CHAPTER:1 INRTODUCTION

After preparation of the financial statements, one may be interested in knowing the position of an enterprise from different points of view. This can be done by analyzing the financial statement with the help of different tools of analysis such as ratio analysis, funds flow analysis, cash flow analysis, comparative statement analysis, etc. Here I have done financial analysis by ratios. In this process, a meaningful relationship is established between two or more accounting figures for comparison.

Financial ratios are widely used for modeling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas.

Financial statements are those statements which provide information about profitability and financial position of a business. It includes two statements, i.e., profit & loss a/c or income statement and balance sheet or position statement.

The income statement presents the summary of the income earned and the expenses incurred during a financial year. Position statement presents the financial position of the business at the end of the year.

Before understanding the meaning of analysis of financial statements, it is necessary to understand the meaning of analysis and financial statements.

Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. By financial statements, we mean two statements- (1) profit & loss a/c (2) balance sheet. These are prepared at the end of a given period of time. They are indicators of profitability and financial soundness of the business concern.

Thus, analysis of financial statements means establishing meaningful relationship between various items of the two financial statements, i.e., income statement and position statement

Parties interested in analysis of financial statements

Analysis of financial statement has become very significant due to widespread interest of various parties in the financial result of a business unit. The various persons interested in the analysis of financial statements are:-

Short- term creditors They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not. Long term creditors They are interested in knowing whether the principal amount and interest thereon will be paid on time or not.

Shareholders They are interested in profitability, return and capital appreciation.

Management The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions.

Trade unions
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They are interested in financial statements for negotiating the wages or salaries or bonus agreement with management.

Taxation authorities These authorities are interested in financial statements for determining the tax liability.

Researchers They are interested in the financial statements in undertaking research in business affairs and practices.

Employees They are interested as it enables them to justify their demands for bonus and increase in remuneration. You have seen that different parties are interested in the results reported in the financial statements. These results are reported by analyzing financial statements through the use of ratio analysis.

CHAPTER:2 BANK PROFILE

1. STATE BANK OF INDIA:

Type- Public (BSE, NSE:SBI) & (LSE:SBID) Founded- Calcutta, 1806 (as Bank of Calcutta) Headquarters- Corporate Centre, Madam Cama Road, Mumbai 400 021 India Key people- Om Prakash Bhatt, Chairman State Bank of India (SBI) (LSE: SBID) is the largest bank in India. It is also, measured by the number of branch offices and employees, the second largest bank in the world. The bank traces its ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network in India and overseas, including products aimed at NRIs. With an asset base of $126 billion and its reach, it is a regional banking behemoth. SBI has laid emphasis on reducing the huge manpower through Golden handshake schemes and computerizing its operations. The State Bank Group, with over 16000 branches, has the largest branch network in India. It has a market share among Indian commercial banks of about 20% in deposits and advances. International presence Regional office of the State Bank of India (SBI), India's largest bank, in Mumbai. The government of India is the largest shareholder in SBI.
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The bank has 52 branches, agencies or offices in 32 countries. It has branches of the parent in Colombo, Dhakka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank, State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India (California), and State Bank of India (Canada). In 1982, the bank established its California subsidiary, which now has seven branches. The Canadian subsidiary was also established in 1982 and also has seven branches, four in the greater Toronto area, and three in British Columbia. In Nigeria, it operates as INMB Bank. This bank was established in 1981 as the IndoNigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branches throughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India already has a branch in Shanghai and plans to open one up in Tianjin.

2. INDUSTRIAL CREDIT & INVESTMENT CORPORATION OF INDIA (ICICI)

ICICI was formed in 1955 at the initiative of the World Bank, the government of India and Indian industry representatives. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. Until the late 1980s, ICICI primarily focused its activities on project finance, providing longterm funds to a variety of industrial projects. With the liberalization of the financial sector in India in the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services provider that, along with its subsidiaries and other group companies, offered a wide variety of products and services. As Indias economy became more market-oriented and integrated with the world economy, ICICI

