List of Tables

RATIO ANALYSIS
TECHNIQUE IN 2008-09
LIST OF TABLES
SL No. PARTICULARS PAGE No.
1 Table showing Current ratio 45
2 Table showing Debt equity ratio 47
3 Table showing Proprietary ratio 49
4 Table showing Interest coverage ratio 51
5 Table showing Debt to total funds ratio 53
6 Table showing Gross profit ratio 55
7 Table showing Net profit ratio 57
8 Table showing Operating ratio 59
9 Table showing Operating profit ratio 61
10 Table showing Return on investment 63
11 Table showing Return on equity capital 65
12 Table showing Earning per share 67
13 Table showing Price earnings ratio 69
14 Table showing Cost of goods sold ratio 71
15 Table showing Administration overhead ratio 73
16 Table showing Selling overhead ratio 75
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LIST OF CHARTS
SL No. PARTICULARS PAGE No.
1 Chart showing Current ratio 46
2 Chart showing Debt equity ratio 48
3 Chart showing Proprietary ratio 50
4 Chart showing Interest coverage ratio 52
5 Chart showing Debt to total funds ratio 54
6 Chart showing Gross profit ratio 56
7 Chart showing Net profit ratio 58
8 Chart showing Operating ratio 60
9 Chart showing Operating profit ratio 62
10 Chart showing Return on investment 64
11 Chart showing Return on equity capital 66
12 Chart showing Earning per share 68
13 Chart showing Price earnings ratio 70
14 Chart showing Cost of goods sold ratio 72
15 Chart showing Administration overhead ratio 74
16 Chart showing Selling overhead ratio 76
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CHAPTER I
INTRODUCTION
1.1 INTRODUCTION
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Accounting serves the purpose of providing financial information relating a

business. Such information is provided to people who have an interest in the
organization, such as share holders, managers, creditors, debenture holders, bankers,
tax authorities and others. Broadly speaking, on the basis of type of accounting
information and the purpose for which such information is used, accounting may be
divided into three categories:
1. Financial Accounting (General Accounting)
2. Cost Accounting
3. Management Accounting
MANAGEMENT ACCOUNTING
1.1.1 MEANING:
The term ‘management accounting’ is the modern concept of accounts as a

total of management. It is a broad term and is concerned with all such accounting
information that is useful to management. In simple words, the term management
accounting is applied to the provision of accounting information for management
activities such as planning, controlling and decision making, etc.
1.1.2 DEFINITIONS:
According to the Institute of Charted Accountants of England, “any form of

accounting which enables a business to be conducted more efficiently” may be
regarded as management accounting. Management accounting information can help
managers identify problems, solve problems and evaluate performance.
In the words of Robert Anthony, “Management accounting is concerned with

accounting information that is useful to management.”
The Institute of Cost and Works Accountants of India (ICWAI) has

defined management accounting as “a system of collection and presentation of
relevant economic information relating to an enterprise for planning, controlling and
decision making.”
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The Charted Institute of Management Accountants (CIMA) of UK has

given a very authoritative and comprehensive definition as follows:
“Management accounting is an Integral part of management concerned with

identifying presenting and interpreting information used for –
i. Formulating strategy
ii. Planning and controlling activities
iii. Decision making
iv. Optimizing the use of resources
v. Disclosure to shareholders and others externals to the entity
vi. Disclosure to employs and safeguard assets”
1.1.3 SCOPE OF MANAGEMENT ACCOUNTING
Management accounting has a very wide scope. It includes not only financial
accounting and cost accounting but also all types of internal financial controls,
internal audit, tax accounting, office services, cost control and other methods and
control procedures. Thus scope of management accounting, inter alia includes the
following:
a. Financial accounting
b. Cost accounting
c. Budgeting and forecasting
d. Tax planning
e. Reporting to management
f. Cost control procedures
g. Statistical tools
h. Internal control and internal audit
i. Financial analysis and interpretation
j. Office services
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1.1.4 FUNCTIONS (OR OBJECTIVES) OF MANAGEMENT

ACCOUNTING
Main functions of management accounting are as follows:
a. Planning
b. Coordinating
c. Controlling
d. Communication
e. Financial analysis and interpretation
f. Qualitative information
g. Tax policies
h. Decision making
1.1.5 CHARACTERISTICS OR NATURE OF MANAGEMENT

ACCOUNTING:
It is clearly from the above definitions that management accounting is

concerned with accounting data that is using in decision making. The main
characteristics of management accounting are as follows:
a. Using in decision making

b. Financial in cost accounting information
c. Internal use
d. Purely optional
e. Concerned with future
f. Flexibility in presentation of information
1.1.6 LIMITATIONS OF MANAGEMENT ACCOUNTING
Management accounting is a very useful tool of management. However, it

suffers from certain limitations as stated below:
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a. Based on historical data

b. Lack of wide knowledge
c. Complicated approach
d. Not a suitable of management
e. Costly system
f. Developing stage
g. Lack of objectivity
h. Resistance from staff
1.2 RATIO ANALYSIS
1.2.1 INTRODUTION TO RATIO ANALYSIS:
Ratio Analysis is the one of the powerful tools of the financial analysis. A
ratio can be defined as ‘the indicated quotient of two mathematical expression’ and as
‘the relationship between two or more things’. Ratio is thus the numerical or an
arithmetical relationship between two figures. Ratio analysis can be defined as the
systematic used of ratio to interpret the financial statements so that the strengths and
weakness of a firm as well as its historical performance and the current financial
condition can be determined. The relationship between the two variables can be
expressed as:
a. Pure ratios say current assets to current liabilities are 2:1

b. A rate say current assets are two times of current liabilities
c. A percentage say current assets are 200% of current liabilities
These alternative methods of expressing items, which are related to each other,
are for the purpose of financial analysis, referred to as ratio analysis.
The rational of ratio analysis lies in the fact that it makes related information
comparable. A single number by itself has no meaning but when expressed in terms of
a related figure, it yields significant interface. Ratios become useful only when the
comparison consists of past ratio or projected ratio or competitors ratio or industry
ratio.
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1.2.2 NATURE AND SCOPE OF RATIO ANALYSIS:
Ratio Analysis is a powerful tool of financial analysis. Ratio Analysis is one

of the tools of financial analysis. The other tools of financial analysis are:
• Comparative financial statements

• Common measurement statements
• Trends percentages analysis
• Funds flow statement
• Cash flow statement
• Net working capital analysis
Ratio analysis is a statistical yardstick that provides a measure of relationships

between two accounting figures. Ratio analysis of financial statements stands for the
process of determining and presenting the relationship of items and group of items in
the statement. Ratio analysis can be used both in the trend/dynamic analysis and
statistical analysis.
There are several ratios that an analyst can comply but the type of ratio he would
precisely use depends upon the purpose for which analysis is made.
1.2.3 OBJECTIVES OF RATIO ANALYSIS:
The objectives of ratio analysis are as follows:
• The main objective of ratio analysis is to analyze the firm’s relative strength and
weakness.
• To evaluate the financial condition and performance of the firm.
• To get way for useful interpretation out of the financial statements for the organization
growth.
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• To suggest corrective measures when the financial condition and Performance of the
firm is unfavorable.
1.2.4 IMPORTANCE OF RATIO ANALYSIS:
Ratio analysis is the important technique of financial analysis. It is a way by

which financial stability and health of a concern can be judged. The following are the
main points of importance of ratio analysis.
 Useful in financial position analysis:
Accounting ratios reveal the financial position of the concern. This helps the
banks, insurance companies, financial institutions, shareholders, investors and other
interested people for making investment decisions.
 Useful in simplifying accounting figures:
Accounting ratios simplify, summarize and systematize the accounting figures

in order to make them more understandable. They highlighted the inter relationship
which exist between various segment of the business as expressed by the accounting
systems.
 Useful in assessing the operational efficiency:
Accounting ratios helps to have an idea of the working of a firm. The

efficiency of the concern becomes evident when analysis is an accounting ratio. They
diagnose the financial position by using liquidity, Solvency and profitability etc. This
helps the management to assess financial requirements and the capabilities of business
units.
 Useful in forecasting purposes:
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If accounting ratios are calculated for a number of years, then a trend is

established. This trend helps in setting up future plans and forecasting.
 Useful in locating the weak spots in the business:
Accounting ratios are of great assistance in locating the weak spots in the
business even though the overall performance may be efficient. Weakness in financial
structure due to incorrect policies in the past or present are revealed through
accounting ratios. E.g. If a firm finds that increase in distribution expenses is more
than proportionate to the results expected or achieved it can take remedial steps to
overcome this adverse situation.
 Useful in comparison of performance:
Through accounting ratios comparison can be made between one departments

of a firm with another of the same firm in order to the performance of various
departments in the firm.
1.2.5 ADVANTAGES OF RATIO ANALYSIS:
The importance of ratio analysis lies in the fact that it presents facts on
Comparative
Basis. The following are the some of the advantages of ratio analysis.
 Helps in the analysis of liquidity position of the firm. This ability is reflected in the
liquidity ratios of the firm. The liquidity ratios are particularly useful in credit
analysis by Banks and other suppliers of short-term loans.
 Helps the analyzing long-term solvency of the firm. Ratio analysis reveals the
strengths and weakness of a firm in this respect. The leverage ratios, for instance, will
indicate whether a firm has reasonable proportion of various sources of funds or if it is
heavily loaded with debt in which case its solvency is exposed to serious strain.
 Yet another dimension of the usefulness of the ratio analysis, relevant from the
viewpoint of management is that which throws light on the degree of efficiency in the
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management and utilization of its assets. The various activity ratios measure this kind
of operational efficiency.
 Ratio analysis provides an integrated view of the overall profitability of the firm,
which the management is constantly concerned. It enables to analyze the ability of the
firm to meet its short term as well as long-term obligations.
 Helps in planning, forecasting the performance of the firm over a time. When the
ratios are compared for previous, it indicates future success or failure.
 Facilities for inter-firm comparison. An inter-firm comparison would demonstrate the

firm’s position and also its competitors. If the results are at variance either with the
industry standard or with those competitors, the firm can seek to identify the probable
reasons and in light take remedial measures.
 Facilities for trend analysis. The advantage of trend analysis of ratios lies in the fact
that the analyst can know the direction of movement is Favorable or unfavorable when
compared over the years.
1.2.6 LIMITATIONS OF RATIO ANALYSIS:
Ratio analysis is very important revealing the financial position of the

business. But in spite, of its limitations, which restricts its use. These limitations
should be kept in mind while making use of ratio analysis for interpreting the financial
statements. The following are the main limitations of ratio analysis.
 False results if based on incorrect accounting data:

