SYNOPSIS

THE STUDY OF FINANCIAL ANALYSIS AT HDFC BANK

Synopsis for the dissertation submitted in partial fulfilment of the requirements for the award of the degree of

BACHELOR OF BUSINESS MANAGEMENT OF BANGALORE UNIVERSITY By

RAJNI KANT Register Number: 06MJC08017

Under the guidance of

Mrs.POONGA THAI

Department of Management Studies T. John Institute of Management and Science

Bangalore

2006-2009

1. TITLE OF THE STUDY

The study of financial analysis at HDFC bank 1.1 GENERAL INTRODUCTION: Finance is the life-blood of business. It is rightly termed as the science of money. Finance is very essential for the smooth running of the business. Finance controls the policies, activities and decision of every business.

Definition

Finance is that business activity which is concerned with the organization and conversation of capital funds in meeting financial needs and overall objectives of a business enterprise.- Wheeler

Financial management is that managerial activity which is concerned with the planning and controlling of a firm financial reserve. Financial management as an academic discipline has undergone fundamental changes as regards its scope and coverage. In the early years of its evolution it was treated synonymously with the raising of funds. In the current literature pertaining to this growing academic discipline, a broader scope so as to include in addition to procurement of funds, efficient use of resources is universally recognized.

1.2 INDUSTRIAL BACKGROUND: Meaning of Bank

According to banking regulation act of 1949 defines the term banking as accepting for the purpose of lending or investment of deposits of money from the public, repay on demand or otherwise and withdraw by cheques, draft or otherwise.

Kinds or types of bank: Commercial bank Industrial bank Foreign exchange bank Co-operative bank

Agricultural bank Land and development bank Saving bank Central bank

1.3 FINANCIAL ANALYSIS:

Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationships between the items of the balance sheet and profit and loss account. The purpose of financial analysis is to disclose the information contained in the financial statements so as to judge the profitability and financial soundness of the organization.

1.4 ANALYSIS AND INTERPRETATION:

Analysis of Financial statements is a process of scanning them with a view to get the necessary information. Accordingly, there are a large number of persons who are interested in the analysis of financial statements. However, even with the accompanying schedules, the layman does not understand the statements. Except an expert analyst, others including the management cannot follow and digest the information contained in the statements. Hence, the need for analysis.

1.5 TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS:

A financial analyst analyzes the financial statements by selecting the appropriate techniques according to the purpose of analysis. Financial statements may be analyzed by means of any of the following techniques. Comparative Statements Common-size Statements Trend Analysis Ratio Analysis Fund Flow Statements Cost-Volume-Profit A Analysis

1.6 LIMITATIONS OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from some serious limitations:

Limited use of a single ratio

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 meaningful conclusion.

Window Dressing
Financial statements can easily be window dressed to present a better picture of its financial and profitability position to outsiders. Hence, one has to be very careful in making a decision from ratios, calculated from such financial statements. But it may be very difficult for an outsider to know about the window dressing made from a firm.

Personal Bias
Ratios are only means of financial analysis and not an end of itself. Ratios have to be interpreted and different people may interpret the same ratio in different ways.

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. Moreover comparisons are difficult due to differences in definitions of various financial terms used in the ratio analysis.

Price Level Changes

While making ratio analysis, no consideration is made to the changes in price levels and this makes the interpretation of ratios invalid.

1.7 Research design

Research design means a search of facts, answers to question and solution to the problems. It is a prospective investigation. Research is a systematic logical study of an issue or problem through scientific method. It is a systematic and objective analysis and recording of controlled observation that may lead to the development of generalization, principles, resulting in prediction and possibly ultimate control of events. Research design is the arrangement of conditions for the collection and analysis of data in manner that aims to combine relevance to the research purpose with relevance to

economy. There are various designs, which are descriptive and helpful for analytical research.

1.8 OBJECTIVES OF THE STUDY Based on the information furnished in the financial statements, the various objectives of the ratio analysis are: To show the firms relative strength and weakness. To determine the financial condition and financial performance of the firm. To involve comparison for a useful interpretation of the financial statemen The overall operating efficiency and performance of the bank.

1.9 NEED OF THE STUDY:

Any company would like to know its position against its competitors. The ultimate performance indicator of any company is the financial parameters because invariably all costs efficiencies; activities and solvency position of the company will be reflected in the financial mirror. The following are stated as the need for the study: To understand the volume of the profit and its reasonableness. To understand the movement of profit over a period of time. To know the reason for the variation in the profit. To know the present standing of the company.

2.1 SCOPE OF THE STUDY:

Ratio analysis is perhaps the first financial tools developed to analyze and interpret the financial statement and is still used widely for this purpose. Financial performance analysis is a well-researched area and innumerable studies have proved the utility and usefulness of this analytical technique. This research seeks to investigate and constructively contribute to help:

The bank in finding out the gray areas for improvement in performance

 The bank to understand its own position over time

The managers to understand the contribution to the performance of the bank The present and potential investors outside parties such as the creditors,debtors, government and many more to get an idea of the overall performance of the bank

2.2 LIMITATIONS OF THE STUDY:

Definitions used are universal.
Selected study period is sufficient.

Selected financial ratio reflects the financial performance of the bank.

Ultimate performance evaluation of the bank is shown in its financial assets.

2.3 SOURCES OF DATA:

Data is defined as group of non-random symbols in the form of text, image, or voice representing quantities, actions as objects. Data is processed into a form that is meaningful to the recipient and is of real and perceived value in the current or prospective actions or decisions of the recipient.

Data are mainly classified into two groups:

Primary data

Secondary data

2.4 FINDINGS
The bank needs to maintain more current assets in order to meet its short-term obligations. The growth of the bank is not stable in maintenance of liquidity ratio as it are fluctuating every year because low investment in temporary & marketable securities. Cash position of the bank is good The proprietary ratio of the bank is fluctuating higher rate. So, the bank growth is good. The solvency ratio of the bank remains almost the same in the four consecutive years. Net worth ratio is in a good position as the net worth is more than fixed assets in all four consecutive years. The shareholders funds are sufficient to finance the fixed assets Increase in external debt and also shareholders funds & it is fluctuating every year Price earning ratio as been good and the market share of the bank is increasing day by day.

2.5 SUGGESTIONS
Loan to small scale industries and cottage industries. Loan to self-employed person or young entrepreneurs. Increase short-term deposits and long-term deposits by providing higher rate of interest. Increase the availability of car loans. The bank can also provide two wheelers and education loan which can boost in come of the bank.

2.6 BIBLIOGRAPHY

For the purpose of the study, the following books have been referred:

STANDARD TEXT BOOK SUCH AS:

SI No Title of Books 1
Financial Management

Authors
I.M Pandey Professor, IIM Ahmadabad

Publishers
Vikas Publishing House Pvt ltd

Edition
2002

Financial Management Theory and Practice

Prasanna Chandra, IIM Bangalore

Tata McGraw Hill Publishing Co. ltd, New Delhi

2002

3 4

Management Accountancy

B.S Raman

United Publishers Mangalore Himalaya Publication House, Mumbai S. Chandra & company ltd Kalyani Publishers

2000 2001

Business Finance

Reddy and Appannaih

Management Accounting

R.S.N Pillai Bagavathi

2002

Management Accounting

P.K Sharma & Shashi K.Gupta

2000

COMPANY LITERATURE

Annual Report of HDFC Bank Limited

WEBSITES, WHICH ARE USED TO GATHER INFORMATION:

www.hdfcbank.com