AN STUDY ON PROFITABILITY ANALYSIS

CHAPTER-1

INTRODUCTION

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INTRODUCTION

1. Finance
Is the life blood of every business. It is the foundation of every business activity and it

is pivot around which every business activity relates, Finance has acquired so much

importance that modern is described as money. At present, we cant think of an

economy without money, because an economy without money cannot function

effectively. Efficiency and smoothly. Money has overcome the difficulties of the

borer system. It has made possible tremendous saving of time and troublr in the

narshalling of productive facilities and in the finance distribution of the output of the

industry to final consumes.

Finance is one of the major elements which activities the overall growth of the

economy. Finance has widely been termed as the master key providing access to all

resources required for the running business activities. Finance is regarded for running

business activities, Finance is regarded as the life blood of a business enterprises, this

is because in the modern money oriented economy. Finance is one of the basic

foundation of all kinds of economic activities. Therefore a well-knit financial system

directly contributed to the growth of the economy. Finance is the management of

monitory affaris of company.

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Meaning Of Finance

The word ‘Finance is derived from an old French word ‘Finer’, meaning thereby to
pay, settle or finish. In other words, the term ‘Finance’ means ‘Money’ or to provide
money or ‘provision of funds’ as and when needed.

Finance is that administrative functions in an organization which relate with the

arrangement of cash credit, so that the organization may have the means to carry out
its objectives as satisfactorily a possible.

1.2 Defination of Finance

“The provision of money at the time it is wanted”. In a broad sense, finance refers to
funds or monitory resources needed by Individual, business houses and the
government.

F. W.Paish

"Finance is that business activity which is concerned with the acquisition and
conservation of capital funds in meeting the financial needs and overall objectives of
a business enterprise".

B.O.Wheeler

Finance is defined as the management of money and includes activities like investing,
borrowing, lending, budgeting, saving, and forecasting.

Finance is defined that is concerned with the allocation ( investment ) of assets and
liabilities over space and time, often under conditions of risk or uncertainity.

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1.3 Features Of Finance

• Finance is essential for business activity in the sense that business activities are not
possible without finance.

• All business concerns weather small or large need finance.

• Business may be short term finance, medium, term finance depending upon the
nature of the activities to be financed.

• Investment opartunities.

• Diversify your investment.

• Financial decision making.

• System of internal controls

• Acquisition, allocation and utilization of funds

• Maximisation of shareholders wealth.

1.3 Importance Of Finance

Finance is the life blood of business. The plan of business concern would remain mere
dreams unless adequate finance is available to convert the business plans into reality.

❖ To purchase of fixed assets i.e. land, building

❖ To pay for purchase of raw materials

❖ To replace existing assets or acquire new assets

❖ To expand the existing business

❖ To hold stock of material and finished goods

❖ To promote or establish the business

❖ To acquire fixed assets

❖ To make investigation such as market surveys, develop product, etc

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1.5 OBJECTIVES OF FINANCE

The finance is generally concerned with procurement, allocation and control of

financial resources of a concern. The objective can be;

• To ensure regular and adequate supply of funds to the concern

• To ensure adequate returns to the shareholders

• To ensure optimum utilisation of funds

• To ensure safety on investment

• To plan a sound capital structure

• A goal or target pursued by the finance department within an organisation.

• It will be set by the managers responsible for the finance of the business.

1.6 .Functions of Finance

1. Investment decision

Investment decision relates to selection to selection of asset in which funds will be

invested by a firm. The asset that can be acquired by a firm may be long term asset

and short term assets,

2. Financial decision

Financing decision is concerned with financing mix or capital structure the mix of

department and equity is known as "Capital Structure". Determination of the

proportion of equity and debt is the main issue in financing to shareholders and also

financing risk.

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3, Dividend Decision

A firm may distribution its profits or retain the balance with it the decision depends upon the

preference of the shareholders and investment opportunities available to the firm. Dividend

decision has a strong influence on the market price of share.

Therefore the dividend policy is too determined in terms of its impact on shareholder's value.

The optimum dividend policy is one which maximise the value of shares and wealth of

shareholders the financial manager should determine the optimum payout ratio is the

proportion of net profit to be paid out to shareholders .

The financial manager should also consider those factors . The determine
the divided policy practices.

1.7 Sources of Finance

Sources of finance are three types;

1. Short term finance

2. Medium term finance

3. Long term finance

4. Dividend decision

Short term finance refers to finance required by a firm for a period of one or less year. It is
also known as working capital finance.

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"Short term finance required is finance required for purchase of raw material, payment of
wages and meeting the others 'day —to-day' manufacturing, administrative, marketing and
others expenses of a firm, it is called a short term finance".

A, Features of short term finance

❖ It is for a short period of one year or less

❖ It is only which is quickly available

❖ It is suitable for small concern

❖ It is less costly as compared to long term finance

B, Importance of short term finance

• It is an index of solvency of the firm

• It enhance the credit worthiness of the firm

• It helps the firm to maintain good business relation

• It improve the morale of the executive and employees of the firm.

2, Medium term finance

Medium term financial refers to finance required for period of one year to five year, "It is

finance requires for permanent or regular working capital, replacement of worn out

machinaries, small expension and modernization and for meeting the long term needs for

which long term finance cannot be quickly arranged".

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A, Features of medium term finance

➢ it is for one year to five year

➢ It is relatively cheque as compared to long term finance
➢ But it is costlier than short term finance
➢ It is also much importance to small business undertaking.

3, long term Finance

Long term finance refers to finance required for a period exceeding five years. It is required
to a great extent to the fixed capital requirement of the business.

A, Features of medium term finance

➢ It is required for long period exceeding five years

➢ It is required for financing fixed capital of an undertaking.

➢ It is costlier than short term and medium term finance

➢ It is Required for establishing new undertakings

➢ It is also required for expansion and development of existing business

➢ Long term loans are raised securities.

B. Importance of Long term finance

■ For acquisition of fixed assets such as land, building, machinery, etc

■ For acquisition of intangible assets such as goodwill, patents, trademark.

■ For meeting promotion or preliminary expenses

■ For meeting the cost of setting up of the organization.

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1.8, Benefits of Finance

The benefits or advantages of finance may be considered fewer than three heads.
They are;

1. Benefits of finance to the Business units

2. Benefits of finance to the Investors

3. Benefits of finance to the society

1. Benefits of finance to the Business units

Finance helps in running of every business.

a) Finance is the lubricant which keeps a business enterprise moving and dynamic.

b) Finance guides and regulates investment decision and expenditure. c

c) Finance is necessary for the acquisition of fixed assets.

d) Finance is also helps in meeting the working capital needs of the needs.

e) Finance is needed for payment of Tax to the government in time.

f) Finance is needed for payment of annual dividend to share holder.

g) Finance is helpful for Modernisation, Diversification, Expansion and Development

the business.

h) Finance helps to offer fair returns on investment to shareholders.

