Bank of India
Bank of India
Bank of India
for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION Submitted by J.Anand (Reg.No. 3511010044)
Dr. T.Ramachandran
J.Anand during the year 2012 of his study in the SRM School of Management, SRM University, Kattangulathur under my supervision and the report has not formed the basis for the award of any Degree/Fellowship or other similar title to any candidate of any University.
Guide
Head-MBA
INTERNAL EXAMINER
EXTERNAL EXAMINER
DECLARATION
I, J.Anand, hereby declare that the Project Report, entitled Ratio Analysis in Bank Of India on Salem Branch , submitted to the SRM University in partial fulfillment of the requirements for the award of the Degree of Master of Business Administration is a record of original training undergone by me during the period Feb-Apr 2012 under the supervision and guidance of Dr.T.Ramachandran, Professor, SRM School of Management, SRM for the award of any
Place: Chennai
Date:
ACKNOWLEDGEMENT
With great pleasure, Im presenting this project entitled A STUDY ON RATIO ANALYSIS IN BANK OF INDIA. The project of this dimension would not have been
possible without the sincere help and earnest support provided to me from all sources that was approached. I would like to express my heart filled thanks and gratitude Mr.Ashok Rathinam, manager for providing me an opportunity in this prestigious organization. It is a matter of privilege and honor for us to place on record our indebtedness to Chancellor, Dr.T.R.PACHAMUTHU, SRM University for who has given the official permission to undertake the project.
I would like to record our thanks to Mrs. Dr.Jayshree Suresh, (DEAN), School of Management, SRM University for encouraging and supporting me in doing this project successfully.
I owe my personal debt of gratitude to our guide Dr.T.Ramachandran for his valuable ideas, creative support, timely advice, keen interest and the encouragement shown in successful completion of this project.
My great and sincere thanks to all other faculty members, students, friends and all those who are directly and indirectly involved in this endeavor.
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CHAPTER SCHEME
CHAPTERS
PARTICULARS
INTRODUCTION 1.1 GENERAL INTRODUCTION 1.2 FINANCIAL PERFORMANCE 1.3 USERS ARE FINANCIAL INTERESTED 1.4 RATIO ANALYSIS 1.5 NATURE OF RATIO ANALYSIS 1.6 STEPS INVOLVEDIN RATIO ANALYSIS 1.7 PURPOSE OF THE RATIO ANALYSIS 1.8 UTILITY OF THE RATIO ANALYSIS 1.9 LIMITATIONS OF THE RATIO ANALYSIS 1.10 USER INTERESTED IN FINANCIAL PERFORMANCE ANALYSIS 1.11 BANK PERFORMANCE 1.12 FINANCIAL STATEMENT ANALYSIS 1.13 FINANCIAL STATEMENT,THEIR USER AND SIGNIFICANCE 1.14 STEPS INVOLVED IN THE ANALYSIS OF FINANCIAL STATEMENTS 1.15 VARIOUS ACCOUNTING RATIOS
PAGE NO
CHAPTERS-1
1 3 4 5 6 7 7 7 8 8 11 11 12 13 14
CHAPTER-2
BANK PROFILE 2.1 HISTORY OF THE BANK OF INDIA 2.2 PRODUCTS AND SERVICES 2.3 THE BANK LAUNCHED SEVERAL PRODUCTS 2.4 COMPETITORS INFORMATION
22 24 25 26
CHAPTER-3
27
3.2 STATEMENTS OF THE PROBLEMS 3.3 OBJECTIVES 3.4 BENEFITS OF THE STUDY 3.5 RESEARCH DESIGN 3.6 DATA COLLECTION 3.7 TOOLS & TECHNIQUES FOR DATA COLLECTION CHAPTER-4 ANALYSIS OF DATA 4.1 DATA ANALYSIS &INTERPRETATION CHAPTER-5 SUMMARY OF FINDINGS,SUGGESTION&CONCLUSION 5.1 FINDINGS 5.2 SUGGESTION 5.3 CONCLUSION
27 27 28 28 29 29
31
55 57 58
LIST OF TABLES
TABLE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 CURRENT RATIO QUICK ASSET RATIO DEBTEQUITYRATIO PROPRIETARY RATIO FIXED ASSETS RATIO GROSS PROFIT RATIO NET PROFIT RATIO OPERATING RATIO RETURN ON ASSETS
TITLE
PAGE 31 34 36 38 39 40 41 43 45 47 48 49 51 53
TOTAL CAPITAL TURN OVER RATIO FIXED ASSETS TURN OVER RATIO WORKING CAPITAL TURN OVER RATIO STOCK/ INVENTORY TURN OVER RATIO
LIST OF GRAPH
GRAPH 1 2 3 4 5 6 7 8 9 10 11 12 13 14 CURRENT RATIO CURRENT RATIO DEBT EQUITY RATIO PROPRIETARY RATIO FIXED ASSETS RATIO GROSS PROFIT RATIO NET PROFIT RATIO OPERATING RATIO RETURN ON ASSETS
TITLE
PAGE 33 35 37 38 39 40 42 44 46 47 48 50 52 54
TOTAL CAPITAL TURN OVER RATIO FIXED ASSETS TURN OVER RATIO WORKING CAPITAL TURN OVER RATIO STOCK/ INVENTORY TURN OVER RATIO
CHAPTER-1 INTRODUCTION
1.1 GENERAL INTRODUCTION:
Finance is a key in part of all round development of a concern. Finance is described as Lifeblood of an industry and pre-requisite for accelerating the process of development. Every business needs finance, finance is the live wire of an organization like the heart beat of a human being and money goes easily where it is treated best and shies away where it is treated shabbily. Financial analysis is the process of determining the significant operation and financial characteristics of a firm from accounting data and financial statements. Financial analysis is an examination of the organizations financial statements and the various ratios derived from information on its balance sheet and income statement. The term interpretation means explaining the meaning and significance of the data so simplified financial statements are indicators of the 2 significant factors a) Profitability & b) Financial Soundness
