1.

Executive Summary
Analysis and interpretation of the financial statement has now become an
important technique of credit appraisal. Though the basic technique of
appraisal remains the same in all the cases but the approach and the
emphasis in analysis vary. Analysis of financial statement is necessary
because it help in depicting the financial position on the basis of past
and current records. Analysis of financial statement helps in making the
future decision and strategies. Therefore, it is very necessary for every
organization whether it is a financial or manufacturing etc. to make financial
statement and to analysis it.

Income statement analysis which is done by using ratio analysis and trend
analysis give the true picture of the company.

In order to understand and analysis Ratio we have used profit and loss and
balance sheet of both banks. The analysis showed various aspect of bank
regarding their financial system. Observation also indicated most widely
emphasized goal of the firm is to maximize the value of the firm to it’s to meet
the long term and short term requirements. Funds are invariably required to
carry on the various activities of a business. on the basis of ratio analysis we
have suggested some issues which will helpful to bank regarding their
financial systems analysis of financial statements helped me to know how
ration analysis helps the banker to know the financial position of the business.
Among the various tools for evaluating the financial statements, ratio analysis
is the most widely used tool, as it helps us to measure the financial and
operational performance of any business.

Studying the financial performance of SBI & ICICI was a meaningful and
knowledgeable. We as a team made it possible the financial analysis of the
company.

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 2. Objective of study

 To Analysis SBI & ICICI Bank Financial Statement.

 To understand the importance of financial statement analysis, calculate
the ratios, and also analyze them.
 Through the net profit ratio and other profitability ratio, understand the
profitability position of SBI & ICICI bank.
 Evaluating company’s performance relating to Financial Statement
Analysis.
 To know the liquidity position of the company, with the help of Current
ratio.

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 3. Introduction
Every financial manager is involved in financial decision making and financial
planning in order to take right decision at right time, he should be equipped
with sufficient past and present information about the firm and its operations
and how it is changing overtime. Much of this information that is used by
financial manager to take various decisions and to plan for the future is
derived from the financial statements. The project, is to analyze the financial
statements and to study different ratios to determine the financial position of
SBI & ICICI Bank.

Financial analysis involves the use of various financial statements. These

statements do several things. First, the balance sheet summarizes the assets,
liabilities and owners equity of a business at moment in time, usually the end
of a year or a quarter. Next the income statement summarizes the revenues
and expenses of the firm over a period of time while balance sheet represents a
snapshot of the firm s financial position at a moment in time.

Financial management is planning and controlling of financial resources of a

firm with a specific objective. Since, financial management as a separate
discipline is of recent origin, it is still in a developing stage. It is very crucial for
an organization to manage itsfunds effectively and efficiently. Financial
management has assumed greater importance today as the financial strategies
required to survive in the competitive environment have become very
important.

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Introduction to financial analysis

A Financial Statement is a compilation of data, which is logically and

consistently organized according to accounting principles. Its purpose is to
convey an understanding of some financial aspects of a business firm. It shows
a position at a movement in time, as in the case of balance sheet, or reveals a
series of activities over a given period of time, as in the case of an income
statement. Financial statements are the major means through which firms
present their financial situation to stock holders, creditors and general public.
The majority of firms which include extensive financial statements in their
annual reports, which receive wide distribution.

Nature of financial statement Analysis:

Financial Statement Analysis consist of the application of analytical tools and

techniques to the data in financial statements in order to derive from them
measurements and relationships that are significant and useful for decision
making. The process of financial analysis can be described in various ways,
depending on the objectives to be obtained. Financial analysis can be used as a
preliminary screening tool in the selection of stocks in the secondary market. It
can be used as a forecasting tool for future financial conditions and results. It
may be used as a process of evaluation and diagnosis of managerial, operating
or other problem areas. Above all, financial analysis reduces reliance on
intuition, guesses and thus narrows the areas of uncertainty that is present in
all decision making processes. Financial analysis does not lesson the need for
judgment but rather establishes a sound and systematic basis for its rational
application.