Accounting ratios can be correct only if the data are correct. Sometimes the
information given in the financial statements is effected by window dressing that is
showing position better than what actually is.
 No idea of probable happenings in future:
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Ratios are an attempt to make an analysis is of the past financial statements so

they are historical documents. Now-a-days keeping in view the complexities of the
business, it is important to have an idea of probable happenings in future.
 Variations in accounting methods:

The two firm’s results are comparable with the help of accounting ratios only
if they follow the same accounting methods or bases. Comparison will become
difficult if the two concerns follow the different methods of providing depreciation,
differences in the basis of inventory valuation, estimated working of financial
statements of such firms by means of ratios is bound to be misleading.
 Price level changes:

Changes in price level make comparison for various years difficult. For
example the ratio of sales to total assets in 1998 would be much higher than in 1980
due to rising prices, fixed assets being shown at cost and not at Market price.
 Only one method of analysis:

Ratio analysis is only a beginning and gives just a fraction of information
needed for decision-making. Therefore to have a comprehensive analysis of financial
statements, ratios should be used along with other methods of analysis.
 No Common standards:
It is very difficult to lay down a common standard for comparison because
circumstances differ from concern to concern and the nature of each industry is
different.
For example a business with current ratio of more than 2:1 might not be in a
position to pay current liabilities in time because of an unfavorable distribution of
current assets in relation of liquidity and vice-versa in other concern.
 Different meanings assigned to the same term:
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Different firms, in order to calculate ratio may assign different meanings. For
example, profit for the purpose of calculating a ratio may be taken as profit before
charging interest and tax or profit before tax interest or profit after tax and interest.
1.2.7CLASSIFICATION OF RATIOS:
Several ratios, calculated from the accounting data, can be grouped into
various classes according to the function. The parties in the ratio analysis are short
term and long-term creditors, owners and management. Short-term creditors’ main
interest is in the liquidity or short-term solvency of the firm. Long term creditors on
the other hand, are more interested in the long-term solvency and the profitability of
the firm. Similarly owners concentrate on the firm’s profitability and financial
condition. Management is interested in evaluating every aspect of the firm’s
performance. They have to protect the interest of all parties and see that the firms
grow profitability. In view of the requirements of the various users of ratios, we may
classify them into the following four important categories. They are:
 Liquidity ratios
 Capital structure ratios
 Turnover ratios or Activity ratios
 Profitability ratios
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1)Liquidity ratio 2) Capital structure ratio 3) Turnover ratio 4) Profitability ratio

Current ratio Debt equity ratio Stock TOR GP ratio
Quick ratio Proprietary ratio Debtors TOR NP ratio
Solvency ratio Creditors TOR Operating ratio
Current Asset TOR Return on shareholder
fund ratio
LIQUIDITY RATIOS
Liquidity ratios help in measuring the ability of the firm to meet its current
obligation. Infect, the analysis of the liquidity needs the preparations of each budgets
and cash flow statements, but liquidity ratios by establishing relationship between
cash and other current assets to current obligations, gives us a quick measure of
liquidity. It is extremely important for a firm to be able to meet its obligations as it
becomes due. A firm should ensure that it does not suffer from lack of liquidity and
also that it is not too highly liquid. The failure of a company to meet its obligations
due to lack of sufficient liquidity will result in the closure of the firm. A very high
degree of liquidity is also bad, idle assets earn nothing. The firm’s funds will be
unnecessarily locked up in the current assets. Therefore it is necessary to strike a
proper balance between liquidity and non-liquidity.
The ratios that indicate the extent of liquidity are as follows:
• Current ratio
• Quick ratio or Acid test ratio
• Absolute liquid ratio
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CURRENT RATIO
It may be defined as the relationship between current assets and current

liabilities. The measure of the general liquidity of the firm for the short period of the
time
Current Ratios = Current Assets / Current Liabilities

Current assets include cash and other assets, which can be converted into cash
within a year, such as marketable securities, debtors and inventory. Prepaid expenses
should be included in the current assets as they represent the payments that need not
be paid by the firm in the near future. All obligations maturing within a year are
included in current liabilities. Thus current liabilities include creditors, bills payable,
accrued expenses, bank overdraft, income tax liability and long term debt maturing in
the current year. The current ratio is a measure of the firm’s short-term solvency. It
indicates the availability of current assets in rupees for every one rupee of current
liability
As a conventional rule, a current ratio of 2:1 or more is considered

satisfactory.
QUICK RATIO/ACID TEST RATIO
The quick or acid test ratio is more defined measure of the firm’s liquidity.
This ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or within a
reasonable time without a loss of value.
Quick ratio = Liquid assets / Current Liabilities

Quick assets include cash and book debts (Debtors and Bills receivable) only.
Inventories are excluded because it takes time to sell finished goods and convert raw
materials and work in progress into finished goods. There is also uncertainty in selling
of inventories. Since the expenses cannot be converted into cash, the prepaid expenses
are excluded.
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By convention a quick ratio of 1:1 is considered. It is considered that if quick

assets are equal to current liabilities then the concern can meet its obligation
 ABSOLUTE EQUITY RATIO:
This is known as super quick ratio or cash ratio.
In calculating this ratio, both inventories and receivables are deducted from the
current assets to arrive at absolute liquid assets such as cash and easily marketable
investments in securities. Higher the ratio, the higher is the cash liquidity. A low ratio
is not a serious matter because the company always borrows from the bank for short –
term requirements.
Absolute liquidity ratio = cash in hand and at bank + short term marketable securities /
current liabilities
CAPITAL STRUCTURE RATIOS OR GEARING RATIOS
 DEBT EQUITY RATIO
Debt equity ratio shows the relationship between the total debts and owned
capital. It is the ratio of the amount invested by the outsiders to the amount invested
by the shareholders. It is also known external internal equity ratio. This ratio reflects
the relative claims of the shareholder and creditors against the assets of a company
alternatively. It may be expressed as follows.
Debt equity ratio = External equity / Internal equity

OR
Debt equity ratio = Outsiders fund / Shareholders fund
The term external equity refers to total outside liabilities or borrowed funds.
Outside liabilities include all debts whether long term or short term. Internal equity or
shareholders funds include equity share capital, preference share capital, reserves and
surpluses. Internal equity is to net worth.
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A ratio of 1:1 is considered to be a satisfactory ratio although cannot be any

standard norm for all business.
PROPRIETARY RATIO
This is a variant of debt equity ratio. This ratio establishes the relationship
between shareholders funds and total assets. It indicates the proportion of total assets
financed by shareholders. It is usually computed as follows:
Proprietary ratio = Shareholders / Total assets or Total resources X 100

A high proprietary ratio indicates a relatively favorable position to the
creditors at the time of liquidation. On the other hand, a low ratio indicates a higher
risk to creditors.
 INTEREST COVERAGE RATIO
This ratio indicates whether the business earns sufficient profit to pay
periodically the interest charges.
Interest coverage ratio = earnings before tax and interest (EBIT) / Fixed interest
charges
 DEBT TO TOTAL FUNDS RATIO
This ratio shows the relationship between debts and the total funds employed
in the business.
The term debt includes long – term loans and current liabilities like sundry
creditors, bills payable, bank overdraft, outstanding expenses etc. Total funds
employed include shareholder funds, long term loans and current liabilities.
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Debts to total funds ratio = Debt / Total funds
 CAPITAL GEARING RATIO
This is the ratio between the fixed interest bearing securities and equity share
capital. Fixed income securities include debentures and preference share capital. Thus
the ratio is:
Capital gearing ratio = Fixed income securities / Equity share holders fund
A company is highly geared if the ratio is more than one. If it is less than one,
it is low geared. If the ratio is exactly one, it is evenly geared. A highly geared
company has the advantage of trading on equity.
TURNOVER RATIOS
 INVENTORY TURNOVER RATIO
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This ratio is calculated by dividing the cost of goods sold by average

inventory.
Inventory turnover ratio = Cost of goods sold / Average stock
 DEBTORS TURNOVER RATIO
Debtor’s turnover ratio is the ratio, which indicates the relationship between
debtors and sales. It is the ratio, which indicates the number of times the debtors are
collected in a year. This ratio is generally expressed as a rate that is as so many times.
It is expressed as follows:
Debtors turnover ratio = Net annual credit sales / Average receivables or Average
debtors
Here,
Net annual credit sales = total sales – cash sales – sales returns.
Average receivables = closing debtors + closing bills receivables
 CREDITORS TURNOVER RATIO
Creditors’ turnover ratio is the ratio between creditors and purchases. It

indicates the number of times the creditors are paid in a year. This ratio is generally
expressed as a rate that is as so many times. It is expressed as follows:
Creditors turnover ratio = Net annual Credit purchases / Average creditors & average
bills payable
 CASH TURNOVER RATIO
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Cash turnover ratio is the ratio between cash and sales. Cash for this purpose
means cash in hand, cash at bank and readily realizable investments or securities.
Sales means, total annual sales minus sales returns. This ratio is expressed as a
proportion that is as.
Cash turnover ratio = Net annual sales / Cash
WORKING CAPITAL TURNOVER RATIO
Working capital turnover ratio is the ratio between working capital and
turnover. Working capital is the excess of current assets over current liabilities.
Turnover means net sales. This ratio is expressed as proportion that is as.
Working capital turnover ratio = Net sales / Working capital

