OPERATING RATIO

Operating cost/Net Operating ratio= sales

Table no.1 Year Operating cost (unit) Net sales (Rs) Operating ratio 2009 -2010 278841528.94 11164912649.63 2.49 % 2010- 2011 343207061.81 17283722558.70 1.98 % 2011-2012 426008796.03 18987403920.51 2.24 %

*100

17283722558 11164912649

18987403920

Operating Cost Net sales

278841528

343207061

426008796

Year 2010

Year 2011

Year 2012

OPERA TINGRA TIO

Ratio 2010 2.49 1.98 2.24 Ratio 2011 Ratio 2012

Year 2010

Year 2011

Year 2012

Interpretation: A ratio that shows the efficiency of a company's management by comparing operating expense to net sales As in Fy 2009-10 operating ratio is 2.49. As in Fy 2010-11 the ratio declines by 0.51 % because net sales & operating cost increase as compared to the last year. In fy 2011-12 the ratio increases by 0.26 %. When operating ratio is higher means as we can see in Fy 2009-10 the ratio is less favorable because the operating ratio should be low enough to leave a portion of sales to give a fair return to investors.

Return On Investment: Operating Profit/ Capital Employed

Ratio/ Year Operating profit Capital employed Return on investment

2009-2010 278841528.94 570517915.01 0.48

2010 -2011 343207061.81 907168645.47 0.37

2011-2012 426008796.03 1249390462 0.34

Interpretation: This is the ratio between net profits and capital employed. The ratio is generally calculated as percentage multiplying with 100. The net profit is decreases due to the decreases in the income from services. As Compared to capital employed. From last three years ROI Decreases Continuous.

Activity Ratio: Fixed Assets Turnover Ratio: Net Sales / Net Fixed Assets Ratio/Year 2010 2011 2012

Net Sales Net Fixed Assets Fixed Assets Turnover Ratio

11164912649.63 682963492.06 16.34

17283722558.70 1055033367.06 16.38

18987403920.51 1402669650.56 13.53

Interpretation:

As we can see that the investment of fixed assets have pushed up sales very efficiently because in all the three years sales are high as compared to fixed assets. As per shown in balance sheet the secured loan & the unsecured loan have increased in all the three years. In 2011 the ratio is 16.38 which means bank is overtrading. In 2010 & 2012 the ratio Therefore we can say that investment of fixed assets has been judicious to the bank.

Capital Turnover Ratio: Capital Turnover Ratio= Sales / Net Assets Ratio/ Year Sales Net assets Capital turnover ratio 2010 11164912649.63 682963492.06 16.34 2011 17283722558.70 2061344239.33 8.38 2012 18987403920.5 1055033367.06 17.99

Interpretation: In 2011 the ratio is 8.38 which show the inefficiencies utilization of working capital they have invested in fixed assets but have not got sales as expected. Generally a high working capital turnover ratio is better. A low ratio indicates inefficiency in utilization of working capital. In 2011 net assets has increased more with sales so the ratio has been decline. As per the graph when the sales are low the ratio are high. In year 2012 the difference between the sales and net assets are very less so the ratio also increases.

Findings
1. Operating ratio of bank should not be stable because of various issues like management policy related to the operating Expenses.
2. The return on investment is increased from 0.32 to 0.42 compared with the previous year. Both the profit and shareholders funds increase cause an increase in the ratio

Suggestions
1. Bank Should Try to implement effective policy to control the expenses that helps to reduce expenses and increases profit.