A !A&!S:

T,ere are no 0e##<accepte. tan.ar. or ru#e o" t,um2 "or a## ratio 1

0,ic, can 2e accept a norm ! I" ren.er interpretation o" t,e ratio .i""icu#t!



;. I "$&$ ( 'I#I(A(I% %- A,,%U (I G

Li-e "inancia# tatement ratio a# o u""er "rom t,e in,erent 0ea-ne o"

accounting recor. uc, a t,eir ,i torica# nature1 Ratio o" t,em are not

nece ari#$ true in.icator o" t,e< "uture!

=. ,"A G$ %- A,,%U (I G *&%,$!U&$:

C,ange in accounting proce.ure 2$ a "irm o"ten ma-e ratio ana#$ i

mi #ea.ing! >!g! a c,ange in /a#uation in met,o. o" in/entorie 1 "rom FIFO toLIFO increa e t,e co t o" a#e an. re.uce con i.era2#$ t,e /a#ue o" c#o ing

toc- t,at ma-e toc- turno/er ratio to 2e #ucrati/e an. an un"a/ora2#e gro

pro"it ratio!

@. 3I !%3 !&$SSI G:5

Financia# tatement can ea i#$ 2e 0in.o0 .re e. to pre ent a 2etter picture o" it "inancia# an. pro"ita2#$ po ition to out i.er ! Hence one ,a to 2e

/er$ care"u# in ma-ing a .eci ion "rom ratio ca#cu#ate. "rom uc, "inancia#

tatement ! But it ma$ 2e /er$ .i""icu#t "or an out i.er to -no0 a2out t,e

0in.o0 .re ing ma.e 2$ "irm!

. *$&S% A' BIAS:

Ratio are on#$ mean o" "inancia# ana#$ i an. not an en. in it e#" "!Ratio ,a/e to 2e interprete. an. .i""erent peop#e ma$ 2e interprete. t,e ame

ratio in .i""erent 0a$ !



&A(I%S

6. ,U&&$ ( &A(I%:

Current ratio ma$ 2e .e"ine. a t,e re#ation ,ip 2et0een current a et

an. current Lia2i#itie ! T,i ratio a# o -no0n a 0or-ing capita# ratio i a

mea ure o" genera# #i7ui.it$ an. i mo t 0i.e#$ u e. to ma-e t,e ana#$ i o" a

tort<term "inancia# po ition or #i7ui.it$ o" a "irm! It i ca#cu#ate. 2$ .i/i.ing

t,e tota# o" current a et 2$ tota# o" current #ia2i#itie ! T,u 1

Current Ratio Current A et

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Current Lia2i#itie

Or Current A et Current Lia2i#itie

,%#*% $ (S %- ,U&&$ ( &A(I%

,urrent assets ,urrent 'iabilities

&! Ca , in Han. &)! Out tan.ing >9pen e Accrue.

+! Ca , at Ban- e9pen e

(! Mar-eta2#e Securitie &&! Bi## pa$2#e

GS,ort<term=

*! S,ort<term in/e tment &+! Sun.r$ Cre.itor

! Bi## recei/a2#e &(! S,ort<term A./ance



! Sun.r$ De2tor &*! Income<Ta9 Pa$2#e!

'! In/entor$GStoc-= & ! Di/i.ent Pa$2#e

! 0or-<in<Proce & ! Ban-<o/er.ra"t Gi" not a permanent

! Prepai. >9pen e arrangement=

A ,ig, current ratio ma$ not 2e "a/ora2#e .ue to t,e "o##o0ing rea on 5

Gi= T,ere ma$ 2e #o0 mo/ing toc- ! T,e toc- 0i## pi#e up .ue to poor

a#e!

Gii= T,e "igure o" .e2tor ma$ go up 2ecau e .e2t co##ection ma$ not

ati "actor$!Giii= T,e ca , or 2an- 2a#ance ma$ 2e #$ing i.#e 2ecau e o" in u""icient

in/e tment Opportunitie !

On t,e ot,er ,an.1 #o0 current ratio ma$ 2e .ue to t,e "o##o0ing rea on 5

Gi= T,ere ma$ not 2e u""icient "un. to pa$o"" #ia2i#itie !

Gii= T,e 2u ine ma$ 2e tra.ing 2e$on. it capacit$! T,e re ou e ma$ not0arrant t,e acti/itie !