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2, Benefits of Finance to the Investors

a) Finance provides wide investment opportunities to the investors.

b) Development of financial market by business enterprises has injected safety and

liquidity to the investment of investors.

3, Benefits of Finance to the Society

a) Finance provides wide investment opportunities to the investors.

b) Finance increases the employment opportunities to the investors.

c) Finance helps the society to have large verity to goods which they need.

d) Finance contributes to industrial development in background areas.

e) Finance contributes to balanced regional development of country.

f) Finance in also contributes to the development of money market and capital

market in the country.

1.9 Types of Finance

There are mainly two types of finance. They are as follows

1. Personal Finance

2. Corporate Finance

1. Personal Finance

In this finance decision may involves paying for education, financing durable goods
such as real estate and cars, playing in.g. Health and property insurance. Investing

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and saving for retirement. Personal financial decision may also involve paying for a
loan or debt obligations.

1. Corporate Finance

Corporate finance can easily categorize in two categories. First one is short
term finance with generally involves balancing risk and profitability while attempting
to entities wealth and the value of its stock.

Second one is Long term funds are provided by ownership equity and long
term credit, often in the form of bonds. The balance these forms the companies capital
structure. Short term funding or working capital is mostly provided by banks
extending a line of credit.

PROFITABILITY ANALYSIS
1.10 Introduction

The main and alternative objective of any organization whether manufacturing or

service industry is to maximised the profit so the profit is the residuals income and is

a return for the risk. The profit is the difference between the total income and total

expenditure.

In the present scenario profit pervading not only in all the liabilities and assets side of

the balance sheet but also in income and expenditure of profit and loss account.

Each and every of the balance sheet and profit could eventually become the main

parameters for evaluation

performance recent years.

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1.11 Operational definition of the concepts

In economic sense, profit would mean net increase in the wealth viz, cash flow plus
changes in the value of the firms assets. In decision making situation the financial
manager needs to focus on cash flows and economic definition of profit. In noted that
the accountants concept of profit is different from that of the economics the
computation profit is by the arbitrary of expenditure between revenue expenditure and
capital expenditure price level changes also complicate the measurement of the
accounting profit.

Maximum output for a given amount of input or uses maximum input for
producing a given output. It assumed to case the efficient allocation of resources
under the comparative market conditions and profit considered as the most
appropriate measures of a firms performance.

A company should earn profit to survive and grow over a long period of time.
Profit is essential but it would be assume that every action instead by management of
a company should be aimed at maximizing profits irrespective social consequences.

It is unfortunate that the work profit is looked upon as a term of abuse since some
firms always want to maximize profits at the cost of employees customers and society
except such infrequent cases. It is a that efficient profit must be earned to sustain the
operation of the business to be able to obtain funds from investors for expansion and
growth and to contribute towards the social overheads for the welfare of the society.

Profit is the ultimate output of a company and it will have no future, if company and it
fails
to make sufficient profits. Therefore, The financial manager.

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Should continuously evaluate the efficiency of the company in terms of the profit. The
profitability ratios are calculated to measure the operation efficiency of the interested
in the profitability of the firm, owners, shareholders of the company want to get a
required rate of return on their investment. This is possible only when the
organization obtains enough
profits.

Generally two major types of profitability ratios are calculated;

1, Profitability in relation to sale

2, Profitability in relation to investment

Meaning of profit

The positive gain of an investment or business operation after subtracting from all
expenses opposite of loss.

Profitability

The ability to earn a profit by a firm to generate net income on a consistent basis. It is
often measurement by price to earnings ratio.

Profitability Analysis

The primary objective of a business undertaking is to earn profits. Profits earning is

considered essential for the survival of the business.

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according to Lord Keynes, "Profit is the engine that drives enterprise".

A business needs profits not only for its existence but also for expansion and
diversification. The investors want an adequate return on their investment, workers
want higher wages, creditors want higher security for their interest and loan so on.

A business enterprise can discharge its obligation to the various segments of

the society only through earning of profits. Profits are, thus, a useful measures of
overall efficiency of a business. Profit to the management are test of efficiency and a
measurement of control to owners, a measure of worth of their investment to the
creditors, the margin of safety to employees, a source of fringe

Benefits to government, a measure of tax-paying capacity and basis of

legislative action to customer, a hint to demand for better quality price cuts to an
enterprise, less cumbersome source of finance for growth and existence and finally to
the country, profit and an index of economic progress profitability ratios and
calculated to measure the overall efficiency of the business.

An analysis of cost and revenue to determine whether a will make a profit and
if so how much, this is important information in deciding on whether to make an
investment.

1.12 Importance of Profitability Analysis

The primary objective of business undertakings is to earn profits. Profits

earnings is considered essential for the survival of the business. In the words of Lord
Keynes profit is the engine that drives the business enterprises.

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Business needs profit not only for its existence but also for expansion.

Business needs profit not only for its existence but also expansion.

❖ The investors want an adequate return on their investment.

❖ Workers want higher wages.

❖ Creditors want higher security for their interest and loan so on.

❖ A business enterprise can discharge its obligation to the various segments to

the society only through earning of profits.

❖ Profits are thus a useful measure of overall efficiency of a business.

❖ Profit to the management is the test of efficiency and a measurement of

control.

❖ To owners a measure of worth of their investment.

❖ To creditors the margin of safety

❖ To employees a source of fringe benefits.

❖ To government a measure of tax- paying capacity and the basis of legislative

action.

❖ To customers a hint to demand for better quality and price cuts.

❖ To an enterprises less cumbersome source of finance for growth and existence

and finally to the country.

❖ Profits are on index of economic progress profitability ratios are calculated to

measure the overall efficiently of the business.

1.13 Benefits of profitability Analysis

➢ Profitability analysis will identifies the extent which major business segment

contribute to company overhead and profits.

➢ It provides a method for management to compare performance of business
segment.

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➢ It provides method of management to assess a products return on investment.

➢ Provides a method for management to estimate the potential of new business

opportunities.

The length of time required to repay the initial investment can be a critical factor.

The main important two profitability ratios they are as follows;

A. General profitability Ratios

B. Overall profitability ratios

1.14 1 A 1 General profitability Ratios

The main important General profitability Ratios are as given below;

1) Gross Profit Ratio

2) Operating ratio

3) Operating Profit ratio

4) Expenses Ratio

5) Net Profit Ratio

1. GROSS PROFIT RATIO

Gross profit ratio measure the relationship of gross profit to net sales and is usually

represented as a percentage. Thus, it is calculated by dividing the gross profit by sales.

