INTRODUCTION:

In Accounting working capital is the difference between the inflow and outflow of funds. In other words, it is the net cash inflow. It is define as the excess of current assets over current liabilities and provisions. In other words, it is net current assets or net working capital.

A study of working capital is of major importance to internal and external analysis because of its close relationship with the day to day operations of a business working capital is the portion of the assets of a business which are used on or related to current operations and represented at any one time by the operating cycle of such items as against receivable, inventories of raw materials, stores, work in process and finished goods, merchandise notes or bills receivables and cash.

Working capital comprises current assets which are district from other assets. In the first instance, current assets consist of these assets which are of short duration working capital may be regarded as the life blood of a business. Its effective provisions can do much to ensure the success of a business while its inefficient management can lead not only to loss of profits but also to the ultimate downfall of what otherwise might be considered as a promising concern.

The funds required and acquired by a business may be invested to two types of assets. 1. 2. Fixed asset Current asset

Fixed assets are those which yield the returns n the due course of time. The Various decisions like in which fixed assets funds should be invested and how much should be invested n the fixed assets etc are in the form of capital budgeting decision. This can be said to be fixed capital management. Other types of assets are equally important. i.e. Current Assets

These types of assets are required to ensure smooth and fluent business operation and can be said to be life blood of the business. These are two concepts of working capital. Gross and net grows working capital refers to gross current assets. Net working capital refers to the difference between current assets and current liabilities. The term current assets refers to those assets held by the business which can be converted into cash within a short period of time of say one year, without reduction in valve. The main types of current assets are stock, receivables and cash. The term current liabilities refer to those liabilities, which are to be paid off during the course of business, within a short period of time. Say one year. They are expected to be paid out of current assets or earnings of the business. The current liabilities mainly consist of sundry creditors, bills payable, bank overdraft, or cash credit, outstanding expenses etc.

NEED FOR WORKING CAPITAL:

The need of gross working capital or current assets cannot be overemphasized. The object of any business is to earn profits. The main factor affecting the profits is the magnitude of sales of the business. But the sales cannot be converted into cash immediately. There is a time log between the sale of goods and realization of cash. There is a need of working capital in the form of current assets to fill up this time lag. Technically, this is called as operating cycle or working capital cycle, which is the heart of need for working capital. This working capital cycle can be described in the following words. If the company has a certain amount of cash, it will be required for purchasing the raw material though some raw material may be available on credit basis. Then the company has to spend some amount for labour and factory overheads to convert the raw material in work in progress, and ultimately finished goods. These finished goods when sold on credit basis get converted in the form of sundry debtors. Sundry debtors are converted in cash only after the expiry of credit period. Thus, there is a cycle in which the originally available cash is converted in the form of cash again but only after following the stages of raw material, work in progress, finished goods and sundry debtors. Thus, there is a time gap for the original cash to get converted in form of cash again. Working capital needs of company arise to cover the requirement of funds during this time gap, and the quantum of working capital needs varies as per the length of this time gap. 2

Thus, some amount of funds is blocked in raw materials, work in progress, finished goods, study debtors and day to day requirements. However some part of these current assets may be financed by the current liabilities also. E.g. some raw material may be available on credit basis, all the expenses need not be paid immediately, workers are also to be paid periodically etc. But still the amounts required to be invested in these current assets is always higher than the funds available from current liabilities. This is precise reason why the needs for working capital arise. From the financial management point of view, the nature of fixed assets and current assets differ from each other.

1)

The fixed assets are required to be retained in the business over a period of time and they yield the return over their life, whereas the current assets loose their identify over a short period of time say one year.

2)

In the event of current asses, it is always necessary to strike a proper balance between the liquidity and profitability principles, which is not the case with fixed assets. Eg. If the size of current assets is large, it is always beneficial from the liquidity point of view as it ensures smooth and fluent business operations. Sufficient raw material is always available to cater to the production needs, sufficient finished goods are available to cater to any kind of demand of customers, liberal credit period can be offered to the customers to improve the sales and sufficient cash is available to pay off the creditors and so on. However if the investment in current assets is more than what is ideally required, it affects the profitability, as it may not be able to yield sufficient rate of return on investments. On the other hand if the size of current assets to too small, it always involves the risk of frequent stock out inability of the company to pay its dues in time etc. As such, the investment in current assets should be optimum. Hence it is necessary to manage the individual components of current assets in a proper way.