capitalized on the new opportunities to provide a wider range of financial products and services to a broader spectrum of clients. ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI Banks initial equity capital was contributed 75.0% by ICICI and 25.0% by SCICI Limited, a diversified finance and shipping finance lender of which ICICI owned 19.9% at December 1996. Pursuant to the merger of SCICI into ICICI, ICICI Bank became a wholly-owned subsidiary of ICICI. ICICIs holding in ICICI Bank reduced due to additional capital raising by ICICI Bank and sale of shares by ICICI, pursuant to the requirement stipulated by the Reserve Bank of India that ICICI dilute its ownership of ICICI Bank. Effective March 10, 2001, ICICI Bank acquired Bank of Madura, an old private sector bank, in an all-stock merger. The issue of universal banking, which in the Indian context means the conversion of long-term lending institutions such as ICICI into commercial banks, had been discussed at length over the past several years. Conversion into a bank offered ICICI the ability to accept low-cost demand deposits and offer a wider range of products and services, and greater opportunities for earning non-fund based income in the form of banking fees and commissions. ICICI Bank also considered various strategic alternatives in the context of the emerging competitive scenario in the Indian banking industry. ICICI Bank identified a large capital base and size and scale of operations as key success factors in the Indian banking industry. In view of the benefits of transformation into a bank and the Reserve Bank of Indias pronouncements on universal banking, ICICI and ICICI Bank decided to merge. At the time of the merger, both ICICI Bank and ICICI were publicly listed in India and on the New York Stock Exchange. The amalgamation was approved by each of the boards of directors of ICICI, ICICI Personal Financial Services, ICICI Capital Services and ICICI Bank at their respective board meetings held on October 25, 2001. The amalgamation was approved by ICICI Banks and ICICIs shareholders at their extraordinary general meetings held on January 25, 2002 and January 30, 2002, respectively. The amalgamation was sanctioned by the High Court of Gujarat at Ahmedabad on March 7, 2002 and by the High Court of Judicature at Bombay on April 11, 2002. The amalgamation became effective on May 3, 2002. The date of the amalgamation for accounting purposes under Indian GAAP was March 30, 2002.

The Sangli Bank Limited, an unlisted private sector bank merged with ICICI Bank with effect from April 19, 2007. On the date of acquisition, Sangli Bank had over 190 branches and extension counters, total assets of Rs. 17.6billion (US$ 440 million), total deposits of Rs. 13.2 billion (US$ 330 million), total loans of Rs. 2.0 billion (US$ 50million).

3. PUNJAB NATIONAL BANK (PNB)

Punjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The Bank, founded by Dyal Singh Majithia and Lala Harkishen Lal, is the second largest government-owned commercial bank in India with about 4,500 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by Bankers Almanac, London. Total Business of the bank for financial year 2007 is estimated to be approximately US$60 billion. It has a banking subsidiary in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty, Shanghai, and Dubai. We are a leading public sector commercial bank in India, offering banking products and services to corporate and commercial, retail and agricultural customers. Our banking operations for corporate and commercial customers include a range of products and services for large corporations, as well as small and middle market businesses and government entities. We offer a wide range of retail credit products including housing loans, personal loans and automobile loans. We cater to the financing needs of the agricultural sector and have created innovative financing products for farmers. We also provide significant financing to other priority sectors including small scale industries. Through our treasury operations, we manage our balance sheet, including the maintenance of required regulatory reserves, and seek to maximize profits from our trading portfolio by taking advantage of market opportunities. Our revenue, which is referred to herein and in our financial statements as our income, consists of interest income and other income. Interest income consists of interest on advances (including the discount on bills discounted) and income on investments. Income on investments consists of interest and dividends from securities and our other investments and interest from interbank loan and cash deposits we keep with the RBI. Our securities portfolio consists primarily of
7

