financial statement analysis _ soubhagya
TRANSCRIPT
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Financial Statement Analysis
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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 earn ing 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.
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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 analysisof State Bank of Mysorehas 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 wasoriginated 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.
PHASE1
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 periodicfailures 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.
PHASE2
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 19thJuly
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.
PHASE3
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 thedomestic 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.
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1.4. STRUCTURE OF INDIAN BANKING SYSTEM:
Reserve Bank of India
Scheduled
Banks
Non-Scheduled
Banks
Commercial
Banks
Central Co-
operative Banks
and primary
credit societies
Commercial
banks
State Co-operative
Banks
Indian Banks Foreign Banks
Private Sector
Banks
Public Sector
Banks
Other Nationalized
Banks
Regional Rural
Banks
State Bank of India and
its subsidiaries
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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.
1953During the year, the bank was appointed as an agent of the Reserve Bank of
India to conduct Government Business and Treasury Operations.
1959The 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 presentlycovers 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.
2002Enters the market of with a coupon of 6.4% per annum for its Tier-2 capitalbonds 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.
2004SBM 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.
2005SBM 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. Davangerebranch 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
Centurion Bank ltd ES Bank of India etc. Corporation Bank
Dena Bank Federal Bank India Global Trust Bank ltd
HDFC Bank India Hongkong Shanghai Banking
Corporation Ltd
ICICI Bank ltd
Indian Overseas Bank Industrial Development Bank
of India
ING Vysya Bank ltd
JP Morgan Chase Bank Karnataka Bank Punjab and Sind Bank
Standard Chartered Bank State Bank of Indore 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
internationalUnited 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 officerslevel. 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 mail-
Customers 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.
Top Management (Policy framework)
(Implementation and follow up)
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.
LocalHead Offices
Corporate Center
Zonal Offices
Regional Offices
Branches
(Extension)
Customer
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3. MCKENSYS 7S FRAMEWORK
According to McKensysseven 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 ORGANISATIONS7 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 publicsector 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.
ChairmanSri.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,
CashierB.N.Ugraiah, Single Window OperatorP.Neelavathamma, Computer Operator-
A.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 covers-
Assistant 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, customersand 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 customersvoice.
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 ANALYSISSWOT 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 WEAKNESSES
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.
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
place.
Changing spending habits.
Growing market for loans.
Capturing various banking service
before other nationalized bank and
MNC banks make a foray into it.
There are fourteen different banks
already established in surrounding of
this Bank.
Deregulation creating higher customer
expectations in terms of price
convenience
Entering of private banks to the industry.
