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Financial Analysis of

Rushikulya Gramya Bank,Brahmapur

A DissertationSubmitted in partial fulfillment of

The Master of Finance And Control

under Berhampur university, Brahmapur

By

Sameer Kumar Panigrahi

Roll No. MF1710

Under the guidance of

Prof. Kishor Rout

Berhampur UniversityBerhampur, Odisha 760010, India


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ACKNOWLEDGEMENT

I would like to thank all those who directly or indirectly contributed in making this

project a success. I owe a lot to Prof. Kishor Rout for this constant encouragementand support: and to my friends for all the support.

I would like thank Prof. Kishor Rout, Course Coordinator MFC for this help and

support.

And, finally the boosting from our honorable H.O.D, Prof. Sangram Mudali, once in

a while really worth mentioning.

Friends and parents are an inevitable pat of life in all endeavors. So, we would like to

express our sincere thanks for the encouragement and help they have rendered.

Sameer Kumar Panigrahi

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DECLARATION

I hereby declare that the Dissertation reportentitled Financial Analysis of RushikulyaGramya Bank, Berhampur is the produce of mysincere effort. This Dissertation Project Report isbeing submitted by me alone, at BerhampurUniversity , for the partial fulfillment of the courseMFC, and the report has not been submitted to anyother educational institutions for any otherpurpose.

Date:Signature

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FINANCIAL ANALYSIS

1. INTRODUCTION

1.1 General Overview

Finance is always one of the important and basic factors of all kinds of

economic activities. It is rightly been said that business needs money to make money.

Hence efficient management of every organization is closely linked with efficient

management of finance.

Finance is concerned with the flow of funds and decision related to business

operations affecting valuation of the firm finance function cover decision related to

investment, financing and dividends. Working capital management is one of the

dynamic fields in finances. Every business needs funds for two purposes, for its

establishment and to carry out its day to day operations. Short term funds are required

to carry out its day to day operations. Long term funds are required to create

production facilities through purchase of fixed assets such as plant, machinery, land,

building, furniture etc.

In simple words working capital refers to that part of the firms capital which

is required for financing short term or current assets such as cash, marketable

securities, debtors and inventories. Funds thus invested in current assets keep on

revolving fast and are being constantly converted into cash assets cash flows out again

in exchange for other current assets

1.1.1 Regional Rural Banks

A rural bank is a financial institution that helps in rationalizing the developing

regions or developing country to finance their needs specially the projects regardingagricultural progress. Regional Rural Banks were established under the provisions of

an Ordinance promulgated on the 26th September 1975 and the RRB Act, 1976 with

an objective to ensure sufficient institutional credit for agriculture and other rural

sectors. The Regional Rural Banks mobilize financial resources from rural / semi-

urban areas and grant loans and advances mostly to small and marginal farmers,

agricultural laborer and rural artisans. The area of operation of Regional Rural Banks

is limited to the area as notified by Government of India covering one or moredistricts in the State.

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FINANCIAL ANALYSIS

1.1.2 Original Goals

The RRBs, called by different names in different states, such as Grameena

Banks, Gramin Banks, Grama Banks, Gramya Banks, etc were started in 1975, i.e.

during the Emergency days, with the aim of providing credit to small and marginal

farmers, agricultural laborers, rural artisans, street vendors and all those living below

the poverty line as the preamble of the Regional Rural Banks Act, 1976 proclaimed in

unequivocal terms. The need for the new genre of banks was felt as then existing

institutions - commercial banks and cooperatives - were found to be suffering from

some weaknesses vis--vis rural credit, particularly for the weaker sections.

Based on the recommendations of a working group, hurriedly set up under the

chairmanship of M Narasimham (who was then working as the additional secretary

banking and became popular during the early 1990s with his recommendations on

financial sector reforms), the experiment of these new banks, tiny scheduled

commercial banks in the central sector with one or two districts as their area of

operation, was started in 1975. Their share capital was apportioned by the central

government, the respective state government and another commercial bank, called the

sponsor bank, in the ratio of 50:15:35.

The RRBs have no doubt turned from eternal loss makers into profit-making

entities following the revamping measures. The net profit generated in the RRBs in

2007-08 was Rs.625.11 crore. Though higher than the previous year's Rs.617.13

crore, it was lower than the profit earned in the year before of Rs.748.11 crore. This

raises doubts on the sustainability of even the commercial character of these banks,

which have sacrificed their social responsibility. At times, the external factors such asloan waivers and rescheduling of installments on account of drought and the resultant

reduction in non-performing assets favorably influence their financial results.

In fact, the accumulated loss in the system during 2007-08 of Rs.2, 759.49 crore was

higher than the previous year's Rs.2, 636.85 crore. Also to be viewed from the

commercial angle is the fact that their business volume is disproportionately low

compared with their share in branch network.