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Gross profit ratio = Gross profit* 100

Net sales

Gross profit ratio= sales-cost of goods sold* 100

Sales

Interposition of Gross profit ratio

i. The gross profit ratio indicates the excent to which selling prices of goods per

unit may declaration without resulting is losses on operation of a firm. It reflects the

efficiency with which a firm products its products.

ii. There is no standard norm for gross profit and it may very from business to

business but the gross profit should be adequate to cover the operating

(administrative and office expenses, selling distribution of expenses) and to

provide for fixed

charges, dividends and accumulation of reserve

A company of gross profit ratio over time or for different forms in the same

industry is a good measure of profitability.

2) OPERATING RATIO
Operating ratio measure the cost of operation pre rupee of sales. The ratio is

calculated by dividing operating costs with the net sales and it's generally represents

as a percentage.

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Operating Ratio = Operating cost* 100

Net sales

Operating Ratio = cost of goods sold + Operatingemenses * 1 00,

Net sales

Operating expenses consist of

A, Administrative and office expenses like rent, salaries to staff,

insurance, director fees etc

B, Selling and distribution expenses like advertisement, salaries of salesman, etc

Interpretation of operating ratio

Operating ratio indicates the percentage of net sales that is consumed

by operating lost. Obviously, higher the operating ratio the less

favourable it is. Because, it would have a small margin (Operating

profit) to cover interest, income-tax, dividend and reserves.

There is no rule of thumb for this ratio as it may differ from firm to

firm depending upon the nature of its business and its capital structure.

Operating ratio is considered to be a yardstick of operating efficiency but it

should be used continuously because it may effected by a uncontrollable factors beyond

the control of the firm.

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3) OPERATING PROFIT RATIO

Operating profit ratio is calculated by dividing operating profit by sales. Operating profit

as calculated as follows method;

Operating profit ratio-Net sales — operating cost (cost of goods sold +

Administrative and office expenses+ selling and distribution expenses)

OR

Operating profit ratio= Net profit + non operating expenses- non operating income so,

Operating profit ratio = operating profit* 1 00

4) EXPENSES RATIO

Expenses ratio indicates the relationship of various expenses to net

sales. The operating ratio reveals the average total variation in expenses but some of the

expenses may be increasing while some may be failing.

Hence, expenses ratio are calculated by dividing each item of expenses or group of

expenses with the net sales to analysis the causes of variation of the operating ratio. The

operating ratio can be calculated for each individual item of expenses or a group of items of a

particular type of expenses like cost of sales ratio, administrative expenses ratio, selling

expenses ratio, material consumed ratio, etc………

Particular expenses ratio = particular expenses * 100

Net sales

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Individual or special expenses ratio may be calculated as follows;

a) Cost of goods sold ratio = cost of goods sold* 100

b) A dminis trativ e and office expens es ratio = A dminis trative and

office

expenses*100

c) S e l l i n g a n d d i s t r i b u t i v e e x p e n s e s r a t i o = - - s e l l i n g a n d
distribution

expenses/sales* 100

d) Non — operating expenses ratio= Ni=on operating expenses/ sales* 100

5) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit ( after taxes ) and sales, and

indicates the efficiency of the management in manufacturing, selling, Administrative and

other activates of the firm.

This ratio is the overall measure of firms profitability and is calculated as;

a) Net profit ratio = Net profit after tax* 100

Net sales

b) Net profit ratio = Net operating profit* 100

Net sales

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The two basic element of the ratio are net profits and sales. The net profits are obtained
after
deducting income-tax and generally, non operating incomes and expenses are
excluded from for calculating this ratio.
the net profits

5). CASH PROFIT RATIO

The net profits of a firm are affected by the amount or method of depreciation charged,

further, depreciation being non-cash expenses it is better to calculated cash profit ratio. This

ratio measure the relationship between cash operated from operations and the net sales. This

ratio calculated as follows;

Cash profit Ratio= cash profit* 1 00

Net sales

Where, Cash profit = Net profit + Depreciation

Overall profitability ratio will

be calculated in different types. They are as follows;

1.15 (B) Overall Profitability Ratios

Profits are the measure of overall efficiency of a business. The higher the profits, the more efficient

are the business considered. For example, company A earns a net profit of Rs. 50000 while company B earns only Rs.

40000. Company A shall be considered better. Charges in total profits may although indicate charges in efficiency but they

will not

indicate true state of the business or profitability unless profits are related with the size of investment.

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1) Return on share holders investment or net worth ratio

2) Return on equity share

3) Earnings per share

4) Return on capital employed

5) Capital turnover ratio

6) Dividend yield ratio

7) Dividend payout ratio

8) Price earnings ( earnings yield )

1) RETURN ON SHAREHOLDERS INVESTMENT OR NET WORTH RATIO.

Return on shareholders investment, popularly known as return on investment or

return shareholders. Proprietors fund is the relationship between net profits ( after

interest and tax ) and proprietors funds.

Thus, Returns on shareholders investment= Net profit (after interest and

tax)/ share funds

Interpretation and significance of Return on investment

❖ This ratio is one of the most important ratios used for measuring the overall

efficiency of a firm. As the primary objective of business is to maximize is to

maximize its earnings. This ratio indicates the extent which this primary objective of

business is being achieved.

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❖ As this ratio revels the how well the resources of a firm are being used, higher the
ratio better the ratio the results.

❖ The inter-firm compensation of this ratio determines whether the investments in

the firm are attractive or not as the investors would like to invest only where the
return is higher.

2) RETURN ON EQUITY CAPITAL

Ordinary shareholders are the real owners of the company. They assume the higher
risk in the company, preference share holders get a fixed rate of dividend irrespective
of the quantum of profits of the company

This ratio can be calculated as given below;

Return on equity capital=Net profit after tax- preference dividend/ equity share
capital (

paid-up ).

This ratio is more meaningful to the shareholders who are interested to know profits
earned by the company and those profits which can be made available to pay dividend
to them. Interpretation of return on shareholders investments and higher the ratio.

3) EARNINGS PER SHARE (E,P,S)

Earnings per share are a small variation of return on equity capital and are calculated

by dividend the net profit after taxes and preference dividend by the total number of

equity shares thus,

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4) RETURN ON CAPITAL EMPLOYED

Return on capital employed establishes the relationship between profits and the

capital employed. It is the primary ratio and is most widely used to measure the

overall profitability and efficiency of a business.