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6.ANALYSIS OF FINANCIAL STATEMENTFinancial 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
March
2009
Absolute
Change
%Change
Capital and liabilities:
Total Share Capital 36.00 36.00 0.00 0.00
Equity Share Capital 36.00 36.00 0.00 0.00
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 1341.81 1635.11 293.3 21.86
Revaluation Reserves 0.00 599.93 599.93
Net Worth 1377.81 2271.04 893.23 64.83
Deposits 27462.40 32915.77 5453.37 19.86
Borrowings 1731.53 2762.08 1030.55 59.52
Total Debt 29193.93 35677.85 6483.92 22.21
Other Liabilities & Provisions 2497.96 2536.89 38.93 1.56
Total Liabilities 33069.70 40485.78 7416.08 22.43
Assets
Cash & Balances with RBI 2661.55 1735.05 -926.5 -34.8
Balance with Banks, Money at 244.54 407.66 163.12 66.70
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Call
Advances 21027.15 25616.05 4588.9 21.82
Investments 8402.76 11377.96 2975.2 35.41
Gross Block 406.56 1060.28 653.72 160.79
Accumulated Depreciation 283.57 328.91 45.34 15.98
Net Block 122.99 731.37 608.38 494.66
Capital Work In Progress 0.00 0.00
Other Assets 610.72 617.70 6.98 1.14
Total Assets 33069.71 40485.79 7416.08 22.42
Contingent Liabilities 12871.72 17073.93 4202.18 32.65
Bills for collection 2888.47 2935.50 47.03 1.63
Book Value (Rs) 3827.26 464.20 -3363.06 -87.87
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
March
2009
Absolute
change
%Change
Income
Interest Earned 2494.40 3247.28 752.88 30.18
Other Income 422.13 480.36 58.23 13.79
Total Income 2916.53 3727.64 810.71 27.80
Expenditure
Interest expended 1732.10 2409.02 676.92 39.08
Employee Cost 337.56 384.55 46.99 13.92
Selling and Admin Expenses 106.90 175.23 68.33 63.92
Depreciation 57.78 42.60 -15.18 -26.27
Miscellaneous Expenses 363.34 379.32 15.98 4.40
Preoperative Exp Capitalized 0.00 0.00
Operating Expenses 638.42 719.25 80.83 12.66
Provisions & Contingencies 227.16 262.45 35.29 15.54
Total Expenses 2597.68 3390.72 793.04 30.53
Net Profit for the Year 318.85 336.91 18.06 5.66
Extraordinary Items 0.00 0.00
Profit brought forward 0.00 0.00
Total 318.85 336.91 18.06 5.66
Preference Dividend 0.00 0.00
Equity Dividend 36.00 36.00
Corporate Dividend Tax 6.12 6.12
Per share data (annualized)
Earnings Per Share (Rs) 885.71 93.59 -792.12 -89.43
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Equity Dividend (%) 100.00 100.00
Book Value (Rs) 3827.26 464.20 -3363.06 -87.87
Appropriations
Transfer to Statutory Reserves 276.74 294.80 18.06 6.53
Transfer to Other Reserves -0.01 -0.01
Proposed Dividend/Transfer to
Govt
42.12 42.12
Balance c/f to Balance Sheet 0.00 0.00
Total 318.85 336.91 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 7sand 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 PROJECTA report on the study of Financial Statement Analysis at State Bank of Mysore,
rajajareshwary nagar branch
1.2. STATEMENT OF THE PROBLEMThe 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 STUDYThe 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 1 st January
2010 to 10
th
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. Suchdata 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 STATEMENTSA 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 STATEMENTBasically, 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 STATEMENTSFinancial 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 freshworking 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 itemsstatement 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) Debt-equity ratio = Long term debt / Shareholders fund
2) Proprietary ratio = Shareholders fund / Total assets3) Fixed assets to Net worth ratio = Fixed assets / Net worth
4) Current assets to Net worth ratio = Current assets / Net worth
5) 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
March
2006
Amount Percentage Amount Percentage
Capital and liabilities:
Total Share Capital 36.00 0.217 36.00 0.186
Equity Share Capital 36.00 0.217 36.00 0.186
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 720.45 4.352 899.22 4.650
Revaluation Reserves 0.00 0.00 0.00 0.00
Net Worth 756.45 4.569 935.22 4.836
Deposits 13585.17 82.07 16368.75 84.65