Banking in one form or another was in existence even in ancient times. The writings of Manu (the maker of old Hindu Law) and Kautilya (the Minister of Chandragupta Maurya) contained references to banking. However, banking as a kind of business i.e., modern banking is of recent origin. It came into existence only after the industrial revolution. After the industrial revolution, with the increase in the size of industrial and business units, joint stock company people with small means to become shareholders of big
industrial and business enterprises. Still, there were certain sections of public who were not prepared to invest their money on the shares of joint stock companies. However they were willing to part with a little surplus money, if they were assured of the repayment of their money with a little interest thereon. So naturally, there arose the need for formation of financial institutions that could collect the surplus funds of people on terms acceptable to them and make them available to the needy for productive purpose. Accordingly a large number of financial institutions called joint stock banks were set up after industrial revolution. As such joint banks or modern banks are of recent development. The Indian Banking Regulation Act of 1949 defines the term Banking Company as any company which transacts the business of banking in India and the term banking as Accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and with draw able by cheque draft order or demand otherwise. The term Banking includes not only the above motioned important activities but also several other activities. Such as collecting of cheque, drafts bills, remittance of funds, acceptance of safe custody deposits, which is generally referred to as subsidiary service. The essential characteristics of banks: Acceptance of deposits from the public on fixed, current, or savings bank accounts. Allowing of withdrawals of such deposits by cheque, drifts, order or other wise. Utilization deposits are hand for the purpose of lending or investment. Performance of other activities called subsidiary services n addition to the principal activities of receiving of deposits and lending of fund. A banker should deal mainly with other peoples money. He should use his brain but others money. The bank offering attractive interest on the saving of the people deposited with them, banks promote the habit of thrift and saving
among the people by accepting the saving of the people. Banks provides safety and security to the surplus money of the depositor. Banks are useful in several ways; we can rightly conclude that a strong and sound banking system is dispensable for development of any country.
1.2 FINANCIAL PERFORMANCE
Financial performance analysis as the name suggests, is the evaluation procedure of the performance on clients of the Bank of india. The evaluation is based on financial data provided by Bank of india and the data in the financial statements is used for the financial performance analysis. Financial performance analysis is the process of evaluating the relationship between component parts of financial statement to obtain a better understanding of the client position and performance. The financial statements extremely useful information to the extent the balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, etc and the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the costs incurred during the year Financial performance analysis is understood that the clients of the bank submit financial statements for at least a period of last 3 years along with application form requesting various credit facilities like working capital limits, term loan, etc. Limits requested for various purposes may be Fund Based or Non Fund Based. On receipt of application form & financial statements bank undertakes appraisal of application for credit facilities in a prescribed form. The various details of financial statements are incorporated in appraisal form as prescribed
by the bank . 1.3 Users are financial interested: The first task in the financial analysis is to select the information relevant to the decision under consideration from the total information contained in the financial statements.
