DECLARATION.

I MR. NIKHIL GOENKA hereby declare that this project titled ratio analysis of oriental bank of commerce Is the record of authentic work carried out by me under the guidance and supervision of pro.ASMITA BHAGAT During the academic year (2012-2013). The work has been submitted to the University of Pune as well as the Institute towards the award of a degree in BBA.

X
NIKHIL GOENKA CANDIDATE

PLACE: DATE:

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ACKNOWLEDGEMENT
Perseverance inspiration and motivation have always played a key role in success of any venture.
I HEREBY EXPRESS MY DEEP SENSE OF GRATITUDE TO ALL THE PERSONALITIES INVOLVED DIRECTLY AND INDIRECTLY IN MY PROJECT WORK. I WOULD LIKE TO THANK GOD FOR HIS BLESSINGS AND MY PARENTS (GUARDIANS) ALSO FOR THEIR VALUABLE SUGGESTIONS AND SUPPORT IN MY EXERTION. WITH MAMMOTH PLEASURE , I WOULD LIKE TO EXPRESS MY APPRECIATIONS TO PROF. ASMITA BHAGAT -THE PROJECT GUIDE FOR HAVING GIVEN ME THIS PRIVILEGE OF WORKING UNDER HER AND COMPLETINGTHIS WORK. CORRESPONDINGLY, I WOULD LIKE TO THANK MR. BABAN BARGE (FINANCE LECTURER) FOR HIS HELP IN THIS PROJECT WORK. AND OTHER FACULTY MEMBERS WHO HAVE PARTLY TAUGHT ME IN MY ENTIRE BBA COURSE CURRICULUM FOR THEIR SOURCE OF GUIDANCE, INSPIRATION AND MOTIVATION.

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Summary
This summer project report is prepared on the ORIENTAL BANK OF COMMERCE. RATIO ANALYSIS OF OBC is our TOPIC . We have selected this topic to measures the financial position of the company and banks profit ability as well as its credit policy with the help of ratio analysis. Ratio analysis is a widely used of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that strengths and weakness of the bank as well as its historical performance and current financial condition can be determined.

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CONTENTS:
SR. NO.

TOPICS.

PAGE .

1.

INTRODUCTION
COMPANY PROFILE RATIO ANALYSIS

6-22
23-32
33-

2.

3.

4.

OBJECTIVES OF RATIO ANALYSIS

TYPES OF RATIOS

5.

6.

ADVANTAGES & LIMITATIONS

IMPORTANCE OF RATIOS

7.

8.

BALANCE SHEET
ANALYSIS AND INTERPRETATION OF DATA

9.

10 11.

PROBLEMS OF THE BANK

FINDINGS & SUGGESTIONS (CONCLUSIONS)

12.

BIBLIOGRAPHY
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INTRODUCTION:

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Introduction to the bank (OBC.)

Oriental Bank of Commerce made a beginning under its Founding Father, Late RaiBahadurLalaSohanLal,and the first Chairman of the Bank. Within four years of coming into existence, the Bank had to face partition. Branches in the newly formed Pakistan had to be closed down and the Registered Office had to be shifted from Lahore to Amritsar. Late LalaKaram Chand Thapar, the then Chairman of the Bank, in a unique gesture honoured the commitments made to the depositors from Pakistan and paid every rupee to its departing customers. The Bank has witnessed many ups and downs since its establishment. The period of 1970-76 is said to be the most challenging phase in the history of the Bank. At one time profit plummeted to Rs.175 that prompted the owner of the bank, the Thapar House, to sell / close the bank. Then employees and leaders of the Bank came forward to rescue the Bank. The owners were moved and had to change their decision of selling the bank and in turn they decided to improve the position of the bank with the active cooperation and support of all the employees. Their efforts bore fruits and performance of the bank improved significantly. This was the turning point in the history of the bank. The bank was nationalized on 15th April, 1980. At that time total working of the bank was Rs.483 crores having 19th positions among the 20 nationalized banks. Within a decade the bank turned into one of the most efficient and best performing banks of India. The bank has progressed on several fronts crossing the Business Mix mark of Rs 2 lacscrores as on 31st March2010making it the seventh largest Public Sector Bank in India, achievement of 100% CBS, reorienting of lending strategy through Large & Mid Corporates and establishment of new wings viz., Rural Development and Retail & Priority Sector. The Bank has to its utmost credit lowest staff cost with highest productivity in the Indian banking industry.

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RATION ANALYSIS

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INTRODUCTION TO RATIO ANALYSIS.

1. RATIO ANALYSIS
Ratio analysis is a widely used of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that strengths and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items variables. The alternative, methods of expressing items, which are related to each other , are for purposes of financial analysis, referred to as ratio analysis. It should be noted that computing the ratio does not add any information not already inherent in the above figures of profits and sales. What ratios do is that they reveal the relationship in a more meaningful way so as to enable us to draw conclusions from them. The rational of ratio analysis lies in the fact that it makes related information comparable. A single figure by itself has no meaning but when expressed in terms of a related figure, it yields significant inferences. For instance, the fact that net profits of a firm amount to say, Rs. 10 lacks throws no light on its adequacy or otherwise. Figure of net profit has to be considered in relation to other variables. How does it stand relation to sales? What does it represent by way of return on total assets used or total capital employed? If therefore net profits are shown in terms of their relationship with items such as sales, assets, capital employed equity capital and so on; meaningful conclusions can be drawn regarding their adequacy. Ratio is very useful for grasping the message of the financial statement and understanding them. It helps to enlarge and understand the financial health and travel of the business, it past performance makes it possible to forecast about future state of the business. The ratio used to measure the effectiveness of the employment of resources is termed as Activity Ratio or Turnover Ratio Unlike in the past when security was considered to be sufficient consideration for banks and financial institutions to grant loans and advances, nowadays the entire lending is need-based and the emphasis is on the financial viability of a proposal and not only on security alone. Further all business decision contains an element of risk. The risk is more in the case of decisions relating to credits. Ratio analysis and other quantitative techniques facilitate assessment of this risk. Ratio-analysis means the process of computing, determining and presenting the relationship of related items and groups of items of the financial statements. They provide in a summarized and concise form of fairly good idea about the financial position of a unit. They are important tools for financial analysis.

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Meanings of Ratio: According to J. Batty, "The term accounting ratios is used to describe significant relationships which exist between figures shown in a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of the accounting organization" In simple words, "Ratio" is the numerical relationship between two variables which are connected with each other in some way or the other. 'DEFINITION OF RATIO ANALYSIS' A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis. It is the most widely used tool since it compares risk and return relationships of firms from various aspects. Ratio analysis is the method or process by which the relationship of items or group of items in the financial statements are computed, determined and presented. It is an attempt to derive quantitative measures or guides concerning the financial health and profitability of a business enterprise. It can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but the group of ratios he would prefer depends on the purpose and objectives of analysis

How a Ratio is expressed? As Percentage -such as 25% or 50% . For example if net profit is Rs.25, 000/- and the sales is Rs.1,00,000/- then the net profit can be said to be 25% of the sales. As Proportion - The above figures may be expressed in terms of the relationship between net profit to sales as 1:4. As Pure Number /Times -The same can also be expressed in an alternatively way such as the sale is 4 times of the net profit or profit is 1/4th of the sales

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Nature of Ratio Analysis: Ratios, by themselves, are not an end but only one of the means of understanding the financial health of a business entity. Ratio analysis is not capable of providing precise answers to all the problems faced by any business unit. Ratio analysis is basically a technique of: 1. Establishing meaningful relationship between significant variables of financial statements and 2. Interpreting the relationships to form judgment regarding the financial affairs of the bank.