CLASSIFICATIONS OF WORKING CAPITAL:

Working capital may be classified into two ways. On the basis of concept, on the basis on time. On the basis of concept working capital can be classified as gross working capital and not working capital. On the basis of time, working capital may be classified as permanent or fixed working capital on temporary or variable working capital.

CHARACTERISTICS OF WORKING CAPITAL:

Working capitals distinguishing it from the fixed capital are as follows:1) SHORT TERM NEEDS: Working capital is used to acquire current assets which get converted into cash in a short period. In this respect it differs from fixed capital which represents funds locked in long term assets. The duration of the working capital depends on the length of products process, the time that elapses in the and the wanting period of cash receipt.

2)

CIRCULAR MOVEMENT: Working capital is constantly convents into cash which against turn into working capital. The process of conversion goes on continuously. The cash is used to

purchase current assets and when the goods are produced and sold out. These current assets are transferred into cash. Thus it move in a circular always that is why working capital is also described as circulating capital.

3)

A DEMAND OF FORMARENCY: Though working capital is a short term capita, it is required always and forever as stated before, working capital is necessary to continue the production activity of the enterprise. Hence so long as production continues, the enterprises will constantly remain in need of working capital. The working capital that is required permanently is called permanent or regular working capital. 4

4)

AN ELEMENT OF FLUCTUATION: Though the requirements of working capital are field permanently its requirement fluctuates more widely than that of fixed capital. The requirement of working capital various directly with the level of production. It varies with the variation of the purchase and sale policy. The portion of working capital that changes with

production, sale, price, etc. is called variable working capital.

5)

LIQUIDITY: Working capital is more liquid than fixed capital. If need arises, working capital can be converted into cash within a short period and without mush loss. A company in need of cash can get it through the conversion of its working capital by insisting on quick recovery of its bills receivable and by expediting sales of its product. It is due to this trait of working capital that the companies with a buyer amount of working capital feel more secure.

6)

LESS RISK: Funds invested in fixed assets get locked up for a long period of time and cannot be recovered easily. There is also a danger of fixed assets like Machinery getting absolute due to technological innovation. Hence investment is fixed capital is

comparatively more risky. As against this, investment in current assets is less risky as it is a short term investment. Working capital involves more of physical risk only, and that too is limited. Working capital involves financial or economic risk to a much loss extent because the variations of product prices are less severe generally. Moreover, working capital get converted only cash again and again. Therefore, it is free from the risk arising out of technological changes.

7)

SPECIAL ACCOUNTING SYSTEM NOT NEEDED: Since fixed capital is invested in long term assets, it becomes necessary its adopt various systems of estimating depreciation. On the other hand working capital is invested in short term assets which last for one year only. Hence it is not necessary to adopt special accounting system for them.

CLASSIFICATIONS OF WORKING CAPITAL :

Working capital may be classified into two ways. On the basis of concept, on the basis on time. On the basis of concept working capital can be classified as gross working capital and not working capital. On the basis of time, working capital may be classified as permanent or fixed working capital on temporary or variable working capital.

ADVANTAGES OF ADEQUATE WORKING CAPITAL :

1) SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining the solvency of the business by providing uninterrupted of production. 2) GOODWILL: Sufficient amount of working capital enables a firm to make prompt payment and makes and maintain the goodwill. 3) EAST LOANS: Adequate working capital leads to high solvency and credit standing can arrange loans from the banks and other on easy and favorable terms. 4) CASH DISCOUNT: Adequate working capital also enables a concern to avail cash discounts on the purchases and hence reduces costs. 5) REGULAR SUPPLY OF RAW MATERIALS: Sufficient working capital ensures regular supply of raw materials and continues products. 6) REGULAR PAYMENTS OF SALARIES, WAGES AND OTHER DAY TO DAY COMMITMENTS: It looks to the satisfaction of the employees and raises the moral of the employees, increase their efficiency, reduces wastage and costs and enhance production and profits.

7)

EXPLOITATION OF FAVORABLE MARKET CONDITIONS : If a firm is having adequate, working capital than it can exploit the favorable market conditions such as purchasing its requirements in bulk when the prices are lower and holdings its inventories for higher price

8)

ABILITY TO FACES CRISES: depression.

A concern can face the situation during the

9)

QUICK AND REGULAR RETURN ON INVESTMENTS: Sufficient working capital enables a concern to pay quick and regular of dividends to its investors in gain confidence of the investors and can raise more funds in future.