,"A*($& 5@

-I !I GS C !A(A A A'8SIS





(= It ,a #arge t c#iente#e among ne0 pri/ate ector 2an- acro it &&+

2ranc,e an. e9ten ion counter !

*= It ,a 2roug,t tate o" t,e art 2an-ing 0it,in t,e reac, o" t,e cu tomer 0it,

2ene"it #i-e• #onger 2an-ing ,our 1

• ' .a$ 0ee-1

• Fu##$ computeri4e. "unctioning1 air con.itione.!

• An. com"orta2#e 0or-ing en/ironment!

= It ,a ma.e t,e concept o" An$0,ere1 An$ time 2an-ing a rea#it$ 0it,

• Remote cu tomer termina#

• Te#e 2an-ing

• Mo2i#e 2an-ing

= Ee ,a/e "oun. t,at ma#e are ti## more oriente. to0ar. "inancia# ectoran. "ema#e are not $et acti/e#$ participating in 2an-ing ector !

'= Ee ,a/e "oun. t,at mi..#e age. cu tomer are more inc#ine. to0ar.

2an-!

= It can 2e conc#u.e. t,at cu tomer main#$ come 0it, t,e re"erence o"

ot,er cu tomer 0,ic, c#ear#$ ,o0 t,at e9i ting cu tomer are "u##$

ati "ie. 0it, 2an-

er/ice !

= Mo t#$ cu tomer ,a/e "oun. po iti/e .i""erence among HDFC BANK

an. ot,er 2an- ! A cu tomer are ati "ie. an. ,a/e gi/en po iti/e

re pon e!



&A(I% A A'8SIS C I ($&*&$(A(I% :

6. ,urrent Assets

,urrent &atio D 5555555555555555555555555555555

,urrent 'iabilities

Ca , 2a#ance 0it, RBI Ba#ance 0it, ot,er 2an-

o/ernment Securitie

Current Ratio <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

B P Intere t accrue. 8n ecure. Bon. De"erre. ta9

*) &+(* + &&)& &+)&& <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< ! 5&

(+ '' +' '+( &(')))) +) ))

(++'& * &' + &&( )

+)&+ <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< !& 5&

&(( &(& +*) ) &(')))) ++ ())

I ($&*&$(A(I% :

T,e ana#$ i ,o0 t,at t,e ,ort<term po ition o" 2an- i oun.! A

compare. to i.ea# ratio +5 & 2ot, t,e $ear ,o0 ,ig, ratio! It ,o0 t,at in



+)&+ 2an- ,a impro/e. it in/e tment in go/t! ecuritie 6 re.uce. ca ,

2a#ance 0it, RBI 6 t,e B P o" 2an- ,a increa e.! E,ic, ,o0 a .ecrea e

tren. in current ratio!

9. !ebt equity ratio

%utsiderEs fund

!ebt equity D 55555555555555555555555555555

ShareholderEs fund

!eposits F borro7ing

! $ ratio D 555555555555555555555555555555555555555555

,apital F &eserve C Surplus

&*++ +* ( )&'

+)&& <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< &'!(5&&) )))) &) &*

*&( ' * & &)

+)&+ <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< &'!+5&

&) )))) &( '((

I ($&*&$(A(I% : A compare. to +)&&1 t,e .e2t e7uit$ ratio i #ig,t#$

impro/e.! T,ere i #itt#e increa e in .epo it 2ut .ecrea e in 2orro0ing maintain

t,e ratio ame a +)&&!

Tota# income

DTR <<<<<<<<<<<<<<<<<<<<<<<<<<





I ($&*&$(A(I% : 5 A compare. to +)&&1 t,e ratio i increa e.1 it ,o0

t,at "irm i earning u""icient pro"it "rom it a et ! Hence 2an- can pro/i.e

u""icient return to it ,are,o#.er !

@. *$&,$ (AG$ %- I ($&$S( $>*A !$! (% (%(A'

$>*$ !I(U&$:

Interest e panded

D 5555555555555555555555555555 6HH

(otal $ penditure

+ * &)(

+)&& <<<<<<<<<<<<<<<<<< !

* ( &)

+&& & *

+)&+ <<<<<<<<<<<<<<<<<< * !

*( (

I ($&*&$(A(I% : 5 T,e ratio ,o0 t,e .ecrea ing tren. 0,ic, mean t,e.e2t in 2an- i .ecrea ing o t,e intere t pa$ment! E,ic, i goo. ign "or

Ban- gro0t, t,at 2an- i earning pro"it 2$ it capita# or a et rat,er t,an

.e2t !