Sources of Financial Information

The financial data needed in financial analysis come from many sources. The
primary source is the data provided by the firm itself in its annual report and
required disclosures. The annual report comprises the income statement, the
balance sheet, and the statement of cash flows, as well as footnote to these
statements. Besides this information such as the market price of securities
publicly traded corporations can be found in the financial 20 press and the
electronic media daily. The financial press also provides information to stock
price indices for industries and for market as a whole.

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Advantages of Financial Statement Analysis

There are various advantages of financial statements analysis. The major

benefit is that the investors get enough idea to decide about the investments of
their funds in the specific company. Secondly, regulatory authorities like
International Accounting Standards Board can ensure whether the company is
following accounting standards or not. Thirdly, financial statements analysis
can help the government agencies to analyze the taxation due to the company.
Moreover, company can analyze its own performance over the period of time
through financial statements analysis.

Limitations of Financial Statement Analysis:

Comparison of one company with another can provide valuable clues about the
financial health of an organization. Unfortunately, differences in accounting
methods between companies sometimes make it difficult to compare the
company’s financial data. For example if one firm values its inventories by LIFO
method and another firm by the average cost method, then direct comparison
of financial data such as inventory valuations and cost of goods sold between
the two firms may be misleading. Sometimes enough data are presented in foot
notes to the financial statements to restate data to a comparable basis.
Otherwise, the analyst should keep in mind the lack of comparability of the
data before drawing any definite conclusion.

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 4. Ratio Analysis
This is the important tool available to financial analyst for their work. An
accounting ratio shows the relationship in mathematical terms between two
interrelated accounting figures. Fundamental Analysis has a very broad scope.
One aspect looks at the general (qualitative) factors of a company. The other
side considers tangible and measurable factors (quantitative). This means
crunching and analyzing numbers from the financial statements. If used in
conjunction with other methods, quantitative analysis can produce excellent
results.

Ratio analysis isn't just comparing different numbers from the balance sheet,
income statement, and cash flow statement. It's comparing the number against
previous years, other companies, the industry, or even the economy in general.
Ratios look at the relationships between individual values and relate them to
how a company has performed in the past, and might perform in the future.

A ratio is one figure express in terms of another figure. It is a mathematical

yardstick that measures the relationship two figures, which are related to each
other and mutually interdependent. Ratio is express by dividing one figure by
the other related figure. Thus a ratio is an expression relating one number to
another. It is simply the quotient of two numbers.

Meaning of ratio analysis

Ratio analysis is the method or process by which the relationship of items or

group of items in the financial statement are computed, determined and
presented. Ratio analysis is an attempt to derive quantitative measure or
guides concerning the financial health and profitability of business enterprises.
Ratio analysis can be used both in trend and static analysis. There are several
ratios at the disposal of an analyst but their group of ratio he would prefer
depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this

section, we will focus on a technique, which is easy to use. It can provide you
with a valuable investment analysis tool. This technique is called cross-
sectional analysis. Cross-sectional analysis compares financial ratios of several
companies from the same industry. Ratio analysis can provide valuable

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information about a company's financial health. A financial ratio measures a
company's performance in a specific area. For example, you could use a ratio of
a company's debt to its equity to measure a company's leverage. By comparing
the leverage ratios of two companies, you can determine which company uses
greater debt in the conduct of its business. A company whose leverage ratio is
higher than a competitor's has more debt per equity. You can use this
information to make a judgment as to which company is a better investment
risk. However, you must be careful not to place too much importance on one
ratio. You obtain a better indication of the direction in which a company is
moving when several ratios are taken as a group.

3forms of ratio

Since a ratio is a mathematical relationship between to or more variables

accounting figures, such relationship can be expressed in different ways as
follows –

A] As a pure ratio:

For example the equity share capital of a company is Rs. 20,00,000 & the
preference share capital is Rs. 5,00,000, the ratio of equity share capital to
preference share capital is 20,00,000: 5,00,000 or simply 4:1.