The term capital employed refers to the total of investments made in a business

and can be defined in a number of ways.

a) Gross capital employed

b) Net capital employed

c) Proprietors capital employed

Return on Gross capital employed = Adjusted net profit * 100

Gross capital employed

Return on net capital employed = Adjusted net profit * 100

Net capital employed

5) CAPITAL TURN OVER RATIO.

Capital turnover ratio is the relationship between cost of goods sold and the capital

employed. This ratio is calculated to measure the efficiency or effectiveness with

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which a firm utilize its resources or the capital employed. As capital is invested in a

business to make sales and earn profits. This ratio is a good indicator of overall

profitability of a concern.

Capital turnover ratio = Cost of goods sold or sales

Capital employed

Capital turnover ratio can be classified as follows;

a) Fixed assets Turnover

b) Working capital turnover

Fixed assets turnover is the relationship between sales or cost of goods sold and fixed

capital assets employed in a business.

Working capital turnover ratio indicates the velocity of the utilization of net

working capital.

Fixed assets turnover = cost of goods sold or sales.

Fixed assets.

Working capital turnover = cost of goods sold or sales

(average) working capital

6) DIVIDEND YIELD RATIO.

Share holders are the real owners of a company and they are interested in real sense

in the earnings distributed and paid to them as dividends. Therefore dividend yield

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ratio is calculated to evaluate the relationship between dividend per share paid and the

market value of the share.

Dividend yield ratio = Dividend per equity share

Market value per share

Dividend per share = Dividend paid to share holders Number of share

7) DIVIDEND PAY OUT RATIO OR PAY OUT RATIO

Dividend pay-out ratio is calculated to find the extent to which earnings per share

have been retained in the business. It is an important ratio because plugging back of

profits enables a company to grow and pay more dividends in future.

Dividend pay out ratio = Dividend per equity share

Earning per share

8) PRICE EARNINGS RATIO

Price earnings ratio is also called as a earnings per ratio. Price earnings ratio is the

between market price per equity share and earnings per share. The ratio is calculated

to make an estimate of appreciation in the value of a share of a company and is widely

used to investors to decide whether or not to buy shares in a particular company. The

ratio is calculated as below;

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Price earnings ratio = Market price equity shares

Earnings per shares

Generally, Higher the price- earnings ratio, the better it is if the price earnings ratio

falls. The management should look into the causes that have resulted into the fall of

this ratio.

1.16 DEVIDEND AND MEANING OF CO-OPERATIVE BANKS

Devine defines 'a mutual society formed composed & governed by working people

themselves for encouraging regular saving and granting small loans on easy terms of

interest & repayments.

On the basis of above definitions co- operative bank is a co-operative organization

where persons voluntarily associated together as human being on the basis of equality

for the promotion of economic interest of themselves engaged in the banking function

of acceptance of deposits & sending the credit.

1.17 Man advanta es of co-o erative credit or banking system have

been claimed

• Co-operative like money lenders, can process intimates knowledge of the character

and financial position of their members, of and the local production possibilities and

chance of growth,

• Co-operative have lower administrative costs on account of voluntary services

rendered by their members.

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• They instill among their members a strong feeling of responsibility for prompt
payments of interest and repayments of loans.

They prompt thrift and saving among their members and mobilize their

• small saving for productive or useful purposes.

• The procedure of deposit and withdrawal of a co-operative credit society or bank is

for less complicated, since personal identification and such other problems do not
exist.

• Co-operative may provide loans to their members at lower rates of interest and save
them from the clutches of shylock type money lenders.

• They make their members financially more secure.

• They are suitable to help people of small meaning.

1.17 MERITS OF CO-OPEARTWE , BANK

• As the management of co-operative banks at the lower rung of the ladder on the
honorary services of the members, the cost of operation of co-operative banks is
relative low.

• Because of the low cost of operation, the co-operative banks are able to provide
credit to the weaker sections at cheaper rates.

• They instill among their members a strong feeling of responsibility for prompt
payment of interest and repayment of loans.

• They promote thrift and saving among their members and mobilize their small saving
for productive or useful purposed.

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• Co-operative provides loans to their members at lower rated of interest and save

them from the clutches of shylock type money lender. • They make their members

financially more secure.

• They are suitable to help people of small means.

1.18 LIMITATIONS OF CO — OPERATIVE BANKING

• The smack size of co-operative banks has checked the growth of co-operative

banking.

• Co-operative banks are not able to mobilize adequate resources from members as

well as non — members for one reason or the other.

• On account of limited funds at their disposal. Co-operative banks are not able to

grant adequate credit to their members.

• Most of the loans concentrated in a few persons mostly related to each other. This

has also resulted in poor recovery of advances.

• The limited managerial talent available with the co-operative banks & the ineffective

post credit supervision employed are also responsible for the poor recoveries of

advances.

1.19 PRINCIPALS OF CO-OPERATIVE BANKING

Co-operative banking has certain principles of its own. The important principles of co-

operative banking are.

• Principle of co-operative and mutual help.

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• Principle of service and non-profit.

• Principle of 'one man one vote' in management.

• Principles of thrift and savings.

• Principle of personalization of credit.

1.19 THE STRUCTURE OF CO OPERATIVE BANKING SYSTEM

IN INDIA:

The co-operative banking system in is india federal in structure. It has a pyramid type
of three

tier structure constituted by:

• Primary agriculture credit societies (PACS )

• Central co-operative bank (CCBS)

• State co-operative bank (SCBS)

1.18 CO OPERATIVE BANKING SYSTEM IN INDIA:

Primary credit societies lie, the total or base level. In rural areas are primary

agriculture Credit societies (PACS), which cater to the short and medium term credit

needs of the farmers.

In urban areas to provides non — agricultural credit, urban co-operative banks and

employee's credit societies are formed. Urban banks are their members, they also

accept deposits from members and non members.

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The central co-operative banks (CCBS) are federations of primary societies belonging

to specific district. By furnishing credit to the primary society's central co-operative

banks serve as an important link between these societies and the money market of the

country. No central co-operative banks lends to individuals. It lends to societies only.

The state co-operative banks (SCBS) lies at the apex of the entire co-operative credit

structure. Every state co-operative bank's basic function is to furnish loans to the

central co-operative banks in order to enable them to help promote the lending

activities of the primary credit societies. The state co-operative banks thus, serve as

the final link between the money market and the co-operative sector of the company.

