Authorised Learning Centre

ACIIT INSTITUTE, Ludhiana. Learning Centre Code No. 1788

FINANCIAL RATIO ANALYSIS OF KOTAK MAHINDRA BANK

BY

Varun Sachdeva
Roll No.: 581127281
A project report submitted in partial fulfillment of the requirement for

Master of Business Administartion in Finance

Of Sikkim Manipal University, INDIA

SIKKIM MANIPAL UNIVERSITY

Directorate of Distance Education

Annexure B

I here by declare that the project report entitled

FINANCIAL RATIO ANALYSIS OF KOTAK MAHINDRA BANK

Submitted in partial fulfillment of the requirement for the degree of

Master of Business Administartion in Finance

To Sikkim Manipal University, INDIA

Is my original work and not submitted for the award of any other degree, diploma fellowship, or any other similar title or prizes

Place: Ludhiana Date: ___________

Varun Sachdeva Reg. No.: 581127281

Annexure C

The Project Report of

Varun Sachdeva
Is approved and is acceptable in quality and form

Internal Examiner

External Examiners

(Name, Qualification and Designation)

(Name, Qualification)

Annexure D This is to certify that the project report entitled

FINANCIAL RATIO ANALYSIS OF KOTAK MAHINDRA BANK

Submitted in partial fulfillment of the requirement for the degree of

Master of Business Administartion in Finance

Of Sikkim Manipal University, INDIA

SIKKIM MANIPAL UNIVERSITY

Directorate Distance Education

Varun Sachdeva

Has worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, Diploma, Fellowship or other similar titles or prizes and that the work has not been published in any journal or Magazine.

(Reg. No. 581127281)

Certified [Enter Guide Name] ([Enter Qualification of Guide]) [Enter Designation of Guide]

PREFACE
One can learn more about a road by travelling it, than by consulting all the maps in the world. In the present age of business when profit maximization is the prime motive of every man, Price quality & service are the major trust areas to conquer the market. Initiative, foresight, talent & competency are imperative to manage the modern business. The MBA course inculcates those skills in students, which prepare them to face the challenges of business world. In the midst of the course, project work in some business organization is arranged for the student that is very essential. Such training gives practical experience and helps the students to view the real business world closely, which in turn widely influences their conception and perceptions. The project become more significant when it is done in a reputed & fast growing professionally managed organization like Kotak Mahindra Bank . We were really fortunate to get an opportunity to work with it. I must forewarn that this project is not a work of excellence by scholar. It is a student attempt to watch, analyze & understand the practical aspects by applying theoretical knowledge & concepts. I have made best possible attempt to accomplish the work assigned.

ACKNOWLEDGEMENT
A Kind Thought Has A More Than A Material Gift Because It Cannot Be Bought First of all I would like to thank almighty for vesting me wisdom without which I would not be able to carry out this project. A project usually falls short of its expectations unless guided by the right person at the right time. This project would not have been completed without the direct or indirect help and guidance of the staff of Kotak Mahindra Bank. They provided us with the necessary resources and an environment conducive for healthy learning and training under their able guidance. The summer training was an amazing experience. It gave the much needed knowledge. I got a chance to understand the activities performed. However, this would not have been possible without the noble attitude of some persons in bank. At the outset, I would like to take this opportunity to gratefully acknowledge the very kind and patient guidance and encouragement that I have received from our CHIEF MANAGER MR. HARSH MARWAHA. Last but not the least I would like to thank all the staff of bank who had directly or indirectly supported me in completion of my project report. VARUN SACHDEVA

INDEX

Sr.No. 1. 2. 3. 4. 5. 6. 7. Introduction of ratio analysis Steps in ratio analysis Significance of ratio analysis Trend, industry analysis Standards of comparison Classification of ratios Organization profile

Contents

About company, its formation Progress so far Kotaks businesses Mission of company Vision statement Promises, services, awards,principles 8. 9. Research objectives & scope Research methodology Intro, steps in research, sampling Data collection, limitations 10. Data interpretation & presentation Profit & loss a/c, balance sheet Calculation of ratios Presentation in graphs

11. 12. 13.

Findings Suggestions Bibliography

CHAPTER-1 INTRODUCTION

RATIO ANALYSIS
DEFINITION OF RATIO ANALYSIS :
There are various methods or techniques used in analyzing financial statements such as comparative statements, trend analysis, common-size statements, schedule of changes in working capital, fund flow and cash flow analysis, cost-volume profit analysis and the ratio analysis.

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two variables. In other words we can say that ratio analysis is a technique of analysis and interpretation of financial statements. It is a process of establishing and interpreting various ratios for helping in making certain decisions. Ratios serve as a means of better understanding of companys performance as a whole. It is with the help of ratios that the financial statements i.e. profit and loss account and the Balance sheet can be analysed more clearly and decisions made more accurately from such analysis.

STEPS INVOLVED IN THE RATIO ANALYSIS:- The following are thefour

steps involved in the ratio analysis: 1. Selection of relevant data from the financial statements i.e. from the Profit and loss account or the Income statement as the case may and the Balance sheet depending upon the objective of the analysis of the concerned organization.. 2. Then we will calculate the appropriate ratios from the above data. 3. Next step is the comparison of the calculated ratios with the ratios of the same firm in the past or the ratios developed from the projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs. 4. Last but not the least we make interpretation of the ratios and thus draw conclusions.

SELECTION OF DATA CALCULATION OF RATIOS COMPARISON OF RATIOS RATIOS INTERPRETATION OF

 SIGNIFICANCE OR IMPORTANCE OF RATIO ANALYSIS :The significance or the importance of ratio analysis are as follows:
HELPS IN EVALUATING THE FIRMS PERFORMANCE: With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e. whether the management has utilized the firms assets correctly, to increase the investors wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets. HELPS IN COMMUNICATING: The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of ratios. The info contained in the financial statements is conveyed in a meaningful manner to the one for whom it is meant. Thus, ratios help in communication and enhance the value of the financial statements. HELPS IN INTER FIRM COMPARISION:Ratio analysis helps in inter-firm comparison by providing necessary data. An inter-firm comparison indicates relative position.It provides the relevant data for the comparison of the performance of different departments. If comparison shows avariance, the possible reasons of

variations may be identified & if results are negative, the actions may be initiated immediately to bring them as desired. HELPS IN CO-ORDINATION:Ratios even help in co-ordination which is of utmost importance in effective business management. Better communication of efficiency and weakness of an enterprise and weakness of an enterprise results in better co-ordination in the enterprise. HELPS IN CONTROL :Ratio analysis even helps in making effective control of the business. Standard ratios can be based upon proforma financial statements and variances or deviations, if any, can be found by comparing the actual with the standards so as to take a corrective action at the right time. The weaknesses or otherwise, if any, come to the knowledge of the management which helps in effective control of the business. SIMPLIFIES FINANCIAL STATEMENT :The information given in the basic financial statements serves no useful Purpose unless it is interpreted and analyzed in some comparable terms. The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner. HELPS IN DETERMINING THE FINANCIAL POSITION OF THE CONCERN: Ratio analysis facilitates the management to know whether the firms financial position is improving or deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know

the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling. HELPS IN BUDGETING AND FORECASTING:Accounting ratios provide a reliable data, which can be compared, studied and analyzed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action. LIQUIDITY POSITION:With the help of ratio analysis conclusions 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 obligations whenever they become due. The ability to meet short term liabilities is reflected in the liquidity ratio of a firm. LONG TERM SOLVENCY:Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency is measured by the leverage or capital structure and profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets. OTHER USES : There are so many other uses of ratio analysis .It is an essential part of the budgetary control & costing. These are of immense imp in analysis & interpretation of financial statements as they bring the strength or weakness of firm.

 TREND AND INDUSTRY ANALYSIS : Thats where trend (time-series) and industry (crosssectional) analysis come in. You can compare your firms ratios to trend data, which is data from other time periods related to your firm with a current data, so as to see how your firm is doing over a series of time periods. You can analyse its performance over a number of years that whether your company is progressing or its constant or its going worse In a similar way you can also compare your firms ratios to industry data. You can gather data from similar firms in the same industry, calculate their financial ratios, and see how your firm is doing as compared to the industry at large. Ideally, to get a good picture of the financial picture of your firm, you should do both.

