Financial Statement Analysis

Financial Statement Analysis
EXECUTIVE SUMMARY
All business organization prepares financial statements after every financial year. The financial statements clearly indicate the financial position of the business concern. The published financial statements may of considerable interest to shareholders, trade organizations, business analyst and many others. Each of these groups may be interested in different aspects of the business concern according to their own purposes. The basis for financial planning, analysis and decision making is the financial information is needed to predict, compare and evaluate the firms earning ability. It is also required to aid in economic decision making investment and financial decision making. The financial information of an enterprise is contained in the financial statement or accounting reports. The financial analysis is the process of analyzing the financial strengths and weaknesses or the firm by properly establishing the relationships between the items of the balance sheet and profit and loss account This report deals with the financial performance of State Bank of Mysore for the financial year 2005-2009. This report briefly explains the subject matter (financial statement analysis) of the study conducted. The basis for financial planning, analysis and decision making is the financial information. Financial information is needed to predict, compare and evaluate the firms earning ability. The objective of the study was to thoroughly analyze the companys performance and the financial position over the years. The balance sheet and the income statement of the company provide some extremely useful information to the extent that the balance sheet mirrors are financial position on a given date in terms of the structure of assets, liabilities, etc. The comparison of the above statements is therefore an important aid in determining the companys position and performance over a period of time.
JSS Academy of Technical Education, Bangalore
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The first task in the analysis is the selection of the information relevant to the decision under consideration from the total information contained in the financial statements. The second task is to arrange the information in a way to highlight comparison among different variables from balance sheet and income statement of different years. The final step is that of drawing inferences and conclusions. The best tool used for the purpose the finding out trends of an organizations growth over a period of time is comparative statement analysis, common size statement analysis and ratio analysis. The variables in the balance sheet provides considerable information which is eventually helpful for the organization as the trends can be studied and it forms the basis of drawing important inferences. Financial analysis is required for the day-to-day operations of the business. Financial statement analysis of State Bank of Mysore has been taken to analyze the financial aspects for the better understanding of the financial standing of the bank.
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1. INDUSTRY PROFILE
1.1. GENESIS OF BANKING IN INDIA
In India banking was originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which is formally, took over its responsibilities in 1935 from the Imperial Bank of India. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest banks in 1980. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks, 31 private banks and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by a rating agency ICRA Limited that, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
1.2. HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot get healthy economy. For the past three decades Indias banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans and cosmopolitans in India. In fact Indian banking system has reached even to the remote corners of the country. This is one of the reasons for Indias growth process. The governments regular policy for Indian bank since 1969 has paid rich dividend with the nationalization of 14 major private banks in India. An account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money at the time not long ago. Today, he has a choice. Days are gone when most efficient banks were transferring money from one branch to other in two
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days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the day. The first bank in India was established in 1786. From 1786 till today the journey of Indian Banking System can be segregated into three distinct phases. They are as, The early phase from 1786 to 1969 of Indian Banks. Nationalization of Indian banks and up to 1991 prior to Indian banking sector reforms. New phase of Indian Banking System with the advent of Indian Financial and Banking Sector Reforms after 1991.
PHASE 1
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bank of Bengal. The East India Company established Bank of Bengal in 1809, Bank of Bombay in 1840 and Bank of Madras in 1843 as independent units and called Presidency Banks. These three were amalgamated in 1920 and Imperial Bank of India was established and which started as private shareholders banks, mostly the Europeans shareholders. Allahabad Bank was established in 1865 and first time exclusively by Indians, Punjab National Bank was set up in 1894 with headquarters at Lahore. Between 1906 to 1913 Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India is came in 1935. During the first phase of growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with Banking Companies Act 1949, which was later charged to Banking Regulations Act 1949 as per Amending Act 1965. Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority.
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During those days the public was lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the postal department was comparatively safer. Moreover funds were largely given to traders.
PHASE 2
After independence Government took major steps in this Indian Banking Sector Reforms. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on large scale especially in rural and semi-urban areas. It forms State Bank of India to act as the principal agent of RBI and to handle banking transactions of the union and state governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 19 th July 1960. In the 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi, 14 major commercial banks in the country was nationalized. Second phase of nationalization Indian Banking Sector Reforms was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by government of India to regulate banking institutions in the country. 1949: Enactment of banking regulations act. 1955: Nationalization of State Bank of India. 1959 : Nationalization of SBI subsidiaries 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore.
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After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11000%. Banking in the sunshine of government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.
PHASE 3
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give satisfactory service to customers. Phone banking and Net banking are introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macro economics as other East Asian companies suffered. This is all due to flexible exchange rate regime, the foreign reserves are high, the capital accounts are not yet fully convertible, and banks and their customers have limited foreign exchange exposure.
1.3. VISION OF BANKS IN INDIA The banking scenario in India has already gained all the momentum, with the domestic and international banks gathering pace. The focus of all banks in India has shifted their approach to cost, determined by revenue minus profit. This means that all the resources should be used efficiently to better the productivity and ensure the win-win situation. To survive in the long run, it is essential to focus on cost saving. Previously, banks focused on the revenue model which is equal to cost plus profit. Post the banking reforms, banks shifted their approach to the profit model, which meant that the bank aimed at higher profit maximization.
JSS Academy of Technical Education, Bangalore Page 6
1.4. STRUCTURE OF INDIAN BANKING SYSTEM:
Reserve Bank of India
Scheduled Banks
Non-Scheduled Banks
State Co-operative Banks
Commercial banks
Central Cooperative Banks and primary credit societies
Commercial Banks
Indian Banks
Foreign Banks
Public Sector Banks
Private Sector Banks
State Bank of India and its subsidiaries
Other Nationalized Banks
Regional Rural Banks
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1.5. NATURE OF BANKING INDUSTRY

Banks safeguard money and provide loans, credit and payment services such as checking accounts, debit cards and cashier checks. Banks also may offer investment and insurance products. As a variety of models for cooperation and integration among finance industries emerged, some of the traditional distinctions between banks, insurance companies and securities firms have diminished. In spite of these changes banks continue to maintain and perform their primary role- accepting deposits and lending money. The business of banking consists In receiving deposits of money on which interest may or may not be allowed; In making advances of money, principally in the way of discounting notes; In effecting the transmission of money from one place to another. This is true of the ordinary banks of deposit and discount, both State and National.
1.6. EMPLOYMENT IN BANKING INDUSTRY

The Banking industry employed about 1.8 million wage and salary workers in 2008. About 74% jobs were in commercial banks; the remainder was concentrated in savings institutions and credit unions. In 2008, about 85% of establishments in banking employed fewer than 20 workers. However, these small establishments, mostly bank branch offices, employed 38% of all employees. Banks are found everywhere in the united states, but most bank employees work in heavily populated states such as New York, California, Illinois, North Carolina, Pennsylvania and Texas.
1.7. FOCUS OF BANKS IN INDIA

The Banking Industry is slated for growth in future with a more qualitative rather than quantitative approach. The total assets of all commercial banks by end-march 2010 is projected to touch Rs 40, 90,000 crore. This is going to comprise around 65% of GDP at current market prices as compared to 67% in 2002-2003. The Banks assets estimated to
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grow at an annual composite rate of growth of 13.4% during the rest of the decade as against 16.7% between 1994-95 and 2002-03. Barring the asset side, on the liability perspective, there will be huge additions to the capital base and reserves. People will rely more on borrowed funds, pace of deposit growth slowing down side by side. However, advances and investments would not see a healthy growth rate.
1.8. CONSOLIDATION OF BANKS IN INDIA

India would see a large number of global banks controlling huge stakes of the banking entities in the country. The overseas banking units would bring along with it capital, technology, and management skills. This would lead to higher competition in the banking frontier and ensure greater efficiency. The FDI norms in the banking sector would give more leverage to the Indian banks. Thus, a consolidation phase in the banking industry in India is expected in the near future with mergers and acquisitions gathering more pace. One might also see mergers between public sector banks or public sector banks and private banks. Credit cards, insurance are the next best strategic places where alliances can be formed.
1.9. FUTURE CHALLENGES OF BANKS IN INDIA

The Indian banks are hopeful of becoming a global brand as they are the major source of financial sector revenue and profit growth. The financial service penetration India continues to be healthy, thus the banking industry is also not far behind. As result of this, the profit for the Indian banking industry will surely surge ahead. The profit pool of the Indian Banking Industry is probable to augment from US$ 4.8 billion in 2005 to US$ 20 billion in 2010 and further to US$ 40 billion by 2015. This growth and expansion pace would be driven by the chunk of middle class population. The increase in number of private banks, the domestic credit market of India is estimated to grow from US$ 0.4 trillion in 2004 to US$ 23 trillion by 2050.
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2. COMPANY PROFILE
2.1. BACKGROUND AND INCEPTION OF STATE BANK OF MYSORE
State Bank of Mysore is established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Govt. of Mysore, at the instance of the banking committee headed by the great engineer-statesman, Late Dr. Sir M Visvesvaraya. Subsequently, in March 1960 the bank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares. The Banks shares are listed in Bangalore, Chennai, and Mumbai Stock Exchanges. The bank has regional offices in Bangalore, Mysore, Mangalore, Mandya, Hassan, Shimoga, Davanagere, Bellary, Tumkur, Kolar, Chennai, Coimbatore, Hyderabad, Mumbai and New Delhi. The banks turnover in the year 2008-09 was around US$10 billion and profit about US$ 65 million.
MILESTONES OF STATE BANK OF MYSORE