1.19 CATEGORIES

1.20 Short term lending oriented co-operating banks with in these categories of
banks like;

• State Co-operative Banks

• District CoOopeartive Banks

• Primary Co-operative Banks

Long term lending oriented co-operative banks with in the second category there are
land

development banks are;

• State Level

• District Level

• Village level

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1.21 FEATURES OF CO-OPETRATIVE BANK

• They are organized and managed on the principle of co-operative self-help and

mutual help. They function with the rural of " one member one vote"

• Co-operative banks perform all the main banking function of deposit mobilization

supply of credit and provision for remittance facilities.

• Co-operative banks are perhaps the first government supported agency in India.

• Co-operative banks belongs to money market as well as capital markets.

• Co-operative banks accept current, saving, fixed and other type of time deposits

from individual and institution including banks.

• Co-operative banks do banking business mainly in the agriculture and rural sector.

• Co-operative banks also required to comply with requirements of SLR and CLR

liquidity requirements as other scheduled and non scheduled banks.

• Some co-operative banks are scheduled co-operative banks while others are Non -

scheduled bank.

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CHAPTER-2

RESEARCH DESIGN

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2. RESEARCH DESIGN

A.INTRODUCTION

The purpose of research is to gain knowledge, which will be used for solving problems

or satisfying ones thirst for knowledge. One can also for define research as scientific

search for pertinent information on a specific topic. In fact research is an art of

scientific investigation. The investigation must be exhaustive and accurate. In the

order to achieve the goal of the researcher, the evidence as to be collected.

Research is an academic activity and such the should be used in technical

sense. According to professor Gilford Moody "research comprises defining and

redefining problems, formulating hypothesis or suggested solution, collecting,

organizing and evaluating data. Making deduction and making conclusion and they fit

the formulated hypothysis".

Research common parlance refers to search for knowledge. Once can also define

research as a scientific and systematic search for pertinent information on a specific

topic. In fact, research is an art scientific investigation. The advanced learners

dictionary of current English lays down the meaning of research as "A careful

investigation or enquiry especially through search for new facts in any branch of

knowledge".

a.Meaning of Research

Research is a scientific and systematic search for pertinent information on a specific

concept or fact it is simply answer to question or solution to problem.

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IN SIMPLE WORDS, "Research is a systemized effort to gain new knowledge".

a.Research Design

A research design is a logical and planning and it helps in a piece of research.

Research design is the programme that guides the process of collecting, analysis and

interpreting the observation. Design is the blue print of the proposed study.

a. Meaning of research design

Research design is the conceptual structure within which research is conducted. It

constitute the blue print for the collection, measurement and analysis of data.

a. Definition of research design

Ker linger has defined research design as "research design is the plan, structure and
strategy

of investigation conceived so as to obtain answer to a question and to control

variance".

The data collected here may relate to the photographic or the behavioural variables of
the

respondents under study.

Research design is needed and it is very important because it facilities the smooth

sailing of research operations by fixing boundaries and minimizing the time, money

and energy and it also provides blue print of the research operation.

b. Title of the study

"An study of profitability analysis at URBUN CO-OPERATIVE DREDIT SOCIETY".

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c. Statement of the Problem

A healthy company is one which is financially sound not only in the present but also

would be in the future. To know the financial position of the company systematic

financial analysis has to be done to assess to profitability and solvency position of the

company. The project deals with the profitability analysis of the URBON CO —

OPERATIVE CREDIT SOCIETY.

The project analysis of the profitability performance of the Urban Co — operative

credit society ltd, kanakapura. The researcher conducted this research to find out the

financial status profit earned by the organization through transactions and what steps

are taken out by the urban co — operative credit society to increase the profit of the

organization. Thus the statement of the problem is profitability analysis of urban co —

operative credit society.

2.9 Objectives of the study

The principle objective of the study is to get interrelated the theoretical

aspects with things that are functioning in industry and studying in industry and
studying the organization as a whole. Some important objectives of the study are;

• To understand the financial performance indicators of urban Co — operative credit

society Itd.

• To analysis the financial performance of the company in the area of liquidity,

profitability through financial indicators.

• To find out the short — term solvency of the company.

• To find out the position of the return on total resources of the firm. • To know the
cash liquidity of the company

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To know the net profit earned by the company. .

To know the sources of income.

To know how they reduce the cost of expenditure.

To study and analysis various profitability analysis by the company

2.10 Scope of the study

The study was taken up to know the financial activity in the urban co — operative
credit society ltd relating their business activities and performance of the company.

The present study is pertaining to the urban co — operative credit society ltd at
Kanakapura. They study on profitability analysis in respect of the urban co —
operative credit society ltd.

➢ The study is being done ascertain the financial status of urban co — operative
credit society.

➢ The study on financial performance comprises of ratios.

➢ The study was made to analysis the financial performance with reference to
financial statement like, profit and loss a/c and balance sheet with the help of tables
and graphs.

2.11 Limitations of the study

❖ The study is based on the data given by the officials and reports of the company.

❖ Time was limited and subject is vast and limited information resources.

❖ The comparison and analysis are limited only of the past 5 years.

❖ The study includes the collections of secondary data, so it may not provide the true
and fair view of the profitability position of organization'

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The research is conducted as per information provided by organization.

2.12 Methadology of study

place of the study : Urban co-operative credit society ltd, kanakapura

Title of the study : Profitability Analysis of urban co — operative credit society ltd,

Kanakapura.

Limitation starting — I have made an effort to study completely and as exhaustively

as possible, However the followings problems were faced during the study.

2.13 Method of study

1) discussion with the management of the company to get general information about

their activities.

2) study of the classification of the items adapted in profit and loss account and

balance sheet and the accounting policies of the concern.

3) study of the annual reports for collecting data for 5 years.

2.14 DATA COLLECTION METHOD

a) Primary data

b) Secondary data

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A. PRIMARY DATA

Primary data may be described are those data have been observed by the researcher for

the first time. Primary data re — collected from the field of the specific purpose of the

research. Such as observation of functions undertake and interviewing through asking

questions personally.

The primary data is collected through or concerned with the face to face interaction

and discussion with various executives, officers and other staff members of urban co-

operative credit society ltd.

B. SECONDARY DATA

Secondary data are those that have been complied already before conducting the

research. Secondary data may be internal as well as external. Internal data are

collected from the company records.

The secondary sources of data collection is by way of recorded facts and information.

Annual reports, manuals prepared by the organizations for once in a format.

The profit and loss account and balance sheet of the urban co — operative credit

society ltd are the main secondary information for the calculation and analysis of

profitability position of the urban bank.

The collection of data also includes certain information interviews, which were done

individually in relation to the study conducted which were used for cross verification.