. *$&,$ (AG$ %- %*$&A(I G $>*$ S$S (% (%(A'

$>*$ !I(U&$:



%perating $ penses

D 5555555555555555555555555555 6HH

(otal $ penditure

&+* +)

+)&& <<<<<<<<<<<<<<<<<< &)) +'!(

* ( &)

& ' &*'

+)&+ <<<<<<<<<<<<<<<<<< &)) ( !+

*( (

I ($&*&$(A(I% : T,e ratio i increa e. "rom +)&& 1 t,i ,o0 2an- i

pen.ing more in it .a$ to .a$ operation! Ban- can increa e it pro"it 2$re.ucing it e9pen e !

J. $( *&%-I( (% (%(A' I ,%#$:

et *rofit

D 5555555555555555555555555 6HH(otal in/ome

(& *)+

+)&& <<<<<<<<<<<<<<<<<< &)) ! +

* +(&+



('))+&

+)&+ <<<<<<<<<<<<<<<<<< &)) '! (

*'+(

I ($&*&$(A(I% : 5 T,i $ear t,e ,a increa e. t,at mean t,e pro"it

to tota# income i increa e.! It ,o0 t,at t,e pro"ita2i#it$ o" t,e 2an- i

increa ing!

!ividend per share!ividend 8ield &atio D 5555555555555555555555555555

#arket 1alue per share

Di/i.en. pai. to ,are,o#.er

Di/i.en. per ,are <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< Num2er o" ,are

&( )))))

D!P!S! +)&& <<<<<<<<<<<<<<<<<< R ! &!( per ,are

&) ))))))

' )))

+)&+ <<<<<<<<<<<<<<<<<< R )!'( per ,are

&) ))))))

I ($&*&$(A(I% : 5 T,e ratio i .ec#ine. a compare to pre/iou $ear

2ecau e t,i $ear 2an- u e it pro"it in ma-ing re er/e rat,er t,an .i tri2uting

in ,are,o#.er !





(&$ ! A A'8SIS %- "!-, BA K

& Depo it 5 mean t,e .e2t o" t,e 2an-1 0,ic, it o0n to ot,er 2an- a

0e## a pu2#ic! Ban- pa$ a regu#ar amount o" intere t on t,e e

.epo it ! Depo it can 2e a/ing 2an- .epo it or term .epo it or

term .epo it or .epo it can 2e "rom 2ranc,e in In.ia or a2roa.!

!eposits

8ear !eposits+)) &(+! &

+))' &' &)&&

+)) + )''( +

+)) ()* '(+

+)&) (( ( ')'

+)&& ( )&'+)&+ *&( ' *

Ta-ing +)) a 2a e tear

8ear !eposits

+)) &))+))' &((!'+

+)) & '!* (

+)) +()! )

+)&) + (! +

+)&& +'&! )

+)&+ (&(!+



0

50

100

150

200

250

300

350

1 2 3 4 5 6 7

Years

D e p o s i t s

Analysis : T,e a2o/e ana#$ i ,o0 t,at t,ere 0a a regu#ar increa e in

.epo it o" HDFC Ban- o/er a num2er o" $ear ! T,e .etai# ,o0 t,at t,ere ,a

2een a ro e in a/ing 2an- .epo it an. term .epo it con i.era2#$ o/er t,e

$ear!



$( *&%-I( :5 T,e e are t,e mo t important criteria 2ecau e it i t,oug, t,i

0e mea ure t,e o/era## pro"ita2i#it$ o" an un.erta-ing

Year Net pro"it Gin )))@ =

+)) (+( +'

+))' (+*&'

+)) ((&&*(

+)) (* +&+

+)&) ( '& *+)&& (& *)+

+)&+ ('))+&

Ta-ing +)) a t,e 2a e $ear

Year net pro"it Gin &))@ =

+)) &))

+))' &))!+ )

+)) &)+!( *

+)) &)'! (+)&) &&)!*)

+)&& !*&

+)&+ &&*!('



90

95

100

105

110

115

120

1 2 3 4 5 6 7

Years

N e

t P r o f i

t

Analysis : T,e a2o/e ana#$ i c#ear#$ 2ring out t,at pro"it are on ri ing tren.!

T,i ,o0 t,at 2an- i "inancia##$ oun.! It i a2#e to ca , pro"it on it

pro.uct an. er/ice it .ea# in!



