A STUDY ON

FINANCIAL PERFORMANCE ANALYSIS (RATIO ANALYSIS)

A case study of
Andhra Pradesh state financial corporation (Visakhapatnam branch)

A project report Submitted in Partial Fulfillment of the Requirement

for the award of the Degree of

MASTER OF BUSINESS ADMNISTRATION

ANDHRA UNIVERSITY

DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

By: shemelis meressa (reg no: 109200202021)

Advisor: PROF. SHEEBA RANI

August, 2010
Visakhapatnam

DECLARATION
I am, Mr. SHEMELIS MERESSA, a student of DEPARTMENT OF COMERCE AND

MANAGEMENT STUDIES, ANDHRA UNIVERSITY studying in MBA declare that

the information in this report is genuine to the best of my knowledge and also it

is not submitted to any other University or Institution for the award of any

Degree.

CERTIFICATE
This is to certify that Mr. SHEMELIS MERESSA is a bonafied student of
DEPARTMENT OF COMMERCE AND MANAGEMENT, ANDHRA UNIVERSITY
pursuing MBA, final year course for the period 2009-2011. He carried his project
report on the topic “FINANCIAL PERFORMANCE ANALYSIS OF APSFC at APSFC,
VISAKHAPATNAM” for the partial fulfillment of the award of Master Degree in
MBA under my guidance.

PLACE: Visakhapatnam Prof. SHEABA RANI

DATE:               

ACKNOWLEDGEMENT
First of all I would like to extend my special thanks to my Almighty God for
everything of merits is due to his benevolence.

It is difficult to thank all those people that have helped me in accomplishing my

project work, but the following deserve a special mention.

With immense pleasure and deep sense of gratitude, I express my indebtedness

to my esteemed project guide Prof. D.M SHEABA RANI for unreserved
constructive idea and keen interest in the progress of the work.

I express my deep sense of gratitude to the Management of, “Andhra Pradesh

State Financial Corporation Visakhapatnam Branch”, for giving me an
opportunity to undergo field training in their esteemed organization and in
particular Mr. B.B.S.K.R.RAMANA MURTHY (deputy manger) and M.A WASAY,
(finance manger) , and their staff for their sincere cooperation.

Abstract
The study has been concentrated on how significant business decisions are
frequently made using financial ratio analysis from the financial statement of the
corporation.

The main objective of the financial analysis is to understand the information

contained in financial statements with a view to know the strength or weakness
of the firm and to make forecast about the future prospect of the firm and
thereby enabling the financial analyst to take different decision regarding the
operation of the firm.

This project attempted in detail to brief out what is the need, who uses, types,
limitation of ration analysis of financial statement in case of Andhra Pradesh
state financial corporation in light of the above aim.

As far financial analysis, the analysis is designed to determine the relative

strengths and weaknesses of a company, and as a result the financial statement
of the corporation has been analyzed in a simplified and understandable way.
The study has been decided to incorporate the usefulness of financial analysis as
from an investor’s standpoint, predicting the future is what financial statement
analysis is all about. From management’s standpoint, financial statement
analysis is useful both to help anticipate future conditions and, more important,
as a starting point for planning actions that will influence the future course of
events.
ACRONYMS

APSFC - Andhra Pradesh State Finance Corporation

SFC - State financial corporation

IDBI - industrial development bank of India

SIDBI - small industrial development bank of India

APIIC - Andhra Pradesh Industrial Infrastructure Corporation

APSSIDC - Andhra Pradesh Small Industrial Development Corporation

ROI - Return on Investment

ROCE - Return on Capital Employed

EM - Equity Multiplier

EBIT - earnings before interest and tax

LISTS OF TABLES
S.NO Table Tittle of the table Page No.

1 5.1 Trend in income and profit

3 5.2 Trends in resource structure

4 5.3 Trends in resource and sanction

5 5.4 Cash ratio

6 5.5 Debt ratio

7 5.6 Debt equity ratio

8 5.7 Operating assets and net worth ratio

9 5.8 Return on capital employed ratio

10 5.9 Operating Profit margin and net income

margin ratio

11 5.10 Earnings per share

12 5.11 Interest coverage ratio

TABLE OF CONTENTS

Declaration……………………………………………………………………………………………
Acknowledgement ………………………………………………………………………………..

Acronomy……………………………………………………………………………………………….

List of tables……………………………………………………………………………………………

CHAPTER I

1.1Introduction…………………………………………………………………………………… 1

1.2 Objective of the study……………………………………………………………………… 2

1.3 Need of the study …………………………………………………………………………… 3

1.4 purpose of the study……………………………………………………………………….. 4

1.5 Significance of the study………………………………………………………………….. 5

1.5 Frame work of the study ………………………………………………………………… 6

1. Methodology …………………………………………………………………………………… 7

1.6 Limitation of the study …………………………………………………………………… 8

CHAPTER II

International and Indian industrial financial corporation overview

2.1 International overview………………………………………………………………… 10

2.2 Indian financial corporation overview…………………………………………… 15

CHAPTER III

Profile of the corporation

3.1 introduction……………………………………………………………………………… 19

3.2 profile of APSFC……………………………………………………………………………… 20

3.2.1 Objectives of APSFC………………………………………………………………….. 21

3.2.2 Function of APSFC……………………………………………………………………. 22

3.2.3 Area of operations…………………………………………………………………… 23

3.2.4. Organization and network………………………………………………………. 23

3.2.5 Scope of business……………………………………………………………………. 25

3.2.6 Sources of resource ………………………………………………………………… 25

3.2.7 Ownership……………………………………………………………………………… 26

3.2.8 Operational policies of APSFC……………………………………………………… 28

CHAPTER IV

4. Theoretical frame work

4.1 Introduction …………………………………………………………………………………… 33

4.2 financial analysis……………………………………………………………………………… 34

4.2.1 Role of financial analysis…………………………………………………………… 37

4.2.2 Devices of financial analysis……………………………………………………… 38

4.3 ratio analysis…………………………………………………………………………………… 39

4.3.1 Why use ratio analysis……………………………………………………………… 40

4.3.2Who use ratio analysis……………………………………………………………… 41

4.3.3 Standard of comparison…………………………………………………………… 42

4.4. Types of ratios………………………………………………………………………………… 43

4.4.1 Liquidity ratio………………………………………………………………………… 45

4.4.2 Asset management ratio…………………………………………………………. 54

 4.4.3 Profitability ratio…………………………………………………………………… 59

4.4.4 Leverage ratio………………………………………………………………………… 64

CHAPTER V

Data analysis and interpretation…………………………………………………………….. 68

CHAPTER VI

Summary……………………………………………………………………………………………… 91

Major finding and suggestion………………………………………………………………… 94

Bibliography…………………………………………………………………………………………… 97