Compare two firms

Compare one firm yearly

 STANDARDS OF COMPARISION:
The ratio analysis involves comparison for a useful interpretation of the financial statements. A single ratio is itself does not capable of indicating favourable or unfavourable condition. It should be compared with some standards. It consists of:

PAST RATIOS: Ratios calculated from the past historical financial statements of

the same firm. FOR EXAMPLE: Current ratio in 1991 compared with of 2009.

COMPETITORS RATIOS: Ratios of some selected firms,

especially

most

progressive and successful competitors of the firm, at the same point of time. FOR EXAMPLE: Solvency ratio of Punjab national bank compared with state bank of India.

INDUSTRY RATIOS: Ratios of industry to which the firm actuallybelongs. This

is also a basis which can be used for interpretation of a firm to know its progress in an industry.

PROJECTED RATIOS: Ratios developed using the projected or proforma

financial statements of the same firm. Ratios can also be calculated for future standards based upon the projected or proforma financial statements. These future ratios may be taken as a standard for comparison and the ratios calculated on actual financial statements can be compared with thestandard ratios to find out variances, if any. Such variances help in interpreting and taking corrective action for improvement in future.

CLASSIFICATION OF RATIOS
The use of ratio analysis is not confined to financial managers only. There are different parties interested in ratio analysis for knowing the financial position of a firm for different purposes. The parties who are interested in financial analysis are short and long term creditors, owners and management. Short term creditors main interest is in the liquidity position or short term paying capacity of the firm. Long term creditors, on the other hand, are more interested in the solvency or long term financial position of the concern. Similarly, owners or the shareholders generally concentrate on the firm's profitability or dividend position. On the other hand, Management is interested in evaluating every aspect of the firm's performance to protect the interest of all the parties. Thus ratios are classified as follows:

TRADITIONAL CLASSIFICATION Balance sheet Profit and loss Account Ratios Composite/ mixed

FUNCTIONAL CLASSIFICATION Liquidity Ratios Leverage Ratios Activity Ratios Profitability Ratios

SIGNIFICANCE RATIOS Primary Ratios Secondary Ratios

(A) TRADITIONAL CLASSIFICATION:

BALANCE SHEET RATIOS
Current ratio

PROFIT& LOSS A/C RATIOS

Gross profit ratio

MIXED RATIOS

Stock turnover ratio Debtors turnover Payable turnover

Liquid ratioOperating ratio Absolute liquidityOperating profit RatioratioFixed asset turnover

Debt equity ratioNet profit ratioReturn on equity Proprietory ratioCash profit ratioReturn on sh.holder Capital gearing Expense ratiofunds ratio Asset proprietorshipInterest coverageCapital turnover Ratio ratio ratio Capital inventory to Working capital Working capital ratioturnover ratio Current to fixed assetReturn on total Ratioresources ratio & Total assets ratio

(a)

Balance sheet or position statement ratios: Balance sheet ratios deal with the relationship between two balance sheet items. Both the items must pertain to the same balance sheet.

(b)

Profit and loss account or revenue/income statements ratios: These ratios deal with the relationship between two profit & loss account items. Both the items must belong to the same profit and loss account.

(c)

Composite / mixed ratios or inter statement ratios : These ratios exhibit the relationship between a profit & loss account or income statement and a balance sheet item e.g. stock turnover ratio.

(B) (a)

FUNCTIONAL CLASSIFICATION : Liquidity ratios: These measure the short term solvency or financial position of a firm. These are calculated to comment upon the short term paying capacity of concern to meet its current obligations.

(b)

Long term solvency and leverage ratios: These ratios convey a firms ability to meet the interest costs and repayment schedules of its long term obligations. The leverage ratios can further be classified as: (i) Financial leverage (ii) Operating (iii) Composite leverage

(B) FUNCTIONAL CLASSIFICATION

LIQUIDITY RATIOS 1.Current ratio

2.Liquidity Ratio 3. Absolute Liquid ratio 4.Interval measure

LONG TERM & LEVERAGE

1. Debt equity ratio 2. Debt to total capital Ratio 3. Interest coverage ratio 4.Cash flow/debt ratio

ACTIVITY RATIOS
1 . Stock turn over ratio 2.debtors turn 3.fixed assets ratio 4.total asset turnover 5.working capital ratio 3.operating profit ratio 4 .Net profit ratio 5 .Expense ratio (A) Sales 1. Gross profit 2.operating

PROFIT RATIOS

5.Debtors turnover 5.Capital gearing Ratio 6.Creditors turnover Ratio 7. Inventory turnover Ratio B) Investment ROI, EPS, P/E ROC, ROR. Ratio

(c)

Activity ratios: Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. These ratios are also called turnover ratios. Because they indicate the speed with which assets are being turned over into sales.

(d)

Profitability ratios:These ratios measure the results of business operations or overall performance and effectiveness of the firm. Generally two types of profitability ratios are calculated : (i) In relation to sales (ii) In relation to Investments.

(C) CLASSIFICATION ACCORDING TO SIGNIFICANCE OR IMPORTANCE:

Some ratios are more important than others and firms may classify them as primary and secondary ratios. The primary ratio is one which is of the prime importance to the concern, thus return on capital employed is named as primary concern. The other ratios which support or explain the primaryratio are called secondary ratiose.g. therelationship of operating profit to sales. The BRITISH INSTITUTE OF MANAGEMENT recommended the classification of ratios according to importance for inter firm comparisons.

ANALYSIS OF SHORT TERM FINANCIAL POSITION OR TEST OF LIQUIDITY

The short term creditors of a company are interested in knowing the companys ability to meet its current or short term obligations as and when these become due. The short term obligations of a firm can be met only when there are sufficient liquid assets. Therefore, it is very important to have a proper balance in regard to the liquidity of the firm. Two types of ratios can be calculated for measuring short term financial position or short term solvency of a firm. (A) (B) Liquidity ratios Current assets movement or efficiency ratios

(A) LIQUIDITY RATIOS:

Liquidity ratios measure the firms ability to meet current obligations. It is extremely essential for a firm to be able to meet its obligations as they become due. The short term obligations are met by realizing amounts from current, floating or circulating assets. The current assets should either be liquid or near liquidity. These should be convertible into cash for paying obligations of short term nature.In fact analysis is of liquidity needs in the preparation of cash budgets and cash and funds flow statements.

Liquidityratiosbyestablishing arelationship between cash and other current assets to current obligations provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity and also that it does not have excess liquidity. The failure of the company to meet its obligations due to the lack of sufficient liquidity willresult ina poor credit worthiness, loss of creditors confidence or even in legal tangles resulting in the closure of company. A very high degree of liquidity is also bad, because idle assets earn nothing. The firm's funds will be unnecessarily tied up to current assets. Therefore, it is necessary to strike a proper balance between high liquidity and lack of liquidity.

HIGH LIQUIDITY

BBBBBAB

LOW LIQUIDITY

To measure the liquidity of a firm, the following ratios can be calculated:

1. 2. 3. 4.

Current ratio Quick ratio Interval measure Absolute liquid ratio or cash position ratio

These ratios are of utmost importance as the bankers, suppliers of goods and other short term creditors are interested in the liquidity of the concern.

1. CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current liabilities.Current ratio is calculated by dividing current assets by current liabilities. Current assetsinclude cash and those assets which can be converted into cash within a year, such as marketable securities, debtors and inventories. Current liabilities include sundry creditors, bills payable, accrued expenses, short term bank loan, income tax liabilityand dividend payable . The current ratio is a measure of firm's short term solvency, general liquidity. As a conventional rule a current ratio of 2:1 or more is considered satisfactory. The current ratio represents margin of safety for creditors. CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITIES 2. QUICK RATIO: Quick ratio establishes a relationship between quick or liquid assets and current or liquid liabilities. An asset is said to be liquid if it can be converted into cash within a short period without loss of value. In that sense Cash in hand & cash at bankare the most liquid asset, other assets which are considered to be relatively liquid and included in quick assets are sundry debtors and bills receivables and marketable securities & short

term or temporary investments. Inventories& prepaid expenses are considered to be less liquid because they cannot be converted into cash immediately. Generally as a rule of thumb quick ratio of 1:1 is considered satisfactory. It is generally thought that if quick assets are equal to current liabilities then the concern may be able to meet its short term obligations.