1913 - The Bank was established as Bank Of Mysore Ltd on the 19th may and commenced its business on the 2nd October 1913, under the patronage of his highness of the Maharaja of Mysore, with an authorized capital of Rs.20 lakhs. 1953 During the year, the bank was appointed as an agent of the Reserve Bank of India to conduct Government Business and Treasury Operations. 1959 The Bank was constituted as State Bank of Mysore as a subsidiary of State Bank of India, under State Bank of India (subsidiary banks) act. 1959 enacted through an act of parliament (act no.38 of 1959). The Bank has formulated schemes for financing coffee planters/coffee traders against coffee curers certificate, financing coffee traders, coffee exporters and coffee curers who also engage in trading. State Bank of Mysore has various deposit schemes to cater to the requirements of its customers.
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The Bank also actively participated in all Government sponsored schemes and contributed its share of financial assistance or the economically weaker sections through DIR, IRDP, Prime Ministers Rojgar Yojna and SUME schemes. The Bank has sponsored two Regional Rural Banks, Cauvery Grameena Bank and Kalpataru ameena Bank which have between them 202 branches for the growth of agriculture and rural industries. The Bank, as part of State Bank Group has been engaged in financing SSI since 1960 and introduced the concept need based rather than security oriented finance and entrepreneur scheme under which technically qualified persons were financed the entire requirement up to Rs. 2 lakhs. The Bank has 3 specialized SSI branches to assist SSI units and proposes to establish 3 more such SSI branches shortly. The Bank has correspondent and agency arrangements all over the world and offers spot services in 18 major approved currencies. The Banks computerized dealing room is equipped with state-of-the-art information network for excellent services to the banks customers. The Bank also proposed to open 21 NRI service centres to specially cater to the requirements of NRI customers. State Bank of Mysore handles a significant part of the day-to-day banking business of both the state and central governments in the state of Karnataka and is a banker to various public sector undertakings in the various sectors of the economy. The Bank has been actively participating in welfare banking needs of the public through its community services. The Bank has set up social circles, a voluntary group of employees to conduct the community service activities, at various centers. The Bank is the proud recipient of the Rolling Trophy from the Red Cross Society of Karnataka for 17 years in succession, till date, for having mobilized the maximum number of blood donors each year, among banking institutions. The Bank has installed a Main Frame Computer in its Head Office which provides a useful information system to the Management and Mini Computers at the Zonal Offices.
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The Bank is the member of the Society for Worldwide Inter Bank Financial Telecommunication (SWIFT) which was established to offer cost effective and transmission of financial messages globally, 2 branches of the Bank are presently covers the scheme and an additional 15 branches are proposed to be covered under SWIFT shortly. 1992 The State Government has also taken up vigorously ASHRAYA, a new housing scheme for the weaker sections and VISHWA, a new rural and cottage industry scheme. A new programme called AKSHAYA has also been launched to help children in primary education. The Konkan Railway Project and the new Mangalore Port Project are also progressing satisfactorily. The Bank has also been assisting small scale industries by offering technology and financial consultancy services to the units in its books so as to enable them to overcome the problems of technological obsolescence, marketing, management etc. The Bank has been given a special annual award by the Karnataka unit of the Indian Red Cross Society for the fourteenth time for having held the most number of voluntary blood donation camps. 1994 Several important measures has been introduced in the busy season credit policy of November 1993 and the slack season credit policy of may 1994, announced by Reserve Bank of India. The Bank extended rehabilitation finance to 54 such units during the year under review. The Banks STREE SHAKTI PACKAGE designed exclusively for women. The Bank also proposes to introduce Automated Teller Machine (ATM) and Electronic Fund Transfer facility during the next year as a measure of offering state of the art banking services to its customers. 2000 Mr.M.Sitarama Murty has been appointed as the Managing Director of the Bank. CRISIL has reaffirmed the a+ and p1+ rating assigned to the bond issue and the CD programme of the bank. 2001 The State Bank of Mysore has opened a foreign exchange cell at its Hirehally Industrial Estate branch at Tumkur District to enable small scale industrialists to manage their foreign exchange transactions.
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The Bank has closed its issue of unsecured non-convertible debentures after raising the target of Rs.60 crore. 2002 Enters the market of with a coupon of 6.4% per annum for its Tier-2 capital bonds issue of Rs.60 crore on a private placement basis. Slashes interest rate on domestic term deposits and on NRE deposits by 25-50 basis points. 2003 Considers new method of appraisal for lending to the agricultural sector more on the lines of industrial credit given to trade and commerce. Declared a dividend of 40% on equity capital for the year ended. Ties up with the HMT ltd and launches SBM-HMT agri farm scheme, to promote agricultural mechanization in south India. Maruti Udyog forges alliances with SBM to offer car finance. Slashes floating home loan rates and the new loans are as follows; for maturities up to 5 years-the rates would be 8%, for maturities up to 10 years-the rates would be 8.75% on a floating rate basis and above 10 years-9.25%. The fixed rate housing loan remained unchanged. Farm lending rate up to Rs.50000 was lowered to 9%. Inaugurated two branches in Hyderabad. 2004 SBM joins hands with LTJD for tractor financing. State Bank of Mysore has informed that Shri.M.Sitaram Murty, Managing Director of the Bank retired from the services on December 31, 2003 on attaining super annuation. Mr.Vijayanand assumes charges as Managing Director of the Bank from 01/03/2004. State Bank of Mysore joined the Real Time Gross Settlement System (RTGS) network that facilitates inter-bank funds settlement on 22 July. 2005 SBM unveils new single window system. 2006 Mr.P.P.Pattanayak has assumed charge as Managing Director of the State Bank of Mysore. Mr.Pattanayak was earlier Deputy Managing Director (DMD) and Chief Credit Officer of the State Bank of India, Mumbai.
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2.2. NATURE OF BUSINESS CARRIED

Sate Bank of Mysore is carried banking business. The main characteristics of this business are as follows; The acceptance of deposits or installment savings etc. The lending of funds or the discounting of bills. Exchange transactions. The guaranteeing of debt or the acceptance of bills. The handling of money or other matters related to money of the national government, local bodies, or corporations.
2.3. VISION, MISSION AND QUALITY POLICY

VISION AND MISSION STATEMENT A premier Commercial Bank in Karnataka, with All India presence, committed to provide consistently superior and personalized customer service backed by employee pride and will to excel, earn progressively high returns for shareholders and be responsible corporate citizen contributing to the well being of the society. QUALITY POLICY We always attempt to provide and create an environment for the participants to experience and learn Training Philosophy Training in the State Bank of Mysore is a proactive, planned and continuous process as an integral part of organization development. It seeks to impart knowledge, improve skills and reorient attitudes for individual growth and organizational effectiveness.
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2.4. SERVICES PROFILE

Deposits State Bank of Mysore introduces many deposit schemes. They are, Mybank Akshaya-Recurring Deposit Scheme (with flexibility) Ananya Deposit Scheme Multi Option Deposit Scheme Long Term Floating Deposit Account Saving Bank Account Term Deposits Reinvestment Deposits Mystar Deposit Scheme Power Money Recurring Deposits Cash Certificate Grameena Thevani Yojana Perennial Income Plan Super Savings Package Bhagyalakshmi Deposits Harsha Deposits
Personal Banking Schemes Personal Loan Mortgage Loan Housing Loan Happy Home Gnanamitra Education Loan Loan for purchase of residential site/plot MYBANK ADHYAPAK-(to teachers) MYBANK ARAKSHAK-(to police personnel) MYBANK UTSAV-(to celebrate festival)
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SBM car loan scheme SANJEEVINI-product scheme for high cost treatment MYBANK SAMACHAR-(for journalists) GAGAN MITRA-(for pilot and air hostesses training) Mybank udyogi gnanamitra-(for employed persons to undertake higher studies)
C & I Banking Schemes (Commercial and Institutional) Scheme for trades- Liberalized trade finance Handy Loans Scheme Corporate Loan Current Account Plus Rent Plus SBM Paryatan Plus SBM School Plus Fair Practices Code for Lenders etc
Agri Banking Schemes Kisan Gold Card Scheme Kisan Credit Card Scheme Gramin Bandaran Yojana Scheme for combined Harvesters Kisan Chakra Scheme Agriclinics and agri business centres Solar Photo Voltaic Pumpsets Scheme for development of Vanilla Produce Marketing Loan Drip Irrigation Sprinkler Irrigation Swarna mitra Scheme My Krishigen General Credit Card etc.
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SME Banking Schemes(Small and Micro Enterprises) Credit Guarantee Fund Trust Scheme Loans to SMEs Laghu Udyami Credit Card Scheme Stree Shakti Package for women entrepreneurs Mybank Sanchari Suvidha Annapurna Mybank Doctor Flexi(SSI) term loan SME Credit Plus Green Auto Swarojgar Credit Card Scheme Mybank Professional Plus Artisans Credit Card etc
ATM Services NRI Services NRI Deposits Proforma for foreign currency remittances Account Opening Form for NRIs Interest rates on NRE Deposits and schemes Money Transfer to India through Western Union Remittances to India-Global Link Services etc.
Internet Banking Real Time Gross Settlement(RTGS) Transactions National Electronic Fund Transfer (NEFT)
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2.5. AREA OF OPERATION

As the Bank is working in all area of the nation, the State Bank of Mysore is achieved national level operation. The State Bank of Mysore branches In Bangalore are- Dr. Ambedkar Veedhi branch, M.G.Road branch, Jayanagar branch, Malleswaram branch, L.C.Road branch, Basavaraja Market branch, Industrial Finance branch, Bangalore main branch, R.M.Vilas branch, SSI Peenya industrial area branch. And Mysore main branch, market branch and CFTRI branch in Mysore. Davangere branch in Davangere. JVSL branch in Bellary district. Bhadravathi branch in shimoga. Mangalore branch in Mangalore. Tirupur branch in Tamil Nadu. Secunderabad branch in Secunderabad. T.Nagar branch, Industrial Finance branch and Chennai main branch in Chennai. Bentinck street branch, Shakespeare sarani branch, Rash Behari avenue branch in Calcutta. Nehru place branch, Karol bagh branch, Nayabazaar branch, Industrial Finance branch, Connaught place branch and Punjabi bagh branch in New Delhi. Khar branch and Mumbai main branch in Mumbai. Abids branch and Industrial Finance branch in
Hyderabad. Jaipur branch in Jaipur. Avinashi branch in Coimbatore. Ahmadabad branch in Ahmedabad. Haritha branch in Dharmapuri district. Vishakhapatnam branch in
Vishakhapatnam. Indore branch and Surat branch in Indore. Branch Network and ATMs. The bank has widespread network of 682 branches as on 30.09.2009. and 20 extension counters spread all over India, which includes 5 specialized SSI branches, 4 industrial finance branches, 3 corporate accounts branches, 4 specialized personal banking branches, 10 agricultural development branches, 3 treasury branches, 1 asset recovery branch and 8 service branches, offering wide range of services to the customers. The bank has regional offices in Bangalore, Mysore, Mangalore, Mandya, Hassan, Shimoga, Davanagere, Bellary, Tumkur, Kolar, Chennai, Coimbatore, Hyderabad, Mumbai and New Delhi.
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2.6. OWNERSHIP PATTERN

