A Study on

In
THE DURGA CO-OPERATIVE URBAN BANK
LTD.

A Project Report submitted in partial fulfillment for the
Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted By
k.sivaji
(107P1E0037)
2010-2012
GLOBAL INISTITUTE
OF
MANAGEMENT AND TECNOLOGY
(Affiliated to .!.".# $A$%!ADA&

'
DECLARATION
% hereby declare that this project entitled WORKING CAPITAL
MANAGEMENT in THE DURGA CO-OPERATIE URBAN BANK LTD! (as
been prepared and composed by me in partial fulfillment of the re)uirements for the
award of the degree of MASTER OF BUSINESS ADMINISTRATION BY
"AWAHARLAL NEHURU TECHNOLOGICAL KAKINADA!
% also declare that this report is the result of my own effort and has not
previously formed the basis for the award of any degree* diploma (or& other similar
title.
#KOLUSU SIA"I)
Place+
Date
,
CHAPTER-I DESIGN OF THE STUDY

Introduction
Need for study
Obecti!es
"et#odo$o%y
&i'it(tions
CHAPTER-II PROFI&ES

Co')(ny Profi$e
Industry Profi$e
CHAPTER-III THEORETICA& ASPECTS OF
*OR+ING CAPITA& "ANAGE"ENT

CHAPTER-I, DATA ANA&YSIS
AND
INTERPRETATION
CHAPTER-, FINDINGS AND SUGGESTIONS
Findin%s
Su%%estions
-I-&IOGRAPHY
-



.
INTRODUCTION$
/inancial statement are prepared primarily for decision 0 making. "hey
play a dominant role in setting the framework of managerial decisions. 1ut the
information provided in the financial statement is but an end in itself as no meaningful
conclusions can be drawn from these statements alone. (owever* the information
provided in the financial statements is of immense use in making decisions through
analysis and interpretation of financial statements. /inancial analysis is the process of
identifying the financial strengths and weaknesses of the firm by properly establishing
relationship between the items of the balance sheet and the profit and loss account2*
there are various methods or techni)ues used in analy3ing financial statements* such
as comparative statements* trend analysis* 4ommon 0 si3e statements* schedule of
changes in working capital* funds flow and cash flow analysis* cost 0 volume 0 profit
analysis and ratio analysis.
5orking capital is one of the most important re)uirements of any 1usiness
concern. 5orking capital can be compared with the blood of human beings. As human
cannot survive without blood* in the same way any business concern can not survive
without working capital.
5orking capital management deals with maintaining the levels of 5orking
capital to optimum* because if a concern has inade)uate opportunities and if the
working capital is more than re)uired then the concern will lose 6oney in the form of
interest on the blocked funds. "herefore working capital 6anagement plays a very
important role in the profitability of a company.
"o go deeper into the topic first of all the meaning of working capital should
be made clear. "he term working capital stands for that part of the capital* which is
re)uired for financing the current needs of the company.
%t is usually invested in raw material stock (both finished and semi finished&.
Accounts receivable* saleable securities and in cash. 4apital in all these forms is
constantly being converted into cash and this cash flow out again in e7change for
other forms of working constantly turned over management of working capital usually
involves planning and controlling these current assets.
8
M%&'(') * D%+('(,(-'$
9enerally speaking* working capital is that amount of /unds which enterprise
must have to /inance its day:to:day operations. 5orking capital of business
enterprises can be defined as a position of its total financial resources which is put to
variable operative purpose.
5orking capital includes not only cash but also need cash assets like
receivable and inventory which are in the process of moving towards cash* in a short
span of time. %n other words* the capital needed for the purchase of inventory*
payment of direct and indirect e7penses* carrying out production* investment in
securities receivables and )uarter of cash that is to be maintained are known as
working capital.
"he capital re)uirement of a business can be divided into two main categories.
a& /i7ed capital re)uirements and
b& 5orking capital re)uirements
FI.ED CAPITAL$
"he capital which is meant for meeting the permanent or long term needs of
the business. %n other words fi7ed capital is re)uired for the ac)uisition of those
assets that are to be used over long period.
/i7ed capital is re)uired for ac)uisition of tangible assets such as land and
1uilding* Plant and 6achinery* /urniture etc. %ntangible assets such as 9oodwill*
Patents* 4opy Rights ;tc.
"hese /unds are re)uired not only while establishing as new enterprise but
also for e7panding* diversifying and maintaining intact the e7isting enterprise.
CONCEPT OF WORKING CAPITAL$
"he term 5orking 4apital is commonly used for the capital
re)uired for day:to:day working in a business concern. Such as for purchasing raw
material* for meeting day to day is on salaries* wages* rents and advertising etc. %t is
necessary for any organi3ation to run successfully its activities to provide ade)uate
working capital.
<
4urrent assets means which can be converted into cash within an accounting
year and includes cash* Short term Securities* debtors. 1ills receivables* stock etc.
"he following definition will substantiate the concepts.
1. WORKING CAPITAL MEANS CURRENT ASSETS CURRENT
LIABILITIES.
,. Any ac)uisitions of /unds which increase the current assets increase
working capital for they are one and the same.
"he working capital refers to the difference between 4urrent Assets and
4urrent =iabilities* it is e7cess of current assets over current liabilities.
4urrent liabilities refer to the claims of outsiders which are e7pected to nature
for payment with in an accounting year and include creditors for goods bills payable*
overdraft etc.
Sufficient amount of working capital enables a company to pay )uick and
regular dividends so its investors as there may not be much pressure to plunge back
the project.
DETERMINANTS OF WORKING CAPITAL
A wide variety of factors influence the total investment in working
capital in an enterprise. Significant among them are:
1. PROMOTIONAL AND FORMATIE PHASE$
"he start up of a new project its initial years form the most crucial phase for
planning of working capital funds. 1y neglecting this* many ventures run into
financial difficulties in their early operating years. "he rather casual approach to
assessment of working capital needs during the periods when industry and business
functioned in a sellers marketing could be understood as the bankers was willing too
absorb all shocks of fluctuations in project operating by providing ready funds to meet
emergency needs. "he position has undergone radical change* the banker can no
longer be taken for granted* and in the absence of proper estimation of working
capital needs* the project may have to face serious financial problems.
>
2. POSITION OF BUSINESS CYCLE$
6ovement of the business cycle brings about shifts in working capital
position. "he upward swing is association with spurt in sales and increase in levels of
inventories and book debts. "here could be a cash shortage and borrowings may
become necessary. ?n the other hand* when there is a downswing* the levels of
inventories and books debts may fall* but revenues also fall* while categories of costs
remain fi7ed and cash shortage might* still be felt.
3. NATURE OF BUSINESS$
"he nature of business has an important bearing on its working capital needs.
Some venture like retail stores* construction companies etc. re)uire an abundance of
working capital. %n other case* such as power generating and supply the current assets
play a minor and secondary role.
/! THE MANUFACTURING CYCLE$
A long manufacturing cycle between the raw material purchase and the
completion of the manufacturing process will obviously mean a larger tie:up of funds
to meet increase working capital needs. %n such cases* management should try to
increase the rate of production and reduce the cycle time and thus cut down working
capital re)uirement. "his can also be achieved through process changes or through
effective organi3ation at all levels of enterprise activity. /re)uent changes in set ups*
waiting for materials* tools or instructions and accumulations work:in:progress result
in e7tending the time cycle and booking more funds. ?rgani3ed negotiations with
suppliers for attractive credit terms and retention of their continued confidence by the
settlement of bills on agreed dates can also help reduce working capital re)uirements.
0! CREDIT TERMS TO CUSTOMERS$
"he credit terms to customers influence the working capital level by determine
the level of investment in books debts. 6anagement has to decide on suitable credit
policy relevant to each customer base on the merits of his case. #nduly liberal credit
policies and permissive attitude in the matter of collection of outstanding can lock up
funds that would otherwise be available for operating.
@
1! ERITIES SUPPLY OF RAW MATERIALS$
"he sources of certain raw materials are few and irregular and pose problems
in the matter of procurement and holding* suing up more funds. 6aterials that are
available only in certain seasons have to be obtained and stored* in advance. "he
working capital re)uirements* in such instances* will show seasonal fluctuations.
7! SHIFT IN DEMAND FOR PRODUCTS$
Some manufactured products are subject top seasonal fluctuations in sales. %n
order to utili3e the capacity to the ma7imum possible e7tent* steady production may
have to be maintaining* though the demand for finished products may vary from time
to time. /inished goods inventories will therefore accumulate during off:season*
re)uiring increased amounts of working capital to support higher levels of inventory.
/inancial planning will have to provide for these funds re)uirements associated with
steady production and seasonal sales.
2! GROWTH AND E.PANSION PROGRAMS$
As business grows* additional working has to be found. %nfact* the need for
increased working capital does not follow the growth in business activities* but
procedes it. Advance planning of working capital is thus a containing necessary for a
growing concern. ?r else* the company may have substantial earning but little cash
with fact growth they may be under constant financial pressure for e7ternal funds to
reinforce internal generation. /orward planning and continuous review there of are
absolutely necessary for such companies.
3! COMPETITIE CONDITIONS$
%n a competitive market* winning and maintaining customer2s goodwill will
involve additional costs and present a variety of working capital problems. "o offer
the customer the benefits of choice* a variety of products will have to be
manufactured and stocked. "his would mean higher levels of inventories in all stages
and therefore* additional working capital funds.
A
10! PROFIT LEELS$
1y the very nature of things* some enterprise generates high margings
compared to others. "he product catergory and the firm2s position in the market may
have given this advantage. ?thers have to struggle in a highly competitive
environment. 1ut* profit cannot be considered as available cash at the end of period.
;ven as the company operations are in progress* cash is used up for augmenting
stocks* book debts and fi7ed assets. ;laborate planning and projection of e7pected
activities and cash flows at short will have to be identified to meet anticipated deficits*
sources of funds will have to be identified and where surpluses are e7pected* suitable
applications will have to be planned.
11! RESERES POLICY$
?ne of the cherished goals of enterprise* management has to build up ade)uate
reserves out of profits. "he urge to retain profits may act as a major constraint on the
dividend policy* the funds position being given higher priority over dividend policy.
12! DEPRECIATION POLICY$
Depreciation policy determines the amount to be provided as depreciation on
the various categories of fi7ed assets. "he depreciation charges do not involve any
cash outflow. ;nhanced rates of depreciation have the effect of reducing profits
correspondingly* which in turn can help in holding back distribution of dividends. 1y
this process cash is conserved Depreciation policies* thus* e7ert influence on the status
of working capital in the enterprise from time to time.
13! PRICE LEEL CHANGES$
Rapidly rising prices create the need for more funds for maintaining the
present volume of activity. /or same levels of inventories* higher cash outlays are
needed. %n an inflationary set up* even operating e7penses will grow for given levels
of activity some companies may be able to compensate part of these cost increases
through increases in prices for their products. "he implications of changing price
'B
levels on working capital position will vary from company to company depending on
the nature of its operation and its standing in the market.
5ith a large variety of factors e7erting influence on working capital
re)uirements* the management has to be continuously aware of the developments*
internal* e7ternal and environmental* and has to plan and review constantly its
working capital needs and strategy.
'. C5orking capital means current assetsD.
,. Any ac)uisition of funds which increase the current assets increase
working capital for that they are the one and the same. "he working capital
refers to the difference between current assets and the current liabilities. %t
is e7cess of current assets over current liabilities.
NEED FOR WORKING CAPITAL$
"he need for working capital arises from business Cvery objective i.e. wealth
ma7imi3ationD. %t is possible only when the corporation earns sufficient profits.
"hese profits depends on the magnitude of receivables. "hese receivables do not
convert into cash immediately. "here is always item gap between receivable and
receipts of cash. "herefore* working is needed for this period in order to sustain the
business activity. %n case ade)uate working capital is not available for this period* the
corporation will not be in a position to sustain the activity.
THUS WORKING CAPITAL NEEDED FOR THE FOLLOWIN
PURPOSES:
/or purchase of Raw:material components and spares.
"o pay wages and salaries.
"o increase day:to:day e7penses and overhead cost such as fuel* power* office
e7penses etc.
"o ne7t the selling costs* such as packaging advertising etc.
"o maintain the inventories of Raw:material work:in:progress.
Stores and spares and finished stock.
''
/rom the above points* it sis clear that working capital is re)uired because of time
gap between receivables and their acry actual reali3ation in cash.
Ade)uacy of working capital is the lifeblood and controlling nerve centre of a
business.
%nade)uate as well as redundant working capital is dangerous for the health of
industry.
SIGINIFICANCE OF WORKING CAPITAL
"he world in which real firms function is not perfect. %t is characteri3ed by the
firm2s considerable uncertainty regarding the demand* market price* )uality and
availability of its own products and those of suppliers. "hese real world circumstances
introduce problems to the firm must deal. 5hile the firm has many strategies
available to address these circumstances* strategies that utili3e investments or
financing with working capital accounts often after a substantial advantages over the
other techni)ues. "he importance of working capital management is reflected in the
fact that financial managers spend a great deal of time in managing current assets and
liabilities like.
Arrangement short term financing
!egotiating favorable credit terms
4ontrolling the movement of cash
Administering accounts receivables
6onitoring investment in receivables

