CHAPTER – I

INTRODUCTION

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 INTRODUCTION

A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical
values taken from an enterprise's financial statements. Often used in accounting, there are
many standard ratios used to try to evaluate the overall financial condition of a
corporation or other organization. Financial ratios may be used by managers within a
firm, by current and potential shareholders (owners) of a firm, and by a firm's creditors.
Financial analysts use financial ratios to compare the strengths and weaknesses in various
companies.[1] If shares in a company are traded in a financial market, the market price of
the shares is used in certain financial ratios.

Ratios can be expressed as a decimal value, such as 0.10, or given as an equivalent

percent value, such as 10%. Some ratios are usually quoted as percentages, especially
ratios that are usually or always less than 1, such as earnings yield, while others are
usually quoted as decimal numbers, especially ratios that are usually more than 1, such as
P/E ratio; these latter are also called multiples. Given any ratio, one can take its
reciprocal; if the ratio was above 1, the reciprocal will be below 1, and conversely. The
reciprocal expresses the same information, but may be more understandable: for instance,
the earnings yield can be compared with bond yields, while the P/E ratio cannot be: for
example, a P/E ratio of 20 corresponds to an earnings yield of 5%.

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 PRE-REQUISITIES TO RATIO ANALYSIS

In order to use the ratio analysis as device to make purposeful conclusions, there
are certain pre-requisites, which must be taken care of. It may be noted that these
prerequisites are not conditions for calculations for meaningful conclusions. The
accounting figures are inactive in them & can be used for any ratio but meaningful
& correct interpretation & conclusion can be arrived at only if the following points
are well considered.

1) The dates of different financial statements from where data is taken must be
same.
2) If possible, only audited financial statements should be considered,
otherwise there must be sufficient evidence that the data is correct.

3) Accounting policies followed by different firms must be same in case of

cross section analysis otherwise the results of the ratio analysis would be
distorted.

4) One ratio may not throw light on any performance of the firm. Therefore, a
group of ratios must be preferred. This will be conductive to counter checks.

5) Last but not least, the analyst must find out that the two figures being used to
calculate a ratio must be related to each other, otherwise there is no purpose
of calculating a ratio.

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 CLASSIFICATION OF RATIOS

On the Basis of On the Basis of On the Basis of On the Basis of

Liquidity Efficiency Solvency Profitability
   
- Current Ratio - Debtors Turnover - Proprietory - Gross Profit
- Quick Ratio Ratio Ratio Ratio
- Absolute - Working Capital - Interest - Net Profit
Liquid Ratio Turnover Ratio Coverage Ratio Ratio
- Asset Turnover - Ratio of - Return on
Ratio Current asset to Capital
Proprietary Employed
Fund Ratio
- Earning Per
Share Ratio

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 CURRENT RATIO
Meaning:

This ratio compares the current assests with the current liabilities. It is also known
as ‘working capital ratio’ or ‘ solvency ratio’. It is expressed in the form of pure
ratio.
E.g. 2:1
Formula:

Current assets
Current ratio =
Current liabilities

The current assests of a firm represents those assets which can be, in the ordinary
course of business, converted into cash within a short period time, normally not
exceeding one year. The current liabilities defined as liabilities which are short
term maturing obligations to be met, as originally contemplated, with in a year.
Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities
(CL). Current assets include cash and bank balances; inventory of raw materials,
semi-finished and finished goods; marketable securities; debtors (net of provision
for bad and doubtful debts); bills receivable; and prepaid expenses. Current
liabilities consist of trade creditors, bills payable, bank credit, provision for
taxation, dividends payable and outstanding expenses. This ratio measures the
liquidity of the current assets and the ability of a company to meet its short-term
debt obligation.
CR measures the ability of the company to meet its CL, i.e., CA gets converted into
cash in the operating cycle of the firm and provides the funds needed to pay for
CL. The higher the current ratio, the greater the short-term solvency. This
compares assets, which will become liquid within approximately twelve months

5
with liabilities, which will be due for payment in the same period and is intended
to indicate whether there are sufficient short-term assets to meet the short- term
liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the
entity may face liquidity problem but also Ratio over 2: 1 as above indicates over
trading, that is the entity is under utilizing its current assets.
LIQUID RATIO:
Meaning:
Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compare the
quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g.
1:1.
The term quick assets refer to current assets, which can be converted into, cash
immediately or at a short notice without diminution of value.
Formula:
Quick assets
Liquid ratio =
Quick liabilities
Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers
to those current assets that can be converted into cash immediately without any
value strength. QA includes cash and bank balances, short-term marketable
securities, and sundry debtors. Inventory and prepaid expenses are excluded since
these cannot be turned into cash as and when required.
QR indicates the extent to which a company can pay its current liabilities without
relying on the sale of inventory. This is a fairly stringent measure of liquidity
because it is based on those current assets, which are highly liquid. Inventories are
excluded from the numerator of this ratio because they are deemed the least liquid
component of current assets. Generally, a quick ratio of 1:1 is considered good.

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One drawback of the quick ratio is that it ignores the timing of receipts and
payments.