These

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questions the administered in order to acquire the information purpose of any section.

and knowledge required for the

2. 15 TOOLS AND TECHNIQUES ODF DATA

COLLECTION

I. Observations

II. Interviewing the relative department executives

III. Organizations audited financial statement

Iv. Organization information booklet

2.16 .SAMPLING PLAN

The sampling plan is used to understand the financial performance of a company. Its

stockholders look at these financial statement the balance sheet, profit and loss

account and the sources and uses of fund statement. The balance sheet show of

financial position of the company at a given point of time. The profit and loss

statement reflects the financial performance of the company over a period of time.

Typically it is drawn up for a period one year. The sources and uses of fund statement

portray the flow of funds through the business during a given accounting period.

Systematic sampling was used to analysis the data.

2.16. SAMPLING SIZE

The sampling size used in the project study relates to financial figures, covering the

period from 2010 — 2014. Each data was already checked and verifying by

accountants. Hence, the

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data is straight way taken for analysis. The data is collected from the accounting

statements. Comparatively covers the study as it is concerned with the true financial

data of the company.

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CHAPTER-3

COMPANY PROFILE

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"RYTHARA SEVA SAHAKARA SENGA,BIDADI" was the first urban co-operative bank

in the country started in April 06, 1973 by Sri. B.V SHARABHAIAH&C.BORAIAH.

The co operative societies in Karnataka and the License was granted by RBI

no.UBD/KA/642, dated 11.11.1986 for conducting the "Banking Business.

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Nature of the Business carried

The business carried by the bank is generally related with providing short term and long term

loans, It also accepts deposits from public. RSSS also provides loans to Processing in

Karnataka and working capital loans to state and national level institutions. they offer all

types of banking services to customers like deposits, loans, pay order, bank guarantees,

cheque collection facility, etc

 Cash receipts/ deposits.

 Cash withdrawals

 Sanction and disbursements of loan.

 Lockers facilities.

 Updating and issuing of new pass book and cheque books.

 Issuing demands drafts.

 Issuing gold coins.

VISION, MISSION AND QUALITY POLICY

Vision

 Accepting deposits for the purpose of promoting saving habits in the minds of the

public and the members.

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♦ BCC has vision to mobilize deposits of rs.1000 and to raise advance portfolio to rs

800crores in the next 3 years.

♦ To increase the branch network to 25 branches

♦ The RSS believes that every individual from each strata society needs affordable, relevant

and quality banking to fulfill personal aspirations.

♦ The vision of the bank is to Constantly strive towards meeting those social needs by

providing world-class infrastructure for co-operative banking.

Mission

♦ In fulfillment of its vision, the bank commits itself to a mission to excel in all its activities

to create an atmosphere of effective banking, induce healthy challenges and competitions,

encourage sustainable accomplishments and ensure enriching rewards to everyone members,

staff; associates and the society of large.

♦ To meet the growing aspiration of the customers of the bank in particular and other in the

general in the changing environment.

♦ To bring about total customers satisfaction by providing quality services.

♦ To meet the economic and career aspiration of the employees of the bank.

♦ To promote the effectiveness of credit and to reduce the risk in granting credit through

careful and continuous supervision.

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QUALITY POLICY
Following are some of the rules and regulations provided by the bank for the benefits of
customers.

Avail nominations facilities to a/c including savings bank a/c and current a/c holders.

Bank will exchange mutilated currency notes as per RBI guidelines.

Banks will give standing instructions for the payment of bills, rents, interest,
insurance, etc.

Banks provides required and important guidelines to the lockers holders.

PRODUCTS/ SERVICE PROFILE

the main operation of the bank (customer service)

Withdrawals

Cash receipts

Sanctions and disbursement of loans

Lockers facilities

Clearing cheques

Updating pass book

Issue new cheque book

Issuing demand draft

Pay order

Telegraphic transfer

Opening of fixed deposit account

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OWNERSHIP PATTERN
PRESIDENT Sri. Bairegowda

Vice President Sri. Shivaiah

Directors B.P. Ramu

Chandrashekhar

R. Mallesh

Smt. Lakshmi

C.N. Nagarajaiah

G.D Sathish

Smt. Uma

B.C Shivakumar

CANARA BANK

COMPETITORS INFORMATION
Raithara seva sahakara sanga, is the co-operative bank, it is facing competition from the

commercial banks undertake a number of banking services. Since the urban co-operative

banks are localised and do not have network of bankers they are not in position to meet all the

banking services.

Therefore the institution like government, public sector undertakings and the urban co-

operative banks are facing competition from the commercial banks.

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The list of competitors is as given below

 Karnataka bank

 State bank of India

 Bank of Naroda

 Bank of India

 Canara bank

 Union bank of India

 Allahabad bank

 Indian bank

 Corporation bank, etc...

Achievements/ Awards
Since from the opening, the bank has been functioning effectively. Rythara Seva sahakara

sangha, Bidadi. was awarded by “Sahakara chalivali shathamanostva” 26 to 29 in Mysore.

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Workflow model of mortgage loan activity

Workflow model

Mortgage loan work flow activity

Customer apporaches the bank branch office

Loans from is given to the customer; customer fills the form and submits it will the
necesssary original documents customers approaches the bank’s branch office

Case worker scrutinises the application and sends it to the branch manager

Branch manager inspects property & sends the application to the administrative
department office

Re-scrutiny is done and the application is sent to legal opinion

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Valuation of the property takes place, when board approves, sanction of loans takes
places

2.9 FUTURE GROWTH AND PROSPECTS

 To rose deposits up to 500 crores and loans and advances up to 370 crores.

 To make all the branches to core banking facilities and help to customers.

 The bank wants to increase its operations by setting up its banches all over the

Karnataka.

 There are planing to enter core banking.

 Opening of branches at all the districts head-quarters and minorities concentrated

centre’s.

 To increase deposits.

 To improve the customers service by adopting latest technology.

 The banks aim to achieve 1000 crores deposits in few years.

 Foreign exchange bank.

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STRUCTURE

PRESIDENT

VICE PRESIDENT

BOARD OF DIRECTORS

GENERAL MANAGER

ACCOUNTANT

ASSISTANT ACCOUNTANT
|

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EMPLOYEES

SWOT ANALSIS

STRENGTGS

1. BRAND NAME :
The Bangalore city cooperative bank has earned a reputation in the market for extending

quality services to the market vis-a-vis is competitors. I have earned a strong brand name in

cooperative banking.

2. VAST EXPERIENCE:
The Bangalore city cooperative bank has a vast experienced hundred years in banking

business.