10)

HIGH MORALE: Adequate working capital briefs and environment of securities, confidence, high morale which results in overall efficiency in a business.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL:

Excessive working capital means ideal funds which earn no profit for the firm and business cannot earn the required rate of return on its investments. Redundant working capital leads to unnecessary purchasing and accumulation of inventors Excessive working capital impels excessive, debtors and defective credit policy which cause higher incidence of bad debts. It may reduce the overall efficiency of the business. If a firm is having excessive working capital then the relation with banks and other financial institution may not be maintained. Due to lower rate of return in investments, the values of shares may also fall. The redundant working capital gives arise to speculative transactions.

DISADVANTAGES OF INADEQUATE WORKING CAPITAL:

Every business needs some amounts of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales there is an operational cycle involved in sales and realization of cash.

WORKING CAPITAL vs CASH:

The term working capital has many connections and is often used very loosely in practice. Small business owners after refer to the need to obtain more working capital to keep their business operating in the black, and many people equate working capital with cash.

DEFINITION OF WORKING CAPITAL:

Working capital is the total of all those items shown on a companys balance sheet as short term or current assets. That is cash, market securities, account receivable, and inventories. A current asset is one that is expected to be turned into cash in one year or the current operating cycle. Whichever is longer, nevertheless, when we speak of working capital, we usually mean net working capital, which are current assets minus current liabilities (accounts payable, taxes and wages currently payable, short term bank borrowing and the current part of long term debt). Net working capital is a useful indication of the funds available to the company to finance its current operations, but we shall see that net working capital is not synonymous with cash on even liquidity. An understanding of working capital does, however, provide managers with an sight on both cash flow and liquidity.

ADEQUACY OF CASH AND WORKING CAPITAL:

These definition point out a crucial distinction, although cash is a part of working capital and although working capital is closely connected with cash needs, working capital is not the same thing at cash.

WORKING CAPITAL POLICIES:

Different companies adopt different policies concerning the management of working capital. As in most areas of financial management, some companies adopt very aggressive policies, some companies adopt, very conservation policies and some try to follow a middle of the road approach.

ADEQUACY OF CASH AND WORKING CAPITAL:

These definition point out a crucial distinction, although cash is a part of working capital and although working capital is closely connected with cash needs, working capital is not the same thing at cash.

WORKING CAPITAL FINANCING BY BANKS:

A commercial bank is a business organization which deals in money ie., lending and borrowing of money. They perform all types of functions like accepting deposits, advancing loans, credit creation and agency functions besides these usual functions, one of the most important functions of banks is to finance working capital requirement of firms working capital advances from major part of portfolio of banks. In determining working capital requirements of a firm, the bank takes into account its sales and production plans and desirable levels of current assets. The amount approved by the bank for its firms working capital requirement is called credit limit. Thus it is maximum fund which a firm can obtain from the bank. In the case of firms with seasonal businesses, the bank may approve separate limits, for peak season and 9

non-peak season. These advances were usually given against the security of the current assets of the borrowing firm, usually; the bank credit is available in the following forms.

Cash Credit: Under this facility, the bank specifies a pre-determined limit and the borrower is allowed to withdraw funds from the bank up to that sanctions credit limit against a bond or other security. However, the borrower cannot borrow the entire sanctioned credit in lump sum; he can draw it periodically to the extent of his requirements. Similarly, repayment can be made whenever desired during the period. Though he is no commitment charge involves interest is payable on the amount actually utilized by the borrower and not on the sanction limit.

Over Draft: Under this arrangement, the borrower is allowed to withdraw funds is excess of the actual credit balance in current account up to a certain specific limit during a stipulated period against a security within the stipulated limits any number of withdrawals is permitted for the bank overdraft facility is generally available against the securities of life insurance policies, fixed deposits receipts, government securities, states and debentures, etc. of the corporate sector. Interest is charged on the amount actually withdrawn by the borrower, subject to some minimum charges.

Loans:

Under this system, the total amount of borrowing is credited to the current

account of the borrower or released to him in cast. The borrower has to pay interest on the total amount of loan, irrespective of how much he draw loans are payable either on demand or on periodical in statements. They can also be renewed from time to time. As a form of financing, loan imply a financial disciplines on the part of the borrowers.