CASH RATIO
Meaning:
This is also called as super quick ratio. This ratio considers only the absolute
liquidity available with the firm.
Formula:

Cash + Bank + Marketable securities

Cash ratio =
Total current liabilities

Since cash and bank balances and short term marketable securities are the most
liquid assets of a firm, financial analysts look at the cash ratio. If the super liquid
assets are too much in relation to the current liabilities then it may affect the
profitability of the firm.

INVESTMENT / SHAREHOLDER

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EARNING PER SAHRE:-
Meaning:
Earnings per Share are calculated to find out overall profitability of the
organization. An earnings per Share represents earning of the company whether or
not dividends are declared. If there is only one class of shares, the earning per
share are determined by dividing net profit by the number of equity shares.
EPS measures the profits available to the equity shareholders on each share held.

Formula:
NPAT
Earning per share =
Number of equity share

The higher EPS will attract more investors to acquire shares in the company as it
indicates that the business is more profitable enough to pay the dividends in time.
But remember not all profit earned is going to be distributed as dividends the
company also retains some profits for the business

DIVIDEND PER SHARE:-

Meaning:
DPS shows how much is paid as dividend to the shareholders on each share held.
Formula:
Dividend Paid to Ordinary Shareholders
Dividend per Share =
Number of Ordinary Shares

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DIVIDEND PAYOUT RATIO:-
Meaning:
Dividend Pay-out Ratio shows the relationship between the dividend paid to equity
shareholders out of the profit available to the equity shareholders.
Formula:
Dividend per share
Dividend Pay out ratio = *100
Earning per share
D/P ratio shows the percentage share of net profits after taxes and after preference
dividend has been paid to the preference equity holders.
GEARING

CAPITAL GEARING RATIO:-

Meaning:
Gearing means the process of increasing the equity shareholders return through the
use of debt. Equity shareholders earn more when the rate of the return on total
capital is more than the rate of interest on debts. This is also known as leverage or
trading on equity. The Capital-gearing ratio shows the relationship between two

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types of capital viz: - equity capital & preference capital & long term borrowings.
It is expressed as a pure ratio.

Formula:

Preference capital+ secured loan

Capital gearing ratio =
Equity capital & reserve & surplus
Capital gearing ratio indicates the proportion of debt & equity in the financing of
assets of a concern.

PROFITABILITY
These ratios help measure the profitability of a firm. A firm, which generates a
substantial amount of profits per rupee of sales, can comfortably meet its operating
expenses and provide more returns to its shareholders. The relationship between
profit and sales is measured by profitability ratios. There are two types of
profitability ratios: Gross Profit Margin and Net Profit Margin.

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GROSS PROFIT RATIO:-
Meaning:
This ratio measures the relationship between gross profit and sales. It is defined as
the excess of the net sales over cost of goods sold or excess of revenue over cost.
This ratio shows the profit that remains after the manufacturing costs have been
met. It measures the efficiency of production as well as pricing. This ratio helps to
judge how efficient the concern is I managing its production, purchase, selling &
inventory, how good its control is over the direct cost, how productive the
concern , how much amount is left to meet other expenses & earn net profit.
Formula:
Gross profit
Gross profit ratio = * 100
Net sales
NET PROFIT RATIO:-
Meaning:
Net Profit ratio indicates the relationship between the net profit & the sales it is
usually expressed in the form of a percentage.
Formula:
NPAT
Net profit ratio = * 100

Net sales
This ratio shows the net earnings (to be distributed to both equity and preference
shareholders) as a percentage of net sales. It measures the overall efficiency of
production, administration, selling, financing, pricing and tax management. Jointly
considered, the gross and net profit margin ratios provide an understanding of the
cost and profit structure of a firm.

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RETURN ON CAPITAL EMPLOYED:-
Meaning:

The profitability of the firm can also be analyzed from the point of view of the

total funds employed in the firm. The term fund employed or the capital

employed refers to the total long-term source of funds. It means that the

capital employed comprises of shareholder funds plus long-term debts.

Alternatively it can also be defined as fixed assets plus net working capital.

Capital employed refers to the long-term funds invested by the creditors and the
owners of a firm. It is the sum of long-term liabilities and owner's equity. ROCE
indicates the efficiency with which the long-term funds of a firm are utilized.

Formula:

NPAT
Return on capital employed = *100
Capital employed

FINANCIAL
These ratios determine how quickly certain current assets can be converted into
cash. They are also called efficiency ratios or asset utilization ratios as they
measure the efficiency of a firm in managing assets. These ratios are based on the
relationship between the level of activity represented by sales or cost of goods sold
and levels of investment in various assets. The important turnover ratios are
debtors turnover ratio, average collection period, inventory/stock turnover ratio,

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fixed assets turnover ratio, and total assets turnover ratio. These are described
below:

DEBTORS TURNOVER RATIO (DTO)

Meaning:
DTO is calculated by dividing the net credit sales by average debtors outstanding
during the year. It measures the liquidity of a firm's debts. Net credit sales are
the gross credit sales minus returns, if any, from customers. Average debtors
are the average of debtors at the beginning and at the end of the year. This
ratio shows how rapidly debts are collected. The higher the DTO, the better it
is for the organization.
Formula:
Credit sales
Debtors turnover ratio =
Average debtors
INVENTORY OR STOCK TURNOVER RATIO (ITR)
Meaning:

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ITR refers to the number of times the inventory is sold and replaced during the
accounting period.
Formula:

COGS
Stock Turnover Ratio =
Average stock

ITR reflects the efficiency of inventory management. The higher the ratio, the
more efficient is the management of inventories, and vice versa. However, a high
inventory turnover may also result from a low level of inventory, which may lead
to frequent stock outs and loss of sales and customer goodwill. For calculating
ITR, the average of inventories at the beginning and the end of the year is taken. In
general, averages may be used when a flow figure (in this case, cost of goods sold)
is related to a stock figure (inventories).