State Bank of Mysore is established in the year 1913 as Bank of Mysore Ltd. And in the year 1960 the bank became an Associate of State Bank of India. Presently the share holding pattern of State Bank of Mysore is: State Bank of India holds 92.33% of shares. Remaining 7.67% of shares are holds by public.
2.7. COMPETITORS INFORMATION

Main competitors of the State Bank of Mysore are; Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank, Union Bank, IDBI Bank, Indian Bank, Oriental Bank and State Allahabad Bank. Other competitors are, Axis Bank American Express Bank ltd Andhra Bank Corporation Bank Global Trust Bank ltd
Centurion Bank Citi ltd BankYES YES Bank of India etc. Dena Bank HDFC Bank India Federal Bank India
Hongkong Shanghai Banking ICICI Bank ltd Corporation Ltd
Indian Overseas Bank
Industrial Development Bank ING Vysya Bank ltd of India
JP Morgan Chase Bank Standard Chartered Bank
Karnataka Bank State Bank of Indore
Punjab and Sind Bank State Bank of Hyderabad

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State Bank of Patiala State Bank of Travancore State Bank of Bikaner and Jaipur Export and Import Bank Syndicate Bank of India SBI Commercial and
international United Bank of India UCO Bank State bank of Mysore
2.8. INFRASTRUCTURAL FACILITIES

The State Bank of Mysore, Rajarajeshwari Nagar Branch is having one big hall and one store room. And the hall encompassed by one manager room, four cash cabins, one computer room and one ATM room is attached to this building. Totally twelve computers are installed in the branch including server. Banks building covers the area of 1400 sq.ft. Quarters or rent facilities are to be given by head office to the employees working under officers level. Training facilities are also to be given by head office to the new employees.
2.9. ACHIEVEMENT/AWARDS
Achievements in the area of information technology Core banking solution State Bank of Mysore boasts of being the first ever Karnataka-based Bank to have fully networked braches. The Bank is included in Core Banking Solution from 31 December 2005. Within one year, the Bank converted all its branches to Core Banking, in order to make it more convenient for its customers, who can now bank with State Bank of Mysore, anytime, anywhere in India. The Bank is fully on core banking platform since 1st January 2006. The software provides for Anywhere Banking, Internet Banking, ATMs, Real Time Gross Settlement, and National Electronic Fund Transfer etc. The new functionalities introduced under the CBS are: State Bank Group Payment Scheme- Facilitating transfer of funds between customers accounts across state bank group branches instantaneously.
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SSMS alert- Customers get SMS alert for any transaction which exceeds the threshold limit and for balance going for below threshold limit and Statement through mailCustomers get statement through mail at prescribed frequencies as per their request. Automated Teller Machines The customers of State Bank of Mysore are now provided easy access to money through more than 7500 State Bank Group ATMs and ATMs of UTI Bank, HDFC Bank, Indian Bank, Andhra Bank, Punjab National Bank, Corporation Bank and Dena Bank, Union Bank of India, Bank of India, UCO Bank, Canara Bank, IndusInd Bank etc. The ATM availability is around 92.5%. The average transactions in a month are over 27 lacs and cash disbursed exceeds of Rs. 463 crores. The daily average hit per ATM is 282 as on March 2008, compared to 254 for March 2007. Human Resources The bank has dedicated workforce of 9720 employees consisting of 3169 supervisory staff, 6551 non-supervisory staff (as on 31.03.2008). The skill and competence of the employees have been kept updated to meet the requirement of customers keeping in view the changes in the environment. Financial Profile The paid capital of the bank is Rs. 360 million as on 31.03.2009 out of which State Bank of India holds 92.33%. The networth of the bank as on 31.03.2009 is 1619.44 crores and the Bank has achieved a capital adequacy ratio of 12.99% as at the end of March 2009. The Bank has an enviable track record of earning profits continuously and uninterrupted payment of dividend since its inception in 1913. The Bank earned a net profit of Rs.336.91 crores for the year ended march 2009 and earning per share is at Rs.94 In the year 2004-05, The State Bank of Mysore Rajarajeshwari Nagar branch achieved as Best Branch Award
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2.10. WORK FLOW MODEL

The work flows from the top management to customers in the following manner.
Corporate Center
Top Management (Policy framework)
Local Head Offices

(Implementation and follow up)
Zonal Offices
Regional Offices
Branches
(Extension)
Customer
2.11. FUTURE GROWTH AND PROSPECTS.

The Branch has an aspect to become a big branch in that area. The State Bank of Mysore is going to merge with State Bank of India shortly, so that it will become a global bank.
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3. MCKENSYS 7S FRAMEWORK
According to McKensys seven elements are distinguished as hard ss and soft ss. The hard elements are feasible and easy to identify. They can be found in st rategy statements, corporate plans, organization charts and documentation. The soft elements are hardly feasible. They are difficult to describe since capabilities, values, and elements of corporate culture are continuously developing and changing. McKinseys 7S model provides a useful framework for reviewing the impact of change. It also provides a useful framework for analyzing the strategic attributes of an organization. Strategy, Structure and Systems can be considered the hardware of success whilst style, staff, skills and shared values can be seen as the usually more successful at the implementation of strategy. There is no particular order to the 7s; each of the 7s is elaborated as below: AN ORGANISATIONS 7 Ss
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1. STRATEGY
Strategy is determination of basic long term goals and objectives of an organization and adoption of courses of action and the allocation of resources for carrying out these goals. The bank is taking many initiatives to take advantage of the opportunities as well as to meet the challenges the banks initiatives in the area of technology, product, marketing, HR development will enhance its competitive capabilities. Further the bank has also drawn an ambitious drawn expansion programmed to increase its client base and business volumes. The bank has also recently appointed a constant guide it in implementation of an enterprise wide integrated risk management system in the bank. All these efforts will help the bank to improve upon the performance levels in the coming years. The continued good performance of the Indian economy promises increasing opportunities for business growth. The new generation private sector banks have become active in competition. The foreign banks are likely to increase their operations. This scenario through challenging is leading to improvements in the functioning of the public sector banks as well they are now in the process of improving their capabilities in information technology product innovation and business process reengineering are also gaining the centre stage with competition driving down the interest spread trust of business volumes, non interest income recovery and cost control are likely to increase further. Technology would further influence customer service delivery of products and risk management particles. In order to confirm to the global best produces in the area of risk management, Banks would be increasingly focusing more on new types of risks, likes operational risks. And also to achieve all goals or objectives the Bank is adopted and following main course of action is SERVICE. Service is only the finest way to achieve banks goals because all the activities of the bank are totally based on service providing by the bankers to the customers.
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2. STRUCTURE
Structure is relatively company arrangements and relationships. It includes reporting relationships and how a company member is to communicate with other members. Functional excellence can only be achieved if there is sufficient integrity and focus within each business unit and structuring an organization is therefore not an easy task. In order to understand how an organization merely works, one has to look beyond the structure as drawn out on a piece of paper. ORGANISATIONAL SETUP The Chairman of State Bank of India, Shri.O.P.Bhat is the Chairman of State Bank of Mysore. The Managing Director is assisted by the chief general manager and 6 general managers.
Chairman Sri.O.P.Bhat
Managing Director Mr.Dilip Mavinkurve
Chief General manager-Mr. A Ramakrishnan
General Manager (Operatio ns) A K Basu
General Manager (P&D) Mr. Sebastian Chacko
General Manager( C&I)Mr. S Vijaykum ar
General Manager (Treasury) -Mr. Vijaykuma r
General Manager (Vig & Inspn)-T Thomas Mathew
General Manager (Technolo gy)M.K.Nanj unda
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STRUCTURE OF THE BRANCH The State Bank of Mysore Rajarajeshwari Nagar Branch Manager is C.S.Udayakumar; Assistant Manager is S.R.Anandkumar, Special assistant - M.R.Bhagya, Cashier B.N.Ugraiah, Single Window Operator P.Neelavathamma, Computer OperatorA.N.Mohanshankar and Seema S Nayak, Peon H.S.Nanjappa and Sweeper R.Nalanda bai.
3. SYSTEM
Systems is refers to all rules, regulations and procedures both formal and informal that compliments company structure. Systems do not only refer to hard copy reports and procedures but also informal mechanisms such as meeting and conflict management routines. It is important that
systems emphasize, key themes, but at the same time it should permit dissection and exception systems are powerful influences of behaviors of State Bank of Mysore. Banks systems include: The negotiated dealing systems (NDS) Centralized funds management system (CFMS). Structured financial messaging systems (SFMS) Real time group settlement systems (RTGS) Theses are corporate email solutions for strengthening messaging network, using INFINET infrastructure of institute for development and research in banking technology has been implemented at all branches and offices of the bank.
4. STAFF
Staff refers to the number and type of personnel within the organization. The total staff strength of the bank as at the end of March, 2008 stood at 9720 as against 9666 as at the end of March, 2007. The staff strength comprised of 3169 officers, 4406 clerical staff and 2145 subordinate staff. Of these 1015 is ex-defense personnel, 110 belonging to physically handicapped category and 538 belong to minority communities.
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There are two main grades are specified by State Bank of Mysore- Clerical grade and Management grade. Clerical grade includes-Peon, Computer Operator, Single window operator, Special assistant and Head cashier or cashier officer. Management grade coversAssistant Manager, Deputy Manager, Manager, Chief Manager, Assistant General Manager, Deputy General Manager, General Manager, Chief General Manager, Managing Director.
5. STYLE
Style basically means managements attitude forwards its employees, customers and shareholders. The style of the banks management becomes evident through the patterns of actions taken by members of the top management team over a period of time. The management style followed in State Bank of Mysore is participative in nature and in mixture of self-management for customer facing activities and task management for organizational activities. If staff is to treat customers as individuals then they themselves will need to be managed as individuals. This suggests a self management style. However, organizational activities like making strategic decisions probably require a task management style. The challenge for management is to mix the styles as appropriate without confusing staff.
6. SKILL
Skills are the distinctive capability of personnel of the organization as a whole. Skills refer to the fact that employees have the skills needed to carry out the companys strategy. For staff to develop appropriate new skills requires a learning environment. Training and development ensuring people know how to do their jobs and stay up to date with the latest techniques.
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State Bank of Mysore being a service organization requires its employees to possess business and financial management skills and interpersonal skills and group awareness and networking skill. The Bank is endeavoring to update and upgrade the skills of its
employees to face the challenges of present day banking. At the entry level one should pass banking exam which will be conducted by state bank of India group. Management grade requires minimum graduation level education and clerical grade requires minimum PUC level education.
7. SHARED VALUE
The fundamental values that are shared in the organization and serve as guiding principles. Important shared values are the central believes and attitudes. The framework suggests that, there are multiple factors that influence a companys ability to change and that because of interconnectedness of variables; it would be difficult to make significant progress in one area without making progress in other as well. Central belief, attitude of the Bank totally based on customers. They are; Bankers need to listen all customers voice. They need to work hard to satisfy customers. They try to magnetize more customers by offering attractive interest rates. State Bank of Mysore Mission Statement A premier Commercial Bank in Karnataka, with All India presence, committed to provide consistently superior and personalized customer service backed by employee pride and will to excel, earn progressively high returns for shareholders and be responsible corporate citizen contributing to the well being of the society.
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5. SWOT ANALYSIS
SWOT matrix conceptual frame work for a systematic analysis that facilitates matching the external threats and opportunities with internal weaknesses and strength of the organization. Based on the competencies and shortcomings, strength, weakness, opportunity and threat analysis is done for State Bank of Mysore which is presented below, STRENGTHS This branch is a well established branch in rajarajeshwari nagar area. It was opened in the year 2000, and it is only the second bank opened in this place. Reputation of good services. Experienced workforce. Strong capital base. WEAKNESSES There are fourteen different banks already established in surrounding of this Bank. It is not a business area. In this area most of people living are middle class. Poor Infrastructure. Smaller credit card base.
OPPORTUNITIES
THREATS
Higher saving oriented peoples There are fourteen different banks place. Changing spending habits. Growing market for loans. Capturing various banking service before other nationalized bank and MNC banks make a foray into it. already established in surrounding of this Bank. Deregulation creating higher customer expectations convenience Entering of private banks to the industry. in terms of price
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6. ANALYSIS OF FINANCIAL STATEMENT