The second step involved in this is to arrange the information in a way to establish the relationship. The final step is interpretation and drawing of inferences and conclusions. In short it is the process of selection, relation and evaluation. The financial performance analysis can be done using various tools. Financial ratio analysis is an important tool among the same. The other tools include the comparative analysis (i.e., inter- firm comparison). Time series analysis of ratios, common size statement analysis, indexed statement analysis, trend analysis, fund flow statement, and cash flow statement etc... But here Im used the financial tool can be done through by Ratio analysis. 1.4 RATIO ANALYSIS: Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial Structure, leverage, and interest coverage. 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 clients of bank financial figures over a period of time; financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a client of Bank of india financial condition, its operations and attractiveness as an investment.
Financial ratios are calculated from one or more pieces of information from a client of bank financial statements. Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations. Overviews of some of the categories of ratios which are used by the Bank of India before permit various credit facilities to clients. Leverage Ratios which show the extent that debt is used in a client of bank Capital structure. Liquidity Ratios which give a picture of a company's short term financial Situation or solvency. Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets. Profitability Ratios which use margin analysis and show the return on sales and capital employed. Solvency Ratios which give a picture of a company's ability to generate cash flow and pay it financial obligations. Equity analysts look more to the operational and profitability ratios, to determine the future profits that will accrue to the shareholder. The stakeholders of a firm viz., shareholders, creditors, suppliers, managers, employees, tax authorities, banks and financial institutions are interested in broadly knowing about the firms financial conditions. Of course, their specific concern may differ. Trade creditors and short - term lenders are interested primarily in the short term liquidity of the firm and its ability to pay its dues in the next 12 months or so. Term lending institutions and debentures holders have a relatively longer time horizon and are concerned about the ability of the firm to service its debt over the next five to ten years. Long term shareholders and managers who want to make a career with the firm are interested in the profitability and growth of the firm over an extended period of time.
1.5 NATURE OF RATIO ANALYSIS Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and weakness of a firm. Calculation of mere ratios does not serve any purpose, unless several appropriate ratios are analyzed and interpreted. There are a number of ratios, which can be calculated and interpreted. There are a number of ratios, which can be calculated from the information given in the financial statements, but the Banker has to select the appropriate data and calculate only a few appropriate ratios from the same keeping in mind the objective of analysis. Accounting ratio may indicate not only that financial positioning precarious but also the past policies or actions which have caused it. 1.6 STEPS INVOLVED IN RATIO ANALYSIS: 1. Selection of relevant date from the financial statements depending upon the objective of the analysis. 2. Calculating of appropriate ratios from the above date. 3. Comparison of calculated ratios with the ratios of the same firm in the past or the ratios developed from projected financial statements the ratios of some other firms of the comparison with the ratios of the industry to which the firm belong. 4. Interpretation of the ratio. 1.7 Purpose of the ratio analysis: To study the short term solvency of the firm- liquidity of the firm. To study of the long term solvency of the firm-leverage position of the firm.
To interpret the profitability of the firm-profit earning capacity of the firm. To identify the operating efficiency of the firm- turnover of the ratios. 1.8 Utility of the Ratio Analysis: Easy to understand the financial position of the firm. Measure of expressing the financial performance and position. Intra firm analysis of the financial information over many number of years. Inter firm analysis on the financial information within the industry. Possibility for financial planning and control. 1.9 Limitations of the Ratio Analysis: It is a dependant tool of analysis. Ambiguity in the handling of terms Qualitative factor is not considered. Not ideal for the future forecast. Time value of money is not considered. False results if based on incorrect accounting data. No idea of probable happenings In future. No use if ratios are worked out for insignificant and unrelated figures. 1.10 Users are interested in Financial Performance Analysis: Generally speaking every segment of the society is directly or indirectly interested in the analysis of financial performance. Although every group is interested in financial position and operating business results of the organization, yet the primary information that each seeks to obtain from these statement differs materially reflecting the purpose the statement is to serve. How ever, it is practically impossible that a set of financial statements will satisfy the precise needs of each group. Financial statements are, therefore, general purpose statements intended to serve the various needs of general groups such as:
Owners: owner has an obvious interest in the analysis of financial statements they assume the primary risk of business by investing their money. Owners of business need periodic reports to find answers to various questions relating to profitability and financial position of the concern. Creditors: creditors are individuals, agencies or institutions that extend credit facilities to a firm. They are primarily concerned, with the safety for their investment in the borrowing firm, the prompt receipt of interest when due and the collection of the loan on the schedule date. Management: management depends heavily on the financial and managerial reports in order to formulate company policies, establish organizational objectives evaluate companys performance and its employees, and to make other related decisions. In order to plan and control business operations efficiently, functional mangers require accurate and current financial information pertinent to specific areas of responsibility. Employees: Employees are also interested in the companys financial position and its options. They make frequent use of available information to gain insights into such matters fringe benefits, salary determination and working conditions. Government: central, state and local government agencies have become increasingly interested in the internal operations of business enterprise. They use financial statement to ensure that the company is meeting its various legal obligations. Financial analyst: financial analysts are experts in the study of the financial information. Their responsibility is to assemble and examine volumes of financial information for use by their clients for investment decision-making purposes. Institutions investors such as mutual investment companies, Banks, insurance firms and trustees of large estates normally employ their own staff of financial analysis who serves as advisors to the institutions management on investment opportunities.