FIXED ASSETS TURNOVER (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets.
Formula:

Net sales
Fixed assets turnover =
Net fixed assets
This ratio measures the efficiency with which fixed assets are employed. A high
ratio indicates a high degree of efficiency in asset utilization while a low ratio
reflects an inefficient use of assets. However, this ratio should be used with caution
because when the fixed assets of a firm are old and substantially depreciated, the
fixed assets turnover ratio tends to be high (because the denominator of the ratio is
very low).

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PROPRIETORS RATIO:
Meaning:

Proprietary ratio is a test of financial & credit strength of the business. It relates
shareholders fund to total assets. This ratio determines the long term or ultimate
solvency of the company.
In other words, Proprietary ratio determines as to what extent the owner’s interest
& expectations are fulfilled from the total investment made in the business
operation.
Proprietary ratio compares the proprietor fund with total liabilities. It is usually
expressed in the form of percentage. Total assets also know it as net worth.
Formula:
Proprietary fund
Proprietary ratio = OR

Total fund
Shareholders fund

Proprietary ratio =
Fixed assets + current liabilities

STOCK WORKING CAPITAL RATIO:

Meaning:
This ratio shows the relationship between the closing stock & the working capital.
It helps to judge the quantum of inventories in relation to the working capital of the
business. The purpose of this ratio is to show the extent to which working capital is
blocked in inventories. The ratio highlights the predominance of stocks in the
current financial position of the company. It is expressed as a percentage.
Formula:

Stock
Stock working capital ratio =
Working Capital

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Stock working capital ratio is a liquidity ratio. It indicates the composition &
quality of the working capital. This ratio also helps to study the solvency of a
concern. It is a qualitative test of solvency. It shows the extent of funds blocked in
stock. If investment in stock is higher it means that the amount of liquid assets is
lower.

DEBT EQUITY RATIO:

MEANING:
This ratio compares the long-term debts with shareholders fund. The relationship
between borrowed funds & owners capital is a popular measure of the long term
financial solvency of a firm. This relationship is shown by debt equity ratio.
Alternatively, this ratio indicates the relative proportion of debt & equity in
financing the assets of the firm. It is usually expressed as a pure ratio. E.g. 2:1

Formula:
Total long-term debt

Debt equity ratio =

Total shareholders fund

Debt equity ratio is also called as leverage ratio. Leverage means the process of the
increasing the equity shareholders return through the use of debt. Leverage is also
known as ‘gearing’ or ‘trading on equity’. Debt equity ratio shows the margin of
safety for long-term creditors & the balance between debt & equity.

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RETURN ON PROPRIETOR FUND:
Meaning:
Return on proprietors fund is also known as ‘return on proprietors equity’ or
‘return on shareholders investment’ or ‘ investment ratio’. This ratio indicates the
relationship between net profit earned & total proprietors funds. Return on
proprietors fund is a profitability ratio, which the relationship between profit &
investment by the proprietors in the concern. Its purpose is to measure the rate of
return on the total fund made available by the owners. This ratio helps to judge
how efficient the concern is in managing the owner’s fund at disposal. This ratio is
of practical importance to prospective investors & shareholders.
Formula:
NPAT
Return on proprietors fund = * 100
Proprietors fund

CREDITORS TURNOVER RATIO:

It is same as debtors turnover ratio. It shows the speed at which payments are made
to the supplier for purchase made from them. It is a relation between net credit
purchase and average creditors
Net credit purchase
Credit turnover ratio =
Average creditors

Months in a year
Average age of accounts payable =
Credit turnover ratio

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Both the ratios indicate promptness in payment of creditor purchases. Higher
creditors turnover ratio or a lower credit period enjoyed signifies that the creditors
are being paid promptly. It enhances credit worthiness of the company. A very low
ratio indicates that the company is not taking full benefit of the credit period
allowed by the creditors.

IMPORTANCE OF RATIO ANALYSIS:

As a tool of financial management, ratios are of crucial significance. The

importance of ratio analysis lies in the fact that it presents facts on a comparative
basis & enables the drawing of interference regarding the performance of a firm.
Ratio analysis is relevant in assessing the performance of a firm in respect of the
following aspects:
1] Liquidity position,
2] Long-term solvency,
3] Operating efficiency,
4] Overall profitability,
5] Inter firm comparison
6] Trend analysis.

1] LIQUIDITY POSITION: -
With the help of Ratio analysis conclusion can be drawn regarding the
liquidity position of a firm. The liquidity position of a firm would be satisfactory if
it is able to meet its current obligation when they become due. A firm can be said
to have the ability to meet its short-term liabilities if it has sufficient liquid funds to
pay the interest on its short maturing debt usually within a year as well as to repay
the principal. This ability is reflected in the liquidity ratio of a firm. The liquidity

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ratio are particularly useful in credit analysis by bank & other suppliers of short
term loans.