Bill Financing:

This facility enables a borrower to obtain credit from a bank against its

bills. The bank purchases or discounts the bills of exchange and promissory notes of the borrower and credits, the amount in his account after deducting discount under this facility, the amount provided is covered by cash credit and overdraft limit. Before purchasing or discounting the bills, the bank satisfies itself about the credit with drawer and genuineness of the bill.

10

Letter Of Credit:

While the other forms of credit are direct forms of financing in which the

banks provide funds as well as bears the risk, letter of credit is an indirect form of working capital financing in which banks assumes only the risk and the three supplier himself provide the funds. A letter of credit is the guarantor provided by the buyers banker to the seller. The bank opens letter of credit in favor of customers to facilitate his purchase of goods. This arrangement passes the risk of the supplies to the bank. The customer pays bank charges for the facility to the bank.

Working Capital Loan :

Sometimes a borrower may require additional credit in excess of

sanctioned credit limit to meet unforeseen contingencies book provide such credit though a working capital demand loan account or separate non open able cash credit account. This arrangement is presently applicable to borrowers having working capital requirement of Rs.10 corers or above. The minimum period of working capital demand loan keeps on changing working capital demand loan is granted for a fixed term on maturity of which it has to b e liquidated, renewed or rolled over. On such additional credit, the borrower has to pay a higher rate of interest more than the normal rate of interest.

METHODOLOGY:
The Methodology, have adopted for the study is the various tools, which is basically analyze critically financial position of the organization. The study is based on secondary data.

LIMITATION:
Limitation is collected from the secondary data.

OBJECTIVE:
To analysis the industry of ICICI bank especially for a period of 5 years. To ascertain the financial appraisal of working capital by using selected ratio.

11

REVIEW OF LITERATURE S.No:1

Title of the Article Name of the Author : : Project on Working Capital Finance @ SBI Babasab Patil

Objectives:
To know the project financed by SBI To know the risks involved in project financing To appraise the project using financial tools.

Statistical:
It is an indication of the extent of the extent to which short term creditors are covered by assets that are expected to be converted to cash in a period corresponding to the maturity of claims. The ideal current ratio 2:1. The firm current ratio indicate that the firm is in a position to meet its short term obligation because the ratio is in increasing trend, by observing the above table we can say that though the firm does not maintain ideal current ratio, it is still in a position to meet its current obligation.

Conclusion:
The project undertaken has helped a lot in understanding the concepts of project financing in nationalized bank with reference to state bank of India. The project financing is an important aspect which helps in increasing the profit of the bank. To sum up it would not be out of way to mention here that the state bank of India has given special inputs on project on working capital financing the conceited efforts of the management.

Source :
The data is collected from the list of website. www.google.com

12

S.No:2
The Title of The Article Author Name : : Working Capital finance Analysis of HDFC bank Neetu Hans

Objectives:

To analysis the industry especially private bank industry for the selected period of 5 years. To carryout financial and Non-financial analysis of HDFC bank as a whole for the selected period.

Methodology :
These are the most popular tools of fundamental analysis. They focus on earning, growth and value in the market. EPF P/E = Earning price per share =Price Earnings ratio

Statistical :
1) Based on the past 5 years EPS data, estimated growth % can be determine . And the estimated growth rate is 10.1% 2) Now by using the current EPS we can compound it with the estimated growth i.e. 10.1% 3) 4) 5) 6) Current EPS is 40.95 compounding of the EPS is 40.95 = 40.085. Now based on the past 5 years P/E lakhs the average of P/E value which is 20.432. Now multiplying the step 3 & 4 and we will get the estimated share price. Estimated share price is 921.176 and current share is 1033 which is higher than the estimated it means that share price is overvalued and investor should sell the share for short term. 13

Conclusion :
According to financial analysis of ICICI bank it performance in the private industry in good and expected to grow further in the near future which is good sign for investment. EPS and dividend both are increasing and its on the top in term of profit and not interest income. If we compared it with the other banks in the some industry but we cannot ignore the intrinsic value of the company which is lower the current value which shows then investor should sell the share of the company.

14

S.No:3
The Title of The Article : Report On Working Capital Finance Assistance Provided by Punjab National Bank. Author Name : Hemanth CR

Objectives:

To understand and analysis how far the theoretical issues of financial management have been practically used in the bank when the present study is made. To ascertain the financial appraisal of working capital by using selected ratio. To study the assessment of working capital involving computation of maximum permissible bank finance.

Methodology :
The report will be prepared mainly using secondary data. The contains tools use in data collection.