Usefulness of Ratio Analysis: Usefulness of ratio analysis depends upon identifying: 1. 2. 3. 4. 5. Objective of analysis Selection of relevant data Deciding appropriate ratios to be calculated Comparing the calculated ratios with norms or standards or forecasts; and Interpretation of the ratios

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TYPES OF RATIOS:

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Classification of Ratios.

Balance Sheet Ratio

P&L Ratio or Income/Revenue Statement Ratio

Balance Sheet and Prof Loss Ratio

Financial Ratio Current Ratio Quick Asset Ratio Proprietary Ratio Debt Equity Ratio

Operating Ratio Gross Profit Ratio Operating Ratio Expense Ratio Net profit Ratio Stock Turnover Ratio

Composite Ratio

Fixed Asset Turnover Rati Return on Total Resources Ratio, Return on Own Funds Rat Earning per Share Ratio, Debtors Turnover Ratio,

1. Current Ratio : It is the relationship between the current assets and current liabilities of a concern. Current Ratio = Current Assets/Current Liabilities If the Current Assets and Current Liabilities of a concern are Rs.4,00,000 and Rs.2,00,000 respectively, then the Current Ratio will be : Rs.4,00,000/Rs.2,00,000 = 2 : 1 The ideal Current Ratio preferred by Banks is 1.33 : 1 2. Net Working Capital : This is worked out as surplus of Long Term Sources over Long Tern Uses, alternatively it is the difference of Current Assets and Current Liabilities. NWC = Current Assets Current Liabilities

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Current Assets : Raw Material, Stores, Spares, Work-in Progress. Finished Goods,
Debtors, Bills Receivables, Cash.

Current Liabilities : Sundry Creditors, Installments of Term Loan, DPG etc. payable
within one year and other liabilities payable within one year. This ratio must be at least 1.33 : 1 to ensure minimum margin of 25% of current assets as margin from long term sources. Current Ratio measures short term liquidity of the concern and its ability to meet its short term obligations within a time span of a year. It shows the liquidity position of the enterprise and its ability to meet current obligations in time. Higher ratio may be good from the point of view of creditors. In the long run very high current ratio may affect profitability ( e.g. high inventory carrying cost) Shows the liquidity at a particular point of time. The position can change immediately after that date. So trend of the current ratio over the years to be analyzed. Current Ratio is to be studied with the changes of NWC. It is also necessary to look at this ratio along with the Debt-Equity ratio. 3. ACID TEST or QUICK RATIO : It is the ratio between Quick Current Assets and Current Liabilities. The should be at least equal to 1. Quick Current Assets : Cash/Bank Balances + Receivables up to 6 months + Quickly realizable securities such as Govt. Securities or quickly marketable/quoted shares and Bank Fixed Deposits Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities

4. DEBT EQUITY RATIO : It is the relationship between borrowers fund (Debt) and Owners Capital (Equity). Long Term Outside Liabilities / Tangible Net Worth Liabilities of Long Term Nature Total of Capital and Reserves & Surplus Less Intangible Assets 5. PROPRIETARY RATIO:This ratio indicates the extent to which Tangible Assets are financed by Owners Fund. Proprietary Ratio = (Tangible Net Worth/Total Tangible Assets) x 100 The ratio will be 100% when there is no Borrowing for purchasing of Assets.

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6. GROSS PROFIT RATIO: Bycomparing Gross Profit percentage to Net Sales we can arrive at the Gross Profit Ratio which indicates the manufacturing efficiency as well as the pricing policy of the concern. Gross Profit Ratio = (Gross Profit / Net Sales) x 100 Alternatively, since Gross Profit is equal to Sales minus Cost of Goods Sold, it can also be interpreted as below: Gross Profit Ratio = [ (Sales Cost of goods sold)/ Net Sales] x 100 A higher Gross Profit Ratio indicates efficiency in production of the unit. 7. OPERATING PROFIT RATIO: It is expressed as => (Operating Profit / Net Sales) x 100

Higher the ratio indicates operational efficiency 8. NET PROFIT RATIO : It is expressed as => (Net Profit / Net Sales) x 100

It measures overall profitability. . STOCK/INVENTORY TURNOVER RATIO: (Average Inventory/Sales) x 365 (Average Inventory/Sales) x 52 (Average Inventory/Sales) x 12 for days for weeks for months

Average Inventory orStocks = (Opening Stock + Closing Stock) ----------------------------------------2

. This ratio indicates the number of times the inventory is rotated during the relevant accounting period

10. DEBTORS TURNOVER RATIO: This is also called Debtors Velocity or Average Collection Period or Period of Credit given. (Average Debtors/Sales) x 365 for days (52 for weeks & 12 for months)

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11. ASSET TRUNOVER RATIO: 12. FIXED ASSET TURNOVER RATIO:

Net Sales/Tangible Assets Net Sales /Fixed Assets

13. CURRENT ASSET TURNOVER RATIO: Net Sales / Current Assets 14. CREDITORS TURNOVER RATIO: This is also called Creditors Velocity Ratio, which determines the creditor payment period. (Average Creditors/Purchases) x365 for days (52 for weeks & 12 for months)

15. RETRUN ON ASSETS:

Net Profit after Taxes/Total Assets

16. RETRUN ON CAPITAL EMPLOYED: (Net Profit before Interest & Tax / Average Capital Employed) x 100 Average Capital Employed is the average of the equity share capital and long term funds provided by the owners and the creditors of the firm at the beginning and end of the accounting period. 17. RETRUN ON EQUITY CAPITAL (ROE): Net Profit after Taxes / Tangible Net Worth 18. EARNING PER SHARE: EPS indicates the quantum of net profit of the year that would be ranking for dividend for each share of the company being held by the equity share holders. Net profit after Taxes and Preference Dividend/ No. of Equity Shares 19. PRICE EARNING RATIO: PE Ratio indicates the number of times the Earning Per Share is covered by its market price. Market Price per Equity Share/Earning Per Share

PAT + Depr. + Annual Interest on Long Term Loans & Liabilities

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20. DEBT SERVICE COVERAGE RATIO: This ratio is one of the most important one which indicates the ability of an enterprise to meet its liabilities by way of payment of installments of Term Loans and Interest thereon from out of the cash accruals and forms the basis for fixation of the repayment schedule in respect of the Term Loans raised for a project.(The Ideal DSCR Ratio is considered to be 2 )

---------------------------------------------------------------------------------------------------Annual interest on Long Term Loans & Liabilities + Annual Installments payable on Long Term Loans & Liabilities (Where PAT is Profit after Tax and Depr. is Depreciation) Parties interested in analysis of financial statements Analysis of financial statement has become very significant due to widespread interest of various parties in the financial result of a business unit. The various persons interested in the analysis of financial statements are:Short- term creditors They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not. Long term creditors: They are interested in knowing whether the principal amount and interest thereon will be paid on time or not. Shareholders: They are interested in profitability, return and capital appreciation. Management: The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions. Trade unions: They are interested in financial statements for negotiating the wages or salaries or bonus agreement with management. Taxation authorities: These authorities are interested in financial statements for determining the tax liability. Researchers: They are interested in the financial statements in undertaking research in business affairs and practices. Employees: They are interested as it enables them to justify their demands for bonus and increase in remuneration. You have seen that different parties are interested in the results reported in the financial statements. These results are reported by analyzing financial statements through the use of ratio analysis.