Investors: investors in a business learn a great deal about a company from its financial statements. Investors would like to be clear about the nature and prospectus of investment opportunity offered by a particular business before he commits his money to it. Banks: Banks would willingly part with their money only if they are assured of the profitability and long term solvency of the business in which they are asked to invest. Financial statements are normally used by the lenders to judge for themselves the profitability and liquidity of the business and to assure themselves of the security available for the money lent. Promote Research and development: for research and development, the amount of investment require is voluminous, which has not to be mobilized from either internally and externally to the requirement of the future prospectus of the bank Researcher use the financial statement information extensively for the purpose of their research work. To understand the financial performance analysis and condition of a firm, its banker looks at their financial statements of client. The Balance Sheet The Profit and Loss Account Note that the Companies Act requires that the Annual Report of the company, a public document that is sent to shareholders, contain the Balance Sheet, the Profit and Loss Account, the Directors report, and the Auditors report. Though not presently required by law, most companies present Fund Flow Statement and Cash Flow Statement as well in the Annual Report.
1.11 BANK PERFORMANCE:
The most important type of income of banks is their interest income. It has been generally about 89 percent of their total income in case of Private sector banks.
The two major sources of interest income are income on advances and income on investment.
The second component of banks total income is the income generated by fee based activities such as commission, brokerage, profits on sale of land, income from exchange transaction etc 1.12 FINANCIAL STATEMENT ANALYSIS Financial statements contain large numbers of accounting data and figures. But the accounting or financial figures, as found in the financial statements (i.e.) the absolute financial figures, are not more than a group of accounting figures. They do not convey anything by themselves to a layman. However, they may tell a vivid (i.e. clear) story of the financial adventure of firm, if they are analyzed and interpreted. Through analysis and interpretation, the financial statements can be made to tell the story of actual progress and the financial position of the firm in clear and simple language, which can be easily understood by a layman.
DEFINITION: According to Kennedy and Muller- defines financial statement
analysis as The analysis and interpretation of financial statements are an attempt to determine the significance and meaning of financial statement data so that the forecast may be made of the prospects for future earnings, ability to pay interest and debt maturities and profitability and sound dividend policy. 1.13 Financial Statements, their uses and significance: The two financial statements viz. the Balance Sheet and the Profit and Loss Account aid the understanding of a firms financial performance.
Balance Sheet The Balance Sheet shows the financial condition of a business at a given point of time, in terms of assets and liabilities. Assets are classified into the following categories: fixed assets, investments, current assets, loans and advances and miscellaneous expenditures and losses. Liabilities are classified as follows: share capital, reserves and surplus, secured loans, unsecured loans, current liabilities and provisions. As per the Companies Act, the Balance Sheet of a company shall be in either the horizontal form or the vertical form. Profit and Loss Account The Profit and Loss Account technically is an adjunct to the balance sheet because it provides details relating to net profit, which represents the change in owners equity. Yet, in practice it is often considered to be more important than the Balance Sheet because the details of revenues and expenses provided in the Profit and Loss Account shed considerable light on the performance of the business. There is no prescribed standard format to make this account. However, the Companies Act does require that the information provided should be adequate to reflect a true and a fair picture of the operations of the company for the accounting period. The important items in the profit and Loss Account are: net sales, cost of goods sold, gross profit, operating expenses, operating profit, non-operating surplus/ deficit, profit before interest and tax, interest, profit before tax, tax, and profit after tax. Thus the Balance Sheet shows the financial position or condition of a firm at a given point of time. It provides a snapshot and may be regarded as a static picture. The income statement referred to in India or Profit and Loss Account reflects the performance of a firm over a period of time.