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FINANCIAL ANALYSIS

While RRB branches account for 19.58% of the total bank branches, their deposit of

Rs.83,143.55 crore accounts for only 2.6% of the total bank deposits in India and

advances of Rs.48,492.59 crore constitute a still lower share of 2.01%.

Similarly, the rural branches of the RRBs account for 36.94% of the total rural

branches of all the banks put together. But, their share in institutional agricultural

advances is not more than 10%. While it is clear that the turnaround strategy of RRBs

has clearly turned them away from their original goals, their profits, induced through

sacrificing the rural weaker sections' credit and other measure, do not seem to be

sustainable. Also, the business levels of the banks are nowhere comparable to their

size in terms of number of offices.

1.2 Objectives of Study

The present study has been taken up with the following objectives

To Study the different practices of Financial Analysis of RGB.Berhampur.

To know the short-term solvency of RGB.Berhampur.

To identify problems, if any, in the Financial Analysis of RGB, Berhampur.

Types of loans provided to industries by RGB.Berhampur relating to Working

Capital.

To know the changes in the financial position of RGB.Berhampur over a

period of time.

1.3 Company Profile

Rushikulya Gramya Bank, the Bank has been vigorously pursuing its social objectiveand is committed to serve the economically backward people, agriculturists, rural

women and small business entrepreneurs for the all round development of Ganjam &

Gajapati District

Rushikulya Gramya Bank has its network operations in Ganjam & Gajapati Districts

only which was earlier undivided Ganjam District. The following are the blocks,

tahasil & sub-division where the banks network of operation takes place:

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FINANCIAL ANALYSIS

BERHAMPUR: The Rushikulya Gramya Bank (RGB) will be the first Regional Rural

Bank (RRB) in the State to provide core banking facility to its customers.

At present the RGB has 80 branches in Ganjam and Gajapati districts. It has branches

in remote areas like Gayaganda in Gajapati district. But the bank authorities are

confident of enabling core banking facility soon as all their braches have been fully

computerized. Only proper networking would provide Core Banking Solution (CBS)

to our customers who are mostly rural inhabitants, said Mr. Doraswamy. The urban

and semi-urban branches of the RRB have already been networked on experimental

basis. It may be noted that the Reserve Bank of India has directed all RRBs in the

country to provide core banking facility to their customers by 2012, but the RGB

plans to reach the target early.

Apart from it the RGB also plans to provide ATM facility to its customers.

But the bank plans to make it cost effective.

As per the plans the RGB is expected to open limited number of ATM counters. But

the ATM card holders of the bank would be provided the facility to withdraw and

deposit cash through ATMs of Andhra Bank all over the country. Bank is also

vigorously pursuing its social objectives and is committed to agriculturalists,

backward for the all round development of Ganjam & Gajapati Districts. Serve the

economically Backward People.

EMBLEM

1.4 History

Rushikulya Gramya Bank, the first of three Regional Rural Banks sponsored byAndhra Bank was established on 14th day of February, 1981 under provision of

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FINANCIAL ANALYSIS

Section 3 of the Regional Rural Bank Act, 1976 with its Head Office at Berhampur

(Ganjam), Orissa. As a Scheduled Commercial Bank, it is authorized to conduct all

types of banking activities under Section-5B of the Banking Regulation Act 1949.

The Bank has been vigorously pursuing its social objective and is committed to serve

the economically backward people, agriculturists, rural women and small business

entrepreneurs for the all round development of Ganjam & Gajapati District.

1.4.1 Administrative Setup

Branch Network:

The Bank covers two districts namely Ganjam and Gajapati having a branch network

as follows:

Table 1.1 Branch Network

District Rural Semi-

Urban

Urban Total Satellite

Offices

Area

OfficeGanjam 48 14 10 71 4 1Gajapati 9 1 -- 10 3 --

Total 57 15 10 81 7 1

1.4.2 Policy

Customer delights by providing world-class services.

Be a dynamic benchmark and leader in the field of regional rural banking.

Develop pride for all stakeholders including society around.

Build culture of intellectual honesty and professional integrity.

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FINANCIAL ANALYSIS

1.4.3 RGB Core Values

Integrity

Trust

Caring for people.

Commitment to excellence

1.5 Strategy

RUSHIKULYA GRAMYA BANK- STRATEGIC OBJECTIVES

Leadership in the field of regional rural banking.

Sustained growth of business.

Competitiveness with other commercial banks in its area of operation.

Empowerment of women through credit.

Total financial inclusion in its service area to bring at least one member per

family into the financial inclusion.