Financial statements or financial reports are formal records of the financial activities of a business, person, or other entity. Financial statements provide an overview of a business or person's financial condition in both short and long term. All the relevant financial information of a business enterprise, presented in a structured manner and in a form easy to understand is called the financial statements. COMPARATIVE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST MARCH, 2008-2009 (In Rs.Cr) Particulars March 2008 Capital and liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions 36.00 36.00 0.00 0.00 1341.81 0.00 1377.81 27462.40 1731.53 29193.93 2497.96 36.00 36.00 0.00 0.00 1635.11 599.93 2271.04 32915.77 2762.08 35677.85 2536.89 0.00 0.00 0.00 0.00 293.3 599.93 893.23 5453.37 1030.55 6483.92 38.93 64.83 19.86 59.52 22.21 1.56 0.00 0.00 0.00 0.00 21.86 March 2009 Absolute Change %Change
Total Liabilities Assets Cash & Balances with RBI
33069.70
40485.78
7416.08
22.43
2661.55
1735.05 407.66
-926.5 163.12
-34.8 66.70
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Balance with Banks, Money at 244.54

Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 21027.15 8402.76 406.56 283.57 122.99 0.00 610.72 33069.71 12871.72 2888.47 3827.26 25616.05 11377.96 1060.28 328.91 731.37 0.00 617.70 40485.79 17073.93 2935.50 464.20 6.98 7416.08 4202.18 47.03 -3363.06 1.14 22.42 32.65 1.63 -87.87 4588.9 2975.2 653.72 45.34 608.38 21.82 35.41 160.79 15.98 494.66
ANALYSIS AND INTERPRETATION: Share capital remains constant. Reserves and Surplus is 21.86% increase in 2008-2009 o This indicates that profitability of the concern is good. There is also increase in deposits of the bank: o 19.86% increase in 2008-2009 Borrowing is increase by 59.52%, it shows bank increase their liability. Cash and Bank balance with RBI have decreased by 34.8%, which is a not good indication as it has decreased that liquidity position of the bank. Investment has increased by 35.41%. The increase in investment is appreciable. Advances have increased by 21.82%. This indicates that bank is doing quite well, as it is lending huge advances to its customer. These in turn result in higher interests to the bank on the advances lent. Fixed asset has highly increased by 494.66%. To conclude, the financial position of the Bank seems to be good.
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COMPARATIVE PROFIT AND LOSS ACCOUNT OF STATE BANK OF MYSORE FOR THE YEAR ENDED 2008-2009 (In Rs.Cr.) Particulars March 2008 Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalized Operating Expenses Provisions & Contingencies Total Expenses 1732.10 337.56 106.90 57.78 363.34 0.00 638.42 227.16 2597.68 2409.02 384.55 175.23 42.60 379.32 0.00 719.25 262.45 3390.72 80.83 35.29 793.04 12.66 15.54 30.53 676.92 46.99 68.33 -15.18 15.98 39.08 13.92 63.92 -26.27 4.40 2494.40 422.13 2916.53 3247.28 480.36 3727.64 752.88 58.23 810.71 30.18 13.79 27.80 March 2009 Absolute change %Change
Net Profit for the Year Extraordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Earnings Per Share (Rs)
318.85 0.00 0.00 318.85 0.00 36.00 6.12
336.91 0.00 0.00 336.91 0.00 36.00 6.12
18.06
5.66
18.06
5.66
885.71
93.59
-792.12
-89.43
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Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves 276.74 -0.01 294.80 -0.01 42.12 18.06 6.53 100.00 3827.26 100.00 464.20 -3363.06 -87.87
Proposed Dividend/Transfer to 42.12 Govt Balance c/f to Balance Sheet Total 0.00 318.85
0.00 336.91 18.06 5.66
ANALYSIS AND INTERPRETATION:

The interest earned is increased by 30.18%. This fact indicates that the bank is financially sound. Other income has increased by 13.79%. The Interest Expended has increased by 39.08%. This indicates that there is gradual increase in the deposits from the customers which is a good sign as one of their main businesses is to accept deposits from customers. The Operating expense has increased by 12.66%. This Operating Expenses in turn reduces the net profit. Therefore, the bank should try to reduce its expenses as much as possible to increases its net profit. Net Profit has decreased by 5.66%. To conclude, the operating efficiency of the bank is quite satisfactory.
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7. LEARNING EXPERIENCE
MBA course is complete only when it comprises both classroom as well as industrial exposure. Summer project undertaken at State Bank of Mysore gave an opportunity to learn the practical aspects of the theoretical concepts learnt in the syllabus. The study was greatly educative. I came to know about detail study of banking industry profile, company profile, area of operation, work flow model and SWOT of State Bank of Mysore. I have learned how the McKinseys model applied in State Bank of Mysore and under this I have studied in depth about all 7s and their interrelationships. This project helped me to know how nationalized bank works and which are measures have been adopted to increase the efficiency and effectiveness of the bank. And also I realized that the importance of time in the organization and how the employees follow the rules and regulations of the bank. By this project I came to know that financial position of the bank and which are the mechanism using by the bank to improve the profitability. Financial statement analysis like comparative statement, common size statement and ratio analysis used to analyze balance sheet and profit & loss account of five consecutive years, thought me how practically banks are applying these tools to know the result and to build a future plan. Finally this project helped me a lot in studying various functions of State Bank of Mysore and gave an opportunity to compare the theoretical study to practical experiences.
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1. GENERAL INTRODUCTION
1.1.
TITLE OF THE PROJECT

A report on the study of Financial Statement Analysis at State Bank of Mysore, rajajareshwary nagar branch
1.2.
STATEMENT OF THE PROBLEM

The study has been conducted to an assessment of the viability, stability and
profitability of the bank business. It mainly concentrates on understanding and analyzing the various transactions of the bank which were carried out to attain its main objectives, to evaluate the growth achieved in terms of finance and the problems involved in various decisions making with regard to financing and direct operations.
1.3.
OBJECTIVES OF THE STUDY Primary objective:

The main objective of this study is to understand and ascertain the financial performance of State Bank of Mysore and to analyze that by using common size statement and ratio analysis.
Secondary objectives :
To study the industry profile of the banking sector and the company profile of the state bank of mysore. To know strengths, weaknesses, opportunities and threats of the bank. To know the liquidity position of the bank. To analyze the profitability of the bank.
1.4.
SCOPE OF THE STUDY

The scope of the study includes study and analysis of financial statements for the past five consecutive years. The current study is undertaken for the purpose of
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knowing the financial performance of the bank. The study focuses attention mainly on the level of financial performance carried out during the period of 1st January 2010 to 10th March 2010.
1.5. METHODOLOGY
The research design of this study is an analytical research i.e. it is conducted for achieving a certain purpose. The main purpose of this study is the analysis of financial statements and to know the profitability position of the Bank. Data or Information required for the study was collected from annual reports and balance sheet and profit & loss account of recent five years and for the study of the research I have used the following tools to find out interpretation: Comparative statements. Common size statements. Ratio analysis.
SOURCES OF DATA The study has been undertaken by using both primary and secondary data. Primary Data Data originally collected for investigation are known as primary data. Such data are original in character. Primary data may be obtained by applying any one of the following method; Direct personal interview. Indirect oral interview. Information from correspondents. Mailed questionnaire method. Schedules sent through enumerators. The primary data has been collected through direct personal interview, at the State Bank of Mysore, Rajarajeshwari Nagar branch, Bangalore, from the officials.
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Secondary Data Data which are not originally collected for investigation are known as secondary data. Such data are not original in character. Secondary data may be obtained by applying any one of the following methods: Published sources. Unpublished sources. The data used for the project is secondary data which has been collected from the banks annual reports, books, the related websites and other sources.
1.6.
LIMITATIONS OF THE STUDY
In depth study was not possible because of limited time duration however sufficient data was collected to do justice to the report. All the information could not be elicited because of its confidential nature. Since secondary data is used for analysis, it suffers from the limitations of Secondary data.
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2. THEORETICAL CONCEPTS OF THE STUDY
2.1.
MEANING OF FINANCIAL STATEMENTS
A financial statement is a collection of data organized according to logical and consistent accounting procedures. Its purpose is to covey an understanding of some
financial aspect of a business firm. It may show a position at a moment in time, as in the case of a balance sheet or may reveal a series of activities over a given period of time, as in the case of an income statement. Financial statements can be referred to as representation of the financial status of a company in a systematically documented form. There are different types of financial statements. Financial statements are required to be audited by authentic, efficient audit firms to avoid manipulation of numbers. Statements are usually audited by the accounting firms after a thorough study of the company records. The accounting and the audit firms make sure that the company is obeying and operating as per norms laid down by the Generally Accepted Accounting Principles or GAAP.
2.2.
TYPES OF FINANCIAL STATEMENT
Basically, there are four different types of financial statements. The different types of financial statements indicate the different activities occurring in a particular business house. Balance Sheet Income statement Statement of retained earnings Statement of cash flow or Cash flow statement Balance sheet: The balance sheet provides a snapshot of the business's assets, liabilities and owner's equity for a given time. It provides an insight into the financial status of a company at a particular time. The balance sheet, type of financial statement is different in comparison to the other types of financial statements.
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Income statements: It is known as the P&L statement or the Profit And Loss Statement. This statement, ascertains the profit and loss of any business. This can be again of two types: Single Step Income Statement Multi Step Income Statement Statements of Retained earnings: This financial statement denotes alterations in the title rights of equities in any business. Cash flow statement: This statement highlights flow of cash over a period of time. The cash flow may be from investment activities, operations or financing activities. The cash-flow statement is designed to convert the accrual basis of accounting used to prepare the income statement and balance sheet back to a cash basis.
2.3. PURPOSE OF FINANCIAL STATEMENTS