1.14 STEPS INVOLVED IN THE ANALYSIS OF FINANCIAL STATEMENTS: From a study of the meaning of analysis of the financial statements, it is clear that the work of analysis of financial statement involves three steps or processes they are: Analysis Comparison Interpretation ANALYSIS: The data shown in the financial statements are either the balances of individual accounts or groups of balances of many accounts. As a result, they lack homogenizing and uniformity. They are not of much help to an analyst, who requires homogenize and comparable data (i.e. inter connected data) for judging the profitability and the financial position of a concern. So, to obtain the desired homogeneous and comparable data (i.e., the inter-connected data) the figures founding the financial statements have to be analyzed. COMPARISON: Mere splitting up or regrouping of the figures found in the financial statements into the desired component parts is not sufficient for judging the profitability and the financial status of an enterprise. After the figures contained in the financial statements are dissected or split into the required comparable compound parts, the comparable component parts (i.e., the inter-connected figures) must be compared with each other, and their relative magnitudes (i.e., their relationship must be measured).
INTERPRETATION: After the financial statements are analyzed or dissected into comparable component parts and the relative magnitudes of the comparable components parts (i.e., the relationship of the inter-connected component parts) is measured through comparison, the results (i.e., the relationship between the interconnected components parts) must be interprete. 1.15 VARIOUS ACCOUNTING RATIOS ARE: Ratio may be based on figures in the balance sheet, in the P&L or in both, Ratios indicating financial position are calculated on the basis of the B/S these indicating profitability and efficiency of control over expenses are calculated or on the basis of P&L a/c and those which through light on operating efficiency or effective use of facilities and resource are calculated on the basis of figures in both statements. The accounting ratios are classified into various categories viz: Ratio to judge financial position and policies Profitability Ratios Turnover (performance or activity) Ratios These ratios have been discussed and analyzed in chapter Number 1) Ratio to judge financial position and policies: Most of the ratios to judge the soundness of financial position and policies are based on the Balance sheet basically two ratios viz, the debt equity ratio. Showing the long term financial policy followed by the concern and the current ratio showing the short term financial policy should through enough light o the financial position of the concern. a) Current Ratio: its one of the important accounting ratios for the finding out the ability of the business fleeces to meet the short-term financial commitments. For the calculation of this ratio current assets will include cash, bank balance, short term investment, bills receivable, trade debtors, short term loans and
advances, inventories and pre-paid payment sand current liabilities will include bank overdraft, bills payable, trade creditors, provision for taxation, proposed dividends, unclaimed dividends, advance payments and unexpired discounts, accrued interest on loans and debentures outstanding expenses and the portion of long term debt to mature within one year. With the help of this ratio is Current ratio = Current assets Current liabilities
b) Quick asset ratio (Acid Test Ratio): Its a ratio that expresses the relationship between the quick assets and current liabilities. Liquid assets are those assets which are readily converted in to cash and will include cash balances, bills receivable, sundry debtors and short-term, investments. Inventories and prepaid expenses are not included in liquid assets because the emphasis in on the ready availability of cash in case of liquid assets. Liquid liabilities include all items of current liabilities except bank overdraft. This ratio is the acid test of a concerns financial soundness. It is calculated Acid test ratio = Liquid assets Current liabilities Liquid asset = current assets-(closing stock + Prepaid Expenses) C) Debt Equity ratio: ratio b/w long term loans and share holders funds, Share holders funds consist of preference share capital, equity share capital, profit & Loss A/c, capital reserves, revenue reserve and reserves representing marked surplus, like reserves for contingencies, etc,, less fictitious assets. Whether a given debt to equity ratio shows a favorable or unfavorable financial position of the concern depends on the industry and the pattern of earning. Debt Equity Ratio = long term debt
D) Proprietary Ratio: The ratio illustrates the relationship between the owners contribution and the total volume of assets. Or how much funds are contributed by the owners in financing the assets of the firm. The greater ratio means that greater is the contribution made by the owners in financing the assets.