(%(A' ASS$(S: T,e e inc#u.e 2ot, t,e current a 0e## a "i9e. a et

o" t,e "irm! T,e ca , 2a#ance in/e tment1 a./ance 1 ot,er a et a## "orm a part

o" it!

Year Tota# a et Gin &))@ =

+)) & * )+ '

+))' +&&' *)*

+)) (& * (**

+)) ('(* (+'+)&) ( + '

+)&& *+( *

+)&+ * ( *


Year Tota# a et

+)) &))

+))' &( !'+)

+)) +) !+*'

+)) +*&!&&*+)&) + )!

+)&& +' !'*

+)&+ (&+!*&



0

50

100

150

200

250

300

350

1 2 3 4 5 6 7

Years

T o

t a l A s s e

t s

Analysis : T,ere ,a 2een ri e in t,e a et o/er t,e $ear ! T,u it can 2e ai.

t,at HDFC Ban- ,o#. a #arge amount o" tota# a et an. ,a 2een a regu#ar ri e

in it o/er t,e #a t i9 $ear !



A!1A ,$S

T,e$ are t,e a et o" t,e compan$! A./ance inc#u.e t,e ca , cre.it1 term

#oan o""ere. 2$ t,e 2an- ! T,e e can 2e ecure. or un ecure. a./ance !

Year A./ance

+)) & ' +

+))' *+()()

+)) &()&*)(+)) & ) ** (

+)&) & &&* ()

+)&& &' '&+ )

+)&+ +( (* (

Ta-ing +)) a 2a e!

Year A./ance

+)) &))

+))' & +!( ++)) + )!

+)) + )!( &

+)&) (&)! +

+)&& (* !*&

+)&+ * (!



0

50

100

150

200

250

300

350

400

450

500

1 2 3 4 5 6 7

Years

A d v a n c e s

Analysis : T,e a2o/e ana#$ i c#ear#$ 2ring out t,at t,ere i continuou ri e in

a./ance ma.e 2$ 2an-! T,e 2an- earn intere t on t,e e a./ance ! E,ic, i

po iti/e in.icator o" t,e gro0t, o" t,e 2an-!!



I 1$S(#$ (: T,e e are t,e a et are t,e 2an-ing in titution! In/e tment

ma.e 2$ t,e 2an- can 2e ,ort a 0e## a #ong term in nature! In/e tment can

2e ma.e 2$ 2an- in "orm o" ,are or .e2enture etc!

Year In/e tment Gin &))@ =

+)) '

+))' ++ '+

+)) &+ '+* )

+)) &* ( + (

+)&) &('&+'*&+)&& &* * &+*

+)&+ & '& *&+


Year In/e tment

+)) &))

+))' &+&!&

+)) & &!) )

+)) +& ! ++)&) +)&!

+)&& +& !'(

+)&+ +(&! (





,%##% SI?$ BA'A ,$ S"$$(

*arti/ulars 9H66 9H69 *er/entages

Fixed assetsPremi e

Ot,er "i9e. a et

Capita#

A./ance

Ot,er a et

In ta##ment

&&*

& & +

()**')

&' '&+ )

+ *& &

( +

!&

(! *

!'&

*&! +

! (

! (

(

&'& *&

)

+( (* (

++'))(

*

!&

(! *

!&**

* ! (

*!

!')

Tota# "i9e. a et + +) &! * (+( ))& !Current Assets

Ca , 6 Ban- 2a#ance 0it, RBI

Ba#ance 0it, Ban-

o/ernment ecuritie

*)

&+( * +

&&)& &

!*'

+!

+ !'&

(++'& *

&' +

&&)& &

!

(!

++!'

Tota# Current A et GRBI= & (& +& ( !) & )&* + ((!)'Tota# A et GA B= *+ '+' &)) * ( * &))

Liabilities & Capital

O0ner@ e7uit$

Re er/e 6 Surp#u

&) ))))

&) &*

+!**

+!

&) ))))

&( '((

+!&

+!

Tota# GC= +&* &* !)) +*('(( !)+ Long Term debts

Borro0ing

Depo it

&*++ +*

( )&'

(!(+

(!'*

& &)

*&( ' *

&!+

!*

Tota# GD= ('(& *& '!) *& ( * !'Current Lia2i#itie 6

Pro/i ion G>=

(*)(+ +( '! * ( !+)

Tota# GC D >= *+ '+' &)) * ( * &))



I ($&*&$(A(I%

From t,e a2o/e ana#$ i "i9e. a et ,a 2een increa e.1 a#mo t 2$ an. t,e

current a et ,a 2een .ecrea e. on t,e #ia2i#itie i.e1 T,e$ are a#mo t ame

0it, #itt#e .i""erence t,at 2ring t,e o/era## ati "actor$ po ition!