B] As a rate of times:

In the above case the equity share capital may also be described as 4 times
that of preference share capital. Similarly, the cash sales of a firm are Rs.
12,00,000 & credit sales are Rs. 30,00,000. so the ratio of credit sales to cash
sales can be described as 2.5 [30,00,000/12,00,000] or simply by saying that
the credit sales are 2.5 times that of cash sales.

C] As a percentage:

In such a case, one item may be expressed as a percentage of some other item.

For example, net sales of the firm are Rs.50,00,000 & the amount of the gross
profit is Rs. 10,00,000, then the gross profit may be described as 20% of sales [
10,00,000/50,00,000]

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Types of Ratios

1] Balance sheet ratio

If the ratios are based on the figures of balance sheet, they are called Balance
Sheet Ratios. E.g. ratio of current assets to current liabilities or ratio of debt to
equity. While calculating these ratios, there is no need to refer to the Revenue
statement.

These ratios study the relationship between the assets & the liabilities, of the
concern. These ratio help to judge the liquidity, solvency & capital structure of
the concern. Balance sheet ratios are Current ratio, Liquid ratio, and
Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working
capital ratio.

2] P& L A/C ratio

Ratio based on the figures from the revenue statement is called revenue
statement ratios. These ratio study the relationship between the profitability &
the sales of the concern. Revenue ratios are Gross profit ratio, Operating ratio,
Expense ratio, Net profit ratio, Net operating profit ratio, Stock turnover ratio.

3] Composite/ combined ratio:

These ratios indicate the relationship between two items, of which one is found
in the balance sheet & other in revenue statement.

There are two types of composite ratios. Some composite ratios study the
relationship between the profits & the investments of the concern. E.g. return
on capital employed, return on proprietors fund, return on equity capital etc.

Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios,
dividend payout ratios, & debt service ratios

Ratios for short-term creditors:

 Current ratios
 Liquid ratios
 Stock working capital ratios etc.

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Ratios for the shareholders

 Return on proprietors fund

 Return on equity capital etc.

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 5. Significance of ratio analysis
CURRENT RATIO

Meaning:

This ratio compares the current assests with the current liabilities. It is also
known as ‘working capital ratio’ or ‘ solvency ratio’. It is expressed in the form
of pure ratio.

E.g. 2:1

Formula:

Current Ratio = Current Assets / Current Liabilities

Significance:

The current assests of a firm represents those assets which can be, in the
ordinary course of business, converted into cash within a short period time,
normally not exceeding one year. The current liabilities defined as liabilities
which are short term maturing obligations to be met, as originally
contemplated, with in a year. Current ratio (CR) is the ratio of total current
assets (CA) to total current liabilities (CL).

Current assets include cash and bank balances; inventory of raw materials,
semifinished and finished goods; marketable securities; debtors (net of
provision for bad and doubtful debts); bills receivable; and prepaid expenses.

Current liabilities consist of trade creditors, bills payable, bank credit,

provision for taxation, dividends payable and outstanding expenses. This ratio
measures the liquidity of the current assets and the ability of a company to
meet its short-term debt obligation. CR measures the ability of the company to
meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm
and provides the funds needed to pay for CL. The higher the current ratio, the
greater the short-term solvency. This compares assets, which will become
liquid within approximately twelve months with liabilities, which will be due for
payment in the same period and is intended to indicate whether there are
sufficient short-term assets to meet the short- term liabilities. Recommended

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current ratio is 2: 1. Any ratio below indicates that the entity may face liquidity
problem but also Ratio over 2: 1 as above indicates over trading, that is the
entity is under utilizing its current assets.

LIQUID RATIO

Meaning:

Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compare
the quick assets with the quick liabilities. It is expressed in the form of pure
ratio. E.g. 1:1. The term quick assets refer to current assets, which can be
converted into, cash immediately or at a short notice without diminution of
value.

Formula:

Liquid ratio = Quick Assets / Current Liabilities

Significance:

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA
refers to those current assets that can be converted into cash immediately
without any value strength. QA includes cash and bank balances, short-term
marketable securities, and sundry debtors. Inventory and prepaid expenses are
excluded since these cannot be turned into cash as and when required. QR
indicates the extent to which a company can pay its current liabilities without
relying

on the sale of inventory. This is a fairly stringent measure of liquidity because

it is based on those current assets, which are highly liquid. Inventories are
excluded from the numerator of this ratio because they are deemed the least
liquid component of current assets. Generally, a quick ratio of 1:1 is considered
good. One drawback of the quick ratio is that it ignores the timing of receipts
and payments.