Before looking at the ratios there are a number of cautionary points concerning their use that need to be identified: a. The dates and duration of the financial statements being compared should be the same. If not, the effects of seasonality may cause erroneous conclusions to be drawn. b. The accounts to be compared should have been prepared on the same bases. Different treatment of stocks or depreciations or asset valuations will distort the results. c. In order to judge the overall performance of the firm a group of ratios, as opposed to just one or two should be used. In order to identify trends at least three years of ratios are normally required.

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ADVANTAGES OF RATIO ANALYSIS: With the help of the ratio you can predict financial position of the company. After showing the ratio its easy for bank to work with a company We can compare two firm after seen there ratio Its help to forecasting and make future plan of the company With the help of the ratio we can locate the weak spot or problem of the company Its also help in cost control in the firm With the help of the ratio employee can know about the company and its helping in their job.

Drawbacks & limitations of ratio analysis Ratio analysis is widely used in practice in business. Teams of investment analysts pour over the historical and forecast financial information of quoted companies using ratio analysis as part of their toolkit of methods for assessing financial performance. Venture capitalists and banker use the ratios featured here and others when they consider investing in, or loaning to businesses. The main strength of ratio analysis is that it encourages a systematic approach to analysing performance. However, it is also important to remember some of the drawbacks of ratio analysis

Ratios deal mainly in numbers they dont address issues like product quality, customer service, employee morale and so on (though those factors play an important role in financial performance) Ratios largely look at the past, not the future. However, investment analysts will make assumptions about future performance using ratios Ratios are most useful when they are used to compare performance over a long period of time or against comparable businesses and an industry this information is not always available Financial information can be massaged in several ways to make the figures used for ratios more attractive. For example, many businesses delay payments to trade creditors at the end of the financial year to make the cash balance higher than normal and the creditor days figure higher too.

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Why I have selected this subject?

I have selected this because of the following reasons: 1. This subject has a great importance and provides benefits to parties who directly or indirectly interact with the bank. 2. By going through this study, the investors who are interested in investing in the banks Shares will easily take a decision whether to invest in the shares or not. 3. It is beneficial to the bankers (banks employees) and offers motivation by showing how actively they contribute to the banks growth. 4. The subject crystal clear picture regarding important aspects such as liquidity, leverage, activity, Profitability, solvency, safety & security of loans & advances to or already been provided. 5. Ratio analysis makes the following comparisons possible: -between bank and its competitors. -between the bank and the best enterprise in the industry. -between the bank and average performance in the industry. -between the bank and the global average performance.

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OBJECTIVES OF RATIO ANALYSIS:

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OBJECTIVES OF RATIO ANALYSIS.

1. To provide the way for effective control of the enterprise in the matter of achieving the physical and monetary targets. 2. To act as index of the efficiency of an enterprise. 3. To point out the financial conditions of the business whether its very strong, questionable or poor & enables the management to take necessary steps. 4. To focus on facts on a comparative basis & facilitate drawing of conclusions relating to the performance of a firm. 5. To throw light on the degree of efficiency, in the management & the effectiveness in the utilization of its assets.

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IMPORTANCE OF RATIOS:

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Importance of ratios.

Ratio analysis is an important technique of financial analysis. It is a means for judging the financial health of a business enterprise. It determines and interprets the liquidity, solvency, profitability, etc. of a business enterprise.

through the use of different ratios. Financial ratios simplify, summaries, and systemize the accounting figures presented in financial statements.

soundness can be made between one industry and another. Similarly comparison of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located, remedial measures are taken to correct them.

accounting ratios are calculated for a number of years, they will reveal the trend of costs, sales, profits and other important facts. Such trends are useful for planning.

rds for judging actual performance of a business. For example, if owners of a business aim at earning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily.

discloses the position of business with liquidity viewpoint, solvency view point, profitability viewpoint, etc. with the help of such a study, we can draw conclusion regarding the financial health of business enterprise.

Accounting Ratios are effective tools for analysis and interpretation of financial statements. If properly used and applied, accounting ratios are capable of

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USES OF ACCOUNTING INFORMATION

providing very useful information on banks financial position, profitability and stability. They are the indicators of managerial and operational efficiency. Some uses of ratios are summarized below:

It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business.(simplifies financial statements) They provide data for inter firm comparison. They highlight the factors associated with successful and unsuccessful firms. They also reveal strong and weak firms, overvalued and undervalued firms.(facilitates inter firm comparison) Ratio analysis makes it possible to compare different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.(makes intra-firm comparison possible) It helps in planning and forecasting. Over a period of time a firm or industry develops certain norms that may indicate future success or failure. If relationship changes in firms data over different time periods, the ratios may provide clues on trends and future problems.(helps in planning) Ratios avoid distortions that may result from the study of absolute data or figures. Ratios analyze the financial health; operating efficiency and future prospects by inter relating the various financial data found in the financial statements. Ratios are invaluable guides to management. They assist the management to discharge their functions of planning, forecasting, etc. efficiently.

Ratios study the past and relate the findings to the present. Thus, useful inferences are drawn which are used to project the future.

Ratios are increasingly used in trend analysis. Ratios being measures of efficiency can be used to control efficiency and profitability of a business entity. Ratios play a very important role in security and credit analysis.

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Ratios assist investors in making sound investment decisions and also the shareholders in evaluating the share performance.

Ratios are yardsticks, increasingly used by bankers and financial institutions, in evaluating the credit standing of their borrowers and customers.

Classification of ratios.

1. According to the nature of accounting statement from which the ratios are derived. Balance sheet ratios-this deals with the relationship between two items appearing in the balance sheet e.g. current ratio, liquid ratio, debt ratio, equity ratio, etc. Profit and loss account ratios-this type shows the relationship between items which are the profit & loss a/c itself e.g. gross profit ratio, net profit ratio, operating ratio, etc. Combined or composite ratios-these show the relationship between items one of which is taken from profit & loss a/c and the other from the balance sheet e.g. rate of return on capital employed, debtors turnover ratio, stock turnover ratio, capital turnover ratio, etc. 2. Classification from point of view of financial management or objective. a) Liquidity ratios b) Capital structure ratios c) Turnover ratios d) Profitability ratios. LIQUIDITY RATIOS. Liquidity means ability of a firm to meet its current obligations. The liquidity ratios therefore, try to establish a relationship between current liabilities which are obligations soon becoming due & current assets which presumably provide the source from which obligations will be met. In other words, liquidity ratios answer the question, will the company probably be able to meet its obligations when they become due? -failure to meet obligations leads to: i) bad credit ratings ii) loss of creditors confidence ii) suits against the company.

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Types of liquidity ratios 1. Current ratio ( working capital ratio) It is used to perform the short term financial analysis. It matches current assets & current liabilities. I.e. current ratio= current assets current liabilities.

