ABSTRACT

This technical note explains in detail the analysis of financial statements of a banking concerns. It provides insights into two widely used financial tools, ratio analysis and working capital management. The objective of this note is to help the reader understand how these tools should be used to analyze the financial position of a firm. To demonstrate the process of financial analysis two of the banks, YES bank and the AXIS bank, are analyzed in terms of ratio analysis and working capital management.

INTRODUCTION
Banking
The Indian banking system emerged relatively unscathed from the global economic downturn of 200 8-09. While credit growth slowed down, banks were able to control the levelof non-performing asset s (NPAs), thanks partly to the Reserve Bank of Indian allowing one-time restructuring of accounts. N PAs as a proportion of gross advances increased from 2.3 per cent as on March 31, 2009 and 2.5 p er cent as the end of March 31, 2010. The government has supporting growth of public sector banks infusing capital as per requirement. The government is expected to continue to maintain its strong s upport for the banking system, while simultaneously imposing prudential norms to ensure its orderly growth. Indian banking industry is considered to be very stable and very healthy balance sheet and low to risky assets . The global financial crises did not affect the Indian bank significantly. Despite of recent growth of private banking, the sector is dominated by government controlled banks that hold by three fourth of total bank assets.

FINANCIAL RATIO ANALYSIS

Financial ratio analysis involves the calculation and comparison of ratios which are derived from the information given in the company's financial statements. The historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and its investment attractiveness. Financial ratio analysis groups the ratios into categories that tell us about the different facets of a company's financial state of affairs. Some of the categories of ratios are described below through a flow chart:

RATIOS

LIQUIDITY RATIO

TURNOVER RATIO

PROFITABILITY RATIO

LEVERAGES RATIO

LIQUIDITY RATIOS Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios which indicate the liquidity of a company are Current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below. CURRENT RATIO Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank credit, provision for taxation, dividends payable and outstanding expenses. This ratio measures the liquidity of the current assets and the ability of a company to meet its short-term debt obligation Current Ratio = Current Assets / Current Liabilities CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL. The higher the current ratio, the greater the short-term solvency. While interpreting the current ratio, the composition of current assets must not be overlooked. A firm with a high proportion of current assets in the form of cash and debtors is more liquid than one with a high proportion of current assets in the form of inventories, even though both the firms have the same current ratio. Internationally, a current ratio of 2:1 is considered satisfactory.

QUICK OR ACID-TEST RATIO Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those current assets that can be converted into cash immediately without any value dilution. QA includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required. Quick Ratio = Quick Assets / Current Liabilities

QR indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current assets which are highly liquid. Inventories are excluded from the numerator of this ratio because they are deemed the least liquid component of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts and payments. CASH RATIO Since cash and bank balances and short term marketable securities are the most liquid assets of a firm, financial analysts look at the cash ratio. The cash ratio is computed as follows: Cash Ratio = (Cash and Bank Balances + Current Investments) / Current Liabilities

The cash ratio is the most stringent ratio for measuring liquidity. OPERATIONAL/TURNOVER RATIOS These ratios determine how quickly certain current assets can be converted into cash. They are also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in managing assets. These ratios are based on the relationship between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. The important turnover ratios are debtors turnover ratio, average collection period, inventory/stock turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described below: DEBTORS TURNOVER RATIO (DTO)

DTO is calculated by dividing the net credit sales by average debtors outstanding during the year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus returns, if any, from customers. Average debtors is the average of debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are collected. The higher the DTO, the better it is for the organization. Debtors Turnover Ratio = Net Credit Sales / Average Debtor

AVERAGE COLLECTION PERIOD (ACP)

ACP is calculated by dividing the days in a year by the debtors' turnover. The average collection period represents the number of day's worth of credit sales that is blocked with the debtors (accounts receivable). It is computed as follows: Average Collection Ratio = Months (days) in a Year / Debtors Turnover The ACP and the accounts receivables turnover are related as: ACP = 365 / Accounts Receivable Turnover The ACP can be compared with the firm's credit terms to judge the efficiency of credit management. For example, if the credit terms are 2/10, net 45, an ACP of 85 days means that the collection is slow and an ACP of 40 days means that the collection is prompt. INVENTORY OR STOCK TURNOVER RATIO (ITR)

ITR refers to the number of times the inventory is sold and replaced during the accounting period. It is calculated as follows: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also result from a low level of inventory which may lead to frequent stock outs and loss of sales and customer goodwill. For calculating ITR, the average of inventories at the beginning and the end of the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories). FIXED ASSETS TURNOVER (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets. It can be computed as follows: FAT = Net sales / Average net fixed assets

This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and

substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low).