Decisions concerning the above areas play an important role in ma7imi3ing
overall value of the firm. ?nce decisions concerning these areas are reached* the level
of working capital is also determined in active decision sense* but falls out as residual
from the decision just made.
',
THE ADANTAGE OF WORKING CAPITAL AS
ADE4UATE WORKING CAPITAL MAY BE ENUMERATED AS
FOLLOWS:
%t create a felling of Security and confidence ade)uate working capital creates
a sense of security* confidence and loyalty* not only through out business it
self* but also among its customers* creditors and business associates.
;asy loans from the 1ank an ade)uate 5orking capital i.e. e7cess of 4urrent
Assets over 4urrent =iabilities the 4ompany to borrow unsecured loans from
the bank because the e7cess provide a good security to the unsecured loans.
Ade)uate working capital can be meant fro meeting unforeseen contingencies*
e.g. financial crises due to heavy losses etc.
%t increases /i7ed Assets ;fficiency Ade)uate working capital increase the
;fficient of the /i7ed Assets of the 1usiness because of its proper
maintenance.
T5%6% &6% ,7- 8-'8%9,: -+ 7-6;(') 8&9(,&<
a& 9ross concept
b& !et concept
GROSS WORKING CAPITAL$
%t is the total of all current assets which include inventories* sundry EDebtors* cash
in hand* advances* investments* short term deposits etc. 9ross working capital means
total current assets.
NET WORKING CAPITAL:
!et working capital is the e7cess of current assets over current liabilities.
'-
NETWORKING CAPITAL = CURRENT ASSETS > CURRENT LIABILITIES
5hen the current assets e7ceed the current liabilities the working capital is
positive and the negative working capital results when current liabilities are more than
the current assets.
TYPES OF WORKING CAPITAL$
5orking capital can be classified into two categories i.e.
'. Permanent working capital
,. "emporary or variable working capital
P%6?&'%', 7-6;(') 8&9(,&<$
%t is the minimum amount of investment in all current assets which is re)uired
at all times to carry out minimum level of business activities. "an don 4ommittee has
reserved to this type of working capital as C4ore 4urrent AssetsD.
CHARACTERISTICS OF PERMANENTS WORKING
CAPITAL$
Amount of permanent working capital remains in the business in one form or
another.
%t also grows with the si3e of the business. %t is permanently needed for the
business* and there fore* it should be financed out of long term funds.
ARIABLE WORKING CAPITAL$
"he amount of working capital over permanent working capital is known as
variable working capital. "he amount of such working capital keeps on fluctuating
from time to time on the business activities. %t may again be subdivided into seasonal
working capital and special working capital. Seasonal working capital is re)uired to
'.
meet the seasonal demand of busy periods occurring at stated intervals on the other
hand* special working.
"his is the loop which starts at the cash and the marketable securities account*
goes through the current account as direct lab our and material which are purchased
and use to produce inventory* which in turn is doled and generates accounts
receivables* which are finally collected to replenish cash. "he major point to notice
about this cycle is that the turnover or velocity of resources through this loop is very
high related to the other inflows and outflows of the cash account.
WORKING CAPITAL MAY BE ENUMERATED AS BELOW$
1! C&:5 D(:8-@',
%f proper cash balance is maintained* the business can avail the advantage of
cash discount by paying cash for the purchase of raw materials and merchandise.
%t will result in reducing the cost of production.
2! I, 86%&,% & +%%<(') -+ S%8@6(,A &'B C-'+(B%'8%
"he proprietor or offices or management of a concern are )uite carefree* if
they have proper working capital arrangement because they need not worry for the
payment of business e7penditure or creditors. Ade)uate 5orking capital creates a
sense of security* confidence and loyalty not only through out the business itself*
but also among its customers* creditors and business associates.
3! CM@:,D +-6 ?&(',&('(') S-<E%'8A &'B 8-',('@(') P6-B@8,(-'
%n order to maintain the solvency of the business* it is essential that
Sufficient amount of funds be available to make all payment in time as and
5hen they are due.
/! S-@'B G--B7(<< &'B D%F, C&9&8(,A
%t is common e7perience of all prudent business that promptness ofF
Payment in business creates goodwill and increase the debt capacity of the
business. A firm can raise funds from the market* purchase goods on credit and
borrow short term funds from banks etc.
'8

