3 Ratio Analysis

INTRODUCTION
Financial Analysis:
The term financial analysis refers to the process of determining

financial strength and weakness of the firm by establishing strategic
relationship between the items of the balance sheet, profit & loss account
and other operative data. In the words of Myers, Financial statement
analysis is largely a study of relationship among the various financial factors
in a business as disclosed by a simple set of statement among and a study
of the trend of these factors as shown in a series of statements.
The first task of the true financial analysis is to select the information
relevant to the decision under consideration from the total information
contained in the financial statements. The second task is to arrange them in
a way to highlight significant relationships. The final step is interpretation
and drawing of inferences and conclusions.
The nature of the analysis will defer depending on the purpose of

analyst. Trade creditors are interested in the firms ability to meet their
climes very short period of time. The suppliers of long term debt, on the
other hand are concerned with true firms long term solvency and survival
the inverters, how have invested their money in the firms shares are most
concerned about the firms earning and stability. Finally management of the
firm would be interested in every aspect of the financial analysis.
The objective of this project is to establish a meaningful interrelation

among the various components of the financial statement through financial
analysis by pressing the technique of ratio analysis. It is further sought to
1
PBR VISVODAYA INSTITUTE OF TECHNOLOGY&SCIENCE
highlight the company position with regard to the following aspects with the
help of these ratios.
Short-term Financial Solvency:
Is shows the firms ability to meet its current or short-term obligations

as and when these become due. This can be ascertained through the
liquidity position of the firm.
Long-term financial solvency:
It refers to the ability of the firm to meet its long-tem obligations and also
future prospects of raising debts.
Profitability in relation to sales:
It portrays the profit margin enjoyed by the company in relation to sales.
Profitability in relation to investment:
It shows the returns earned by the company on its investment. It also

highlights the efficiency of the management and the profitability of the
company for the prospective investor.
Overall efficiency:
This pasteurizes the efficiency of the company with regard to the

several aspects liquidity, profitability etc. It acts as a general indicator of
efficiency of the management, profitability to an investor and security to a
creditor.
2
INDUSTRY PROFILE
BANKING INDUSTRY
A bank is a financial institution and a financial intermediary that

acceptsdeposits and channels those deposits into lending activities, either
directly orthrough capital markets. A bank connects customers that have
capital deficits tocustomers with capital surpluses.
Due to their critical status within the financial system and the
economygenerally, banks are highly regulated in most countries. They are
generallysubject to minimum capital requirements which are based on an
international setof capital standards, known as the Basel Accords.
Banking in India originated in the last decades of the 18th century. The
firstbanks were The General Bank of India, which started in 1786, and Bank
ofHindustan, which started in 1790; both are now defunct. The oldest bank
inexistence in India is the State Bank of India, which originated in the Bank
ofCalcutta in June 1806, which almost immediately became the Bank of
Bengal.
This was one of the three presidency banks, the other two being the Bank of
Bombay and the Bank of Madras, all three of which were established
undercharters from the British East India Company. For many years the
Presidencybanks acted as quasi-central banks, as did their successors.
The three banksmerged in 1921 to form the Imperial Bank of India, which,
upon India'sindependence, became the State Bank of India in 1955.
3
Structure of Indian Banking
As per Section 5(b) of the Banking Regulation Act 1949: Banking means
theaccepting, for the purpose of lending or investment, of deposits of money
fromthe public, repayable on demand or otherwise, and withdawal by
cheque, draft,order or otherwise.
All banks which are included in the Second Schedule to the Reserve Bank
ofIndia Act, 1934 are scheduled banks. These banks comprise Scheduled
Commercial Banks and Scheduled Cooperative Banks.Scheduled Commercial
Banks in India are categorised into five different groupsaccording to their
ownership and / or nature of operation. These bank groups
are:
(i) State Bank of India and its Associates,
(ii) Nationalised Banks,
(iii) Regional Rural Banks,
(iv) Foreign Banks and
(v) Other Indian Scheduled Commercial Banks (in the private sector).
Besides the Nationalized banks (majority equity holding is with the

Government), the State Bank of India (SBI) (majority equity holding being
with the Reserve Bank of India) and the associate banks of SBI (majority
holding being with State Bank of India), the commercial banks comprise
foreign and Indian
private banks. While the State bank of India and its associates,
nationalizedbanks and Regional Rural Banks are constituted under
respective enactments ofthe Parliament, the private sector banks are
banking companies as defined in theBanking Regulation Act. These banks,
along with regional rural banks, constitute.
the public sector (state owned) banking system in India.
4
The Public Sector Banks in India are back bone of the Indian financial
system.The cooperative credit institutions are broadly classified into urban
credit cooperatives and rural credit cooperatives. Scheduled Co-operative
Banks consist of Scheduled State Co-operative Banks and Scheduled Urban
Co-operative
Banks.
Regional Rural Banks (RRBs) are state sponsored, regionally based and
ruraloriented commercial banks. The Government of India promulgated the
Regional Rural Banks Ordinance on 26th September 1975, which was later
replaced by the Regional Rural Bank Act 1976. The preamble to the Act
states the objective to develop rural economy by providing credit and
facilities for the development of agriculture, trade, commerce, industry and
other productive activities in the rural areas, particularly to small and
marginal farmers, agricultural labourers,artisans and small entrepreneurs.
Bank Nationalization
The Government of India issued an ordinance and nationalised the 14

largest commercial banks with effect from the midnight of July 19, 1969.
Within two weeks of the issue of the ordinance, the Parliament passed the
Banking. Companies (Acquisition and Transfer of Undertaking) Bill, and it
received thepresidential approval on 9 August 1969.
The need for the nationalisation was felt mainly because private commercial
banks were not fulfilling the social and developmental goals of banking
which are so essential for any industrialising country.
Banking Regulation Act in 1949 and the nationalisation of the largest bank,
theState Bank of India, in 1955, the expansion of commercial banking had
largelyexcluded rural areas and small-scale borrowers.
A second dose of nationalization of 6 more commercial banks followed in

1980.
5
The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of nationalization,
theGovernment of India controlled around 91% of the banking business of
India.Later on, in the year 1993, the government merged New Bank of India
withPunjab National Bank. It was the only merger between nationalized
banks andresulted in the reduction of the number of nationalised banks from
20 to 19. Afterthis, until the 1990s, the nationalised banks grew at a pace of
around 4%, closer to the average growth rate of the Indian economy.
List of Nationalised Banks in India in 2012:
1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. Indian Bank
11. Indian Overseas Bank
12. Oriental Bank of Commerce
13. Punjab and Sind Bank
14. Punjab National Bank
15. State Bank of Bikaner & Jaipur
16. State Bank of Hyderabad
17. State Bank of India (SBI)
18. State Bank of Indore
19. State Bank of Mysore
20. State Bank of Patiala
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21. State Bank of Travancore
22. Syndicate Bank
23. UCO Bank
24. Union Bank of India
25. United Bank of India
26. Vijaya Bank
Reserve Bank of India has, vide its letter no DBOD. BP.

1630/21.04.152/2004-05dated April 15, 2005 confirmed that IDBI Ltd. (since
renamed as IDBI Bank Ltd.) may be considered as Government-owned bank.
Ministry of Finance has vide itscircular no. F.No. 7/96/2005-BOA dated
December 31, 2007 advised Secretariesof all Ministries/Departments of
Government of India that IDBI Bank Ltd. is to be treated on PAR with
Nationalised Banks/State Bank of India by Govt.Departments/Public Sector
Undertakings/other entities for all purposes,including
deposits/bonds/investments/guarantees etc. and Government
business.
Reserve Bank of India

The Reserve Bank of India is the central bank of the country. Central banks
are arelatively recent innovation and most central banks, as we know them
today,were established around the early twentieth century.
The Reserve Bank of India was set up on the basis of the recommendations
of theHilton Young Commission. The Reserve Bank of India Act, 1934 (II of
1934) provides the statutory basis of the functioning of the Bank, which
commencedoperations on April 1, 1935.
The Bank was constituted to

Regulate the issue of banknotes
Maintain reserves with a view to securing monetary stability and
7
To operate the credit and currency system of the country to its
advantage.The Bank began its operations by taking over from the
Government the functionsso far being performed by the Controller of
Currency and from the Imperial Bankof India, the management of
Government accounts and public debt. The existingcurrency offices at
Calcutta, Bombay, Madras, Rangoon, Karachi, Lahore andCawnpore (Kanpur)
became branches of the Issue Department. Offices of theBanking
Department were established in Calcutta, Bombay, Madras, Delhi
andRangoon. Burma (Myanmar) seceded from the Indian Union in 1937 but
the Reserve Bankcontinued to act as the Central Bank for Burma till
Japanese Occupation ofBurma and later upto April, 1947. After the partition
of India, the Reserve Bankserved as the central bank of Pakistan upto June
1948 when the State Bank ofPakistan commenced operations.
The Bank, which was originally set up as ashareholder's bank, was

nationalised in 1949.The Reserve Bank of India was nationalised with effect
from 1st January, 1949 onthe basis of the Reserve Bank of India (Transfer to
Public Ownership) Act, 1948.
All shares in the capital of the Bank were deemed transferred to the
CentralGovernment on payment of a suitable compensation.An interesting
feature of the Reserve Bank of India was that at its very inception,the Bank
was seen as playing a special role in the context of development, functions
like Monetary Policy, Bank Supervision and Regulation, and Overseeing the
Payments System and onto developing the financial markets.
Regulation of Banks by RBI
The Reserve Bank of India has been empowered under the Banking
RegulationAct, 1949 to regulate and supervise banks' activities in India and
their branchesabroad While the regulatory provisions of this Act prescribe
the policy framework to be followed by banks, the supervisory framework
8
provides themechanism to ensure banks' compliance with the policy
prescription.
While the Department of Banking Operations and Development

exercis esregu latorypowers in respect of commercial banks and Local Area
Banks (LABs),Regional Rural Banks/District and State Co-operative Banks
and Urban CooperativeBanks are regulated by Rural Planning and Credit
Department andUrban Banks Department, respectively.Department of
Banking Operations and DevelopmentThe Department of Banking
Operations and Development is entrusted with the responsibility of
regulation of commercial banks and LABs under the regulatory provisions
contained in the Banking Regulation Act, 1949 and the Reserve Bank of India
Act, 1934 and other related statutes besides enunciation of banking polices.
It's functions broadly relate to prescription of regulations for compliance with
various provisions of Banking Regulation Act on establishment of banks such
as licensing and branch expansion, maintenance of statutory liquidity
reserves, management and operations, amalgamation, reconstruction and
liquidation of banking companies. The other important activities of the
Department include approval for setting up of subsidiaries and undertaking
of new activities by commercial banks.
Urban Bank Department RBI