Social Cost for Social Benefit

As these banks were designed to exclusively cater to the credit needs of the poor in

the rural and far-flung areas, it was presumed that they would incur some losses. The

framers of the RRB policy spelt this out in the very beginning, not as if they were

discovered subsequently. These losses were supposed to be treated as the necessary

social cost for the social benefit of covering the rural poor.

In fact, the RRBs lived up to this expectation; as many as 196 RRBs were established

by 1990 with more than 14,500 branches across the length and breadth of the country,

taking banking services to the unbanked rural, tribal and other interior areas. About

123 million persons, belonging to the weaker sections, benefited from these banks.

But the performance evaluation was made in terms of the viability of the RRBs. The

accumulated losses of Rs.621 crore by 1991-92 and 152 out of 196 RRBs being in

losses was a big cause of concern that provoked the corrective measures. If the

performance were viewed keeping the establishment goals in view, this loss, which

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FINANCIAL ANALYSIS

worked out to Rs.18 lakh per RRB per year, would be peanuts compared with the

service they rendered to the poor.

1.6 Operational Details The bank has crossed another mile stone by achieving the Business of

Rs.1174.38Crores for the year ending 31st March, 2011 as against Rs.1000

Crores as on 31st March, 2010. Bank has registered a growth of 23.13% over

31st March, 2010, being highest growth in the history of the Bank.

The aggregate deposit has increased from Rs.532.88 Crores to Rs.684.42

Crores during the year registering a growth of 28.44%..

The low cost deposit constitutes 50.57% of the total deposits..

The gross advances have increased to Rs.305.98 Crores from Rs.271.15

Crores during the year despite the prevalence of conditions proof credit off

take due to Debt Waiver.

The Credit Deposit Ratio is at 44.71%.

Branch has earned a Gross Profit of Rs.4.80 Crs. as on 31.03.2011.

All the branches earned profit during 2008-09 except the three newly opened

branches i.e. Kabisuryanagar, Ankuli and Khodasingi. There is no

accumulated loss.

The total Reserve of bank has increased to Rs.1642.04 Lakh as on 31st March,

2011

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FINANCIAL ANALYSIS

2. METHODOLOGY

2.1 Design of the Study

Collecting the information about the companys profile.

Collection of the data from the accounts office.

Implementing the data in charts and analyzing them

2.3 Limitations of Study

The project has been subject to the following limitations:

Data only for five years has been collected.

More dependency on secondary data..

The study is conducted with the data available and the analysis was made

accordingly.

It was tough to get all relevant facts from the employees concerned with the

business. Time factor was a limitation as only a stipulated period was available.

Much information was classified as confidential which would have helped to

get more clear idea about the working capital of RGB.Berhampur.

The ongoing audit at the time of project work has put pressure on the time

frame.

The overall performance is taken into consideration without taking into

account the individual values

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FINANCIAL ANALYSIS

3. DATA ANALYSIS

3.1 Financial AnalysisAs financial analysis refers to know the short term as well as long

term financial position of the organization, As the short term solvencygives a clear guidelines of the financial position, so here I analysis the fullshort term financial position of the organization. For this purpose a

propore short term working capital analysis must be required.

Capital required for a business generally classified under two categories

1. Fixed capital

2. working capital

Every business needs funds for two purposes:

a. Establishment of business b. Carry out day-to day business

Long-term funds are required to create production facilities through purchase

of fixed assets such as plant and machinery, land, building etc. Investments in these

assets represent that part of firms capital, which is blocked on a permanent or fixed

basis and is called fixed capital. Funds are also need for short-term purposes for the

purchase of raw materials, payment of wages and other day-to day expenses, etc.

These funds are known as working capital. In simple words, working capital refers to

that part of firms capital, which is required for financing short term or current assets

such as cash, marketable securities, debtors and inventories.

3.1.1 Meaning of Working Capital

Working capital defined as the excess of current assets over current liabilities.

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FINANCIAL ANALYSIS

Concepts of Working Capital

One of the most important areas in the day-to-day management of the firm is

the management of working capital. Financial Analysis is the functional area of

finance that covers al the current accounts of the firm. It is concerned with

management of the level of individual current assets as well as fixed asset and also the

management of the working capital. Financial management means procurement of

funds and effective utilization of these procured funds. Procurement of funds in firstly

concerned for financing working capital requirement of the firm and secondly for

financing fixed assets.

The working capital can be used in two different ways:

Gross Working Capital: The gross working capital refers to investment in all

the current assets taken together. The total of investments in all current assets

is known as Gross Working Capital.

Net Working Capital: The term net working capital refers to excess of the

total current assets over total current liabilities. It may be noted that the current

liabilities refers to these liabilities which are payable within a period of one

year.

Time point of view - permanent and temporary working capital

Permanent working capital permanent working capital is the minimum

level of investment required in the business at all points of time. It is also

called fixed or hard core working capital.

