A PROJECT REPORT
ON
RATIO ANALYSIS ON AXIS BANK LTD
SUBMITTED:
By Kuldeep Shyam Sunder Singh
in partial fulfillment for the award of the degree
of
MASTER OF COMMERCE PART II
Under The Guidance Of
Prof. Aruna Singham
BUNTS SANGHA’S
S.M.SHETTY COLLEGE OF SCIENCE, COMMERCE AND
MANAGEMENT STUDIES
UNIVERSITY OF MUMBAI
OCTOBER 2015
[1]
Address: Opp. JalvayuVihar, Hiranandani Garden, Powai, Mumbai - 400076
Web site: http://smshettyinstitute.org Telephone:(91-22)61327321Email id: [email protected] Telefax:(91-22) 61327304
EVALUATION CERTIFICATE
This is to certify that the undersigned have assessed and evaluated the project
on “RATIO ANALYSIS ON AXIS BANK LTD ”, submitted by Kuldeep
singh student of M Com part – II.
This project is original to the best of our Knowledge and has been accepted for
internal assessment.
Internal Examiner External Examiner Principal Prof. Aruna Singham Dr.Sridhara Shetty
[2]
Address: Opp. JalvayuVihar, Hiranandani Garden, Powai, Mumbai - 400076
Web site: http://smshettyinstitute.org Telephone:(91-22)61327321Email id: [email protected] Telefax:(91-22) 61327304
DECLARATION BY THE STUDENT
I, Kuldeep Singh, student of M Com Part – II hereby declare that the project for
the paper Financial Management, titled, “RATIO ANALYSIS ON AXIS
BANK LTD” submitted by me for semester – III during the academic year
2015-16, based on actual work carried out by me under the guidance and
supervision of Prof. Aruna Singham.
I further state that this work is original and not submitted anywhere else for any
examination.
Signature
(Kuldeep Singh)
[3]
ACKNOWLEDGMENT
Through this acknowledgment express my sincere gratitude to all those people
who have been associated with this assignment and have helped me to make it a
worthwhile experience.
Firstly I extend my thanks to the principle of the college, and vice principle Dr
Liji Santosh, who have given me the chance to prove myself, shared their
opinion through which I received the required crucial information’s for my
report.
Also I express my sincere thanks to my prof. Aruna Singham, who give these
opportunity to learn the subject in practical approach and provided me the
valuable guidance in preparing the project report.
Kuldeep Singh
[4]
CONTENTSSr. No. TITLE Page No
1CHAPTER 1 :
Introduction 6
A Study of Unit Lined Insurance Plans of ICICI Prudential Life Insurance
7
Objectives of Study 11
Scope of Study 12 Statement of Problem 13
Research Methodology 14
2 CHAPTER 2 : About the Company 15 ICICI Prudential Life Insurance 17 Objectives of LIC 20
3 CHAPTER 3 :
Ratio Analysis 22
4 CHAPTER 4 :
Ratios- What do they tell us? 25
5 CHAPTER 5 :
Balance Sheet 28 Profit and Loss Statement 29
6 CHAPTER 6 :
Calculation of Ratios 30
7 CHAPTER 7 :
Conclusion 35 Bibliography 36
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[6]
RATIO ANALYSIS
A financial ratio (or accounting ratio) is a relative magnitude of two selected
numerical values taken from an enterprise's financial statements. Often used in accounting,
there are many standard ratios used to try to evaluate the overall financial condition of a
corporation or other organization. Financial ratios may be used by managers within a firm,
by current and potential shareholders (owners) of a firm, and by a firm's creditors. Financial
analysts use financial ratios to compare the strengths and weaknesses in various companies.If
shares in a company are traded in a financial market, the market price of the shares is used in
certain financial ratios.
Ratios can be expressed as a decimal value, such as 0.10, or given as an equivalent
percent value, such as 10%. Some ratios are usually quoted as percentages, especially ratios
that are usually or always less than 1, such as earnings yield, while others are usually quoted
as decimal numbers, especially ratios that are usually more than 1, such as P/E ratio; these
latter are also called multiples. Given any ratio, one can take its reciprocal; if the ratio was
above 1, the reciprocal will be below 1, and conversely. The reciprocal expresses the same
information, but may be more understandable: for instance, the earnings yield can be
compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20
corresponds to an earnings yield of 5%.
Values used in calculating financial ratios are taken from the balance sheet, income
statement, statement of cash flows or (sometimes) the statement of retained earnings. These
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comprise the firm's "accounting statements" or financial statements. The statements' data is
based on the accounting method and accounting standards used by the organization.
Financial ratios quantify many aspects of a business and are an integral part of the
financial statement analysis. Financial ratios are categorized according to the financial aspect
of the business which the ratio measures. Liquidity ratios measure the availability of cash to
pay debt.Activity ratios measure how quickly a firm converts non-cash assets to cash assets.
Debt ratios measure the firm's ability to repay long-term debt. Profitability ratios measure
the firm's use of its assets and control of its expenses to generate an acceptable rate of return.