The Urban Banks Department of the Reserve Bank of India is vested with
theresponsibility of regulating and supervising primary (urban) cooperative
banks,which are popularly known as Urban Cooperative Banks (UCBs). While
overseeing the activities of 1926 primary (urban) cooperative banks, the
Urban Banks Department performs three main functions : regulatory,
supervisory and developmental. The Department performs these functions
through its Regional offices.
Regulatory Functions
(i) Licensing of New Primary (Urban) Cooperative Banks
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(ii) Licensing of Existing Primary (Urban) Co-operative Banks
(iii) Branch Licensing
(iv) Statutory Provisions
The regulatory functions of Urban Banks Department relate to

monitoringcompliance with the provisions of the Banking Regulation Act,
1949 (As Applicable to Cooperative Societies) by urban cooperative banks.
These provisions include :
a. Minimum Share Capital

Under the provisions of Section 11 of the Banking Regulation Act, 1949
(AsApplicable to Cooperative Societies)
b. Maintenance of CRR and SLR
As in the case of commercial banks, primary (urban) cooperative banks are
also required to maintain certain amount of cash reserve and liquid assets.
The scheduled primary (urban) cooperative banks are required to maintain
with the Reserve Bank of India an average daily balance - in terms of Section
42 of the Reserve Bank of India Act, 1934. Non-scheduled (urban)
cooperative banks, - under the provision of Section 18 of Banking Regulation
Act, 1949 (As Applicable to Cooperative Societies).
Supervisory Functions
To ensure that the UCBs conduct their affairs in the interests of the
depositors and also comply with the regulatory framework prescribed by the
Reserve Bank of India, the department undertakes on site inspection of
these banks with frequency ranging from one to two years depending upon
the financial condition / status of banks. The thrust of supervision is to
ensure that banks' affairs are not conducted in a manner detrimental to the
depositors' interest and also to assess the solvency of the bank vis-N-vis its
liabilities, besides examining the banks' compliance with the existing
regulatory framework. The department also undertakes off-site surveillance
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of scheduled banks and non-scheduled banks with a deposit base of Rs 100
crore and above based on a set of quarterly and annual returns.
Developmental Functions
With a view to extending institutional credit support to tiny and cottage

units, the Reserve Bank of India grants refinance facilities to urban
cooperative banks under the provisions of Section 17 of the Reserve Bank of
India Act, 1934. The refinance is given at the Bank Rate.
Training is imparted to the middle and top management of urban

cooperative banks through College of Agricultural Banking, Pune.
Sections / Divisions of Urban Banks Department
1. Administration
This Section handles staff matters of the department.
2. New Bank Licensing and Branch Licensing

This section frames policies for issue of bank licence /allots centres for
opening of branches and authorizes regional offices to take action
accordingly. It also deals with conversion of cooperative credit societies into
urban banks.
3. Returns
Returns section at each of the regional offices is responsible for monitoring
receipt of various statutory returns under the provisions of Banking
Regulation Act, 1949, (AACS) and Sec 42 of Reserve Bank of India Act 1934
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in case of scheduled UCBs. They also verify compliance with the provisions
of the Acts, ibid, and take suitable action against non-compliant UCBs.
4. Banks Supervision
This division arranges inspection of urban cooperative banks through

regionaloffices and closely monitors the action taken by the UCBs to rectify
theirregularities / deficiencies pointed out in inspection reports. The division
alsoassociates itself with theRCS of respective states in rehabilitation of
financiallyweak UCBs.
5. Banking Policy
This section frames policies on prudential norms, investment policies,

monitoring priority sector targets, refinancing, issue of directives on interest
rates, CRR/SLR, etc. Policies relating to para banking activities such as
merchant banking, hire purchase, leasing, insurance business, etc. are also
formulated by this division. Besides, the section also attends to compliance
with the directions of Local Board / Central Board / BFS, furnishes requisite
material for Bank's publications such as Annual Report, Report on Trend and
Progress of Banking in India, Currency and Finance, etc.
Banking
The Indian banking system emerged relatively unscathed from the global
economic downturn of 200809. While credit growth slowed down, banks
were able to control the level of nonperforming assets (NPAs), thanks partly
to the Reserve Bank of Indian allowing onetime restructuring of accounts.
NPAs as a proportion of gross advances increased slightly from 2.3 per cent
as on March 31, 2009 and 2.5 per cent as the end of March 31, 2010. The
government has been supporting the growth of public sector banks by
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infusing capital as per requirement.
The government is expected to continue to maintain its strong support for

the banking system, while simultaneously imposing stringent prudential
norms to ensure its orderly growth. Aggregate yoy bank credit growth was
22 per cent as of the first week of November 2010, primarily supported by
large borrowings for 3G spectrum and broadband wireless access auctions.
Despite hike in deposit rates by 50 bps (on an average) in the first half of
201011, the deposit growth rate has been 1415 percent till 5th November
2010. This is primarily because of investors preferring to channelize their
savings to other avenues on account of negative real interest rates on bank
deposits. For inflows to revive, the deposit rates will need to be more
attractive. Realizing this, several banks increased their deposit rates by a
further 25 75 bps in the first week of October 2010.
13
COMPANY PROFILE
CREATING BANKING HISTORY

Kotak Mahindra group, established in 1985 by Uday Kotak, is an Indian
financial services conglomerate. In February 2003, Kotak Mahindra Finance
Ltd. (KMFL), the Groups flagship company, received a banking licence from
the Reserve Bank of India (RBI). With this, KMFL became the first non-
banking finance company in India to be converted into a bank Kotak
Mahindra Bank Limited (KMBL).
Kotak Mahindra Bank is an Indian private sector banking headquartered in

Mumbai, Maharashtra, India. In February 2003, Reserve Bank of India (RBI)
gave the licence to Kotak Mahindra Finance Ltd., the group's flagship
company, to carry on banking business.
14
It offers a wide range of banking products and financial services for
corporate and retail customers through a variety of delivery channels and
specialized subsidiaries in the areas of personal finance, investment
banking, life insurance, and wealth management.
In a study by Brand Finance Banking 500, published in February 2014 by the

Banker magazine (from The Financial Times Stable), KMBL was ranked 245th
among the worlds top 500 banks with brand valuation of around half a
billion dollars ($481 million) and brand rating of AA+.
Kotak Mahindra Bank Ltd is one of the fastest growing bank and among the
most admired financial institutions in India. The Bank offers transaction
banking, operates lending verticals, manages IPOs and provides working
capital loans. They have one of the largest and most respected Wealth
Management teams in India, providing the widest range of solutions to high
net worth individuals, entrepreneurs, business families and employed
professionals. The Bank has over 245 branches, a customer base of over 8
lakh and has spread all over India.
The Bank offers complete financial solutions for infinite needs of all
individual & non-individual customers depending on the customer's need -
delivered through a state of the art technology platform. They also offer
investment products like Mutual Funds, Life Insurance, retailing of gold coins
and bars etc. Apart from Phone banking and Internet banking, they offer
convenient banking facility through Mobile banking, SMS services, Netc@rd,
Home banking and Bill Pay facility among others.
The Depository services offered by the Bank allows the customers to hold
equity shares, government securities, bonds and other securities in
electronic or DE mat forms. Their Salary 2 Wealth offering provides
comprehensive administrative solutions for Corporates with features such as
easy and automated web based salary upload process thereby eliminating
the paper work involved in the process, a dedicated relationship manager to
service the corporate account, customized promotions and tie - ups and
15
many such unique features. The Bank offers comprehensive business
solutions for the business community that includes the Current Account,
Trade Services, Cash Management Service and Credit Facilities. Their
Wholesale banking products offer business banking solutions for long-term
investments and working capital needs, advice on mergers and acquisitions
and equipment financing.
The Bank addresses the entire spectrum of financial needs of Non-Resident