Statistical :
The above table shows the proportion of working capital financed by Punjab National Bank. The table shows that PNB, finance 30% of working capital range of less than 15% to 20% of working capital range between 15% 25% 40$ of working capital range is between 25% to 50% and there remaining 10% of working capital range is between 50% to 100% . Thus we can conclude that mostly 25% to 50% of working capital is financed by PNB.

15

Conclusion:
This study indicate that in order to improve the overall performance of Punjab National Bank Management must take all possible steps, review and modify various policies, financial, trading and inventory status by using sound information management system to enable management to have a close control over the various operation.

Source :
Web site : www.google.com www.prob.com

16

S.No:4

The Title of The Article Author Name

: :

Project On Working Capital Finance Chandra Mohanty

Objectives:

To study the various components working capital. To analysis the liquidity trend To appraise the utilization of current asset and current liabilities and find out short coming if any.

Methodology :Research methology is a systematic approach in management research to achieve predefined objectives. It contains periodic tools. It is basic on secondary data.

Statistical:
Ratio analysis helps to approve the firm in the term of their profitability and efficiency of performance, either individually or in relation to other firm in same industry. As future is closely related to the immediate past, ratios calculated on the basis historical financial data may be of good assistance to predict the future. e.g. Current ratio which shows a constant decline trend may be indicate the need for further introduction of long term finance in order to increase the liquidity position as the ratio analysis is concerned with all the aspect of the firm. Financial analysis is liquidity, solvency, activity, profitability and overall performance, it enables the interested person to know the financial and operational characteristic of an organization and take suitable decision.

17

Conclusion:
On the basis of data analysis on working capital finance though the net working capital is decreased, still the it is in better manageable position to maintain their current asset / current liabilities.

Source :
The data is collected from the web site. www.google.com

18

S.No: 5

The Title of The Article Author Name

: :

Project On Working Capital Finance Reena Srivastava

Objectives:

To provide reliable financial influence of a business firm. To provide financial information those assets is estimating the learning potential of the business.

Methodology :
The methodology, have adopted for the study is the various tools, which is basically analyze critically financial position of the organization. The study is based on Secondary date.

Statistical :
As we know that ideal current ratio for any firm is 2:1 . If we the current ratio of the company for last three years it has increased from 2006 to 2008. The current ratio is more than the ideal ratio. The current assets are more than its current liabilities.

These ratio shows that company carries a small amount of cash but there is nothing to be worried about the lack of cash because company has reserve, borrowing power and long term investment. In India, firms have credit limits sanctioned from banks and can easily draw cash.

19

Conclusion:
However the financial manager handles the finance matter in profitable manner in the critical challenging atmosphere the recommendation are made which word suggest the organization in formulation of healthy and strong position financially with proper management system. Through the evaluation of various percentage, rations are comparative analysis, the organization would be able to conquer its efficiencies and makes the desired changes.

Source :
www.filedocs.com

20

Bibliography Serial No1.

The title of the Article Author Name Source : : : Project on working capital finance @ SBI Babasab Patel www.google.com

Serial No2.
The title of the Article Author Name Source : : : Working capital finance analysis of HDFC bank Neetu Mans (2007) www.google.com. www.hdfcbank.com

Serial No3
The title of the Article : Report on working capital finance assistance provided by Punjab National Bank Author Name Source : : Memanth CR (2006) www.google.com, www.pnb.com

Serial No4.
The title of the Article : Author Name Source : : Project on working capital finance Babasab Patel www.google.com

Serial No5.
The title of the Article Author Name Source : : : Project on working capital finance Reena Srivastava (2009) www.filedocs.com

21

FINANCIAL STATEMENT ANALYSIS:

A financial statement analysis consists of the application of analytical tools and techniques to the data in financial statement in order to derive from them measurements and relationship that are significant and useful for decision making.

USES OF FINANCIAL STATEMENT ANALYSIS:

Financial statement analysis can be used as preliminary screening tools in the selection of stock in the secondary market. It can be uses as forecasting tools of future financial condition and results. It may be used as process of evaluation and diagnosis of managerial operating or other problem areas.

SOURCE OF FINANCIAL INFORMATION:

The financial data needed in the financial analysis come from many sources.

TOOLS OF FINANCIAL ANALYSIS:

In the analysis of financial statement, the analyst has a variety of tools available to choose the best that suits his specific purpose. In this report we will confine ourselves to ratio analysis based on information provided from financial statement such as balance sheet and profit & loss account.