0! E&:A <-&': +6-? ,5% F&';:
1! D(:,6(F@,(-' -+ B(E(B%'B:
7! EG9<-(,&,(-' -+ G--B -99-6,@'(,(%:
IMPORTANCE OF WORKING CAPITAL$
C"he fact of large scale investments in fi7ed capital is often determined by a
relatively small amount of current assetsD. 5orking capital is just like a heart of
industry it is weakG the business cannot proper and survives* although there is large
body of fi7ed assets.
SOURCES OF WORKING CAPITAL$
"he working capital re)uirement should be met from three types of sources of
funds* which are mentioned below*
"hey are+
1) =ong term financial sources
2) Short term financial sources
3) Spontaneous financial sources
=ong 0term financial sources of working capital include.
LONG TERM SOURCES$
: issue of shares
: issue of debentures
: retained profits
: sale of fi7ed assets
: "erm loans etc.
Short term financial sources are used to finance day:to:day business. ?peration and
included.
'<
SHORT-TERM SOURCES
INTERNAL E.TERNAL
: Depreciation : 1ank 4redit
: Provision for ta7ation : "rade credit
: Acured e7penses :4ustomer2s credit
CHANGES IN WORKING CAPITAL$
"he changes in the level of working capital occur for basic reasons.
P-<(8A C5&')%:$
"he major cause for changes in working capital is because of policy changes
initiated by the management. Policy changes can also be known as currents assets
policy. %t may be defined as the relationship between current assets and sales volume.
TECHNOLOGICAL CHANGES$
"his can cause significant changes in the level of working capital. %f a new
process emerges as a result of technological development which shortens the
operating cycle it reduces the need of working capital and vice versa.
GROWTH AND E.PANSION OF BUSINESS$
As a corporation grows* it is logical to e7pect that a larger amount of working
capital will be re)uired. %t is difficult to determine precisely the relationships between
the growths in the volume of business of a corporation and the increase in its working
capital. "he composition of a working capital in a going corporation also shifts with a
economic circumstances and corporate practice. 9rowth industry re)uires more
working capital than those that of static* other things being e)ual.
'>
ABILITY OF CREDIT$
"he working capital re)uirement of a firm affected by credit terms granted by
its creditors. A firm will need a less working capital of a liberal credit from banks
also influences the working capital needs of the firm. A firm which can get 1ank
credit easily on favorable conditions will operate with less working than a firm
without such a facility.
OB"ECTIE OF THE STUDY$
'. "o project in the various accepts of /inancial 6anagement of "he Durga
co:operative urban bank with a particular emphasis on working capital.
,. "o study the origin and development of HD41.
-. "o find out the present and future working capital position.
.. "o find and understand the trend in working capital position.
8. "o know the strengths and weakness of the bank.
<. "o offer conclusions and suggestions.
TIME SPAN$
"he time span of the study was for a period of < years commencing from
,BB.:B8 to ,BBA:,B'B.
TOOLS H TECHNI4UES USED$
Simple statistical techni)ues like percentage* average have been used.
1esides* statistical tools* functional ratios like li)uidity ratio* profitability ratio and
current ratio* )uick ratio* activity ratio will etc.* also be used to e7amine the effect of
working capital management of the co:operative bank.
'@
IMPORTANCE OR ADANTAGE OF ADE4UATE WORKING
CAPITAL
SOLENCY OF THE BUSINESS$ Adeu!te "#$%in&
'!(it!) *e)(+ in M!int!inin& t*e +#),en'y #- t*e bu+ine++
by ($#,idin& uninte$$u(ted #- ($#du'ti#n.
G--B7(<<$ Sufficient amount of working capital enables a firm to make
prompt payments and makes and maintain the goodwill.
E&:A <-&':$ Ade)uate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable terms.
'. C&:5 D(:8-@',:$ Ade)uate working capital also enables a concern
to avail cash discounts on the purchases and hence reduces cost.
,. R%)@<&6 S@99<A -+ R&7 M&,%6(&<$ Sufficient working capital
ensures regular supply of raw material and continuous production.
R%)@<&6 P&A?%', -+ S&<&6(%:I W&)%: &'B O,5%6 D&A TO D&A
C-??(,?%',:$ %t leads to the satisfaction of the employees and raises the
morale of its employees* increases their efficiency* reduces wastage and costs
and enhances production and profits.
'. EG9<-(,&,(-' O+ F&E-6&F<% M&6;%, C-'B(,(-':$ %f a firm is
having ade)uate working capital then it can e7ploit the favorable
market conditions such as purchasing its re)uirements in bulk when
the prices are lower and holdings its inventories for higher prices.
,. AF(<(,A T- F&8% C6(:%:$ A concern can face the situation during
the depression.
-. 4@(8; A'B R%)@<&6 R%,@6' O' I'E%:,?%',:$ Sufficient
working capital enables a concern to pay )uick and regular of
dividends to its investors and gains confidence of the investors and can
raise more funds in future.
'A
.. H()5 M-6&<%$ Ade)uate working capital brings an environment of
securities* confidence* high morale which results in overall efficiency
in a business.
E.CESS OR INADE4UATE WORKING CAPITAL
;very business concern should have ade)uate amount of working capital to
run its business operations. %t should have neither redundant or e7cess working
capital nor inade)uate nor shortages of working capital. 1oth e7cess as well as
short working capital positions are bad for any business. (owever* it is the
inade)uate working capital which is more dangerous from the point of view of the
firm.
DISADANTAGES OF REDUNDANT OR E.CESSIE
WORKING CAPITAL
'. ;7cessive working capital means ideal funds which earn no profit for the
firm and business cannot earn the re)uired rate of return on its
investments.
,. Redundant working capital leads to unnecessary purchasing and
accumulation of inventories.
-. ;7cessive working capital implies e7cessive debtors and defective credit
policy which causes higher incidence of bad debts.
.. %t may reduce the overall efficiency of the business.
8. %f a firm is having e7cessive working capital then the relations with banks
and other financial institution may not be maintained.
<. Due to lower rate of return n investments* the values of shares may also
fall.
>. "he redundant working capital gives rise to speculative transactions
,B
DISADANTAGES OF INADE4UATE WORKING
CAPITAL
;very business needs some amounts of working capital. "he need for working
capital arises due to the time gap between production and reali3ation of cash from
sales. "here is an operating cycle involved in sales and reali3ation of cash. "here are
time gaps in purchase of raw material and productionG production and salesG and
reali3ation of cash.
"hus working capital is needed for the following purposes+
/or the purpose of raw material* components and spares.
"o pay wages and salaries
"o incur day:to:day e7penses and overload costs such as office
e7penses.
"o meet the selling costs as packing* advertising* etc.
"o provide credit facilities to the customer.
"o maintain the inventories of the raw material* work:in:progress* stores
and spares and finished stock.
/or studying the need of working capital in a business* one has to study the
business under varying circumstances such as a new concern re)uires a lot of
funds to meet its initial re)uirements such as promotion and formation etc. "hese
e7penses are called preliminary e7penses and are capitali3ed. "he amount needed
for working capital depends upon the si3e of the company and ambitions of its
promoters. 9reater the si3e of the business unit* generally larger will be the
re)uirements of the working capital.
"he re)uirement of the working capital goes on increasing with the growth and
e7pensing of the business till it gains maturity. At maturity the amount of working
capital re)uired is called normal working capital.
"here are others factors also influence the need of working capital in a business.
,'
?1;4"%H;S I 6;"(?D?=?9J
OB"ECTIES$
"o study the components o f working capital in detail cash management.
%nventory management.
"o find out the working trends in working capital management.
"o evaluate the working capital performance of the company using working ratios*
"o study financing working capital in T.E /URGA CO OPERATI0E URBAN
BANK LT/.
/or any statistical en)uiry* the investigator may collect the data from two
sources. "hey are+
Primary Data and
Secondary Data.
"he researcher would have to decide which sort of data he would be using for
his study and accordingly he will select one or the other method of data collection
Sources of Data
Primary Data
Secondary Data
?bservation 6ethod. Published Data.
%nterview 6ethod. #npublished Data
Kuestionnaires.
Schedules.
?ther 6ethods!
,,
PUBLISHED DATA$
"he primary data are those which are collected a fresh and for the first time.
C-<<%8,(-' -+ P6(?&6A D&,&$
5e collect this data during the course of doing e7periments in an e7perimental
research* but in some cases* we do research of the descriptive type and perform
surveys* then we can obtain primary data either through observation or through
personal interviews.
S;4?!DARJ DA"A+
"he secondary data are those which have already been collected by someone
else and which have already been passed through the statistical process.
"he chief source of this data may be broadly classified into two types+
Published Data and
#npublished Data.
PUBLISHED DATA$
"he published data is defined as data* which was printed in+
L Harious publications of the 4entralFStateF=ocal 9ovt.
L Harious publications of /oreign 9ovt.
L "echnical and trade journals.
L 1ooks* maga3ines and newspapers.
L Reports prepared by research scholars
L Public Records and Statistical reports* etc.
UNPUBLISHED DATA$
"he unpublished data is the data* which was not printed but found from
sources like+
L Diaries.
L =etters.
L #npublished biographies and
L #npublished autobiographies etc.
L
,-
=%6%"A"%?!S ?/ "(; S"#DJ+
"hough the project had been completed successfully a few limitation are
e7pected the study is the subject to some limitations
(ere in the study only working tool has been used* it is not possible to access
the companies2 performance based on these results.
"he period covered in the study only 8 years.
Since the procedures and policies of the company don2t allow disclosure of all
the financial information the project has to be completed with the available
data collected with minimum effort
,.