2] LONG TERM SOLVENCY: -

Ratio analysis is equally useful for assessing the long-term financial viability
of a firm. This respect of the financial position of a borrower is of concern to the
long-term creditors, security analyst & the present & potential owners of a
business. The long-term solvency is measured by the leverage/ capital structure &
profitability ratio Ratio analysis s that focus on earning power & operating
efficiency.
Ratio analysis reveals the strength & weaknesses of a firm in this respect.
The leverage ratios, for instance, will indicate whether a firm has a reasonable
proportion of various sources of finance or if it is heavily loaded with debt in
which case its solvency is exposed to serious strain. Similarly the various
profitability ratios would reveal whether or not the firm is able to offer adequate
return to its owners consistent with the risk involved.
3] OPERATING EFFICIENCY:
Yet another dimension of the useful of the ratio analysis, relevant from the
viewpoint of management, is that it throws light on the degree of efficiency in
management & utilization of its assets. The various activity ratios measures this
kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate
analysis, dependent upon the sales revenues generated by the use of its assets- total
as well as its components.
4] OVERALL PROFITABILITY:
Unlike the outsides parties, which are interested in one aspect of the
financial position of a firm, the management is constantly concerned about overall

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profitability of the enterprise. That is, they are concerned about the ability of the
firm to meets its short term as well as long term obligations to its creditors, to
ensure a reasonable return to its owners & secure optimum utilization of the assets
of the firm. This is possible if an integrated view is taken & all the ratios are
considered together.
5] INTER – FIRM COMPARISON:
Ratio analysis not only throws light on the financial position of firm but also
serves as a stepping-stone to remedial measures. This is made possible due to inter
firm comparison & comparison with the industry averages. A single figure of a
particular ratio is meaningless unless it is related to some standard or norm. one of
the popular techniques is to compare the ratios of a firm with the industry average.
It should be reasonably expected that the performance of a firm should be in broad
conformity with that of the industry to which it belongs. An inter firm comparison
would demonstrate the firms position vice-versa its competitors. If the results are at
variance either with the industry average or with the those of the competitors, the
firm can seek to identify the probable reasons & in light, take remedial measures.
6] TREND ANALYSIS:
Finally, ratio analysis enables a firm to take the time dimension into account.
In other words, whether the financial position of a firm is improving or
deteriorating over the years. This is made possible by the use of trend analysis.
The significance of the trend analysis of ratio lies in the fact that the analysts can
know the direction of movement, that is, whether the movement is favorable or
unfavorable. For example, the ratio may be low as compared to the norm but the
trend may be upward. On the other hand, though the present level may be
satisfactory but the trend may be a declining one.
ADVANTAGES OF RATIO ANALYSIS

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 Financial ratios are essentially concerned with the identification of
significant accounting data relationships, which give the decision-maker insights
into the financial performance of a company. The advantages of ratio analysis can
be summarized as follows:
 Ratios facilitate conducting trend analysis, which is important for
decision making and forecasting.
 Ratio analysis helps in the assessment of the liquidity, operating
efficiency, profitability and solvency of a firm.
 Ratio analysis provides a basis for both intra-firm as well as inter-firm
comparisons.
 The comparison of actual ratios with base year ratios or standard ratios
helps the management analyze the financial performance of the firm.

LIMITATIONS OF RATIO ANALYSIS

Ratio analysis has its limitations. These limitations are described below:
1] Information problems

 Ratios require quantitative information for analysis but it is not decisive

about analytical output .
 The figures in a set of accounts are likely to be at least several months out of
date, and so might not give a proper indication of the company’s current
financial position.
 Where historical cost convention is used, asset valuations in the balance
sheet could be misleading. Ratios based on this information will not be very
useful for decision-making.

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2] Comparison of performance over time

 When comparing performance over time, there is need to consider the

changes in price. The movement in performance should be in line with the
changes in price.
 When comparing performance over time, there is need to consider the
changes in technology. The movement in performance should be in line with
the changes in technology.
 Changes in accounting policy may affect the comparison of results between
different accounting years as misleading.
3] Inter-firm comparison
 Companies may have different capital structures and to make comparison of
performance when one is all equity financed and another is a geared
company it may not be a good analysis.
 Selective application of government incentives to various companies may
also distort intercompany comparison. comparing the performance of two
enterprises may be misleading.
 Inter-firm comparison may not be useful unless the firms compared are of
the same size and age, and employ similar production methods and
accounting practices.
 Even within a company, comparisons can be distorted by changes in the
price level.
 Ratios provide only quantitative information, not qualitative information.
 Ratios are calculated on the basis of past financial statements. They do not
indicate future trends and they do not consider economic conditions.
PURPOSE OF RATIO ANLYSIS:

1] To identify aspects of a businesses performance to aid decision making

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2] Quantitative process – may need to be supplemented by qualitative
Factors to get a complete picture.
3] 5 main areas:-
 Liquidity – the ability of the firm to pay its way
 Investment/shareholders – information to enable decisions to be made on
the extent of the risk and the earning potential of a business investment
 Gearing – information on the relationship between the exposure of the
business to loans as opposed to share capital
 Profitability – how effective the firm is at generating profits given sales and
or its capital assets
 Financial – the rate at which the company sells its stock and the efficiency
with which it uses its assets