Indians. Their tie-up with the Overseas Indian Facilitation Centre (OIFC) as a
strategic partner gives them a platform to share their comprehensive range
of banking & investment products and services for Non Resident Indians
(NRIs) and Persons of Indian Origin (PIOs). The bank has overseas
subsidiaries with offices in Mauritius, London, Dubai, Singapore, New York &
San Francisco. The overseas subsidiaries are mainly engaged in investment
advisory and investment management of funds, Equity & Debt Trading,
management of GDR/ FCCB issuances, broker & broker dealer activities and
investments.
Kotak Mahindra Bank Ltd was incorporated in the year 1985 with the name
Kotak Capital Management Finance Ltd. In April 8, 1986, the company's
name was changed Kotak Mahindra Finance Ltd. They started bill
discounting activity. In the year 1987, they entered into lease and hire
purchase market. In the year 1990, they started car finance division and
during next year, they started investment banking division. Alsom they took
over FICOM, one of India's largest financial retail marketing networks. In the
year 1994, the company formed Kotak Mahindra International in Mauritius
and opened an office in Dubai. They formed Kotak Mahindra (UK) formed
with office in London. In the year 1996, the car finance business was hived
off into a separate company, namely Kotak Mahindra Primus Ltd and Ford
Credit took a 40% stake in Kotak Mahindra Primus. In the year1998, they
formed Kotak Mahindra Inc.
With office in New York. In the year 2001, Kotak Securities Ltd became a
subsidiary company. In February 2003, the company was given the license to
16
carry on banking business by the Reserve Bank of India (RBI). This approval
created banking history since Kotak Mahindra Finance Ltd is the first non-
banking finance company in India to convert themselves into a bank as
Kotak Mahindra Bank Ltd. In March 2003, they commenced banking
operations. The Bank started their operations in New Delhi by inaugurating a
branch. They entered into ATM sharing agreement with UTI Bank (now
known as Axis Bank), in which the Bank customer's were free to access
around 800 ATM's.
They unveiled several home finance products options that include Home
Loan, Home Equity Loan, Home Loan Transfer and Home Improvement
Loans. Also, they launched online remittance services called FUNDS to HOME
for Non-resident Indians. In January 2005, the Bank opened 29th retail-
banking branch at Mehsana in Gujarat. In February 2005, they launched
Rajajinagar extension counter in Bangalore and launched free Mobile
Banking facility. Also, they launched their branch at Chennai, Tamilnadu. In
February 23, 2005, they opened their retail-banking branch in the business
capital of Madhya Pradesh. In March 2005, they opened their eighth retail-
banking branch at Napean Sea Road in Mumbai.
In May 2005, the Bank opened new retail-banking branch at Parry's Corner in
Chennai. In June 2005, they opened two retail-banking branches in Delhi at
Safdarjung Enclave and Punjabi Bagh. In October 4, 2005, the Bank acquired
40% stake in Kotak Mahindra Primus Ltd (KMP) held by Ford Credit
International (FCI) thereby giving the Bank and their subsidiary, complete
ownership of KMP. Simultaneously, they also sold their stake in Ford Credit
Kotak Mahindra Ltd (FCKM) to FCI. In September 2006, the Bank acquired
51% of the paid up Share capital of Kotak Mahindra Securities Ltd (KMSL) by
way of preferential allotment of shares by KMSL to the Bank. In March 2007,
the Bank entered into a subscription agreement with International Finance
Corporation, whereby the Bank will issue Upper Tier II Subordinated Bonds
17
by way of Debentures of the value of USD 45 million with the final maturity
of over 15 years.
During the year 2007-08, the Bank increased 73 new full fledged branches &
179 new ATMs, taking the network size to 178 branches and 314 ATMs. They
added n new products & services like Gold debit card, smart fee (a fee
solution for Educational Institutions), a GPRS based mobile banking, Bill
presentment and payment facility, online term deposits etc. to meet the
needs of the customers. In September 2007, Kotak Mahindra Icn set up a
branch in San Francisco. During the year 2008-09, the Bank added 39
branches and 74 ATMs taking the total network size to 217 branches and
387 ATMs (including 175 off site ATMs).
They introduced several new features like, Online password, two factor
authentication, improved features for security of fund transfers, e-tax
payment facility, auto payment of bills, PIN based IVR. During the year 2009-
10, the Bank 32 branches, 77 off site and 28 onsite ATMS taking the total
number of branches to 249 Nos, 252 Nos off-site ATMs and 240 Nos on-site
ATMs. They had a debit card base of 829,876. They opened a representative
office in Dubai. Also, they entered Ahmedabad Commodity Exchange as
anchor investor. In June 2010, the Bank entered into an agreement with
Sumitomo Mitsui Banking Corporation, Japan for a preferential issue of 1.64
crore shares at Rs 833 per share which amounts to approximately 4.5%
stake on a post-issue basis for Rs 1,366 crore.
During the year 2010-11, the Bank added 72 branches and 246 ATMs and
ended the year with 321 Branches and 710 ATMs, and thereby increasing
their presence to 183 locations. They also added over half a million new
customers this year across core banking products of savings and checking
account, term deposits, overdrafts and non resident accounts. During the
year, the Bank's Treasury started Correspondent Banking Division to build
and leverage on relationships with offshore banks for improving quality and
international reach for their customers. Also, the Bank entered into a
strategic arrangement with PVR Cinemas, one of the elite name in
18
entertainment industry, to distribute credit card products aimed at upmarket
customers.
In August 2011, the Bank entered into business cooperation arrangement

with CIMB Group Sdn Bhd, Malaysia (CIMB). In October 2011, Kotak Mahindra
Capital Company Ltd, a subsidiary of the Bank and Evercore Partners, global
investment banking advisory firm headquartered in New York, USA, entered
into an exclusive strategic partnership for cross-border M&A advisory
services between India and. the United States, the United Kingdom and
Mexico. The Bank is looking for possible acquisition targets in the banking,
brokerage or asset management space to expand their presence in India.
The lender is also looking to expand their presence by increasing their
branch network to 500 by 2012 from the current 300. Also, the Bank plans to
open their maiden overseas branch in Singapore and has applied for a
licence to the Indian central bank.
The Complete Bank

At kotak mahindra bank we are address the entire spectrum of financial
needs of individuals and corporates. We have the products, the experince,
the infrastructure and most importantly the commitment to delivar
pragmatic, and to and solution that really work.
A licences authorizing the bank to carry on banking business has been

abtained from the RESERVE BANK OF INDIA (RBI) in terms of section 22 of
the banking regulation act 1949.it must be distinctly understood, however,
that in issuing licences, the RESERVE BANK OF INDIA (RBI) thus not under
take any responsibility for the financial soundness of the bank of the
currentness of the any of the statement made or opinion expressed in the
connection
Yea
Milestone
r
19
198
Kotak Mahindra Finance Limited commences bill discounting business
5
198 Kotak Mahindra Finance Limited enters leasing and hire purchase
7 business
199
Starts the auto finance division for financing passenger cars
0
199
Launches investment banking business
1
199
Enters the funds syndication business
2
Commenced joint venture with Goldman Sachs Group Inc.

199
5 Investment Banking division incorporated into a separate company -
Kotak Mahindra Capital Company
The auto finance business is hived off into a separate company -

Kotak Mahindra Prime Limited (formerly known as Kotak Mahindra
199 Primus Limited).
6
Kotak Mahindra takes a significant stake in Ford Credit Kotak
Mahindra Limited, for financing Ford vehicles.
199 Launches mutual fund through Kotak Mahindra Asset Management

8 Company (KMAMC).
200 Kotak Securities launches online broking business (now
0 www.kotaksecurities.com[8]).
200 Launches insurance business, partners Old Mutual from South Africa
1 to form Kotak Mahindra Old Mutual Life Insurance Ltd.
200 Kotak Mahindra Finance Ltd. (KMFL), the group's flagship company,
20
receives banking license from the Reserve Bank of India (RBI). With
3 this, KMFL becomes the first non-banking finance company to be
converted into a commercial bank - Kotak Mahindra Bank Ltd.
200 Enters alternate assets business with the launch of a private equity
4 fund.
200 Buys out Goldman Sachs' equity stake in Kotak Mahindra Capital
6 Company and Kotak Securities Ltd
200 Launched a Pension Fund under India's National Pension System
8 (NPS)
Kotak Mahindra Bank Ltd. opens a representative office in Dubai
200
Kotak Mahindra Bank Ltd. becomes anchor investor in Ahmedabad
9
Commodities Exchange (ACE)
201 ING Vysya Bank has merged with Kotak Mahindra Bank with effect
5 from 1 April 2015.
RESEARCH METHODOLOGY & DESIGN
OBJECTIVES OF THE STUDY:
1. To measure the overall financial position of KOTAK MAHINDRA

BANK PRIVATE LIMITED.
2. To study the important aspects like liquidity,. Leverage, activity

and profitability of the company through ratio analysis.
3. To find out the operating efficiency of the company.
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4. To suggest measures for improving the performance of the
company in the light of the above.
NEED OF THE STUDY
The study has great significance and will provide benefits to

various parties who directly or indirectly interact with the company.
It is important because it is beneficial to the employees and offer

motivation by showing how actively they are contributing for the
companys growth.
It is beneficial to the management of the company as it provides

a clear-cut picture with regard to the liquidity, profitability, leverage
and activity ratios.
22
SCOPE OF THE STUDY
The study is confirmed to the management of RATIO ANALYSIS in

PAVAN TRADERS . The main aim of the study is to assess the
necessary of managing Current Assets and Current liabilities .
23
METHODOLOGY
SOURSES OF DATA:
The data has been collected in two ways as from
DATA COLLECTION
METHODS
PRIMARY DATA SECONDARY

DATA
Primary Data:
The primary data was collected mainly through interactions and

discussions with the companys executives.
24
Secondary Data:
Secondary data can be collected through annual reports and

documents.
LIMITATIONS
Every study is conducted with some limitations. This study is no

exception. The limitations are due to very busy schedule of the higher
authorities concerned. The availability of them was difficult in order to
hold discussions related to the study.
This study was conducted within a period of 6weeks. So the

study may not be detail or full pledged.
There was a major emphasis on secondary data rather than

primary data. The study is done based on the annual reports of the
company An overall perspective of revisiting of Ratio Analysis was
taken, without going into a detailed analysis.
25
CONCEPTUAL FRAME WORK
RATIO ANALYSIS:
A ratio is the numerical or quantitative relationship between two

variable which are compared RATIO ANALYSIS is essentially concerned
with the calculation of relationship which after proper identification
and interpretation may provide information about the operations and
state of affairs of a business enterprise.
Financial ratio analysis is the calculation and comparison of ratios

which are derived from information in a companys financial
statements.
Ratio analysis is the process of determining and interpreting

numerical relationship based on financial statements. A ratio is a
statistical yard stick that provides a measure of the relationship
between variables of figures. This relationship can be expressed as a
26
percentage on as quotient. Ratio analysis is a powerful tool of financial
analysis. In finance analysis ratio is used as a bench mark of a firm.
The absolute accounting figures reported in the financial

statements do provide a meaning full understanding of the
performance and financial position of the firm. Ratio help to
summarized large quantities of financial data and to make qualitative
judgment about the firms financial performances.
Ratio analysis is the systematic use of ratio to interpret the

financial statement so that strength and weakness of firm as well as
its historical performance and current position can be determined.
DEFINITION OF RATIO:
According to professor spring field, professor .mass and Merriam
defined formally as the indicted quotient of two mathematical
expression and as the relationship between two more variable
SCOPE OF FINANCE FUNCTION:
Firms create manufacturing capacities for the production of

goods. Some provide services to customers. They sell their goods or
services to earn profit. They raise funds to acquire manufacturing and
other facilities, thus, the three important activities of a business firm
are;
Production
Marketing
Finance
27
A firm secures whatever capital it needs and employs it (finance
activity) in activities that generate returns on invested capital
(production and marketing activities)
MAJOR AREAS OF FINANCE FUNCTIONS:
A Firm perform finance functions simultaneously and

continuously in the normal course of the presences. They do not occur
in sequence. Finance functions call for skillful planning, control and
execution of firms activity
1. Investment Decision:
It relates to the allocation of capital involving decision to commit

funds to long-term assets which would yield benefits in future. It is one
significant aspect in the task of measuring the prospective profitability
of new investments, future benefits are difficult to measure and
cannot be predicated with continuity because of the uncertain future
capital budgeting involves risk.
2. Financing Decision:
Broadly a finance manager must declare when, where and how

to acquire funds to meet the firms investments needs. The finance
manager must strive to obtain the either best financing mix or
optimum capital structure of this firm. The use of debt affects the
return and rise of shareholder. It may increase the return of equity
funds. A proper balance will have to struck between rises and retain.
3. Dividend Decision
28
The finance manager must decide whether the firm should
distribute all profits or distribute a portion and retain the balance. The
dividend policy should be determined in terms of its impact on the
market value of the firms share, thus shareholders are indifferent to
the firms dividend policy. The finance manager must decide to the
optimum dividend payout ratio.
4. Liquidity Decision:
Along with terms of funds current assets should also be