TOTAL ASSETS TURNOVER (TAT)

TAT is the ratio between the net sales and the average total assets. It can be computed as follows: TAT = Net sales / Average total assets

This ratio measures how efficiently an organization is utilizing its assets LEVERAGE/CAPITAL STRUCTURE RATIO These ratios measure the long-term solvency of a firm. Financial leverage refers to the use of debt finance. While debt capital is a cheaper source of finance, it is also a risky source. Leverage ratios help us assess the risk arising from the use of debt capital. Two types of ratios are commonly used to analyze financial leverage - structural ratios and coverage ratios. Structural ratios are based on the proportions of debt and equity in the financial structure of a firm. Coverage ratios show the relationship between the debt commitments and the sources for meeting them. The long-term creditors of a firm evaluate its financial strength on the basis of its ability to pay the interest on the loan regularly during the period of the loan and its ability to pay the principal on maturity. RATIOS COMPUTED FROM BALANCE SHEET Debt-Equity: This ratio shows the relative proportions of debt and equity in financing the assets of a firm. The debt includes short-term and long-term borrowings. The equity includes the networth (paid-up equity capital and reserves and surplus) and preference capital. It can be calculated as: Debt / Equity Debt-Asset Ratio: The debt-asset ratio measures the extent to which the borrowed funds support the firm's assets. It can be calculated as: Debt / Assets The numerator of the ratio includes all debt, short-term as well as long-term, and the denominator of the ratio includes all the assets (the balance sheet total).

AVERAGE COLLECTION PERIOD (ACP)

ACP is calculated by dividing the days in a year by the debtors' turnover. The average collection period represents the number of day's worth of credit sales that is blocked with the debtors (accounts receivable). It is computed as follows: Average Collection Ratio = Months (days) in a Year / Debtors Turnover The ACP and the accounts receivables turnover are related as: ACP = 365 / Accounts Receivable Turnover The ACP can be compared with the firm's credit terms to judge the efficiency of credit management. For example, if the credit terms are 2/10, net 45, an ACP of 85 days means that the collection is slow and an ACP of 40 days means that the collection is prompt. INVENTORY OR STOCK TURNOVER RATIO (ITR)

ITR refers to the number of times the inventory is sold and replaced during the accounting period. It is calculated as follows: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also result from a low level of inventory which may lead to frequent stock outs and loss of sales and customer goodwill. For calculating ITR, the average of inventories at the beginning and the end of the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories). FIXED ASSETS TURNOVER (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets. It can be computed as follows: FAT = Net sales / Average net fixed assets This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low).

TOTAL ASSETS TURNOVER (TAT)

TAT is the ratio between the net sales and the average total assets. It can be computed as follows: TAT = Net sales / Average total assets

This ratio measures how efficiently an organization is utilizing its assets. PROFITABILITY RATIOS These ratios help measure the profitability of a firm. There are two types of profitability ratios:

Profitability ratios in relation to sales and Profitability ratios in relation to investments.

PROFITABILITY RATIOS IN RELATION TO SALES A firm which generates a substantial amount of profits per rupee of sales can comfortably meet its operating expenses and provide more returns to its shareholders. The relationship between profit and sales is measured by profitability ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit Margin. Gross Profit Margin: This ratio measures the relationship between gross profit and sales. It is calculated as follows: Gross Profit Margin = Gross Profit/Net sales * 100 This ratio shows the profit that remains after the manufacturing costs have been met. It measures the efficiency of production as well as pricing. Net Profit Margin: This ratio is computed using the following formula: Net profit / Net sales This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios provide an understanding of the cost and profit structure of a firm.

PROFITABILITY RATIOS IN RELATION TO INVESTMENT These ratios measure the relationship between the profits and investments of a firm. There are three such ratios: Return on Assets, Return on Capital Employed, and Return on Shareholders' Equity. Return on Assets (ROA): This ratio measures the profitability of the assets of a firm. The formula for calculating ROA is: ROA = EAT + Interest - Tax Advantage on Interest / Average Total Assets Return on Capital Employed (ROCE): Capital employed refers to the long-term funds invested by the creditors and the owners of a firm. It is the sum of long-term liabilities and owner's equity. ROCE indicates the efficiency with which the long-term funds of a firm are utilized. It is computed by the following formula: ROCE = (EBIT / Average Total Capital Employed) * 100 Return on Shareholders' Equity: This ratio measures the return on shareholders' funds. It can be calculated using the following methods:

Rate of return on total shareholders' equity. Rate of return on ordinary shareholders. Earnings per share. Dividends per share. Dividend pay-out ratio. Earning and Dividend yield.

(i) Return on Total Shareholders' Equity The total shareholders' equity consists of preference share capital, ordinary share capital consisting of equity share capital, share premium, reserves and surplus less accumulated losses. Return on total shareholders' equity = (Net profit after taxes) * 100 /Average total shareholders' equity (ii) Return on Ordinary Shareholder's Equity (ROSE) This ratio is calculated by dividing the net profits after taxes and preference dividend by the average equity capital held by the ordinary shareholders. ROSE = (Net Profit after Taxes - Preference Dividend) * 100 / Networth (iii) Earnings per Share (EPS) EPS measures the profits available to the equity shareholders on each share held. The formula for calculating EPS is:

EPS = Net Profits Available to Equity Holders / Number of Ordinary Shares Outstanding (iv) Dividend per Share (DPS) DPS shows how much is paid as dividend to the shareholders on each share held. The formula for calculating EPS is: DPS = Dividend Paid to Ordinary Shareholders / Number of Ordinary Shares Outstanding (v) Dividend Pay-out Ratio (D/P Ratio) D/P ratio shows the percentage share of net profits after taxes and after preference dividend has been paid to the preference equity holders. D/P ratio = Dividend per Share (DPS) / Earnings per Share * 100 (vi) Earning & Dividend Yield Earning yield is also known as earning-price ratio and is expressed in terms of the market value per share. Earning Yield = EPS / Market Value per Share * 100 Dividend Yield is expressed in terms of the market value per share. Dividend Yield = (DPS / Market Value per Share) * 100

VALUATION RATIOS Valuation ratios indicate the performance of the equity stock of a company in the stock market. Since the market value of equity reflects the combined influence of risk and return, valuation ratios play an important role in assessing a company's performance in the stock market. The important valuation ratios are the Price-Earnings Ratio and the Market Value to Book Value Ratio. Price-Earnings (P/E) Ratio: The P/E ratio is the ratio between the market price of the shares of a firm and the firm's earnings per share. The formula for calculating the P/E ratio is: P/E ratio = Market Price of Share / Earnings per Share The price-earnings ratio indicates the growth prospects, risk characteristics, degree of liquidity, shareholder orientation, and corporate image of a company.