3. DIVERSIFIED PORTFOLIO :
The Bangalore city cooperative bank has the entire product under his belt, which helps to

extend partnership with existing customers. The bank has umbrella of products to offer their

customers, if once customer has relationship with the bank, so products l, which bank

offering are :-

 Retail banking

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 Business banking

 Merchant establishment services

 Personal loans & car loans

 Insurance

 Housing loans

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4. AGGRESSIVE MARKETING :
The Bangalore city cooperative bank has Known for aggressive marketing of its products.

Recent strategy to push its product is, it is the sole sponsor of a Kannada music show which

is telecasted in ETV Kannada channel

5. FOCUS ON ALL KINGS OF CUSTOMERS :

The bank targets not only the top bracket of clients but even Carter yo the needs

of small business/ customers. Due to this reason the bank may retain good

clients effectively

6. AGGRESSIVE APPROACH IN LENDING :

Bank has a aggressive approach in lending. Because of this policy company prefers this bank

when to other nationalised bank.

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WEAKNESS

1. TECHNOLOGY :

From its inception, bank has not adopted a policy of selecting internationally proven and

specialized packaged systems for its technology. Banks technol acknowledgedglobally which

as a com ogy platform has not been petitive advantage for any bank.

2. NO PRESENCE OUTSIDE INDIA:

dank is having any presence outside india,because of which companiesp refer MNC bank,

mainly city bank tries to emerge outside India then it has a huge potential of customers.

3. POOR CUSTOMER CARE/SERVICE:

With its aggressive marketing this bank is rapidly increasing its customer base. They are not

however, increase the number of employees accordingly. This is leading to deterioration of

the standard the number of employees accordingly. This leading to detonation of the standard

of customer services.

4. MARKET SHARE:

Bank has not got market share in the industry in according to our survey. Which is a great

setback for any business.

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OPPORTUNITIES :

1. NEW IT & ITES COMPANIES:

ET& ITES sector is on boom in the Indian in the market; it opens the door for bank to market

context, with new companies mushrooming capture the huge untapped market.

2. DISSATISFIED CUSTOMERS OF OTHER BANKS:

The groups from its survey and analysis of companies have found out that there are many

comp which are not satisfied its current bank, so the bank with its superior service quality

long working hours can capture those customers.

3. BUSINESS ADVISING FOR SMALL PLAYERS:

The analysis has also indicated that the concept of business advising through very popular

with the higher-end players is virtually nonexistent in the lower end of the market. It should

take this opportunity to provide business advice to the smaller companies at a competitive

rate and try to take the first-mover advantage.

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THREATS :

1. ADVENT OF MNC BANK:

large numbers of MNC banks are mushrooming in the Indian market due to the friendly

policies adopted by the gore This can increase the level of competition and p prove a

poteinitial threat for the market share of the bank.

DISSATISFIED CUSTOMERS:

The analysis indicated that through most of the companies are satisfied with the product offer

by this bank but the poor customer support/services are creating a lot of dissatisfaction among

the customers, this can prove to be a serious problem as far as the market reputation of the

bank is concerned and can be a major thrust in future business accusation.

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CHAPTER-4

DATA ANALYSIS & INTERPRETATION

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ANALYSIS AND INTERPRETATION

INTRODUCTION

Generally research consists of two Parties that is gathering of data and analysie analysis

interpretation of data involves an object. The active e and materials in all the possession of

the research he inherent reaction among variables objective reaction and derived from the

data The inherent Pertaining to the problem. Analysissis and interpretation represents the

application of the deductive large to the research process. deduc

4.2 definition of analysis :

The process of evaluating data using analytical and reasoning to examine each component of

the data provided. This form of analysis is just one of the many steps that must be completed

when conducting the research experiment. Data form various sources is gathered, reviewed

and thus analysis to from some short of findings or conclusion. There are a variety of specific

data analysis method some of which includes data mining, text analysis, business intelligence

and data visualization

MEANING OF INTERPRETATION

Interpretation;

• The act of interpreting — Explanation of what is obscure, translation, vision,

construction. As the interpretation of a foreign language of a dream of an enigma.

• The power or explaining.

• In artists way of expressing his thoughts or embodying his consumption of nature

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TABLE-1

TABLE SHOWING THE INTEREST INCOME TO TOTAL RATIO

Interest income to total ratio = Interest income x 100

Total income

YEARS INTEREST TOTAL INCOME INTEREST

INCOME TO

TOTAL RATIO

2015-16 28197948.00 511037167.87 55.17%

2016-17 37702976.00 674146758.89 555.26%

2017-18 45109375.00 827341790.18 5.542%

2018-19 52574318.00 1070477221.98 4.912%

2019-20 63939021.00 134567888.18 47.52%

ANLAYSIS :-

This table shows the return on net.1 profit to total assets ratio of the urban co-operative

credit society limited. The bank has return on net profit to total assets ratio was 4960 ill

the year 2015-'16, 1.21% in the year 2017-18, 1.12% in the year 2019-20, 99.49% in the

Year 2018'19 totally from the help of this table we came to know the in the year 2019-20

the bank has done more transaction of total assets.

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CHART-1

GRAPH SHOWING THE INTEREST INCOME TO TOTAL RATIO

Chart Title
1200000000

1000000000

800000000

600000000

400000000

200000000

0
2015-16 2016-17 2017-18 2018-19 2019-20

INTEREST TOTAL INCOME

INTEREST INCOME TO TOTAL RATIO

INTERPRETATION:-

From the above graph the total interest income in the total ratio in the year 2015-16 is

unsatisfactory but later on it has been fluctuating and it indicates that total income has

due to increase I total interest income.

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TABLE-2

TABLE SHOWING THE NET INTEREST MARGIN RATIO

Net interest margin ratio = interst income - interset expenses x 100

Average assets

YEARS INETEREST INTEREST AVERAGE NET

INCOME EXPENESES INCOME INTEREST

MARGIN

ASSETS
2015-16 33041311 9654626 46712845 50.06%

2016-17 39813595 15260204 15514644 58.25%

2017-18 46042293 21199518 62142554 39.97%

2018-19 49074597 22725952 67860201 38.82%

2019-20 55962941 26615299 77845713 37.69%

ANALYSIS:-

This table shows the net interest margin ratio of the urban co - operative credit society

limited. Was 50.06% in the year 2013-14, 58.25% in the year 2014-15, 39.97% in the year

2015-16, 38.82% in the year 2016-17, 37.69% in the year 2017-18year will be having huge

transaction about net interest margin ratio.