Government of India and state government securities. We meet our statutory liquidity reserve ratio requirements through investments in these and other approved securities. We also hold debentures and bonds issued by public sector undertakings and other corporations, commercial paper, equity shares and mutual fund units. Our interest expense consists of our interest on deposits as well as borrowings. Our interest Income and expense are affected by fluctuations in interest rates as well as the volume of activity. Our interest expense is also affected by the extent to which we fund our activities with low interest or non-interest deposits, and the extent to which we rely on borrowings. Our non-interest expense consists principally of operating expenses such as expenses for wages and employee benefits, rent paid on premises, insurance, postage and telecommunications expenses, printing and stationery, depreciation on fixed assets, other administrative and other expenses. Provisioning for non-performing assets, depreciation on investments and income tax is included in provisions and contingencies We use a variety of indicators to measure our performance. These indicators are presented in tabular form in the section titled Selected Statistical Information on page []. Our net interest income represents our total interest income (on advances and investments) net of total interest expense (on deposits and borrowings). Net interest margin represents the ratio of net interest income to the monthly average of total interest earning assets. Our spread represents the difference between the yield on the monthly average of interest earning assets and the cost of the monthly average of interest bearing liabilities. We calculate average yield on the monthly average of advances and average yield on the monthly average of investments, as well as the average cost of the monthly average of deposits and average cost of the monthly average of borrowings. Our cost of funds is the weighted average of the average cost of the monthly average of interest bearing liabilities. For purposes of these averages and ratios only, the interest cost of the unsecured subordinated bonds that we issue for Tier 2 capital adequacy purposes (Tier 2 bonds) is included in our cost of interest bearing liabilities. In our financial statements, these bonds are accounted for as other liabilities and provisions and their interest cost is accounted for under other interest expenses. Since 1969, when we became a public sector bank, we have managed to continue to grow our business while maintaining a strong balance sheet. As of September 30, 2004, our total deposits represented 85.9% of our total liabilities. On average, interest free demand deposits and low
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interest savings deposits represented 43.8% of these deposits in the first six months of fiscal 2005.These low-cost deposits led to an average cost of funds excluding equity for the first six months of fiscal 2005 of 4.7%. As of September 30, 2004, our gross and net non-performing assets constituted 7.65% and 0.30% of our gross and net advances, respectively. In fiscal 2004 our total income was Rs. 96.5 billion and our net profit was Rs. 11.1 billion before adjustment and Rs. 10.6billion after adjustment as part of the restatement of our financial statements for this Issue. In the first six months of fiscal 2005 our total income was Rs. 51.9 billion and our net profit was Rs. 7.4billion. Between fiscal 2002 and 2004, our total income grew at a compound annual rate of12.5%, ourunadjusted and adjusted net profit grew at a compound annual rate of 40.4% and37.4%, respectively, and our total deposits and total advances grew at a compound annual growth rate of 17.1% and 17.2%, respectively. We intend to maintain our position as a cost efficient and customer friendly institution that Provides comprehensive financial and related services. We seek to achieve this by continuing to adopt technology which will integrate our extensive branch network. We intend to grow by cross selling various financial products and services to our customers and by expanding geographically in India and internationally. We are committed to excellence in serving the public and also maintaining high standards of corporate responsibility. In line with our philosophy of aiding Indias development we have opened branches in many rural areas.

CHAPTER:3 OBJECTIVES

Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. For that there are some objectives which are described as under. 1. EARNING CAPACITY OR PROFITABILITY The overall objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. It also helps in knowing the capacity to pay the interest and dividend. 2. COMPARATIVE POSITION IN RELATION TO OTHER FIRMS The purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms engaged in similar business. Such comparison also helps the management to study the position of their firm in respect of sales expenses, profitability and using capital.etc. 3. EFFICIENCY OF MANAGEMENT The purpose of financial statement analysis is to know that the financial policies adopted by the management are efficient or not. Analysis also helps the management in preparing budgets by forecasting next years profit on the basis of past earnings. It also helps the management to find out shortcomings of the business so that remedial measures can be taken to remove these shortcomings. 4. FINANCIAL STRENGTH The purpose of financial analysis is to assess the financial potential of business. Analysis also helps in taking decisions;

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(a) Whether funds required for the purchase of new machinery and equipments are provided from internal resources of business or not. (b) How much funds have been raised from external sources. 5.SOLVECNY OF THE FIRM The different tools of analysis tells us whether the firm has suffucient funds to meet its shortterm and long-term liabilities or not.

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CHAPTER:4 IMPORTANCE
Ratio analysis is an important technique of financial analysis. It is a means for judging the financial health of a business enterprise. It determines and interprets the

liquidity,solvency,profitability,etc. of a business enterprise. es simple to understand various figures in the financial statements through the use of different ratios. Financial ratios simplify, sumarise, and systemise the accounting figures presented in financial statements. sion of profitability and financial soundness can be made between one industry and another. Similarly comparision of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located, remidial masures are taken to correct them.

sales, profits and other important facts. Such trends are useful for planning. level of activities, can be set as standards for judging actual performance of a business. For example, if owners of a business aim at earning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily.

position of business with liquidity viewpoint, solvency view point, profitability viewpoint, etc. with the help of such a study, we can draw conclusion regardings the financial health of business enterprise.