EARNING PER SAHRE

Meaning:

Earnings per Share are calculated to find out overall profitability of the
organization. An earnings per Share represents earning of the company
whether or not dividends are declared. If there is only one class of shares, the
earning per share are determined by dividing net profit by the number of equity

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shares.EPS measures the profits available to the equity shareholders on each
share held.

Formula:

Earning per share = NPAT / Number of equity share

Significance:

The higher EPS will attract more investors to acquire shares in the company as
it indicates that the business is more profitable enough to pay the dividends in
time. But remember not all profit earned is going to be distributed as dividends
the company also retains some profits for the business

DIVIDEND PAYOUT RATIO

Meaning:

Dividend Pay-out Ratio shows the relationship between the dividend paid to
equity shareholders out of the profit available to the equity shareholders.

Formula:

Dividend Pay out ratio = Dividend per share / Earning per share *100

Significance:

D/P ratio shows the percentage share of net profits after taxes and after
preference dividend has been paid to the preference equity holders.

CAPITAL GEARING RATIO

Meaning:

Gearing means the process of increasing the equity shareholders return

through the use of debt. Equity shareholders earn more when the rate of the
return on total capital is more than the rate of interest on debts. This is also
known as leverage or trading on equity. The Capital-gearing ratio shows the
relationship between two types of capital viz: - equity capital & preference
capital & long term borrowings. It is expressed as a pure ratio.

Formula:

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Capital gearing ratio = Preference capital+ secured loan / Equity capital &
reserve & surplus

Significance:

Capital gearing ratio indicates the proportion of debt & equity in the financing
of assets of a concern. If the amount of fixed cost bearing capital is more than
the equity share capital including reserves an undistributed profits), it will be
called high capital gearing and if it is less, it will be called low capital gearing.

The high gearing will be beneficial to equity shareholders when the rate of
interest/dividend payable on fixed cost bearing capital is lower than the rate of
return on investment in business.

Thus, the main objective of using fixed cost bearing capital is to maximize the
profits available to equity shareholders.

PROFITABILITY

These ratios help measure the profitability of a firm. A firm, which generates a
substantial amount of profits per rupee of sales, can comfortably meet its
operating expenses and provide more returns to its shareholders. The
relationship between profit and sales is measured by profitability ratios. There
are two types of profitability ratios: Gross Profit Margin and Net Profit Margin.

GROSS PROFIT RATIO

Meaning:

This ratio measures the relationship between gross profit and sales. It is
defined as the excess of the net sales over cost of goods sold or excess of
revenue over cost.

Formula:

Gross profit ratio = Gross profit / Net sales * 100

Significance:

This ratio shows the profit that remains after the manufacturing costs have
been met. It measures the efficiency of production as well as pricing. This ratio
helps to judge how efficient the concern is I managing its production,
purchase, selling & inventory, how good its control is over the direct cost, how

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productive the concern , how much amount is left to meet other expenses &
earn net profit.

NET PROFIT RATIO

Meaning:

Net Profit ratio indicates the relationship between the net profit & the sales it is
usually expressed in the form of a percentage.

Formula:

Net profit ratio = NPAT / Net sales * 100

Significance:

This ratio shows the net earnings (to be distributed to both equity and
preference shareholders) as a percentage of net sales. It measures the overall
efficiency of production, administration, selling, financing, pricing and tax
management. Jointly considered, the gross and net profit margin ratios provide
an understanding of the cost and profit structure of a firm.

RETURN ON CAPITAL EMPLOYED

Meaning:

The profitability of the firm can also be analyzed from the point of view of the
total funds employed in the firm. The term fund employed or the capital
employed refers to the total long-term source of funds. It means that the
capital employed comprises of shareholder funds plus long-term debts.
Alternatively it can also be defined as fixed assets plus net working capital.
Capital employed refers to the long-term funds invested by the creditors and
the owners of a firm. It is the sum of long-term liabilities and owner's equity.
ROCE indicates the efficiency with which the long-term funds of a firm are
utilized.