Temporary working capital - temporary working capital is that part of total

working capital which is required by an organization over and above the

permanent working capital and is dependent on factors like peak season, trade

cycle boom etc. it is also called.

The various sources for the financing of working capital are as follows:

Sources of Working Capital

Permanent or fixed Temporary or variable

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FINANCIAL ANALYSIS

Figure 3.1 Sources of Working Capital

PERMANENT OR FIXED: The permanent sources of working capital are as

follow:

Shares

Debentures

Public deposits

Loan from the financial institution

TEMPORARY OR VARIABLE: the temporary or variable sources of working

capital are follows:

Commercial bank

Commercial paper

Accrued expenses

Advances

Accounts receivable

Indigenous bank

3.1.2 Financing of Working Capital

The working capital requirements of a concern can be classified as:

a) Permanent or fixed working capital requirements.

b) Temporary or variable working capital requirements.

The fixed proportion of working capital should be generally financed from the fixed

capital sources while the temporary or variable working capital requirements of a

concern may be met from the short-term sources of capital.

3.1.4 Financial Analysis And Management

Working capital management has significant in a financial management due to

the fact it plays a pivotal role in keeping the wheels of a business enterprises running.In common parlance the management of current assets is called the Working Capital

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FINANCIAL ANALYSIS

management. In any business firm whether it is trading business or manufacturing

business, they need some asset, in terms of money. As we know that money is the

lifeblood of any business. Shortage of funds for working capital has caused many

businesses to fail and in many cases has retarded their growth. Lack of efficient and

effective utilization of working capital leads to earn low rate of return on capital

employed or even compel sustain losses. These assets may be for short term or

temporary purpose or long-term purposes. Long term funds may require for many

purposes like acquisition of fixed asset, diversification and expansion of business on

modernization of plants and machinery and research and development.

But funds are also needed for short-term purposes i.e. for day-today requirement. The

requirements of working capital varies from firm to firm, its depending upon the

nature of the business like production policies, market conditions, season ability of

operations, conditions of supplies etc. working capital used for procurement or raw

material, payment of wages to workmen and for meeting the routine expanses.

So the sales do not convert into cash instantly. This system requires some times lag

between sales of goods and receipt of payment. So a need for short term funds in the

form of current assets are required in lack of immediate realization of cash against

goods sold.

Another problem may arise if the finished good are in the stocks and within the given

period it could not be sold and some goods like raw materials, semi finished good are

also in the stock many funds blocked in different types of inventory. For the

successful running of the business requires sufficient amount of funds. Working

capital in any organization should be excess or deficient as it will hamper the

profitability of the organization. So the management of these funds or current assets is

termed as working Capital Management. It is the most vital ingredient of a business.

Working capital can be defined as excess of current assets over current liabilities.

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FINANCIAL ANALYSIS

CURRENT ASSETS

Current assets are those assets which will be converted into cash within the

current accounting period of within the next year as a result of ordinary operations of

the business.

Resources of Current Assets:

Cash and bank Balance

Receivable

Period expanses

Short Term Advances

Temporary investments

Cash is used for purchasing the raw materials, to pay wages and other manufacturing

things. After manufacture the product, finished goods puts in the stock-in-inventory

and then goods will be sold for the receivable accounts.

CURRENT LIABILITIES

Current liabilities are those debts of the firm that have to be paid during thecurrent accounting period or within a year. Current liabilities includes:-

Creditors for goods purchased

Outstanding expenses

Short term borrowing

Advance received against sales

Taxes and Dividends Paid

3.1.5 Why Working Capital is Maintained?

It decides cash needs.

What level of inventory is needed to be maintained?

How quickly the bank overdraft will be paid?

What period of credit to be granted to debtors?

What portion of current assets should be financed by short-term funds etc?

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FINANCIAL ANALYSIS

3.1.6 Importance of Working Capital

A firm may have to face the following adverse consequences from inadequate

working capital.

1. Growth may be stunted. It may become difficult for the firm to

undertake profitable protects due to non-availability of funds.

2. Implementation of operating plans may become difficult and

consequently firm profits goals may not be achieved.

3. Operating inefficiency may creep in due to difficulties in meeting even

day to day commitment.

4. Fix assets may not be efficiently utilized due to lack of working funds,

thus lowering the rate of return on investment in the process.

5. Attractive credit opportunities may have to be lost due o paucity of

working capital.

6. The firm losses its reputation when it is not in a position to honor its

short terms obligation. As a result the firm is likely to face tight credit terms.

3.1.7 Managing Working Capital

The management of current assets basically involves two processes.

Forecasting needed funds.