QUICK RATIO: QUICK OR LIQUID ASSETS CURRENT LIABILITIES

QUICK ASSETS= CURRENT ASSETS (INVENTORIES + PREPAID EXP) 3. ABSOLUTE LIQUID RATIO OR CASH RATIO:

Although receivables, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time, thus the absolute ratio should also be calculated together with current ratio and acid test ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES ABSOLUTE LIQUID ASSETS =CASH & BANK + SHORT TERM SECURITIES

4. INTERVAL MEASURE OR DEFENSIVE INTERVAL RATIO:

The ratio which assesses a firm's ability to meet its regular cash expenses is the interval measure. Interval measure relates the liquid assets to average daily cash operating outflows. The daily operating expenses will be equal to cost of goods sold plus office & administrative, selling & distribution and general expenses less depreciation and other non- cash expenses divided by number of days in the year.

INTERVAL MEASURE= QUICK OR LIQUID ASSETS AVERAGE DAILY OPERATING EXPENSES

LIQUID ASSETS = CASH + SHORT TERM SECURITIES + RECEIVABLES AND THE AVERAGE DAILY CASH OPERATING EXPENSES = COST OF GOODS SOLD + ADMINISTRATION & OFFICE EXPENSES + SELLING & DISTRIBUTION EXPENSES (DEPREIATION AND OTHER NON CASH EXPENSES) NO. OF DAYS IN AYEAR (365 OR 360) Thus by calculating all these ratios we can come to know about the short term liquidity of the organization and thus can take decisions easily and correctly.

(B) ACTIVITY RATIOS OR EFFICIENCY RATIOS:

Funds of creditors and owners are invested in various assets in business to generate sales and earn profits. The efficiency with which assets are managed directly affect the sales. The better the management of assets, the larger is an amount of sales and the profits. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets or resources. These ratios are also called turnover ratios because they indicate the speed with which assets are being converted 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.
1. 2. 3. 4.

Inventory turnover ratio Debtors turnover ratio Creditors turnover ratio Working Capital turnover ratio

1. INVENTORY TURNOVER RATIO: Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirements of the business. But the level of inventory should neither be too high nor too low because it blocks capital. Therefore Inventory turnover ratio is

Calculated which indicates the efficiency of the firm in producing and selling its product. It would indicate whether inventory has been efficiently used or not. The purpose is to see whether only the required funds have been locked up in inventory. It indicates the no. of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. It is calculated by dividing cost of goods sold by average inventory. Average inventory consists of opening stock plus closing stock divided by 2.

INVENTORY TURNOVER RATIO:COST OF GOODS SOLD AVERAGE INVENTORY AVERAGE INVENTORY = OPENING + CLOSING STOCK

2. DEBTORS TURNOVER RATIO: A concern may sell goods on cash as well as on credit. Credit is one of the important elements of sales promotion. Trade debtors are expected to be converted into Cash within a short period of time&are included in current assets. Debtors turnover ratio is found out by dividing credit sales by average debtors. Debtors turnover indicates the number of times debtors turnover each year. Generally the higher the value of debtors turnover, the more efficient is the management of credit.

DEBTORS TURNOVER RATIO =

CREDIT SALES AVERAGE DEBTORS

AVERAGE DEBTORS= OPENING + CLOSING TRADE DEBTORS

Collection Period: The average collection period represents the average no. of days for which a firm has to wait before its receivables are converted into cash. In other words, the average number of days for which debtors remain outstanding is called the average collection period.

AVERAGE COLLECTION PERIOD=

NO. OF DAYS IN A YEAR

DEBTORS TURNOVER RATIO

3. CREDITORS / PAYABLES TURNOVER RATIO:

In the course of business operations, a firm has to make credit purchases & incur short term liabilities. A supplier of goods i.e. creditor is naturally interested in finding out how much time the firm is likely to take in repaying its creditors so thus it is calculated. Much time the firm is likely to take in repaying its trade creditors so thats why the creditors turnover ratio is calculated.

CREDITORS TURNOVER RATIO = NET CREDIT ANNUAL PURCHASES AVERAGE TRADE CREDITORS AVERAGE TRADE CREDITORS = OPENING + CLOSING TRADE CREDITORS

Payment Period: The average payment period ratio represents the average number of days taken by the firm to pay its creditors. Generally, lower the ratio, the better is the liquidity position of the firm and higher the ratio, less liquid is the position of the firm. AVERAGE PAYMENT PERIOD: NO. OF WORKING DAYS CREDITORS TURNOVER RATIO

4. WORKING CAPITAL TURNOVER RATIO: Working capital of a concern is

directly related to sales. The current assets like debtors, bills receivable, cash , stock etc. change with the increase or decrease in sales. A firm may also like to relate net current assets to sales. WORKING CAPITAL = CURRENT ASSETS- CURRENT LIABILITIES WORKING CAPITAL TURNOVER RATIO= COST OF SALES OR SALES AVERAGE WORKING CAPITAL AVERAGE WORKING CAPITAL= OPENING + CLOSING WORKING CAPITAL 2

ANALYSIS OF LONG TERM FINANCIAL POSITION OR TESTS OF SOLVENCY:

The term solvency refers to the ability of a concern to meet its long term obligations. The long term indebtedness of a firm includes debenture holders, financial institutions providing medium & long term loans and other creditors selling goods on installment basis. All these parties are more concerned with firms long term financial strength. In fact a firm should have 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 a general rule, there should be an appropriate mix of debt and owner s equity in financing the firm's assets.The long term creditors of a firm want to know firms ability to pay regular interest on long term borrowings, repayment of principal amount at maturity and security of their loans.These ratios indicate firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings.

(A)CAPITAL STRUCTURE RATIOS:

1. DEBT EQUITY RATIO:

Debt equity ratio is calculated to measure the relative claims of outsiders & the owners i.e. shareholders against the firms assets. This ratioindicate the

relationship between the external equities or the outsiders funds and the shareholders funds.It is computed by dividing long term borrowed capital or total debt by Share -holders fund or net worth.

DEBT EQUITY RATIO: TOTAL DEBT NET WORTH Or DEBT EQUITY RATIO: LONG TERM DEBT SHARE HOLDERS FUND

2. FUNDED DEBT TO TOTAL CAPITALISATION RATIO: The ratio

establishes a link between the long term funds raised from outsiders and total long term funds available in the business. It will be calculated as follows: FUNDED DEBT (LONG TERM DEBT) TOTAL CAPITALISATION
3. CAPITAL EMPLOYED TO NET WORTH RATIO:

X 100

There is an another alternative way of expressing the basic relationship between debt and equity. It helps in knowing, how much funds are being contributed together by lenders and owners for each rupee of owner's contribution. This can be found out by calculating the ratio of capital employed or net assets to net worth.