A higher working capital turnover ratio indicates the efficiency and a lower
working capital turnover ratio indicates the inefficiency of the management in the
utilization of working capital.
PROFITABILITY RATIOS
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 RETURN ON INVESTMENT
Return on capital employed ratio or return on investment ratio is the ratio

between return on capital employed.
Return on capital employed means operating profit or net profit before
deducting interest on long term loans and deposits, debentures and taxes. Capital
employed refers to the total long-term funds employed or used in the business.
Return on capital employed is calculated as follows:
Return on capital employed = Operating profit / Capital employed X 100

Here,
Operating profit = Profit before interest and tax.
Capital employed =Equity share capital + Preference share capital + un
disturbed profit + Reserves and surplus + Long term liabilities – Fictitious assets –
Non business assets.
This ratio is the measure of productivity of the capital employed in the
business. In other words, it indicates the overall profitability of the business.
 RETURN ON TOTAL ASSETS RATIO
Return on totals assets or total resources ratio is the ratio of the net profit to
total assets or total resources. Return here means the net profit after tax that is final
net profit. Total assets or total resources mean all realizable assets, including
intangible assets if they are realizable. This ratio is calculated as follows:
Return on total assets ratio = Net profit / Total assets X 100
 EARNING PER SHARE ( E.P.S)
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E.P.S is a ratio between net profit available for equity shareholders i.e., net
profit after taxes and preference dividends, and the number of equity shares. In other
words, it means Earning per equity share.
The earning per shares expressed as follows:
Earnings per share = Net profit available for equity shareholders / Number of equity
shares
DIVIDEND PAYOUT RATIO
Dividend payout ratio is the ratio between dividend per equity share and
earnings per equity share. This ratio indicates to what portion of earnings per share
has been used for paying dividend and what portion has been retained for ploughing
back. It also throws light on the chances of appreciation in the price of the shares.
The payout ratio is expressed as follows:
Dividend payout ratio = Dividend per equity share / Earnings per equity share X
100
A low payout ratio indicates that only a small portion of earnings of the
company has been used for dividend and the major portion if the earnings is retained
as ploughing back. On the other hand, a very high payout ratio indicates that the entire
earning of the company has been for dividend, and nothing is retained for ploughing
back.
PRICE EARNING RATIO
Price Earnings Ratio is the ratio, which express the relationship between
market price per share and earnings per share. The price earnings ratio is usually
expressed as follows:
Price earnings ratio = Market price per equity share / Earnings per equity share
This ratio indicates the number of times the earnings per share is covered by
its market price. This ratio is very useful to an investor for predicting the market price
of the share at some future data. It is also useful to the financial manager in
connection with the fresh issue of shares.
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INTEREST EARNED TO TOTAL INCOME
This ratio assesses the share of interest income of the bank, as interest is a
major source of income to a bank. This ratio can be applied to both aspects of interest
earned on investments and interest earned on loans and advances.
Interest earned to total income = Interest earned / Total income X 100
 INTEREST PAID TO TOTAL INCOME:
Interest paid on borrowings and deposits is the main expenditure for the bank.
The ratio of interest paid to total income indicates the extent of total income that is
drained out for payment of interest.
Interest paid to total income = Interest Paid / Total income
 TOTAL EXPENDITURE TO TOTAL INCOME
Working out this ratio indicates the percentage of expenditure incurred by the
bank for earning its total income. This also reveals the profitability of bank.
Total expenditure to total income = Total expenditure / Total Income X 100
Total Expenditure = Expenditure – N/ P.
NET PROFIT TO TOTAL DEPOSITS
The bank needs to mobilize deposits and other funds more of no cost and low
cost deposits. Very efficient employment of funds in loans and advances should be
there instead of maintaining excess liquidity over the statutory requirement.
Net Profit to Total Deposits = Net Profit / Total Deposits X 100
NET PROFIT TO INTEREST EARNED
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The ratio indicates the relationship between interest earned and interest paid.
More of interest earned than interest paid is a good ratio indicator.
Net Profit to Spread = Net Profit / Spread X 100
 RATIO ESTABLISHMENT EXPENDITURE TO TOTAL

EXPENDITURE
In order to conduct the banking business, a share of interest income will be

directed towards establishment expenses like staff and Bank establishment.
Establishment expenditure Total expenditure = Establishment expenses / Total

Expenditure X 100
 RATIO OF COST MANAGEMENT
This would be worked out with reference to the total cost of establishment
expenses to working capital. It reveals the cost of operating & cost of managing the
bank. The bank should inculcate cost consciousness among its staff.
Ratio of Cost Management = Establishment expenses / Working capital X 100
 INTEREST PAID ON DEPOSITS
Interest paid on borrowings and deposits is the main expenditure for the Bank.
The ratio is calculated by dividing interest paid by total deposit.
Interest paid on deposit = Interest paid / Total deposits X 100
 OTHER EXPENDITURE TO TOTAL INCOME:
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This expenditure is calculated to know other expenses of Bank that is the

expenses other than interest paid.
Other expenditure to total income = other expenditure / Total income X 100

Other Expenditure = Total expenditure – Interest paid
Total expenditure = (Expenditure – N/P)
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CHAPTER II
RESEARCH DESIGN
RESEARCH METHODOLGY
Title of the project
“Financial analysis of VIJAYA Bank Using Ratio Analysis Technique”
2.1 INTRODUCTION TO THE RESEARCH PROBLEM:
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Research design simply means a search of facts answers to question or

solution to problems. It is a prospective investigation. Research is a systematic and
logical study of an issue or problem through scientific method. It is a systematic and
objective analysis and according to controlled observations, that may lead to
development of general principles, resulting in predictions and possibility ultimate
control of events.
A Research design is the arrangement of conditions for the collection and

analysis of data in a manner that aims to combine relevance to the research purpose
with economy in the procedure. There are various research designs, but descriptive
and analytical research designs are most suitable for this study.
Sources of data
A) Secondary data
The sources of data for the study are particularly secondary in nature. The
secondary accounting data and other related information have been collected from the
management of VIJAYA BANK and it includes Annual Reports and financial
statements of the company.
Sampling plan
Not applicable because only VIJAYA BANK is taken for study and
concentrate on financial performance of the company.
2.2 STATEMENT OF PROBLEM:
Analysis of financial statement i.e. income statement and the balance sheet is
very difficult to analyze the complete picture of financial performance. Therefore
there is a need of applying the modern tools of management accounting to access the
exact financial performance and position of the business enterprise.
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The ratio analysis technique is a crucial technique to assess the financial status of the
organization. The project has been undertaken with the aim of analyzing the financial
status of VIJAYA BANK for 4 years.
To evaluate a firm’s financial conditions and performance, there is a need to

perform check up a various aspects of a firm’s financial health. A tool frequently used
during these checks up is a financial ratio or index, which relates two pieces of
financial data by dividing one quantity by the other. A financial analyst user uses
these ratios much like a skilled physician uses lab tests results.
2.3 PURPOSE OF STUDY:
The main objective of the study is to conduct a trend analysis of “VIJAYA

BANK”. Trend ratios involve a comparison of ratios of a firm over time i.e. present
ratios are compared with past ratios of the firm. For the purpose of comparison of the
profitability of VIJAYA BANK, a time period of 5 years has been taken (2004-2008)
quantitatively. The study examines the direction of change in the performance,
improvement, deterioration or constancy over the years qualitatively. It would also
analyze the status of the firm and its prospects for the future.
2.4 SCOPE OF STUDY:
Ratio analysis is perhaps the first financial tool development to analyze

and interpret the financial statement and is still used widely for the purpose. Financial
performance analyze is a well researched area and innumerable studies have proved
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the utility and usefulness of this analytical technique. This research seeks to
investigate and constructively contribute to help:
• The company in finding out the gray areas for improvement in performance.
• The company to understand its own position over time.
• The company to understand their contribution to the performance of the company.
• 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 firm.
2.5 OBJECTIVES OF THE STUDY:
• To ascertain the financial ratios which are likely to reflect the liquidity, profitability,
solvency as well as the profit of VIJAYA BANK.
• To calculate the profit of VIJAYA BANK and to analyze the profits over the years.
• To reflect the financial position of the Organization.
• To plan and forecast of the events.
2.6 OPERATIONAL DEFINITION AND CONCEPTS:
2.6.1 DEFINITION OF CONCEPTS:

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• Financial analysis: The use of financial data to evaluate the financial position of a
firm.
• Balance Sheet: A summary of firms financial position on a given data that shows
total assets= Total liabilities + Owners equity.
• Income Statement: A summary of a firm’s revenues and expenses over a specific

period ending with net income or loss for the period.
• Financial ratio: An index that relates two accounting numbers and it obtained by
dividing one number by other.
• Liquidity: Ability to meet short-term obligations when they become due.
• Profit: Measure of efficiency and control.
• Profitability: The ability to earn an adequate return on sales, total assets and invested
capital.
• Share Holders equity: Total assets – Total liabilities.
• Current ratio: The ratio of current assets to current liabilities.
• Quick ratio: The ratio of quick assets to current liabilities
• Coverage ratio: Ratios that relate financial charges of a firm to its ability to cover.
• Debt equity ratio: The ratio of debt to equity. It is a measure of long-term financial
position of the firm.
• Interest coverage ratio: Earnings before interest and tax divided by invested capital
interest changes. It indicates a firm’s ability to cover interest changes.
• Proprietary ratio: This ratio establishes the relationship between the shareholders
funds and total assets. It indicates the proportion of total assets financed by
shareholders.
• Unsecured Loans: A form of debt for money borrowed that is not backed by pledge
of specific assets.
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• Contra entry: A contra entry is one which is offset by an opposite entry, either a
debit or credit.
CHAPTER III
COMPANY PROFILE
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INDUSTRIAL BACKGROUND OF THE PROJECT
3. INDUSTRIAL BACKGROUND:
In Today banks have become a part and parcel of our life. Now banks offer
access even a common and their activities extend to areas which are untouched. Apart
from their traditional business oriented functions they have now come out to fulfill
national responsibilities. They accelerate the economic growth of a country and steer
the wheels of the economy towards its goal of “self reliance in all fields”.
3.1 ORIGIN OF BANKING:
The word Bank has been originally derived from the Italian word ‘Banco’
meaning a bench. In olden days money lenders used to exhibit the coins of different
countries on a separate bench and the business of exchanging the coins were carried
on through those money lenders, especially in Greece, Italy and England. Whenever
these moneylenders were not in a position to convert the currency of one country into
the currency of another, people virtually broke up their benches. Hence, the word
‘Bankrupt’. The word Bank has also originated from German word ‘Bank’, meaning
thereby a joint-stock fund, collected from public for the purpose of financing the
needy people.
3.2 EVALUATION OF BANKING IN INDIA:
Banking is known in India since ancient times. It originated in our country as

early as 600 B.C. References are found in the early Vedic literature of deposits,
pledges, loans and rates of interest. However, banking in those days consisted mainly
of money lending activities. Commercial banking of modern lines was started in India
only during the nineteenth century. Earlier in British India, mainly the employees at
the East India Company established banks and they were called the Agency Houses.
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It is these ‘Agency houses’ which paved the way for the establishment of Joint Stock
Bank to be established in India. The Bank of Hindustan was the first Joint Stock Bank
to be established in India under European Management. But soon it failed.
Later three Presidency Banks were started with financial position of the
Government. These Banks were the Bank of Bengal, The Bank of Bombay and the
Bank of Madras. The Commercial Bank was perhaps the first purely Indian Joint
Stock Bank to be established in 1889. Later the Punjab National Bank in 1894 and the
people Bank in 1901 were established. The Swadeshi Movement in 1905 gave a real
stimulus to the development of Indian Bank. The Bank of India was started in 1906,
the Indian Bank in 1907, the Bank of Baroda in 1908 and the Central Bank of India in
1911. However, the banking arises of 1913 hit hand many of the banks. In 1922 the
banking industry witnessed many bank failures. It is only in recent years, such bank
failures have been prevented and stability restored. In 1935, the Reserve Bank of
India, which is acting as the Central Bank of our country, was established.
3.3 BANKING SYSTEM IN INDIA:
The Banking system plays an important role in the economic development of

the country. Indian Banking system is characterized by the present of wide variety of
institutions. At the top of the banking systems there is the Reserve Bank of India
which is the Central Bank of our country. There are 28 Public Sector Banks in India.
The Banking scene is dominated by Public Sector Banking. Nearly the Public Sector
Banking controls 25% of banking resources of the country. Two more apex
institutions in the field of agriculture and exports respectively have also been
established. They are:-
THE NABARD (National Bank for Agriculture and Rural Development) and
EXIM Bank (Export Import Bank of India). In the sphere of Industrial Finance, we
have specialized financial institutions such as IFCI, IBRD, ICICI, SFC and SDC.
Agriculture finance is provided by Co-operative Banks and Regional Rural Banks.
3.4 CLASSIFICATION OF BANKS:
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The banking institutions form an indispensable part in a modern development

society. They perform varied functions to meet various sections of the Society. On
the basis of the functions performed the banks can be classified into the following
types.
Commercial Banks, Co-operative Banks, Land Development Banks, Central

Banks, Savings Banks, Investment Banks or Industrial Banks, Exchange Banks.
3.5 PROFILE OF THE COMPANY
3.5.1GENERAL HISTORY OF VIJAYA BANK:
Vijaya bank(VB) came into existence in 15th April 1980,as a consequence of

the Government of India taking over the undertaking of Vijaya Bank Ltd. The bank is
engaged in transacts all types of banking business including foreign exchange. The
bank has strong presence in the fast growing southern states. Its business activities
are diversified and encompass merchant banking, credit cards, ATMs, Housing
finance, fast collection services etc.
The Bank has sponsored its first Regional Rural Bank in the year 1985 under
the name and style Visweswaraya Grameena Bank in March. This Regional Rural
Bank cater the needs of the target group belonging to Mandya district of Karnataka
state. VB introduced the Novell scheme under the name of ’Vijaya Vichar Vihar’ in
the year 1989. During the year1992, the bank had introduced automatic renewal
facility up to four times in respect of short-term deposits accepted for periods from
forty-six days to one year for the convenience of the customers.
VB had entered into the Memorandum of Understanding (MoU) with the

Reserve Bank of India in the year of 1994 to fulfill definite performance
commitments. Also in the same year of 1994, the bank introduced the new scheme
viz. Vijaya Bank Bond Scheme and Vijaya Service Card for enlarging its services to
its business clientele. The Bank opened its third exclusive NRI branch at
Mapuca(Goa) and established social NRI vells at the branches in Tiruvalla, Kottayam,
Trivandraum and Kozhencherry(all in Kerala State). During the year 1995, Vb has
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opened 33 new branches and also the bank opened five Hi-tech Finance branches at
Bangalore, Coimbatore, Delhi, Hyderabad and Lucknow. In the identical year of
1995,the has entered into an agreement with M/sOrential Exchange Co., WLL
Manama, Bahrain providing for the Bank’s participation in the said exchange
company’s day-to-day management. Vijaya Bank launched a fully operational
Custodual Services Division at Mumbai. In the year 1996, VB had opened its first
subsidiary, Vibank Housing Finance Limited to add impetus to housing finance.
Vijaya bank introduced three new loan schemes, namely, ‘Vijaya Nivruthi’, Vijaya
Krishi Vikas’ and ‘Vijaya Mangala’ to cater to the credit needs of pensioners, farmers
and workingwomen respectively. The Bank has also entered into tie-up arrangements
with ICICI, banking service called ‘Any Branch Banking’ in the same year 1996.
During the year 1997, Vijaya Bank had launched a special agriculture credit
plan targeted specifically at agriculture and other, rural advances. The Bank also
launched the ‘special loan recovery motivation scheme’, which helped reduce the
level of NPAs from 11.6percent to 9.6 percent. The bank had entered into domestic
correspondent banking arrangements with various private sector banks and freign
banks during the year 1998. After a year, in 1999. Vijaya bank had entered into
rs200cr take out financing arrangement with the housing and urban development
corporation (hudco) for funding in fracture projects. In the year2000 VB had
introduced new scheme named V-star savings bank account scheme VB taped the
capital market with initial public offering in the year2000 the bank has signed a pact
with lic in2003 to offer life insurance cover to all its existing as well as its new
deposit-holders. VB had unveiled a new electronic fund remitence facility called V-
remit, under which the bank consumers can electronically remit funds to the account
holders in any bank .
The MoU was signed with m|s national insurance company limited in year
2033 for marketing banc assurance products bank as decided to amalgament its own
subsidiary VIBANK housing finance limited (VHFL ) with vijaya bank .Vijaya bank
has opened a kiosk that is exclusively for retail lending at its Ashokanagar branch in
Mangalore and signed the MoU with Punjab National Bank and Principal Financial
Group of USA for a joint venture participation in Asset management Company. In the
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year 2004,the bank made tie-up with NIC to offer free insurance policy. Punjab
National Bank(PNB) and VB had entered into a four-way partnership with with
Principal Financial of the US and Berger Paints to set up an insurance braking
company.Vibank Finance Ltd became a wholly owned subsidiary of the bank in the
identical year of 2004.
The Bank signed a pact with Nabard to co-finance agriculture, agro

processing, hi-tech agriculture and rural development projects. Vijaya Bank launched
the bank’s second city specific credit card-the’ Hyderabad Card’. During the year
2005, the bank made tie-up wiyh TAFE. In the year 2006-07, the bank implemented
the Crore Banking Solution(CBS) in additional 152 branches. VB opened 43 new
branches, upgraded 10 extension counters into full-fledged branches, converted 2
regional foreign exchanges into full-fledged overseas branches and also converted one
capital market services branch into a general banking branch in the year 2006-07. The
bank had helped 11061 self help groups in the same year by the way of loan
disbursement. In June of the year 2007, VB had inked a memorandum of
understanding (MoU) with credit rating agency ICRA, under which ICRA will assign
ratings to small scale industries (SSIs) and small and medium enterprises (SMEs) that
are borrowers of the bank. As of April 2008, signed a memorandum of understanding
with Fitch ratings India to provide bank loan ratings to its corporate clients at a normal
fee. Vijaya Bank plans to focus on farm and retail lending to push up business.
BREIF HISTORY:
Vijaya Bank was established on 23rd October 1931 by late Shri A.B.Shetty
and other enterprising farmers in Mangalore, Karnataka. The objective behind
establishment of the Bank was essentially to promote banking habit, thrift and
entrepreneurship among the farming community of Dakshina Kannada district in
Karnataka State. The bank became a scheduled bank in 1958.
During 1963-68, nine smaller banks merged with Vijaya Bank and the Bank
steadily grew into a large All India bank. Vijaya Bank was nationalized on April 15,
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1980 and today the Bank has a network of 913 branches that span all 28 states and 3
union territories in the country.
Vijay Bank has been constantly focusing on technological up gradation. As on

October 2005, all the 913 branches have been computerized, covering 97% of the
bank's total business.
The Bank has diversified into new areas such as credit card, merchant banking,
hire purchase and leasing, and electronic remittance services. Vijaya Bank is one of
the few banks in the country to take up principal membership of VISA International
and MasterCard I.
3.5.2 NATURE OF OPERATIONS:

Each branch provides effective and efficient services and significantly
contributes to the growth of the individual, and the nation.
Vijaya Bank is one among the few banks in the country to take up principal
membership of VISA International and MasterCard International.
3.5.3 MANAGEMENT:
Today, living up to the ideals of the visionaries of the bank, the management
includes dedicated professionals, who bring with them a considerable amount of
expertise and experience in the banking industry. Organization structure
The Bank has a three tier Organisation structure.