Acquiring funds

Monitoring levels of cash, receivables, inventory

Recording time spent managing current accounts

3.1.8 Factors Determining the Working Capital Requirement Nature of the business

Size of business/scale of operation

Production policy

Manufacturing process/length of production cycle

Seasonal variation

Rate of stock turnover

Credit policy

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FINANCIAL ANALYSIS

Business cycles

Rate of growth of business

Earning capacity and dividend policy

Price level change

The necessity of maintaining adequate amount of working capital as follows:

Solvency of the business: Adequate working capital helps in maintaining

solvency of the business forms pay its debts on time by working capital

continuously. His will only possible if the working capital be adequate.

Goodwill: Sufficient working capital enables a company to create and

maintain goodwill through prompt payments.

Easy Loans: A companys adequate working capital creates favorable and

easy conditions to arrange the loans.

Cash Discounts: Adequate working capital avail cash discount & reduces

cost.

Regular supply of Raw Materials: Sufficient working capital regulates

continuous production as it ensures regular supply of raw materials.

Regular Payment of Salaries, Wages and others day-to-day commitments:

A company which ample working capital can make regular payments to its

employees which in turn raises the morale and their efficiency and reduces

wastages and enhances production and profit.

Exploitation of favorable market conditions: Company having adequate

working capital can exploit favorable conditions as purchasing its

requirements in bulk when the prices are lower and by holding its inventories

for higher prices.

Ability to face prices: The crisis in emergencies like depression can be faced

easily by company having adequate working capital.

Quick and regular return on investment: Sufficiency of working capital

enables a company to pay quick and regular dividend to its investor as their

may not be much pressure to plough back profits which creates a favorable

market to raise additional funds in the future.

High Morale: Adequacy of working capital creates an environment of

security; confidence high morale creates overall efficiency in a company.

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FINANCIAL ANALYSIS

Table 3.1 Showing Gross Working Capital of RGB, Berhampur

YEAR GROSS WORKING CAPITAL(lakhs)

2006-07 21522007-08 27562008-09 29762009-10 40952010-11 4582

Figure 3.4 Gross Working Capital

INTERPRETATION:

It proves that the gross working capital of RGB. Berhampur has a positive trend.

Gross working capital refers to the current assets of the company. It increases due to

increase in current assets. The gross working capital of RGB, Berhampur is high in

the year 2010-11.so it is in a liquid able position.

Here we can say that the liquidity position of the organization is sound to meet the

obligations. The working capital is also able to meet the day to day operation of the

organization. As the working capital represents a large portion of total investment,

here, it can be said that the organization is in a very good position.

Table 3.2 Comparison of working capital of two different years of RGB.

(2004-05)- (2005-06)

(In lakhs)

2152

27562976

40954582

0500

10001500

2000250030003500

4000

45005000

GrossWorkingCapital

2006-07 2007-08 2008-09 2009-10 2010-11

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FINANCIAL ANALYSIS

Particulars 2006-07 2007-08 Increase DecreaseCurrent assets:Cash in hand 488 439 49Cash at bank 427 451 24Loans and Advances 354 428 74Inventories 883 1438 555Total current assets 2152 2756 604 49Current liability:Liabilities & provision 816 860 44Total Current Liability 816 860WORKING CAPITAL (CA-CL) 1336 1896 560

ANALYSIS:

As compare to the last year, this year the working capital has increased. Last year it

was 1336 lakhs, in the year 05-06, it is 1896 lakhs.It is because the current assets has

increased and the current liabilities has decreased. So the company is in a liquid able

position to meet the obligations and the working capital is in a good condition.

Table 3.3 Comparison of working capital of two different years (2005-06)

- (2006-07)

(In lakhs)

Particulars 2007-08 2008-09 Increase DecreaseCurrent assets:Cash in hand 439 534 95Cash at bank 451 544 93Loans and Advances 428 487 59Inventories 1438 1411 27Total current assets 2756 2976 220Current liability:

Liabilities & provision 860 888 28Total Current Liability 860 888WORKING CAPITAL (CA-CL) 1896 2088 192

ANALYSIS:

As compare to the last year, this year the working capital has increased. It is because

provisions are less and inventories are high in this particular year. So it is showing a

good portion of investment in the current assets, and the current liabilities can be paid

out of that.

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FINANCIAL ANALYSIS

Table 3.4 Comparison of working capital of two different years(2006-

07----2007-08)

(in lakhs)Particulars 2008-09 2009-10 Increase Decrease

Current assets:

Cash in hand 534 748 214Cash at bank 544 1300 756Loans and Advances 487 1543 1056Inventories 1411 504 907Total current assets 2976 4095 1119

Current liability:Liabilities & provision 888 600 288Total Current Liability 888 600WORKING CAPITAL (CA-CL) 2088 3495 1407

ANALYSIS OF WORKING CAPITAL:

As compare to the last year, this year the working capital has increased. Last year it

was 2088 lakhs, but this year in 07-08 it is 3495 lakhs. It is because the current assets

has increased and the current liabilities has decreased. The amount of investment in

the current assets is more and the liabilities are less. So the company is able to meet

its outsiders liabilities. The financial position of the company can be said well.