CHAPTER II
,8
DURGA CO-OPERATIVE URBAN BANK
- A COMPANY PROFILE`
1R%;/ (%S"?RJ ?/ D#R9A 4?:?P;RA"%H; #R1A!
1A!$+:
"he bank was established in the year 'A,A* with a small capital of Rs.-BB
and registered under A.P co:operative societies act of 'A<.. "he 1y:law of the
society was been registered which includes the objectives of the society. "he
founder president of the bank is Sri.Helagaleti Dasaradharamaya. =ater the
society was given under banking regulation act the Reserve 1ank of %ndia who
conducts banking operations. "he banking section will navigate through all the
aspects of the 1anking System in %ndia. %t will discuss upon the matters with the
birth of the banking concept in the country to new players adding their names in
the industry in coming few years. %t is a non:scheduled co:operative bank.
"he bankers of all banks* Reserve 1ank of %ndia (R1%&* the %ndian
1anks Association (%1A& and top ,B banks like %D1%* (S14* %4%4%* A1! A6R?*
etc. has been well defined under three separate heads with one page dedicated to
each bank.
(owever* in the introduction part of the entire banking cosmos* the
past has been well e7plained under three different heads namely+
(istory of 1anking in %ndia
!ationali3ation of 1anks in %ndia
Scheduled 4ommercial 1anks in %ndia
"he first deals with the history part since the dawn of banking system in
%ndia. 9overnment took major step in the 'A<A to put the banking sector into
systems and it nationali3ed '. private banks in the mentioned year. "his has been
elaborated in !ationali3ation of 1anks in %ndia. "he last but not the least e7plains
about the scheduled and unscheduled banks in %ndia. Section ., (<& (a& of R1% Act
'A-. lays down the condition of scheduled commercial banks. As per R1% license
,<
the bank has started collecting deposits from various customers. Subse)uently* the
bank has also entered in to loaning business.
AR;A ?/ ?P;RA"%?!+:
"he area of operation of the bank shall be confide to that portion of
Hijayawada 6unicipal 4orporation which lies to the west of the railway line
including old town Hidyadharapuram* 1havanipuram and 9ollapudi.
4;!"RA= 1?ARD ?/ D%R;4"?RS
DESIGNATION
4(A%R 6A!
H%4; 4(A%R6A!
6A!A9%!9 D%R;4"?R
I;M;4#"%H; D%R;4"?R
1?ARD ?/ D%R;4"?RS
NAME

Sri"hammina kanaka Hijay $umar.
Sri syaidh Athik.
$. Srinivas Rao.
4. !arasaia Reddy.
1. "hatha Rao.
4. 6allikarjuna Rao.
1. 1askar Rao.
1. (ari sankar Rao.
S. Srinivas Rao.
9. Sankar Jadhav.
%. Srimannarayana.
$. Prabhakar Rao.
?1;4"%H;S+:
,>
"o encourage thrift* self:help and co:operation among members.
"o accept deposits of money from the public* repayable on demand or
otherwise* and with draw able by che)ue* draft order or otherwise for the
purpose or lending or investment.
"o borrow or raise money.
"o lend or to advance money upon or without security to members and to
others as permitted by the registrar.
"o draw* make* accept* discount* buy* sell* collect and deal in 1ills of
e7change. (undies* promissory notes* coupons* draft* 1ills of lending*
railway receipts* warrants* certificates. Scrip2s and other instruments and
other securities whether transferable or negotiable are not.
"o grant and to issue letters of credit* travelers che)ues and circular notes.
"o buy and to sell foreign e7change including foreign bank notes.
"o ac)uire* to hold* to issue on commission* to underwrite and to deal in
stock* funds* shares* debentures* debentures stocks* bonds* obligations*
securities and investment of all kinds.
"o purchase and to sell bonds* scrip2s other forms or securities on behalf of
constituents.
"o receive all kinds of bonds* scrip2s. Haluables on deposits or for safe
custody or otherwise.
"o provide safe deposit vaults.
"o collect and transmit money and advances.
"o negotiate loans and advances.
"o carry on and to transact every kind of guarantees and indemnity
business on behalf of constituents.
"o effect* to insure* to guarantee* to underwrite* to participate in managing
and carrying out any issue* public or private* of state* municipal or other
loans or of sharesG debentures* debenture stock of any company* co:
operative* society* corporation or association and to lend money for the
purpose of any such issue.
"o ac)uire* to construct* to maintain and to alter any building or works
necessary or convenient for the purpose of the bank.
,@
"o manage* to sell and to reali3e any property this may come in to the
possession of the bank in satisfaction or part satisfaction of any of its
claims.
"o open branches and pay offices* with the permission of the Registrar and
the reserve bank of %ndia with in the area of operation of the bank so as to
provide banking services to the public.
"o establish* to support* or to aid in establishment and support of
associations* institutions* funds* trusts and conveniences calculated to
benefit members* employees* e7:employees of the bank or the dependents
or connections of such persons.
"o prepare and to finance schemes for amelioration of the finance
condition of the members.
"o provide financial and technical assistance to self:employed persons for
getting up their own business and finance the small scale and other
industries as are permitted by the Reserve 1ank of %ndia from time to time.
"o enter into participation arrangements E arrangements with any other
bank or banks or financial institutions with the object of marking loans and
advances.
"o do any other form of business as specified in clause ('& of section < of
the banking regulation actG 'A.A(as applicable to co:operative societies&.
"o do all such other things as are incidental and conductive to the
promotion or advancement of these objects and of the business of the
bank.
"o undertake any other form of business which the central government
may specify as a form of business in which it is =awful for co:operative
banking institutions to engage.
/unds
,A
/unds may be raised by following meansG
Share
;ntrance /ee
Subscription
Deposits
=oans* 4ash 4redits* ?verdrafts and Advances
Donations* 9rants and Subsidies