NET WORTH RATIO:

CAPITAL EMPLOYED

NET WORTH
4. PROPRIETORY RATIO:

This ratio establishes the relationship between shareholders funds to total assets of the firm. It is an important ratio for determining long term solvency of a firm. The components of the ratio are shareholders funds and total assets. PROPRIETORY RATIO: SHAREHOLDERS FUNDS TOTAL ASSETS
5. SOLVENCY RATIO :

This ratio is small variant of equity ratio and can be simply calculated as 100equity ratio. It shows the relationship between total liabilities to total assets of a firm. SOLVENCY RATIO: TOTAL LIABILITIES / TOTAL ASSETS
6. FIXED ASSETS TO NET WORTH RATIO :

This ratio establishes the relationship between fixed assets and shareholders funds i.e. share capital plus reserves and retained earnings. FIXED ASSET TO NET WORTH RATIO: FIXED ASSETS (AFTER DEP.) SHAREHOLDERS FUNDS

(B) COVERAGE RATIOS: 1. INTEREST COVERAGE RATIO OR DEBT SERVICE RATIO: This ratio is used to test the debt servicing capacity of a firm. This ratio is calculated by dividing the net profit before interest & taxes by fixed interest charges. DEBT SERVICE RATIO: NET PROFIT BEFORE INTEREST & TAX FIXED INTEREST CHARGES 2. TOTAL COVERAGE RATIO: NET PROFIT BEFORE INTEREST & TAX TOTAL FIXED CHARGES 3. PREFERENCE DIVIDEND COVERAGE RATIO: PROFIT AFTER TAX PREFERENCE DIVIDEND 4. CASH TO DEBT SERVICE RATIO: It is calculated as follows: = ANNUAL CASH FLOW BEFORE INTEREST & TAX + DEPRECIATION INTEREST + SINKING FUND APPROPRIATION ON DEBT / 1- TAX RATE

ANALYSIS OF PROFITABILITY OR PROFITABILITY RATIOS:

A company should earn profits to survive and grow over a long period of time. Profits are essential but it would be wrong to assume that every action initiated by management of a company should be aimed at maximizing profits, irrespective of social consequences. Profit is the difference between revenues and expenses over a period of time. Profit is the ultimate output of a company and it will have no future if it fails to make

sufficient profits. Therefore, the financial manager should continuously evaluate the efficiency of the company in terms of profits. The profitability ratios are calculated to measure the operating efficiency of the company. Generally, there are two types of profitability ratios 1. 2. Profitability in relation to sales Profitability in relation to investment.

(A) GENERAL PROFITABILITY RATIOS: a. Gross Profit Ratio: It is calculated by dividing gross profit by sales. 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 the sales revenue. GROSS PROFIT RATIO= GROSS PROFITS / SALES b. Net Profit Ratio: Net profits are obtained when operating expenses, interest and taxes are subtracted from the gross profit. The net profit margin is measured by dividing profit after tax or net profit by sales. This shows relationship between net profits and sales. NET PROFIT RATIO= NET PROFIT SALES c. Operating Expense Ratio: Operating expense ratio explains the relationship between cost of goods sold and other operating expenses, sales. It explains changes in the profit margin ratio. This ratio

is computed by dividing operating expenses like cost of goods sold plus selling expenses, general expenses and administrative expenses by sales. OPERATING EXPENSE RATIO= OPERATING EXPENSES X 100 SALES The higher operating expenses ratio is unfavorable since it will leave less operating income to meet interest, dividends etc. d. Operating profit ratio: This ratio is calculated by dividing operating profit by sales. Operating profit is calculated as sales cogs office, administrative & selling, distribution expenses. OPERATING PROFIT RATIO = SALES- COGS- OFFICE & SELLING EXP. X 100 NET SALES e. Expense ratio: Expense ratio indicate a relationship of various expenses to sales. It will be calculated as follows: PARTICULAR EXPENSE RATIO: PARTICULAR EXPENSE X 100 SALES f. Cash profit ratio: The net profits of a firm are affected by the amount/ method of depreciation charged. As depreciation being a non -cash expense, it is better to calculate cash profit ratio. CASH PROFIT RATIO: CASH PROFIT X 100 SALES

(C)OVERALL PROFITABILITY RATIOS : a. Return On Investment: The term investment may refer to total assets or net assets. The conventional approach of calculating return on investment is to divide profit after tax by investment. Investment represents pool of funds supplied by shareholders and lenders. While PAT represent residue income of shareholders. It shows the relationship between net profits and the proprietors funds. RETURN ON INVESTMENT= PROFIT AFTER TAX SHAREHOLDERS FUNDS b. Return On Equity: Ordinary share-holders are the real owners of the business. So they are entitled to the residual profits. A return on shareholders equity is calculated to see the profitability of owners investment. Return on equity indicates how well the firm has used the resources of owners. The earning of a satisfactory return is the most desirable objective of business. RETURN ON EQUITY=NET PROFIT AFTER TAX- PREFERENCE DIVIDEND EQUITY SHARE CAPITAL (PAID UP) c. Earnings Per Share: The measure is to calculate the earning per share. The earning per share is calculated by dividing profit after tax by total number of outstanding shares. EPS simply

shows the profitability of the firm on a per share basis, it does not reflect how much is paid as dividend and how much is retained in business.

EARNINGS PER SHARE= PROFIT AFTER TAX- PREFERENCE DIVIDEND NO. OF EQUITY SHARES d. Capital turnover ratio: Capital turnover ratio is the relationship between cost of goods sold & the capital employed. As capital is invested in a business to make sales and earn profits, this ratio is a good indicator of overall profitability of the concern. CAPITAL TURNOVER RATIO: COST OF GOODS SOLD OR SALES CAPITAL EMPLOYED e. Working capital turnover ratio: This ratio indicates the velocity of the utilization of net working capital. WORKING CAPITAL TURNOVER RATIO: COST OF GOODS SOLD OR SALES AVERAGE WORKING CAPITAL (D)MARKET TEST OR VALUATION RATIOS: (i) Dividend yield ratio: Shareholders are the real owners of a company & they are interested in earnings &dividends distributed. So this shows the relationship between dividend per share paid & market value of the share. DIVIDEND YIELD RATIO: DIVIDEND PER EQUITY SHARE X 100 MARKET VALUE PER SHARE

Dividends Per Share: The net profits after taxes belong to shareholders. But the income which they really receive is the amount of earnings distributed as cash dividends. Therefore, a larger number of present and potential investors may be interested in DPS rather than EPS. DPS is the earnings distributed to ordinary shareholders divided by the number of ordinary shares outstanding. DPS= DIVIDEND PAID TO SHARE HOLDERS NUMBER OF SHARES

(ii). Dividend Pay Out Ratio: The dividend pay- out ratio is simply the dividend per share divided by Earnings Per Share. It is calculated to find the extent to which EPS have been retained in the business. DIVIDEND PAY OUT RATIO= DIVIDEND PER SHAREX 100 EARNINGS PER SHARE

(iii).Price- Earning Ratio: The reciprocal of the earnings yield is called price -earning ratio. The price earning ratio is widely used by security analysts to value the firm's performance as expected by investors. Price earning ratio reflects investors expectations about the

growth of firm's earnings. Industries differ in their growth prospects. Accordingly, the P/E ratios for industries vary widely. PRICE EARNING RATIO = MARKET VALUE PER SHARE EARNING PER SHARE (iv)Earnings yield ratio: This ratio also shows a relationship between earnings per share & market value of shares. It can be calculated as follows: EARNING YIELD RATIO: EARNINGS PER SHARE X 100 MARKET PRICE PER SHARE

ANALYSIS OF CAPITAL STRUCTURE OR LEVERAGE

(A)Capital gearing ratio: The term capital gearing is used to describe the relationship between equity share capital including reserves to preference share capital & other fixed interest bearing securities. If preference share capital &loans exceed equity share capital, the firm is said to be highly geared and vice-versa. CAPITAL GEARING RATIO: EQUITY SHARE CAPITAL+ RESERVES PREFERENCE CAPITAL+ LONG LOANS (B) Leverages: (I) Financial leverage or trading on equity:The use of long term fixed interest bearing debt & preference share capital along the equity share capital is called

FINANCIAL LEVERAGE OR TRADING ON EQUITY. It is owners equity which is used as a basis to raise loans, thats why its called trading on equit y.