Financial statements may be used by the user for different purposes: Owners and managers require financial statements to make important business decisions that affect its continued operations. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial institutions use them to decide whether to grant a company with fresh working capital or extend debt securities such as a long-term bank loan or debentures to finance expansion and other significant expenditures. Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company. Media and the general public are also interested in financial statements for a variety of reasons.
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2.4.CHARACTERISTICS OF IDEAL FINANCIAL STATEMENTS.

The ideal financial statement should have the following characteristics: 1. Understandability 2. Relevance Materiality Timeliness
3. Reliability Faithful representation Substance over form Completeness
4. Comparability
2.5. MEANING OF FINANCIAL STATEMENTS ANALYSIS:

The term financial analysis also known as analysis and interpretation of financial statement, refers the process of determining financial strength and weakness of the firm by stabling strategic relationship between the items of balance sheet, profit and loss account and others operative data. Analyzing financial statement according to Metcalf and Titard is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance.
2.6. METHODS OF FINANCIAL ANALYSIS:

The analysis and interpretation of financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. An effort is made to use those devices which clearly analyze the position of the enterprise. The following methods of analysis are generally used. 1. Comparative statements 2. Trend analysis 3. Common size statements 4. Fund flow analysis 5. Cash flow analysis
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6. Ratio analysis 7. Cost volume profit analysis
1) COMPARATIVE STATEMENTS: The Comparative financial statements are statements of the financial position at different periods of time. The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods. Two financial statements (balance sheet and income statements) are prepared in comparative form for financial analysis purposes Comparative Balance sheet: The Comparative Balance sheet analysis is the study of the trend of the same items, group of items and computed items in two or more balance sheets of same business enterprise on different dates. Comparative Income statement: The income statement gives the results of the operations of a business. The Comparative Income statement gives an idea of progress of a business over a period of time. 2) TREND ANALYSIS: The financial statement may be analyzed by computing trends of series of information. This method determines the direction upwards or downwards and involves the computation of the percent relationship that each statement item bears to the same item in the base year. 3) COMMON SIZE STATEMENT: The common size statements, balance sheet and income statement are shown in analytical percentages. The figures are shown as percentage of total assets, total liabilities and total sales. The total assets are taken as 100 and different assets are expressed as a percent of the total similarly various liabilities. The analyst is able to assess the figures in relation to total values. Common size balance sheet A statement in which balance sheet items are expressed as the ratio of each asset to total assets and the ratio of each liability is expressed as ration of total liabilities is called Common size balance sheet.
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Common size income statement: The items in income statement can be shown as percentage of sales to show the
relation of each item to sale. A significant relationship can be established between items statement and volume of sales.
4) RATIO ANALYSIS: Meaning of Ratio: Ratio is a relationship between two figures expressed mathematically. Financial ratios provide numerical relationship between two relevant financial data. Financial ratios are calculated from the balance sheet and P&L account. The relationship can be either expressed as a percent or as a quotient. Ratio summarizes the data for easy understanding comparison and interpretation. Therefore, ratios can be classified into following three broad categories. 1) Liquidity ratios 2) Balance sheet ratios 3) Profit and loss account ratios 4) Profitability ratios These ratios are discussed below: 1) LIQUIDITY RATIOS: The terms Liquidity and short term solvency are used synonymously. Liquidity and short term solvency means ability of the business to pay its short term liabilities, liability to pay-off. Traditionally three ratios are used to highlight the business liquidity. These are current ratio, quick ratio and absolute liquid ratio. a) Current ratio= Current assets / Current liabilities b) Quick ratio= Quick assets / Quick liabilities c) Absolute liquid ratio = Absolute liquid assets / current liabilities
2) BALANCE SHEET RATIOS: The balance sheet ratios deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities. Both the items must, however, pertain to the same balance sheet.
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The various balance sheet ratios have been named as: 1) 2) 3) 4) 5) Debt-equity ratio = Long term debt / Shareholders fund Proprietary ratio = Shareholders fund / Total assets Fixed assets to Net worth ratio = Fixed assets / Net worth Current assets to Net worth ratio = Current assets / Net worth Fixed assets ratio = Fixed assets / Capital employed
3) PROFIT AND LOSS ACCOUNT RATIOS: These ratios deal with the relationship between two profit and loss account items, e.g., the ratio of gross profit to sales, or the ratio of net profit to sales. Both the items must, however, belong to the same profit and loss account.
4) PROFITABILITY RATIOS: The profitability ratios measure the profitability or the operational efficiency of the firm. This ratio reflects the final results of business operations. The various profitability ratios are: 1) Return on equity ratio = Net profit / Share capital 2) Earning per share ratio = Net profit available to shareholders / No. of equity shares. 3) Ratio of advance to deposits = Advances / Deposits 4) Return on Advance ratio = Net profit / Advance. 5) Return on Investments ratio = Net profit / Investments 6) Return on total assets ratio = Net profit / Total assets 7) Return on capital employed ratio = Net profit / Capital employed 8) Return on shareholders fund ratio = Net profit / Shareholders fund
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DATA ANALYSIS AND INTERPRETATION

COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST MARCH, 2005 AND 2006 (In Rs.Cr) Particulars March 2005 Amount Capital and liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 36.00 36.00 0.00 0.00 720.45 0.00 756.45 13585.17 319.58 13904.75 1891.43 16552.63 0.217 0.217 0.00 0.00 4.352 0.00 4.569 82.07 1.93 84.00 11.43 100.00 36.00 36.00 0.00 0.00 899.22 0.00 935.22 16368.75 582.22 16950.97 1451.26 19337.45 0.186 0.186 0.00 0.00 4.650 0.00 4.836 84.65 3.01 87.66 7.50 100.00 Percentage March 2006 Amount Percentage
Assets Cash & Balances with RBI 941.53 5.68 3.77 53.05 35.02 1.33 745.71 612.76 11754.16 5693.52 344.14 3.86 3.17 60.78 29.44 1.78
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Balance with Banks, Money at 624.15 Call Advances 8781.26 Investments Gross Block 5796.19 220.48

Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 130.42 90.06 2.18 317.25 16552.62 3871.13 973.15 2101.24 0.79 0.54 0.013 1.92 100.00 23.39 5.88 12.69 180.84 163.30 0.00 368.00 19337.45 5740.85 1599.21 2597.83 0.94 0.84 0.00 1.90 100.00 29.69 8.27 13.43
COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST MARCH, 2006 AND 2007 (In Rs.Cr) Particulars March 2006 Amount Capital and liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 36.00 36.00 0.00 0.00 899.22 0.00 935.22 16368.75 582.22 16950.97 1451.26 19337.45 0.186 0.186 0.00 0.00 4.650 0.00 4.836 84.65 3.01 87.66 7.50 100.00 36.00 36.00 0.00 0.00 1105.33 0.00 1141.33 22022.35 989.92 23012.27 2689.05 26842.65 0.13 0.13 0.00 0.00 4.12 0.00 4.25 130.75 3.69 85.73 10.02 100.00 Percentage March 2007 Amount Percentage
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Assets Cash & Balances with RBI 745.71 3.86 3.17 60.78 29.44 1.78 0.94 0.84 0.00 1.90 100.00 29.69 8.27 13.43 2095.63 342.76 16465.54 6989.75 367.53 234.14 133.39 0.00 815.59 26842.66 5969.40 1753.75 3170.36 7.81 1.28 61.34 26.03 1.37 0.87 0.50 0.00 3.04 100.00 22.24 6.53 11.81
Balance with Banks, Money at 612.76 Call Advances 11754.16 Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 5693.52 344.14 180.84 163.30 0.00 368.00 19337.45 5740.85 1599.21 2597.83
COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST MARCH, 2007 AND 2008 (In Rs.Cr) Particulars March 2007 Amount Capital and liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth 36.00 36.00 0.00 0.00 1105.33 0.00 1141.33 0.13 0.13 0.00 0.00 4.12 0.00 4.25 36.00 36.00 0.00 0.00 1341.81 0.00 1377.81 0.11 0.11 0.00 0.00 4.06 0.00 4.17 Percentage March 2008 Amount Percentage
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Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 22022.35 989.92 23012.27 2689.05 26842.65 130.75 3.69 85.73 10.02 100.00 27462.40 1731.53 29193.93 2497.96 33069.70 83.04 5.24 88.28 7.55 100.00
COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST MARCH, 2008 AND 2009 (In Rs.Cr) Particulars March 2008 Amount Capital and liabilities: Percentage March 2009 Amount Percentage
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Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 36.00 36.00 0.00 0.00 1341.81 0.00 1377.81 27462.40 1731.53 29193.93 2497.96 33069.70 0.11 0.11 0.00 0.00 4.06 0.00 4.17 83.04 5,24 88.28 7.55 100.00 36.00 36.00 0.00 0.00 1635.11 599.93 2271.04 32915.77 2762.08 35677.85 2536.89 40485.78 0.089 0.089 0.00 0.00 4.04 1.48 5.61 81.30 6.82 88.12 6.57 100.00
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ANALYSIS AND INTERPRETATION: The percentage of share capital was 0.217% in 2004-2005, 0.186% in 2005-2006, 0.13% in 2006-2007, 0.11% in 2007-2008 and 0.089% in 2008-2009. This indicates that bank is less dependent on its internal source of funds. The percentage of reserves and surplus was 4.352% in 2004-2005 and 4.650% in 2005-2006, afterwards declining 4.12% in 2006-2007, 4.06% in 2007-2008 and
4.04% in 2008-2009. The percentage of reserves and surplus was higher than the percentage of reserves and surplus in 2009. This indicates higher profitability. The percentage of Deposits was 82.07% in 2004-2005, 84.65% in 2005-2006, 130.75% in 2006-2007, 83.04% in 2007-2008 and 81.30% in 2008-2009. This indicates that deposits are the main source of funds of bank. These deposits are external funds which are accepted from customers. The percentage of Borrowings was 1.93% in 2004-2005, 3.01% in 2005-2006, 3.69% in 2006-2007, 5.24% in 2007-2008 and 6.82% in 2008-2009. o From this we can know that the percentage of borrowing of bank is very less. This indicates that the banks financial position is sound. The percentage of Fixed Assets was 0.54% in 2004-2005, 0.84% in 2005-2006, 0.50% in 2006-2007, 0.37% in 2007-2009 and 1.81% in 2008-2009. The percentage of Advances was 53.05% in 2004-2005, 60.78% in 2005-2006, 61.39% in2006-2007, 63.58% in 2007-2008 and 63.27% in 2008-2009. o This indicates that banks application of funds is done mainly as advances to the customers, which in turn results in higher interest earnings to the bank. The percentage of Investment was 35.02% in 2004-2005, 29.44% 2005-2006, 26.03% in 2006-2007, 25.40% in 2007-2008 and 28.10% in 2008-2009. o Investment is showing a decreasing trend. It means bank is diverting its funds towards loans and advances to the customers by reducing its investments. So, we can say that the bank is has a very good liquidity position.
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COMMON SIZE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2005 AND 2006 (In Rs.Cr) Particulars March March 2005 2006 Amount Percentage Amount Percentage Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalized Operating Expenses Provisions & Contingencies Total Expenses 623.03 330.67 176.28 31.87 235.68 0.00 606.93 167.57 1397.53 40.10 21.28 11.35 2.05 15.17 0.00 39.06 10.78 89.94 735.09 295.96 208.67 54.28 296.87 0.00 669.95 186.13 1590.87 43.41 17.48 12.32 3.21 17.53 0.00 39.56 10.10 93.95 1167.77 386.01 1553.78 75.17 24.84 100.00 1346.76 346.56 1693.32 79.53 20.46 100.00
Net Profit for the Year
156.26
10.06
102.46
6.05
COMMON SIZE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2006 AND 2007 (In Rs.Cr) Particulars March March 2006 2007 Amount Percentage Amount Percentage Income Interest Earned 1346.76 79.53 1805.79 83.76
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Other Income Total Income Expenditure Interest expended Employee Cost Selling and Expenses Depreciation 735.09 295.96 Admin 208.67 54.28 296.87 Exp 0.00 669.95 186.13 1590.87 43.41 17.48 12.32 3.21 17.53 0.00 39.56 10.10 93.95 1092.91 317.57 106.33 59.80 330.18 0.00 602.66 211.22 1906.79 50.70 14.73 4.93 2.77 15.31 0.00 27.95 9.80 88.44 346.56 1693.32 20.46 100.00 350.22 2156.01 16.24 100.00
Miscellaneous Expenses Preoperative Capitalized Operating Expenses Provisions & Contingencies Total Expenses
102.46
6.05
249.23
11.56
COMMON SIZE PROFIT AND LOSS ACCOUNT FOR AND 2008 (In Rs.Cr) Particulars March 2007 Amount Percentage Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation 1092.91 317.57 106.33 59.80 50.70 14.73 4.93 2.77 1805.79 350.22 2156.01 83.76 16.24 100.00
THE YEAR ENDED 2007
March 2008 Amount
Percentage
2494.40 422.13 2916.53
85.53 14.47 100.00
1732.10 337.56 106.90 58.78
59.39 11.57 3.67 2.02

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Miscellaneous Expenses Preoperative Exp Capitalized Operating Expenses Provisions & Contingencies Total Expenses 330.18 0.00 602.66 211.22 1906.79 15.31 0.00 27.95 9.80 88.44 363.34 0.00 638.42 227.16 2597.68 12.46 0.00 21.89 7.79 89.07
249.23
11.56
318.85
10.93
COMMON SIZE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2008 AND 2009 (In Rs.Cr) Particulars March March 2008 2009 Amount Percentage Amount Percentage Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalized Operating Expenses Provisions & Contingencies Total Expenses 1732.10 337.56 106.90 58.78 363.34 0.00 638.42 227.16 2597.68 59.39 11.57 3.67 2.02 12.46 0.00 21.89 7.79 89.07 2409.02 384.55 175.23 42.20 379.32 0.00 719.25 262.45 3390.72 64.63 10.32 4.70 1.13 10.18 0.00 19.30 7.04 90.96 2494.40 422.13 2916.53 85.53 14.47 100.00 3297.28 480.36 3727.64 88.45 12.87 100.00
318.85
10.93
336.91
9.04
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ANALYSIS AND INTERPRETATION: The Interest earned as a percentage of total income was: o 75.17% in the year 2004-2005 o 79.53% in the year 2005-2006 o 83.76% in the year 2006-2007 o 85.53% in the year 2007-2008 o 88.45% in the year 2008-2009 This is a very good sign as there are continuous increases in interest earned by the bank. Other income was between 24.84 to12.87 percent of total income from the 2005 to 2009. The percentage of Interest Expended has increased from 40.10% in 2004-2005 to 43.41% in 2005-2006. Further, it increased to 50.70%, 59.39%, 64.63% in the year 2006-2007, 2007-2008, 2008-2009 respectively. The percentage of Operating Expenses was: o 39.06% in the year 2004-2005 o 39.56% in the year 2005-2006 o 27.95% in the year 2006-2007 o 21.89% in the year 2007-2008 o 19.30% in the year 2008-2009 From this we can make out that the bank is trying to reduce its operating expenses, as it affects the net profit of the bank. The percentage of Net Profit was: o 10.06% in the year 2004-2005 o 6.05% in the year 2005-2006 o 11.56% in the year 2006-2007 o 10.93% in the year 2007-2008 o 9.04% in the year 2008-2009 To conclude, profitability of the concern is sound.
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RATIO ANALYSIS AND INTERPRETATION
LIQUIDITY RATIOS : 1. CURRENT RATIO. = current assets/ current liabilities. CA=cash & bank balances, advances. CL=deposits, other liabilities and provisions. (Rs. in cr.) CURRENT ASSETS 10346.94 13112.63 18903.93 23933.24 27758.76 CURRENT LIABILITIES 15476.6 17820.01 24711.4 29960.36 35452.66 CURRENT RATIO 0.67 0.74 0.76 0.79 0.78
YEAR
2004-05 2005-06 2006-07 2007-08 2008-09
0.8 0.78 0.76 0.74 0.72 0.7 0.68 0.66 0.64 0.62 0.6
current ratio
0.79 0.74 0.67 0.76
0.78
current ratio
2004-05
2005-06
2006-07
2007-08
2008-09
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Interpretation: Current ratio is the most commonly used to perform the short- term financial analysis. It is also knows as the working capital ratio. This ratio throws good light on the short terms financial position and policy. It is an indicator of firms ability to promptly meet its short- terms liabilities. A relatively high ratio indicates that the firm is liquid and has the ability to meet its current liabilities. Normally a current ratio of 2:1 is considered satisfactory. From the above table it is clear that the bank has current ratio of 0.67 in 2004-05, 0.74 in 2005-06, 0.76 in 2006-07, 0.79 in 2007-08, 0.78 in 2008-09. The bank has current ratio of less than the ideal current ratio of 2:1. It shows that its working capital position is very weak.
2. LIQUID RATIO = LIQUID ASSETS/ CURRENT LIABILITIES LA= cash & bank balances CL=deposits, other liabilities. & provisions. (Rs. in cr.) CURRENT LIABILITIES 15476.6 17820.01 24711.4 29960.36 35452.66
YEAR
LIQUID ASSETS
LIQUID RATIO
2004-05 2005-06 2006-07 2007-08 2008-09
1565.68 1358.47 2438.39 2906.09 2142.71
0.10 0.08 0.10 0.10 0.06
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LIQUID RATIO
0.1 0.1 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 0.08 0.06 LIQUID RATIO 0.1 0.1
2004-05 2005-06 2006-07 2007-08 2008-09
Interpretation: Liquid ratio is also called quick ratio. Quick ratio is a more rigorous test of liquidity of a firm than the current ratio. When quick ratio is used along with current ratio, it gives better picture of the firms ability to meet its short-term liabilities out of its short-term assets. This ratio is of great importance for bank and financial institution. Generally a quick ratio of 1:1 is considered to represent satisfactory current financial position. From the above table it is clear that liquid ratio of the state bank of mysore is 0.10, 0.08, 0.10, 0.10, 0.06 respectively for the past 5 years. Since the liquid ratio of the bank is less than the ideal liquid ratio of 1:1, this shows that the short-term liquidity position of the bank is weak.
3. ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS/ LIQUIDE LIABILITIES ABL=balances with bank. LL= other liabilities& provisions
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(Rs. in cr.) ABSOLUTE LIQUID ASSETS 624.15 612.76 342.76 244.54 407.66 LIQUID LIABILITIES 1891.43 1451.26 2689.05 2497.96 2536.89 ABSOLUTE LIQUID RATIO 0.33 0.42 0.13 0.10 0.16
YEAR
2004-05 2005-06 2006-07 2007-08 2008-09
ABSOLUTE LIQUID RATIO