Significance & objectives of liquidity ratios - Current ratio throws good light on the short term financial position & policy. Its an indicator of a firms ability to promptly meet its current liabilities. A relatively high current ratio indicates that the firm is liquid & has the ability to meet its current liabilities. A relatively low current ratio indicates that the firm will find it hard to pay its bills. Normally, the current ratio of 2:1 is considered satisfactory. In other words, current assets should be twice the amount of current liabilities. If the current asset ratio is 1:1, it means that funds yielded by current assets are just enough to pay only the amounts due to various creditors & there will be nothing left to meet the expenses which are being currently incurred. A very high current ratio is also not a sign of desirable condition because it indicates idleness of funds which is not a sign of efficiency financial management. 2. Quick ratio. It is also called as acid test ratio or liquid ratio. Its a more severe test of liquidity of the company. It shows the ability of a business to meet its immediate financial commitments. It is used to supplement the information given by the current ratio. Quick ratio = quick assets ------------------------Quick liabilities Significance& objectives: -quick ratio is a more rigorous test of liquidity of a firm than the current ratio. When it is used along with current, it gives a better picture of the firms ability to meet its short term liabilities out of its short term assets. This ratio is of great importance forBANKS&financial institutions.

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-generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial position.

OBJECTIVES OF THE STUDY: The major objectives of this study are; 1. To know about the financial strengths & weaknesses of oriental bank of commerce (obc). 2. To analyze the liquidity, profitability & efficiency positions of the bank during the study. 3. To evaluate and analyze various facts of financial performance of the bank. 4. To determine the profitability and liquidity ratios. 5. To evaluate the performance of the bank by using ratios as a yardstick to measure the efficiency of the bank. 6. To offer appropriate suggestions for the better performance of the bank.

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RESEARCH METHODOLOGY:

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RESEARCH METHODOLOGY:
Usually, research is based on primary as well as secondary data. But in this project, we have collected this information through secondary sources. The research was done with the help of senior staff of the bank which provides accurate data for ratio analysis. The information has been used to calculate performance of the bank and based on that, interpretations and suggestions have been made.

Sources of secondary information.

1. Most of the calculations are made on the financial statements of the banks provided statements. 2. Reference text books such as,FANANCIAL MANAGEMENT of SATISH INAMDAR AND JAIN & KHAN. 3. Website. Other sources: Books Accounting Principles and Applications by Horace R. Brock (McGraw Hill, 1990). Analysis and Use of Financial Statements by Gerald I. White, Ashwinpaul C. Sondhi and Dov Fried (John Wiley & Sons, 1997). Corporate Controllers Handbook of Financial Management 2nd ed. by Joel G. Siegel, Jae K. Shim and Nicky A. Dauber (Prentice Hall, 1997). Handbook of Budgeting 4th ed. by Robert Rachlin (Wiley, 2000). Winning Business: How to Use Financial Analysis and Benchmarks to Outscore Your Competition (with CD-ROM) by Rich Gilder sleeve (Gulf Publishing, 1999). Magazines Journal of Accountancy Templates: Templates in this booklet are used courtesy of SCORE. Download Excel files of these templates at: http://www.score.org then selects Business Toolbox in the left navigation pane and Template Gallery. Templates can also be found at: http://www.resources.zionsbank.com then selects Business Tools in the left navigation pane. Writer: E. Bond Copyright 1999-2005 Edward Lowe Foundation. www.edwardlowe.org All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.

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Limitations.
Every study team will be bound to face some limitations. Though the study provides an insight into the financial and other aspects of the bank, we faced the following limitations: Time. The whole study was conducted in a period of less than 60 days. Lack of enough information as most it was kept confidential such as the annual balance sheet.

COMPARATIVE STUDY REQUIRED Ratios are useful in judging the efficiency of the business only when they are compared with the past results of the business or with the results of a similar business. However, such a comparison only provides a glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations. LIMITATIONS OF FINANCIAL STATEMENTS Ratios are based only on the information which has been recorded in the financial statements. Financial statements suffer from a no. of limitations; the ratios derived therefore, are also subject to those limitations. For e.g. on-financial changes though are important for the business but are not revealed by the financial statements. If the management of the company changes, it may have ultimately adverse effects on the future profitability of the company but this cannot be judged by having a glance at the financial statements of the company. RATIOS ALONE ARE NOT ADEQUATE Ratios are only indicators; they cannot be taken as final regarding good or bad financial position of business. Other things also must be considered. For eg. A high current ratio does not necessarily mean that the concern has a good liquid position in case current assets mostly comprise of out-dated stock. It has been correctly observed, Ratios must be used for what they are- financial tools. Too often they are looked upon as ends in themselves rather than as a means to an end. The value of a ratio should not be regarded as good or bad inter se. It may be an indication that a firm is weak or strong in a particular area but it must never be taken as proof. Ratio may be linked to railroads. They tell the analyst- Stop, look and listen! WINDOW DRESSING The term window dressing means manipulation of accounts in a way as to conceal vital facts and present the financial statements in a way to show a better position than what it actually is. On account of such a situation, presence of particular ratio may not be a definite indicator of good or bad management. For eg. A high stock turnover ratio is generally considered to be an indication of operational efficiency of the business but this might have been achieved by unwarranted price reductions or failure to maintain proper stock of goods. PROBLEMS OF PRICE LEVEL CHANGES Financial analysis on accounting ratios will give misleading results, if the effect of changes in price level is not taken into account. For example, two companies set up in different years, having plant and machinery of different ages, cannot be compared on the basis of traditional accounting statements. This is because the depreciation charged on plant and machinery in case of old company would be at much lower figure as compared to the company which has been set up recently. The financial statements of the

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companies should, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made. The techniques of current purchasing power and current cost accounting are quite helpful in this respect. NO FIXED STANDARDS No fixed standards can be laid down for ideal ratios. For e.g. Current ratio is generally considered to be ideal if current assets are twice current liabilities. However, in case of those concerns which have adequate arrangements with their bankers for providing funds when they require, it may be perfectly ideal if current assets are equal to or slightly more than current liabilities.

RATIOS ARE COMPOSITE OF MANY FIGURES Ratios are a composite of many different figures. Some cover a time period, others are at an instant of time while still others are only averages. It has been said that a man who has his head in the oven and his feet in the icebox is on the average, comfortable! Many of the figures used in the ratio analysis are no more meaningful than the average temperature on the room in which the man sits. A balance sheet figure shows the balance of the account at one moment of one day. It certainly may not be representative of typical balance during the year. Differences in accounting policies with reference to stock valuation, depreciation, etc render ratios useless. Besides there are no standard definitions for certain terms like operating profit, current assets, etc. Without further investigations, ratios may not serve the purpose. For e.g. A high current ratio is considered desirable, but if inventories (one of the elements of current assets), consist mostly of dead and obsolete stock a company may not be able to meet its current obligations. Ratios are often calculated as rough estimates and are often calculated with the figures as on a particular date. Therefore, they are not accurate and precise. For e.g. Solvency ratios, worked out for a firm engaged in seasonal business, whose accounting year ends at a time when the sales are high, may appear quite favourable. It may therefore be concluded that ratio analysis, if done mechanically, is not only misleading but also dangerous. It is indeed a double edged sword which requires a great deal of understanding and sensitivity of the management process rather than the mechanical financial skill.