22

PROFIT AND LOSS ACCOUNTS OF ICIC BANK

MARCH 2011 Income Operating income Expenses Material Consume Manufacturing Expense Persona expense Selling expenses Admin expenses Expenses capitalized Cost of sale Operating profit Other recurring income Adjusted profit Financial expense Depreciation Other written off Adjusted PBT 2816.93 305.79 4909.00 8031.72 7380.82 7.26 7388.68 16957.15 562.44 10131.51 Tax charges Adjusted PAT NM recurring items Other non-cash Adjustment Reported net profit Earnings Before Appropriation 8613.59 23 6834.63 6193.87 5156.00 3403.66 -2.17 5179.21 4024.98 -0.58 3757.55 4157.73 3110.22 1609.33 5110.21 41.17 14600.78 3890.47 134.52 1925.79 236.28 7440.42 9602.49 5552.30 305.36 5857.66 17592.57 519.50 -12354.42 1971.70 669.21 7475.63 10116.54 5407.891 330.64 5738.55 22725.93 678.60 17665.98 1830.51 3740.62 17.51 1611.73 4092.12 65.61 984.25 2995.00 115.22 2078.90 1750.60 6447.32 10276.82 5706.85 65.58 5772.43 23484.24 578.35 5194.08 1616.75 1741.63 4946.89 8305.07 3793.56 309.17 4102.73 16358.50 544.78 3557.05 32369.69 327470.36 38250.39 39467.92 28457.13 MARCH 2010 MARCH 2009 MARCH 2008 MARCH 2007

Equity dividend Preference dividend Dividend tax Retained earning

1612.58 202.28 6798.73

1337.95 164.04 5332.63

1224.58 151.21 4848.07

1227.70 149.67 3778.63

901.17 153.10 2349.39

24

RATIO ANALYSIS

CAPITAL ADEQUACY RATIO:

A measure of a banks capital it is expressed as a percentage of a banks risk weighted credit exposures. It calculated capital risk. Mar 07 11.18 Mar 08 11.56 Mar 09 10.09 Mar 10 11.93 Mar 11 13.21

Mar 7th

Mar 8th

Mar 9th

Mar 10th

Mar 11th

Capital adequacy ratio (CAR) is a ratio of banks capital to its risk. National regulators track a banks CAR to ensure that it can absorb a reasonable amount of loss and are complying with their statutory capital requirement. The formula for capital adequate ratio is (Tier 1 capital + Tier 2 capital) / risk weighted assets capital adequacy ratio is the ratio which determines the capacity of the bank in terms of meeting the time liabilities and other risks such as credit risk, operational risk, etc. In the simplest formulation, a banks capital is the Cushion for potential losses, which the banks depositor or other lenders. Her incase of ICICI bank we can see that its CAR showed a sudden dip in the year 2008 but after that it has shown a study rise for the next 2 years which is a good sign For its depositors and investors. 25

DEBT EQUITY RATIO:

A measure of a companys financial leverage calculated by dividing its total liabilities by stock holders equally. It indicates what proportion of equity and debt the company is using to finance its assets. DEBT EQUITY FUND

Mar 07 69.93

Mar 08 84.28

Mar 09 102.11

Mar 10 186.19

Mar 11 234.24

250 200 150 100 50 0 7-Mar Mar 8th Mar 9th Mar 10th Mar 11th

The debt to equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders equity and debt used to finance a companys assets. More, in case of ICICI bank we can see that the add-equity ratio has incurred during the years. This is because its equity capital showed no growth from the year 2007 to 2009 and it decreased by around Rs. 250 crores in 2010 and renewed the same for the year 2010. But its debt capital has shown and study increase over the past 5 years from this we can infer that since ICICI bank is a public sector undertaking it depends much more on debt capital rather than equity capital. 26

CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current liabilities. CURRENT RATIO CURRENT ASSET CURRENT LIABILITIES.

Mar 07 65.17
250

Mar 08 79.27

Mar 09 98.16

Mar 10 182.22

Mar 11 238.24

200

150

100

50

0 Mar 7th Mar 8th Mar 9th Mar 10th Mar 11th

A relatively high current rates is an indication that the firm is liquid and has the ability to pay its current obligations in time as and when they become due. An increase in the current rates represent improvement in the liquid position of the firm while a decrease in the current ratio indicates that there has been deterioration in the liquidity position of the firm.