managed efficiently for safeguarding the firm against the dangerous of
illiquidity and insolvency. An investment in current assets affects the
firms profitability liquidity and risk. In order to ensure that neither
insufficient nor unnecessary funds are invested, finance manager
develops some techniques of managing current assets.
IMPORTANCE OF FINANCIAL MANAGEMENT:
Financial management is of greater importance in the

present corporate world. It is science of money, which permits the
authorized to go further.
SIGNIFICANCE OF FINANCIAL MANAGEMENT:
It assists in the assessment of financial needs of industry

large or small and indicates the internal and external resources for
meeting them. It assesses the efficiency and effectiveness of the
29
financial institution in mobilizing individual or corporate savings. It also
prescribes various means for such mobilization of savings into
desirable investment channels.
It assists the management while investing the funds in

profitable projects by analyzing viability of that project through capital
budgeting techniques. It utilizes the funds procured from different
sources and it also regulates and controls the funds to get maximum
use
.
NATURE OF RATIOS:
Ratio Analysis is a widely used tool of financial analysis. The term

ratio in it refers to relationship expressed in mathematical terms
between two individual figures of group of figures connected with each
other is some logical manner and are selected from financial
statements of the concern. The ratio analysis is based on the fact that
a single accounting figure by itself may not communicate any
meaningful information but when expressed as a relative to some
other figure, it may definitely provide some significant information.
The relationship between two or more accounting figure/group is
called as financial ratio. A financial ratio helps to express the
relationship between two accounting figures in such a way that users
can draw conclusions about the performance, strengths and weakness
of firm.
Standards of comparison:
The ratio analysis involves comparison for a useful

interpretation of the financial statements. A single ratio in itself does
not indicate favorable or unfavourable condition. It should be
30
compared with some standards. Standards of comparison may consist
of:
Past ratios, i.e. ratios calculated from the financial statements

of the same firm from past information;
Competitors ratio, i.e. ratios of some selected firms, especially
the most progressive and successful competitor, at the same
point in time.
Industry ratios, i.e. ratios of the industry to which the firm
belongs; and
Project ratios, i.e. ratios developed using the projected
financial statements of the same firm.
Time series Analysis

The easiest way to evaluate the performance of a firm to
compare its present ratios with the past ratios. When financial ratios
over a period of time are compared, it is known as the time series (or
trend) analysis. It gives an indication of the change and reflects
whether the firms financial performance has improved, deteriorated
or remained constant over time. The analyst should not simply
determine the change, but more importantly, he/she should
understand why ratios have changed. The change, for example, may
be affected by changes in the accounting polices without a material
change in the firms performance.
Cross sectional Analysis:

Another way of comparison is to compare ratios of one firm with
some selected firms in the same industry at the same point of time.
This kind of comparison is known as the cross-sectional analysis. In
most cases, it is more useful to compare the firms ratios with ratios of
31
a few carefully selected competitors, who have similar operations. This
kind of a comparison indicates the relative financial position and
performance of the firm. A firm can easily resort to such a comparison,
as it is not difficult to get the published financial statements of the
similar firms.
Industry Analysis:
To determine the financial condition and performance of a firm,
its ratios may be compared with average ratios of the industry of
which the firm is a member. This sort of analysis, known as the
industry analysis, helps to ascertain the financial standing and
capability of the firm vis--vis other firms in the industry.
Industry ratios are important standards in view of the fact that
each industry has its characteristics, which influence the financial and
operating relationship. But there are certain practical difficulties in
using the industry ratios. First, it is difficult to get average ratios for
the industry. Second, even if industry ratios are available they are
averages---averages of the ratios of strong and weak firms. Some time
differences may be so wide that the average may be of little utility.
Third, averages will be meaningless and the comparison in the
industry and eliminate extremely strong and weak firms, the industry
ratios will prove to be very useful in evaluating the relative financial
condition and performance of firm.
Pro forma Analysis:

Sometimes future ratios are used as the standard of comparison.
Further ratios can be developed from the projected or production
forma, financial statements. The comparison of current or past ratios
with future ratios shows the firms relative strengths and weakness in
32
the past and future. If the future ratios indicate weak financial
position, corrective actions should be initiated.
UTILITY OF RATIO ANALYSIS:
The ratio analysis is the most powerful tool of the financial

analysis. Many diverse groups of people are interested in analyzing the
financial information to indicate the operating and financial efficiency,
and growth of the firm. These people use ratios to determine those
financial characteristics of the firm in which they are interested. With
the help of ratios, one can determine
The ability of the firm to meet its current obligations
The extent to which the firm has used its long term
solvency by borrowing
The efficiency with which the firm is utilizing its assets
in generating sales revenue, and
The overall operating efficiency and performance of
the firm.
Performance Analysis:
As stated previously, a short-term creditor will be interested in

the current financial position of the firm, while a long-term creditor will
pay more attention to the solvency of the firm. The long-term creditor
will also be interested in the profitability of the firm. The equity
shareholders are generally concerned with their return and may bother
about the firms financial condition only when their earnings are
depressed. In fact, it has to be realized that the short-term and long-
term financial position and the profitability of the firm are tested in
every kind of financial analysis, only the emphasis would differ. Some
33
ratios are more important in one kind of analysis than others. If a
short-term creditor analyze only the current position and finds it
satisfactory, he/she cannot be certain about the safety of his/her claim
if the firms long-term financial position or profitability is unfavourable.
The satisfactory current position would become adverse in future if the
current resources were consumed by the unfavourable long-term
financial condition. Similarly, the good long-term financial position is
no guarantee long-term creditors claims if the current position or the
profitability of the firm is bad.
Credit analysis
In credit analysis, the analyst will usually select a few important
ratios. He may use the current ratio or quick-asset ratio to judge the
firms liquidity or debt-paying ability; debt-equity ratio to determine the
stake of the owners in the business and the firms capacity to survive
in the long-term and of the profitability ratios, for example, return on
capital employed, to determine the firms earnings prospects. If the
profitability is high, the current ratio is low and the debt equity ratio is
high (unreasonable), the extension of credit may be approved to the
firm because a profitable company will grow and will have
improvement in its current ratio and other ratios
Security analysis:
The ratio analysis is also useful in security-analysis. The major
focus in security analysis is on the long-term profitability. Profitability is
dependent on a number of factors and, therefore, the security analyst
also analyses ratio. He would certainly with the efficiency with which
the firm utilizes its assets and the financial risk to which the firm is
exposed. Therefore, besides analyzing the profitability ratios
meticulously, he will also analysis activity ratios and leverage ratios.
34
The detailed analysis of the earning power is important for security
analysis.
Competitive analysis:
The ratios of the firm by themselves do not reveal anything. For
meaningful interpretation, the ratios of a firm should be compared
with the ratios of similar firms and industry. This comparison will reveal
whether the firm is significantly out of line, the firm should undertake
a detailed analysis to spot out the trouble are
ADVANTAGES OF RATIOS:
Useful for evaluating performance in terms of profitability and

financial stability.
Useful for intra and inter firm comparison.
Useful for forecasting and budgeting.
It is just in a tabular form over a period of years indicates the
trend of the business.
Simple to understand rather than the reading but the figures of
financial statements
Key tool in the hands of modern financial management.
Enables outside parties to assess the strength and weakness of
the firm.
Ratio analysis is very useful for taking management decision and
also highlights the performance in the area of profitability,
financial stability and operational efficiency.
LIMITATIONS OF FINANCIAL RATIOS:
35
The ratio analysis is a widely used technique to evaluate
the financial; position and performance of a business. But there are
certain problems in using ratios. The analyst should be aware of these
problems. The following are some of the limitations of the ratio
analysis.
It is difficult to decide on the proper basis of comparison.
The comparison is rendered difficult because of differences

in situations of two companies or of one company over
years.
The price level changes make the interpretations of ratios

invalid.
The differences in the definitions of items in the balance

sheet and the profit and loss statement make the
interpretation of ratios difficult.
The ratios calculated at a point of time are less informative

and defective as they suffer from short-term changes.
The ratios are generally calculated from past financial

statements and thus are no indicators of future.
Differences in accounting policies and accounting period

make the accounting data of two firms non-comparable as
also the accounting ratios.
36
It is very difficult to generalize whether a particular ratio is
good or bad. For example, a low current ratio may be said
bad from the point of view of low liquidity, but high
current ratio may not be good as this may result form
inefficient working capital management.
Financial ratios provide clues but not conclusion. These are

tools only in the hands of experts because there is no standard ready-
made interpretation of financial ratios.
TYPES OF RATIOS:
Several ratios, calculated from the accounting data, can be

grouped into various classes according to financial activity or function
to be evaluated. As stated earlier, the parties interested in financial
analysis are short-term and long-term creditors, owners and
management. Short-term creditors main interest is in the liquidity
position or the short-term solvency of the firm. Long-term creditors, on
the other hand, are more interested in the long-term solvency and
profitability of the firm. Similarly, owners concentrate on the firms
profitability and financial condition. Management is interested on in
evaluating every aspect of the firms performance. They have to
protect the interests of all parties and see that the firm grows
profitably. In view of the requirements of the various users of ratios,
we may classify them into the following four important categories.
Liquidity ratios
Leverage ratios
Activity ratios
37
Profitability ratios
Liquidity ratios; measure the firms ability to meet current
obligations; leverage ratios show the proportions of debt and equity in
financing the firms assets; activity ratios reflect the firms efficiency in
utilizing its assets. And profitability ratios measure overall
performance and effectiveness of the firm.
LIQUIDITY RATIOS
The terms liquidity and short-term solvency are used

synonymously. Liquidity of short-term solvency means ability of the
business to pay its short-term liabilities. Inability to pay=off short-term
liabilities affects its credibility as well as its credit rating. Continuous
default on the part of the business leads to commercial bankruptcy.
Eventually such commercial bankruptcy may lead to its sickness and
dissolution. Short-term lenders and creditors of a business are very
much interested to know its state of liquidity because of their financial
stake.
Traditionally, two ratios are used top highlight the business

liquidity. These are current ratio and quick ratio. Other ratios include
cash ratio, interval measure ratio and new working capital ratio.
1. CURRENT RATIO:
The current ratio is measure of the firms current ratio

short-term solvency. It indicates the availability of current assets in
rupees for every one rupee of current liability. A ratio of greater than
one means that the firm has more current assets than current claims
against them.
38
Computation of current ratio:
Current assets
Current Ratio =
Current liabilities
Current assets include cash and those assets, which can be

converted into cash with in a year, such as marketable securities,
debtors, prepaid expenses and inventories etc. All obligations
maturing within a years are included in current liabilities. Current
liabilities include creditors, bills payable, accrued expenses, short-term
bank loan etc.
Significance & interpretation of the Current Ratio:
Computation of quick ratio:
Current assets
Quick Ratio = inventories
Current liabilities
An asset is liquid if it can be converted into cash

immediately or reasonably soon without a loss of value. Cash is the
most liquid asset. Other assets, which are considered to be relatively
liquid and include in quick assets, are debtors and bills receivable and
markets securities. Inventories are considered to be less liquid.
Inventories normally require some time for realizing in to cash, their
value also has a tendency to fluctua
Significance & interpretation of the Quick Ratio:
A company with a high value of quick ratio can suffer from
the shortage of funds if it has slow-paying, doubtful and long-duration
39
outstanding debtors. On the other hand, a company with a low value
of quick ratio may really be prospering and paying its current
obligation in time if it has been turning over its inventories efficiently.
Nevertheless, the quick ratio remains an important index of the firms
liquidity.
2. Cash Ratio:
Since cash is the most liquid asset, a financial analyst may
examine cash ratio and its equivalent to current liabilities.
Computation of cash ratio:
Cash + Marketable
Cash Ratio = Securities
Current liabilities
The investments or marketable securities are equivalent of
cash; therefore, they may be include in the computation of cash ratio.
There is nothing to be worried about the lack of cash if the company
has reserve borrowing power, in India, firms have credit limits
sanctioned from banks, and can easily draw cash.
3. Net Working Capital Ratio:

The difference between current asset and current liabilities
excluding short-term borrowing is called net working capital (NWC).
NWC is sometimes used as measure of the firms liquidity. It is
considered thatll, between two firms, the one having the larger NWC
has a greater ability to meet its current obligations. This is not
necessarily so, the measure of liquidity is a relationship, rather than
the difference between current assets and current liabilities, NWC,
40
however, measure the firms potential reservoir of funds. It can be
related to net assets (or capital employed)
Net Working Capital ratio

Net Working Capital ratio (NWC)
Net assets (NA)
LEVERAGE RATIOS:
The second category of financial ratios is leverage or

capital structure ratio. The short term creditors, like bankers and
suppliers o raw material, are more concerned with the firms current
debt-paying ability. On the other hand, long-term creditors, like
debenture holders, financial institutions etc. are more concerned with
the firms long-term financial; strength. In fact, a firm should have a
strong short-as well as long-term financial position. To judge the long-
term financial position of the firm, financial leverage, or capital
structure, ratios are calculated. These ratios indicate mix of funds
provided by owners and lenders. As general rule there should be an
appropriate mix of debt and owners equity in financing the firms
assets. The long-term solvency to the firm can examine by using
leverage or capital structure ratios.
4. Debt Ratio:
Several debt ratios may be used to analyze the long-term

solvency of the firm. The firm may be interested in knowing the
proportion of the interest-bearing debt (also called funded debt) in the
capital structure.
41
Computation of debt ratio:
Total Debt (TD)

Debt Ratio = Total debt(TD)+Net
worth(NW)
Total debt will include short and long-term borrowings from

financial institutions, debenture/bonds, deferred payment
arrangements for buying capital equipments, bank borrowings, public
deposits and any other interest-bearing loan. Capital employed will
include total debt and net worth.(NW).
Capital employed (CE) equals net assets (NA), which
consists of net fixed assets (NFA) and net current assets (NCA). Net
current assets are current assets (CA) minus current liabilities (CL)
excluding interest-bearing short-term debt for working capital.
5. Debt-Equity Ratio:
This ratio is calculated to measure the relative claims of
outsiders and the owners (i.e. share holders) against the firms assets.
This ratio is very often referred in capital structure decision as well as
in the legislation dealing with the capital structure decisions. (I.e. issue
of shares and debentures)
Computation of debt ratio:
Debt-equity ratio Long term liabilities

= Share holders fund
Here, long term liabilities= secured loans + Unsecured loans

Shareholders fund=equity &Preference share capital + Reserves &
Surplus + Revaluation Reserves - Fictitious Assets.
42
6. Capital Employed to Net worth Ratio:
There is yet another way of expressing the basic

relationship between debt and equity. One may want to know: How
much funds are being contributed together by lenders and owners for
each rupee of the owners contribution.
Computation of capital employed to net worth ration:
Capital employed to net Capital Employed (CE)

worth ratio= Net Worth(NW)
7. Interest Coverage Ratio:
The interest coverage ratio is used to test the firms debt-

servicing capacity. It shows the number of times the interest charges
are covered by funds that are ordinarily available for their payment.
Since taxes are computed after interest, interest coverage is
calculated in relation to before tax earnings.
Computation of interest coverage ratio:

Interest EBIT
coverage = Interest
8. Proprietary Ratio:
43
It is used in the analysis of long-term solvency and financial
stability of the firm. The proportion of total asset of a firm collected
through proprietors fund can be understood from this ratio.
9. Fixed Assets Ratio:
This ratio indicates mode of financing the fixed assets. It is

used to measure the long-term solvency and financial stability of a
firm.
Fixed asset
Computation of fixed
Capital
asset ratio =
employed
Here, Fixed asset= Net block + Investment + other

Assets
Capital employed=Equity & preference share capital + Reserves &
surplus + Long term loans - factious assets
ACTIVITY RATIOS:
Funds of creditors and owners are invested in various

assets to generate sales and profits. The better the management of
assets, the larger the amount of sales. Activity ratios are employed to
evaluate the efficiency with which the firm manages and utilizes its
assets. These ratios also called turnover ratios because they indicate
44
the speed with which assets are a being conveyed or turned over into
sales. Activity ratios, thus, involve a relationship between sales and
assets. A proper balance between sales and assets generally reflects
that assets are managed well several activity ratios can be calculated
to judge the effectiveness of asset utilization.
10. Inventory Turnover Ratio:
Inventory turnover ratio indicates the efficiency of the firm in

producing and selling its product.
Computation of inventory turnover ratio:
cost of goods sold

Inventory &
Average
interpretation
inventory
Average inventory is the average of opening and closing balances of

inventory.
Significance & interpretation:
The inventory turnover shows how rapidly the inventory is
turning into receivable through sales.
Generally, a high inventory turnover is indicative of good
inventory management.
A low inventory turnover implies excessive inventory levels
than warranted by production and sales activities, or a
slow-moving or obsolete inventory.
Debtors (Accounts Receivable) Turnover Ratios:
45
A firm sells goods for cash and credit. Credit is used as a
marketing tool by a number of companies. When the firm extends
credits to its customers, debtors (accounts receivable) are created in
the firms accounts. Debtors are expected to be converted into cash
over a short period and, therefore, are included in current assets. The
liquidity position of the firm depends on the quality or liquidity of
debtors. (a) Debtors turnover (b) collection period (c) against
schedule of debtors.
11. Debtors Turnover Ratio:

Debtors turnover indicates the number of times debtors turnover each
year.
Computation of debtors turnover ratio:
Sales
Debtors turnover ratio
Debtors.
Significance & interpretation:
The analysis of the debtors turnover ratio supplements the

following information regarding the liquidity of one item of
current assets of the firm. The ratio measures how rapidly
receivables are collected.
A high ratio is indicative of shorter time-lag between credit

sales and cash collection.
A low ratio shows that debts are not being collected rapidly.
12. Average Collection Period:
46
The average number of days for which debtors remain
outstanding is called the average collection period (ACP)
Computation of average collection period ratio:
360
Average collection period
Debtors
ratio =
turnover
13. Total assets turnover ratio:
Some analysts like to compute the total assets turnover in

addition to or instead of the net assets turnover. This ratio shows the
firms ability in generating sales from all financial resources committed
to total assets.
Computation of total asset turnover ratio:
Sales
Total asset turnover
Total
ratio =
assets
14. Fixed assets turnover ratio:
It is used to measure the efficiency which the firm has

utilized its investments in fixed assets and its overall activities. It
indicates the generation of the sales for per rupee invested in fixed
assets.
Computation of fixed asset turnover ratio:
Fixed assets turnover Net sales
47
ratio = Fixed Assets
Here, Fixed assets= Net block + Other assets + Investment.
15. Net Assets Turnover:

The firm can compute net assets turnover simply by
dividing sales by net assets (NA)
Net assets turn over Sales

= Net assets
16. Working Capital Turnover Ratio:
A firm may also like to relate net current assets (or net
working capital gap) to sales. The quantum of sales generated from
each rupee working capital into business can be known.
Computation of working capital turnover ratio:
Working capital turnover Sales

ratio = Net assets
Significance & Interpretation:
The higher the ratio, the more efficient the management of

converting the working capital available into sales. But it cannot be
taken to be granted, as the current assets are only temporary in
nature and cannot be used constantly. They cannot be made use of
throughout the years i.e. different periods.
48
PROFITABILITY RATIOS:
The profitability ratios measure the profitability or the

operational efficiency of the firm. These ratios reflect the final results
of business operations. The results of the firm can be evaluated in
terms of its earnings with referenced to a given level of assets or sales
or owners interest etc. Besides management of the company, creditors
and owners are also interested in the profitability of the firm. Creditors
want to get interest and repayment of principal regularly. Owners want
to get a required rate of return on their investment. This is possible
when the company earns enough profits.
Generally, two major types of profitability ratios are calculated:
o Profitability in relation to sales
o Profitability in relation to investment.
17. Gross Profit Margin:
The gross profit margin reflects the efficiency with which

management produces each unit of product. This ratio indicates the
average spread between the cost of goods sold and sales revenue.
Computation of gross profit ratio:
sales-cost of goods
Gross profit
sold
margin =
Sales
49
A high gross profit margin ratio is a sign of goods

management. A gross profit margin ratio may increase due
to any of the following factors (a) higher sales prices, cost
of goods sold remaining constant (b) lower cost of goods
sold, sales prices remaining constant (c) a combination of
variations in sales prices and costs, the margin widening
and (d) and increase in the proportionate volume of higher
margin items. The analysis of these factors will reveal to
the management how a depressed gross profit can be
improved.
18. Net profit Margin:

Net profit margin ratio establishes a relationship between net
profit and sales and indicates managements efficiency in
manufacturing, administering and selling the products. The ratio is the
overall measure of the firms ability to turn each rupee sales into net
profit. If the net margin is inadequate, the firm will fail to achieve
satisfactory return on shareholders funds. The ratio indicates the firms
capacity to withstand adverse economic conditions.
Computation of net profit margin ratio:
Net profit Margin Profit after Tax