ROLE OF RATIO ANALYSIS:

It is true that the technique of ratio analysis is not a creative technique in the
sense that it uses the same figure & information, which is already appearing in the
financial statement. At the same time, it is true that what can be achieved by the
technique of ratio analysis cannot be achieved by the mere preparation of financial
statement.
Ratio analysis helps to appraise the firm in terms of their profitability &
efficiency of performance, either individually or in relation to those of other firms
in the same industry. The process of this appraisal is not complete until the ratio so
computed can be compared with something, as the ratio all by them do not mean
anything. This comparison may be in the form of intra firm comparison, inter firm
comparison or comparison with standard ratios. Thus proper comparison of ratios

23
may reveal where a firm is placed as compared with earlier period or in
comparison with the other firms in the same industry.
Ratio analysis is one of the best possible techniques available to the
management to impart the basic functions like planning & control. As the future is
closely related to the immediate past, ratio calculated on the basis of historical
financial statements may be of good assistance to predict the future. Ratio analysis
also helps to locate & point out the various areas, which need the management
attention in order to improve the situation.
As the ratio analysis is concerned with all the aspect of a firms financial
analysis i.e. liquidity, solvency, activity, profitability & overall performance, it
enables the interested persons to know the financial & operational characteristics
of an organisation & take the suitable decision.

24
 CHAPTER – II
COMPANY PROFILE

25
 COMPANY PROFILE

SBI Life Insurance is a joint venture between the State Bank of India and Cardiff SA of
France. SBI Life Insurance is registered with an authorized capital of Rs 1000 core and a
paid up capital of Rs 350 carore. SBI owns 74% of the total capital and Cardiff the
remaining 26%.
State Bank of India enjoys the largest banking franchise in India. Along with its 7
Associate Banks, SBI Group has the unrivalled strength of over 14,000 branches across
the country, the largest in the world.
Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone’s leading
Bank. BNP is one of the oldest foreign banks with a presence in India dating back to
1860. It has 9 branches in the metros and other major towns in the country.
Cardif is a vibrant insurance company specializing in personal lines such as long-term
savings, protection products and creditor insurance. Cardif has also been a pioneer in the
art of selling insurance products through commercial banks in France and 29 more
countries.
SBI Life Insurance’s mission is to emerge as the leading company offering a
comprehensive range of Life Insurance and pension products at competitive prices,
ensuring high standards of customer service and world class operating efficiency. The
company plans to make the insurance buying process quick, simple and based on well-
informed judgment.
In 2004, SBI Life Insurance became the first company amongst private insurance players
to cover 30 lacks lives. The company expects to carve a niche in the Indian insurance
market through extensive product innovation and aims to provide the highest standards of
customer service through a technological interface. To facilitate this, call centers have
been already installed and help lines will be installed and customers will have access to
their accounts through the Internet or through SBI branches.

26
The company proposes to make available ready liquidity to its Life Insurance policies by
way of loans at SBI counters. This will make Life Insurance a liquid asset in the financial
portfolio of households.

SBI Life Insurance is uniquely placed as a pioneer to usher bank assurance into India.
The company hopes to extensively utilize the SBI Group as a platform for cross-selling
insurance products along with its numerous banking product packages such as housing
loans, personal loans and credit cards. SBI’s access to over 100 million accounts provides
a vibrant base to build insurance selling across every region and economic strata in the
country.

SBI Life has a unique multi-distribution model encompassing Bancassurance, Agency

and Group Corporate.

SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance
products along with its numerous banking product packages such as housing loans and
personal loans. SBI’s access to over 100 million accounts across the country provides a
vibrant base for insurance penetration across every region and economic strata in the
country ensuring true financial inclusion.
Agency Channel, comprising of the most productive force of more than 20,000 Insurance
Advisors, offers door to door insurance solutions to customers.

27
Why SBI Life: 5 reasons to select SBI Life as your preferred insurance company.
 Customer Satisfaction - many of our customers who have bought an insurance
policy with us have bought a second one!
 Financially sound with over a 100 years of banking experience, when you trusted
us with your money, why would you trust somebody else with your protection
needs.
 Affordability
 Easy to buy (accessibility)
 Trust & reliability.
 With us you’re sure!
ORGANIZATION STRUCTURE

28
 UNIT LINKED PLANS

Unit Linked Insurance Plans are long term investment cum protection plans that offer you
an opportunity of availing market linked returns while providing life insurance
protection. Depending on your risk appetite, you have the option of choosing from host of
funds having varied degree of risk exposure. Flexibility and transparency are some of the
other attractive features that make ULIPs an attractive long term investment option.