0.5 0.4 0.3 0.2 0.1 0 2004-05 2005-06 2006-07 2007-08 2008-09 0.13 0.16 0.1 0.33 ABSOLUTE LIQUID RATIO 0.42
Interpretation: Absolute liquid ratio is more rigorous ratio than the current and liquid ratio used to measure the liquidity of the company. It is the real measure of the liquidity or short-term solvency of a concern. The standard or ideal absolute liquid ratio is 1:2 (i.e. 0.5). From the above table it is clear that the absolute liquid ratio of state bank of mysore is 0.33, 0.42, 0.13, 0.10, 0.16 for the past 5 years. This ratio is also less than the ideal ratio of 0.5, so the bank is facing a strong problem of liquidity.
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BALANCE SHEET RATIOS:
1. DEBT-EQUITY RATIO = LONG TERM DEBT/ SHAREHOLDERS FUND LTD= deposits, borrowings SF= capital, reserves surplus. (Rs. in cr.) LONG DEBT 13904.75 16950.97 23012.27 29193.93 35677.85 TERM SHAREHOLDERS DEBT-EQUITY FUND 756.45 935.22 1141.33 1377.81 2271.04 RATIO 18.38 18.13 20.16 21.19 15.71
YEAR
2004-05 2005-06 2006-07 2007-08 2008-09
DEBT-EQUITY RATIO
15.71 18.38 2004-05 21.19 18.13 2005-06 2006-07 2007-08 20.16 2008-09
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Debt generally refers to long-term securities. Equity refers to shareholders fund. It includes equity share capital and reserves and surplus. Debt-equity ratio measures the contribution of the owners to the long-term finances of the concern as compared to the contributions of the long-term creditors. It is a test of long-term solvency of the concern. A low debt-equity ratio implies a greater claim of owners on the assets of the company then the creditors. The standard debt-equity ratio is 2:1. From the above table it is quite clear that the bank has debt-equity ratio of 18.38, 18.13, 20.16, 21.19, and 15.71 in the past 5 years. Since the debt-equity ratio is very higher than the standard ratio. This shows that the debt holders have more claims on the assets of the company than the equity holders.
2. PROPRIETARY RATIO = SHAREHOLDERS FUND/ TOTAL ASSETS SF= capital, reserves and surplus TA= assets (Rs. in cr.) SHAREHOLDERS FUND 756.45 935.22 1141.33 1377.81 2271.04 PROPRIETARY RATIO 0.046 0.048 0.043 0.042 0.056
YEAR
TOTAL ASSETS
2004-05 2005-06 2006-07 2007-08 2008-09
16552.62 19337.45 26842.66 33069.71 40485.79
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PROPRIETARY RATIO
0.06 0.05 0.04 0.03 0.02 0.01 0 0.046 0.048 0.043 0.042 0.056 PROPRIETARY RATIO
Interpretation: Proprietary ratio is the ratio, which measures the relationship between shareholders funds and total assets. Proprietary ratio measures the extent to which shareholders own the business and thus indicates the general financial strength of the business. Higher the proprietary ratio, the greater the long-term stability of the company and consequently greater protection to creditors. Generally a ratio of 1:2 is considered ideal (i.e.0.5). From the above table it is clear that the proprietary ratio of the state bank of mysore is 0.048, 0.046, 0.043, 0.042, 0.056 for the past 5 years. This ratio is far less than the standard proprietary ratio. This shows that long-term stability of the bank is very less.
3. FIXED ASSETS TO NET WORTH RATIO = FIXED ASSETS/ NET WORTH FA= assets NW= capital, reserves surplus
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(Rs. in cr.) FIXED YEAR FIXED ASSETS NET WORTH ASSETS
TO NET WORTH RATIO
2004-05 2005-06 2006-07 2007-08 2008-09
90.06 163.30 133.39 122.99 731.37
756.45 935.22 1141.33 1377.81 2271.04
0.12 0.17 0.12 0.09 0.32
FIXED ASSETS TO NET WORTH RATIO

100% 80% 60% 40% 20% 0% 0.12 0.17 0.12 0.09 0.32
FIXED ASSETS TO NET WORTH RATIO
Interpretation: This ratio expresses the relationship between the fixed assets and net worth of the company. This ratio indicates the proportion of fixed assets financed by the owners or the proprietors i.e., it indicates as to what extent the owners have invested funds on the fixed assets, which constitutes the main structure of the business. The ideal ratio is 2/3 or 0.667. From the above table it is clear that the fixed asset to net worth ratio is 0.12, 0.17, 0.12, 0.09 and 0.32 respectively for the past 5 years.
JSS Academy of Technical Education, Bangalore Page 61
Since these ratios are far less than the standard ratio of 0.667. It can be inferred that the owners have financed not only the fixed assets, but also a good portion of current assets. This indicates that financial position of the concern is strong and the risk of creditors is relatively less.
4. CURRENT ASSET TO NET WORTH RATIO = CURRENT ASSETS/ NET WORTH CA=cash & bank balances, advances NW=capital, R&S (Rs. in cr.) CURRENT ASSETS 10346.94 13112.63 18903.93 23933.24 27758.76 CURRENT ASSET TO
YEAR
NET WORTH
NET WORTH RATIO 13.68 14.02 16.56 17.38 12.22
2004-05 2005-06 2006-07 2007-08 2008-09
756.45 935.22 1141.33 1377.81 2271.04
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CURRENT ASSET TO NET WORTH RATIO

20 18 16 14 12 10 8 6 4 2 0
13.68
14.02
16.56
17.38 12.22
CURRENT ASSET TO NET WORTH RATIO
2004-05 2005-06 2006-07 2007-08 2008-09
Interpretation: This ratio shows the relationship between current assets and net worth of the business. This ratio indicates the proportion of current assets financed by the owners fund. There are no standard current assets to net worth ratio. Though there are no standard current assets to net worth ratio. One can say that, if this ratio is high, the financial strength of the concern is good and if this ratio is low, the financial position of the concern is week. From the above table it is clear that the current assets to net worth ratios are 13.68, 14.02, 16.56, 17.38, and 12.22 for the past 5 years. Since, the actual current assets to net worth ratio are very high, it can be inferred that the financial strength of the bank is good.
5. CURRENT LIABILITIES TO NET WORTH RATIO. = CURRENT LIABILITIES/ NET WORTH CL= deposits, other liabilities & provisions NW= capital & R&S (Rs. in cr.)
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YEAR CURRENT LIABILITIES 15476.6 17820.01 24711.4 29960.36 35452.66 CURRENT LIABILITIES NET WORTH TO NET WORTH RATIO 756.45 935.22 1141.33 1377.81 2271.04 20.46 19.05 21.65 21.74 15.61
2004-05 2005-06 2006-07 2007-08 2008-09
current liabilities to net worth ratio

25 20.45 20 15 10 5 0 2004-05 2005-06 2006-07 2007-08 2008-09 current liabilities to net worth ratio 21.65 19.05 15.61 21.74
Interpretation: A current liability to net worth ratio is the ratio between current liabilities and net worth of the concern. This ratio indicates the relative contributions of the short-term creditors and, the owners in the capital of the business. The desirable level set for this ratio is 1/3 or 0.33. If this ratio is very high, it would mean that the liability base of this concern will not provide adequate cover for long-term creditors. That means it would be difficult for the concern to obtain long-term liabilities.
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From the above table it is clear that this ratio is 20.46, 19.05, 21.65, 21.74 and 15.61 respectively for the past 5 years. Since this ratio is very high it can be inferred that it would be difficult for the concern to obtain long-term liabilities.
6. FIXED ASSET RATIO. = FIXED ASSETS/ CAPITAL EMPLOYED FA=fixed assts CE= capital, R&S, deposits, borrowings (Rs. In cr.) CAPITAL EMPLOYED 14661.2 17886.19 24153.6 30571.74 37948.89 FIXED RATIO 0.006 0.009 0.005 0.004 0.019 ASSETS
YEAR
FIXED ASSETS
2004-05 2005-06 2006-07 2007-08 2008-09
90.06 163.30 133.39 122.99 731.37
fixed assets ratio

0.02 0.015 0.01 0.005 0.006 0 2004-05 0.009 0.005 2005-06 2006-07 0.004 2007-08 2008-09 0.019
fixed assets ratio
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Interpretation: Fixed asset ratio is the ratio between fixed assets and capital employed. Capital employed includes both the shareholders fund and long-term debt. This ratio indicates to how the fixed assets of a concern have been financed i.e. to what extent the fixed assets have been financed by the long-term funds and to what extent they have been financed by the short-term funds. The ideal fixed asset ratio is 0.67. This would mean that not only the fixed assets, but also a part of working capital are financed by long-term funds. From the above table it is clear that this ratio is 0.006, 0.009, 0.005, 0.004 and 0.019 respectively for the past 5 years. These ratios are less than the standard ratio of 0.67.
7. RETURN ON ADVANCES. = NET PROFIT/ ADVANCES (Rs. in cr.) YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 NET PROFIT 156.26 102.46 249.23 318.85 336.91 ADVANCES 8781.26 11754.16 16465.54 21027.15 25616.05 % OF RETURNS 1.78 0.87 1.51 1.52 1.32
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% OF RETURNS
1.32 1.78 2004-05 1.52 2005-06 0.87 2006-07 2007-08 1.51 2008-09
Interpretation: Return on advance ratio refers to the percentage of net earnings available for the advances of the bank. Advances being one of the important functions of the banking sector, which generates revenue to the bank. Higher the return on advance ratio betters for the banking sector, because it will enhance the operating efficiency and profitability of the bank. From the above table it is clear that return on advances is 1.78%, 0.87%, 1.51%, 1.52%, and1.32% respectively for the past 5 years. This is the low rate of net return on the advances.
8. RETURN ON INVESTMENT RATIO. = NET PROFIT/ INVESTMENTS (Rs. in cr.) RETURN on INVESTEMENT RATIO (%) 2.70
YEAR
NET PROFIT
INVESTMENTS
2004-05
156.26
5796.19
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2005-06 2006-07 2007-08 2008-09 102.46 249.23 318.85 336.91 5693.52 6989.75 8402.76 11377.96 1.80 3.57 3.79 2.96
RETURN on INVESTEMENT RATIO (%)