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COMPANYPROFILE:

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Type

Public (BSE: 500315, NSE: ORIENTBANK)

Industry

Banking Financial services

Founded Headquarters

19 February 1943

New Delhi, India NageshPydah (Chairman&MD) Investment Banking Consumer Banking Commercial Banking Retail Banking Private Banking Asset Management Pensions Mortgages Credit Cards

Key people

Products

Revenue

Rs. 11457.17 Crore (2010)

Net income

Rs. 1134.68 Crore (2010)

Total assets

Rs. 8237.958 Crore (2010)

Employees

15,358 (2010)
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COMPANY PROFILE:
Oriental Bank of Commerce (OBC) was started in Lahore, Pakistan in 19th February of the year 1943, made a modest beginning under its Founding Father, Late RaiBahadurLalaSohanLal. OBC is a public sector bank engaging in monetary intermediation of commercial banks, saving banks and discount houses. In 1947, the Bank had to face the holocaust of partition. Branches in the newly formed Pakistan had closed down and the Registered Office had shifted from Lahore to Amritsar. In the year 1951, the registered office was relocated to Delhi. It was nationalized in April of the year 1980. In the year 1992, the merchant banking division of the bank was set up and the bank was authorized to act as a category-I merchant banker by SEBI. OBC launched the scheme christened 'The Comprehensive Village Development Programme' on the auspicious day of Baisakhi, the 13th April of the year 1997 at three villages in Punjab namely RurkiKalan (Distt. Sangrur),RajeMajra (Distt.Ropar) and KhairaMajha (Distt.Jaladhar) and two villages in Haryana, namely Khunga (Distt.Jind) and Narwal (Distt.Kaithal). Two Banks namely Punjab Co-operative Bank Ltd and Bari Doab Bank Ltd were amalgamated with the bank in the same year 1997. In the year 1998, the bank had joined hands with Citibank to launch OBC co-branded credit card. OBC had set up special branch and asset recovery branch, one each at Delhi and Mumbai in the year 1999. The Bank had opened specialised branch for women entrepreneurs in the year 2002 and also in the same year OBC made tie up with Corporation Bank to share each other's ATM network. For the purpose of Centralised Banking Solution (CBS, OBC had joined hands with Infosys Technologies Ltd and Wipro Ltd in the year 2003. during the same year 203, the Bank and Small Industries Development Bank of India (SIDBI) had agreed to work on projects in the field of small-scale, infrastructure and service areas. As per the Bank's IT Plan, the Bank had implemented 'Centralised Banking Solutions (CBS)' with effect from March 2004. In the identical year 2004, OBC made tie up with New Holland Tractors and the Global Trust Bank was merged with the bank. The bank came out with a second public issue in 2005 whereby government holding reduced to 51%. During the year 2006, the Bank had signed the Memorandum of Understanding (MOU) with the IL & FS Investment Securities Ltd, for providing Online / Offline Share Trading facility for its customers. OBC had launched its Internet Banking Services (I Banking) in all CBS Branches of the Bank during November of the year 2006. In 2007, OBC had joined hands with Escorts Ltd, a tractor manufacturer for providing retail tractor finance to farmers. As of March 2007, the bank had signed the MOU with IDBI Capital Market Services for providing online share trading facility for its customers. In the same period Canara Bank, HSBC Insurance (Asia-Pacific) Holdings and the bank had signed a non-binding memorandum of understanding to jointly establish a life insurance company in India. The Bank had launched Oriental Bank Navkiran Deposit Scheme in February of the year 2008. Kotak Mahindra Asset Management Company entered into a distribution tie-up with OBC in March of the year 2008. The Joint Venture was made with Canara Bank and HSBC in 16th June of the year 2008 and the marketing of insurance products commenced through its branch

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network. The Bank network covers 1,323 branches with 79 extension counters spread across 22 states and three union territories, plans to reach 2,000 branches by 2010. Business Description: Oriental Bank Of Commerce operates in the National commercial banks sector. Oriental Bank of Commerce (the Bank) is a commercial bank. The Bank operates in four segments: treasury operations, corporate/wholesale banking, retail banking and other banking business operations. The treasury operations segment consists of dealing in securities and money market operations. The corporate / wholesale banking segment includes all advances to trusts, partnership firms, companies and statutory bodies, which are not included under retail banking segment. The retail banking segment provides services to individual, Hindu undivided family (HUF), partnership firm .trust, private ltd companies, public ltd. companies and co-operative societies. The other banking business operations segment includes all other banking operations not covered under treasury, wholesale banking and retail banking segments. As of march 31, 2011, the Bank operated 1620 branches. During the fiscal year ended March 31, 2011, it had opened 84 new branches besides up gradation of 28 extension counters. In our complete report available for purchase the company is compared to: Central Bank of India, Syndicate Bank and Indian Overseas Bank. OBC Q3 net profit down 13% at Rs 354 cr Public sector lender Oriental Bank of Commerce has reported a net profit of Rs 354 crore in the quarter ended December FY12, a fall of 13% as compared to Rs 408 crore in the corresponding quarter of last fiscal. Net interest income went up 10.6% to Rs 1,139 crore from Rs 1,030 crore year-on-year. Numbers were slightly better than analysts' expectations; CNBC-TV18 poll saw profit after tax of Rs 334 crore and net interest income of Rs 1,061 crore. Gross non-performing assets (NPAs) declined at 2.92% versus 2.95% quarter-onquarter. The bank reported gross NPAs at Rs 3,232 crore as against Rs 3,111 croreQoQ. Provisions nearly doubled to Rs 381 crore from Rs 192 crore year-on-year while reduced by 21% quarter-on-quarter.Oriental Bank Dec '11 profit at Rs 4,196.49 crore Oriental Bank of Commerce has reported its results for the quarter ended Dec '11. Interest earned for the quarter was Rs 4,196.49 crore and net profit was Rs 354.22 crore. For the quarter ended Dec 2010 the interest earned was Rs 3032.76 crore and net profit was Rs 408.25 crore.

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Oriental Bank Of Commerce Key Data:

Ticker: Exchanges: 500315 BOM Country: Major Industry: Sub Industry: 2011 Sales 130,482,460,000 (Year Ending Jan 2012). Employees: INDIA Financial Commercial Banks 16,618

Currency:

Indian Rupees

Market Cap:

83,968,868,180

Fiscal Yr Ends: Share Type:

March Ordinary

Shares Outstanding: Closely Held Shares:

291,761,182 169,221,486

VISION AND MISSION:

Our Vision
To be a sound all India, customer centric, efficient bank with contemporary size, technology and human capital; endeavouring to enrich lives across all sections of society; and committed to upholding the highest standards of corporate governance.

Our Mission

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To provide the finest banking services by upgrading human capital and infusing advanced technology, thereby achieving total customer satisfaction; and being reckoned as the Best Bank in the Industry on all efficiency parameters. To enhance shareholders wealth by ensuring sound growth of business and make valuable contributions to national economic growth.