6a7imum 1orrowing Power

"he ma7imum borrowing power of the banks shall not e7ceed .B times the
paid:up share capital and reserves minus the bad debts reserve and accumulated
losses.
=?A!S A!D ADHA!4;S+:
=oans* cash credits andEor overdrafts on current accounts may be granted
to members on current accounts may be granted to members on security or
securities mentioned below or other securities approved by the 1oard of
Directors or without security.
Personal security andEor suretyEsureties of other memberEmembers.
4ollateral security of movable and immovable property.
"he rate of interest charged on loans or mortgage loans is '@N.
"he bank is also e7tending loans facilities to the needy customers
for consumption purposes.
"he loan shall be on gold mortgage* the rate of interest charged
shall be '8N.
"he bank is also issuing loans on fi7ed deposits and re:investments
deposits made with the bank.
Any other tangible security.
"he percentage of margin shall be @8N and the rate of interest will
be ,N and the rate of deposit.
-B
"he bank is also e7tending loan facility on !S4 bond and $issan
Hikas patra issued by post offices on lean basis. "he rate of interest
shall be '<N.
%ndustrial* mercantile* agricultural* and other marketable
commodities or machinery under pledge* hypothecation or charge
of the 1ank.
Pledge if 9overnment trustee securities shares of approved
companies* debentures and deposits with the 1ank.
%nsurance policies assigned to the 1ank with in surrender value.
5arehouse receipts.
"he 1oard may frame detailed loan regulations prescribing
proportion of unsecured loans to total and advances* proper terms
and conditions and the nature of securities* acceptable for loans and
advances for different purposes* provided that the 1oard groups of
industries as may be specified by the R1% from time to time on
proper security.
Short term loans will be for periods up to '8 months* medium term loans
for '8 months to 8 years and long term loans over 8 years with the
permission of 9overnment.
D;P?S%"S+
"he deposits are the money2s at the persons who are the habit of thrift the
deposits were divided into various categories such as saving deposits* current
deposits* thrift deposits* recurring deposits and reinvestment deposits.
"he rate of interest form the saving deposits payable on Rs.-E: ma7imum
rate of interest shall be '-N.
Refinancing
-'
Refinancing refers to the replacement of an e7isting debt obligation with a
debt obligation bearing different terms. "he most common consumer refinancing
is for a home mortgage.
!o %ncome !o Asset+
!o %ncome !o Asset (!%!A& is a term used in the #nited States mortgage
industry to describe one of many documentation types which lenders may allow
when underwriting a mortgage.
!%!A programs are reserved for the most credit:worthy of
borrowers. "his means* among other criteria* a satisfactory mortgage history paid
As Agreed (no mortgage lates in the last ,. months&* minimum credit scores of
<<B and a =oan to Halue ratio of no more than>8N. /or higher loan amounts the
minimum credit scores start above >BB and ="H ratios cap out at about <BN.
CO-OPERATIE STRATAGY$
"he bank is tapping deposits from middle class and higher middle class
people and lending by way of advances to middle and lower middle class people.
"he deposits were tapped at higher rate of interest than commercial banks to tune
of ' N to , N. "he same mode continues to loans also. So* the bank continues to
e7it in competitive market by withstanding the pressure from co:operative
banking sector.
BUSINESS FOCUS$
"he bank focuses in business on mortgage of immovable property and
jeweler. As the strata of customers are middle and lower middle class the bank
concentrates on mortgage policy. "he purpose of loans shall be mainly for
ceremonial purposes and domestic needs and in some cases for small and petty
business.
CAPITAL STRUCTURE$
-,
"he capital employed for running the business shall be collected from
borrowers by fi7ing a percentage such as -N to 8N. "he mode of collection of
share capital is linking with borrowing which is known as C=oan =inked
1orrowing C. As per %ncome "a7 Act'A. 4 ('&. 4o:operative societies re
e7empted from collecting "DS ("a7 Deducted at Source& from the depositors.
"his is way to enhance the share capital by encouraging the depositors to join as
members by taking shares fro' t#e institution. So/ t#ey '(y %et t#e benefit
of TDS for t#eir de)osits.
NETWORK$
"he bank had a server with ,B clients. "he data from terminals such as
clients goes to central server and the same can be retrieved from any of the
terminals as and when re)uired. "he mode of transactions can be operated through
=A6 (=ocal Area !etwork&.
TECHNOLOGY$
"he bank is using high end servers and technical e)uipment such as core:
banking solutions. "he bank is using readymade software from reputed vendor to
do the banking business. "he visual basic and oracle based software is used. "he
application software as well as system software is made to reach the technology
development today. "he bank is proposing to go for installation of onsite* A"62s
and off:site A"62s.
CO-OPERATIE GOERNANCE RATING$
"he software is so helpful by having the module of 6%S (6athematical
%nformation System& to meet the day:to:day challenges of banking. "his is most
useful for the management to take divisions at regular intervals on aspects of such
as change in the rate of interest on deposits as well as loans and investments in
government and other approved securities. "he management can make use of
technology by providing speedy and faster customer service.
COMPETITION$
--
At present the bank is facing competition from local branches of
nationali3ed banks. %n terms of rate of interest on deposits as well as loans. As the
bank was established way back in the year 'A,A. "he hereditary customer are
continue to e7ist and the service rendered by the bank to them feel as their own.
So* in terms of service the bank is heading towards progress by chasing the
competition from local branches of nationali3ed banks.
ORGANISATIONAL STRUCTURE
SWOT ANALYSIS OF DURGA CO-OPERATIVE URBAN BANK
LIMITED:-
STATE ACTION PLAN
-.
1oard of directors
4.;.? E secretary
6anager
6anager 6anager 6anager
9eneral Administration Deposits =oans I Advances
'& Accountant.
,& (ead clerk E head
cashier.
-& Assistant Accountant.
.& 4lerks.
'& Passing officer.
,& 4lerk.
'& 4lerk.
,& ;7ecution clerk.
INTRODUCTION$
"he co:operative 4redit Structure in A.P. State has a long history dating back
to 'AB.. "he A.P. State 4oop. 1ank (APS41& was established in 'A<- with its
head)uarters at (yderabad.
"he 4o:operative 4redit Structure in A.P. State has undergone major changes
in recent years.
"he 1ank in consonance with the policy by the govt. of %ndia and under
!A1ARD2s directions has entered into a 6emorandum of #nderstanding (6o#& with
!A1ARD along with the State govt. "he HD4 1anks have prepared development
action Plans and entered into 6o# with APS4 1ank.
ABOUT THE BANK:
"he Hijayawada District "he Durga 4o:operative #rban 1ank =imited is
one of the oldest banks in the Andhra Region which is established in the year 'A,A.
REGISTERED OFFICE$
"he Registered ?ffice of the 1ank shall at Raja Rangaiahappa Rao Street*
Hijayawada:'* $rishna District.
AREA OF OPERATION$
"he area of operation of the bank shall be confied to that portion of Hijayawada
6unicipal 4orporation which lies to the west of the Railway line including old town*
Hidyadharapuram* 1havanipuram and 9ollapudi.
BUSINESS ACTIITIES OF APCOB$
"he loan portfolio of AP4?1 covers crop loans. 6edium:term loans and
=ong:term loans for agricultural proposes. "he bank also participates in a big way in
all the government sponsored schemes. 4ash credit loans to 4o:oparative credit
societies. %n respect of long:term loans the bank advances land for investment credit
to 6.%. purposes* for purchases of tractors* power tillers crop harvesters and all other
agricultural machinery for raising horticulture animal husbandries and allied
activities.
FINANCIAL POSITION OF THE BANK$
5ith the emergence of single window credit delivery system about -.- earth while
primary Agriculture credit societies have been re:organi3ed on the basis of viability
into <@ PA4S out of the <. re:organi3ed PA4S ,> are ceded societies which are
-8
being financed by commercial banks. "here are > /S4S in the District* of which (,&
farmers service cooperative societies are under the financial assistance of the bank
some details relating to functioning of the bank are disclosed below.
10. [Rs. In lakhs]
Members No. of Members Share Capital March 2007
o!ernment 1 "1#1.00
$%Cs &&
Non %'ri. Societies 1#(
)*nctional Societies +&, 1&#+.",
Nominal Members 2110( ,7.",
Total 21871 5182.60
"he bank is authori3ed to get /unds from following shares* entrance fees*
subscribes* deposits* loans* cash credits* overdrafts* advances donations* grants and
subsidies.
LIABILITY OF A MEMBER$
"he liability of a shareholder shall be limited to the capital represent by the
share of which such shareholder is the registered shareholder. "he liability of a past
shareholder* to the e7tent of shares as they e7isted at the time when he ceased to be a
shareholder* shall continue for a period of two years from the date of cessation. "he
estate of the deceased shareholder shall remain liable to the e7tent of sums due for
two years.
RESERE FUND$
"he reserve /und shall be separately invested in 9overnment and trusted
securities or in fi7ed deposits with the district 4entral 4o:operative 1ank or the State
4o:operative 1ank.
AUDIT$
"he accounts of the 1ank shall be audited by an auditor appointed by the
Register or 4hief Auditor.
SUBSSIDIARY RULES FRAMED UNDER BYE-LAW
NO!30#..) DEPOSITS OF ALL KINDS AND TYPES$
-<
'. 4urrent deposits
,. Daily Deposits
-. /i7ed Deposits
.. Recurring Deposits
8. 4ash 4ertificate Scheme Deposits

->

WORKING CAPITAL MANAGEMENT
%n this chapter attempt is made to evaluate the performance of working capital
management in "D41 more especially this chapter covers the following aspects.
'. "heoretical framework on working capital management.
,. ?bjectives* policies and planning of working capital management
-. "rends in working capital
.. "urn over of working capital
THEORETICAL FRAMEWORK$
-@
5orking capital refers to the amount of funds* which a corporation may have
to finance to its day:to:day operations. "hese funds are used for carrying out the
routine and regular business operations consisting of purchase of Raw:material
payments of direct and indirect e7penses to invest in stock and stores to maintain
certain amount of cash balances. "hus working capital is the portion of corporation
total capital which is employed in short term operations.
CHARACTERISTICS OF WORKING CAPITAL IN CO-
OPERAIE BANK$
'. "he components of current assets are short in life and do not e7ceed one
accounting year.
,. ;ach component of current assets is transferred into its other forms devoting
a circuit flow chart* inventory* receivables back to cash. "his particular
feature has two implications there are.
(a& Decision assessing the level of working capital is fre)uent and respective.
(b& "he close interaction among the components of working capital calls for the
simultaneous consideration to determine the level and composition of total
working capital.
COMPOSITION OF WORKING CAPITAL
/or the proper understanding of working capital a close at the individual item
of working capital is necessary. 5hen working capital it includes the study of both
current and current liabilities.
COMPONENTS OF CURRENT ASSETS$
'. %nventories
Raw material and 4omponent
5ork:in:progress
/inished stock
-A
,. Accounts Receivables
"rade debtors
=oans and advances and others
-. %nvestment in short:term securities
.. 4ash and bank balance
4ash on hand
1ank balances
A portion of the above current assets investments maybe represented by the
following sources of current liabilities.
COMPONENTS OF CURRENT LIABILITIES$
'. "rade creditors
,. 1orrowings from banks
-. Provisions and other current liabilities
WORKING CAPITAL MANAGEMENT IN THE DURGA
CO-OPERATIE URBAN BANK
OB"ECTIESI POLICIES AND PLANNING$
%n co:operative bank the prime objective of management of working capital is
profitability and li)uidity besides the efficient use of current assets the bank intends to
achieve these objectives of working capital by formulating these suitable* policies.
According the bank has formulated the following policies regarding the management
of working capital.
"o maintenance re)uired level of each item of working capital and their
reviews regularly.
.B
"o ensure efficient management of cash by fi7ing the accurate levels of cash
follows.


.'

DATA ANALYSIS * INTERPRETATION
STATEMENT SHOWING CHANGES IN WORKING CAPITAL DURING THE
PERIOD 2001-2007
Particulars ,BB< ,BB> %ncrease Decrease
.,
CURRENT ASSETS:
4ash on hand
S.1.% 'town
S.1.% ,town
"he $D44 bank* HOA
AP4?D ="D* (JD
4urrent deposits
Savings bank deposits

"otal :A

CURRENT LIABILITIES +
Savings bank deposits
4urrent deposits
?ther liabilities
"otal 01
!et working capital(A:1&
Decrease in working capital
,'A.8A<
-,><B-A
-<BB.<
8A>>A--
.,8A
,B<-'-A
,,.,@8
,>'A88@
,,<<'A8
-<BB.<
<<@<A-,
.,8A
-'<,,<@
,--,<>
8,.A<,
::
::
>B@AAA
::
'BAA',A
@A@,
::
'>A8.,
::
::
'BBA@..
::
::
::
::
::
',.>B'
::
8<.>B@
@,,-<'
'.'BB,A> '8.-,8,-
,8.,>B--
@'<8.B
,A,B@8B
,888'>-.
<-<AA@
-.@888@
,A'<..,- ,A<>.,AB
:'8B<.',< :'.,.'><8
@,,-<'
'8B<.',< '8B<.',< ,8,'<'. ,8,'<'.

INTERPRETATION$
"he current assets are increased in the year ,BB>.
"he current liabilities are also increased in the year ,BB>.
4ompared to current assets and current liabilities in these two years the current
.-
=iabilities are increased more.
Results net decrease in working capital.
STATEMENT SHOWING CHANGES IN WORKING CAPITAL DURFING
THE PERIOD 2007-2002
Particulars ,BB> ,BB@ %ncrease Decrease
..
CURRENT ASSETS:
4ash on hand
S.1.% 'town
S.1.% ,town
"he $D44 bank* HOA
AP4?D ="D* (JD
4urrent deposits
Savings bank deposits
"otal :A

4#RR;!" =%A1%=%"%;S+
Savings bank deposits
4urrent deposits
?ther liabilities

"otal 01
!et working capital(A:1&
%ncrease in working capital
,>'A88@
,,<<'A8
-<BB.<
<<@<A-,
.,8A
-'<,,<@
,--,<>
'-A8>>A
::
-<BB.<
>[email protected]'B
'>-A',
.<-B8@'
,.'@.,
::
::
::
-A>B>@
'<A<8-
'.<@-'-
@8>8
::
::
::
..8AA''
'-,->>A
,,<<'A8
::
::
::
::
::
'>B@BB@
8@@@A8
<'<<8-
'8.-,8,8 '-@@<'>B
,888'>-.
<-<AA@
..B@>BB
,>,8A>.,
',,8@A-
8B,8-8-
-B8A>.-, --8'BA@@
:'8'<.AB>
..8AA''
:'A<,.@'@
'A<,.@'@ 'A<,.@'@ <8B-8-B <8B-8-B
INTERPRETATION$
"he current assets are decreased in the year ,BB@.
.8
"he current liabilities are also increased in the year ,BB@.
4ompared to current assets and current liabilities in these two years the current
=iabilities are increased more.
Results net increase in working capital.
STATEMENT SHOWING CHANGES IN WORKING CAPITAL DURFING
THE PERIOD 2002-2003
Particulars ,BB@ ,BBA %ncrease Decrease
.<
CURRENT ASSETS:
4ash on hand
S.1.% 'town
"he $D44 bank* HOA
AP4?D ="D* (JD
4urrent deposits
Savings bank deposits

"otal :A
CURRENT LIABILITIES +
Savings bank deposits
4urrent deposits
?ther liabilities
"otal 01
!et working capital(A:1&
%ncrease in working capital
'-A8>>A
-<BB.<
>[email protected]'B
'>-A',
.<-B8@'
,.'@.,
,>><8>A
-8A.A<
.<><88'
'>-A',
-<8>.<,
,8'8-'
'-@B@BB
::
::
::
::
A<@A
::
->'>,-
::
<.,,@..
::
88B
,.B>.8A
::
A>-''A
::
,'8'@A.
::
,<8,B-.
'-@@<'>B ''@A88-'
,>,8A>.,
',,8@A-
8B,8-8-
,A.''<-<
@8.'>B
><>>-@>
--8'BA@@ ->A.-'A-
:'A<,.@'@
<.,,@..
:,<B.><<,
,<B.><<, ,<B.><<, @'@8B8< @'B8B8<

INTERPRETATION$
"he current assets are decreased in the year ,BBA.
.>
"he current liabilities are also increased in the year ,BBA.
4ompared to current assets and current liabilities in these two years the current
=iabilities are increased more.
Results net increase in working capital.
STATEMENT SHOWING CHANGES IN WORKING CAPITAL DURFING
THE PERIOD 2003-2010
PAR"%4#=ARS ,BBA ,B'B %!4R;AS; D;4R;AS;
.@
Current assets:
4ash on hand
S1%' town
S1% , town
"he kdcc bank
AP4?1 ltd
4urrent deposits
Saving deposits
"otal:A
Current liabilities:
saving deposits
current liabilities
other liabilities
"otal:1
!et working
capital(A:1&
,>><8>A
:::::::::::::::
-8A.A<
.<><88'
'>-A',
-<8>.<,
,8'8-'
''@A88-'
:::::::::::::::::::
::::::
,A.''<-<
@8.'>B
><>>-@>
->A.-'A-
::::::::::::::::::
:,<B.><<,
.8,,>B>.B'
::::::::::::::::::
-<@A.<.@,
.B,--.<..B
,>,-@@<.@@
>B'<8>A.>A
,<BA@@.@B
'@A'<.<88.>
-..<8@<'..@
'>8>-.8.<<
<<<[email protected]>
:::::::::::::::::::
.,@@@<A,.''
:::::::::::::::::::
:,-A>,,-<..'
'>.<',>.B'
::::::::::::::::::
A.8B
::::::::::::::::
,8.AA>..@@
--8A'>>.>A
A.8>
><>.'@<.<@
::::::::::
::::::::::::::
'B''AB,.B-
::::::::::::::::::::
'B''AB,.B-
::::::::::::::::::::
<<<,,@..<8
::::::::::
:::::::::::::::
:::::::::::::::
<8-,B8..B
::::::::::::::::
::::::::::
::::::::::::
<8-,B8..B

8B8.,,8..@
AB-'>8.<<
::::::::::::::::
::::::::::::::::::::
8A8><AA.A8
::::::::::::::::::::
<<'BAB..A8
INTERPRETATION$
"he current assets are increased in the year ,B'B.
.A
"he current liabilities are also decreased in the year ,B'B.
4ompared to current assets and current liabilities in these two years the current
=iabilities are increased more.
Results net increase in working capital.
STATEMENT SHOWING CHANGES IN WORKING CAPITAL DUREING
THE PERIOD 2010-2011
PAR"%4#=ARS ,B'B ,B'' %!4R;AS; D;4R;AS;
8B
Current assets +
cash on hand
S1% ' town
S1% , town
"he kdcc bank
AP4?1 =td
4urrent deposits
Saving deposits
"otal:A
4urrent liabilities
Saving deposits
4urrent deposits
?ther liabilities
"otal:1
!et working
capital(A:1&
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INTERPRETATION$
8'
"he current assets are increased in the year ,B''.
"he current liabilities are also increased in the year ,B''.
4ompared to current assets and current liabilities in these two years the current
=iabilities are increased more.
Results net decrease in working capital.
THEORITICAL FRAME WORK
8,
INTRODUCTION$
"he financial analysts always need certain yard sticks to evaluate the
efficiency and performance of any business unit. "he one of the most fre)uently used
yard sick is ratio analysis* ratio analysis involves the use of carious methods for
calculating and interpreting financial ratio2s to assess the performance.
"he ratio analysis is the powerful tool of financial analysis. "he ratio is defined as
the indicated )uotient of two mathematical e7pressions and as the relationship
between two or more things in financial analysis ratio is used as an inde7 or yard
sticks for evaluating the financial performance of the company.
C"he relationship between two accounting figures* e7pressed
mathematically is known as a financial relation or a ratioD.
A ratio helps the analyst to make )ualitative judgment about the firm2s
financial position and performance.
SIGNIFICANCE OF RATIO ANALYSIS$
6ost specifically* the following are the uses of ratio analysis+
6eaningful conclusions can be drawn only when the financial information
contained in the statements are analy3ed through ratios and interpreted
properly.
Ratio analysis is of much help in financial forecasting and planning.
"hrough ratio2s* the financial strength and weakness of a firm can be
communicated in a more easy and understandable manner.
;ffective communication of strengths and weakness of a business from help in
better co:ordination in the enterprises.
Ration analysis helps in ensuring effective control of the business. they also
facilitate establishment of a standard costing system and budgetary control.
R%,@6' -' ('E%:,?%',:$
8-
"he return on investment is calculated by dividing net profits and
shareholders fund. %t e7presses the relationship between profits and shareholders fund
in order to know risk level of the investments.
FORMULA$
!et profit
Return on investments P
Shareholders fund
Jears !et profit Shareholders fund Ratios
,BB<:B>
,BB>:B@
,BB@:BA
,BBA:'B
,B'B:''
[email protected]
.,B.>@>
88B,A'A
<.A.B,-
>8.@,'>
@A8,.<,A
A-8BB<,'
'B-..A>A8
''.<--<.@
',A.8,',A
B.B.,
B.B..
B.B8-
B.B8<
B.B8@
GRAPH$
8.
INTERPRETATION$
"he return on investments of "(; D#R9A 4?:?P;RA"%H; #R1A!
1A!$ ="D for the year ,BB- to ,BB< shows decreasing trend but in the year ,BB< to
,B'B the return on investments showed an improvement of B.B8@
88
R%,@6' -' 8&9(,&< %?9<-A%B$
"he return on capital employed is calculated by dividing the net profits after
ta7es and total capital employed multiplied with hundred. "he ratio illustrates how
much return is earned in the form of net profit after ta7es out of the total capital
employed. "he capital employed is nothing but the combination of both non:current
liabilities and owner2s e)uity.
FORMULA$
!et Profit after "a7es 7'BB
Return on capital employed P
"otal capital employ
Jears !et profit after
ta7es
"otal capital
employed
hundreds Ratios
,BB<:B>
,BB>:B@
,BB@:BA
,BBA:'B
,B'B:''
[email protected]
.,B.>@>
88B,A'A
<.A.B,-
>8.@,'>
@A8,.<,A
A-8BB<,'
'B-..A>A8
''.<--<.@
',A.8,',A
'BB
'BB
'BB
'BB
'BB
..,A
...A
8.-'
8.<<
8.@-
8<
GRAPH
INTERPRETATION$
"he return on capital employed for the year ,BB.:,BB8 is <.-, but in ,BB8:
,BB< it decreased to 8.B@.%n the year ,BB<:,BB> decreased by ..,A and ,BB@ to ,BBA it
shows an improvement.
8>
MEASUREMENT OF CURRENT RATIO IN THE DURGA
CO-OPERATIE URBAN BANK > I"AYAWADA
MEASUREMENT OF CURRENT RATIODS$
LI4UIDITY RATIO$
=i)uidity ratio measures the short term solvency comment of a business there
ratio* are calculated a comment upon the short: term paying capacity of a company or
the company ability to meet its current obligators the important li)uidity ratios are
a& 4#RR;!" RA"%?
b& K#%4$ RA"%?
c& A1S?=#"; =%K#%D RA"%?
#A)! CURRENT RATIO$
4urrent ration is relationship between current assets and current liabilities.
"his ratio is a measure of general li)uidity and is must widely used to make the
analysis or a short: term financial position or li)uidity of a company is calculated by
dividing the total current assets by total current liabilities.
Relatively high current ratio is on indication of the companies li)uidity
position and has the ability to pay its current obligation in time as and when they
become due on the other hand a relating low current ration represent that the li)uidity
position of the company is not good and the company shall not be able to pay its
current liabilities in time without facing difficulties. An increase in current ratios
represents the improvement the improvement in the li)uidity position of a company
while a decrease in current ratio indicated that there has been deterioration in the
li)uidity position of company as a convention. "he current ratio of ,+' is considered
to be satisfactory. 1ut in case of firms in %ndia this is about '.-+' is rather than ,+'
during to strict monetary policy of reseve bank of %ndia
CURRENT RATIO ANALYSI
8@
4urrent ratioP4urrent assetsE current liabilities
Y%&6 C@66%', &::%,: C@66%', <(&F(<(,(%: C@66%', R&,(-
,BB<:B>
,BB>:B@
,BB@:BA
,BBA:'B

,B'B:''
'.'BB,A>
'8.-,8,8
'-@@<'>B
''@A88-'
'@A'<.88
,A'<..,-
-B8A>.-,
-B8'BA@@
->A.-'A.
.,@@@<A,
B..@
B.8B
B..8
B.-'
B...
AE%6&)%

9RAP(+
8A
INTERPRETATION$
%t can be observe from the above table that the current ratio of the bank move
'.8+' to ,.A+' during the study perform from ,BB-:B. to ,BB@:BA. 9enerally consider
satisfactory ratio is ,+' the ratio of bank less than the consider satisfactory ratio* this
ratio indicate that the cushion avertable to short: term creditors are relatively lower:
An average its standards at ,+' which is less than the consider satisfactory ratio of ,+'
that is every one rupee of current liabilities minimum , Rupees are available as
margin of set.
<B
4UICK RATIO:
Kuick ratio also known as Acid "est or =i)uid ratio is a more vigorous )uick
assets and current liableness. Kuick ratio can be calculated by dividing the total )uick
assets by total current liabilities.
#sually a high )uick ratio is an indication that the company is li)uid and has
the ability to meet its current or li)uidity liabilities in time and on the other hand a
low )uick ratio represents that the company li)uidity position is good an increase in
the )uick ratio reveals the li)uidity position of the company improved. As a general
rule a )uick ratio of '+' is considered to be satisfactory. 1ut the acceptable ratio for
%ndian firms may B.@B+' instead of '+'
4UICK ASSETS = CURERENT ASSETS > #STOCKJPREPAID E.PENSES)
4UICK LIABILITIES = CURRENT LIABLITIES > BANK OER DRAFT
QUICK RATIO
Y%&6 4@(8; &::%,: C@66%', <(&F(<(,(%: 4@(8; R&,(-
,BB<:B>
,BB>:B@
,BB@:BA
,BBA:'B

,B'B:''
'.'BB,A>
'8.-,8,8
'-@@<'>B
''@A88-'
'@A'<.88
,A'<..,-
-B8A>.-,
-B8'BA@@
->A.-'A.
.,@@@<A,
B..@
B.8B
B..8
B.-'
B...
AE%6&)% 0!11
<'
9RAP(+
INTERPETATION :
'. An observation of table revels the year highest ratio is ...B during the year ,BBA:
'B and the lowest ratio is '..8 during the period ,BB.:B8.
,. Average ratio is -.,A during the si7 years period.
-. Kuick ratio represents a satisfactory financial condition. %dle )uick ratio of '+' the
ratio2s or used to know the li)uidity position of organi3ations.
.. 1y observing the li)uid position is satisfied and it is very good.
<,
ABSOLUTE LI4UID RATIO $
Absolute li)uid ratio is calculated to know the absolute li)uid position of firm.
Absolute li)uid ratio is rigorous measure of firm2s ability to serve its short:term
liabilities. "he usefulness of the ratio is test of li)uidity position of firm and its
superior the current ratio.
Absolute li)uid assets
Absolute li)uid ratio P
Current liabilities
4ash I bank balance Q current investment
Absolute li)uid assets P
4urrent liabilities.
4ash I1ank balanceP 4urent assets
4urrent investmentP govt . invest ment value

Y%&6 AF:-<@,% <(K@(B
&::%,:
C@66%', <(&F(<(,(%: AF:-<@,% R&,(-
,BB<:B>
,BB>:B@
,BB@:BA
,BBA:'B

,B'B:''
>,B>B,A>
>-.B,8,8
>'@8<'>B
<A@<88--
><@@<.88
,A'<..,-
-B8A>.-,
-B8'BA@@
->A.-'A.
.,@@@<A,
,..>
,.-A
,.-8
'.@.
'.>A
AE%6&)% 0!11
<-
GRAPH$
INTERPRETATION$
"he acceptable from for this ratio is 8BN (or& B.8@' Re.' worth absolute li)uid
asset is considered ade)uate to pay Rs., worth current liabilities.
'. Absolute li)uid assets were lowest in the year ,BB.:B8 at B.,8N the average
absolute the review period.
,. 1y observing the li)uid position is satisfied and it is very good.
<.
DEBT E4UITY RATIO$
A) M%&'(')$
"his ratio establishes a relationship between outside borrowing owned funds
of any enterprise.
B) OFL%8,(E%$
"his objective of computing this ratio is to measure the relative proportion of
debt and e)uity in financing the assets of a firm.
C) C-?9-'%',:$
=ong term debts which mean long term debts (5hether secured or #! secured
e.g. Debentures* bonds and =oans from financial institutions&.
D) C-?9@,&,(-'$
"his ratio is computed by dividing the long term debts by the share holder2s
funds. "his ratio is usually e7pressed as proportions.
<8
E) F-6?@<&$
"otal Debts (?utstanding 1orrowings&
Debit: ;)uity ratio P
"otal ;)uity (;)uity Q Reserve funds&
?utsider funds
Debit: ;)uity Ratio P
Shareholders funds
Y%&6:
D%F, EK@(,A D%F, EK@(,A R&,(-
,BB<:B> -.'8<-A<, @A8,.<,A -.@'
,BB>:B@ -'A>,@A<@ A-8BB<,' -..'
,BB@:BA -,.8B>8'- 'B-..A>A8 -.'-
,BBA:'B .B>->BA@> ''.<--<.@ -.88
,B'B:'' 88@><-'<. ',A.8,',A ..'-

<<
GRAPH$
INTERPRETATION$
'. According the about table there is 1lanca between e7ternal sources and internal
sources in si7 years.
,. "he table reveals that the debt e)uity ratio is showing a continuous decrease for all
the si7 years that is from ,BB-:B. to ,B'B:''.
-. "he average debt e)uity ratio is ,+'.
<>
P6-96(%,&6A 6&,(-$
"he proprietary ratio is calculated by dividing shareholders fund and total
assets. "his ratio illustrates the relationship between the shareholders fund and total
volume of assets. %n simple words* how much funds are contributes by the owners in
financing the assets of the firm.
FORMULA$
Shareholders fund
Proprietary ratio P
"otal assets
Share holder fundsP Share capital valueQresrves
"otal assetsP =ong:term assetsQ current assets
Jears Shareholder fund "otal assets Ratios
,BB>:B@
,BB@:BA
,BBA:'B
,B'B:''
A-8BB<,'
'B-..A>A8
''.<--<.@
',A.8,',A
.8.A'@>@<
.>-'8A>8>
8>-@>-A@.
>8'.>-.,>
B.,B
B.,'
B.'A
B.'>
<@
GRAPH$
INTERPRETATION$
"he proprietary ratio for the year ,BB.:,BB8is B.', and the year ,B'B:,B'' the
ratio increased by B.'>.gradually every year the proprietary ratio increased year by
year to B.,'.
<A
C&:5 6&,(-$
"he cash ratio is calculated by cash plus marketable securities and current
liabilities. %t shows relationship between cash and current liabilities of the
organi3ation.
FORMULA$
4ash Q 6arketable Securities
4ash Ratio P
4urrent liabilities
Jears 4ashQ marketable
securities
4urrent liabilities Ratios
,BB<:B>
,BB>:B@
,BB@:BA
,BBA:'B

,B'B:''
>,B>B,A>
>-.B,8,8
>'@8<'>B
<A@<88--
><@@<.88
,A'<..,-
-B8A>.-,
-B8'BA@@
->A.-'A.
.,@@@<A,
,..>
,.-A
,.-8
'.@.
'.>A
GRAPH$
>B
INTERPRETATION$
"he current assets of "(; D#R9A 4?:?P;RA"%H; #R1A! 1A!$ ="D for
the year ,BB.:,BB8 shows decreasing trend but in the year ,BB>:,BB@ the current
assets showed an improvement. 1ut again in ,B'B:'' the current assets decreased


>'

>,
FINDINGS
%n the years ,BB.:,BBA* all the years operating cycle shows a net decrease in
working capital.
Jear by year current liabilities are increased.
"here is no proportionate change in the position of current assets compared to
current liabilities.
4urrent ratio accepting norm is ,+' company2s current ratio is not up to the
acceptable norm.
4urrent liabilities and current assets are also facing changing trends in the year
,BB.:,BBA.
"he debt e)uity ratio of the company is in declining trend.
"he reserves and surplus to capital ratio is increased by 8.-@.
"he return on investment is increased from B.B.. to B.B8- compared with the
previous year both the profit and share holder funds. %t leads to and increases
in the ratio.
"he proprietary ratio has shown an increasing trend!
So many fluctuations are there in working capital position.
"otal debt of the company is more than three times than net worth.
4ompany is maintaining reserves and surplus to capital in the ratio of more
than '+-.
Return on investment is very* very low because of low net profit.
Share holders funds are very low when compared with total assets of the
company.
>-
SUGGESTIONS$
4ompany has to maintain ,+' ratio of current assets and current liabilities. 1ut
the company current liabilities are more* so company has to increase its
current assets.
Due to heavy dependence on debt funds* banks and returns are not up to the
satisfaction of share holders.
5ith out proper maintenance of working capital* company never turned to
profitability position. So bank has to improve working capital management.
4ompany has to review its policies towards working capital management.
1etter to improve share holders funds than debt funds. 5hich deteriorate its
interest burden.
"o attract more share holders funds bank has to improve its profitability.
"o get more profits bank has to change its policies* procedures towards the
proper planning of working capital management.
1ank has to improve its absolute li)uids assets because their main business is
lending.
1ank always change its policies towards accepting more deposits.
6anagement has to take steps not only for the improvement of working capital
but also towards the over all performance of the bank.
>.
BIBIOGRAPHY$
/inancial management %. 6. PA!D;J
/inancial management R. $. S(AR6A I S. $.
9#P"A
5orking capital management %. 6. PA!D;J
Annual report of DURGA CO-OPERATIVE URBAN BANK
LTD.
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