Formula:

Return on capital employed = NPAT / Capital employed * 100

Significance :

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These ratios determine how quickly certain current assets can be converted
into cash. They are also called efficiency ratios or asset utilization ratios as
they measure the efficiency of a firm in managing assets. These ratios are
based on the relationship between the level of activity represented by sales or
cost of goods sold and levels of investment in various assets.

FINANCIAL

These ratios determine how quickly certain current assets can be converted
into cash. They are also called efficiency ratios or asset utilization ratios as
they measure the efficiency of a firm in managing assets. These ratios are
based on the relationship between the level of activity represented by sales or
cost of goods sold and levels of investment in various assets. The important
turnover ratios are debtors turnover ratio, average collection period,
inventory/stock turnover ratio, fixed assets turnover ratio, andtotal assets
turnover ratio. These are described below:

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DEBTORS TURNOVER RATIO (DTO)

Meaning:

DTO is calculated by dividing the net credit sales by average debtors

outstanding during the year. It measures the liquidity of a firm's debts. Net
credit sales are the gross credit sales minus returns, if any, from customers.
Average debtors are the average of debtors at the beginning and at the end of
the year. This ratio shows how rapidly debts are collected. The higher the DTO,
the better it is for the organization.

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Formula:

Debtors turnover ratio = Credit sales / Average debtors

Significance:

This ratio indicates the speed with which the amount is collected from debtors.
The higher the ratio, the better it is, since it indicates that amount from
debtors is being collected more quickly. The more quickly the debtors pay, the
less the risk from bad- debts, and so the lower the expenses of collection and
increase in the liquidity of the firm.

By comparing the debtors turnover ratio of the current year with the previous
year, it may be assessed whether the sales policy of the management is efficient
or not.

Average collection period

This ratio indicates the time with in which the amount is collected from debtors
and bills receivables.

 Formula:

Average collection period = debtors + bills receivable / credit sales per day

 Here, credit sales per day = net credit sales of the year / 365

 Average collection period can also be calculated on the bases of ‘debtors

turnover ratio’.

The Formula will be:

Average collection period = 12 months or 365 days / debtors turnover ratio

Significance:

This ratio shows the time in which the customers are paying for credit sales. A
higher debt collection period is thus, an indicates of the inefficiency and
negligence on the part of management. On the other hand, if there is decrease
in debt collection period, it indicates prompt payment by debtors which
reduces the chance of bad debts.

INVENTORY OR STOCK TURNOVER RATIO (ITR)

Meaning:

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ITR refers to the number of times the inventory is sold and replaced during the
accounting period.

Formula:

Stock Turnover Ratio = COGS / Average stock

Significance:

ITR reflects the efficiency of inventory management. The higher the ratio, the
more efficient is the management of inventories, and vice versa. However, a
high inventory turnover may also result from a low level of inventory, which
may lead to frequent stock outs and loss of sales and customer goodwill. For
calculating ITR, the average of inventories at the beginning and the end of the
year is taken. In general, averages may be used when a flow figure (in this case,
cost of goods sold) is related to a stock figure (inventories).

FIXED ASSETS TURNOVER (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets.

Formula:

Fixed assets turnover = Net sales / Net fixed assets

Significance:

This ratio measures the efficiency with which fixed assets are employed. A
high ratio indicates a high degree of efficiency in asset utilization while a low
ratio reflects an inefficient use of assets. However, this ratio should be used
with caution because when the fixed assets of a firm are old and substantially
depreciated, the fixed assets turnover ratio tends to be high (because the
denominator of the ratio is very low).

PROPRIETORS RATIO

Meaning:

Proprietary ratio is a test of financial & credit strength of the business. It

relates shareholders fund to total assets. This ratio determines the long term or
ultimate solvency of the company. In other words, Proprietary ratio determines
as to what extent the owner’s interest & expectations are fulfilled from the total

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investment made in the business operation. Proprietary ratio compares the
proprietor fund with total liabilities. It is usually expressed in the form of
percentage. Total assets also know it as net worth.