Market ratios measure investor response to owning a company's stock and also the cost of
issuing stock. These are concerned with the return on investment for shareholders, and with
the relationship between return and the value of an investment in company’s shares.
Financial ratios allow for comparisons
between companies
between industries
between different time periods for one company
between a single company and its industry average
Ratios generally are not useful unless they are benchmarked against something else, like
past performance or another company. Thus, the ratios of firms in different industries, which
face different risks, capital requirements, and competition are usually hard to compare.
Financial ratios may not be directly comparable between companies that use different
accounting methods or follow various standard accounting practices. Most public companies
are required by law to use generally accepted accounting principles for their home countries,
but private companies, partnerships and sole proprietorships may not use accrual basis
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accounting. Large multi-national corporations may use International Financial Reporting
Standards to produce their financial statements, or they may use the generally accepted
accounting principles of their home country. There is no international standard for
calculating the summary data presented in all financial statements, and the terminology is not
always consistent between companies, industries, countries and time periods.
It refers to the systematic use of ratios to interpret the financial statements in terms of
the operating performance and financial position of a firm. It involves comparison for a
meaningful interpretation of the financial statements. In view of the needs of various uses of
ratios the ratios, which can be calculated from the accounting data are classified into the
following broad categories
A. Liquidity Ratio
B. Turnover Ratio
C. Solvency or Leverage ratios
D. Profitability ratios
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RATIOS – WHAT DO THEY TELL US?
CURRENT RATIO
The current ratio measures the short-term solvency of the firm. It establishes the relationship
between current assets and current liabilities. It is calculated by dividing current assets by
current liabilities. Current assets include cash and bank balances, marketable securities,
inventory, and debtors, excluding provisions for bad debts and doubtful debtors, bills
receivables and prepaid expenses. Current liabilities includes sundry creditors, bills payable,
short- term loans, income-tax liability, accrued expenses and dividends payable.
Current Ratio = Current Asset
Current Liabilities
DEBTOR TURNOVER RATIO
This indicates the number of times average debtors have been converted into cash during a
year. It is determined by dividing the net credit sales by average debtors.
Debtor Turnover Ratio = Net Credit Sales
Average Trade Debtors
Net credit sales consist of gross credit sales minus sales return. Trade debtor includes sundry debtors
and bill’s receivables. Average trade debtors (Opening + Closing balances / 2). When the
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information about credit sales, opening and closing balances of trade debtors is not available
then the ratio can be calculated by dividing total sales by closing balances of trade debtor.
Debtor Turnover Ratio = Total Sales
Trade Debtors
EXPENSES RATIO
While some of the expenses may be increasing and other may be declining to know the
behavior of specific items of expenses the ratio of each individual operating expenses to net
sales should be calculated. The various variants of expenses are
Cost of goods sold = Cost of goods sold X 100
Net Sales
Administrative Expenses Ratio = Administrative Expenses X 100
Net sales
Selling and distribution expenses ratio = Selling and distribution expenses X 100
Net sales
DEBT EQUITY RATIO
Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest)
against the assets of the firm. Thus this ratio indicates the relative proportions of debt and
equity in financing the firm’s assets. It can be calculated by dividing outsider funds (Debt)
by shareholder funds (Equity)
Debt equity ratio = Outsider Funds (Total Debts)
Shareholder Funds or Equity
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The outsider fund includes long-term debts as well as current liabilities. The shareholder
funds include equity share capital, preference share capital, reserves and surplus including
accumulated profits. However fictitious assets like accumulated deferred expenses etc
should be deducted from the total of these items to shareholder funds. The shareholder funds
so calculated are known as net worth of the business.
PROPRIETARY (EQUITY) RATIO
This ratio indicates the proportion of total assets financed by owners. It is calculated by
dividing proprietor (Shareholder) funds by total assets.