Name
NageshPydah V Kannan K B R Naidu S SShishodia K S Sreenivasan P B Santhanakrishnan S C Sinha B Srinivas K H Pandey Chandraprakash Singh T Valliappan AbhaChaturvedi

Management - Oriental Bank Designation

Chairman and Managing director Executive Director Director Director Non Official PartTime Director Director Executive Director Director Director Non Official PartTime Director Director Director

Chairpersons
The Chairpersons (CMD)of the banks were as under:
1. Karam Chand Thapar1946 to 1961 2. L. M. Thapar1961 to 1969 3. R. P. Oberoi 1973 to 1976 4. M. K. Vig 1976 to 1983 5. P. S. Gopalakrishnan1984 to 1988 6. S. P. Talwar 1988 to 1990 7. S. K. Soni 1990 to 1996 8. Dalbir Singh 1996 to 2000 9. B. D. Narang 2000 to 2005 10. K. N. Prithviraj 2005 to 2007 11. Alok Kumar Misra 2007 to 04/08/2009 12. T. Y. Prabhu 2009 to jan 2011 13. NageshPaidahjan 2011 onwards

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Oriental Bank of Commerce expects 20% net profit rise in fiscal 2011-12 on robust credit growth
Posted: Fri, Oct. 7, 2011 | 1:33 PM IST

New Delhi: Indian state-run lender Oriental Bank of Commerce expects 20% growth in its net profit during the current financial year 2011-12 on account of robust credit growth and increased focus on average interest bearing assets, Chairman and Managing Director NageshPydah told the Business Line, amid growing concerns over slowdown in credit growth due to high interest rate scenario prevailing in the country. It is not unreasonable to expect a 20% growth in bottom-line this fiscal. I would like to run a balance-sheet that is good on profits. We are aiming at a net interest margin of over 3%, Pydah said. The bank is confident of achieving its expected target of 20% even after keeping aside transitional pension liability of about Rs 1.7 billion in the current fiscal in line with the provisioning norms of the Reserve Bank of India (RBI), he added. For full fiscal year 2010-11, Oriental Bank of Commerce posted a 32.42% rise in its net profit to Rs 15.03 billion from the previous year's Rs 11.35 billion. Industry experts are of the view that the earnings of banks will be affected in this fiscal year due to the tight monetary situation enforced by the RBI in order to battle stubbornly high inflation. The RBI has raised its effective policy rates by 500 basis points since March 2010 in 12 sequential steps and has committed to maintain a tough anti-inflationary stance going forward. Earlier in July, the RBI lowered its credit growth target to 18% from the earlier 19%.

ORIENTAL BANK OF COMMERCE HEAD OFFICE, NEW DELHI Performance Highlights for the Financial Year ended March 2011 NET PROFIT RECORDS 32.45 % GROWTH TO REACH RS.1503 CRORE CRAR INCREASES TO 14.23% RETURN ON ASSETS (ROA) INCREASES TO 1.03% COST TO INCOME RATIO IMPROVES TO 36.84% NET INTEREST MARGIN IMPROVES TO 3.18% Amt. (YoY Growth)
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Business Mix Rs. 2.36 lac crore (15.38 %) Deposits Rs. 1.39 lac crore (15.63%) Advances Rs. 0.97 lac crore (15.03 %) Customer Base More than 1.56 crore Holding of Govt. of India increases to 58% from 51.09%. Net Interest Income increased to Rs.4178 crore from Rs. 2907 crore showing a growth of 43.68% (YoY). NIM improved to 3.18% from 2.56% as on March'10. Decline of 54 bps in cost of deposits to 6.03%. Capital adequacy Ratio (Basel II) stood at 14.23%. Earnings per share improved to Rs. 59.90 from Rs.45.29

Annual results in brief

Mar ' 11 Sales Operating profit Interest Gross profit EPS (Rs) 12,087.82 8,988.80 7,910.26 3,245.14 51.51 Mar ' 10 10,257.12 7,755.16 7,349.69 2,421.50 45.29

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Annual results in details

Mar ' 11 Other income Stock adjustment Raw material Power and fuel Employee expenses Excise Admin and selling expenses Research and development expenses Expenses capitalized 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 (%) 960.07 1,048.45 844.04 1,206.53 535.74 1,502.87 291.76 1225.40 42.00 74.36 24.87 11.52 Mar ' 10 1,200.05 971.29 714.69 815.98 470.84 1,134.68 250.54 1225.40 48.90 75.61 21.14 9.90 Page

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Key financial ratios of oriental bank of commerce

.
Mar '10

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

10.00 10.00 10.40 9.10 74.71 73.77 439.58 452.19 231.10 173.69 --4.53 3.79 12.31 10.65 11.60 9.90 97.43 122.32 14.71 15.49 14.72 15.49 349.97 292.19 380.35 328.81

8.64 3.31 0.09 5.33 1.84 1.49 1.01 0.14 8.72 5.33 0.09 5.73 65.44 0.98

9.13 3.21 0.10 5.92 1.72 1.52 0.91 0.15 9.23 5.92 0.09 5.30 71.65 1.12

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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 Earning Retention Ratio Cash Earning Retention Ratio Adjusted Cash Flow Times Earnings Per Share Book Value

21.12 0.07

18.60 0.10

14.23 71.09 69.18 30.03 6.79 13.62 0.29 1.20

12.54 74.47 69.52 29.40 6.85 16.43 0.27 1.17

0.02 19.50 23.46 22.11

0.02 23.15 23.50 21.84

76.55 76.49 77.89 78.15 87.18 98.53 51.51 45.29 349.97 292.19

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BALANCE SHEET.

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BALANC SHEET:
A balance sheet is a statement of the total assets and liabilities of an organisation at a particular date - usually the last date of an accounting period. A balance sheet, also known as a "statement of financial position", reveals a company's assets, liabilities and owners' equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company's financial statements. If you are a shareholder of a company, it is important that you understand how the balance sheet is structured, how to analyze it and how to read it. How the Balance Sheet Works The balance sheet is divided into two parts that, based on the following equation, must equal each other, or balance each other out. The main formula behind balance sheets is: Assets = Liabilities + Shareholders' Equity This means that assets, or the means used to operate the company, are balanced by a company's financial obligations along with the equity investment brought into the company and its retained earnings. Assets are what a company uses to operate its business, while its liabilities and equity are two sources that support these assets. Owners' equity, referred to as shareholders' equity in a publicly traded company, is the amount of money initially invested into the company plus any retained earnings, and it represents a source of funding for the business. It is important to note that a balance sheet is a snapshot of the companys financial position at a single point in time. Since balance sheets present the health of a company as of one point in time, valuable information will be lost if managers do not take the opportunity to compare the progress and trend of a business by regularly evaluating and comparing balance sheets of past time periods. Information is power. The information that can be gleaned from the preparation and analysis of a balance sheet is one financial management tool that may mean the difference between success and failure.