Market Value to Book Value Ratio: This is the ratio between the market price per share (MPS) and actual book value per share. It can be calculated as follows: Market Value to Book Value Ratio = Market Price per Share / Book Value per Share This ratio reflects the contribution of a company to the wealth of its shareholders. When this ratio exceeds 1, it means that the company has contributed to the creation of wealth of its shareholders. DUPONT ANALYSIS DuPont Analysis is a technique that breaks ROA and ROE measures down into three basic components that determine a firm's profit efficacy, asset efficiency and leverage. The analysis attempts to isolate the factors that contribute to the strengths and weaknesses in a company's financial performance. Poor asset management, expenses getting out of control, production or marketing inefficiency could be potential weaknesses within a company. Expressing these individual components rather than interpreting ROE, may help the company identify these weaknesses in a better way. This model was developed by the US based DuPont company. The model breaks down return on net worth (RONW) into three basic components, reflecting the quality of earnings along with possible risk levels. RONW = PAT / NW Where, PAT = Profit after Tax NW = Net worth The above formula can be further broken down into: RONW = PAT / Sales * Sales / CE * CE / NW Where, CE = Capital Employed.

WORKING CAPITAL MANAGEMENT

Working capital may be defined in two ways, either as the total of current assets or the difference between the total of current assets and total of current liabilities. Like, most other financial terms the concept of working capital is used as different connotations by different writers. Thus, there emerged the following two the concepts of working capital. i) Gross concept of working capital ii) Net concept of working capital Constituents of working capital No matter how, we define working capital, we should know what constitutes current assets and current liabilities. Current Assets: The following are listed by the Company as current assets: 1) Inventories: a) Raw materials and packing materials b) Work-in-progress c) Finished/Traded goods d) Stores, Spares and fuel 2) Sundry Debtors: a) Debts outstanding for a period exceeding six months b) Other debts 3) Cash and Bank balances: a) With Scheduled Banks i) In Current accounts ii) In Deposit accounts b) With others i) in Current accounts 4) Loans and advances: a) Secured Advances b) Unsecured (considered good) i) Advances recoverable in cash or kind for value to be received ii) Deposits iii) Balances with customs and excise authorities

Current liabilities: The following items are included under this category. 1) Current Liabilities: a) Sundry creditors b) Unclaimed dividend warrants c) Unclaimed debenture interest warrants 2) Short term credit: a) Short term loans b) Cash credit from banks c) Other short term payables 3) Provisions: a) For Taxation b) Proposed Dividend i) On preference shares ii) On equity shares

TYPES OF WORKING CAPITAL

Sometimes, working capital is divided into two varieties as: i) Permanent working capital ii) Variable working capital Permanent Working Capital: Though working capital has a limited life and usually not exceeding a year, in actual practice some part of the investment in that is always permanent. Since firms have relatively longer life and production does not stop at the end of a particular accounting period some investment is always locked up in the form of raw materials, work-in-progress, finished stocks, book debts and cash. The investment in these components of working capital is simply carried forward to the next year. This minimum level of investment in current assets that is required to continue the business without interruption is referred to as permanent working capital. While suggesting a methodology for financing working capital requirements by commercial banks, the Tandon committee has also recognised the need to maintain a minimum level of investment in current assets. It referred them as, hard core current assets. The Committee wanted the borrowers to meet this portion of investment out of their own sources and not to depend on commercial banks. Variable Working Capital: This is also known as the circulating or transitory working capital. This is the amount of investment required to take care of the fluctuations in the business activity. While permanent working capital is meant to take care of the minimum investment in various current assets, variable working capital is expected to care for the peaks in the business activity. While investment in permanent portion can be predicted with some probability, investment in variable portion of working capital cannot be predicted easily as sudden changes in the business activity causes variations in this portion of working capital.