Table 3.5 Comparison of working capital of two different years (2007-

08)- (2008-09)

(in lakhs)

Particulars 2009-10 2010-11 Increase DecreaseCurrent assets:Cash in hand 748 1490 742Cash at bank 1300 518 782Loans and Advances 1543 552 991Inventories 504 2022 1518Total current assets 4095 4582 487

Current liability:Liabilities & provision 600 570 30Total Current Liability 600 570WORKING CAPITAL (CA-CL) 3495 4012 517

ANALYSIS:

It is quite clear from the datas of RGB.Berhampur is that, the working capital of

RGB.Berhampur is showing an increasing trend continuously from 2007 to 2011.The

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FINANCIAL ANALYSIS

working capital is highest in 2010-11.so from the above figures, It is quite clear that

RGB.Berhampur is in good liquid position. As it is showing an increase in the

working capital, the organization is profitable and is showing the solvency position of

the organization, is quite appreciable

In the last two years, the working capital has increased .,though in this year the

current assets as well as the current liabilities has also increased but the proportion of

current assets is relatively more than the current liability so there is a increase in

working capital.

Table 3.6 Net Working Capital (in lakhs)

YEAR NET WORKING CAPITAL

2006-07 13362007-08 18962008-09 20882009-10 34952010-11 4012

NET WORKING CAPITAL

Figure 3.5 Net Working Capital

INTERPRETATION:

It refers to the difference between the current assets and current liability. From the

above figure we can see that it has been increased. In 2010-11 it is the highest. Its

current assets are more than its current liabilities. So the organization is investing

13361896 2088

34954012

0

1000

2000

3000

4000

5000

Net working capital

Series1 1336 1896 2088 3495 4012

Net Workin 2006-072007-082008-092009-102010-11

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FINANCIAL ANALYSIS

more capital in its current assets. And the position of RGB.Berhampur is good enough

to meet its outsiders liabilities. As net working capital is increasing, RGB,

Berhampur is in a good liquid able position.

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FINANCIAL ANALYSIS

3.1.10 Ratios related to Working Capital

(a) Current Ratio

The ratio which expresses the relationship between current assets and current

liabilities is known as current ratio, also known as working capital ratio. Current ratio

includes cash and those assets which can be easily converted into cash within a short

period of a time generally one year. Current liabilities are those obligations which are

parable within a short term period generally one year.

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

Table 3.7 Current Ratio

YEAR CURRENT ASSETS

(RS IN LAKHS)

CURRENT LIABILITIES

(RS IN LAKHS)

RATIO

2006-2007 24931.2 13949.15 1.782007-2008 25298.05 14239.98 1.822008-2009 26820.38 14896.55 1.802009-2010 34996.53 18519.80 1.882010-2011 26231.78 19230.29 1.37

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FINANCIAL ANALYSIS

CHART OF CURRENT RATIO

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.61.8

2

2006-07 2007-08 2008-09 2009-10 2010-11

Figure 3.6 Current Ratio

INTERPRETATION OF CURRENT RATIO:

From the above chart we can see that an increase in the current ratio represents

improvement in the liquidity position of a firm while a decrease in current ratio,

indicates that there has been deterioration in the liquidity position of the firm. After

analyzing the current ratio of RGB, we can see that the organization have satisfactory

current ratio. The current ratio is satisfactory.

(b) Quick or Acid Test or Liquid Ratio:

The term liquidity refers to the ability of a firm to pay its short term obligation as and

when they become due. Current asset include inventories and prepaid expenses which

are not easily convertible into cash within in a short period. Quick or acid test ratio

may be defined as the relationship between 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 case, cash in hand and cash at bank are the most

liquid assets. The other assets which can be included in the liquid assets are the bills

receivable, sundry debtors, marketable securities and short term or temporary

investments. The quick ratio can be calculated by dividing the total quick or liquid

assets by current liabilities.

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FINANCIAL ANALYSIS

LIQUID RATIO= LIQUID ASSET / CURRENT LIABILITIESLIQUID ASSETS= SUNDRY DEBTORS + CASH & BANK BALANCES + LOAN

& ADVANCES.