,%#*A&A(I1$ *&%-I( C '%SS A,,%U (For t,e $ear en.e. (& t marc, +)&& 6 +)&+

*arti/ulars 9HHL 9H6H In/rease

!e/rease

In/rease

!e/rease&! Income Intere t earne.

Ot,er income

( (( &

&(* (

(( (')

&(+*+&

<&(* *

<+*&''

<(! )

<&!'

Tota# GA= * +(&+ *'+( <& '+( <(!++! >9pen.iture Intere t

e9pen.e. Operating

e9pen e Pro/i ion 6

contingencie

+ * &)(

&+* +)

' ' '

+&& & *

& ' &*'

+ '

<*+' *

(+ (+'

&) '+)

<& ! )

+ !&)

&*!&Tota# GB= * ( &) *( ( <+&)(*+ <*! )

Net pro"it "or t,e $ear

GA<B=

(& *)+ ('))+& & & & !+&

I ($&*&$(A(I%

T,i in.icate t,ere i a .ecrea e in income .ue t,e increa e in t,e operating

e9pen e ! But t,e pro"ita2i#it$ i increa e. 2$ & !+& !



,AS" -'%3 S(A($#$ ( A A'8SIS C I ($&*&$(A(I%

)9H6659H69+

"!-, BA K '(!.

,AS" -'%3 S(A($#$ ( -%& ("$ 8$A& $ !$! ;6 st

#A&,"4 9H69

Year en.e.

(&!)(!+)&+

GR in )))@ =

Year en.e.

(&!)(!+)&&A! Ca , "#o0 "rom operating

acti/itie

Net pro"it a"ter ta9

Pro/i ion "or Ta9e

Depreciation on "i9e. A et

Net Depreciation on

in/e tment

Pro/i ion "or non<per"orming

a et

Pro/i ion on Stan.ar. a et

Pro/i ion on Lea e A et

Pro/i ion "or "rau.

Lo GPro"it= on a#e o" "i9e.A et

('))+&

)* )

(+& &'

' ) (

+ &

&*(

( )

(

+ '

(& *)+

'( '

+' +*

(

+

&+&+'

<<<<

**'+

%perating profit before 7orking /apital /hanges M@ @;J =@@@;



A.ju tment "or5

Pro/i ion "or inter 2ranc, Gnet= Dr! "rom

B F

<< G =

De"erre. e9p! Eritten o"" "rom B F G& ) = <<<Pro/i ion "or inter 2ranc, Dr! 0ritten 2ac- & ()& <<<GIncrea e = Decrea e in A./ance G * *)= G& +)'=GIncrea e= Decrea e in .epo it G **(*)= G&&+ & =GIncrea e= Decrea e in in/e tment *'+' +( )(&)GIncrea e= Decrea e in 2orro0ing G )(+&*= *+Increa e= Decrea e in ot,er a et + G *(=Increa e= Decrea e in ot,er #ia2i#itie +' &*' ',ash generated from operations 9HJ@6H ==M;;

Direct Ta9e pai. Gnet o" re"un. = G&( = G&+ =et /ash flo7 %perating A/tivities J6M=L ;6M JJB. ,ash flo7 from investingPurc,a e o" "i9e. A et G+ ' *= G( )&=Purc,a e "rom a#e o" Fi9e. A et +* ( +))

et /ash used in investing A/tivities )9L@=L6+ );@==L9+,. ,ash flo7 from finan/ing a/tivity

*ro/eeds from issue of subordinate debt

*ayments of divinded )J LL@+

@HHHHH

6; @HHet /ash Generated from finan/ing

a/tivity

)J LL@+ ; ;@HH

et in/reases in /ash C /ash equivalents ;HH ;J ;9J M@,ash C /ash $quivalents5as at 6 st April @9L H H =L M;J@,ash C /ash $quivalents5as at 6 st #ar/h =LL@=9; @9L H H

Interpretation 5



T,e a2o/e tatement c#ear#$ 2ring out t,at ca , an. 2an- 2a#ance o" Ban- a

on (& t Marc, +)&+ ,a ri en1 0,ic, ,o0 an impro/ement in ca , po ition o"

t,e "irm!

-inan/ial *erforman/e of "!-, Bank

Particu#ar (&!)(!+)&+ (&!)(!+)&&

ro income *'+!( * !+(Operating pro"it &)+! ( &) ! * Net pro"it (&! * ( !'+Pro"it 2roug,t "or0ar. &)!)) &(!)+Tran "er to Statutor$

Re er/e

!+ !))

Tran "er to ot,er

Re er/e

+'!* & !)&

,"A*($&5



,% ,'USI%

I#*%&(A ( -A,(%&S -%& &$A,"I G A ,% ,'USI%



A num2er o" "actor ,ou#. 2e ta-en into con i.eration 2e"ore reac,ing a

conc#u ion a2out ,ort<term "inancia# po ition! Some o" t,e e "actor are a

uc,5

Ga= T$pe o" Bu ine

G2= T$pe o" Pro.uct

Gc= Reputation o" t,e Concern

G.= Sea ona# In"#uence

Ge= T$pe o" A et A/ai#a2#e

9. !$B( $ UI(8 &A(I%:

T,i ratio in.icate t,e re#ati/e proportion o" .e2t an. euit$ in "inancing

t,e a et o" t,e "irm! T,u t,e ratio ,o0 t,e re#ation ,ip 2et0een e9terna#

e7uitie an. interna# e7uitie !

D > Out i.er Fun.<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

S,are,o#.er Fun.

%U(SI!$&S -U ! %& $>($& A' $ UI(I$S: inc#u.e a## t,e #ong term

an. ,ort term .e2t uc, a De2enture 1 Mortgage1 Loan1 Ban- Loan1 Pu2#ic

Depo it 6 CL!

S"A&$"%'!$&S -U ! %& I ($& A' $ UI(I$S: inc#u.e >7uit$

,are capita#1 Pre"erence1 S,are Capita#1 Re er/e an. cre.it Ba#ance o" P6L

A C!



I ($&*&$(A(I% :5

T,e .e2t e7uit$ ratio an important "inancia# ana#$ i to apprai e t,e

"inancia# tructure o" a "irm! T,e ratio i ca#cu#ate. to mea ure t,e e9tent to

0,ic, .e2t "inancing ,a 2een u e. in 2u ine

A ratio o" &5& ma$ 2e u ua##$ con i.ere. to 2e ati "actor$ a#t,oug, t,ere

i no ru#e or t,um2!

A ,ig, D > ratio i a .anger ign "or cre.itor ! Hig, D > in.icate t,at

c#aim or out i.er GCre.itor = are greater t,an t,o e o" o0ner an. .i ea e

margin o" a"et$ a/ai#a2#e to t,e cre.itor ! Lo0er t,an I5 I DI> ratio in.icatet,at more o" t,e "un. in/e te. in t,e 2u ine are pro/i.e. 2$ t,e o0ner !

;. !$B(%&S (U& %1$& &A(I%:

A concern ma$ e## goo. on ca , a 0e## a on cre.it! Cre.it i one o"

t,e important e#ement o" income promotion! T,e /o#ume o" income can 2e

increa e. 2$ "o##o0ing a #i2era# cre.it po#ic$! But t,e e""ect o" a #i2era# cre.it po#ic$ ma$ re u#t in t$ing up u2 tantiate "un. 1 o" a "irm in t,e "orm o"

a./ance Gor recei/a2#e 1 i!e!1 a./ance p#u 2i## recei/a2#e =! A./ance are

e9pecte. to 2e con/erte. into ca t 0it, in a ,ort perio. an. are inc#u.e. in

current a et ! Hence t,e #i7ui.it$ po ition o" a concern to pa$ it ,ort<term

o2#igation In time .epen. upon t,e 7ua#it$ o" it@ a./ance !

Tota# Income<<<<<<<<<<<<<<<<<<<<<<<

A/erage A./ance

Tota# income< intere t recei/e.1 pro"it on a#e re/o#ution or income earne. 2$

0a$ o" .i/i.en. etc!

A/erage A./ance < Opening A./ance C#o ing A./ance

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

+



A./ance inc#u.e Bi## purc,a e. 6.i counte.1 Ca , Cre.it1 O/er.ra"t an.

#oan 1 Term #oan !