27

QUICK RATIO:
Quick ratio also known as acid test or liquidity rates is more rigorous test of liquidity.

QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES

Mar 07 62.16

Mar 08 72.37

Mar 09 96.74

Mar 10 164.46

Mar 11 213.26

250 200 150 100 50 0 Mar 7th Mar 7th Mar 8th Mar 9th Mar 10th Mar 11th

INTERPRETATION:
Usually a high test ratio is an indication that the firm is liquid and has the ability to meet it current or liquid liabilities in time and on the other hand a low quick repressed that the firm liquidity position is not good.

28

DEBT TURNOVER RATIO:

Debt turnover ratio indicates the velocity of debt collection of firm. In simple working indicates the number of times average debtors are turnover during the year.

Mar 07 15.46

Mar 08 16.45

Mar 09 11.87

Mar 10 17.46

Mar 11 19.85

25

20

15

10

0 Mar 7th Mar 8th Mar 9th Mar 10th Mar 11th

Debt turnover indicates the number of times the debts are turned over during a year generally, the higher the value of debtors turnover the more efficient in the management of debtor and more liquid are the debtors.

29

ADVANCES TO ASSETS:
A high ratio of advances to assets would mean that the chances of non-performing assets formation are also high, which is not a good sceneries for a bank.

Mar 07 0.60

Mar 08 0.63

Mar 09 0.61

Mar 10 0.62

Mar 11 0.60

0.635 0.63 0.625 0.62 0.615 0.61 0.605 0.6 0.595 0 1 2 3 4 5 6

Advances to assets is also a good indicator of a firms capital adequacy. A high ratio of advances to assets would mean that the chances of non-performing assets formation are also high, which is not good scenarios for a bank. This could mean the credibility of its assets would go down. In case of ICICI bank, we can see that it is able to maintain a pretty study ratio of its advances to assets which means the credibility of its assets is good.

30

GOVERNMENT SECURITIES TO TOTAL INVESTMENTS :

The ratio of government securities to total investments showed how safe are the company investments.

Mar 07 0.81

Mar 08 0.83

Mar 09 0.83

Mar 10 0.86

Mar 11 0.80

Mar 7th

Mar 8th

Mar 9th

Mar 10th

Mar 11th

The rates of government securities to total investments have how safe are the companys investments. Here in case of ICICI bank we can see that its ratio of investments in government securities to total investment is very high and it has remained quite steady over the years with minimum fluctuations. The high rates tell that ICICI banks investment policy is consecutives and their investment are safe.

31

EARNING QUALITY:

PERCENTAGE GROWTH IN NET PROFITS.

Total 13:1 2008 2009 2010 2011

(Per cent) 0.61 0.30 0.35 081

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 2011

As per the analyses it can be seen that the net profit of the bank is going continuously from the year 2009 onwards. In the year 2009-2010 the net profit was decreased because of the substitute crises in U.S.A. and again it was measure 2009-2010 as RBI did not stopped money flow to the marks. 32

NET PROFIT TOTAL ASSETS:

Total 3-2 200 2 2009 2007 2008 2009 2010 2011

(Per cent) 0.0031 0.0042 0.0049 0.0053 0.0078

2007

2008

2009

2010

2011

Net profit to total assets is continue increasing from 2007 onwards. It means the bank is able to utilize its assets.

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INTEREST INCOME TO TOTAL INCOME

Table: 3.3 2007 2008 2009 2010 2011 (Per Cent) 7.61 7.86 8.39 8.79 8.06

8.8 8.6 8.4 8.2 8 7.8 7.6 7.4 7.2 7 2007 2008 2009 2010 2011

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NON-INTEREST INCOME TO TOTAL INCOME:

Table: 3.4 2007 2008 2009 2010 2011 (Per Cent) 0.30 0.32 0.36 0.35 0.32

0.36 0.36 0.35 0.35 0.34 0.33 0.32 0.32 0.31 0.3 0.3 0.29 0.28 0.27 2007 2008 2009 2010 2011 0.32

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(SUMMARY OF RATIOS)