FINANCIAL LEVERAGE: PROFIT BEFORE INTEREST & TAX EBIT- INTEREST PREFERENCE DIVIDEND (II) Operating leverage: It is obtained by dividing contribution i.e. sales minus variable cost, by the EBIT i.e. earnings before interest & taxes. OPERATING LEVERAGE: CONTRIBUTION EARNINGS BEFORE INTEREST & TAXES (III) Combined leverage: CONTRIBUTION EARNINGS BEFORE INTEREST AND TAXES (IV)Ratio of reserves to equity capital: RESERVES X 100 EQUITY SHARE CAPITAL (V)Total investment to long term liabilities: This is calculated by dividing the total of long term funds by long term liabilities. FORMULA= SHAREHOLDERS FUNDS + LONG TERM LIABILITIES LONG TERM LIABILITIES (VI) Ratio of fixed assets to funded debt: FIXED ASSETS / FUNDED DEBT.

CHAPTER 2

ORGANIZATION PROFILE

COMPANY PROFILE

CORPORATE IDENTITY KOTAK MAHINDRA BANK LIMITED

ABOUT THE COMPANY

Established in 1984, KOTAK MAHINDRA is one of the Indias leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate world as well.

In February 2003, KOTAK MAHINDRA FINANCE LIMITED, the group flagship company was given the license to carry on banking business by the reserve bank of India (RBI). Kotak Mahindra Finance Limited is the first company in the Indian history to convert to a bank.Recently KOTAK MAHINDRA BANK LIMITED and HDFC BANK have signed a memorandum of understanding to share their ATM network. This agreement will give customers of the two banks access to over 1400 ATMs across the country while HDFC Bank has 1335 ATMs across 228 locations in the country; Kotak Mahindra Bank has 75 ATMs at 41 locations, accessible 24 hours a day, and 365 days a year.

The group has a net worth of over 6,523 crores and has a distribution network of branches, franchisees, representative offices and satellite offices across cities and towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group services around 6.2 million customer accounts.

FORMATION OF THE COMPANY

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Since then it's been a steady and confident JOURNEY to GROWTH AND SUCCESS. The general management include Mr. Uday kotak anexecutive vice chairman,& MD, Mr. C.JAYARAM, MR. DIPAK GUPTA.

PROGRESS SO FAR.

1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting 1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market 1990 The Auto Finance division is started 1991 The Investment Banking Division is started. Takes over FICOM, one of Indias largest financial retail marketing networks 1992 Enters the Funds Syndication sector 1995 Brokerage and Distribution businesses incorporated into a separate company Kotak Securities. Investment Banking division incorporated into a separate company - Kotak Mahindra Capital Company 1996 The Auto Finance Business is hived off into a separate company - Kotak Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited). Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford vehicles. The launch of Matrix Information Services Limited marks the Groups entry into information distribution.

2000 Kotak Mahindra ties up with Old Mutual plc. For the Life Insurance business. Kotak Securities launches its on-line broking site (now www.kotaksecurities.com). Commencement of private equity activity through setting up of Kotak Mahindra Venture Capital Fund. 2001 Matrix sold to Friday Corporation Launches Insurance Services 2003 Kotak Mahindra Finance Ltd. converts to a commercial bank the first Indian company to do so.

2004 Launches India Growth Fund, a private equity fund. 2005 Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Kotak Mahindra. 2006 Bought the 25% stake held by goldman sachs in kotak Mahindra capital co.& kotak securities. 2008 Launched a pension fund under NEW PENSION SYSTEM. 2009 It opened a representative office in DUBAI. Entered AHMEDABAD COMMODITY EXCHANGE as anchor investor. 2010 AHMEDABAD DERIVATIVES & COMMODITY EXCHANGE, a kotak anchored enterprise, became operational as a NATIONAL COMMODITY EXCHANGE.

JOURNEY SO FAR

KOTAK MAHINDRA BANK LIMITED

OUR BUSINESSES OR WE CAN SAY MULTIPLE BUSINESSES ONE BRAND.Kotak Mahindra Bank Ltd is a one stop shop for all banking needs. The bank offers personal finance solutions of every kind from savings accounts to credit cards, distribution of mutual funds to life insurance products. Kotak Mahindra Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. Kotak has 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.

KOTAKS BUSINESSES : (A) KOTAK MAHINDRA CAPITAL COMPANY LIMITED:

Kotak Mahindra Capital Company Limited (KMCC) is India's premier Investment Bank and a Primary Dealer (PD) approved by the RBI. KMCC's core business areas include Equity Issuances, Mergers & Acquisitions, Structured Finance and Advisory Services, Fixed Income Securities and Principal Business. (B) KOTAK SECURITIES:

Kotak Securities Ltd. is one of India's largest brokerage and securities distribution house in India. Over the years Kotak Securities has been one of the leading investment broking houses catering to the needs of both institutional and non-institutional investor categories with presence all over the country through franchisees and co-coordinators. Kotak

Securities Ltd. offers online (through www.kotaksecurities.com) and offline services based on well-researched expertise and financial products to the non-institutional investors. (C) KOTAK MAHINDRA PRIME LIMITED:

Kotak Mahindra Prime Limited (KMP) (formerly known as Kotak Mahindra Primus Limited) has been formed with the objective of financing the retail and wholesale trade of passenger and multi utility vehicles in India. KMP offers customers retail finance for both new as well as used cars andwholesale finance to dealers in the automobile trade. KMP continues to be among the leading car finance companies in India. (D) KOTAK MAHINDRA ASSET MANAGEMENT COMPANY:

Kotak Mahindra Asset Management Company (KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in excess of Rs. 11,000 cores and offers schemes catering to investors with varying risk- return profiles. It was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. (E) KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LIMITED:Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Mahindra Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to take important financial decisions at every stage in life by offering them a wide range of innovative life insurance products, to make them financially independent. The company covers over 3 million lives & is one of the fastest growing insurance companies in India.

(E) KOTAK PRIVATE EQUITY GROUP (KPEG): Kotak Private Equity Group helps nurture emerging businesses and mid-size enterprises to evolve into tomorrow's industry leaders. With a proven track record of helping build companies, KPEG also offers expertise with a combination of equity capital, strategic support and value added services. What differentiates KPEG is not merely funding companies, but also having a close involvement in their growth as board members, advisors, strategists and fund-raisers. (F) KOTAK REALTY FUND : Kotak Realty Fund deals with equity investments covering sectors such as hotels, IT parks, residential townships, shopping centres, industrial real estate, health care, retail, education and property management. The investment focus here is on development projects and enterprise level investments, both in real estate intensive businesses. Thus, kotak mahindra company is not restricted to one business only.

MISSION OF THE COMPANY:

To provide error free quality service to all the customers with speed and smile by deploying best and innovative practices, enthusiastic talents, state of art technologies and thus create center of excellence in operations management. Our team pushes the limits so our clients can benefit. Always looking forward, we are committed to fostering and developing successful business relationships. With a commitment to excellence and paying sharp attention to the quality of work and services, perfectionalism is our only acceptable standard. Thus companys main focus is on the customer satisfaction because as we all know customer is the king of the market. So thats why company value their customers and their different types of needs are studied and efforts are made to cater to their needs and to satisfy them also happily. A company is always interested that its customer enjoys while being with them.

KOTAK MAHINDRA BANK LIMITED

PROMISES :

To deliver the highest standard of service quality.

To advise you of our targeted turnaround time and adhere to the same.

To have transparency in all our transactions or dealings.

To have solution oriented mindset where customers are placed first.

To act courteously fairly and reasonably in all our dealing with you.

To accept and act upon customers feedback/complaint.

SERVICES OFFERED:(a)KOTAK MOBILE BANKING

FEATURES I. No need to remember complex codes. II. Security through 128 bit encryption. III. Check account balance for current, saving accounts. IV. Transfer funds between accounts. V. Purchase mutual funds units.

(b)KOTAK GOLD ETERNITY

FEATURES I. 24 Pure gold bars. II. Manufactured in Switzerland by PAMP III. Certified by one of the top assayers in the world. IV. Tamper proof packaging to ensure the purity of gold bar.