TANDON COMMITTEE NORMS

Since mid-sixties, the issue of financing working capital has been engaging the attention of industry and the policy makers. The measures taken by the Reserve Bank of India included the introduction of Credit Authorisation Scheme in November 1965, Constitution of the Dahejia Committee in October 1968, Tandon Committee in July 1974 and the Chore Committee in March 1979. Over the years, attempt has been made to streamline the flow of credit from the banking sector to the industry. The link between financing of working capital and the recommendations of various committees is that the latter tried to make out a case for fixing norms for the maintenance of various current assets; thus leading to the determination of optimum working capital. In this regard, Tandon Committee, for the first time, made an attempt to prescribe norms for holding diverse current asset items. The committee wanted the commercial banks to quantify the desirable level of net working capital and the maximum permissible lending by the banks. In its approach to the methods of lending, the Committee sought to identify the Reasonable level of current assets as the basis of its calculation of different methods. In other words, the total of current assets is based on the norms suggested by them rather than the actual current assets held by the undertakings. For this purpose, the Committee suggested norms for carrying raw materials, work-in-progress, finished goods, and receivables in respect of 15 major industries. The norms for the four kinds of assets are related in the following manner: Type of Asset 1. Raw Materials 2. Work-in-progress 3. Finished goods 4. Receivables Relation to Months consumption of raw materials Months cost of production Months cost of sales Months sales

The norms represent the maximum levels of inventories and receivables in each type of industry. It is further laid down that, if the holding of any kind of asset is higher than the level fixed by the relative norms, the surplus would be treated excess holding to be shed off, failing which an amount equal to the value thereof would be treated as excess borrowing and a levy of penal rate of interest is suggested on such excess borrowing. Again, it is not permitted to set off such excess against any shortfall in the holding of other current assets, as the norms represent the maximum permissible levels of holdings.

AXIS BANK LTD.

Balance sheet
Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 077

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 410.55 18,588.28 405.17 0.17 15,639.27 359.01 1.21 9,854.58 357.71 2.19 8,410.79 3,120.588 281.683

Loan funds
Secured loans Unsecured loans Total 1,89,237.80 2,08,236.63 1,41,300.22 1,57,344.84 1,17,374.11 1,27,588.90 87,626.22 96,396.91 58,785.600 62,187.811

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 3,426.49 1,176.03 2,250.46 22.69 71,991.62 2,107.98 942.79 1,165.18 57.24 55,974.82 1,741.86 726.45 1,015.40 57.48 46,330.35 1,384.70 590.33 794.37 128.48 33,705.10 450.555 648.388 24.822 26,897.166 1,098.933

Net current assets

Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 4,632.12 8,208.86 -3,576.74 70,688.02 3,901.06 6,133.46 -2,232.40 54,964.83 3,745.15 9,947.67 -6,202.52 41,200.72 2,784.51 7,556.90 -4,772.38 29,855.57 23,588.622 1,892.077 5,873.800 -3,981.733

Cash Flow
Particulars Profit Before Tax Net Cash Flows from Operating Activity Net Cash Used in Investing Activity Net Cash Used in Financing Activity Net Inc/Dec in Cash and Cash Equivalent Cash and Cash Equivalent - Beginning of the Year Cash and Equivalent - End of the Year
Profit & Loss account of Axis Bank 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 8,591.82 1,613.90 2,406.59 289.59 3,496.55 0.00 5,734.55 2,072.08 16,398.45 Mar '11 12 mths Net Profit for the Year Extraordionary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) 82.54 140.00 62.06 120.00 50.57 100.00 29.94 60.00 23.40 45.00 3,388.49 0.00 3,427.43 6,815.92 0.00 670.36 0.00 6,633.53 1,255.82 2,443.05 234.32 2,502.55 0.00 5,066.76 1,368.98 13,069.27 Mar '10 12 mths 2,514.53 0.00 2,348.09 4,862.62 0.00 567.45 0.00 7,149.27 997.66 1,572.83 188.67 2,008.57 0.00 3,590.42 1,177.31 11,917.00 Mar '09 12 mths 1,815.36 0.00 1,553.87 3,369.23 0.00 420.52 0.00 4,419.96 670.25 952.61 158.11 1,483.94 0.00 2,454.03 810.88 7,684.87 Mar '08 12 mths 1,071.03 0.00 1,029.07 2,100.10 0.00 251.64 0.00 2,993.32 381.35 589.31 111.86 812.03 0.00 1,387.06 507.49 4,887.87 Mar '07 12 mths 659.03 -31.80 731.04 1,358.27 0.00 148.79 0.00 15,154.81 4,632.13 19,786.94 11,638.02 3,945.78 15,583.80 10,835.49 2,896.88 13,732.37 7,005.32 1,750.59 8,755.91 4,560.40 986.49 5,546.89

Mar'11 5,135.66 11,425.07 -13,985.33 8,769.69 6,204.75 15,203.91 21,408.66

Mar'10 3,851.36 28.87 -5,122.98 5,304.07 189.54 15,016.90 15,206.44

Mar'09 2,785.19 10,551.63 -9,741.96 1,692.32 2,512.66 12,504.24 15,016.90

Mar'08 1,646.27 5,960.45 -4,702.52 4,325.79 5,585.94 6,918.31 12,504.24

Mar'07 996.24 5,295.53 -3,655.58 1,637.01 3,276.46 3,641.84 6,918.31

------------------- in Rs. Cr. ------------------Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths Mar '07 12 mths

Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total

462.77 836.95 338.84 670.36 4,969.77 6,815.92

395.99 867.43 0.31 567.45 3,427.43 4,862.62

284.50 600.62 0.00 420.52 2,348.09 3,369.23

245.13 294.60 -0.01 251.64 1,553.87 2,100.10

120.80 180.40 0.00 148.79 1,029.07 1,358.26

Ratios
Liquidity ratios
Current Ratio Calculation of current ratio 2011 2010 2009 2008 2007

Current 4,632.123,901.063,745.152,784.511,892.077 assets Current liabilities 8,208.866,133.469,947.677,556.90 5,873.800 Current 0.56 0.63 0.37 0.36 0.32 ratio The norm for the current ratio in BANKING AREA is 1.33:1. The current ratio of AXIS BANK is almost equal to .56:1, which is less than the norm. On an average, for every rupee of current liability, AXIS BANK has Rs. 0.56 of current assets. The current ratio can be better judged if it is studied along with ratios such as receivables turnover. The higher the receivables greater the firm's ability to pay its current liabilities. Generally, a low current ratio indicates the firm's inability to meet its current obligations. But a high current ratio may represent unnecessary blocking of liquid assets such as cash and cash equivalents.