Head Office,
Regional Office
and Branches.
The Head office hosts various functional departments that are instrumental in policy
formulations and monitoring of performances of the regions and branches.
The bank's 20 Regional Offices exercise immediate supervision and control over the
branches under their jurisdiction.
Directors (Position - 03.03.2009)
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Currently, the Bank's board of directors consists of :
1. Shri. Albert Tauro, Chairman & Managing Director

2. Shri. S.C. Kalia, Executive Director
3. Shri. G.B.Singh, Govt. Nominee Director.
4. Shri. K. Venkatappa, RBI Nominee Director.
5. Shri. P. Shantharam Shetty, Workmen Director.
6. Shri. Ranjan Shetty, Officer-employee Director
7. Shri. Brij Mohan Sharma, Non Official Director (Chartered Accountant Category)
8. Shri. Ashok Kumar Shetty, Shareholder Director.
9. Shri. Ashok Kumar, Shareholder Director.
10. Shri. Nishank Kumar Jain, Non Official Director
11. Shri. Sridhar Cherukuri, Non Official Director
12. Shri. S. Ananthan, Shareholder Director
13. Shri. B. Ibrahim, Non Official Director
General Managers General Managers at the Head office (Position as on

11.10.2008)
1. Shri. S. Jayaram Shetty

2. Shri. K. Shamasundara Shetty
3. Shri. K. Jayakar Shetty
4. Shri. Naveenkumar Hegde
5. Shri. J. Pandiyan
6. Shri. Shantharam Kamath
7. Shri. K. Jagajjeevan Hegde
8. Shri. Vasanth K Hegde.
9. Shri. Prakashchandra Shetty
General Manager at Regional Office
1. Shri. Mohandas Shetty V : Regional Office - Bangalore - South.

2. Smt. Chandra K : Regional Office, Chennai.
3. Shri. Vasanth Kumar Shetty G : Regional Office, Delhi.
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4. Shri. Chinnobaiah H B : Regional Office, Lucknow.

5. Shri. Prakashchandra Hegde A : Regional Office, Mumbai.
3.5.4 VIJAYA BANK SNAPSHOT:
COMPANY PROFILE : VIJAYA BANK

TICKER : 532401
EXCHANGES : OTHBOM
2008 SALES : 45,094,000,000
MAJOR INDUSTRY : FINANCIAL
SUB : COMMERCIAL BANKS
COUNTRY : INDIA
EMPLOYEES : 11439
Vijaya Bank steadily grew into a large All India bank, with nine smaller banks
merging with it during the 1963-68. The credit for this merger as well as growth goes
to late Shri M.Sunder Ram Shetty, who was then the Chief Executive of the bank. The
bank was nationalized on 15th April 1980. The bank has built a network of 1061
branches,46 Extension Counters and 337 ATMs as at 04.10.2008, that span all 28
states and 4 union territories in the country.
PRODUCT PROFILE:
Internet Banking
FORM NAME
V-Net Banking application form
V-Net Banking Requisition for Resetting Password form
V-Net Funds Transfer Beneficiary Registration / Cancellation form
V-Net application form for Corporate Users Individuals
V-Net application form for Corporate
V-Net Format of letter of Mandate for Corporate
V-Net specimen for 'Board Resolution' for Corporate

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V-Net SMS alerts application form
Deposits / NRI Deposits:
FORM NAME
Deposit application form (no. 2-426)
Customer Profile form (no. 2-504) Annexure
Deposit application form for Non Resident Indians (NRE / FCNR / NRO)
Customer Profile form (no. 2-504) Annexure
Application Form for opening ‘V– GenU TH’ Savings Bank Account & Add-on Credit
Card
Retail Lending Schemes:
FORM NAME
Loan application acknowledgement form
Home loan application
Application under V-Equip and V – Cash
Application for education loan
Application for Vijaya Wheels
Statement of Assets & Liabilities of Individuals - no. 26 (a) (for credit limits below
Rs.10 lakhs)
Statement of Assets & Liabilities of Individuals - no. 26 (b) (for credit limits of Rs. 10
lakhs & above)
Credit Cards / Debit Cards Application form:
FORM NAME
Application for Vijaya Classic Visa/MasterCard
Application for Vijaya gold Visa/MasterCard
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Application for ADD-ON Credit Card
Application for Corporate Membership – VISA / MasterCard Credit Card
Application for Vijaya International Visa Gold Cards
Application for Visa Global Credit Card - for Individuals
Application Visa Global Credit Card - for Corporate
Application for Revolving Credit Facility for Credit Card Liability
Application for Credit Card Photo card [for issue of Photo Card]
Application for Vijaya Global DEBIT cum ATM card [Application- DC 1]
Application for Vijaya Global DEBIT cum ATM card [Annexure to DC 1]
Nomination on Deposits / Articles left in Safe Custody / SDV Lockers:
FORM NAME
Form for Nomination on Deposits / Articles left in Safe Custody / Safe Deposit Vaults
/ Lockers - 2-358 (a)
Cancellation of Nomination on Deposits / Articles left in Safe Custody / Safe Deposit

Vaults / Lockers - 2-358 (b)
Variation of Nomination on Deposits / Articles left in Safe Custody / Safe Deposit

Vaults / Lockers - 2-358 (c)
Form for Nomination on Safe Deposit Vaults / Lockers by Joint Hirers - 2-258 Jt A
Variation of Nomination on Safe Deposit Vaults / Locker by Joint Hirers - 2-358 Jt B
Banking Ombudsman:
FORM NAME
Application Form for Complaint (To be lodged with the Banking Ombudsman)
Application Form for arbitration to be submitted to the Banking Ombudsman
Remittances:
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FORM NAME
NRI Remittances
GBP
USD
EURO
Other Remittances
National Electronic Fund Transfer application form [NEFT- 2A]
Real Time Gross Settlement application form [RTGS ]
Others:
Loan application acknowledgement form
Form No 61
Form No 60
Application for drawl of pension through a Public Sector Bank.
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CHAPTER IV
DATA ANALYSIS & INTERPRETATION
DATA ANALYSIS AND INTERPRETATION
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5.1 ANALYSIS OF DATA:
The information collected from the balance sheet and the profit and loss
account helps the management to plan the operation regarding financial debt of the
firm. This data analysis helps the management to take suitable corrective measure and
to enable the management to strengthen the financial position.
5.2 INTERPRETATION OF RATIO:
Broadly Speaking of ratios may be interpreted in four different ways as

follows:-
 An individual ratio may have significance of own.
E.g.: A Ratio of 25% of net profit on capital employed shows a satisfactory return
 Ratios may be interpreted by making comparison over time; such comparisons will
indicate the trend of rise, decline or stability of the profitability.
 A ratio of anyone firm may be compared with ratios of other firm in the same
industry. It is also known as interring firm comparison.
 Ratios may be interpreted by considering a group of several related ratio.
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CALCULATION OF LIQUID RATIOS:
CURRENT RATIO:
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES
TABLE NO. : 1
Particulars
Rs in 2005 2006 2007 2008
crores
Current 1614.57 2835.14 5070.12 6103.36

assets
Current
liabilities 1487.50 1639.83 2658.18 3854.47
Current 1.08% 1.72% 1.90% 1.58%

ratio
ANALYSIS:
This ratio is a measure of the banks short term solvency. And the above
calculation shows the current ratio is worth 1.08% in 2005, it increased in 2006 to
1.72% and in the year 2007 it is increased to 1.90% and in 2008 it is decreased to
1.58%.
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GRAPH NO. : 1
GRAPH SHOWING CURRENT RATIO:
INTERPRETATION:
From the table it can be studied that there is a no fluctuation in the current
ratio in 2005, 2006, and 2007 it raised till 2007 and then in 2008 it has decreased due
to the increase in the % of current liabilities compared to the current assets. In 2005,
2006, 2007 it increased due to the raise in the % of current assets compared to the
current liabilities.
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CALCULATION OF CAPITAL STRUCTURE RATIOS
DEBT EQUITY RATIO:
DEBT EQUITY RATIO = LONG TERM DEBTS / SHAREHOLDERS FUNDS
TABLE NO. : 2
Particulars
Rs in 2005 2006 2007 2008
crores
Long term 640.83 515.82 198.14 1918.87

loans
Equity
shareholders 433.52 433.52 433.52 433.52
Debt equity
ratio 1.08% 1.72% 1.90% 1.58%
ANALYSIS:
The debt equity ratio in the year 2005 is 1.08% and it is increased to 1.72% in
2006 and again raise to 1.92% in the year 2007 and decreased to 1.58% in the year
2008.
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GRAPH NO. : 2
GRAPH SHOWING DEBT EQUITY RATIO:
INTERPRETATION:
The debt equity ratio reflects the relative claims of the shareholders and
creditors against the assets of the company. From the table it can be observed that the
ratio and the borrowed fund are increasing but the share capital remains the same from
the year 2008 it as decreased to 1.58%.
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PROPRIETARY RATIO:
PROPRIETARY RATIO = SHAREHOLDERS FUND / TOTAL ASSETS
TABLE NO. : 3
Particulars
Rs in 2005 2006 2007 2008
crores
Shareholder
s fund 433.52 433.52 433.52 433.52
Total assets 29340.4 31537.0 42357.5 56185.1