PRODUCTS OFFERED

ATM

PHONE BANKING

NET BANKING

GLOBAL DEBIT CARD

AWARDS AND CERTIFICATES

2012 The company got ICAI AWARD for excellence in financial reporting category-1 in banking sector for the year ended 31st march, 2010. Asia money: Best local cash management bank 2010. IDG INDIA: Kotak won the CIO 100 the agile award 100 award 2010. 2011 Banking technology excellence awards, best bank award in IT AWARD in IT framework and governance among other banks 2009 IR GLOBAL RANKING: Best corporate governance policies ranked among the top five companies in asia pacific 2009 FINANCE ASIA: Best Private Bank in India, for Wealth Management business, 2009 KOTAK ROYAL SIGNATURE CREDIT CARD: Was chosen "Product of the Year" in a survey conducted by Nielsen in 2009. EUROMONEY: Best Private Banking Services (overall), 2009 2010 Banking Technology Award for IT Governance and Value Delivery, 2008 IBA BANKING TECHNOLOGY AWARDS:

Best Customer Relationship Achievement - Winner 2008 & 2009

 EMERSON UPTIME CHAMPION AWARDS: Technology Senate Emerson Uptime Championship Award in the BFSI category, 2008.

2010 Awarded the 10th Best Employer in the recently Conducted Hewitts Best Employers in India 2007 Study. Best Investment Bank in India by Finance Asia. Emerged winner in 16 categories in the Euro money Private Banking Poll 2007, including the Best local Private Bank. 2009 IT Team of the Year award at the annual Banking Technology Awards 2006. Kotak Securities was ranked The Most Customer Responsive Company for 2006 (Category - Financial Services) by Avaya Global connect Awarded the Best Domestic Investment Bank and the Best Equity House in The Asset Triple A Country Awards Awarded Voice of Customers Award for the Best Passenger Vehicle Finance Company in India in 2006 by Frost & Sullivan Best Investment Bank in India by Finance Asia

 Adjudged the best Mutual Fund House in the NDTV Business Leadership Award 2006 2007 Ranked as the top mergers & acquisitions advisor in India in terms of the value of mergers & acquisitions deals announced from January to December 2005. Topped the India Advisory Partners In data League table in terms of the value of deals announced for the calendar year 2005. Thus, we can say that kotak Mahindrais a recognized name in the field of banking and of course when we talk about the awards and certificates.

PRINCIPLES OF CUSTOMER SERVICE IN BANKING:

1. By satisfying our clients business objectives we satisfy our own professional and personal objectives. 2. We want our client to regard Kotak Mahindra bank as their partner of choice time after time. 3. Satisfied clients become engaged clients, when they trust us, bond us and feel a sense of pride through an association with us. 4. Engaged clients forms a significant source of continued and improved growth. 5. An engaged client will actively sell our banks products and services to others. 6. Engaged client forms a sound commercial foundation for Kotak Mahindra Banks future. 7. Dont keep good news to yourself-inform the client of every success. 8. Give every client a reason to trust Kotak Mahindra bank. 9. Do what you said; you could do it, when you said you could do it. 10.Take personal ownership and responsibility for keeping the client informed of progress in any matter they have raised to you.

11.Let the client know in advance, if you will be unable to deliver as intended even bad news can be well received, if its conveyed in time. 12.Ensure all communications are reviewed before being sent to a client. 13.Treat all clients with equal and absolute respect.

COMPANYS PRODUCT OR SERVICES IN MUTUAL FUNDS

Kotak 30 Kotak Lifestyle Kotak Equity Arbitrage Fund Kotak Indo World

Kotak Midcap Kotak Contra Kotak Emerging

Kotak Opportunities Kotak Tax Saver Kotak Global

Equity Scheme

Emerging Market

Infrastructure Fund

CHAPTER-3

RESEARCH OBJECTIVES &SCOPE

(A) OBJECTIVES OF PROJECT :

Ratios are highly important profit tools in financial analysis that help financial analyststo implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage as well. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas. Ratio analysis is primarily used to compare a company's financial figures over a period of time, a method sometimes called trend analysis. Through trend analysis, you can identify trends, good and bad, and adjust your business practices accordingly. You can also see how your ratios stack up against other businesses, both in and out of your industry. There are several considerations you must be aware of when comparing ratios from one financial period to another or when comparing the financial ratios of two or more companies.

If you are making a comparative analysis of a company's financial statements over a certain period of time, make an appropriate allowance for any changes in accounting policies that occurred during the same time span.

When comparing your business with others in your industry, allow for any material differences in accounting policies between your company and industry norms.

When comparing ratios from various fiscal periods or companies, inquire about the types of accounting policies used. Different accounting methods can result in a wide variety of reported figures.

(B) SCOPE OF PROJECT:

Financial ratio analysisis the calculation and comparison of main indicators ratios which are derived from the information given in a company's financial statements(which must be from similar points in time and preferably auditedfinancial statements and developed in the same manner). It involves methods of calculatingand interpreting financial ratios in order to assess a firm's performance and status. This analysis is primarily designed to meet informational needs of investors, creditors and management. The objective of ratio analysis is the comparative measurement of financial data to facilitate wise investment, credit and managerial decisions. Some examples of analysis, according to the needs to be satisfied, are:

HORIZONTAL ANALYSIS

VERTICAL ANALYSIS

CROSS-SECTIONAL ANALYSIS

Horizontal analysis: The analysis is based on a year-to-year comparison of a firm's ratios.

Vertical analysis: The comparison of balance sheet accounts either using ratios or not, to get useful information and draw useful conclusions and

Cross-sectional analysis Ratios are used and compared between several firms of the same industry in order to draw conclusions about an entity's profitability and financial performance. Interfirm analysiscan be categorized under cross-sectional, as the analysis is done by using some basic ratios of the industry in which the firm under analysis belongs to (and specificall, the average of all the firms of the industry) as benchmarks or the basis for our firm's overall performance evaluation.

CHAPTER-4 RESEARCH METHODOLOGY &LIMITATION

(A) MEANING OF RESEARCH:

Research Methodology is a way to systematically solve the research problem. It may be understood as a Science of studying how research is done, Scientifically in it we study the various steps that generally adopted by a researcher in studying his research problem along with the logic behind them. Accuracy of the study depends on the systematic application of the method. The researcher has to decide the method to be used that helps him to get a desired direction in a systematic way. Definitions: ACCORDING TO CLIFFORD WOODY:Research comprises defining and redefining problems, formulating a hypothesis or suggested solutions; collecting, organizing and evaluating data, making deductions and reaching conclusions to determine whether they fit the formulating hypothesis. ACCORDING TO REDMAN & MORY: Research is a systematized effort to gain new knowledge.Research is an academic activity. The inquisitiveness is the mother of all knowledge and the method, which man employs for obtaining the knowledge of whatever the unknown, can be termed as research.Thus, Research Methodology is a strategy that guides a researcher in providing answers to research questions and for this research, survey is being done.

Research in common parlance refers to a search for knowledge. In fact research is an act of scientific investigation. Research is a scientific and systematic search for pertinent information on a specific topic.

STEPS OF RESEARCH PROCESS:The seven major steps to be used in a

research processare as follows: Determine or define the problem or opportunity that is faced

Specify what information is needed

Identify the sources of the information.

Decide on the techniques for accruing the information Gather and process the information

Analyze and interpret the meaning.

Present the findings to the decision makers.

(B)SAMPLING DESIGNSampling is the selection of some part of aggregate or totality on the basis of which a judgement or inference about the aggregate or totality is made and thus the conclusions are drawn which are applicable to the whole universe. Thus a researcher must prepare a sample design for his study i.e. he must plan how a sample should be selected and of what size such a sample would be. A SAMPLE DESIGN is a definite plan for obtaining a sample from a given population. It refers to a technique or the procedure the researcher would adopt in selecting items for the sample. Sample design is determined before data are collected.

(C) SAMPLING UNITThe sampling unit of my survey includes the Balance Sheet, Profit & Loss Account, Quarterly Results etc. (D) SAMPLING METHODIn my survey,I have used Observation Method. (E) DATA COLLECTIONData Collection is done in two ways they are as follows1. Primary data collection 2. Secondary data Collection

PRIMARY DATA

SECONDARY DATA

PRIMARY DATA are those which are collected afresh and for the first time and thus happen to be original in character. SECONDARY DATA,on the other hand, are those which have already been collected by someone else and which have already been passed through the statistical process. The researcher would have to decide which sort of data he would be using for his study and accordingly he will have to select one or the other method of data collection. In my project I have taken secondary data for analysis it is through Website, Journals etc.