Quick Ratio
Year 2011 2010 2009 2008 2007 Quick assets 1608.9 1177.01 947.018 697.50 434.07 Current liabilities 8,208.866,133.46 9,947.67 7,556.90 5,873.800 19.60 19.19 9.52 9.23 7.39 Quick ratio Interpretation: A quick ratio of 1:1 is usually considered satisfactory. It is more rigorous and penetrating test of liquidity position of a firm. In case of presenting company, it would find difficult to pay its current liability.

Profitability ratios Net Margin:

Year NET PROFI T SALES 2011 3,388.49 2010 2,514.53 2009 2008 2007 659.03

1,815.36 1,071.03

19,786.94 15,583.80 13,732.37 8,755.91 5,546.89

Net margin

17.20

16.10

13.31

12.22

12.01

The net margin has been increasing steadily since 2007. Which is probably a positive sign for the bank.

OPERATING Profit Margin:

Operating profit/sales Net Margin 2011 2010 2009 5,306.84/ 3,941.77/ 2,999.92/ 19,786.94 15,583.80 13,732.37 26.8 25.58 22.13 2008 2,034.80/ 8,755.91 23.25 2007 1,193.09/ 5,546.89 21.84

The OPERATING profit margin has increased significantly. The high OPERATING profit margin implies higher returns to shareholders in the form of dividends and stock price appreciation.

Debt Equity Ratio

Year Debt Equity(resrv& surplus+capital)

2011

2010

2009

2008

2007

1,89,237.801,41,300.221,17,374.1187,626.2258,785.600 18588.28+ 15639.27+ 9854.58+ 410.55 405.17 359.01 8410.79+ 3120.58+ 357.71 357.71

Ratio

9.96

8.81

11.49

9.99

17.28

Interpretation : The debt-equity ratio is fluctuating. This implies that the company is relying more on its owner's equity to finance its assets rather than on borrowed funds. Though the firm is using relatively less proportion of debt, the returns on equity investments have been profitable. This can be explained by calculating the average rate of return earned on the capital employed in assets and comparing that rate with the average interest rate paid for borrowed funds.

RETURN ON NET WORTH RATIO:

Year 2011 2010 2009 2008 2007 PAT 3,395.47 2,518.40 1,823.56 1,086.21 661.94 18588.28+ 15639.27+ 9854.58+ 8410.79+ 3120.58+ NET WORTH(resrv& surplus+capital) 410.55 405.17 359.01 357.71 357.71 17.87 15.69 17.85 12.38 19.45 Ratio

Dividend per Share

Calculation of dividend per share: years Dividend to shareholders Number of shares outstanding Dividend per share 2011 2010 2009 2008 2007 670.36 567.45 420.52 251.64 148.79 48 47 42 42 43 14.00 12.00 10.00 6.00 4.50

The dividend pay-out to ordinary shareholders has been increasing year after year, resulting in an increase in DPS. Higher dividends may have been declared because of stagnation in the business, as a result of which earnings were not retained. However, the increase in dividends also indicates that the company is generating profits consistently.
Key Financial Ratios of Axis Bank

Mar '11 Investment Valuation Ratios Face Value Dividend Per Share 10.00 14.00

Mar '10

Mar '09

Mar '08

Mar '07

10.00 12.00

10.00 10.00

10.00 6.00

10.00 4.50

Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Interest Spread Adjusted Cash Margin(%) Net Profit Margin Return on Long Term Fund(%) Return on Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Management Efficiency Ratios Interest Income / Total Funds Net Interest Income / Total Funds Non Interest Income / Total Funds Interest Expended / Total Funds Operating Expense / Total Funds Profit Before Provisions / Total Funds Net Profit / Total Funds Loans Turnover Total Income / Capital Employed(%) Interest Expended / Capital Employed(%) Total Assets Turnover Ratios Asset Turnover Ratio Profit And Loss Account Ratios Interest Expended / Interest Earned Other Income / Total Income Operating Expense / Total Income Selling Distribution Cost Composition Balance Sheet Ratios Capital Adequacy Ratio Advances / Loans Funds(%) Debt Coverage Ratios Credit Deposit Ratio Investment Deposit Ratio Cash Deposit Ratio Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Leverage Ratios Current Ratio Quick Ratio Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit

129.26 471.17 373.06 -3.73 18.71 17.20 72.29 17.83 17.87 462.77 462.77 9.14 5.08 0.17 4.06 2.57 2.54 1.60 0.16 9.30 4.06 0.09 5.65 56.69 1.78 27.65 0.40 12.65 76.16 74.65 38.71 7.07 9.96 0.66 1.43 0.02 19.60 19.78 18.22