RATIO Per Share Ratio

Adjusted EPS (Rs) Adjusted cash EPS (Rs) Repoted EPS (Rs) Repoted Cash EPS (Rs) Dividend Per Share Operating profit per share (Rs) Book value (excel revres ) Per Share (Rs) Book value (ind revres) Per Share (Rs) Net Operating Income Per share (Rs) Free Reseues per share ( Rs) 478.31 463.01 281.04 293.74 358.12 356.94 444.94 343.59 351.04 417.64 270.37 354.71 316.45 346.21 199.52 478.31 463.01 444.94 419.64 270.37 Mar11 Mar10 Mar09 Mar08 Mar07

44.37 49.25 44.73 49.61 14.00 64.08

34.90 10.45 36.10. 41.66 12.00 49.80

33.60 39.70 33.76 39.85 11.00 48.58

36.78 41.97 37.37 42.56 11.00 51.29

33.30 39.36 34.59 40.64 10.00 42.19

Profitability Ratios
Operating Margin (%) Gross Profit Margin (%) Net profit Margin (%) Adjusted cash margin (%) Adjusted retune on net worth (%) Repated Retunen on net worth (%) Retune on long term fund 36 22.80 21.06 15.91 17.52 9.27 9.35 42.97 16.95 15.06 12.17 13.64 7.53 7.79 44.72 14.13 12.36 9.74 11.45 7.55 7.55 56.72 14.45 13.33 12.99 11.41 10.51 10.81 11.81 12.30 8.80 8.94 12.31 12.79

62.34 82.46

HEVERAGE RATIO:
Long term debt /Equity Total debt / Equity Owners fund as % of Total source Fixed asset tuners ratio 19.62 3.55 20.35 4.60 18.46 15.95 9.52 5.15 5.61 4.52 4.10 3.91 0.01 4.42 0.01 5.27 0.01 4.50

LIQUIDITY RATIO:
Current Ratio Current Ratio (inc st loan) Quick ratio 1.73 0.11 15.86 1.94 0.13 14.70 0.78 0.13 5.94 0.72 0.10 6.42 0.61 0.08 6.04

PAYOUT RATIO:
Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio Cash earnings retention ratio 35.23 31.76 64.49 68.01 37.31 32.33 61.40 66.70 36.60 33.12 33.89 31.00 29.08 28.84 63.23 66.35 64.80 68.87 70.51 70.22

COVERAGE RATIO:

Adjusted cash flow time total debt Financial charges coverage ratio Financial charges coverage ratio (pst tax)

39.77 0.43 1.34

44.79 0.33 1.26

49.41 52.34 65.12 0.25 1.20 1.25 1.20 1.25 1.22

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COMPONENT RATIO:
Material cost component (%earning) Selling cost component Export as percent of total sales Import comp in law material consumed Long term assets/total assets 0.94 0.83 0.80 0.72 1.74 0.75 4.43 0.78 6.12 0.80

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CONCLUSION:
The balance sheet along with the income statement is an important tool for investors and many other parties who are interested in it to gain insight into a company and its operation. The balance sheet is a snapshot at a single point of time of the companys accounts. Covering its assets, liabilities and shareholders equity. The purpose of the balance sheet is to give users or idea of the companys financial position along with displaying what the company owns and owes. It is important that all investors know how to use, analyze and read balance sheet. Profit and loss account tells the net profit and net loss of a company and also appropriation. In the case of ICICI Bank, during fixed 2008 the bank continued to grow and diversify its assets base and revenue streams. Trend analysis of profit and loss account and balance sheet shows the % change in items of Profit and loss account and balance sheet i.e. % change in 2009 from 2007 and % change in 2008 from 2007. It shows that all items are increased mostly but increase in this year is loss than as compared to increase in previous year. In profit and loss accounts, all items like interest income. Non-interest income, interest expenses operating expenses, operating

profit, profit before tax and after tax is incurred that in mostly cases it is loss than from previous year but in some items like interest income, interest expenses, provision % increase is more. Some items like tax, depreciation, lease income is decreased. Similarly in balance sheet all items like advances, cash, liabilities, and deposits are increased except borrowing switch is decreased % increase in some item is more than previous year and in some items it is less.

Ratio analysis of financial statement shows that banks current ratio is better than the quick ratio and fixed/worth ratio. It means bank has invested more in current assets than the fixed assets and liquid assets. Thus, the ratio analysis and trend analysis show that ICICI banks financial position is good. Banks profitability is increasing but not at high rate. Banks liquidity position is fair but not good because bank invests more in current assets than the liquid assets. As well all know that ICICI bank is on the first position among the entire private sector bank of India in all areas but it should pay attention or its profitability and liquidity .Banks position is stable.

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