= Sales
Net profit is obtained when operating expenses; interest

and taxes are subtracted from the gross profit. The net profit margin
ratio is measured by dividing profit after tax by sales.
50
. A firm with a high net margin ratio would be advantageous

position to survive in the face of falling selling prices, rising costs of
production or declining demand for the product. It would really be
difficult for a low net margin firm to withstand these adversities.
Similarly, a firm with high net probity margin can make better use of
favorable conditions, such as rising selling prices, falling costs of
production or increasing demand for them product. Such a firm will be
able to accelerate its profits at a faster rate than a firm with a low net
profit margin.
19. Operating Ratio:

It explains the change in the net profit margin ratio. The
operating efficiency of the firm can be judged through this ratio.
Computation of operating ratio:
Cost of goods sold + operating expenses/sales

Operating expenses means administrative, general and selling
expenses.
It is Dividend firm the ratio that the consumption to cost of
goods and operating expenses in terms of percentage of sales. The
remaining sales are let to cover interest. Income tax, dividends and
the firms needs to retain profits for expenditure. The higher the ratio
the lesser the amount to meet the fixed charges.
51
20. Return on Equity (ROE):
Return on equity measures the profitability of equity funds
invested in the firm. This ratio reveals how the firm has utilized
profitability of the owners funds.
Computation of return on equity ratio:
PAT
Return on equity =
Net Worth
Here, net worth= Equity & preference share capital + reserves &
Surplus-factious Asse
21. Return On Capital Employed:
It is used to analyze the profitability in the firms point of view

how funds employed and to evaluate the efficiency of the
management. This ratio explains the relationship between the
operating profits such that net profit before interest and tax and the
net or gross capital employed in the firm.
Profit before interest &

Return on capital Tax
employed Capital employed
Here, profit before interest & tax = PBT + Interest.

Capital employed = equity & preference share capital + reserves &
Surplus+ Long term loans - fictitious assets.
22. Earning Per Share Ratio (EPS):
The profit ability of common shareholders investment can

also be measure in many other ways. One such measure is to
calculate the earning per share.
52
Computation of earning per share ratio:
Profit after Tax

Earnings per share =
No. of equity shares
LIQUIDITY RATIOS:
4.1CURRENT RATIO:
Current Assets
Current Ratio = -------------------------------
Current Liabilities
Current ratio may be defined as the relationship between current

assets and Current liabilities, this ratio, also known as working capital
ratio, is a measure of general liquidity and is most widely used to
make the analysis of liquidity of a firm. The ideal ratios are 2:1 which
means for every one rupee of current liability the organization has to
maintain two rupees of current assets.
53
TABLE; 4.1
(Rs in crores)
CURRENT CURRENT
YEARS RATIO
ASSETS LIABILITIES
2011-12 50425.06 43648.84 1.16
2012-13 65216.82 57315.69 1.14
2013-14 83229.27 73855.9 1.13
2014-15 86478.4 74916.13 1.15
2015-16 104805.36 91481.81 1.15
Graph; 4.1
54
1.17
1.16
1.16
1.16
1.15 1.15
1.15
1.15
1.14
1.14
1.14
1.13
1.13
1.13
1.12
1.12
1.11
2010-11 2011-12 2012-13 2013-14 2014-15
RATIO
INTERPRETATION:
From the above graph we can interpret that the firm had current
ratio of 1.16:1 in the year 2010-11, 1.14:1 in the year 2011-12, 1.13:1
in the year 2012-13, 1.13:1 in the year 2013-14 and 1.15:1 in the year
2014-15. Since the firms current ratios were lower than standard ratio
of 2:1, we can interpret that the firms liquidity position was
satisfactory
4.2. LIQUID RATIO:
Liquid Assets
55
Liquid Ratio = --------------------------------
(or)
Current liabilities
Current assets -
inventory
= --------------------------------
-----------
Current liabilities
Quick ratio or Liquid ratio establishes a relationship between

quick or liquid assets and currents liabilities. An asset is liquid if it can
be converted into cash immediately without a loss of value.
The ideal ratio is 1:1 that means for every one rupee of current
liability the organization has to maintain 1 rupee of liquid asset.
TABLE; 4.2
(Rs in crores)
CURRENT
YEARS LIQUID ASSETS RATIO
LIABILITIES
2010-11 50425.06 43648.84 1.16
2011-12 65216.82 57315.69 1.14
2012-13 83229.27 73855.9 1.13
2013-14 86478.4 74916.13 1.15
2014-15 104805.36 91481.81 1.15
56
Graph; 4.2
1.17
1.16
1.16
1.16
1.15 1.15
1.15
1.15
1.14
1.14
1.14
1.13
1.13
1.13
1.12
1.12
1.11
2010-11 2011-12 2012-13 2013-14 2014-15
RATIO
INTERPRETATION:
From the above graph we can interpret that the firm had current
ratio of 1.16:1 in the year 2010-11, 1.14:1 in the year 2011-12, 1.13:1
in the year 2012-13, 1.13:1 in the year 2013-14 and 1.15:1 in the year
satisfactory
57
4.3ABSOLUTE LIQUID RATIO:
Absolute liquid
assets
Absolute liquid ratio =
--------------------------------------------
Absolute liquid
current liabilities
Absolute liquid assets = Liquid assets - Debtors-

Bills receivables
Although debtors and bills receivable are more liquid than

inventories, yet there may be doubts regarding their realization into
cash immediately. Hence, the absolute liquid ratio is also to calculate,
together with current ratio and acid test ratio so as to exclude
receivables from the current assets.
The ideal ratio is 0.5:1 that means for every one rupee of current
liability the organization has to maintain rupee of absolute liquid
assets.
TABLE; 4.3
(Rs in crores)
YEARS ABSOLUTE RATIO
CURRENT
LIQUID
LIABILITIES
ASSETS
2010-11 2107.72 43648.84 0.05
58
2011-12 2016.49 57315.69 0.04
2012-13 2207.9 73855.9 0.03
2013-14 2949.23 74916.13 0.04

2014-15 3920.3 91481.81 0.04
Graph; 4.3
ABSOLUTE LIQUID RATIO

0.06
0.05
0.05
0.04
0.04
0.04 0.04
RATIO
0.03
0.03
0.02
0.01
0.00
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
From the above table it is observed that the firm have absolute
liquidity ratio of 0.05:1 in the year 2010-11, 0.04:1 in the year 2011-
12, 0.03:1 in the year 2012-13, 0.04:1 in the year 2013-14 and 0.04:1
in the year 2014-15.
So we can interpret that the firm maintained almost similar ratios
to standard ratio of 0.5:1. Hence the firms liquidity position is said to
be satisfactory.
59
60
4.4NET WORKING CAPITAL RATIO:
The ratio establishes the relationship between net working

capital and net assets. This ratio sometimes used as a measure of a
firms liquidity. Higher the net working capital ratio indicates high
liquidity position of the firm. And lower the ratio indicates lower
liquidity position of the firm.
Net Working
Net Working Capital Ratio
=-----------------------------------------
Net assets
Net Working Capital Ratio = Current assets - Current Liabilities
Net assets =Fixed assets+ current assets-

current liabilities
TABLE; 4.4
(Rs in crores)
NET WORKING NET
YEARS RATIO
CAPITAL ASSETS
2010-
6776.22 7201.83 0.94
11
2011-
7901.13 8351.1 0.95
12
61
2012-
9373.37 9837.79 0.95
13
2013-
11562.27 12669.21 0.91
14
2014-
13323.55 14530.26 0.92
15
Graph; 4.4
NET WORKING CAPITAL RATIO

0.96
0.95
0.95 0.95
0.94
0.94
RATIO
0.93
0.92 0.92
0.91
0.91
0.90
0.89
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
From the above table we can observe that Net working capital
ratio was increased year by year. As the ratios are used to know the
liquidity position of the company we can conclude that liquidity
position of the company was improved.
62
4.5DEBT-EQUITY RATIO:
Debt equity ratio indicates the relationship between the

outsiders funds and the shareholders funds. Lower the debt ratio
indicates more funds are invested by equity shareholders than debt
providers, so it shows higher safety to the debt providers and good
solvency position of the firm and vice versa.
Outsiders Funds
Debt-Equity Ratio
=-----------------------------------------
Shareholders funds
Outsiders Funds =Longer-term loans +current liabilities.
Shareholders funds =Equity cap + Pref.cap+share premium +

Reserves & Surplus
P & L a/c + sinking fund Accumulated

losses differed expenses.
63
TABLE.4.5
(Rs in crores)
SHARE
YEARS OUTSIDERS FUND HOLDER RATIO
FUND
2010-11 43648.84 6833.39 6.39
2011-12 57315.69 7980.76 7.18
2012-13 73855.9 9464.49 7.80
2013-14 74916.13 12283.61 6.10
2014-15 91481.81 14144.08 6.47
Graph; 4.5
DEBT-EQUITY RATIO
9.00
7.80
8.00 7.18
7.00 6.39 6.47
6.10
6.00
RATIO
5.00
4.00
3.00
2.00
1.00
0.00
2010-11 2011-12 2012-13 2013-14 2014-15
64
INTERPRETATION:
From the above table it is observed that the debt equity ratio of the
firms was 6.39 in the year 2010-11, 7.18in the year 2011-12, 7.80in
the year 2012-13, 6.10in the year 2013-14, and 6.47 in the year 2014-
15.Since the ratio is lower than, we can conclude that the firms
solvency position was satisfactory.
4.6CAPITAL EMPLOYED TO NET WORTH RATIO
This ratio is used to know how much funds are being contributed
together by lenders and owners for each rupee of the owners
contribution.
Capital employed
Capital Employed To Net Worth Ratio = -------------------------------------
Net worth
OR
= 1+Debt-Equity ratio
TABLE; 4.6
(Rs in crores)
YEARS DEBT-EQUITY Add value RATIO
RATIO
2010-11 6.39 1 7.39
2011-12 7.18 1 8.18
2012-13 7.80 1 8.80
65
2013-14 6.10 1 7.10
2014-15 6.47 1 7.47
Graph; 4.6
CAPITAL EMPLOYED TO NET WORTH RATIO