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Balance Sheet WORKSHEE T Enter your Company Name here:_____________________________________ Assets Equity Current Assets
Cash in bank Accounts receivable Inventory Prepaid expenses Other current assets Total Current Assets Fixed Assets Machinery & equipment Furniture & fixtures Leasehold improvements Land & buildings Other fixed assets (LESS accumulated depreciation on all fixed assets) Total Fixed Assets( net worth of depreciation) Other Assets Intangibles Deposits Goodwill Other Total Other Assets TOTAL Assets

Liabilities and current liabilities

Accounts payable Interest payable Taxes payable Notes payable, short term (due within 12 months) Current part, long-term debt Other current liabilities Total current liabilities Long-term debt

Bank loans payable Notes payable to stockholders LESS: Short-term portion Other long-term debt Total long-term Debt TOTAL Liabilities Net Worth Total liabilities & Net Worth

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How to analyze a balance sheet

Now that you have created a balance sheet for your business, there are some easycalculations that you can perform that will give you a better understanding of your company. Using data from your balance sheet, you can calculate liquidity and leverage ratios. These financial ratios turn the raw financial data from the balance sheet into information that willhelp you manage your business and make knowledgeable decisions. A ratio shows the relationshipbetween two numbers. It is defined as the relative size of two quantities expressed as the quotient ofone divided by the other. Financial ratio analysis is important because it is one method loan officers useto evaluate the credit worthiness of potential borrowers. Ratio analysis is a tool to uncover trends in abusiness as well as allow the comparison between one business and another. In the following section, four financial ratios that can be computed from a balance sheet are examined: Current Ratio Quick Ratio Working Capital Debt/Worth Ratio Current Ratio The current ratio (or liquidity ratio) is a measure of financial strength. The number of timescurrent assets exceed current liabilities is a valuable expression of a business solvency. Hereis the formula to compute the current ratio: Current Ratio = Total Current Assets Total Current Liabilities The current ratio answers the question, Does my business have enough current assets to meet thepayment schedule of current liabilities with a margin of safety? A rule-of-thumb puts a strong currentratio at two. Of course, the adequacy of a current ratio will depend on the nature of the small business and the character of the current assets and current liabilities. While there is usually little doubt about debts that are due, there can be considerable doubt about the quality of accounts receivable or the cash value of inventory. A current ratio can be improved by either increasing current assets or decreasing current liabilities. This can take the form of the following: Paying down debt. Acquiring a loan (payable in more than one years time). Selling a fixed asset. Putting profits back into the business. A high current ratio may mean that cash is not being utilized in an optimal way. That is, the cash might better be invested in equipment. Quick Ratio The quick ratio is also called the acid test ratio. It is a measure of a companys liquidity. The quick ratio looks only at a companys most liquid assets and divides them by current liabilities.Here is the formula for the quick ratio:
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Quick Ratio = (quick Current Assets - Inventory) ---------------------------------------------------Quick Current Liabilities The assets considered to be quick assets are cash, stocks and bonds, and accounts receivable (all of the current assets on the balance sheet, except inventory). The quick ratio is an acid test of whether or not a business can meet its obligations if adverse conditions occur. Generally, quick ratios between .50 and 1 are considered satisfactory as long as the collection of receivables is not expected to slow. Working Capital Working capital should always be a positive number. It is used by lenders to evaluate a companys ability to weather hard times. Often, loan agreements specify a level of working capital that the borrower must maintain. Working Capital = Total Current Assets - Total Current Liabilities The current ratio, quick ratio and working capital are all measures of a companys liquidity. In general, the higher these ratios are, the better for the business and the higher degree of liquidity.

Debt/Worth Ratio The debt/worth ratio (or leverage ratio) is an indicator of a business solvency. It is a measure of how dependent a company is on debt financing (or borrowings) as compared to owners equity. It shows how much of a business is owned and how much is owed. The debt/worth ratio is computed as follows:

Debt/Worth Ratio = Total Liabilities --------------------Net Worth

Glossary
Allowance for Bad Debts - Amount of estimated debt to the business that is not expected to be repaid and is subtracted from accounts receivable on the balance sheet.Also known as an allowance for doubtful accounts. Assets - Anything that a business owns that has monetary value. Accounts Payable - Debts of the business, often to suppliers, and generally payable within 30 days. Accounts Receivable - An amount owed to the business, usually by one of its customers, as result of the extension of credit. Accrued Payroll Taxes - Taxes payable for employee services received, but for which payment has not yet been made. Balance Sheet - A financial statement showing the assets, liabilities, and net worth of a business as of a specific date.

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Current Assets - Cash and other assets readily converted into cash. Includes accounts receivable, inventory, and prepaid expenses. Current Liabilities - The debts of a company which are due and payable within the next 12 months. Current Ratio - Current assets divided by current liabilities. Debt/Worth Ratio - Total Liabilities divided by Net Worth. Depreciation - An accounting convention to take into account the physical deterioration of an asset. It is a systematic method to allocate the historical cost of the asset over its useful life. Fixed Assets - Also called long-term assets with a relatively long life that is used in the production of goods and services, rather than being for resale. GAAP - Abbreviation of Generally Accepted Accounting Principles. Conventions, rules, and procedures that define accepted accounting practice. Inventory - Goods held for sale, raw material and partially finished products which will be sold when they are finished. Liabilities - Debts of the business. Liquidity - The ability to produce cash from assets in a short period of time. Long-Term Liabilities - Debts of a company due after a period of 12 months or longer. Net Worth - The business owners equity in a company as represented by the difference between assets and liabilities. Owners Equity - See Net Worth. Quick Ratio - Current Assets minus Inventory, divided by Current Liabilities. Also known as the acid test. Working Capital - Current Assets minus Current Liabilities.

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ORIENTAL BANK OF COMMERCE

HEAD OFFICE: NEW DELHI Balance sheets as on 31/3/2011 and 31/3/2010 Schedule As on 31-03-2011 CAPITAL & LIABILITIES Capital 250,53,97 Reserves & surplus 7987,4091 Deposits 120256,5875 Borrowings 4887,02,80 Other liabilities & provisions 4048,42,90 TOTAL 16133,37,32137430,99,33 ASSETS Cash & balances with reserve Bank of India 8086,79,05 Balances with banks & money At call & short Notice 6513,10,91 Investments 35785,31,95 Advances 7083489,2968 Fixed Assets 1394,04,97 Other Assets 2162,42,77 TOTAL 161343,37,32137430,99,33 Contingent Liabilities 48263,10,78 Bills for collection 3260,34,48 1 2 3 4 5 291,76,12 10805,38,41 139054,25,70 5639,21,04 5552,76,05 As on 31-03-2010

9515,13,37

7 8 9 10 11

9573,59,81 42074,76,80 95908,21, 1397,80,05 2873,85,59

12

58978,53,84 39992,78,98

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ANALYSIS AND INTERPRETATION:

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ANALYSIS AND INTERPRETATION:

Important ratios & analysis for oriental bank of commerce 1. credit deposit ratio Credit/loan Credit deposit ratio=-------------------------------Total deposit Indicates % of advances lent by banks through deposits. Higher the ratio, higher the loanassets created from deposits. The outcome of this ratio reflects the ability of the bank to make optimal use of the available resources

credit deposit ratio

70 69.8 69.6 69.4 69.2 69 68.8 68.6 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar credit deposit ratio

Conclusion
Oriental Bank of commerce has a consistent Credit Deposit Ratio of approx. 69% for previous five years. Hence, it can be said that bank is optimally utilizing its deposits for loan funding. Most of the leading PSU banks have Credit Deposit Ratio around 65-70% for the same period.

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2. capital adequacy ratio

Tier i capital + tier ii capital capital adequacy ratio=-------------------------------------risk weighted assets A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or weighted) assets. The RBI has set the minimum capital adequacy ratio at 9% for all banks. A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. The ratio ensures that the bank do not expand their business without having adequate capital.