Proprietary (equity) ratio = Shareholder funds
Total assets
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CHAPTER 5
BALANCE SHEET
PARTICULARS MARCH 2015 MARCH 2014
SOURCES OF FUNDS
Owners' Fund
Equity Share Capital 101.00 101.00
Share Application Money 0.00 0.00
Preference Share Capital 0.00 0.00
Reserves & Surplus 6,380.29 5,581.21
Loan Funds
Secured Loans 54,975.35 44,614.54
Unsecured Loans 3,729.83 3,255.37
Total 65,186.47 53,552.12
USES OF FUNDS
Fixed Assets
Gross Block 115.25 108.15
Less: Revaluation Reserve 0.00 0.00
Less: Accumulated Depreciation 52.88 45.92
Net Block 62.37 62.24
Capital Work-in-progress 0.00 14.53
Investments 184.63 164.03
Net Current Assets
Current Assets, Loans & Advances
80,313.23 64,191.79
Less : Current Liabilities & Provisions
15,373.76 10,880.45
Total Net Current Assets 64,939.47 53,311.34
Miscellaneous Expenses not written
0.00 0.00
Total 65,186.47 53,552.12
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PROFIT AND LOSS STATEMENT
PARTICULARS MARCH 2015 MARCH 2014
Income :
Operating Income 7,575.92 6,114.86
Expenses
Material Consumed 0.00 0.00
Manufacturing Expenses 0.00 0.00
Personnel Expenses 90.41 72.44
Selling Expenses 0.00 110.85
Administrative Expenses 262.78 202.46
Expenses Capitalized 0.00 0.00
Cost Of Sales 353.18 385.75
Operating Profit 7,222.74 5,729.11
Other Recurring Income 82.96 23.09
Adjusted PBDIT 7,305.70 5,752.21
Financial Expenses 5,924.60 4,591.07
Depreciation 7.53 7.42
Other Write offs 0.00 0.00
Adjusted PBT 1,373.57 1,153.72
Tax Charges 350.36 316.72
Adjusted PAT 1,023.21 837.00
Non Recurring Items 0.00 77.09
Other Non Cash adjustments 0.00 0.11
Reported Net Profit 1,023.21 914.20
Earnings Before Appropriation 1,712.14 1,445.03
Equity Dividend 191.77 181.68
Preference Dividend 0.00 0.00
Dividend Tax 32.35 29.42
Retained Earnings 1,488.02 1,233.93
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CHAPTER 6
CALCULATION OF RATIOS
Current Ratio = Current Assets
Current Liabilities
Current Year = 80313.23
15373.36
= 5.22:1
Previous Year = 64191.79
10880.45
= 5.89: 1
COMMENTS – Current ratio is also known as Bankers Ratio/Working Capital Ratio.
This ratio shows the relationship between current assets and current liabilities. It also shows
the short term solvency position of the organization. Ideal current ratio should be 2:1.
Proprietary ratio = Proprietors funds × 100
Total Assets
Current Year = 55209.68 × 100
101876.93
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= 54.09 %
Previous Year = 52216.46 × 100
95802.99
= 54.50 %
COMMENTS :- This ratio shows the relationship between proprietors fund and total
assets. It also shows long tern stability and solvency position of the organization. Ideally it
should be between 65 % to 70 %.
Debt Equity Ratio = Borrowed funds
Proprietor’s funds
Current Year = 23636.51
55209.68
= 42.82: 100
Previous Year = 21418.82
55216.46
= 38.79 : 100
COMMENTS: - This ratio shows the relationship between borrowed funds and
proprietors funds. It also shows the composition and structure of the capital invested in the
business. Standard ratio should be 2:1
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Debtors Turn Over Ratio = Net Credit Sales
Average Receivables
= Net Credit Sales
Average (Debtors + Bills receivables)
Current Year = 38199.43
796.92
= 47.93 times
Previous Year = 33933.46
904.08
= 37.53 times
Comments :- This ratio is an activity ratio which shows the number of times good sold
to debtors and payment received from them. HIGHER the ratio is FAVAROUBLE and vice
versa.
Creditors Turn Over Ratio = Net Credit Purchases
Average Payables
= Net Credit Purchases
Average (Creditors + Bills payables)
Current Year = 9877.40
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6369.91
= 1.55 times
Previous Year = 8014.37
5883.92
= 1.36 times
Comments:- This ratio is an activity ratio which shows the number of times goods purchased on credit basis and payments made to creditors. HIGHER the ratio is FAVOURABLE and vice versa.
Expense Ratio : Employee Benefit Expense Ratio × 100
Net Sales
Current Year = 90.41 × 100
7575.92
= 1.19 %
Previous Year = 72.44 × 100
6114.86
= 1.18 %
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Gross Profit Ratios :- Gross Profit ×100
Net sales
= Sales – COGS × 100
Net sales
Current year = 7575.92 – 353.18 ×100
7575.92
= 95.33%
Previous year = 6114.86-385.75 ×100
6114.86
= 93.69%
Comments : This ratio indicates the relationship between gross profit and net sales. It is
a profitability ratio which shows the efficiency of the company to earn trading surplus.
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CHAPTER 7
CONCLUSION
The study was conducted to study the performance of Axis Bank Ltd. It was found
that the schemes where the investors have chosen equity based fund the returns are directly
proportional to the stock market. However the debt based fund has shown increasing returns
over the time. They are neutral to the volatility shown by the stock market.
The survey showed that around 40% of the investors had invested in ULIP of ICICI
Prudential Life Insurance Co Ltd. The company’s brand image has captured the attention of
investors in Pune. The primary objective for investing in such plans was found to be capital
appreciation and children education. The investors found the allocation charges to be average
and the consequent returns also to be average. It was observed that the switch option was not
exercised by nearly half the investors. Thus, it can be said that the investors are not
monitoring their investment properly. The investors have to understand the working of ULIP
in a better way to maximize their returns.
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BIBLIOGRAPHY
http://economictimes.indiatimes.com/lic-housing-finance-ltd/stocks/companyid-
10823.cms
http://www.investopedia.com/terms/r/ratioanalysis.asp
http://en.wikipedia.org/wiki/Financial_ratio
http://www.demonstratingvalue.org/resources/financial-ratio-analysis
http://www.moneycontrol.com/financials/lichousingfinance/ratios/LIC
www.iciciprulife.com
www.bseindia.com
www.irda.org
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