10
8.8
9 8.18
8 7.39 7.47
7.1
7
6 RATIO
5
4
3
2
1
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
From above the table it is observed that the firms capital

employed to net worth ratio indicates for every one rupee investment
made by equity shareholders both quity share holders and debt
providers together provided Rs. 7.39 in the year 2010-11 Rs.8.18 in
the year 2011-12, Rs 8.8 in the year 2012-13, 7.1 in the year 2013-14,
66
7.47 in the year 2014-15. It shows that the firm solvency position was
satisfactory.
4.7PROPRIETORY RATIO:
This ratio established the relationship between shareholders

funds and total assets; hence Total assets also know the ratio as Net
worth.
Higher the ratio indicated higher the solvency position of the firm
and lower the ratio indicates lower the solvency position of the firm
Shareholders funds
Equity ratio = ---------------------------------------------- x 100
Total assets
Table: 4.7
(Rs in crores)
SHAREHOLDERS TOTAL
YEARS RATIO (%)
FUND ASSETS
2010-11 6833.39 50850.67 13.44
2011-12 7980.76 65666.79 12.15
67
2012-13 9464.49 83693.69 11.31
2013-14 12283.61 87585.34 14.02
2014-15 14144.08 106012.07 13.34
Graph: 4.7
PROPRIETORY RATIO (%)

16.00
14.02
14.00 13.44 13.34
12.15
12.00 11.31
10.00 RATIO (%)

8.00
6.00
4.00
2.00
0.00
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
From the above table we can observed that the proprietary ratio
of the firm was 13% in the year 2010-11, 12% in the year 2011-12,
11% in the year 2012-13, 14% in the year 2013-14 and 13% in the
year 2014-15.
68
Since higher the ratio indicates stronger solvency position of the
firm, we can conclude that the solvency position was satisfactory.
4.8FIXED ASSETS TO NET WORTH RATIO:
The ratio establishes the relationship between fixed assets and

shareholders funds.
Fixed assets (after dep)

Fixed assets to net worth ratio =------------------------------------------x 100
Shareholders funds
It indicates the extent to which shareholders funds are sunk

into the fixed assets if the ratio is less than 100% it implies that
owners funds are more than total fixed assets and vice versa.
Generally the ratio between 60-65%is considered to be satisfactory in
case of industrial under takings.
TABLE: 4.8
(Rs in crores)
FIXED ASSETS
YEAR SHAREHOLDER
AFTER RATIO (%)
S FUND
DEPRECIATION
69
2010-
327.34 6833.39 4.79
11
2011-
333.21 7980.76 4.18
12
2012-
331.89 9464.49 3.51
13
2013-
941.76 12283.61 7.67
14
2014-
1013.71 14144.08 7.17
15
Graph: 4.8
FIXED ASSETS TO NET WORTH RATIO

9.00
8.00 7.67
7.17
7.00
6.00
4.79 RATIO (%)
5.00 4.18
4.00 3.51
3.00
2.00
1.00
0.00
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
70
From the above table it is interpreted that the firms fixed assets
to net worth ratio was 4.79% in the year 2010-11, 4.18% in the year
2011-12, 3.15% in the year 2012-13, 7.67% in the year 2013-14,
7.17% in the year 2014-15.
Since during all years the fixed assets to net worth is less than
100%, the solvency position of the firm can be interpreted as
satisfactory.
4.9FIXED ASSETS RATIO:
The ratio indicates the extent to which the total fixed assets are
financed by long-term funds of the firm.
Fixed assets (After

Dep.)
Fixed assets ratio:
=-----------------------------------------------X100
Total long term Funds
Total long term Funds = Shareholders funds +Long-term loans
The total of the fixed assets should be equal to the total of the
long-term funds or the ratio should be 100%. The ratio higher to 100%
71
indicates that a part of fixed assets are financed through working
capital and vice versa.
Table: 4.9
(Rs in crores)
FIXED
YEARS LONG TERM FUNDS RATIO
ASSETS
2010-
425.61 29260.97 1.45
11
2011-
449.97 38536.52 1.17
12
2012-
464.42 51028.77 0.91
13
2013-
1106.94 59072.33 1.87
14
2014-
1206.71 74860.31 1.61
15
Graph; 4.9
72
FIXED ASSETS RATIO
2.00 1.87
1.80 1.61
1.60 1.45
1.40
1.17
1.20 RATIO
1.00 0.91
0.80
0.60
0.40
0.20
0.00
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
From the above table we can observe that the long term fund of
KOTAK MAHINDRA BANK Ltd more than fixed assets during the sturdy
period i.e. from 2010-11 to 2014-15. It indicates that all fixed assets
are financed by long term funds and some working capital requirement
of the firms are also financed by long term funds, Which is a good
financial policy.
PROFITABILITY RATIO
4.10RETURN ON EQUITY RATIO:
73
Return on shareholders investment or net worth ratio also
known as ROI is the relationship between net profits and the
proprietors funds.
Net profit after interest & tax
2Return on shareholders Investment

=---------------------------------------------x100
Shareholders fund
This ratio is one of the most important ratios used for measuring
the overall efficiency of a firm, hence indicates the extent to which the
earnings are maximized. As this ratio reveals how well the resources of
a firm are being used, higher the ratio better is the position and vice-
versa.
Table: 4.10
(Rs in crores)
NET PROFIT SHARE HOLDER

YEARS RATIO (%)
AFTER TAX FUND
2010-
818.18 6833.39 11.97
11
2011-
1085.05 7980.76 13.60
12
2012-
1360.72 9464.49 14.38
13
2013- 1502.52 12283.61 12.23
74
14
2014-
1865.98 14144.08 13.19
15
Graph 4.10
RETURN ON EQUITYRATIO (%)

16
14.38
13.6 13.19
14
11.97 12.23
12
10 RATIO (%)
8
6
4
2
0
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION:
From above the table it is interpreted that the firm return on

quity was 12% in the year 2010-11,14% in the year 2011-12,14% in
the year 2012-13,12% in the year 2013-14 and 13% in the year 2014-
15.
So we can interpret that the firms return on quity was increasing
year by year.
75
4.11EARNING PER SHARE:
EPS is a small variation of return on equity capital and is
calculated by dividing the net profit after taxes minus performance
dividend by the total number of equity shares. Thus,
Net profit after tax-preference dividend

Earning per share = --------------------------------------------------
Number of equity shares
TABLE 4.11
(Rs in crores)
YEARS NET PROFIT EQUITY SHARE RATIO

2010-
818.18 368.44 2.22
11
2011-
1085.05 370.34 2.93
12
2012-
1360.72 373.3 3.65
13
2013-
1502.52 385.16 3.90
14
2014-
1865.98 386.18 4.83
15
76
Graph 4.11
EARNING PER SHARE

6.00
4.83
5.00
3.90
4.00 3.65
RATIO
2.93
3.00
2.22
2.00
1.00
0.00
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
From above the table it is interpreted that the firms EPS in the
year 2010-11 was Rs 2.22, in the year 2011-12 was Rs 2.93, in the
year 2012-13 was Rs 3.65, in the year 2013-14 was 3.9 and in the year
2014-15 was Rs 4.83.
77
So we can interpret that the companys EPS position in the years
2014-15 and 2010-11 was good and the remaining years the EPS
position was bad.
4.12 RETURN ON INVESTMENT:
The term investment may refer to total assets or net assets. The
firms employed in net assets are known as capital employed. Net
assets equal net fixed assets minus current liabilities excluding bank
loans. Alternatively, capital employed is equal to net worth plus total
debt.
EBIT
ROI before tax = --------------------------------------
Net assets or capital employed
Table 4.12
(Rs in
crores)
YEARS EBIT Net Assets RATIO
2010-11 1553.32 7201.83 21.57
2011-12 1834.83 8351.1 21.97
2012-13 2209.73 9837.79 22.46
2013-14 2542.61 12669.21 20.07
78
2014-15 3254.73 14530.26 22.40
Graph 4.12
RETURN ON INVESTMENT
23.00
22.46 22.40
22.50
21.97
22.00 21.57
21.50
RATIO
21.00
20.50 20.07
20.00
19.50
19.00
18.50
2010-11 2011-12 2012-13 2013-14 2014-15
INTERPRETATION
From the above table it is interpreted that the firms return on
investment (before tax) was 21.57% in the year 2010-11, 22% in the
year 2011-12, 22% in the year 2012-13, 20.1% in the year 2013-14
and 22.4% in the year 2014-15,
So we can interpret that the firms return on investment was not
satisfactory.
79
80
4.13 NON-PERFORMING ASSETS TO TOTAL ASSETS RATIO
Non-performing assets to total assets ratio indicates the relationship

between non performing assets total assets. Lower the non performing
assets ratio indicates less funds are given as loans.so it shows good position
of the firm and vice versa.
Non-performing assets
Non-performing assets to total assets ratio=----------------------------------
total assets
TABLE: 4.13
YEARS NON PERFORMING TOTAL RATIO

ASSETS ASSETS
2010-11 211.16 50850.67 0.004
2011-12 237.38 65666.79 0.004
20012- 311.41 83693.69 0.004
13
2013-14 573.56 87585.34 0.007
2014-15 609.08 106012.07 0.006
Graph: 4.13
81
0.007 0.007
0.006 0.006
0.005
0.004
0.004 0.004 0.004
0.003
0.002
0.001
0.000
2010-11 2011-12 2012-13 2013-14 2014-15
ratio
INTERPRETATION:
From the above graph we can interpret that the firm had Non-
performing assets to total assets ratio of 0.004:1 in the year 2010-11,
0.004:1 in the year 2011-12, 0.004:1 in the year 2012-0.007:1 in the year
2013-14 and 0.006:1 in the year 2014-15. Since the firms current ratios
were lower than standard ratio of 1:1, we can interpret that the firms
liquidity position was good
82
4.14 DEPOSITS TO LOANS & ADVANCE RATIO
The Ratio Is Between The Deposits To Loans &

Advance Ratio Indicates The Relationship Between Deposits To Loans &
Advance Ratio. Lower The Deposits To Loans Ratio Indicates Less Funds Are
Given As Loans.So It Shows Good Position Of The Firm And Vice Versa.
deposits
Deposits to loans & advance =-----------------------------
Loans & Advances
TABLE: 4.14
YEARS DEPOSITS LOANS& ADVANCES RATIO
2010-11 29260.97 29329.31 1.00

2011-12 38536.52 39079.23 0.99
20012-13 51028.77 48468.98 1.05
2013-14 59072.33 53027.63 1.11
20014-15 74860.31 66160.71 1.13
Graph: 4.14
83
1.15 1.13
1.11
1.10
1.05
1.05
1.00
1.00 0.99
0.95
0.90
2010-11 2011-12 2012-13 2013-14 2014-15
ratio
INTERPRETATION:
From the above graph we can interpret that the firm had Non-
performing assets to total assets ratio of 1:1 in the year 2010-11, 0.99:1 in
the year 2011-12, 1.05:1 in the year 2012-13, 1.11:1 in the year 2013-14
and 1.13:1 in the year 2014-15. Since the firms current ratios were lower
than standard ratio of 1:1, we can interpret that the firms liquidity position
was good
4.15 CURRENT ASSETS TO TOTAL ASSETS RATIO
84
The ratio is between the Current assets to total
assets ratio indicates the relationship between Current assets to total assets
ratio. Lower the Current assets to total assets ratio indicates less funds are
given as loans.so it shows good position of the firm and vice versa.
Current assets
Current assets to total assets ratio = -------------------------
Total assets
TABLE: 4.15
YEARS CURRENT TOTAL ASSETS RATIO