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CHAPTER:5 ADVANTAGES & LIMITATIONS

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

LIMITATIONS: The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations. 1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several
13

limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements. 2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations. 3. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. 4. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult. 5. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. 6. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpret and different people may interpret the same ratio in different way. 7. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading.

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CHAPTER:6 CONSOLIDATED BALANCE SHEET 1. STATE BANK OF INDIA

Consolidated Balance Sheet As On 31-March-2012

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2. ICICI
Consolidated Balance Sheet As On 31-March-2012

16

3. PUNJAB NATIONAL BANK

Consolidated Balance Sheet As On 31-March-2012

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CHAPTER:7 RATIO ANALYSIS

PROFITABILITY RATIO
A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. Some examples of profitability ratios are profit margin, return on assets and return on equity. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios. For instances, some industries experience seasonality in their operations. The retail industry, for example, typically experiences higher revenues and earnings for the Christmas season. Therefore, it would not be too useful to compare a retailer's fourth-quarter profit margin with its first-quarter profit margin. On the other hand, comparing a retailer's fourth-quarter profit margin with the profit margin from the same period a year before would be far more informative.

OPERATING MARGIN A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. It Is Also known as "operating profit margin." Calculated as: Operating margin=

Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the
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company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar of sales. The higher the margin, the better. For example, if a company has an operating margin of 12%, this means that it makes $0.12 (before interest and taxes) for every dollar of sales. Often, nonrecurring cash flows, such as cash paid out in a lawsuit settlement, are excluded from the operating margin calculation because they don't represent a company's true operating performance. RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

22.69%

ICICI

14.45%

PNB

21.47%

INTERPRETATION It shows that operating efficiency of SBI is better than PNB and ICICI. While operating efficiency of ICICI is lower than PNB and SBI. So rank of operating efficiency of banks can be given as SBI, PNB and ICICI.

GROSS PROFIT MARGIN: A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. It is also known as "gross margin". Calculated as:

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Gross Profit Margin=

For example, suppose that ABC Corp. earned $20 million in revenue from producing widgets and incurred $10 million in COGS-related expense. ABC's gross profit margin would be 50%. This means that for every dollar that ABC earns on widgets, it really has only $0.50 at the end of the day. This metric can be used to compare a company with its competitors. More efficient companies will usually see higher profit margins.

RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

21.49%

ICICI

12.99%

PNB

20.67%

INTERPRETATION This ratio shows financial position of company. Here, financial position of SBI is better than PNB and ICICI. So SBI is at first rank by its financial position than PNB and ICICI. NET PROFIT MARGIN For a business to survive in the long term it must generate profit. Therefore the net profit margin ratio is one of the key performance indicators for your business.

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The net profit margin ratio indicates profit levels of a business after all costs have been taken into account. It is worth analysing the ratio over time. A variation in the ratio from year to year may be due to abnormal conditions or expenses. Variations may also indicate cost blowouts which need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvements may lead to a further drop in the ratio or even losses before increased profitability is achieved.
The calculation used to obtain the ratio is:

Net Profit Margin=

RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

11.67%

ICICI

10.51%

PNB

12.68%

INTERPRETATION This ratio is key performance indicators for business. Key performance means the profit level of company; from above graph we can say that performance of PNB is better than SBI and ICICI. So profit level of PNB is at first rank than comes SBI and ICICI.

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RETURN ON NETWORTH Return on Net worth (RONW) is used in finance as a measure of a companys profitability. It reveals how much profit a company generates with the money that the equity shareholders have invested. Therefore, it is also called Return on Equity (ROE) It is expressed as:-

Net Income RONW = ------------------------------------------- X 100 Shareholders Equity The numerator is equal to a fiscal years net income (after payment of preference share dividends but before payment of equity share dividends).The denominator excludes preference shares and considers only the equity shareholding. So, RONW measures how much return the company management can generate for its equity shareholders. RONW is a measure for judging the returns that a shareholder gets on his investment as a shareholder, equity represents your money and so it makes good sense to know how well management is doing with it.

RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

13.72%

ICICI

8.94%

PNB

19.00%

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INTERPRETATION This ratio is useful for comparing the profitability of a company to that of other firms in the same industry. Here, profitability of PNB is more than SBI and PNB. So we can say that PNB is at first rank by its profitability than comes SBI and ICICI.