Formula:

Proprietary ratio = Proprietary fund / Total fund

Significance:

This ratio should be 33% or more than that. In other words, the proportion of
shareholders funds to total funds should be 33% or more.

A higher proprietary ratio is generally treated an indicator of sound financial

position from long-term point of view, because it means that the firm is less
dependent on external sources of finance.

If the ratio is low it indicates that long-term loans are less secured and they
face the risk of losing their money.

STOCK WORKING CAPITAL RATIO

Meaning:

This ratio shows the relationship between the closing stock & the working
capital. It helps to judge the quantum of inventories in relation to the working
capital of the business. The purpose of this ratio is to show the extent to which
working capital is blocked in inventories. The ratio highlights the
predominance of stocks in the current financial position of the company. It is
expressed as a percentage.

Formula:

Stock working capital ratio = Stock / Working Capital

Significance:

Stock working capital ratio is a liquidity ratio. It indicates the composition &
quality of the working capital. This ratio also helps to study the solvency of a

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concern. It is a qualitative test of solvency. It shows the extent of funds blocked
in stock. If investment in stock is higher it means that the amount of liquid
assets is lower.

DEBT EQUITY RATIO

MEANING:

Debt equity ratio is also called as leverage ratio. Leverage means the process of
the increasing the equity shareholders return through the use of debt. Leverage
is also known as ‘gearing’ or ‘trading on equity’. Debt equity ratio shows the
margin of safety for long-term creditors & the balance between debt & equity.

Formula:

Debt equity ratio = Total long-term debt / Total shareholders fund

Significance:

This ratio is calculated to assess the ability of the firm to meet its long term
liabilities. Generally, debt equity ratio of is considered safe.

If the debt equity ratio is more than that, it shows a rather risky financial
position from the long-term point of view, as it indicates that more and more
funds invested in the business are provided by long-term lenders.

The lower this ratio, the better it is for long-term lenders because they are more
secure in that case. Lower than 2:1 debt equity ratio provides sufficient
protection to long-term lenders.

RETURN ON PROPRIETOR FUND

Meaning:

Return on proprietors fund is also known as ‘return on proprietors equity’ or

‘return on shareholders investment’ or ‘ investment ratio’. This ratio indicates
the relationship between net profit earned & total proprietors funds. Return on

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proprietors fund is a profitability ratio, which the relationship between profit &
investment by the proprietors in the concern.

Its purpose is to measure the rate of return on the total fund made available
by the owners. This ratio helps to judge how efficient the concern is in
managing the owner’s fund at disposal. This ratio is of practical importance to
prospective investors & shareholders.

Formula:

Return on proprietors fund = NPAT / Proprietors fund * 100

CREDITORS TURNOVER RATIO

It is same as debtors turnover ratio. It shows the speed at which payments are
made to the supplier for purchase made from them. It is a relation between net
credit purchase and average creditors.

Formula :

Credit turnover ratio = Net credit purchase / Average creditors

Average age of accounts payable = Months in a year / Credit turnover ratio

Significance:

Both the ratios indicate promptness in payment of creditor purchases. Higher

creditors turnover ratio or a lower credit period enjoyed signifies that the
creditors are being paid promptly. It enhances credit worthiness of the
company. A very low ratio indicates that the company is not taking full benefit
of the credit period allowed by the creditors.

6. ICICI Bank

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Vision and Mission of ICICI Bank Ltd.

Vision of ICICI Bank

Mission

We will leverage our people, technology, speed and financial capital to:

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  Be the banker of first choice for our customers by delivering high
quality, world-class products and services.
 Expand the frontiers of our business globally.
 Play a proactive role in the full realization of India’s potential.
 Maintain a healthy financial profile and diversify our earnings across
businesses and geographies.
 Maintain high standards of governance and ethics.
 Contribute positively to the various countries and markets in which
we operate.
 Create value for our stakeholders.
CURRENT RATIO

Meaning:

This ratio compares the current assests with the current liabilities. It is also
known as ‘working capital ratio’ or ‘ solvency ratio’. It is expressed in the form
of pure ratio.