ASSETS
2010-11 50425.06 50850.67 0.992

2011-12 65216.82 65666.79 0.993
20012-13 83229.27 83693.69 0.994
2013-14 86478.4 87585.34 0.98
7
20014-15 104805.36 106012.07 0.989
Graph: 4.15
85
0.996
0.994
0.994 0.993
0.992 0.992
0.990
0.989
0.988 0.987
0.986
0.984
0.982
2010-11 2011-12 2012-13 2013-14 2014-15
ratio
INTERPRETATION:
From the above graph we can interpret that the firm had Current
assets to total assets ratio of 0.992:1 in the year 2010-11, 0.993:1 in the
year 2011-12, 0.994:1 in the year 2012-13, 0.987:1 in the year 2013-14 and
0.989:1 in the year 2014-15. Since the firms current ratios were lower than
standard ratio of 1:1, we can interpret that the firms liquidity position was
good.
86
FINDINGS
1. From the above graph we can interpret that the firm had current ratio
of 1.16:1 in the year 2010-11, 1.14:1 in the year 2011-12, 1.13:1 in
the year 2012-13, 1.13:1 in the year 2013-14 and 1.15:1 in the year
satisfactory
2. The firm had quick ratio of 1.16:1 in the year 2010-11, 1.14:1 in the
year 2011-12, 1.13:1 in the year 2012-13, 1.13:1 in the year 2013-14,
and 1.15:1 in the year 2014-15.Even though the firms liquidity ratio is
the year 2014-15 was below standard ratio of 1:1, in remaining all
years the firm maintained a liquidity ratio of more or equalent to
standard ratio. So we can interpret that the firms liquidity position
was satisfactory.
3. The firm have absolute liquidity ratio of 0.05:1 in the year 2010-11,
0.04:1 in the year 2011-12, 0.03:1 in the year 2012-13, 0.04:1 in the
year 2013-14 and 0.04:1 in the year 2014-15. So we can interpret that
the firm maintained almost similar ratios to standard ratio of 0.5:1.
Hence the firms liquidity position is said to be satisfactory.
4. The Net working capital ratio was increased year by year. As the ratios
are used to know the liquidity position of the company we can
conclude that liquidity position of the company was improved.
5. The debt equity ratio of the firms was 6.39 in the year 2010-11, 7.18in
the year 2011-12, 7.80in the year 2012-13, 6.10in the year 2013-14,
and 6.47 in the year 2014-15. Since the ratio is lower than, we can
conclude that the firms solvency position was satisfactory.
87
6. The firms capital employed to net worth ratio indicates for every one
rupee investment made by equity shareholders both Equity share
holders and debt providers together provided Rs. 7.39 in the year
2010-11 Rs.8.18 in the year 2011-12, Rs 8.8 in the year 2012-13, 7.1
in the year 2013-14, 7.47 in the year 2014-15. It shows that the firm
solvency position was satisfactory.
7. The proprietary ratio of the firm was 13% in the year 2010-11, 12% in
the year 2011-12, 11% in the year 2012-13, 14% in the year 2013-14
and 13% in the year 2014-15. Since higher the ratio indicates stronger
solvency position of the firm, we can conclude that the solvency
position was satisfactory.
8. The firms fixed assets to net worth ratio was 4.79% in the year 2010-
11, 4.18% in the year 2011-12, 3.15% in the year 2012-13, 7.67% in
the year 2013-14, 7.17% in the year 2014-15. Since during all years
the fixed assets to net worth is less than 100%, the solvency position
of the firm can be interpreted as satisfactory.
9. The long term fund of KOTAK MAHINDRA BANK Ltd more than fixed
assets during the sturdy period i.e. from 2010-11 to 2014-15. It
indicates that all fixed assets are financed by long term funds and
some working capital requirement of the firms are also financed by
long term funds, Which is a good financial policy.
10. The firm return on quity was 12% in the year 2010-11,14% in the
year 2011-12,14% in the year 2012-13,12% in the year 2013-14 and
13% in the year 2014-15. So we can interpret that the firms return on
quity was increasing year by year.
11. The firms EPS in the year 2010-11 was Rs 2.22, in the year
2011-12 was Rs 2.93, in the year 2012-13 was Rs 3.65, in the year
88
2013-14 was 3.9 and in the year 2014-15 was Rs 4.83. So we can
interpret that the companys EPS position in the years 2014-15 and
2010-11 was good and the remaining years the EPS position was bad.
12. The firms return on investment (before tax) was 21.57% in the
year 2010-11, 22% in the year 2011-12, 22% in the year 2012-13,
20.1% in the year 2013-14 and 22.4% in the year 2014-15, So we can
interpret that the firms return on investment was not satisfactory.
13. The firm had Non-performing assets to total assets ratio of

0.004:1 in the year 2010-11, 0.004:1 in the year 2011-12, 0.004:1 in
the year 2012-0.007:1 in the year 2013-14 and 0.006:1 in the year
, we can interpret that the firms liquidity position was good
14. The firm had Deposits to Loans & advance ratio of 1:1 in the year
2010-11, 0.99:1 in the year 2011-12, 1.05:1 in the year 2012-13, 1.11:1 in
the year 2013-14 and 1.13:1 in the year 2014-15. Since the firms current
ratios were lower than standard ratio, we can interpret that the firms
liquidity position was good
15. The firm had Current assets to total assets ratio of 0.992:1 in the year
2010-11, 0.993:1 in the year 2011-12, 0.994:1 in the year 2012-13, 0.987:1
in the year 2013-14 and 0.989:1 in the year 2014-15. Since the firms current
ratios were lower than standard ratio , we can interpret that the firms
liquidity position was good.
SUGGESTIONS
89
1. Even though firms present liquidity position is satisfactory, it
should improve its liquidity in order to create more confidence in
the minds of creditors.
2. The company should maintain in existing solvency position in

future also in order to create more confidence in the minds of
long term debt providers.
3. The firm should adopt good receivables management and

practices and techniques in order to collect the dues timely from
debtors and to avoid interest loss.
4. The company should try to improve its gross profit by reducing

the unnecessary expenditure.
5. The company should adopt appropriate expenditure cutting

methods to reduce the operating expenses and to improve the
operating profits.
6. The company should adopt appropriate functional policies in

order to improve the overall profitability and to generate more
returns to equity shareholders.
CONCLUSION
90
Through my study, I found that the KOTAK MAHINDRA BANK
PRIVATE LIMITED. Is one of well organized and continuously improving
organization and has a great future.
By observing various ratios, I am advising the company it should
maintain the same liquidity and solvency position in future also to
build more confidence to the short term as well as long term debt
providers.
But at the same time the company should improve its
management techniques and practices to utilize its assets effectively
and to earn more profits.
BIBLIOGRAPHY
91
I.M. PANDEY (2002), "Financial Management", 8Th Edition, Vikas
Publishing House Pvt. Ltd., New Delhi.
PRASANNA CHANDRA, 2002, "Financial Management", 5th Edition,

Tata-Mc Graw hill publishing Company Ltd., New Delhi.
S.P. JAIN, K.L. NARANG, 2003, "Advanced Accountancy", 10Th Edition,

Kalyani Publishers, Ludhiana.
ANNUAL REPORTS:
Companys Annual Reports of 2010-2016s.
WEBSITE:
Www. kotakmanindrabank.com
92

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INTRODUCTION

The term financial analysis refers to the process of determining

The nature of the analysis will defer depending on the purpose of

The objective of this project is to establish a meaningful interrelation

Short-term Financial Solvency:

Is shows the firms ability to meet its current or short-term obligations

Profitability in relation to sales:

It portrays the profit margin enjoyed by the company in relation to sales.

Profitability in relation to investment:

It shows the returns earned by the company on its investment. It also

This pasteurizes the efficiency of the company with regard to the

A bank is a financial institution and a financial intermediary that

Besides the Nationalized banks (majority equity holding is with the

The Government of India issued an ordinance and nationalised the 14

A second dose of nationalization of 6 more commercial banks followed in

Reserve Bank of India has, vide its letter no DBOD. BP.

Reserve Bank of India

The Bank was constituted to

The Bank, which was originally set up as ashareholder's bank, was

Regulation of Banks by RBI

While the Department of Banking Operations and Development

Urban Bank Department RBI

The regulatory functions of Urban Banks Department relate to

a. Minimum Share Capital

With a view to extending institutional credit support to tiny and cottage

Training is imparted to the middle and top management of urban

Sections / Divisions of Urban Banks Department

This Section handles staff matters of the department.

2. New Bank Licensing and Branch Licensing

This division arranges inspection of urban cooperative banks through

This section frames policies on prudential norms, investment policies,

The government is expected to continue to maintain its strong support for

CREATING BANKING HISTORY

Kotak Mahindra Bank is an Indian private sector banking headquartered in

In a study by Brand Finance Banking 500, published in February 2014 by the

The Bank addresses the entire spectrum of financial needs of Non-Resident

In August 2011, the Bank entered into business cooperation arrangement

The Complete Bank

A licences authorizing the bank to carry on banking business has been

Commenced joint venture with Goldman Sachs Group Inc.

The auto finance business is hived off into a separate company -

199 Launches mutual fund through Kotak Mahindra Asset Management

RESEARCH METHODOLOGY & DESIGN

OBJECTIVES OF THE STUDY:

1. To measure the overall financial position of KOTAK MAHINDRA

2. To study the important aspects like liquidity,. Leverage, activity

3. To find out the operating efficiency of the company.

NEED OF THE STUDY

The study has great significance and will provide benefits to

It is important because it is beneficial to the employees and offer

It is beneficial to the management of the company as it provides

The study is confirmed to the management of RATIO ANALYSIS in

The data has been collected in two ways as from

PRIMARY DATA SECONDARY

The primary data was collected mainly through interactions and

Secondary data can be collected through annual reports and

Every study is conducted with some limitations. This study is no

This study was conducted within a period of 6weeks. So the

There was a major emphasis on secondary data rather than

A ratio is the numerical or quantitative relationship between two

Financial ratio analysis is the calculation and comparison of ratios

Ratio analysis is the process of determining and interpreting

The absolute accounting figures reported in the financial