97.29 380.27 325.87 -3.95 17.63 16.10 66.34 15.67 15.69 395.99 395.99 9.38 5.34 0.12 4.04 2.94 2.38 1.53 0.17 9.51 4.04 0.09 7.31 57.00 1.30 30.96 0.30 15.80 72.96 71.87 39.55 7.30 8.81 1.62 1.41 0.03 19.19 22.56 20.64

83.56 377.46 230.47 -4.24 14.76 13.31 97.35 17.77 17.85 284.50 284.50 10.53 4.98 0.06 5.56 2.64 2.25 1.41 0.19 10.60 5.56 0.11 7.78 65.98 0.60 24.95 0.34 13.69 73.87 68.89 39.04 8.16 11.49 1.43 1.28 0.03 9.52 23.16 20.98

56.88 244.63 208.03 -3.77 14.19 12.22 71.17 12.21 12.38 245.13 245.13 9.57 4.74 0.02 4.83 2.51 2.07 1.17 0.18 9.59 4.83 0.10 6.32 63.09 0.16 26.20 0.85 13.73 75.89 65.94 41.39 8.17 9.99 1.46 1.28 0.03 9.23 23.49 20.47

42.36 193.93 86.60 -3.27 14.11 12.01 119.74 19.37 19.45 120.80 120.80 8.88 4.01 0.03 4.87 2.07 1.79 1.07 0.18 8.92 4.87 0.09 4.97 65.64 0.39 23.26 0.54 11.57 69.07 59.85 48.96 7.17 17.28 1.41 1.26 0.03 7.39 22.57 19.30

Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

80.26 81.81 51.35 Mar '11

77.47 79.39 51.33 Mar '10 62.06 395.99

76.94 79.11 58.33 Mar '09 50.57 284.50

76.84 79.78 70.42 Mar '08 29.94 245.13

77.53 80.78 75.97 Mar '07 23.40 120.80

Earnings Per Share Book Value

82.54 462.77

Working capital of axis bank

Working capital = current assets current liability
2011 2010 2009 2008 2007 1,892.077 Current assets 4,632.12 3,901.06 Current liabilities Working capital 8,208.86 -3576.74 3,745.15 2,784.51

6,133.46 9,947.67

7,556.90 5,873.800

-2232.4 -6202.52 -4772.39 -3981.723

Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. A negative working capital is a sign of managerial efficiency in a business with low inventory and accounts receivable (which means they operate on an almost strictly cash basis). In any other situation, it is a sign a company may be facing bankruptcy or serious financial trouble. You can tell if this is the case by comparing a company's accounts payable to the total inventory on the balance sheet.

Yes bank ltd.

Report card
Attribute PE ratio EPS (Rs) Sales (Rs crore) Face Value (Rs) Net profit margin (%) Last dividend (%) Return on average equity Value 17.83 20.95 1,684.06 10 15.56 25 19.16 Date 04/04/12 Mar, 11 Dec, 11 Mar, 11 20/04/11 Mar, 11

Annual results in brief

Sales Operating profit Interest Gross profit Mar ' 11 4,041.74 3,263.72 2,794.82 1,190.38 Mar ' 10 2,369.71 1,732.72 1,581.76 863.33 Mar ' 09 2,003.32 1,523.03 1,492.14 527.65 Mar ' 08 1,310.82 926.06 974.11 350.08 Mar ' 07 587.60 344.80 416.26 172.41

EPS (Rs)

20.95

14.06

10.23

6.76

3.37

Annual results in details

Other income Stock adjustment Raw material Power and fuel Employee expenses Excise Admin and selling expenses Research and development expenses Expenses capitalised Other expenses Provisions made Depreciation Taxation Net profit / loss Extra ordinary item Prior year adjustments Equity capital Equity dividend rate Agg.of non-prom. shares (Lacs) Agg.of non promotoHolding (%) OPM (%) GPM (%) NPM (%)
Balance sheet

Mar ' 11 623.27 362.34 317.47 98.21 365.04 727.13 347.15 2549.05 73.43 80.75 25.52 15.59
Mar ' 11

Mar ' 10 575.53 256.89 243.26 136.84 248.75 477.74 339.67 2474.25 72.84 73.12 29.31 16.22

Mar ' 09 435.02 418.55 61.74 162.07 303.84 296.98 2002.36 67.42 76.03 21.64 12.46

Mar ' 08 354.53 202.41 138.75 43.60 106.46 200.02 295.79 1953.19 66.03 70.65 21.02 12.01

Mar ' 07 194.57 117.47 76.03 49.30 28.75 94.36 280.00 1795.29 64.12 58.68 22.04 12.06
Mar ' 07

Mar ' 10

Mar ' 09

Mar ' 08

Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation

347.15 3,446.93 45,938.93 49,733.01

339.67 2,749.88 26,798.57 29,888.12

296.98 1,327.24

295.79 1,023.13

280.00 507.06

16,169.42 13,273.16 8,220.39 17,793.6 14,592.08 9,007.45 4

255.30 125.78

206.40 92.32

194.88 64.15

133.01 35.73

86.66 17.38

Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Notes: Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs)