E.g. 2:1

Formula:

Current Ratio = Current Assets / Current Liabilities

=3212.96/15501.18

=.020

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 Current Ratio

0.78 0.51

0.62

0.61
0.72

Significance:

The current assests of a firm represents those assets which can be, in the
ordinary course of business, converted into cash within a short period time,
normally not exceeding one year. The current liabilities defined as liabilities
which are short term maturing obligations to be met, as originally
contemplated, with in a year. Current ratio (CR) is the ratio of total current
assets (CA) to total current liabilities (CL).

Current assets include cash and bank balances; inventory of raw materials,
semifinished and finished goods; marketable securities; debtors (net of
provision for bad and doubtful debts); bills receivable; and prepaid expenses.

Current liabilities consist of trade creditors, bills payable, bank credit,

provision for taxation, dividends payable and outstanding expenses. This ratio
measures the liquidity of the current assets and the ability of a company to
meet its short-term debt obligation. CR measures the ability of the company to
meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm
and provides the funds needed to pay for CL. The higher the current ratio, the
greater the short-term solvency. This compares assets, which will become
liquid within approximately twelve months with liabilities, which will be due for
payment in the same period and is intended to indicate whether there are
sufficient short-term assets to meet the short- term liabilities. Recommended
current ratio is 2: 1. Any ratio below indicates that the entity may face liquidity

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problem but also Ratio over 2: 1 as above indicates over trading, that is the
entity is under utilizing its current assets.

LIQUID RATIO:

Meaning:

Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compare
the quick assets with the quick liabilities. It is expressed in the form of pure
ratio. E.g. 1:1. The term quick assets refer to current assets, which can be
converted into, cash immediately or at a short notice without diminution of
value.

Formula:

Liquid ratio = Quick Assets / Current Liabilities

= 181205.60+7114.12+38597.83/15501.18

=14.63

Liquid ratio for 2010 is 14.63

Quick Ratio

5.94 4.98

6.64
6.42

6.04

2005 2006 2007 2008

Significance:

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA
refers to those current assets that can be converted into cash immediately
without any value strength. QA includes cash and bank balances, short-term

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marketable securities, and sundry debtors. Inventory and prepaid expenses are
excluded since these cannot be

turned into cash as and when required. QR indicates the extent to which a
company can pay its current liabilities without relying

on the sale of inventory. This is a fairly stringent measure of liquidity because

it is based on those current assets, which are highly liquid. Inventories are
excluded from the numerator of this ratio because they are deemed the least
liquid component of current assets. Generally, a quick ratio of 1:1 is considered
good. One drawback of the quick ratio is that it ignores the timing of receipts
and payments.

EARNING PER SAHRE

Formula:

Earning per share = NPAT / Number of equity share

2005 2006 2007 2008 2009 2010

NPAT 2,007.28 2,532.95 2,995.00 4,092.12 3,740.62 4024.98

No. of 111.72
Equity 73.67 88.98 89.93 111.27 111.27
share

Earning 36.10
27.22 28.55 34.59 37.37 33.78
per share

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 EPS

33.78 27.22

28.55

37.37

34.59

2005 2006 2007

INTERPRETATION:-

 This yield can be used by a Share holder while making decisions about
the investment on comparison to other alternative investments.
 The E.P.S. when compared to the current market price of the share ,gives
measure of the rate of yield .
 The E.P.S. of the company is currently decreasing because of the
decreasing in the net worth during recession.
 The earning per share of the IDEA CELLULAR LIMITED is continuously
increased in the year from 2005-06 to 2006-07 because of highly
increased in the net profit.

 Then it was also increased in the year 2007-08 because of the increased
in the net profit and relatively less percentage increase in the no.of equity
share.

 The EPS is continuously increase which express that the company is

effectively uses its capital and also efficiently uses the loan funds instead

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 of the owner’s fund. It was good for the share holder’s of the company
and they get the satisfactory return.