Borrowings 319.58 1.93 582.22 3.01
Total Debt 13904.75 84.00 16950.97 87.66
Other Liabilities & Provisions 1891.43 11.43 1451.26 7.50
Total Liabilities 16552.63 100.00 19337.45 100.00
Assets
Cash & Balances with RBI 941.53 5.68 745.71 3.86
Balance with Banks, Money at
Call
624.15 3.77 612.76 3.17
Advances 8781.26 53.05 11754.16 60.78
Investments 5796.19 35.02 5693.52 29.44
Gross Block 220.48 1.33 344.14 1.78
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Accumulated Depreciation 130.42 0.79 180.84 0.94
Net Block 90.06 0.54 163.30 0.84
Capital Work In Progress 2.18 0.013 0.00 0.00
Other Assets 317.25 1.92 368.00 1.90
Total Assets 16552.62 100.00 19337.45 100.00
Contingent Liabilities 3871.13 23.39 5740.85 29.69
Bills for collection 973.15 5.88 1599.21 8.27
Book Value (Rs) 2101.24 12.69 2597.83 13.43
COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST
MARCH, 2006 AND 2007 (In Rs.Cr)
Particulars March
2006
March
2007
Amount Percentage Amount Percentage
Capital and liabilities:
Total Share Capital 36.00 0.186 36.00 0.13
Equity Share Capital 36.00 0.186 36.00 0.13
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 899.22 4.650 1105.33 4.12
Revaluation Reserves 0.00 0.00 0.00 0.00
Net Worth 935.22 4.836 1141.33 4.25
Deposits 16368.75 84.65 22022.35 130.75
Borrowings 582.22 3.01 989.92 3.69
Total Debt 16950.97 87.66 23012.27 85.73
Other Liabilities & Provisions 1451.26 7.50 2689.05 10.02
Total Liabilities 19337.45 100.00 26842.65 100.00
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Assets
Cash & Balances with RBI 745.71 3.86 2095.63 7.81
Balance with Banks, Money at
Call
612.76 3.17 342.76 1.28
Advances 11754.16 60.78 16465.54 61.34
Investments 5693.52 29.44 6989.75 26.03
Gross Block 344.14 1.78 367.53 1.37
Accumulated Depreciation 180.84 0.94 234.14 0.87
Net Block 163.30 0.84 133.39 0.50
Capital Work In Progress 0.00 0.00 0.00 0.00Other Assets 368.00 1.90 815.59 3.04
Total Assets 19337.45 100.00 26842.66 100.00
Contingent Liabilities 5740.85 29.69 5969.40 22.24
Bills for collection 1599.21 8.27 1753.75 6.53
Book Value (Rs) 2597.83 13.43 3170.36 11.81
COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST
MARCH, 2007 AND 2008 (In Rs.Cr)
Particulars March
2007
March
2008
Amount Percentage Amount Percentage
Capital and liabilities:
Total Share Capital 36.00 0.13 36.00 0.11
Equity Share Capital 36.00 0.13 36.00 0.11
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 1105.33 4.12 1341.81 4.06
Revaluation Reserves 0.00 0.00 0.00 0.00
Net Worth 1141.33 4.25 1377.81 4.17
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Deposits 22022.35 130.75 27462.40 83.04
Borrowings 989.92 3.69 1731.53 5.24
Total Debt 23012.27 85.73 29193.93 88.28
Other Liabilities & Provisions 2689.05 10.02 2497.96 7.55
Total Liabilities 26842.65 100.00 33069.70 100.00
Assets
Cash & Balances with RBI 2095.63 7.81 2661.55 8.05
Balance with Banks, Money at
Call
342.76 1.28 244.54 0.74
Advances 16465.54 61.34 21027.15 63.58
Investments 6989.75 26.03 8402.76 25.40
Gross Block 367.53 1.37 406.56 1.23
Accumulated Depreciation 234.14 0.87 283.56 0.86
Net Block 133.39 0.50 122.99 0.37
Capital Work In Progress 0.00 0.00 0.00 0.00
Other Assets 815.59 3.04 610.72 1.85
Total Assets 26842.66 100.00 33069.71 100.00
Contingent Liabilities 5969.40 22.24 12871.72 38.92
Bills for collection 1753.75 6.53 2888.47 8.73
Book Value (Rs) 3170.36 11.81 3827.26 11.57
COMMON SIZE BALANCE SHEET OF STATE BANK OF MYSORE AS ON 31ST
MARCH, 2008 AND 2009 (In Rs.Cr)
Particulars March
2008
March
2009
Amount Percentage Amount Percentage
Capital and liabilities:
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Total Share Capital 36.00 0.11 36.00 0.089
Equity Share Capital 36.00 0.11 36.00 0.089
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Reserves 1341.81 4.06 1635.11 4.04
Revaluation Reserves 0.00 0.00 599.93 1.48
Net Worth 1377.81 4.17 2271.04 5.61
Deposits 27462.40 83.04 32915.77 81.30
Borrowings 1731.53 5,24 2762.08 6.82
Total Debt 29193.93 88.28 35677.85 88.12
Other Liabilities & Provisions 2497.96 7.55 2536.89 6.57
Total Liabilities 33069.70 100.00 40485.78 100.00
Assets
Cash & Balances with RBI 2661.55 8.05 1735.05 4.29
Balance with Banks, Money atCall