129.52 2.91 18,828.84 2,186.11 2,583.07 -396.97 18,564.30

114.09 1.38 10,209.94 1,190.73 1,745.32 -554.59 9,770.82

130.73 0.39 7,117.02 1,326.86 2,918.10 -1,591.24 5,656.90

97.28 3.89 5,093.71 729.70 1,404.13 -674.42 4,520.45

69.28 1.59 3,073.12 376.88 1,228.68 -851.80 2,292.20 52,061.58 2800.00

1,36,395.52 1,05,941.3 6 3471.47 3396.67

47,803.72 68,874.5 4 2969.79 2957.90

Profit loss account

Mar ' 11 Income Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Preference dividend Dividend tax 4,658.12 362.34 20.64 301.26 684.23 1,179.06 14.53 1,193.60 2,794.82 34.84 -1,636.06 365.04 727.58 -0.44 -0.04 727.10 1,400.05 86.79 14.41

Mar ' 10 2,876.15 256.89 10.79 289.82 557.50 736.90 54.27 791.17 1,581.76 30.26 760.91 248.75 478.33 -0.59 477.74 883.51 50.95 8.66

Mar ' 09 2,423.90 218.02 1.48 226.01 445.51 486.25 34.54 520.79 1,492.14 30.10 -1,001.45 162.07 304.00 -0.16 303.84 548.92 -

Mar ' 08 1,590.84 202.41 1.67 133.61 337.69 279.04 74.53 353.57 974.11 19.23 334.34 106.46 200.03 -0.01 200.02 305.32 -

Mar ' 07 736.75 117.47 2.68 65.38 185.52 134.97 45.44 180.40 416.26 11.07 169.33 55.91 94.37 94.37 132.10 -

Retained earnings

1,298.85

823.91

548.92

305.32

132.10

Cash flow
Profit before tax Net cashflow-operating activity Net cash used in investing activity Netcash used in fin. activity Net inc/dec in cash and equivlnt Cash and equivalnt begin of year Cash and equivalnt end of year Mar ' 11 1,092.18 3,050.63 -3,423.73 1,195.82 822.73 2,673.25 3,495.98 Mar ' 10 726.49 960.13 -2,006.16 1,796.57 750.54 1,922.70 2,673.25 Mar ' 09 Mar ' 08 Mar ' 07 465.92 306.54 143.68 -364.59 -196.48 1,801.35 -60.20 -49.54 -1,222.69 719.93 295.14 1,627.57 1,922.70 580.74 334.73 1,292.84 1,627.57 498.60 1,077.26 215.58 1,292.84

Ratios

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Per share ratios Adjusted EPS (Rs) Adjusted cash EPS (Rs) Reported EPS (Rs) Reported cash EPS (Rs) Dividend per share Operating profit per share (Rs) Book value (excl rev res) per share (Rs) Book value (incl rev res) per share (Rs.) Net operating income per share (Rs) Free reserves per share (Rs) Profitability ratios Operating margin (%) Gross profit margin (%) Net profit margin (%) Adjusted cash margin (%) Adjusted return on net worth (%) Reported return on net worth (%) Return on long term funds (%) Leverage ratios Long term debt / Equity Total debt/equity Owners fund as % of total source Fixed assets turnover ratio Liquidity ratios Current ratio Current ratio (inc. st loans) Quick ratio Inventory turnover ratio 20.96 21.96 20.95 21.95 2.50 33.96 109.29 109.29 134.18 82.62 25.31 24.56 15.56 16.31 19.17 19.16 102.46 12.11 7.62 18.25 0.84 0.04 15.34 14.08 14.97 14.06 14.96 1.50 21.69 90.96 90.96 84.68 69.33 25.62 24.56 16.30 17.35 15.48 15.46 74.73 8.67 10.33 13.93 0.68 0.04 14.54 10.24 11.25 10.23 11.24 16.37 54.69 54.69 81.62 36.47 20.06 18.81 12.35 13.59 18.71 18.70 120.56 9.96 9.12 12.44 0.45 0.06 5.14 6.76 7.41 6.76 7.41 9.43 44.59 44.59 53.78 31.18 17.54 16.33 12.01 13.16 15.16 15.16 97.09 10.06 9.03 11.96 0.51 0.04 7.92 -

Mar ' 07 3.37 3.77 3.37 3.77 4.82 28.11 28.11 26.31 16.66 18.31 16.81 12.06 13.48 11.99 11.98 71.98 10.44 8.73 8.50 0.30 0.03 5.74 -

Payout ratios Dividend payout ratio (net profit) Dividend payout ratio (cash profit) Earning retention ratio Cash earnings retention ratio Coverage ratios Adjusted cash flow time total debt Financial charges coverage ratio Fin. charges cov.ratio (post tax) Component ratios Material cost component (% earnings) Selling cost Component Exports as percent of total sales Import comp. in raw mat. consumed Long term assets / total Assets Bonus component in equity capital (%)

13.91 13.28 86.10 86.73 60.25 0.42 1.27 0.44 0.89 -

12.47 11.73 87.54 88.28 52.69 1.50 1.32 0.37 0.89 -

100.00 100.00 48.40 0.34 1.22 0.06 0.84 -

100.00 100.00 60.54 1.36 1.23 0.10 0.87 -

100.00 100.00 77.96 1.43 1.25 0.36 0.89 -

RATIOS
LIQUIDITY RATIOS

CURRENT RATIO: Current assets current liabilities RATIO 2,186.11 1,190.73 1,326.86 729.70 376.88 2,583.07 1,745.32 2,918.10 1,404.13 1,228.68 0.84 0.68 0.45 0.51 0.30

The norm for the current ratio in BANKING AREA is 1.33:1. The current ratio of YES BANK is almost equal to .84:1, which is less than the norm. On an average, for every rupee of current liability, AXIS BANK has Rs. 0.56 of current assets. The current ratio can be better judged if it is studied along with ratios such as receivables turnover. The higher the receivables greater the firm's ability to pay its current liabilities. Generally, a low current ratio indicates the firm's inability to meet its current obligations. But a high current ratio may represent unnecessary blocking of liquid assets such as cash and cash equivalents.