5 5 7 2
Proprietary
ratio 1.47% 1.37% 1.02% 0.77%
ANALYSIS:
In the year 2005 the ratio was 1.47% and it has decreased to 1.37% in the year
2006 and has further decreased to 1.02% in the year 2007 and has further decreased to
0.77% in the year 2008.
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GRAPH NO. : 3
GRAPH SHOWING PROPRIETORY RATIO:
INTERPRETATION:
The proprietary ratio reflects the financial strength. As the indications are
decreasing from 2005-08 the creditors are at higher risk at the time of liquidation.
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INTEREST COVERAGE RATIO:

INTEREST COVERAGE RATIO = EARNINGS BEFORE TAX AND
INTEREST (EBIT) / FIXED INTEREST CHARGES
TABLE NO. : 4
Particulars
Rs in 2005 2006 2007 2008
crores
EBIT 372.82 179.46 347.75 277.59
Fixed
interest 1109.77 1339.02 1751.16 3058.42
charges
Interest
coverage 0.33% 0.13% 0.19% 0.09%
ratio
ANALYSIS:
In the year 2005 it was 0.33% then in the year 2006 it was decreased to 0.13%
and in the year 2007 it was slight increased to 0.19% but in the year 2008 it was
drastically reduced to 0.09%.
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GRAPH NO. : 4
GRAPH SHOWING INTEREST COVERAGE RATIO:
INTERPRETATION:
The interest coverage ratio is declined because EBIT and fixed assets are
decreased in the 2005-06 and it was increased in the year 2006-07 and further it was
declined in 2007-2008.
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DEBT TO TOTAL FUNDS RATIO:

DEBT TO TOTAL FUNDS RATIO = DEBTS / TOTAL FUNDS
TABLE NO. : 5
Particular
s 2005 2006 2007 2008
Rs in
crores
Debts 26692.3 28658.6 38236.1 50304.4

3 3 6
Total funds 29335.4 31534.1 42357.5 56184.3

9 0 0 0
Debt to
total funds 0.90% 0.90% 0.90% 0.89%
ratio
ANALYSIS:
In the year 2005, it was 0.90% and in the year 2006 the ratio is same 0.90%
and in the year 2007 the ratio is again same 0.90%. But in the year 2008 a small
amount of ratio is declined to 0.89%.
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GRAPH NO. : 5
GRAPH SHOWING DEBT TO TOTAL FUNDS RATIO:
INTERPRETATION:
The debt equity ratio shows the relationship between the debts and total funds
employed in the business or organization. In this the ratio was constant from the year
2005 – 07. After 2007 it was declined to a small amount of percentage in 2008.
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CALCULATIONS OF PROFITABILITY RATIOS
GROSS PROFIT RATIO:

GROSS PROFIT RATIO = GROSS PROFIT / NET SALES X 100
TABLE NO. : 6
Particulars
Rs in 2005 2006 2007 2008
crores
Gross 1482.59 1518.48 2098.91 3336.01

profit
Net sales 2094.31 2311.80 2823.11 3983.42
Gross
profit ratio 70.79% 65.68% 74.34% 83.74%
ANALYSIS:
In the year 2005, the ratio of gross profit is 70.79% and it was declined to
65.68% in 2006 and it was increased to 74.34% in 2007 and further it was increased to
83.74% in 2008.
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GRAPH NO. : 6
GRAPH SHOWING GROSS PROFIT RATIO:
INTERPRETATION:
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This ratio expresses the relationship between gross profit and sales. In this
ratio it is having some fluctuations. In 2005 it was in 70.79% and declined then it has
brought up to the 83.74% in the year 2008.
NET PROFIT RATIO:

NET PROFIT RATIO = NET PROFIT / NET SALES X 100
TABLE NO. : 7
Particulars
Rs in 2005 2006 2007 2008
crores
Net profit 380.57 126.88 331.34 361.28
Net sales 2094.31 2311.80 2823.11 3983.42
Net profit 18.17% 5.48% 11.73% 9.06%

ratio
ANALYSIS:
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In the year 2005, the ratio of net profit was 18.17% and it was declined to
5.48% in 2006 and it was increased to 11.73% in 2007 and it was declined to 9.06% in
2008.
GRAPH NO. : 7
GRAPH SHOWING NET PROFIT RATIO:
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RATIO ANALYSIS
INTERPRETATION:
This is the ratio of net profit to net sales. From 2005–08 it was fully fluctuated.
In the year 2005 it was 18.17% and in the year 2008 it was 9.06% means it reduces a
lot. It shows the Net profit position of the bank.
OPERATING RATIO:
OPERATING RATIO = COST OF GOODS SOLD + OPERATING EXPENCES
/ NET SALES X 100
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RATIO ANALYSIS
Cost of goods sold = Sales – Gross profit
Operating expenses = Selling expenses + Administration expenses
TABLE NO. : 8
Particulars
Rs in 2005 2006 2007 2008
crores
Cost of
goods sold
+ 1336.13 1543.62 1495.6 1449.25
Operating
expenses
Net sales 2094.31 2311.80 2823.11 3983.42
Operating 63.79% 66.77% 52.97% 36.38%

ratio
ANALYSIS:
In the year 2005, the ratio of operating ratio was 63.79% and it was increased
to 66.77% in the year 2006 and it was further declined to 59.97% in 2007 and it was
declined to 36.38% in 2008.
GRAPH NO. : 8
GRAPH SHOWING OPERATING RATIO:
VVN College
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RATIO ANALYSIS
INTERPRETATION:
This ratio explains the changes in profit margin; it indicates the average
variations in expenses. Operating ratio in 2005 was 63.79% which is low compared
with the year 2007. The operating ratio is reduces in the year 2008 and 2009. Because
unfavorable margin that fluctuates the all Administration expenses and selling and
distribution expenses.
OPERATING PROFIT RATIO:
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RATIO ANALYSIS
OPERATING PROFIT RATIO = OPERATING NET PROFIT / NET SALES X

100
TABLE NO. : 9
Particulars
Rs in 2005 2006 2007 2008
crores
Operating
net profit 640.13 569.79 621.31 545.56
Net sales 2094.31 2311.80 2823.11 3983.42
Operating
profit ratio 30.56% 24.64% 22.00% 13.69%
ANALYSIS:
In the year 2005, the ratio of operating profit ratio was 30.56% and it was
declined to 24.64% in the year 2006 and it was declined to 22.00% and further it was
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RATIO ANALYSIS
GRAPH NO. : 9
GRAPH SHOWING OPERATING PROFIT RATIO:
INTERPRETATION:
This ratio explains the changes in profit margin as same as operating ratio, it
was 30.56% in 2005 and later on weaker in to 13.69%. It was not a good sign for bank
strength.
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RATIO ANALYSIS
RETURN ON INVESTMENT (ROI):

RETURN ON INVESTMENT = NET PROFIT BEFORE INTEREST AND
TAXES / TOTAL CAPITAL EMPLOYED X 100
TABLE NO. : 10
Particulars
Rs in 2005 2006 2007 2008
crores
Net profit
before 380.57 126.88 288.94 355.91
interest
And taxes
Total
capital 29340.45 31537.05 42357.57 56185.12
employed
Return on
investments 1.29% 0.40% 0.68% 0.63%
ANALYSIS:
In the year 2005, the ratio of Return on Investment (ROI) was 1.29% and it
was declined to 0.40% in the year 2006 and it was increased to 0.68% in 2007 and it
was further declined to 0.63% in 2008.
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RATIO ANALYSIS
GRAPH NO. : 10
GRAPH SHOWING RETURN ON INVESTMENT:
INTERPRETATION:
ROI measures the overall profitability. It measures satisfactorily the overall
performance of a business from a point of view of profitability. It indicates how well
the management has utilized the funds supplied by the owners and creditors. The ROI
ratio in first year is very low which indicates the inefficiency of management but in
2006-08 the ratio gradually declined to 0.40%, 0.68% & 0.63% respectively. This
indicates the performance efficiency of the firm.
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RATIO ANALYSIS
RETURN ON EQUITY CAPITAL:

RETURN ON EQUITY CAPITAL = NET PROFIT AFTER TAX AND
PERFERENCE DIVIDEND / EQUITY SHAREHOLDERS FUNDS X 100
TABLE NO. : 11
Particulars
Rs in 2005 2006 2007 2008
crores
Net profit
after tax and
preference 380.57 126.88 331.34 361.28
dividend
Equity
shareholders 433.52 433.52 433.52 433.52
fund
Return on
equity 87.78% 29.26% 76.43% 83.33%
capital
ANALYSIS:
In the year 2005, the ratio of Return on Equity capital was 87.78% and it was
declined to 29.26% in the year 2006 and it was increased to 76.43% in 2007 and it
was further increased to 83.33% in 2008.
VVN College
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RATIO ANALYSIS
GRAPH NO. : 11
GRAPH SHOWING RETURN ON EQUITY CAPITAL:
INTERPRETATION:
This ratio establishes the relationship between the net profit available to equity
shareholders and the amount of capital invested by them. It was high signal in 2005
then it falls low in 2006 later it gradually moves up to some extent in 2007 and also in
2008, 87.78%, 29.26%,76.43% and 83.33% respectively.
VVN College
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RATIO ANALYSIS
EARNING PER SHARE:

EARNING PER SHARE = NET PROFIT AFTER TAX – PREFERENCE
DIVIDEND / NO. OF EQUITY SHARE.
TABLE NO. : 12
Particulars
Rs in 2005 2006 2007 2008
crores
Net profit
after tax – 380.57 126.88 331.34 361.28
preference
dividend
No. of
equity 433.52 433.52 433.52 433.52
share
Earnings
per share 8.78% 2.98% 7.64% 8.33%
ANALYSIS:
In the year 2005, the ratio of Earning per share was 8.78% and it was declined
to 2.98% in the year 2006 and it was increased to 7.64% in the year 2007 and it was
further increased to 0.63% in 2008.
VVN College
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RATIO ANALYSIS
GRAPH NO. : 12
GRAPH SHOWING EARNING PER RATIO:
INTERPRETATION:
This ratio measures the earning per equity share i.e., it measures the
profitability of the firm on a per share basis.In this ratio the earnings per share is high
and later it falls very downwards and then it comes upwards in running 2 year. It
shows the standard of the bank capacity and share value.
VVN College
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RATIO ANALYSIS
PRICE EARNING RATIO:

PRICE EARNING RATIO = MARKET PRICE PER EQUITY SHARE /
EARNING PER SHARE
TABLE NO. : 13
Particulars
Rs in 2005 2006 2007 2008
crores
Market
price per 64.30 52.55 42.50 49.65
equity
share
Earnings
per share 8.78 2.93 7.64 8.33
Price
earnings 7.32% 17.93% 5.56% 5.96%
ratio
ANALYSIS:
In the year 2005, the ratio of Price earnings ratio was 7.32% and it was
increased to 17.93% in the year 2006 and it was declined to 5.56% in the year 2007
and it was further increased to 5.96% in 2008.
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RATIO ANALYSIS
GRAPH NO. : 13
GRAPH SHOWING PRICE EARNING RATIO:
INTERPRETATION:
This ratio is the market price of shares expressed as multiple of earning per
share (EPS). It also shows the face value of the share. In the ratio the price earning
ratio was at upwards in 2006 comparing with the remaining two years, gradually it
decreases or declined high in 2008. It shows the company value and shares values.
VVN College
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RATIO ANALYSIS
COST OF GOODS SOLD RATIO:

COST OF GOODS SOLD RATIO = COST OF GOODS SOLD / NET SALES X
100
TABLE NO. : 14
Particulars
Rs in 2005 2006 2007 2008
crores
Cost of
goods sold 611.72 793.32 794.2 647.41
Net sales 2094.31 2311.80 2823.11 3983.42
Cost of
goods sold 29.20% 34.31% 25.65% 16.25%
ratio
ANALYSIS:
In the year 2005, the ratio of Cost of goods sold was 29.20% and it was
increased to 34.31% in the year 2006 and it was declined to 25.65% in 2007 and it
was further declined to 16.25% in 2008.
VVN College
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RATIO ANALYSIS
GRAPH NO. : 14
GRAPH SHOWING COST OF GOODS SOLD RATIO:
INTERPRETATION:
VVN College
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RATIO ANALYSIS
The ratio explains the cost of goods sold in the organization, in banking sector
it has some importance. Normally this type ratio is works in other sectors. In this ratio
it was had so many fluctuations in 2005 it was 29.20% and falls in to 16.25% at 2008.
ADMINISTRATION OVERHEAD RATIO:

ADMINISTRATION OVERHEAD RATIO = ADMINISTRATION
OVERHEAD / NET SALES X 100
TABLE NO. : 15
Particulars
Rs in crores 2005 2006 2007 2008
Administratio
n overhead 96.04 108.04 120.60 145.38
Net sales 2094.3 2311.8 2823.1 3983.42

1 0 1
Administratio
n overhead 4.58% 4.67% 4.27% 3.64%
ratio
ANALYSIS:
VVN College
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RATIO ANALYSIS
In the year 2005, the ratio of Administration overhead was 4.58% and it was
increased to 4.67% in the year 2006 and it was declined to 4.27% in 2007 and it was
further declined to 3.64% in 2008.
GRAPH NO. : 15
GRAPH SHOWING ADMINISTRATION OVERHEAD RATIO:
VVN College
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RATIO ANALYSIS
INTERPRETATION:
This ratio explains the administration over head expenses by this we can
calculate the cost of production, in this ratio it was at 4.58% in 2005 and it moves
upwards and falls down towards 3.64% in 2008. It shows the administration overhead
ratio in bank.
SELLING OVERHEAD RATIO:

SELLING OVERHEAD RATIO = SELLING OVERHEAD / NET SALES X 100
TABLE NO. : 16
Particulars
Rs in 2005 2006 2007 2008
crores
Selling
overhead 169.02 117.86 113.56 93.62
Net sales 2094.31 2311.80 2823.11 3983.42
Selling
overhead 8.07% 5.09% 4.02% 2.35%
ratio
VVN College
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RATIO ANALYSIS
ANALYSIS:
In the year 2005, the ratio of selling overhead expenses was 8.07% and it was
declined to 5.09% in the year 2006 and it was declined to 4.02% in 2007 and it was
GRAPH NO. : 16
GRAPH SHOWING SELLING OVERHEAD RATIO:
VVN College
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RATIO ANALYSIS
INTERPRETATION:
This ratio explains the selling overhead ratio which shows the clean picture
and position of the bank. As per this four years from 2005 – 08, the ratio of selling
overhead was in 8.07% it falls very high in ratio compare with 2005. It was not a good
sign of the bank position.
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RATIO ANALYSIS
CHAPTER V
SUMMARY OF FINDINGS &

SUGGESTIONS
5.1 SUMMARY OF FINDINGS:
• This ratio is a measure of the banks short term solvency. And the above calculation
shows the current ratio is worth 1.08% in 2005, it increased in 2006 to 1.72% and in
the year 2007 it is increased to 1.90% and in 2008 it is decreased to 1.58%.
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RATIO ANALYSIS
• The debt equity ratio in the year 2005 is 1.08% and it is increased to 1.72% in 2006
and again raise to 1.92% in the year 2007 and decreased to 1.58% in the year 2008.
• In the year 2005 the ratio was 1.47% and it has decreased to 1.37% in the year 2006
and has further decreased to 1.02% in the year 2007 and has further decreased to
0.77% in the year 2008.
• In the year 2005 it was 0.33% then in the year 2006 it was decreased to 0.13% and in
the year 2007 it was slight increased to 0.19% but in the year 2008 it was drastically
reduced to 0.09%.
• In the year 2005, it was 0.90% and in the year 2006 the ratio is same 0.90% and in the
year 2007 the ratio is again same 0.90%. But in the year 2008 a small amount of ratio
is declined to 0.89%.
• In the year 2005, the ratio of gross profit is 70.79% and it was declined to 65.68% in
2006 and it was increased to 74.34% in 2007 and further it was increased to 83.74% in
2008.
• In the year 2005, the ratio of net profit was 18.17% and it was declined to 5.48% in
2006 and it was increased to 11.73% in 2007 and it was declined to 9.06% in 2008.
• In the year 2005, the ratio of operating ratio was 63.79% and it was increased to
66.77% in the year 2006 and it was further declined to 59.97% in 2007 and it was
• In the year 2005, the ratio of operating profit ratio was 30.56% and it was declined to
24.64% in the year 2006 and it was declined to 22.00% and further it was declined to
13.69% in 2008.
• In the year 2005, the ratio of Return on Investment (ROI) was 1.29% and it was
declined to 0.40% in the year 2006 and it was increased to 0.68% in 2007 and it was
VVN College
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RATIO ANALYSIS
• In the year 2005, the ratio of Return on Equity capital was 87.78% and it was declined
to 29.26% in the year 2006 and it was increased to 76.43% in 2007 and it was further
increased to 83.33% in 2008.
• In the year 2005, the ratio of Earning per share was 8.78% and it was declined to
2.98% in the year 2006 and it was increased to 7.64% in the year 2007 and it was
• In the year 2005, the ratio of Price earnings ratio was 7.32% and it was increased to
17.93% in the year 2006 and it was declined to 5.56% in the year 2007 and it was
• In the year 2005, the ratio of Cost of goods sold was 29.20% and it was increased to
34.31% in the year 2006 and it was declined to 25.65% in 2007 and it was further
• In the year 2005, the ratio of Administration overhead was 4.58% and it was increased
to 4.67% in the year 2006 and it was declined to 4.27% in 2007 and it was further
• In the year 2005, the ratio of selling overhead expenses was 8.07% and it was declined
to 5.09% in the year 2006 and it was declined to 4.02% in 2007 and it was further
5.2 SUGGESTIONS:
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RATIO ANALYSIS
• The bank need to maintain consistency in current ratio and suggested to maintain
enough current assets to meet its short term obligation and see that ideal current ratio
is to be maintained.
• It is here by suggested to maintain a constant liquidity position by their bank to meet
their long term obligation in time.
• It is here by suggested to keep up to earning per share as stable as possible at any
point of time it should not go to the deep decrease in its value.
• Bank’s Net profit has been decreased. So certain measures should be taken for the
proper employment of funds
• Deposits schemes must be made more attractive in order to attract newer and fresh
deposits.
• The borrowings made from the outside source should be reduced further.
If the bank has to attract more customers and deal with more transactions, the bank
can provide advances and loans to the general public for the following purpose-
1. Housing loans or land purchase
2. Loans to small scale industries and cottage industries.
3. Loans to self-employed person or young entrepreneurs
4. Short term, medium term and long term loans to the farmers for installing
pump sets or digging of bore wells.
5. Increase short term deposits and long term deposits by providing higher rate
of interest.
6. The paid up capital may also be enhanced
7. Providing loans to farmer at lower rate of interest.
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RATIO ANALYSIS
CHAPTER VI
BIBILOGRAPHY
BIBILOGRAPHY
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RATIO ANALYSIS
6.1 BOOKS
 Management accounting - M.N.Arora
 Financial management – Reddy Appannaih, Sathya Prasad
 Management accounting – B.S.Raman
 Financial management – I.M.Panday
6.2 WEBSITE VISITED
 www.moneycontrol.com
 www.vijayabank.com
 www.yahoofinance.com
 www.rbi.org.in
 www.bussinessstandard.com
6.3 REPORTS
 Balance sheets, P/L account and Key financial ratios from stock exchange.
 Annual reports of VIJAYA BANK.
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RATIO ANALYSIS
ANNEXURE
VVN College
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RATIO ANALYSIS
Balance Sheet ------------------- in Rs. Cr. -------------------
Mar '04 Mar '05 Mar '06 Mar '07 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Capital and Liabilities:
Total Share Capital 433.52 433.52 433.52 433.52 433.52
Equity Share Capital 433.52 433.52 433.52 433.52 433.52
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 844.62 1,102.64 1,186.62 1,417.81 1,672.89
Revaluation Reserves 57.40 53.02 49.02 45.35 352.64
Net Worth 1,335.54 1,589.18 1,669.16 1,896.68 2,459.05

