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  1. TITLE OF THE PROJECT

FINANCIAL RATIO ANALYSIS OF STATE BANK OF TRAVANCORE 

  1. INTRODUCTION

There are various methods or techniques used in analyzing financial statements, such as comparative statement, trend analysis, common- size statement, schedule of changes in working capital, fund flow analysis, cost – volume profit analysis. The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (quantitative relationship between figures and groups of figures). It is with the help of ratios that the financial statements can be analyzed more clearly and decision made for such analysis. 

MEANING OF RATIO:

A ratio is a simple arithmetic expression of the relationship of one number to another. It may be defined as indicated quotient of two mathematical expressions.

According to Accountant’s Handbook by Wixon, Kell and Bedford, a ratio “is an expression of the quantitative relationship between two numbers”  In a simple language ratio is one number expressed in terms of another and can be worked out by one number into the other. 

NATURE OF RATIO ANALYSIS: 

Ratio analysis is a technique of analysis and interpretation of financial statements. However ratio analysis is not an end in itself. It is only a mean of better understanding of financial strengths and weaknesses of a firm. Calculation of mere ratio does not serve any purpose, unless several appropriate ratios are analyzed and interpreted. There are number of ratios which can be calculated from the information given in the financial, statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis. Financial ratio to provide financial information which is useful to the decision makers and to provide financial information to predict cash flow in future Information about assets, liabilities and changes in resources and claim. 

BANK PROFILE: 

State Bank of Travancore (SBT) was originally established as Travancore Bank Ltd. in 1945 sponsored by the erstwhile Princely State of Travancore. Under a special statute of the Indian Parliament (SBI subsidiary Banks Act 1959) it has been made an Associate of the State Bank of India and a member of the State Bank Group, the largest banking group in India.

The bank has reported a net profit of nearly ₹192 crore(US$30.12 million) in the fourth quarter of the fiscal year 2014-15, compared with ₹48.6 crore(US$7.62 million) a year ago, registering a growth of 295%. For the full fiscal year 2014-15, profit came in at ₹336 crore, against ₹304 crore a year ago

  1. RATIONALE FOR THE STUDY

After globalization, the every business industry has shown a steep rise which has also attracted many investors to invest in this sector. Thus to make a correct investment decision the investor must be well versed with the bank’s financial positioning, ability to pay back, ability to meet the short term and long term obligation.

The study will help to analyze the short term financial performance of the State Bank of Travancore with the help of liquidity ratios. The study will also give an indication of financial position which will help the investors to take a correct decision on investment. Through the liquidity ratio the potential investors, creditors and lenders will come to know the ability of a concern to meet its current obligations when these become due. Financial ratio is most widely used to make the analysis of short-term financial position or liquidity, will enable the management to take decision regarding the short term financial plans. The study of ratio also facilitates the management to know whether the firm’s financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios. 

  1. OBJECTIVES OF THE STUDY

 

  • The major objectives of the recent study are to know about financial strengths and weakness of State Bank of Travancore through Financial Ratio analysis.
  • To evaluate the performance of the bank by using ratios as a yardstick to measure the efficiency of the company.
  • To understand the liquidity, profitability and efficiency positions of the bank during the study period.
  • To evaluate and analyze various facts of the financial performance of the bank.
  • To study the various components of financial statements of State Bank of Travancore for 5 years and analyze them to identify the financial strength of the bank.
  1. RESEARCH METHODOLOGY

Research methodology in a way is a written game plan for conducting research. Research methodology has many dimensions. It includes not only the research methods but also considers the logic behind the methods used in the context of the study and complains why only a particular method of technique has been used. Descriptive research procedure was used for describing the recent situations in the organization and analytical research to analyze the results by using research tools.

Data source & Collection Methods:

Secondary Data:

Secondary Data are those which have already been collected by someone else and which have already been passed through the statistical process. [Secondary data will be collected from the reports of the bank, books, journals and internet. It is gathered from annual reports, official records and standing orders of the units here will be done the analysis on basis of secondary data, which include:

  • Balance Sheet of bank.
  • Profit and loss A/C of the Bank.

Tools used:

The data would be shown with the help of different tools and ratios:–

  • Analysis through various types of ratios.
  • Current ratio
  • Quick ratio
  • Total assets turnover ratio
  • Debt equity ratio
  • Working Capital Turnover Ratio

 

STASTICAL TOOLS: 

Suitable statistical tools shall be used to carry out analysis and prepare graphs, pie- charts etc.