To help you fulfill your long term dreams, SBI Life presents you a wide range of ULIPs
so that you continue to Celebrate Life!
 SBI Life - Smart Performer : A Non-participating Unit Linked Life Insurance
Plan
 SBI Life - Unit Plus Super : Non-participating Unit Linked Life Insurance Plan
 SBI Life - Saral Maha Anand : A Non - participating Unit Linked Life Insurance
Plan
 SBI Life - Smart Elite : A Non-participating Unit Linked Life Insurance Plan
 SBI Life - Smart Scholar : A Non - participating Unit Linked Life Insurance Plan
 SBI Life - Smart Horizon : A Non-participating Unit Linked Life Insurance Plan
 SBI Life - Smart Wealth Assure : A Non-participating Unit Linked Life
Insurance Plan

29
Child Plans
 SBI Life - Scholar II
 SBI Life - Smart Scholar

Pension Plans:
 SBI Life - Annuity Plus

Protection Plans:
 SBI Life - Smart Shield
 SBI Life - Saral Shield
 SBI Life - Swadhan

Savings Plan:
 SBI LIfe - Smart Money Back Insurance
 SBI Life Flexi Smart Insurance
 SBI Life - Sanjeevan Supreme
 SBI Life Shubh Nivesh
 SBI Life - Saral Life

30
 CHAPTER – II
COMPANY PROFILE

31
 COMPANY PROFILE

SBI Life Insurance is a joint venture between the State Bank of India and Cardiff SA of
France. SBI Life Insurance is registered with an authorized capital of Rs 1000 core and a
paid up capital of Rs 350 carore. SBI owns 74% of the total capital and Cardiff the
remaining 26%.
State Bank of India enjoys the largest banking franchise in India. Along with its 7
Associate Banks, SBI Group has the unrivalled strength of over 14,000 branches across
the country, the largest in the world.
Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone’s leading
Bank. BNP is one of the oldest foreign banks with a presence in India dating back to
1860. It has 9 branches in the metros and other major towns in the country.
Cardif is a vibrant insurance company specializing in personal lines such as long-term
savings, protection products and creditor insurance. Cardif has also been a pioneer in the
art of selling insurance products through commercial banks in France and 29 more
countries.
SBI Life Insurance’s mission is to emerge as the leading company offering a
comprehensive range of Life Insurance and pension products at competitive prices,
ensuring high standards of customer service and world class operating efficiency. The
company plans to make the insurance buying process quick, simple and based on well-
informed judgment.
In 2004, SBI Life Insurance became the first company amongst private insurance players
to cover 30 lacks lives. The company expects to carve a niche in the Indian insurance
market through extensive product innovation and aims to provide the highest standards of
customer service through a technological interface. To facilitate this, call centers have
been already installed and help lines will be installed and customers will have access to
their accounts through the Internet or through SBI branches.

32
The company proposes to make available ready liquidity to its Life Insurance policies by
way of loans at SBI counters. This will make Life Insurance a liquid asset in the financial
portfolio of households.

SBI Life Insurance is uniquely placed as a pioneer to usher bank assurance into India.
The company hopes to extensively utilize the SBI Group as a platform for cross-selling
insurance products along with its numerous banking product packages such as housing
loans, personal loans and credit cards. SBI’s access to over 100 million accounts provides
a vibrant base to build insurance selling across every region and economic strata in the
country.

SBI Life has a unique multi-distribution model encompassing Bancassurance, Agency

and Group Corporate.

SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance
products along with its numerous banking product packages such as housing loans and
personal loans. SBI’s access to over 100 million accounts across the country provides a
vibrant base for insurance penetration across every region and economic strata in the
country ensuring true financial inclusion.
Agency Channel, comprising of the most productive force of more than 20,000 Insurance
Advisors, offers door to door insurance solutions to customers.

33
Why SBI Life: 5 reasons to select SBI Life as your preferred insurance company.
 Customer Satisfaction - many of our customers who have bought an insurance
policy with us have bought a second one!
 Financially sound with over a 100 years of banking experience, when you trusted
us with your money, why would you trust somebody else with your protection
needs.
 Affordability
 Easy to buy (accessibility)
 Trust & reliability.
 With us you’re sure!
ORGANIZATION STRUCTURE

34
 UNIT LINKED PLANS

Unit Linked Insurance Plans are long term investment cum protection plans that offer you
an opportunity of availing market linked returns while providing life insurance
protection. Depending on your risk appetite, you have the option of choosing from host of
funds having varied degree of risk exposure. Flexibility and transparency are some of the
other attractive features that make ULIPs an attractive long term investment option.

To help you fulfill your long term dreams, SBI Life presents you a wide range of ULIPs
so that you continue to Celebrate Life!
 SBI Life - Smart Performer : A Non-participating Unit Linked Life Insurance
Plan
 SBI Life - Unit Plus Super : Non-participating Unit Linked Life Insurance Plan
 SBI Life - Saral Maha Anand : A Non - participating Unit Linked Life Insurance
Plan
 SBI Life - Smart Elite : A Non-participating Unit Linked Life Insurance Plan
 SBI Life - Smart Scholar : A Non - participating Unit Linked Life Insurance Plan
 SBI Life - Smart Horizon : A Non-participating Unit Linked Life Insurance Plan
 SBI Life - Smart Wealth Assure : A Non-participating Unit Linked Life
Insurance Plan

35
Child Plans
 SBI Life - Scholar II
 SBI Life - Smart Scholar

Pension Plans:
 SBI Life - Annuity Plus

Protection Plans:
 SBI Life - Smart Shield
 SBI Life - Saral Shield
 SBI Life - Swadhan

Savings Plan:
 SBI LIfe - Smart Money Back Insurance
 SBI Life Flexi Smart Insurance
 SBI Life - Sanjeevan Supreme
 SBI Life Shubh Nivesh
 SBI Life - Saral Life

36
 CHAPTER – III
OBJECTIVES OF THE
STUDY

37
 OBJECTIVES OF THE STUDY

o To analyze the financial information of SBI Life Insurance with the help of Key
Financial Ratios
o To find out of the profitability position of the organization.
o To analyze the current Ratio, working capital turnover ratio and gross profit
margin, to find out the liquidity position of these organization.