244.54 0.74 407.66 1.00
Advances 21027.15 63.58 25616.05 63.27
Investments 8402.76 25.40 11377.96 28.10
Gross Block 406.56 1.23 1060.28 2.62
Accumulated Depreciation 283.56 0.86 382.91 0.95
Net Block 122.99 0.37 731.37 1.81
Capital Work In Progress 0.00 0.00 0.00 0.00
Other Assets 610.72 1.85 617.70 1.53
Total Assets 33069.71 100.00 40485.79 100.00
Contingent Liabilities 12871.72 38.92 17073.90 42.17
Bills for collection 2888.47 8.73 2935.50 7.25
Book Value (Rs) 3827.26 11.57 464.20 1.15
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COMMON SIZE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2005
AND 2006
(In Rs.Cr)
Particulars March2005
March2006
Amount Percentage Amount Percentage
Income
Interest Earned 1167.77 75.17 1346.76 79.53
Other Income 386.01 24.84 346.56 20.46
Total Income 1553.78 100.00 1693.32 100.00
Expenditure
Interest expended 623.03 40.10 735.09 43.41
Employee Cost 330.67 21.28 295.96 17.48
Selling and Admin Expenses 176.28 11.35 208.67 12.32
Depreciation 31.87 2.05 54.28 3.21
Miscellaneous Expenses 235.68 15.17 296.87 17.53
Preoperative Exp Capitalized 0.00 0.00 0.00 0.00
Operating Expenses 606.93 39.06 669.95 39.56
Provisions & Contingencies 167.57 10.78 186.13 10.10
Total Expenses 1397.53 89.94 1590.87 93.95
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
2006
March
2007
Amount Percentage Amount Percentage
Income
Interest Earned 1346.76 79.53 1805.79 83.76
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Other Income 346.56 20.46 350.22 16.24
Total Income 1693.32 100.00 2156.01 100.00
Expenditure
Interest expended 735.09 43.41 1092.91 50.70
Employee Cost 295.96 17.48 317.57 14.73
Selling and AdminExpenses
208.67 12.32 106.33 4.93
Depreciation 54.28 3.21 59.80 2.77
Miscellaneous Expenses 296.87 17.53 330.18 15.31
Preoperative ExpCapitalized
0.00 0.00 0.00 0.00
Operating Expenses 669.95 39.56 602.66 27.95
Provisions & Contingencies 186.13 10.10 211.22 9.80
Total Expenses 1590.87 93.95 1906.79 88.44
Net Profit for the Year 102.46 6.05 249.23 11.56
COMMON SIZE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2007
AND 2008
(In Rs.Cr)
Particulars March
2007
March
2008
Amount Percentage Amount Percentage
Income
Interest Earned 1805.79 83.76 2494.40 85.53
Other Income 350.22 16.24 422.13 14.47
Total Income 2156.01 100.00 2916.53 100.00
Expenditure
Interest expended 1092.91 50.70 1732.10 59.39
Employee Cost 317.57 14.73 337.56 11.57
Selling and Admin Expenses 106.33 4.93 106.90 3.67
Depreciation 59.80 2.77 58.78 2.02
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Miscellaneous Expenses 330.18 15.31 363.34 12.46
Preoperative Exp Capitalized 0.00 0.00 0.00 0.00
Operating Expenses 602.66 27.95 638.42 21.89
Provisions & Contingencies 211.22 9.80 227.16 7.79
Total Expenses 1906.79 88.44 2597.68 89.07
Net Profit for the Year 249.23 11.56 318.85 10.93
COMMON SIZE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2008AND 2009
(In Rs.Cr)
Particulars March
2008
March
2009
Amount Percentage Amount Percentage
Income
Interest Earned 2494.40 85.53 3297.28 88.45
Other Income 422.13 14.47 480.36 12.87
Total Income 2916.53 100.00 3727.64 100.00
Expenditure
Interest expended 1732.10 59.39 2409.02 64.63
Employee Cost 337.56 11.57 384.55 10.32
Selling and Admin Expenses 106.90 3.67 175.23 4.70
Depreciation 58.78 2.02 42.20 1.13
Miscellaneous Expenses 363.34 12.46 379.32 10.18
Preoperative Exp Capitalized 0.00 0.00 0.00 0.00
Operating Expenses 638.42 21.89 719.25 19.30
Provisions & Contingencies 227.16 7.79 262.45 7.04
Total Expenses 2597.68 89.07 3390.72 90.96
Net Profit for the Year 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.)
YEARCURRENT
ASSETS
CURRENT
LIABILITIES
CURRENT
RATIO
2004-05 10346.94 15476.6 0.67
2005-06 13112.63 17820.01 0.74
2006-07 18903.93 24711.4 0.76
2007-08 23933.24 29960.36 0.79
2008-09 27758.76 35452.66 0.78
0.67
0.740.76
0.79 0.78
0.6
0.62
0.64
0.66
0.68
0.7
0.72
0.74
0.76
0.78
0.8
2004-05 2005-06 2006-07 2007-08 2008-09
current ratio
current ratio
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Interpretation:
Current ratio is the most commonly used to perform the short- term financialanalysis. 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 ta