I ($&*&$(A(I% :

De2tor /e#ocit$ in.icate t,e num2er o" time t,e .e2tor are turne.

o/er .uring a $ear! enera##$1 t,e ,ig,er t,e /a#ue o" income turno/er t,e more

e""icient i t,e management o" a./ance income or more #i7ui. are t,e .e2tor !

Simi#ar#$1 #o0 .e2tor turno/er imp#ie ine""icient management o"

a./ance income an. #e #i7ui. .e2tor ! But a precaution i nee.e. 0,i#e

interpreting a /er$ ,ig, .e2tor turno/er ratio 2ecau e a /er$ ,ig, turno/er ratioma$ imp#$ n "irm ina2i#it$ .ue to #ac- o" re ource to e## on cre.it t,ere2$

#o ing a#e an. pro"it ! T,ere i no ru#e o" t,um2 0,ic, ma$ 2e u e. a a

norm to interpret t,e ratio a it ma$ 2e u e. a a norm to interpret t,e ratio a it

ma$ 2e .i""erent "rom "irm to "irm1 .epen.ing upon t,e nature o" 2u ine ! T,i

ratio ,ou#. 2e compare. 0it, ot,er "irm .oing imi#ar 2u ine an. a tren.

ma$ a# o 2e "oun. to ma-e a 2etter interpretation o" t,e ratio!

=. *$&,$ (AG$ %- *&%-I( % (%(A' ASS$(S &A(I%:

Net Pro"it "or t,e $ear <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< 9 &))

Tota# A et

Tota# A et Ca , Fi9e. A et In/e tment In/e tment A./ance



I ($&*&$(A(I% :5

T,e pro/i.e t,e percentage o" net pro"it a "irm i earning on it

in/e tment in a et ! T,i ratio pro/i.e t,e .etai# o" e""icienc$ o" a "irm i!e!

,o0 muc, pro"it it can earn 0it, it a et ! T,i ratio ,o0 ,o0 muc, are t,e

tota# a et an. to 0,at e9tent pro"it i earne.! A ,ig, percentage mean t,at t,e

"irm i "rom t,e pro"ita2i#it$ point o" /ie0! It ,o0 t,at "irm can earn u""icient

pro"it on t,e a et it ,a ! T,e e t$pe o" "irm are ucce "u# "irm "rom #ong<

term point o" /ie0 an. pro/i.e u""icient return !

@. *$&,$ (AG$ %- I ($&$S( $>*A !$! (% (%(A'

$>*$ !I(U&$

Intere t e9pan.e.

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< 9 &))

Tota# >9pen.iture

Intere t e9pen.e. inc#u.e intere t on .epo it 1 intere t on RBI Inter

Ban- Borro0ing Intere t on t,e ot,er u2or.inate .e2t!

Tota# >9pen.iture inc#u.e intere t e9pen.e.1 operating e9pen e an.

ot,er pro/i ion 6 contingencie !

I ($&*&$(A(I% :

T,i ratio in.icate t,at 0,at percentage "rom tota# e9pen.iture

o" a 2an- i pen. on intere t! T,e amount o" intere t pai. 2$ 2an- on

.epo it or 2orro0ing "orm ,o0 muc, percentage o" tota# e9pen.iture!

Pa$ment o" intere t i a regu#ar o2#igation an. ,ence!! T,e 2an- mu t 2e a0are

0,at percentage it i actua##$ pen.ing on t,e intere t it pa$ ! T,i ratio ma-e



c#ear a to 0,at i pent on intere t pa$ment to tota# e9pen.iture! A ,ig,

in.icate t,e .e2t o" t,e 2an- i ,ig, an. o i t,e intere t pa$ment!

. *$&,$ (AG$ %- %*$&A(I G $>*$ ,$S (% (%(A'

$>*$ !I(U&$ :5

Operating >9pen e

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< 9 &))

Tota# >9pen.iture

Operating e9pen e < printing 6 tationar$1 a./erti ement 6 pu2#icit$1

In urance1 repair 1 #o0 c,arge 1 rent1 ta9e 1 #ig,ting etc!

Tota# e9pen.iture5< Intere t e9pen.e.1 operating e9pen e 6 ot,er contingencie !

I ($&*&$(A(I% : 5 T,i ratio c#ear#$ 2ring out t,e percentage o" operating e9pen e to tota#

e9pen.iture! Operating e9pen e i an e9pen e o" .a$ to .a$ 0or-ing! To "in.

out 0,at percentage it "orm o" tota# e9pen.iture i /er$ e entia# ,o0 t,e 2an-

i pen.ing mone$ "or it .a$ to .a$ 0or-ing! I" it i "oun. to 2e ,ig, a##

nece ar$ tep ma$ 2e ta-en "or t,e purpo e!