Return on capital employed

Return on capital employed = NPAT / Capital employed * 100

2005 2006 2007 2008 2009 2010

2,532.9 4024.98
NPAT 2,007.28 2,995.00 4,092.12 3,740.62
5

Capital 1114.89
employe 736.75 889.83 899.34 1,112.68 1,113.29
d

Return
on 3.61
capital 2.72 2.85 3.33 3.68 3.36
employe
d

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 Return on capital employed (for 2010 is 22%)

Return on capital emplyed

21% 17%

18%
21%
23%

2005 2006 2007

Figure 1: Return on capital employed

Interpretation:

 This is another ratio to judge the efficiency and effectiveness of the

company like profitability ratio.
 The income from services is greaterly increased compared with the
previous year and the total capital employed includes capital and
reserves & surplus. Due to huge increase in the net profit the capital
employed is also increased along with income from services. Both are
effected in the increment of the ratio of current year.

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Proprietary ratio
Formula :

Proprietary ratio = Proprietary fund / Total fund

2005 2006 2007 2008 2009 2010

Proprietar 12,549.9 22,205.9 24,313.2 46,470.2 49,533.0 49883.2

y fund 5 9 6 1 2 3

17,460.8 24,577.1 42,258.7 60,507.3 51,920.3 52352.3

Total fund
9 6 3 0 9 0

Proprietar 0.95
0.72 0.90 0.58 0.77 0.95
y ratio

Proprietary ratio

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 Proprietary ratio

0.95 0.72

0.9
0.77
0.58

2005 2006 2007

Interpretation:

 The proprietary ratio establishes the relationship between shareholders

funds to total assets. It determines the long-term solvency of the firm.
This ratio indicates the extent to which the assets of the company can be
lost without affecting the interest of the company.
 The share holder’s funds include capital and reserves and surplus. The
reserves and surplus is increased due to the increase in balance in profit
and loss account, which is caused by the increase of income from
services.
 Total assets, includes fixed and current assets. The fixed assets are
reduced because of the depreciation and there are no major increments
in the fixed assets. The current assets are increased compared with the
year 2007. Total assets are also increased than precious year, which
resulted an increase in the ratio than older.

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 7. State Bank Of India
State Bank of India welcomes you to explore the world of premier bank in
India.

In this section, you can access detailed information on Overview of the Bank,
Technology Upgradation in the Bank, Board of Directors, Financial Results and
Shareholder Info.

The Bank is actively involved since 1973 in non-profit activity called

Community Services Banking. All our branches and administrative offices
throughout the country sponsor and participate in large number of welfare
activities and social causes. Our business is more than banking because we
touch the lives of people anywhere in many ways.

Our commitment to nation-building is complete & comprehensive.

BES's IMSR
Ratio Analysis
Current Ratio = Current Assets / Current Liability
= 3.09.

Quick Ratio = Quick Assets / Quick Liability

= 9.07

Earnings Per Share = NPAT / No. Of Equity Shares

=144.37

Return on Capital Employed = NPAT / Capital Employed * 100

= 23.89
=24%

Debt Equity Ratio = Debt / Debt+Equity

=0.09

Interest Coverage Ratio = EBIT / Fixed interest charges

= 0.79

Price Earnings Ratio = Market Price per share / Earnings per share
= 18.32

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Dividend Payout Ratio = Dividend per share / EPS
= 0.20

Market Price per share- SBI

8. Bibliography

http://www.statebankofindia.com/user.htm
on 13th March 2011 At 11.25 Am

http://www.statebankofindia.com/user.htm
on 13th March 2011 At 11.25 Am

http://www.google.com/#sclient=psy&hl=en&q=icici+bank+annual+report+09-
10&aq=1&aqi=g5&aql=&oq=&pbx=1&bav=on.2,or.r_gc.r_pw.&fp=a0e1d04ac32e
f934
on 16th March 2011 At 14.00 Pm

http://www.icicibank.com/aboutus/annual.html

on 17th March 2011 At 14.36 Pm

BES's IMSR
BES's IMSR