CAR
14.5 14 13.5 13 12.5 12 11.5 11 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar CAR

Conclusion
It can again be seen that Oriental Bank of commerce is consistently achieving Capital Adequacy Ratio of approx. 12% for previous four years till Mar'10. A positive increase in the ratio to 14% can be seen for Mar'11 which surely indicates that the bank is adequately capitalized to expand its operations. Most of the leading PSU banks have Capital Adequacy Ratio of approx. 13% for the same period.

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3. Quick ratio
Quick asset Quick ratio=----------------------------------Quick liabilities Interest Income ratio shows the proportion of interest income on loans to total funds employed by bank. Higher ratio indicates better interest income for the bank and vice-versa.

quick ratio
25

20

15 quick ratio 10

0 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar

Conclusion
Bank has consistently maintained ratio above 12% and successfully increased the ratio in previous two years. This shows a sound liquidity of the bank to meet immediate liabilities.

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4.net interest income ratio Net interest income Net income ratio=---------------------------------Total fund Net Interest Income ratio shows proportion of net interest income (Interest Income minus Interest Expended) to total funds. The higher the ratio the better margin for bank between interest earned & expended.

net interest income ratio

3.5 3 2.5 2 1.5 1 0.5 0 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar net interest income ratio

Conclusion
It has been observed that bank has increasing Net Interest Income ratio showing a better margin between interest earned and expended.

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5.interest income ratio

Interest income Interest income ratio=-------------------------------Total fund Interest Income ratio shows the proportion of interest income on loans to total funds employed by bank. Higher ratio indicates better interest income for the bank and vice-versa.

interest income ratio

10 9.5 9 8.5 8 7.5 7 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar interest income ratio

Conclusion
Bank is doing well in consistently achieving ratio of over 8% since previous four years.

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6.Interest expended ratio

Interest expended Interest expended ratio=-------------------------------Total fund Interest Expended ratio shows the proportion of interest expended on deposits to total funds employed by bank. Higher ratio indicates higher interest paid on deposits by the bank and vice-versa.

interst expanded ratio

8 7 6 5 4 3 2 1 0 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar interst expanded ratio

Conclusion
Bank is doing well in consistently reducing the ratio since previous three years.

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7. Interest expended on deposits ratio.

Interest expended on deposits Interest expended on deposits ratio=--------------------------------Interest earned

This ratio shows the proportion of Interest Expended to Interest Earned by bank. The higher ratio indicates more interest expended by bank on various deposits. Whereas, lesser ratio indicates more interest earned by bank on loans.

90 80 70 60 50 40 30 20 10 0 year 11-Mar 10-Mar 9-Mar 8-Mar 7-Mar Series1 Series2 Series3

Conclusion:
The bank has been successful in reducing the ratio in previous two years. This shows that bank has sound position as the margin in interest earned and expended been increased.

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8.return on profit
profit Return on profit=---------------------------Total assets

Returns on asset (ROA) ratio is the net income (profits) generated by the bank on its total assets (including fixed assets). The higher the proportion of average earnings assets, the better would be the resulting returns on total assets.

return on assest
400 350 300 250 200 150 100 50 0 7-Mar 8-Mar 9-Mar 10-Mar 11-Mar return on assest

Conclusion
The bank has done well in consistently improving ROA ratio for previous five years. Hence, bank is effectively utilizing its average earning assets to generate higher returns.

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Notes/assumption:
1. The conclusions given above are based on the information/data taken from various internet sites. 2. Conclusions regarding financial position of the bank have been given basing on few important ratios studied by us for the bank. 3. In the absence of information on Non-performing Assets of the bank, we are not able to calculate NPA ratio and draw conclusion on the same. 4. Basing on the above ratios, we can say that Oriental Bank of Commerce has sound financial position in terms of capital Adequacy, Net Interest margin and liquidity.

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PROBLEMS OF THE BANK:

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Problems facing obc:

Oriental Bank of Commerce is having good reputation in the banking sector it work with a mission to provide the customers a best service like loans and deposits.While banking with the Oriental Bank of Commerce customers have faced certain problems Which actually prove to be the banks problems too, these are: The rate of interest on loan is very high depending upon the nature of the loan. Returns on the deposited amount is less. only certain minority section are recognized as beneficiaries, only some of agriculture debt are waived besides working with few branch and ATM, least bothered about updating the customers. difficult to show huge profits from treasury operations. This concern becomes much stronger because a substantial percentage of bank deposits remain invested in government bonds. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years. This does not seem to be the case. The PSBs (OBC) have been losing business to the private sector banks in this segment. PSBs need to figure out the means to generate profitable business from this segment in the days to come.

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FINDINGS & SUGGESTIONS:

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FINDINGS & SUGGESTIONS:

FINDINGS.
The bank has a good dividend track report and has consistently declared dividends for the last five years. This is as per the profit and loss account. Found out that the bank had a slightly high credit deposits in 2010 which reflected its ability to utilize its available resources well, this was not the case in 2011. The bank had higher chances of expanding its operations in the year 2011 as its capital adequacy ratio was favourable as compared to the year 2010.

SUGGESTIONS:
In accordance to the problems, there is always a solution(s) to such problems. Owing to the problems facing the ORIENTAL BANK of COMMERCE, we have suggested or recommended some solutions to such problems. These are the following: 1. The bank should make available the Non-performing assets to help give a clear view of the NPA ratio of the bank. 2. The bank should maintain harmonious and strong relationship with the customers by increasing deposits. 3. It should have proper planning of the deposits and loans which will help to earn more profits to the bank. 4. The bank should have a good network with all the sections recognized as beneficial and should have maximum ATMs and online facilities for getting updates with customers. 5. The bank should give high margin to its customers in case of commodity business.

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CONCLUTION:
CONCLUSION
Ratios make the related information comparable. A single figure by itself has no meaning, but when expressed in terms of a related figure, it yields significant interferences. Thus, ratios are relative figures reflecting the relationship between related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute figures, are not of much use. Ratio analysis has a major significance in analyzing the financial performance of a company over a period of time. Decisions affecting product prices, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company. The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firms position and performance. The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing of inferences and conclusions. In brief, financial analysis is the process of selection, relation and evaluation. Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and significance attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an important tool of financial analysis.

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BIBLIOGRAPHY:
The data for this project work was collected using secondary sources only, these are as follows: Reference books, . Reference text books such as,FANANCIAL MANAGEMENT of SATISH INAMDAR AND JAIN & KHAN. 3. Website. Other sources: Books Accounting Principles and Applications by Horace R. Brock (McGraw Hill, 1990). Analysis and Use of Financial Statements by Gerald I. White, Ashwinpaul C. Sondhi and Dov Fried (John Wiley & Sons, 1997). Corporate Controllers Handbook of Financial Management 2nd ed. by Joel G. Siegel, Jae K. Shim and Nicky A. Dauber (Prentice Hall, 1997). Handbook of Budgeting 4th ed. by Robert Rachlin (Wiley, 2000). Winning Business: How to Use Financial Analysis and Benchmarks to Outscore Your Competition (with CD-ROM) by Rich Gilder sleeve (Gulf Publishing, 1999). Magazines Journal of Accountancy

www.obcindia.co.in,

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