Table 3.8 Liquid Ratio

YEAR LIQUID ASSETS

(RS IN LAKHS)

CURRENT LIABILITIES

(RS IN LAKHS)

RATIO

2006-2007 19941.67 13949.15 1.432007-2008 23855.84 14239.98 1.672008-2009 26121.13 14896.55 1.752009-2010 26608.53 18519.80 1.432010-2011 25363.33 19230.29 1.31

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2006-07 2007-08 2008-09 2009-10 2010-11

Figure 3.7 Liquid Ratio

INTERPRETATION OF LIQUID RATIO

A high acid test ratio is an indication that the firm is liquid and has the ability to meet

its current or liquid liabilities in time and on the other hand a low quick ratio

represents that the firms liquidity position is not good. By analyzing the liquid ratio

of the RGB we can see that it has good quick ratio and has a good liquidity position.

The liquidity ratio of RGB is satisfactory because it satisfy the thumb rule (1:1). But

in 2009-2010, 2010-2011 the ratio are reduced. In these years the cash and debtor are

less as compare to last two years.

(c) Cash Ratio:

It measures the ratio between the amounts of cash on hand and the amount of total

assets of the organization .it includes both the fixed as well as the current assets.

CASH RATIO = (CASH ON HAND / TOTAL ASSETS)*100

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FINANCIAL ANALYSIS

Table 3.9 Cash Ratio

YEAR CASH ON HAND

(RS IN LAKHS)

TOTAL ASSETS

(RS IN LAKHS)

RATIO

(TIMES)2006-2007 334.82 43923.90 0.762007-2008 437.22 47667.21 0.912008-2009 507.88 50539.04 1.0042009-2010 641.93 55245.40 1.162010-2011 921.29 62598.69 1.47

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2006-07 2007-08 2008-09 2009-10 2010-11

Figure 3.8 Chart of Cash Ratio

INTERPRETATION:

By analyzing the cash ratio of RGB, we can see that in the year 2006-2007, the cash

ratio is low but after that, it shows an increasing trend. From the above we get to

know that the cash balances of the organization goes on increasing so as the total

assets of the organization. The above data shows that the organization has a good

financial position. The financial position of RGB.Berhampur is sound.

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FINANCIAL ANALYSIS

4. CONCLUSION & RECOMMENDATIONS

4.1 Conclusion

The study involves practical and conceptual overview of decision concerning current

assets like cash and bank balance, inventories, sundry debtor, loan and advances,

other current assets and current liabilities like sundry creditors, other deposits, other

current liabilities. And it is the complete synchronization and coordination among the

working capital component, which shall contribute to optimum levels of operations.

Mismanagement of each or any one of these components shall be detrimental to the

objectives of efficient operation, profitability and maximization of the overall value of

the bank itself. It shows how a well managed company achieves the mission of the

company and gives much more profit. Working capital is an important area in

financial management. Just as circulation of blood is essential for life. No business

can run successfully without an adequate amount of working capital. From the above

study, the finding of the study on working capital Is more efficient.

4.2 Recommendations

The graph of working capital of RGB shows consistent growth. , It is

increasing. Year by year. .So, RGB should continue to make constant efforts

to increase the working capital.

Current assets should be kept more to meet the outsiders liabilities.

The organization must take necessary steps to raise the amount of interest on

loans and advances in order to increase the revenue sources.

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FINANCIAL ANALYSIS

REFERENCES

[1] Financial Management : I M Pandey.

[2] Financial Management : Shashi .K.Gupta.

ANNEXURE

RUSHIKULYA GRAMYA BANK (Sponsored by Andhra Bank)

Head Office, Gate Bazar, BERHAMPUR (GM)

BALANCE SHEET AS ON 31st

MARCH, 2011F O R M - A(Amount in Rs.

'000s)

CAPITAL & LIABILITIES Schedule

As on

31.03.2011

(Current year)

As on 31.03.2010

(Previous year)

Capital 1 191527 191527Reserves & Surplus 2 163723 153602Deposits 3 6844196 5328821

Borrowings 4 153903 276553Other Liabilities & Provisions 5 268668 309366

T O T A L 7622017 6259869

ASSETS Schedule

As on

31.03.2011

(Current year)

As on 31.03.2010

(Previous year)

Cash & Balances with RBI 6 408506 446087Balances with Banks & Money At

Call & Short Notice 7 149059 36976

Investments 8 4003761 3080659Advances 9 2923248 2603910Fixed Assets 10 14221 13190Other Assets 11 123222 79047

T O T A L 7622017 6259869Contingent Liabilities 12 27813 29265Bills for Collection 8063 2027Summary of significant accounting

policies 17 Notes on Accounts 18

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2011FORM B

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FINANCIAL ANALYSIS

(Amount in

'000s)

PARTICULARS Schedule

As on

31.03.2011

(Currentyear)

As on

31.03.2010

(Previous year)