(F) ANALYSIS AND INTERPRETATION: Data collected has compiled up and on the basis of percentage method depicted through bar diagrams Interpretation has done and recommendations has given. .

(G)LIMITATIONS OF RATIOS AND POTENTIAL IMPACT IN THE

ANALYSIS:

Ratios are not predictive, as they are usually based on historical information notwithstanding ratios can be used as a tool to assist financial analysis.

They help to focus attention systematically on important areas and summarize information in an understandable form and assist in identifying trends and relationships (see methods for facilitating the financial analysis above).

However they do not reflect the future perspectives of a company, as they ignore future action by management.

They can be easily manipulated by window dressing or creative accounting and may be distorted by differences in accounting policies.

Inflation should be taken into consideration when a Ratio Analysis is being applied as it can distort comparisons and lead to inappropriate conclusions.

Comparisons with industry averages is difficult for a conglomerate firm since it operates in many different market segments.

Seasonal factors may distort ratios and thus must be taken into account when making ratios are used for financial analysis.

Not always easy to tell that a ratio is good or bad. Must be always used as an additional tool to back up or confirm other financial information gathered.

Different operating and accounting practices can distort comparisons.

Using the average of certain ratios for companies operating in a specific industry to make comparisons and draw conclusions may not necessarily be an indicator of good performance; perhaps a company should aim higher.

CHAPTER-5 DATA INTERPRETATION & PRESENTATION

Profit & Loss account of Kotak Mahindra Bank Mar '12 Mar '11 12 mths Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses 12 mths

------------------- in Rs. Cr. ----------Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths

6,180.24 4,303.56 3,255.62 3,065.14 2,535.36 848.42 507.56 420.97 157.56 310.48 7,028.66 4,811.12 3,676.59 3,222.70 2,845.84 3,667.75 2,058.49 1,397.48 1,546.60 1,309.56 902.36 783.83 583.48 583.63 519.23 542.71 487.82 648.07 552.91 326.66 116.76 98.27 90.00 69.56 50.86 714.03 564.53 396.47 193.91 345.60 0.00 0.00 0.00 0.00 0.00 1,754.66 1,528.58 1,447.42 1,333.60 999.25 521.20 405.87 270.60 66.41 243.10 5,943.61 3,992.94 3,115.50 2,946.61 2,551.91 Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 12 mths 12 mths 818.18 0.00 965.91 12 mths 561.11 2.01 648.94 12 mths 276.10 0.00 528.17 804.27 0.00 12 mths 293.93 0.00 354.18 648.11 0.00

Net Profit for the Year Extra ordianary Items Profit brought forward Total Preference Dividend

1,085.05 0.00 1,494.52

2,579.57 1,784.09 1,212.06 0.00 0.00 0.00

Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total

44.49 7.22 14.65 12.00 107.75 310.81 54.26 51.71

36.88 4.37 11.10 10.00 92.74 207.41 40.91 41.25

29.66 0.00 16.12 8.50 130.40 188.43 28.06 29.66 965.91

25.96 1.86 7.99 7.50 112.98 113.70 13.80 27.82 648.94 804.26

25.87 4.40 8.53 7.50 104.26 74.98 14.70 30.27 528.17 648.12

2,162.79 1,494.52

2,579.57 1,784.09 1,212.06

Balance Sheet of Kotak Mahindra ------------------- in Rs. Cr. ------------------Bank Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 12 mths Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 12 mths 12 mths 12 mths 12 mths

370.34 370.34 0.00 0.00 7,610.41 0.00 7,980.75 38,536.52 16,595.52 55,132.04 2,553.67 65,666.46 Mar '12 12 mths

368.44 368.44 0.00 0.00 6,464.95 0.00 6,833.39 29,260.97 11,723.95 40,984.92 3,032.36 50,850.67 Mar '11 12 mths

348.14 348.14 0.00 0.00 4,191.78 0.00 4,539.92 23,886.47 6,140.51 30,026.98 2,869.42 37,436.32 Mar '10 12 mths

345.67 345.67 0.00 0.00 3,559.86 0.00 3,905.53 15,644.93 5,904.07 21,549.00 3,257.34 28,711.87 Mar '09 12 mths

344.67 344.67 0.00 0.00 3,249.04 0.00 3,593.71 16,423.65 5,119.25 21,542.90 3,175.75 28,312.36 Mar '08 12 mths

Assets Cash & Balances with RBI 2,016.49 Balance with Banks, Money at 618.06 Call Advances 39,079.23 Investments 21,566.81 Gross Block 955.41 Accumulated Depreciation 505.45 Net Block 449.96 Capital Work In Progress 0.00

2,107.72 363.26 29,329.31 17,121.44 831.80 406.20 425.60 0.00

2,085.67 214.59 20,775.05 12,512.66 745.34 317.69 427.65 0.00

995.35 145.32 16,625.34 9,110.18 460.61 247.25 213.36 0.00

1,710.29 439.18 15,552.22 9,141.99 391.42 181.17 210.25 0.00

Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs)

1,935.91 1,503.33 1,420.69 1,622.33 1,258.43 65,666.46 50,850.66 37,436.31 28,711.88 28,312.36 17,319.52 12,291.30 4,156.15 6,166.00 4,470.06 3,063.64 107.75 92.74 130.40 4,486.28 1,188.17 112.98 7,172.79 826.55 104.26

RATIOS (IN %)
CURRENT RATIO CURRENT RATIO (inc. std loans) QUICK RATIO NET PROFIT MARGIN RATIO INTEREST EARNED RATIO OTHER INCOME RATIO INTEREST PAID TO TOTAL EXPENSE RATIO EMPLOYEE COST TO TOTAL EXPENSE RATIO OPERATING EXPENSE RATIO LOAN & ADVANCES RATIO TO TOTAL ASSETS RATIO

MARC MARCH20 MARCH20 MARCH20 MARCH20 H 2012 11 10 09 08

0.75 0.04 0.49 0.04 0.49 0.05 0.49 0.08 0.39 0.06

16.85 15.44

10.86 17

8.46 15.26

5.91 8.57

5.83 10.33

87.9

89.45

88.55

95.11

89.09

12.1

10.55

11.45

4.89

10.91

61.7

51.55

44.85

52.48

51.32

15.18

19.63

18.73

19.8

20.34

29.52

38.28

46.45

45.258

39

59.51

57.67

55.49

57.9

54.93

LONG TERM 0.91 ASSETS TO TOTAL ASSETS TOTAL DEBT 4.83 TO EQUITY RATIO PROPRIETOR 12.15 Y RATIO SOLVENCY RATIO 87.3

0.92

0.90

0.85

0.88

4.28

5.26

4.01

4.57

13.44 85.7 6.2

12.13 86.86 9.4

13.6 84.65 5.46

12.69 85.7 5.85

FIXED 5.6 ASSETS TO SHAREHOLD ER FUND RATIO FIXED 0.713 ASSETS TO TOTAL LONG TERM FUNDS RATIO RATIO OF 546.9 CURRENT ASSETS TO PROPRIETOR S FUND RETURN ON INVESTMEN T 13.59

0.89

1.24

0.84

0.83

487.3

539.5

496.43

527.59

11.97

12.36

7.07

8.18

RETURN ON EQUITY

292.9

222

161.17

79.87

85.28

EARNING PER SHARE

14.65

11.10

16.12

7.99

8.53

RETURN ON TOTAL ASSETS

1.65

1.61

1.49

0.96

1.038

DIVIDEND 4.76 PAYOUT RATIO(NET PROFIT) DIVIDEND 4.3 PAYOUT RATIO(CASH PROFIT) EARNING RETENTION RATIO DIVIDEND PER SHARE 95.24