Proprietary ratio =
E) Fixed assets ratio: This ratio established the relationship between the fixed assets and long term source of funds. Whatever the source of long-term funds raised, they should be used for the acquisition of long term assets. Fixed assets ratio = Shareholders funds + Outsiders funds Net Fixed Assets F) Debt Service Coverage Ratio: This ratio is a key financial ratio for the lenders and is calculated in order to know the ability of a company to make payment of principle amount on time. It is calculated as fallows; DSCR = Net profit before interest and tax Interest + principal payment installment 1-tax rate
It indicates that net profit before interest and tax covers adequately both interest and principal repayment installment. Generally the ratio should be 0.33 but higher the cover is advantageous to the business as it improves its strength to service the debt properly.
G) TOL/NWC (Total Outside Liabilities/ Tangible Net Worth ): Total out side liabilities: This ratio is determined to ascertain the soundness of long-term financial policies of that company. Tangible Net worth: consist of preference share capital, equity share capital, Profit & Loss A/c, capital reserves, revenue reserves and reserves representing marked surplus like reserves for contingences, sinking funds for renewal of fixed assets of -redemption of debentures etc. less fictitious assets.
TOL/NWC =
2) Profitability Ratios: Profits enable of firm to improve its financial strength therefore ratios based on profitability are termed causal ratio indicating the caused of the present of repeated financial position.
The ratios are measuring the profitability of the firms in various angles viz: On sales On investments On capital employed and so on The profits are normally classified into various categories: a) Gross profit Ratio: the ratio elucidated the relationship between the gross profit and sales volume. It facilitates study the profit earning capacity of the firm out of the manufacturing or trading operations. Gross profits = Gross profit Ratio x 100 Sales b) Net Profit Ratio: The ratio expresses the relationship between the net profit and sales volume; it helps to portray the overall operating efficiency of the firm. The net profit ratio is an indicator of overall earning capacity of the firm in term of return out of sales volume.
This ratio explains per rupee profit generating capacity of sales. if the cost of sales is lower, then the net profit will be higher and then we divide it with the net sales, the result is the efficiency. If lower is the net profit per rupee of sales, lower will be the sales efficiency. The net profit ratio is calculated as
c) Operating Ratio: the operating ratio establishes the relationship between the cost of goods sold and operating expenses with the sales volume. Operating ratio = Cost of goods sold + Operating expenses x 100 Net sales d) Return on Assets: this ratio portray the relationship between the earning and total assets employed in the business enterprise. The effective utilization of the assets of the firm through the determining of return on total assets employed. Return on Assets = Net profit after taxes x 100 Average total assets 3) Turn over (performance activity) Ratio: Performance or activity ratio judge how will the facilities at the disposal of the concerns on being used. The importance performance ratios are: a) Total capital turn over ratio: takes into account long-term and short-term, capital and is calculated as: Total capital turnover ratio = Sales or cost of sales Capital employed
b) Fixed assets turnover ratio: It shows how well the fixed assets are being utilized. The way to ascertain the ratio is:
Fixed assets turnover ratio = Sales or cost of sales Net fixed assets c) Working capital turnover ratio: its ratio expresses the number of times a unit invested in working capital produces sale. The ratio is ascertained as, Working capita turnover ratio = Sales or cost of sales Net working capital d) Stock turnover Ratio or inventory Turnover Ratio: The ratio expresses the speed of converting the stock into sales. In other words, how quickly the stock is being converted into sales in a year? A greater ratio of conversion leads to lesser the number of days/weeks/months required to convert the stock into sales. Industries in which the stock turnover ratio is high usually work on a comparatively low margin of profit the rate of profit on sales must be hi if the stock turnover ratio is low. Stock turnover ratio = cost of goods sold Average stock Or Stock velocity period = average stock x 365 Cost of goods sold e) Debtor turns over Ratio: The relationship between credit sales and accounts receivable (trade debtors and bills receivable). This ratio exhibits the speed of the collection process of the firm in collecting the overdue amount from the debtors and against bill receivables. Debtor velocity Period = Average Debtors x 365 Net annual credit sales or sales x 100 closing stock