QUICK RATIO: QUICK assets current liabilities RATIO 2,583.07 1,745.32 2,918.10 1,404.13 1,228.68 15.34 14.54 5.14 7.92 5.74

Interpretation: A quick ratio of 1:1 is usually considered satisfactory. It is more rigorous and penetrating test of liquidity position of a firm. In case of presenting company, it would find difficult to pay its current liability.

PROFITABILITY RATIOS
OPERATING PROFIT RATIO

Year 2011 2010 2009 2008 2007 SALES 4,041.74 2,369.71 2,003.32 1,310.82 587.60 OPERATING 3,263.72 1,732.72 1,523.03 926.06 344.80 PROFIT

Key Financial Ratios of Yes Bank

Mar '11 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Interest Spread Adjusted Cash Margin(%) Net Profit Margin Return on Long Term Fund(%) Return on Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Management Efficiency Ratios Interest Income / Total Funds Net Interest Income / Total Funds Non Interest Income / Total Funds Interest Expended / Total Funds Operating Expense / Total Funds Profit Before Provisions / Total Funds Net Profit / Total Funds Loans Turnover Total Income / Capital Employed(%) Interest Expended / Capital Employed(%) Total Assets Turnover Ratios Asset Turnover Ratio Profit And Loss Account Ratios Interest Expended / Interest Earned Other Income / Total Income Operating Expense / Total Income Selling Distribution Cost Composition Balance Sheet Ratios Capital Adequacy Ratio Advances / Loans Funds(%) Debt Coverage Ratios Credit Deposit Ratio Investment Deposit Ratio Cash Deposit Ratio Total Debt to Owners Fund 77.75 39.92 6.97 12.11 16.50 81.65 69.15 0.31 14.64 0.44 9.77 3.91 0.03 5.86 1.43 2.43 1.52 0.16 9.80 5.86 0.10 18.25 3.60 16.31 15.56 102.46 19.16 19.17 109.29 109.29 10.00 2.50 33.96 134.18 82.62 --

Mar '10

Mar '09

Mar '08

Mar '07

10.00 1.50 21.69 84.68 69.33 -3.21 17.35 16.30 74.73 15.46 15.48 90.96 90.96 9.70 4.37 0.18 5.34 1.88 2.57 1.61 0.17 9.89 5.34 0.10 13.93 66.75 1.85 19.02 0.37 20.60 88.94 80.52 40.33 7.62 8.67

10.00 -16.37 81.62 36.47 -4.12 13.59 12.35 120.56 18.70 18.71 54.69 54.69 12.16 4.67 0.17 7.48 2.23 2.46 1.52 0.22 12.33 7.48 0.12 12.44 74.48 1.40 18.12 0.06 16.60 76.05 74.16 41.47 7.60 9.96

10.00 -9.43 53.78 31.18 -3.31 13.16 12.01 97.09 15.16 15.16 44.59 44.59 11.33 4.39 0.53 6.94 2.40 2.38 1.42 0.20 11.86 6.94 0.11 11.96 74.31 4.48 20.28 0.10 13.60 80.78 73.14 38.00 6.28 10.06

10.00 -4.82 26.31 16.66 -2.63 13.48 12.06 71.98 13.88 11.99 28.11 28.11 9.65 4.20 0.60 5.45 2.43 2.22 1.24 0.17 10.25 5.45 0.10 8.50 70.84 5.81 23.72 0.36 13.60 100.94 78.13 39.74 4.29 10.44

Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Leverage Ratios Current Ratio Quick Ratio Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times

0.43 1.27 0.05 15.34 13.91 13.28 86.10 86.73 60.25 Mar '11

0.50 1.32 0.04 14.54 12.47 11.73 87.54 88.28 52.69 Mar '10 14.06 90.96

0.35 1.22 0.07 5.14 --100.00 100.00 48.40 Mar '09 10.23 54.69

1.36 1.23 0.05 7.92 --100.00 100.00 60.54 Mar '08 6.76 44.59

1.43 1.25 0.04 5.74 --100.00 100.00 77.96 Mar '07 3.37 28.11

Earnings Per Share Book Value

20.95 109.29

Working capital of yes bank

Working capital = current assets current liability
2011 2008 Current assets current liabilities Working capital 2007 2,186.11 2,583.07 -396.97 1,190.73 1,745.32 -554.59 2010 729.70 1,404.13 -674.42 2009 376.88 1,228.68 -851.80

1,326.86 2,918.10 -1,591.24

Working capital is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

A negative working capital is a sign of managerial efficiency in a business with low inventory and accounts receivable (which means they operate on an almost strictly cash basis). In any other situation, it is a sign a company may be facing bankruptcy or serious financial trouble. You can tell if this is the case by comparing a company's accounts payable to the total inventory on the balance sheet.