38
CHAPTER – IV
RESEARCH
METHODOLOGY

39
 RESEARCH METHODOLOGY

MEANING OF RESEARCH
“Research” includes any gathering of data, information and facts for the advancement of
knowledge. Research must be systematic and follow a series of steps and a rigid standard
protocol. These rules are broadly similar but may vary slightly between the different
fields of science.

MEANING OF RESEARCH METHODOLOGY

The word research methodology comes from the word “advance learners dictionary”
meaning of research as a careful investigation or inquiry specially through search for new
facts in any branch of knowledge for example some authors have defined research
methodology as systematized effort to gain new knowledge.
Research Methodology can consider research as movement, a movement from the known
to the unknown. The term Research methodology is an academic activity and as such the
term should be used in technical sense. According to Clifford Woody research comprises
defining and redefining problems, formulating hypothesis or suggested solutions,
collecting, organizing and evaluating data, making deduction and reaching conclusions
and then testing of the conclusion to determine whether they fit the in the formulating
hypothesis.

Analysis of past data a helps the management of the company to plan its future polices
according to the external environment. Based on this, study has been taken up financial
analysis of the company. Any sound research must have a proper design to achieve the
required result, this study id constructed on the basis of descriptive design.

40
 TYPES OF RESEARCH

The study conducted is an analytical study. In analytical research the researcher has to use
facts or information already available and analyze these to make a critical evaluation of
the material.

RESEARCH DESIGN
A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in
procedure.

TYPES & SOURCES OF DATA

SECONDARY DATA SOURCES:
 Through internet, various official site of the Company.
 Through pamphlets and brochures of the Company.
 Journals & Magazine
In this study Secondary Data has been used.

ANALYSIS OF DATA
It is essential to use a systematic research methodology for the assessment of a project
because without the use of a research methodology analysis of any company or
organization will not be possible. In the present analysis mostly secondary data have been
used. Following types of published data:
 Balance Sheet
 Profit & Loss A/c
 Prospectus of the Company
 General Body meeting reports
 Schedules
Data is collected and analyzed with the help of bar graphs and percentage method is also
used in the study.

41
 LIMITATIONS OF THE STUDY

 The research work is mainly based on secondary data that is, it is based on audited
accounts and its audited accounts are ambiguous then the result will be misleading.
 Study was conducted for 2008-2011.
 Inspite of precautions taken there are certain procedural and technical limitations.
 Lack of sufficient time to exhaust the detail study of the above topic became a
hindering factor in my research.
 Resources were limited.

42
 CHAPTER – V
DATA ANALYSIS &
INTERPRETATION

43
 CHAPTER - V
DATA ANALYSIS & INTERPRETATION
WORKING CAPITAL TURNOVER RATIO
= NET SALES / WORKING CAPITAL
2008 2009 2010 2011
Net Sales 795036 906749 6329138 11178901
Working Capital -10010383 -3104479 -5880399 -2351549
Ratio -0.08 -0.29 -1.08 -4.75

Interpretation:
Working capital as usual is the excess of current assets over the current liabilities. A
higher ratio indicates efficient utilization of working capital and a low ratio indicates
otherwise. But a very high working capital turnover ratio is not a good situation for any
firm. Working Capital turnover ratio is in negative which shows that working capital is
not efficiently utilized. In the year 2008 working capital turnover ratio was -0.08, in the
year 2009 it was -0.29, in the year 2010 it was -1.08, in the year 2011 working capital
turnover ratio was -4.75.

44
 CURRENT RATIO = CURRENT RATIO / CURRENT ASSETS
2008 2009 2010 2011
Current Assets 509800 5381386 5298538 8217555
Current Liabilities 10520183 8485865 11178937 10569104
Ratio 0.05 0.63 0.47 0.78

Interpretation:
Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio indicates the short term financial soundness of the company. It
judges whether current assets are sufficient to meet the current liabilities. In the year
current ratio was 0.05, in the year 2009 current ratio was 0.63, in the year 2010 current
ratio of SBI Life was 0.47 and in the year 2011 current ratio was 0.78. This shows that
company is financially sound.

45
 FIXED ASSETS TURNOVER RATIO
= NET SALES / FIXED ASSETS
2008 2009 2010 2011
Net Sales 795036 906749 6329138 11178901
Fixed Assets 1644267 2402401 3244726 3727565
Ratio 0.48 0.38 1.95 3.00

Interpretation:
In the year 2008 fixed asset turnover ratio was 0.48, in the year 2009 it was 0.38, in the
year 2011 Fixed asset turnover ratio was 3.00 which is more than the previous year 2010
i.e. 1.95. This is a good sign for the company.

46
 GROSS PROFIT MARGIN
= GROSS PROFIT * 100 / NET SALES
2008 2009 2010 2011
Gross Profit -2138825 -706727 5569943 10816647
Net Sales 795036 906749 6329138 11178901
Ratio -269.02 -77.94 88.00 96.76

Interpretation:
In the year 2008 gross profit margin was -269.02, in the year 2009 gross profit was
-77.94, in the year 2010 gross profit was 88.00 and in the year 2011 it was 96.76. Gross
Profit Margin of the company has increased during the year 2011 which is a good sign for
the company.