J. $( *&%-I( (% (%(A' I ,%#$:

Net pro"it to tota# income

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< 9 &))

Tota# >9pen.iture

Tota# income inc#u.e t,e income earne. "rom /ariou ource ! It

inc#u.e income "rom in/e tment 1 ppro"it on a#e re/o#ution or income earne.

2$ 0a$ o" .i/i.en. etc!

I ($&*&$(A(I% :5T,i ratio mea ure t,e margin o" pro"it a/ai#a2#e on tota# income! T,e

,ig,er t,e percentage1 t,e 2etter it i no i.ea# tan.ar. can 2e "i9e. 2ut it ,ou#.

2e a.e7uate to co/er a## t,e e9pen e ! T,e ratio pro/i.e a## t,e u e"u# .etai#

0,en compare. to t,e pre/iou perio. ratio! Important conc#u ion can 2e

.ra0n "rom t,i ! T,e rea on "or .ec#ine can 2e "oun. out!

M+ !I1I!$ ! 8I$'! &A(I% :5

S,are,o#.er are t,e rea# o0ner o" a compan$ an. t,e$ intere te. in rea#

en e in t,e earning .i tri2ute. an. pai. to t,em a .i/i.en. ! T,ere"ore1

.i/i.en. $ie#. ratio i ca#cu#ate. to e/a#uate t,e re#ation ,ip 2et0een .i/i.en.

per ,are pai. an. t,e mar-et /a#ue o" t,e ,are!

Di/ine. Yie#. Ratio Di/i.en. per ,are<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Mar-et /a#ue per ,are

Di/i.en. per ,are Di/i.en. pai. to S,are,o#.er

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Num2er o" ,are



69. $A& I G *$& S"A&$) $.*.S.+ :

T,i ratio mea ure t,e pro"it a/ai#a2#e to t,e e7uit$ ,are,o#.er on a per

,are 2a i ! A## pro"it #e"t a"ter pa$ment o" ta9 an. pre"erence .i/i.en. are

a/ai#a2#e to e7uit$ ,are,o#.er ! T,i ratio i ca#cu#ate. 2$ .i/i.ing t,e net

pro"it a/ai#a2#e to e7uit$ ,are,o#.er 2$ t,e num2er o" e7uit$ ,are i ue.5

>ARNIN P>R SHAR> Net Pro"it< Di/i.e. on Pre"erence ,are

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

<<<<<<<<<<<<<<<

Num2er o" >7uit$ S,are

SI NIFICANC>5 T,i ratio i ,e#p"u# in t,e .etermination o" t,e mar-et price

o" t,e e7uit$ ,are o" a compan$! T,e ratio i a# o ,e#p"u# in e timating t,e

capacit$ o" t,e compan$ to .ec#are .i/i.en. on e7uit$ ,are !

6;. !I1I!$ ! *$& S"A&$ )!.*.S.+:Pro"it remaining a"ter pa$ment o" ta9 an. pre"erence .i/i.en. are

a/ai#a2#e to e7uit$ ,are,o#.er ! But a## o" t,e e are not .i tri2ute. among t,em

a .i/i.en.! Out o" t,e e pro"it 1 a portion i retaine. in t,e 2u ine an. t,e

remaining i .i tri2ute. among e7uit$ ,are,o#.er a .i/i.en.! D!P!S i t,e

.i/i.en. .i tri2ute. to e7uit$ ,are,o#.er .i/i.e. 2$ t,e num2er o" e7uit$

,are 5

D!P!S! Di/i.en. Pai. To >7uit$ S,are,o#.er

<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< 9 &))

Num2er o" e7uit$ ,are



S3%( A A'8SIS

S(&$ G"

Strong 2a e o" retai# cu tomer !

Direct acce mar-eting i t,eir mar-eting agent

Proce ing i muc, 7uic-er t,an it competitor !

Sc,eme

3$AK $SS$S

eograp,ica# #ocation

8na0are cu tomer

Intro.uctor$ tage o" net0or-ing in In.ia

%**%&(U I(8

Branc, e9pan ion

Door tep er/ice

("&$A(S

Competitor are coming up 0it, imi#ar an. more /a#ue a..e. er/ice !

#AI ,%#*$(I(%&S

> Mone$

In.u #n.

#DBI

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