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CHART-2

GRAPH SHOWING THE NET INTEREST MARGIN RATIO FOR THE

LAST FIVE YEARS

Chart Title
90000000

80000000

70000000

60000000

50000000

40000000

30000000

20000000

10000000

0
2015-16 2016-17 2017-18 2018-19 2019-20

Series 1 Series 2 Series 3

INTERPRETATION:-

From the above graph the total interest income in the total ratio in the year 2015-16 is

unsatisfactory but later on it has been fluctuating and it indicates that total income has

due to increase I total interest income.

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TABLE-3

TABLE SHOWING THE RETURN ON NET PROFIT TO TOTAL

ASSETS RATIO

Return on net assets to total assets ratio = Net profit x 100

Total assets

YEARS NET PROFIT TOTAL ASSETS RETURN ON NET

PROFIT TO

TOTAL ASSETS

RATIO

2015-16 6166456 124117151 4.96%

2016-17 6514894 497140435 3.31%

2017-18 6611037 542881612 1.21%

2018-19 7036750 622765708 1.12%

2019-20 469433414 471822463 99.49%

ANLAYSIS :-

This table shows the return on net.1 profit to total assets ratio of the urban co-operative

credit society limited. The bank has return on net profit to total assets ratio was 4960 ill

the year 2015-'16, 1.21% in the year 2017-18, 1.12% in the year 2019-20, 99.49% in the

Year 2018'19 totally from the help of this table we came to know the in the year 2019-20

the bank has done more transaction of total assets.

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CHART-3

GRAPH SHOWING THE RETURN ON NET PROFIT TO TOTAL

ASSETS RATIO FOR TRH LAST FIVE YEARS

Chart Title
700000000

600000000

500000000

400000000

300000000

200000000

100000000

0
2015-16 2016-17 2017-18 2018-19 2019-20

NET PROFIT TOTAL ASSETS

RETURN ON NET PROFIT TO TOTAL ASSETS RATIO

INTERPRETATION :-

From the above graph, the return on net profit to total assets has been decreased from

1.49% to 1.12% for five years. It indicates the return on net profit is unsatisfactory. The

bank has to take care preventive action to overcome.

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TABLE-4

TABLE SHOWING THE ADMISITRATION & OFFICE EXPENSES

RATIO

Administration & office expenses ratio = administration & office expenses x 100

Net worth

YEARS ADMINISTRATIO NET WORTH ADMINISTRATION

N & OFFICE & OFFICE

EXPENSES EXPENSES RATIO

2015-16 1051534 26024400 0.40%

2016-17 982948 9135208 10.75%

2017-18 1171445 401378255 1.29%

2018-19 1427474 622765708 0.31%

2019-20 1436380 51049093 0.28%

ANLAYSIS :-

It is determined from the analysis that the administration and office expenses ratio of

the urban co-operative credit society was 0.40% in the year 2015-16, 10.75%in the year

2016-17, 1.29% in the year 2017-18, 0.31% in the year 2017-18, 0.28% in the year 2018-

19, in the year 2015-16 the bank has more expenses relating to the administration and

office expenses.

KLE SOCEITY’S DEGREE COLLEGE

AN STUDY ON PROFITABILITY ANALYSIS

CHART-4

GRAPH SHOWING THE ADMISITRATION & OFFICE EXPENSES

RATIO

700000000

600000000

500000000

400000000

300000000

200000000

100000000

0
2015-16 2016-17 2017-18 2018-19 2019-20

administration and office expensesadministration and office expenses

NET WORTH
ADMINISTRATION & OFFICE EXPENSES RATIO

INTERPRETATION:

From the above graph the administration and office expenses ratio has reduced to

0.40% TO 0.28% It indicates the bank has taken care to reduce the expenses. It is a

good policy.

KLE SOCEITY’S DEGREE COLLEGE

AN STUDY ON PROFITABILITY ANALYSIS

TABLE-5

TABLE SHOWING THE CASH PROFIT RATIO

Cash Profit ratio = Cash profit x 100

Net worth

YEARS CASH PROFIT NET WORTH CASH PROFIT

RATIO

2015-16 5596202 260244400 2.15%

2016-17 6166456 9135208 67.50%

2017-18 6514894 401378255 1.62%

2018-19 6611037 45188913 1.46%

2019-20 7036750 510494093 1.37%

ANALYSIS:

This table shows the cash profit ratio of the urban co-operative credit society limited.

Was 2.15% in the year 2016-17, 67.50% in the year 2017-18, 1.62% in the year 2018-19,

1.46% in the year 2017-18, in this table we came to know the 2016-17 year the bank has

good cash profit ratio.

KLE SOCEITY’S DEGREE COLLEGE

AN STUDY ON PROFITABILITY ANALYSIS

CHART-5

GRAPH SHOWING THE CASH PROFIT RATIO FOR LAST FIVE

YEARS

600000000

500000000

400000000

300000000

200000000

100000000

0
2015-16 2016-17 2017-18 2018-19 2019-20

CASH PROFIT NET WORTH CASH PROFIT RATIO

INTERPRETATION:

From the above graph, the cash profit ratio has been fluctuating in the analysis of five

years. It indicates the bank is having an unsatisfactory cash profit. It should take

preventive measures to control it.

KLE SOCEITY’S DEGREE COLLEGE

AN STUDY ON PROFITABILITY ANALYSIS

TABLE-6

TABLE SHOWING THE ASSETS TURN OVER RATIO

Assets turnover ratio = Net worth x 100

Fixed assets

YEARS NET WORTH FIXED ASSETS ASSETS TURN

OVER RATIO

2015-16 26044400 352818444 73.76%

2016-17 9135208 92755477 9.84%

2017-18 401378255 475065685 84.48%

2018-19 45188913 525960871 85.91%

2019-20 510494093 597693823 85.41%

ANALYSIS:

This table shows the analysis of fixed assets turnover ratio was 73.76% in

the year 2015-16, 9.84% in the year 2017-18, 84.48% in the year 2018-19,

85.91% in the year 85.41% in the year 2019-20. The bank has huge fixed

assets turnover in the year 2018.19, 2019-20.

KLE SOCEITY’S DEGREE COLLEGE

AN STUDY ON PROFITABILITY ANALYSIS

CHART-5

GRAPH SHOWING THE CASH PROFIT RATIO FOR LAST FIVE

YEARS

700000000

600000000

500000000

400000000

300000000

200000000

100000000

0
2015-16 2016-17 2017-18 2018-19 2019-20

NET WORTH FIXED ASSETS ASSETS TURN OVER RATIO

INTERPRETATION :

From the above table graph fixed assets turnover ratio has been

increased in five years analysis. It indicates the net worth has been utilized for

purchasing fixed assets.

KLE SOCEITY’S DEGREE COLLEGE