5.04

5.28

10.07

10.29

4.5

4.55

8.04

8.77

94.96

94.75

89.92

89.67

0.60

0.50

0.85

0.75

0.75

CAPITAL GEARING RATIO

14.48

16.67

15.12

18

16.68

OWNERS FUND AS A % OF TOTAL SOURCES

17.15

18.93

15.97

19.97

17.95

FIXED ASSETS TURNOVER RATIO RETURN ON LONG TERM SOURCES ADJUSTED CASH MARGIN RATIO TOTAL INVESTMEN T TO LONG TERM LIABILITIES CURRENT LIABILITIES TO PROPRIETO RS FUNDS RESERVES TO EQUITY CAPITAL LEVERAGE RATIO

7.36

5.7

4.9

7.08

7.21

65.99

47.5

48.71

50.50

47.47

17.04

19.26

17.76

10.45

12.12

114

116.67

115

118

116.68

31.9

44.37

63.2

83.4

88.36

2054.9

1754.68

1204

1029.8

942.65

0.56

0.72

0.93

1.203

1.22

RESERVES AS A % OF TOTAL LOANS RATIO

13.8

15.72

13.96

16.52

15.08

PRESENTATION OF RATIOS IN FORM OF GRAPHS

NET PROFIT MARGIN RATIO

18 16 14 12 10 8 6 4 2 0 2008 2009 2010 2011 2012

INTEREST EARNED RATIO

96

94

92

90

88

86

84 2008 2009 2010 2011 2012

INTEREST PAID TO TOTAL EXPENSE RATIO

70

60

50

40

30

20

10

0 2008 2009 2010 2011 2012

LOANS AND ADVANCES RATIO

60

59

58

57

56

55

54

53

52 2008 2009 2010 2011 2012

CURRENT RATIO

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0 2008 2009 2010 2011 2012

DEBT- EQUITY RATIO

0 2008 2009 2010 2011 2012

PROPRIETORY RATIO

14

13.5

13

12.5

12

11.5

11 2008 2009 2010 2011 2012

RETURN ON INVESTMENT

16

14

12

10

0 2008 2009 2010 2011 2012

EARNINGS PER SHARE

18

16

14

12

10

0 2008 2009 2010 2011 2012

RETURN ON TOTAL ASSETS

1.8

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0 2008 2009 2010 2011 2012

SOLVENCY RATIO

87.5

87

86.5

86

85.5

85

84.5

84

83.5

83 2008 2009 2010 2011 2012

DIVIDEND PAY-OUT RATIO

12

10

0 2008 2009 2010 2011 2012

CAPITAL GEARING RATIO

20

18

16

14

12

10

0 2008 2009 2010 2011 2012

LEVERAGE RATIO

1.4

1.2

0.8

0.6

0.4

0.2

0 2008 2009 2010 2011 2012

FINDINGS OF THE STUDY:

After doing the analysis, i find out that the net profit margin of a bank is low in year 2012 i.e. 15.44% as compared to last year i.e. 17% which shows that bank is not performing well to recover its debts. The net profit margin ratio is not following any trend.

Interest paid ratio has also shown an increasing trend in the last five years. The operating expense ratiofrom the year 2008 to year 2010 has also shown an increasing trend and then afterwards from 2011 to 2012 it has shown a decreasing trend. In 2012 its 29.52% as compared to last year 38.28%.

The interest earned ratio rises in 2008 & 2009 & then in 2010 it falls. In 2011 also it rises i.e. 89.45% and then it falls i.e. 87.9%. No TREND followed.

The loans and advances ratio in 2008 & 2009 rises. In 2010 it falls then again it rises in 2011 i.e. 57.67 %, in 2012 it increases up to 59.51%.

The current ratio in 2008 was 0.39. Then it remained constant for the three years i.e. 0.49% in the recent year 2012 it rises up to 0.75%.

The quick ratio in 2008 was 0.06% afterward it rises. Now for two years it remained constant 0.04% in 2011 and 2012.

The total debt to equity ratio in 2008 was 4.57%, in 2009 it was 4.01%,thenin 2010 it rises 5.26% in 2011 and 2012 it falls 4.28 & 4.83%.

The proprietory ratio in 2008 was 12.69%, 2009 it was 13.6%. In 2011 it stood 13.44% and in 2012 it is 12.15%. Thus it varies with a very less margin or we can say it remained almost constant.

The solvency ratioin 2008 it was 85.7% in 2009 it was 84.65%, it was 2010 it was 86.86% in 2011it was 85.7% and in 2012 it was 87.3%. Thus it remained constant.

The dividend pay-out ratio for 2008 & 2009 it remained constant, in 2010 & 2011 it was 5.28 % and 5.04% and in 2012 it was 4.76%.

The capital gearing ratio in 2008 it was 16.68%,in 2009 it was 18%, in 2010 it was 15.12% in 2011 it was 16.67% and in 2012 it is 14.475%.

The return on investment ratio comes up by very less margin; it shows that the bank is having a consistent performance in earning on its investment as compared to last year. In 2011 it was 11.97% and in 2012 it was 13.59%.

The earnings per sharein all these five years since 2008 to 2012 was highest in 2010 i.e. it was 16.12 but now in 2011 it falls up to 11.10 and now in 2012 it is 14.65.

The return on equityshows that how the firm uses the shareholders interest or investment fund to generate earning growth. By comparing last five years it is decaling every year which shows the bank is having much profit available to equity shareholder & it is not preferred much by the investors. In 2010 it was 161.17% & in 2011 it was 222% and thus in 2012 it is 292.9% showing a tremendous growth in these last three years.

The Return on assets ratio has also increased in this year i.e. 1.65% and in last year it was 1.61% so its an indicator of good performance also.

The return on long term funds has also increased in 2012 i.e. 65.99% and thus in 2011 it was 47.5%. This ratio has also increased.

Owners funds as a percentage of total resources ratio has fallen in this year i.e. 17.15% and in 2011 it was 18.93%.

The leverage ratio has also fallen in recent year 2012 i.e. 0.56 and in 2011 it was 0.72 and in 2010 it was 0.93. Thus all these above are the findings of my study.

CHAPTER-6 SUGGESTION

SUGGESTIONS
The study has provided with the useful data from the respondents. There has a lot to be recommended. Following are the recommendations made or we can say that the suggestions are as follows: There is a need for better promotion for the investment products & services. The bank should advertise its products through television because it will reach to the masses. More returns should be provided on Insurance plans. As the bank provides the Insurance facility to its customers. It should provide this facility by tie up with the other Insurance organizations as well. The main reason is that, the entire customers do not want Insurance of only one company. They should have choice while selecting a suitable Insurance plans. This will definitely add to the goodwill & profit for the bank. The net profit margin ratio as has fallen down the company should make efforts to Keep it consistent by providing more loans to the public and by providing satisfactory services. Interest paid ratio is also to be kept under control as it will automatically affect net profits. The loans & advances ratio is though satisfactory but still efforts should be made to increase it by widening the customer base.

 The debt equity ratio is just 4.83% so thus an attempt should be made so that they remain balanced. If its possible more equity should be used. The return on investment ratio has improved this year but company should make efforts to have an increasing trend or should try to keep it constant. The return on assets ratio is just 1.65% the company should try to improve it. The solvency ratio is just 87.3% it means that the company can pay only 87% of liabilities from its assets. The company should try to improve as this strongly affects the goodwill of the concern. The owners funds as a percentage of total resources is 17.15% thus this ratio should be increased. Moreand more owners funds should be employed. The adjusted cash margin ratio is also to be improved. The current liabilities to proprietors funds is 31.9 it should be decreased. The capital gearing ratio states that the company is highly geared. A company is relying more on the outsider resources. Thus these are the suggestions made by me.

Chapter-7 BIBLIOGRAPHY

(7.1) Books:
Research methodology by C.R. KOTHARI Management accounting and business finance by SHASHI K. GUPTA & R.K. SHARMA

(7.2) Website
www.google.com www.indiainfoline.com www.kotaklife.com www.insuranceworld.com www.corpbank.com www.about.com