LEVERAGE RATIO: Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses. A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income. Fixed and variable costs are the two types of operating costs; depending on the company and the industry, the mix will differ. The most well known financial leverage ratio is the debt-to-equity ratio. For example, if a company has $10M in debt and $20M in equity, it has a debt-to-equity ratio of 0.5 ($10M/$20M). Companies with high fixed costs, after reaching the breakeven point, see a greater increase in operating revenue when output is increased compared to companies with high variable costs. The reason for this is that the costs have already been incurred, so every sale after the breakeven transfers to the operating income. On the other hand, a high variable cost company sees little increase in operating income with additional output, because costs continue to be imputed into the outputs. The degree of operating leverage is the ratio used to calculate this mix and its effects on operating income.

DEBT-EQUITY RATIO: A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Debt-Equity Ratio=

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Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation. It is also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as companies'. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.

RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

10.96%

ICICI

5.27%

PNB

15.44%

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

RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

6.31%

ICICI

5.61%

PNB

4.35%

INTERPRETATION This ratio shows specific level of revenue by the amount of fixed assets. SBI has a high level of revenue in comparison with ICICI and PNB. After SBI, ICICI has a high level of revenue and than comes PNB at last.

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LIQUIDITY RATIO:

A class of financial metrics that is used to determine a company's ability to pay off its shortterms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.

CURRENT RATIO: This ratio is a rough indication of a firm's ability to service its current obligations. Generally, the higher the current ratio, the greater the "cushion" between current obligations and your Company's ability to pay them. The composition and quality of current assets is a critical factor in the analysis of your Company's liquidity. It is calculated as Total current assets divided by total current liabilities.

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RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

0.07%

ICICI

0.10%

PNB

0.02%

INTERPRETATION Current ratio of ICICI is higher than SBI and PNB, means ICICI has a high ability to pay for its liabilities, and than secondly comes SBI and PNB has a low ability to pay for liabilities in comparison with ICICI and PNB. QUICK RATIO: It is also known as the "Acid Test" ratio; it is a refinement of the current ratio and is a more conservative measure of liquidity. The ratio expresses the degree to which your current Company's current liabilities are covered by the most liquid current assets. Generally, any value of less than 1 to 1 implies a "dependency" on inventory or other current assets to liquidate shortterm debt.

It is calculated as Cash plus trade receivables divided by total current liabilities.

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RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

0.07%

ICICI

0.10%

PNB

0.02%

INTERPRETATION PNB has a high quick ratio means it has enough current assets to cover its current liabilities, while SBI and ICICI have a low quick ratio in comparison with PNB.

PAYOUT RATIOS: The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. Calculated as:

Payout Ratio=

For example, a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.

DIVIDEND PAYOUT RATIO: Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:
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Dividend Payout Ratio= The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. However investors seeking capital growth may prefer lower payout ratio because capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors. Note that dividend payout ratio is a reciprocate ratio to dividend cover, which is calculated as EPS/DPS.

RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

22.64%

ICICI

33.12%

PNB

23.40%

INTERPRETATION ICICI has a high dividend payout ratio, so the Investors who are seeking high current income and limited capital growth should be invest in ICICI bank. PNB and SBI have a low dividend payout ratio, so investors who are seeking capital growth should be invest in PNB and SBI because capital gains are taxed at a lower rate.

EARNING RETENTION RATIO: The percent of earnings credited to retained earnings. In other words, the proportion of net income that is not paid out as dividends.
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Calculated as: Earning Retention Ratio= It can also be calculated as one minus the dividend payout ratio. RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

77.33%

ICICI

66.35%

PNB

76.59%

INTERPRETATION Earning retention ratio is the opposite of the dividend payout ratio. SBI and PNB have a high earning retention ratio, so the Investors who are seeking high current income and limited capital growth should be invest in SBI and PNB. ICICI has a low earning retention ratio, so the investors who are seeking capital growth should be invest in ICICI BANK.

PERSHARE RATIOS EARNIG PER SHARE: The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Calculated as: Earnig Per Share=

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When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio.

For example, assume that a company has a net income of $25 million. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 million is deducted from the net income to get $24 million, and then a weighted average is taken to find the number of shares outstanding (0.5 x 10M+ 0.5 x 15M = 12.5M). An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.

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RATIO AT 31-MARCH 2012 SR. NO. NAME OF BANK PERCENTAGE

SBI

117.33%

ICICI

42.56%

PNB

70.38%

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

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