2.96 2.7 2004-05 1.8 3.79 3.57 2005-06 2006-07 2007-08 2008-09
Interpretation: Return on investment is the most important test of profitability of the business. It measures the overall profitability. ROI measures the earnings power on the net assets of the business. Higher the ROI the more efficient the management is considered to be in using the funds available. From the above table it is clear that the state bank of Mysore has a ROI of 2.70%, 1.80%, 3.57%, 3.79% and 2.96% for the past 5 years Based on the rate of returns on investment, it can be inferred that the earnings of the company is less.
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9. RETURN ON TOTAL ASSETS RATIO. = Net profits/ Total assets (Rs. in cr.) Return on total assets ratio (%) 0.94 0.53 0.93 0.96 0.83
Year
Net profits
Total assets
2004-05 2005-06 2006-07 2007-08 2008-09
156.26 102.46 249.23 318.85 336.91
16552.62 19337.45 26842.66 33069.71 40485.79
Return on total assets ratio (%)

0.83 0.94 2004-05 0.96 0.93 0.53 2005-06 2006-07 2007-08 2008-09
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Interpretation: Returns on total asset ratio express the relationship between the earnings and total assets of the company. It is calculated to measure the extent to which the available resources are being effectively utilized in generating the revenue for the company. Higher the return on assets, more efficient the management is considered to be in using the available assets. From the above it is clear that the state bank of mysore has return on total assets of 0.94%, 0.53%, 0.93%, 0.96% and 0.83% in the past 5 years. Based on the above rate of returns it can be interpreted that the earnings of the banks on its total assets is very less.
10. RETURN ON CAPITAL EMPLOYED RATIO. = Net profits/ Capital employed (Rs. in cr.) Year 2004-05 2005-06 2006-07 2007-08 2008-09 Net profits 156.26 102.46 249.23 318.85 336.91 Capital employed 14661.2 17886.19 24153.6 30571.74 37948.89 Return on capital employed ratio (%) 1.07 0.005 0.01 0.01 0.008
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Return on capital employed ratio (%)

1.5 1 0.5 0.005 0 0.01 0.01 0.008 Return on capital employed ratio (%) 1.07
Interpretation: Return on capital employed is the rate of return earned on the capital employed in the business concern. It measures the profitability of the capital employed in the business. The standard returns on capital employed is ranging from 10% to 15% of the actual rate is more than the standard rate; it is an indication of higher profitability of the capital employed. On the other hand, if the actual ratio is less than the standard ratio, it is an indication of lower profitability of the capital employed. From the above table it is clear that the rate of return on capital employed are 1.07%, 0.005%, 0.01%, 0.01% and 0.008% respectively for the past 5 years. These rates of returns are much lesser than the standard rate of return, so it is an indication of lower productivity of the capital employed.
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11. RETURN ON SHAREHOLDERS FUND RATIO. = Net profits/ Shareholders fund (Rs. in cr.) Return shareholders ratio. (%) 20.66 10.96 21.84 23.14 14.84 on fund
Year
Net profits Shareholders fund
2004-05 2005-06 2006-07 2007-08 2008-09
156.26 102.46 249.23 318.85 336.91 935.22
756.45
1141.33 1377.81 2271.04
Return on shareholders fund ratio. (%)

14.84 20.66 2004-05 23.14 10.96 2005-06 2006-07 21.84 2007-08 2008-09
Page 72
Interpretation: Return on shareholders fund is the ratio of return on the shareholders fund of the company. It measures the specific earnings and profitability of the company. Higher the rate of return on the shareholders fund betters the efficiency and profitability of the company. From the above table it is clear that the rate of return on shareholders fund is 20.66%, 10.96%, 21.84%, 23.14% and 14.84% respectively for the past 5 years. Since the rate of earnings in shareholders fund is more, it can be inferred that the productivity of shareholders fund is more.
12. RETURN ON EQUITY RATIO. = Net profits/ Share capital (Rs. in cr.) Year 2004-05 2005-06 2006-07 2007-08 2008-09 Net profits 156.26 102.46 249.23 318.85 336.91 Share capital 36.00 36.00 36.00 36.00 36.00 Return on equity ratio (%) 434.05 284.61 692.30 885.69 935.86
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Return on equity ratio (%)

935.86 434.05 284.61 2004-05 2005-06 692.3 885.69 2006-07 2007-08 2008-09
Interpretation: Return on equity ratio establishes the relationship between the net profit available for equity shareholders and the amount of capital investment by them. This ratio shows the profits as a percentage on equity shareholders. A high rate of return on equity shareholders fund is favored by investors and a higher market valuation is placed on such shares. It is used for inter-firm comparison to judge the comparative profitability of different firms. The ratio of return on equity ratio is 434.05%, 284.61%, 692.30%, 885.69% and 935.86 for the past 5 years. This is the very high ratio indicating that shareholders fund is favored by investors.
13. RATIO OF ADVANCES TO DEPOSITS. = Advances/Deposits (Rs. in cr.) RATIO OF ADVANCES TO DEPOSITS 0.65
YEAR
ADVANCES
DEPOSITS
2004-05
8781.26
13585.17
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2005-06 2006-07 2007-08 2008-09 11754.16 16465.54 21027.15 25616.05 16368.75 22022.35 27462.40 32915.77 0.72 0.75 0.77 0.78
RATIO OF ADVANCES TO DEPOSITS

0.78 0.65 2004-05 0.72 0.77 0.75 2005-06 2006-07 2007-08 2008-09
Interpretation: Ratio of advances to deposits expresses the relationship between the advances and deposits of the bank. This ratio is calculated to measure the extent to which the advances of the bank are financed by deposits. From the above table it is clear that the ratio between advances to deposits is 0.65, 0.72, 0.75, 0.77 and 0.78 respectively in the past 5 years. From the above ratios it can be inferred that the advances are financed more than 50% by deposits.
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FINDINGS

Banks share capital indicates the bank is less dependent on its internal source of funds. Deposits are main source of funds of bank. These deposits are external funds which are accepted from customers. The percentage of borrowings of bank is very less. This indicates that the bank is financially sound. Banks application of funds is done mainly as advances to the customers, which in tern results in higher interest earnings to the bank. Investment is showing a decreasing trend. It means bank is diverting its funds towards loans and advances to the customers by reducing its investments. As there are continuous increase in interest earned by bank, it is very good sign. Bank is trying to reduce its operating expenses, as it affects the net profit of the bank. The bank has current ratio of less than the ideal current ratio of 2:1. It shows that its working capital is very weak. Since liquid ratio and absolute liquid ratio of the bank is less than the ideal liquid ratio of 1:1, this indicates that the short term liquidity position of the bank is weak and is facing strong problem of liquidity.
The debt-equity ratio is very higher than the standard ratio 2:1. This shows that the debt holders have more claims on the assets of the bank than the equity holders.
The proprietary ratio is far less than the standard proprietary ratio 1:2. This shows that long-term stability of the bank is very less.
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Fixed assets and net worth ratios are far less than the standard ratio of 0.667. It can be inferred that the owners have financed not only the fixed assets, but also a good portion of current assets. This indicates that financial position of the concern is strong and the risk of creditors is relatively less. The actual current assets to net worth ratio are very high, it can be inferred that the financial strength of the bank is good. The desirable level set for current liabilities to net worth ratio is 1/3 or 0.33. If this ratio is very high, it would mean that the liability base of this concern will not provide adequate cover for long-term creditors. That means it would be difficult for the concern to obtain long-term liabilities. Based on the rate of returns on investment of the bank, it can be inferred that the earnings of the bank is less. Based on the rate of returns on total assets of the bank, it can be interpreted that the earnings of the banks on its total assets is very less. Rate of return on capital employed are much lesser than the standard rate of return, so it is an indication of lower productivity of the capital employed.
Since the rate of earnings in shareholders fund is more, it can be inferred that the productivity of shareholders fund is more.
Based on ratio of advances to deposits, it can be inferred that the advances are financed more than 50% by deposits.
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SUGGESTIONS
The bank has the current ratio of less than the ideal current ratio. It shows that its working capital is very weak. To come out this weakness, bank has to maintain proper cash and bank balances up to the minimum level and has to adopt suitable recovery mechanism. According to the financial analysis of the bank, liquidity position of the bank is low. Bank has to preserve minimum cash and bank balances to maintain a good liquidity and absolute liquidity ratios. By this it can get more number of customers as liquidity ratio increases the goodwill of the bank and attracts the customers. The proprietary ratio is far less than the standard proprietary ratio 1:2. This shows that Long term stability of the bank is less. That means banks capital, reserves and surplus is more than the assets of the bank which confirms that bank is based more on liabilities. It is not good to health of bank. So bank has to concentrate on increase the total assets of the bank. Based on the rate of returns on investment of the bank, it can be inferred that the earnings of the bank is less. So bank has to think over efficient use of the investment which leads increase in net profit of the bank. Rate of return on capital employed are much lesser than the standard rate of return, so it is an indication of lower productivity of the capital employed. So bank has to design the plan to increase productivity by increasing the rate of returns of the bank. Based on ratio of advances to deposits, it can be inferred that the advances are financed more than 50% by deposits. That means loans given to the customers are much higher than the cash deposited by the customers, which is unhealthy for the bank. So bank has to concentrate on credit appraisal before sanctioning the loans and try to attract customers to deposit cash by offering the better interest rates.
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CONCLUSION
Bank is diverting its funds towards loans and advances to the customers by reducing
its investments
Bank is trying to reduce its operating expenses, as it affects the net profit of the bank.
According to the current ratio analysis, its working capital is very weak. As the liquidity ratios shows, the short term liquidity position of the bank is weak
and is facing strong problem of liquidity.
The debt holders have more claims on the assets of the bank than the equity holders.
The owners have financed not only the fixed assets, but also a good portion of current assets. This indicates that financial position of the concern is strong and the risk of creditors is relatively less.
The actual current assets to net worth ratio are very high, it can be inferred that the
financial strength of the bank is good

Based on the rate of returns on investment of the bank, it can be inferred that the
earnings of the bank is less
Since the rate of earnings in shareholders fund is more, it can be inferred that the productivity of shareholders fund is more.
Based on ratio of advances to deposits, it can be inferred that the advances are financed more than 50% by deposits.
Page 79

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JSS Academy of Technical Education, Bangalore