TIME FRAME OF THE STUDY:

5 years financial statements of of State Bank of Travancore are:

  • 2014-2015
  • 2013-2014
  • 2012-2013
  • 2011-2012
  • 2010-2011
  1. EXPECTED CONTRIBUTION FROM THE STUDY

The expected contributions of the study are:

  • The study will introduce several techniques to the financial-analyst which can be used to measure the financial performance of the establishment.
  • The study will also enable the management to know whether the firm’s financial position of State Bank of Travancore which can provide sound footing for future prospectus. It also enables the management to analyse its long term and short term payment ability. The study will also facilitate the management in task planning, forecasting and controlling.
  • The study will also help in investment decisions in the case of investors and lending decisions in the case of bankers etc.
  1. LIMITATION

Even though every effort will be taken to minimize the variation and present a factual picture with the help of statistical methods, but still there are some limitations, which are as follows:

  • The preparation and interpretation of data may not be 100% free from errors and may be affected from the annual report of the bank.
  • The study will be based on the balance sheet of the bank and depends directly on balance sheet and annual reports of the bank.
  • Limitations of the time and resources may be narrow the scope of study.
  1. PROPOSED CONTENTS OF DISSERTATION 

Detailed/final Project Report will include the following chapters:

  1. Introduction of the study
  2. Review of Literature
  3. Objective and scope of study
  4. Research Methodology
  5. Data Analysis and Interpretation
  6.  Findings and Recommendation
  7. Conclusion
  8. Limitation of the study
  9. References
  10.  Appendix
  1. REFERENCES
  • Bodie, Zane; Alex Kane and Alan J. Marcus (2009). Essentials of Investments, 5th ed. McGraw-Hill Irwin. pp. 459.
  • Mohan Juneja; Rajesh Bagga; Accounting for management and information technology; Kalyani publisher 2010.
  • Financial Ratio Analysis: A Handy Guidebook by Charles K. Vandyck(Nov 23, 2009)
  • Financial Ratios for Monitoring Corporate Sickness: Towards a More Systematic Approach by L. C. Gupta and Lakshmi Chandra Gupta(Sep 22, 2011)
  • Fridson, Martin, and Fernando Alvarez.Financial Statement Analysis: A Practitioner’s Guide. New York: John Wiley, 2011.
  • Groppelli, Angelico A.; Ehsan Nikbakht (2010). Finance, 4th ed. Barron’s Educational Series, Inc.. pp. 433.
  • GUPTA SHASHI K. “Management Accounting and Business Finance (2011), kalyani publishers.
  • Gupta Shashi K; Sharma R.K.; Financial Management; Kalyani Publisher 2010-2011.
  • Harrington, Diana R.Corporate Financial Analysis: Decisions in a Global Environment. 4th ed. Chicago: Richard D. Irwin, Inc., 2010
  • Houston, Joel F.; Brigham, Eugene F. (2009). Fundamentals of Financial Management. [Cincinnati, Ohio]: South-Western College Pub. p. 90.
  • http://www.investorwords.com/3460/operating_income.html Operating income definition.
  • M. Pandey; Financial Management; Vikas Publishing House Private Ltd.;
  • Jackson, D. A., H. H. Harvey, and K. M. Somers.2011. Ratios in aquatic sciences: statistical shortcomings with mean depth and the morphoedaphic index. Canadian Journal of Fisheries and Aquatic Sciences 47:1788-1795.
  • PANDEY I.M. “Financial Management” (2009) ,vikas publishers.
  • SHARMA R.K., “Management Accounting and Business Finance (2010), kalyani publishers.
  • Soros, George.The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means.New York: PublicAffairs, Perseus Books, 2012.
  • Weygandt, J. J., Kieso, D. E., & Kell, W. G. (2009). Accounting Principles (4th ed.). New York, Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc. p. 800.
  • Weygandt, J. J., Kieso, D. E., & Kell, W. G. (2012). Accounting Principles (4th ed.). New York, Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc. p. 801-802.
  • Williams, Jan R.; Susan F. Haka, Mark S. Bettner, Joseph V. Carcello (2012). Financial & Managerial Accounting. McGraw-Hill Irwin. pp. 266.

INTERNET SITE: 

REFFERED BOOKS

  • FINANCIAL MANAGEMENT – I. M. PANDEY
  • MANAGEMENT ACCOUNTANCY – PILLAI & BAGAVATI
  • MANAGEMENT ACCOUNTING – SHARMA & GUPTA
  • Analysis for Financial Management – Higgins, Robert

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