21,015.0
Deposits 25,617.98 27,709.29 37,604.50 47,952.01
5
Borrowings 336.65 640.83 515.82 198.14 1,918.87
21,351.7
Total Debt 26,258.81 28,225.11 37,802.64 49,870.88
0
Other Liabilities & Provisions 1,383.78 1,487.50 1,639.83 2,658.18 3,854.37
24,071.0
Total Liabilities 29,335.49 31,534.10 42,357.50 56,184.30
2
Assets
Cash & Balances with RBI 875.57 1,282.11 2,248.64 3,399.71 5,661.55
Balance with Banks, Money at Call 242.99 332.46 586.50 1,670.41 435.81
11,045.3
Advances 14,335.78 16,664.01 24,223.55 31,689.22
1
10,836.9
Investments 12,068.74 11,179.70 12,018.41 16,617.32
9
Gross Block 442.03 506.48 554.51 541.24 907.88
Accumulated Depreciation 250.76 288.84 352.02 355.06 400.06
Net Block 191.27 217.64 202.49 186.18 507.82
Capital Work In Progress 0.00 0.00 0.00 0.00 0.00
Other Assets 878.88 1,098.76 652.75 859.23 1,272.59
VVN College
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RATIO ANALYSIS
24,071.0
Total Assets 29,335.49 31,534.09 42,357.49 56,184.31
1
Contingent Liabilities 5,475.89 8,117.84 8,378.34 8,344.96 11,341.68
Bills for collection 1,813.65 1,700.65 1,479.54 1,488.92 2,120.04
Book Value (Rs) 29.48 35.43 37.37 42.70 48.59
Profit & Loss account ------------------- in Rs. Cr. -------------------
Income
1,940.0
Interest Earned 2,094.31 2,311.80 2,823.11 3,983.41
9
Other Income 525.69 353.67 368.99 336.70 532.03
2,465.7
Total Income 2,447.98 2,680.79 3,159.81 4,515.44
8
Expenditure
1,102.3
Interest expended 1,109.78 1,339.02 1,751.16 3,058.42
2
Employee Cost 331.59 318.82 378.84 392.14 404.92
Selling and Admin Expenses 323.26 265.06 225.90 234.16 239.00
Depreciation 25.12 40.05 39.95 40.13 30.80
Miscellaneous Expenses 287.38 333.71 570.21 453.28 426.40
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Operating Expenses 748.92 724.41 750.30 771.40 801.84
Provisions & Contingencies 218.43 233.23 464.60 348.31 299.28
2,069.6
Total Expenses 2,067.42 2,553.92 2,870.87 4,159.54
7
Net Profit for the Year 396.11 380.57 126.88 288.94 355.91
Extraordionary Items 15.20 0.00 0.00 42.40 5.37
Profit brought forward 150.36 104.58 240.77 493.04 606.13
Total 561.67 485.15 367.65 824.38 967.41
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 122.27 122.54 49.43 100.15 101.44
Corporate Dividend Tax 0.00 0.00 0.00 0.00 0.00
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RATIO ANALYSIS
Per share data (annualised)

Earning Per Share (Rs) 9.14 8.78 2.93 6.67 8.21
Equity Dividend (%) 25.00 25.00 10.00 20.00 20.00
Book Value (Rs) 29.48 35.43 37.37 42.70 48.59
Appropriations
Transfer to Statutory Reserves 334.82 129.84 -174.82 102.84 115.32
Transfer to Other Reserves 0.00 0.00 0.00 10.51 -0.05
Proposed Dividend/Transfer to Govt 122.27 122.54 49.43 100.15 101.44
Balance c/f to Balance Sheet 104.58 232.77 493.04 610.89 750.69
Total 561.67 485.15 367.65 824.39 967.40
Yearly Results ------------------- in Rs. Cr. -------------------
Sales Turnover 1,940.09 2,094.31 2,311.80 2,823.11 3,983.42
Other Income 525.69 353.67 368.99 274.79 437.15
Total Income 2,465.78 2,447.98 2,680.79 3,097.90 4,420.57
Total Expenses 810.71 965.39 1,162.31 998.99 1,084.56
Operating Profit 1,129.38 1,128.92 1,149.49 1,824.12 2,898.86
Profit On Sale Of Assets -- -- -- -- --
Profit On Sale Of Investments -- -- -- -- --
Gain/Loss On Foreign Exchange -- -- -- -- --
VRS Adjustment -- -- -- -- --
Other Extraordinary Income/Expenses -- -- -- -- --
Total Extraordinary Income/Expenses -- -- -- -- --
Tax On Extraordinary Items -- -- -- -- --
Net Extra Ordinary Income/Expenses -- -- -- -- --
Gross Profit 1,655.07 1,482.59 1,518.48 2,098.91 3,336.01
Interest 1,102.32 1,109.77 1,339.02 1,751.16 3,058.42
PBDT 552.75 372.82 179.46 347.75 277.59
Depreciation -- -- -- -- --
Depreciation On Revaluation Of Assets -- -- -- -- --
PBT 552.75 372.82 179.46 347.75 277.59
Tax 141.44 -7.75 52.58 16.41 -83.69
VVN College
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RATIO ANALYSIS
Net Profit 411.31 380.57 126.88 331.34 361.28
Prior Years Income/Expenses -- -- -- -- --

Depreciation for Previous Years Written
-- -- -- -- --
Back/ Provided
Dividend -- -- -- -- --
Dividend Tax -- -- -- -- --
Dividend (%) -- -- -- -- --
Earnings Per Share 9.49 8.78 2.93 7.64 8.33
Book Value -- -- -- -- --
Equity 433.52 433.52 433.52 433.52 433.52
Reserves 844.62 1,102.64 1,236.05 1,186.62 1,672.89
Face Value 10.00 10.00 10.00 10.00 10.00
VVN College
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RATIO ANALYSIS

1 Table showing Current ratio 45

2 Table showing Debt equity ratio 47

3 Table showing Proprietary ratio 49

4 Table showing Interest coverage ratio 51

5 Table showing Debt to total funds ratio 53

6 Table showing Gross profit ratio 55

7 Table showing Net profit ratio 57

8 Table showing Operating ratio 59

9 Table showing Operating profit ratio 61

10 Table showing Return on investment 63

11 Table showing Return on equity capital 65

12 Table showing Earning per share 67

13 Table showing Price earnings ratio 69

14 Table showing Cost of goods sold ratio 71

15 Table showing Administration overhead ratio 73

16 Table showing Selling overhead ratio 75

1 Chart showing Current ratio 46

2 Chart showing Debt equity ratio 48

3 Chart showing Proprietary ratio 50

4 Chart showing Interest coverage ratio 52

5 Chart showing Debt to total funds ratio 54

6 Chart showing Gross profit ratio 56

7 Chart showing Net profit ratio 58

8 Chart showing Operating ratio 60

9 Chart showing Operating profit ratio 62

10 Chart showing Return on investment 64

11 Chart showing Return on equity capital 66

12 Chart showing Earning per share 68

13 Chart showing Price earnings ratio 70

14 Chart showing Cost of goods sold ratio 72

15 Chart showing Administration overhead ratio 74

16 Chart showing Selling overhead ratio 76

Accounting serves the purpose of providing financial information relating a

The term ‘management accounting’ is the modern concept of accounts as a

According to the Institute of Charted Accountants of England, “any form of

In the words of Robert Anthony, “Management accounting is concerned with

The Institute of Cost and Works Accountants of India (ICWAI) has

The Charted Institute of Management Accountants (CIMA) of UK has

“Management accounting is an Integral part of management concerned with

1.1.3 SCOPE OF MANAGEMENT ACCOUNTING

1.1.4 FUNCTIONS (OR OBJECTIVES) OF MANAGEMENT

Main functions of management accounting are as follows:

1.1.5 CHARACTERISTICS OR NATURE OF MANAGEMENT

It is clearly from the above definitions that management accounting is

a. Using in decision making

1.1.6 LIMITATIONS OF MANAGEMENT ACCOUNTING

Management accounting is a very useful tool of management. However, it

a. Based on historical data

1.2 RATIO ANALYSIS

1.2.1 INTRODUTION TO RATIO ANALYSIS:

a. Pure ratios say current assets to current liabilities are 2:1

1.2.2 NATURE AND SCOPE OF RATIO ANALYSIS:

Ratio Analysis is a powerful tool of financial analysis. Ratio Analysis is one

• Comparative financial statements

Ratio analysis is a statistical yardstick that provides a measure of relationships

1.2.3 OBJECTIVES OF RATIO ANALYSIS:

The objectives of ratio analysis are as follows:

1.2.4 IMPORTANCE OF RATIO ANALYSIS:

Ratio analysis is the important technique of financial analysis. It is a way by

 Useful in financial position analysis:

 Useful in simplifying accounting figures:

Accounting ratios simplify, summarize and systematize the accounting figures