1. INCOME

Interest Earned13 521563 401513

Other Income14 26203 17923

T O T A L 547766 419436

2. EXPENDITURE

Interest Expended15 340366 271715

Operating Expenses16 159390 115797

Provisions & Contingencies32145 25581

T O T A L 531901 413093

3. PROFIT & LOSS :

Net Profit for the year 15865 6343

Loss brought forward 0 0

T O T A L 15865 6343

4. APPROPRIATIONS

Provisions for Income Tax5543 2236

Provisions for FBT201 177

NET PROFIT TRANSFERRED TO

RESERVES & SURPLUS

(+)10121 (+) 3930

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FINANCIAL ANALYSIS

RUSHIKULYA GRAMYA BANK (Sponsored by Andhra Bank)

Head Office, Gate Bazar, BERHAMPUR (GM)

SCHEDULES AS ON 31 st MARCH, 2011SCHEDULE 1

(Amount in '000s)

A. CAPITALAs on 31.03.2011

(Current year)

As on 31.03.2010

(Previous year)

Other Banks (Indian)Authorized Capital (500000 shares of Rs.100 each ) 50000 50000

Issued Capital (100000 shares of Rs.100 each ) 10000 10000Subscribed Capital (100000 shares of Rs. 100 each) 10000 10000Called Up Capital (100000 shares of Rs. 100 each ) 10000 10000Less : Calls unpaid - -Add : Forfeited Shares - -Paid up Capital 10000 10000Banking companies incorporated outside India - -

T O T A L 10000 10000

B. SHARE CAPITAL DEPOSITSAs on 31.03.2011

(Current year)

As on 31.03.2010

(Previous year)

A. SHARE DEPOSITSa. Share Deposits approved by Govt. of India

as equity support towards restructuring 181527 181527b. Share Deposits received from :

Govt. of India 90764 90764Sponsor Bank 63534 63534Govt. of Orissa 27229 27229

c. Share Deposits due from Govt. of Orissa Nil Nil

T O T A L 181527 181527TOTAL OF A & B 191527 191527

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FINANCIAL ANALYSIS

SCHEDULE 2(Amount in '000s)

RESERVES & SURPLUSAs on 31.03.2011

(Current year)

As on 31.03.2010

(Previous year)

I. STATUTORY RESERVES :Opening Balance - -Additions during the year - -Reduction during the year - -

II. CAPITAL RESERVESOpening Balance - -Additions during the year - -Reduction during the year - -

III. SHARE PREMIUM

Opening Balance - -Additions during the year - -Reduction during the year - -

IV. REVENUE & OTHER RESERVESREVENUE RESERVES - -

Opening Balance - -Additions during the year Reduction during the year OTHER RESERVES

a) Investment Fluctuation ReserveOpening Balance Nil NilAdditions during the year Reduction during the year

V) BALANCE IN PROFIT & LOSS A/C 153602 149672ADD: PROFIT FOR THE YEAR 15865 6343LESS: (a) PROVISION FOR INCOME TAX 5543 2236

(b) PROVISION FOR FBT 201 177

T O T A L 163723 153602

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FINANCIAL ANALYSIS

SCHEDULE 3

(Amount in '000s)

DEPOSITS As on 31.03.2011(Current year)

As on 31.03.2010(Previous year)

A. I. DEMAND DEPOSITSi. From Banks -

ii. From Others 253152 194145II. SAVINGS BANK DEPOSITS 3207839 2372385

III. TERM DEPOSITS i. From Banks 0 -

ii. From Others 3383205 2762291

T O T A L O F I , II & III 6844196 5328821

B. i) Deposits of Branches in India 6844196 5328821ii) Deposits of Branches outside India 0 Nil

T O T A L 6844196 5328821

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FINANCIAL ANALYSIS

SCHEDULE- 4

(Amount in '000s)

BORROWINGS As on 31.03.2011(Current year))

As on 31.03.2010(Previous year)

I. Borrowings in India :i. Reserve Bank of India Nil Nilii. Other Banks

a) Sponsor Bank Nil Nilb) Others c) NABARD 153903 276553

II. Borrowings outside India Nil Nil

T O T A L O F I & II 153903 276553

SCHEDULE- 5(Amount in '000s)

OTHER LIABILITIES & PROVISIONSAs on 31.03.2011

(Current year)

As on

31.03.2010(Previous

year)I. Bills Payable 16831 38310II. Inter office Adjustments (Net) 3379 65526III. Interest Accrued 15669 17921IV. Deferred Tax 0 -V. Others ( including Provisions ) 232789 187609

a) Sundry Creditors 50088 32333

b) Subsidy Reserve Fund 168221 146658c) Bad & Doubtful provisions 0 0d) Amortization of GOIS premium 0 0e) Sundry Suspense 0 0f) Contingent Provision against

Standard Assets

8642 6260

g) Provision for FBT 201 177h) Provision for I.T. 5637 2181

T O T A L (I to V) 268668 309366

sam pro ree

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