47
 NET PROFIT MARGIN
= NET PROFIT / NET SALES
2008 2009 2010 2011
Net Profit -2138905 -706812 5422868 10570390
Net Sales 795036 906749 6329138 11178901
Ratio -2.69 -0.78 0.86 0.95

Interpretation:
In the year 2008 net profit margin was -2.69, in the year 2010 it was -0.78, in the year
2010 current ratio 0.86 and in the year 2011 was 0.95. Net Profit Margin of the company
has increased during the year 2011 which is a good sign for the company.

48
CHAPTER – VI
OBSERVATIONS
& FINDINGS

49
 FINDINGS & OBSERVATIONS

 Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio indicates the short term financial soundness of the company.
It judges whether current assets are sufficient to meet the current liabilities. In the
year current ratio was 0.05, in the year 2009 current ratio was 0.63, in the year
2010 current ratio of SBI Life was 0.47 and in the year 2011 current ratio was
0.78. This shows that company is financially sound.
 Working capital as usual is the excess of current assets over the current liabilities.
A higher ratio indicates efficient utilization of working capital and a low ratio
indicates otherwise. But a very high working capital turnover ratio is not a good
situation for any firm. Working Capital turnover ratio is in negative which shows
that working capital is not efficiently utilized. In the year 2008 working capital
turnover ratio was -0.08, in the year 2009 it was -0.29, in the year 2010 it was
-1.08, in the year 2011 working capital turnover ratio was -4.75.
 In the year 2008 fixed asset turnover ratio was 0.48, in the year 2009 it was 0.38,
in the year 2011 Fixed asset turnover ratio was 3.00 which is more than the
previous year 2010 i.e. 1.95. This is a good sign for the company.
 In the year 2008 gross profit margin was -269.02, in the year 2009 gross profit was
-77.94, in the year 2010 gross profit was 88.00 and in the year 2011 it was 96.76.
Gross Profit Margin of the company has increased during the year 2011 which is a
good sign for the company.
 In the year 2008 net profit margin was -2.69, in the year 2010 it was -0.78, in the
year 2010 current ratio 0.86 and in the year 2011 was 0.95. Net Profit Margin of
the company has increased during the year 2011 which is a good sign for the
company.

50
 CHAPTER – VI
CONCLUSION
& SUGGESTIONS

51
 CONCLUSION

In the year current ratio was 0.05, in the year 2009 current ratio was 0.63, in the year
2010 current ratio of SBI Life was 0.47 and in the year 2011 current ratio was 0.78. This
shows that company is financially sound.In the year 2008 working capital turnover ratio
was -0.08, in the year 2009 it was -0.29, in the year 2010 it was -1.08, in the year 2011
working capital turnover ratio was -4.75.In the year 2008 fixed asset turnover ratio was
0.48, in the year 2009 it was 0.38, in the year 2011 Fixed asset turnover ratio was 3.00
which is more than the previous year 2010 i.e. 1.95. This is a good sign for the
company.In the year 2008 gross profit margin was -269.02, in the year 2009 gross profit
was -77.94, in the year 2010 gross profit was 88.00 and in the year 2011 it was 96.76.
Gross Profit Margin of the company has increased during the year 2011 which is a good
sign for the company.In the year 2008 net profit margin was -2.69, in the year 2010 it was
-0.78, in the year 2010 current ratio 0.86 and in the year 2011 was 0.95. Net Profit
Margin of the company has increased during the year 2011 which is a good sign for the
company.

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 SUGGESTIONS

 Company should try to increase its proportions of fixed assets to net worth.
 Company should pay attention towards the proper and efficient utilization of working
capital.
 Company should improve its sales strategy.
 Company must increase its return.
 It should also pay attention in increasing its net worth in comparison to sales.
 Company must try and maintain a good fixed assets base.
 Company should increase its net profit margin, so that it can survive in adverse
conditions also.

53
BIBLIOGRAPHY

54
 BIBLIOGRAPHY
Books :
 Bhalla V.K”financial management and policy”, first edition, annual
publications, New Delhi.
 Chandra Prasana, Financial Management,TMH, 4th Edition, 1997, New Delhi
 Gupta Sunita, Management of Working Capital,First Edition,New Century
Publications,New Delhi(2003).
 Gupta S.P., Management Accounting, Sahitya Bhawan Pub.,2002.
 Kothari C.R;”Research methodology-methods & techniques”, second edition,
vishwa prakashan Delhi(1990).
 Khan & Jain, Financial Mnaagement, MH 3rd Edition, 1999.
 Maheshwari S.N ;”Management accounting and financial control”, thirteen
edition, sultan chand & sons, New Delhi(2002).
 Pandey I.M., Financial Management,Seventh Edition,Vikas Publishing House,
New Delhi.
 Sharma R.K. & Gupta S.K., Financial Management, Kalyani Publishers, New
Websites:
 www.sblife.com
 www.moneycontrol.com
 www.myiris.com
 www.wikipedia.org

55
ANNEXURE

56
 ANNEXURE - I

57
 ANNEXURE - II

58
 ANNEXURE - III

59
 ANNEXURE - IV

60