2.1 HISTORY OF THE BANK OF INDIA At least three banks having the name Bank of India had preceded the setting up of the present Bank of India. 1. A person named Ramakishen Dutt set up the first Bank of India in Calcutta (now Kolkata) in 1828, but nothing more is known about this bank. 2. The second Bank of India was incorporated in London in the year 1836 as an Anglo-Indian bank. 3. The third bank named Bank of India was registered in Bombay (now Mumbai) in the year 1864. 4. The current bank 5. Bank of India, Mumbai Main Branch 6. The earlier holders of the Bank of India name had failed and were no longer in existence by the time a diverse group of Hindus, Muslims, Parsees, and Jews helped establish the present Bank of India in 1906. It was the first in India promoted by Indian interests to serve all the communities of India. At the time, banks in India were either owned by Europeans and served mainly the interests of the European merchant houses or by different communities and served the banking needs of their own community. 7. The promoters incorporated the Bank of India on 7 September 1906 under Act VI of 1882, with an authorized capital of Rs. 1 crore divided into 100,000 shares each of Rs. 100. The promoters placed 55,000 shares privately, and issued 45,000 to the public by way of IPO on 3 October 1906; the bank commenced operations on 1 November 1906. 8. The lead promoter of the Bank of India was Sir Sassoon J. David (18491926). He was a member of the Sassoons, who in turn were part of a Bombay community of Baghdadi Jews, which was notable for its history of social service. Sir David was a prudent banker and remained the Chief Executive of the bank from its founding in 1906 until his death in 1926. 9. The first board of directors of the bank consisted of Sir Sassoon David, Sir Cowasjee Jehangir, J. Cowasjee Jehangir, Sir Frederick Leigh
Croft, Ratanjee Dadabhoy Tata, Gordhandas Khattau, Lalubhai Samaldas, Khetsety Khiasey, Ramnarain Hurnundrai, Jenarrayen Hindoomull Dani, Noordin Ebrahim Noordin. 10. 1906: BoI founded with Head Office in Bombay. 11. 1921: BoI entered into an agreement with the Bombay Stock Exchange to manage its clearing house. 12. 1946: BoI opened a branch in London, the first Indian bank to do so. This was also the first post-WWII overseas branch of any Indian bank. 13. 1950: BoI opened branches in Tokyo and Osaka. 14. 1951: BoI opened a branch in Singapore. 15. 1953: BoI opened a branch in Kenya and another in Uganda. 16. 1953 or 54: BoI opened a branch in Aden. 17. 1955: BoI opened a branch in Tanganyika. 18. 1960: BoI opened a branch in Hong Kong. 19. 1962: BoI opened a branch in Nigeria. 20. 1967: The Government of Tanzania nationalized BoI's operations in Tanzania and folded them into the government-owned National Commercial Bank, together with those of Bank of Baroda and several other foreign banks. 21. 1969: The Government of India nationalized the 14 top banks, including Bank of India. In the same year, the People's Democratic Republic of Yemen nationalized BoI's branch in Aden, and the Nigerian and Ugandan governments forced BoI to incorporate its branches in those countries. 22. 1970: National Bank of Southern Yemen incorporated BoI's branch in Yemen, together with those of all the other banks in the country; this is now National Bank of Yemen. BoI was the only Indian bank in the country. 23. 1972: BoI sold its Uganda operation to Bank of Baroda. 24. 1973: BoI opened a rep in Jakarta. 25. 1974: BoI opened a branch in Paris. This was the first branch of an Indian bank in Europe. 26. 1976: The Nigerian government acquired 60% of the shares in Bank of India (Nigeria). 27. 1978: BoI opened a branch in New York. 28. 1970s: BoI opened an agency in San Francisco. 29. 1980: Bank of India (Nigeria) Ltd, changed its name to Allied Bank of Nigeria. 30. 1986: BoI acquired Paravur Central Bank (Karur Central Bank or Parur Central Bank) in Kerala in a rescue.
31. 1987: BoI took over the three UK branches of Central Bank of India (CBI). CBI had been caught up in the Sethia fraud and default and the Reserve Bank of India required it to transfer its branches. 32. 2003: BoI opened a representative office in Shenzhen. 33. 2005: BoI opened a representative office in Vietnam. 34. 2006: BoI plans to upgrade the Shenzen and Vietnam representative offices to branches, and to open representative offices in Beijing, Doha, and Johannesburg. In addition, BoI plans to establish a branch in Antwerp and a subsidiary in Dar-es-Salaam, marking its return to Tanzania after 37 years. 35. 2007: BoI acquired 76 percent of Indonesia-based PT Bank Swadesi. 2.2 Products and services: