1.

NEED OF THE STUDY

This requires free market competition between open banks and private banks. Step by step, the
competitiveness from the finance department still exists. By expanding poor resources and
reducing benefits and benefits, these will affect the applicability of commercial banks.

Business banks have assumed a fundamental job in provide guidance to monetary improvement
by cooking the money related necessity of exchange and National industry. By giving general
population savings, commercial banks have ensured capital arrangements. Banks allocate
network investment funds to the classification area and then allocate them according to the
needs of experts arranged nationwide, which can be distributed among unique currency
activities.

“Banks are not just the protected store vaults of these reserve funds, they accept the general
financial framework anyway, and they also open stores during their lending activities. In any
case, the necessary capabilities of the broker are favorable device arrange men ban.

2. REVIEW OF LITERATURE

THEORETICAL FRAMEWORK INCLUDING LITERATURE

The theory applied in this study relates to Financial Management, particularly Financial
statement Analysis, as it would facilitate financial performance analysis. The analysis of
financial statements is generally undertaken for evaluating the financial position/performance of
the company, to be used by its stakeholders such as Investors, Creditors and Managers. The
outcome of analysis also helps in predicting financial performance for future period.

Khan and Jain (2011) have defined the analysis of Financial Statements as a process of
evaluating the relationship between parts of financial statements to obtain a better understanding
of the firm’s position and its performance. There are two broad approaches used to measure
Bank performance, the Accounting Approach, which makes use of financial ratios and secondly
Econometric Techniques. Traditionally, Accounting Methods are largely based on the use of
financial ratios, which have been employed for assessing Bank performance (Ncube, 2009).

Kumar (2012) has given a definition to camel rating system, according to him it is a mean to
categorize bank based on the overall health, financial status, managerial and operational
performance. In his study he has chosen the SBI and its associates for checking the performance
and concludes that State Bank of India is always in the lead than its associates in every aspect of
camel.

In a study conducted by Collis and Jarvis (2006) on financial information and the management
of small private companies in the U.K., the most useful sources of information are the periodic
management account (i.e. the balance sheet and income statement), cash flow information and
bank statements (of course bank statement are another form of cash flow information but
generated externally). These sources of information are used by eight (80) per cent of companies
and this demonstrates the importance of controlling cash, which previous research ( Bolton,
1971, Birly & Niktari, 1995, Jarvis et al, 1996) suggest is critical to the success and survival of a
small business.
In the same research eight-seven (87) per cent of small companies’ prepared profit and loss
accounts and seventy-eight (78) per cent, balance sheet. These key financial statements allow
management to monitor profitability of the business as well as its net assets. Confirming the
usefulness of cash flow information, the analysis shows that seventy-three (73) per cent use bank
reconciliation statement and more than fifty-five (55) percent use cash flow statements and
forecast. However, other competitive performance measures perceived in literature such as ratio
analysis, industry trends and inter-firm comparison are not widely used.

Collis and Jarvis (2002) then states that this may indicate that small companies experience
problems in gaining access to appropriate benchmarks, but could also be the results of
competitors filing abbreviated accounts which reduces the amount of information available for
calculating ratio and making comparison. In addition, as many small companies operate in the
service sector, they occupy niche markets and may be less concerned with competition than
those in other markets.

Melse (2004), reports that ratio analysis provides an insight into the financial health of a firm by
looking into it liquidity, solvability, profitability, activity and capital and market structure.

Jooste (2004) investigates that many authors agree that cash flow information is a better
indicator of financial performance than traditional earnings.

Largay and Stickney (1980) and Lee (1982) show that profits were increasing, W.T. Grant and
Laker Airways had severe cash flow problems prior to bankruptcy. Jooste (2004) further states
that users of financial statements around the world evaluate the financial statements of
companies to determine the liquidity, assets activity, leverage, profitability and performance.
Users of financial statements use traditional balance sheet and income statements ratios for
performance evaluation. Therefore, along with traditional ratios, operating cash flow is also
important when evaluating a company’s performance (Jooste, 2004). Various literature states
that the primary purpose of the cash flow statement is to assess a company’s liquidity, solvency,
viability and financial adaptability.
According to Everingham et al (2003) operating cash flow ratios are indicators of performance.
They determine the extent to which a company has generated sufficient funds

Hr Machirajn international publishers (2009): Efficiency can be considered from technical

economical or empirical considerations. Technical efficiency implies increase in output. In the
case of banks defining inputs and output is difficult and hence certain ratios of costs to assets or
operating revenues are used to measure banks efficiency. In the Indian context public sector
banks accounts for a major portion of banking assets, it is necessary to evaluate the financial
decisions of these banks and compare them with private sector banks to know the quality of
financial decisions on its impact or performance of banks in terms of efficiency, profitability,
competitiveness and other economic variables.

Bhatawdekar (2010) explains that Financial Ratio Analysis is the systematic use of ratio to
interpret the components of financial statements for evaluation of strength and weaknesses of a
firm in addition to its historical performance and present financial condition.

Hassan and Bashir (2005) believe that financial ratios are popular due to several reasons as they
are easy to calculate, interpret and permit comparison between the Banks.

Halkos and Salamouris (2004) conclude that financial ratios permit comparisons between the
Banks and the benchmark, which is usually the average of the industry sector.

Dr.Dhanabhakyam & M.kavitha (2012) in their research used some important ratio to analyses
the financial performance of selected public sector banks such as ratio of advances to assets, ratio
of capital to deposit, ratio of capital to working fund, ratio of demand deposit to total deposit,
credit deposit ratio, return on average net worth ratio, ratio of liquid assets to working fund etc.
The ratio of advances to assets shows an increasing trend for most of the public sector bank. It
shows aggressiveness of bank in lending which ultimately result in high profitability.
 Chaudhary (2014) conducted a study to measure the right performance of public and private
sector banks by the use of secondary data collected from annual reports, periodicals, website etc.
for the year 2009-2011 and found out that in every aspect private sector bank has performed
better than public sector banks and they are growing at faster pace.

Jha and Hui (2012) tried to find out the factors affecting the performance of Nepalese
Commercial Banks By using various camel ratios such as return on asset (ROA), return on equity
(ROE), capital adequacy ratio (CAR) etc. As Public sector banks have higher total assets
compared to joint venture or domestic private banks, thus ROA was found higher whereas
overall performance of public sector was unsound because ROE and CAR of joint venture and
private banks was found superior. The financial performance of public sector banks is being
eroded by other factors such as poor management, high overhead cost, political intervention, low
quality of collateral etc.

Dr Richa Jain, Prof. Mitali Amit Shelankar & Prof Bharti Sumit Mirchandani,

(2015) Tools / Techniques of financial statement analysis:- The various tools and techniques of
financial statement analysis are;

Trend Percentage Analysis: It is also known as Intra firm comparison in which the financial
statements of the same company for few years are compared for some important series of
information.

Comparative Statement: These are the statement of financial positions at different periods of
time. The financial position is shown in a comparative form over two period of time.

Common Size Statements: The common size statements, balance sheet and income statements
are shown in terms of percentages. The data is shown as percentage of total assets, liabilities and
sales.

Ratio Analysis: It is a technique of analysis and interpretation of financial statements. It is the

process of establishing and interpreting various financial ratios for helping in taking decisions.
 Funds Flow Statements: It is a statement of studying the changes in the financial position of a
business enterprise between the beginning and the end it is a statement indicating rises of funds
for a period of time.

Cash Flow Statements: It shows the changes in cash flow between two periods.

AN OVERVIEW OF EARLIER STUDIES

Baral (2005), study the performance of joint ventures banks in Nepal by applying the CAMEL
Model. The study was mainly based on secondary data drawn from the annual reports published
by joint venture banks. The report analyzed the financial health of joint ventures banks in the
CAMEL parameters. The findings of the study revealed that the financial health of joint ventures
is more effective than that of commercial banks. Moreover, the components of CAMEL showed
that the financial health of joint venture banks was not difficult to manage the possible impact to
their balance sheet on a large scale basis without any constraints inflicted to the financial health.

Wirnkar and Tanko (2008), analyzed the adequacy of CAMEL in evaluating the performance of
bank. This empirical research was implemented to find out the ampleness of CAMEL in
examining the overall performance of bank, to find out the importance of each component in
CAMEL and finally to look out for best ratios that bank regulators can adopt in assessing the
efficiency of banks. The analysis was performed from a sample of eleven commercial banks
operating in Nigeria. The study covered data from annual reports over a period of nine years
(1997-2005). The analysis disclosed the inability of each component in CAMEL to congregate
the full performance of a bank. Moreover the best ratios in each CAMEL parameter were
determined.

Bansal (2010) studied the impact of liberalization on productivity and profitability of public
sector banks in India. The study has been conducted on the basis of primary as well as secondary
data for the period 1996-07. The study concluded that the ability of banks to face competition
was dependent on their determined efforts at technological upgradation and improvement in
operational and managerial efficiency, improvement in customer service, internal control and
augmenting productivity and profitability. The study found that public sector banks have to pay
great attention to strategic management, strategic planning and to greater specialization in the
technical aspect of lending and credit evaluation. It was recommended that public sector banks
should strengthen their project appraisal capabilities. In order to raise their productivity and
profitability, public sector banks should spell turnover strategies, income-oriented and cost
oriented strategies from time to time.

Aspal and Malhotra (2013) measured the financial performance of Indian public sector banks’
asset by camel model and applying the tests like Anova, f test and arithmetic test for the data
collected for the year 2007-2011. They concluded that the top two performing banks are bank of
Baroda and Andhra bank because of high capital adequacy and asset quality and the worst
performer is united bank of India because of management inefficiency, low capital adequacy and
poor assets and earning quality. Central bank of India is at last position followed by UCO bank
and bank of Maharashtra.

Tarawneh (2006) in his study measured the performance of Oman Commercial Banks using
financial ratios and Banks were ranked on the basis of their performance. The findings indicated
that Bank performance was strongly and positively influenced by Operational Efficiency, Asset
Management and Bank Size.

Samad (2004) investigated the performance of seven locally incorporated Commercial Banks
during the period 1994-2001. Financial ratios were used to evaluate the Credit Quality,
Profitability and Liquidity Performances.

Dr. Anurag B Singh and Ms.Priyanka Tandon (2012): The researcher has mentioned the
importance of the banking sector in the economic development of the country. In India banking
system is featured by large network of Bank branches, serving many kinds of financial services
of the people. The research Methodology used by there is a comparative analysis of both the
banks based on the mean and compound growth rate (CGR). The study is based on secondary
data collected from magazines, journals & other published documents. Which was a limitation
since it’s difficult to prove the geniuses of the data.

Renu Bagoria (2014): The main objective of this paper is to make a comparative study between
private sector banks and public sector banks and the adoption of various services provided by
this bank. The different services provided by these banks are M-Banking, Net banking, ATM,
etc. One of the services provided by the bank i.e. Mobile banking helps us to conduct numerous
financial transactions through mobile phone or personal digital assistant (pda).Data analysis had
been made in private sector banks like ICICI Bank, INDUSSIND Bank, HDFC Bank, Axis Bank
and public sector banks like SBI Bank, SBBJ, IDBI and OBC Bank. These banks also provide
Mobile Banking service. The overall study showed that the transaction of Mobile banking
through public sector bank is higher than private sector.

Kumar and Sharma (2013) analyzed the performance of top 10 and highest market capitalized
banks in India with the help of camel model approach, for the year 200610, their study found that
Kotak Mahindra Bank is on the lead and on highest position in terms of capital adequacy
followed by ICICI bank and they both are more efficient in managing their liquidity. SBI has
highest NPA level among their peer group followed by ICICI bank whereas PNB is highly
management efficient with the highest grading in this parameter. Earning quality of SBI and
PNB are on top but overall SBI is ranked first followed by PNB and HDFC.

UNIQUENESS OF THE RESEARCH

 CAMEL RATING is an important technique of financial analysis. It is a means for

judging the financial health of a business enterprise. It determines and interprets the
liquidity, solvency, profitability, etc. of a business enterprise. With the help of ratio
analysis, comparison of profitability and financial soundness can be made between one
industry and another. Similarly comparison of current year figures can also be made with
those of previous years with the help of ratio analysis and if some weak points are
located, remedial measures are taken to correct them. It discloses the position of business
 with different viewpoint. It discloses the position of business with liquidity viewpoint,
solvency view point, profitability viewpoint, etc. with the help of such a study, we can
draw conclusion regarding the financial health of business enterprise.

 Ratio analysis refers to the analysis of various pieces of financial information in the
financial statements of a business. They are mainly used by external analysts to determine
various aspects of a business, such as its profitability, liquidity, and solvency. It helps in
comparison. It helps in trend line and operational efficiency.

 Comparative balance sheet presents side by side information about an entity’s assets,
liability and shareholder’s equity as of multiple points in time. It helps in comparison and
forecasting.

3. OBJECTIVE OF THE STUDY

3.1. PRIMARY OBJECTIVE

 To study the overall monetary performance of Axis Bank over a period of five
years (2015-16 to 2019-20).
 To evaluate financial position of the Bank in terms of solvency, profitability, liquidity
and efficiency.
 To determine the long term financial solvency position of the Bank.

SECONDARY OBJECTIVE:

 To analyze the financial progress of axis Bank in 2018 to 2022.

 To identify the financial of SWOT analysis of the axis bank.

 To analyze the growth of axis Bank.

 To analyses the profitability liquidity and solvency position of axis bank.

 4. METHODOLOGY:

The nature of study of this project is descriptive and analytical. In analytical study, one has to use
facts or information already available and analyze these to make critical evaluation of the material.

Secondary data are those data which have already been collected and stored. Secondary data may be
collected from:

 Annual reports of the bank

 Bulletins

 Periodicals

 News letters

 Internal reports of the bank

The study has been conducted with reference to the data related to Axis Bank. The study examines
the financial performance of some variables and compares the performance of the bank over a
period of five years.

SAMPLING DESIGN

For performance analysis of Axis Bank over the years, the study has been taken during the period
from 2019 to 2024 (five years).To know the financial performance of the banks by using ratio
analysis and camel rating. Financial performance of the bank can be analyzed through their
financial reports.
4.2 DATA ANALYSIS TOOLS

In this study, data was analyzed by using tabular representation of data to ease comparing and to
enable readers visually appreciate the findings from the study. Different scales will be used for data
analysis. Various financial ratios, bar charts are used to know financial performance of the bank.

For the analysis of the financial performance the following tools are used:

a) Ratio Analysis

b) CAMEL Rating

c) Comparative balance sheet

a) RATIO ANALYSIS

Ratio analysis is one of the most powerful tools of financial analysis. It is a yardstick which
measures relationship between variables. In layman’s terms a ratio represents for every amount one
thing how much there is of another thing. Ratio analysis is a widely- used tool of financial analysis.
It can be used to compare the risk and return relationship of firms of different sizes. It is defined as
the systematic use of ratio interprets the financial statements so that the strength and weakness of a
firm as well as its historical performance and current financial condition can be determined. The
term ratio to the numerical or quantitative relationship between two items. Following are the ratios:

1) PROFITABILY RATIOS

Profitability is a relative term. It is hard to say what percentage of profits represents a profitable
firm, as profits depend on such factors as the position of the company and its products on the
competitive life cycle (for example profits will be lower in the initial years when investment is
high), on competitive conditions in the industry, and on borrowing costs.

For decision-making, it is concerned only with the present value of expected future profits. Past or
current profits are important only as they help to identify likely future profits, by identifying
historical and forecasted trends of profits and sales. Profitability ratios measure operating efficiency
and ability to ensure adequate return to shareholders.

In other words, they are used to evaluate the overall management effectiveness and efficiency in
generating profit on sales, total assets and owners’ equity. Profitability ratios help to measure how
well a company is managing its expenses. These measurements allow evaluating the company’s
profits with respect to a given level of sales, a certain level of assets, or the owner’s investment. It is
related to the effectiveness with which management has employed both the total assets and the net
assets as recorded on the balance sheet. These ratios are usually created by relating net profit,
defined in a variety of ways, to the resources utilized in generating that profit. Following ratios:

I. Return on Equity

II. Return on Assets

III. Net Profit Margin

I. Return on Equity
equity indicates the profitability to shareholders of the Bank after all expenses and taxes). It
measures how much the firm is earning after tax for each invested in the Bank It is also an indicator
of measuring managerial By and large, higher ROE means better managerial performance; however,
a higher return on equity may be due to debt

(financial leverage) or higher return on assets. Financial leverage creates an important difference
between ROA and ROE in that financial leverage always magnifies ROE. This will always be the
case as long as the ROA (gross) is greater the interest rate on debt. Usually, there is higher ROE for
high growth companies.

ROE = Net income after tax

Total equity

II. RETURN ON ASSETS

It shows the ability of management to acquire deposits at a reasonable cost and invest them in
profitable investments. This ratio indicates how much net income is generated of assets. Return on
assets indicates the profitability on the assets of the Bank after all expenses and taxes. It is a
common measure of managerial performance. It measures how much the firm is earning after tax
for invested in the assets of the firm. That is, it measures net earnings per unit of a given asset,
moreover, how bank can convert its assets into earnings.

Generally, a higher ratio means better managerial performance and efficient utilization of the assets
of the firm and lower ratio is the indicator of inefficient use of assets. ROA can be increased by
Banks either by increasing profit margins or asset turnover but they can’t do it simultaneously
because of competition and trade-off between turnover and margin. So bank maintain higher ROA
will make more the profit.

ROA = Net income after tax

Total assets
III. NET INTEREST MARGIN

It is a profitability metric that measures how much a bank earns in interest compared to the outgoing
expenditures it pays consumers. A positive net margin indicates a bank invests efficiently, while a
negative return implies investment efficiencies.

NIM = Total interest income – Total interest expense

Total assets

2) RISK RATIO

It assesses a company’s capital structure and current risk level in relation to the company’s debt
level. Investors use the ratio to decide whether they want to invest in a company. Here as follows:

I. LEVERAGE RATIOS

Leverage ratio is any one of several financial measurements that assesses the ability of a company
to meet its financial obligations. It may be also be used to measure a company’s mix of operating
expenses to get an idea of how changes in output will affect operating income. Common leverage
ratios include the debt equity ratio, equity multiplier ratio, degree of financial leverage.

Leverage Ratio = Total equity

Total assets
II. TOTAL CAPITAL RATIO

It indicates the relationship between shareholders fund, long term debt, and reserve to total assets. It
shows the long term solvency.

TCR = Total equity + long term debt + reserve

Total assets

III. LOAN RATIO

It measures the percentage of assets that is tied up in loans. Net loan to total assets ratio (NLTA) is
also another important ratio that measures the liquidity condition of the bank. Whereas Loan to
Deposits is a ratio in which liquidity of the bank is measured in terms of its deposits, NLTA
measures liquidity of the bank in terms of its total assets. That is, it gauges the percentage of total
assets the bank has invested in loans (or financings). The higher is the ratio the less the liquidity is
of the bank. Similar to LDR, the bank with low NLTA is also considered to be more liquid as
compared to the bank with higher NLTA. However, high NLTA is an indication of potentially
higher profitability and hence more risk. The higher the ratio, the less liquid the bank is.

Loan Ratio = Net loans

Total assets

b) CAMEL Rating

CAMEL is a proportion based model to assess the execution of banks. It represents Capital
Adequacy, Asset Quality, Management Efficiency, Earning Quality and Liquidity. This model
identifies the strength and weakness of banks and helps in improving future development of
banking. The period for evaluating performance through CAMEL in this study is 5 years, i.e. from
financial year 2016 to 2020.

1.Capital Adequacy (C)

The capital adequacy ratio (CAR) is used to check the ability of the banks in taking up a reasonable
amount of loss. The bank CAR is tracked by the national regulators. This helps in knowing how
safe is the people‘s money to the banks and how the banks can overcome the losses if any. This
helps in protecting the depositors and also to support the steadiness and effectiveness of the banking
systems in the globe. The minimum requirement of CAR ratio, by Basel II norms is 8%, by RBI
9%.

The four ratios under this parameter are:-

a) CAR ratio:

The capital which takes in the losses is called Tier I capital. At the time of winding up of the
company tier II capital can help in absorbing the losses. This capital gives lesser shield to
depositors. The highest CAR ratio is preferred and will be rated at 1.

Capital adequacy ratio = Tier I capital + Tier II capital x 100

Risk weighted assets

b) Debt / Equity ratio:

This ratio shows how much debt is taken up by the company to fund its assets. If the ratio is more
then it means creditor financing is more than the investor financing. This contributes to greater
financial distress if earnings do not surpass the borrowing cost. Lower debt to equity ratio is
preferred and will be ranked as 1.

Debt / Equity ratio = Total liabilities x 100

Shareholder‘s equity
c) Advances / Total assets ratio:

This ratio helps in identifying how violent a bank is, in lending, which results in improved
profitability. The larger the ratio, the better the profit and is ranked 1. Receivables are included in
total advances and re- valued assets are removed from total assets.

Advances / Total assets ratio = Advances x 100

Total assets

2) ASSET QUALITY (A)

This parameter used to assess the credit risk which is tied in with a particular asset. How effective
the organization is in protecting and monitoring the credit risk may have an outcome of the credit
rating that the bank would like to achieve. Asset quality measures how much percentage of Non-
Performing Assets (NPA) are present in the total assets. This also suggests the different ways of
advances the bank may produce. The subsequent proportions be applied to evaluate the asset
quality:

a) NET NPAs to NET ADVANCES

Net Non-Performing Assets are measured as a percentage of net advances. From gross Non-
Performing Assets, provision for Non-Performing Assets and interest in suspense account are
subtracted to get net NPAs. It shows bad debts against the total loan sanctioned. Lower ratio will be
preferred.

Net Non-Performing Assets / Net advances = Net Non-Performing Assets x 100

Net advances

b) Net Non-Performing Assets / Total Assets:

When any borrower is unable to return the interest or the principal amount within 90 days, then that amount
is considered as a Non Performing Asset (NPA). This ratio helps in identifying the competency of the bank
in predicting the credit risk and its ability in recovering the debts. Lower ratio is preferred.

Net NPA / Total assets = Net Non-Performing Assets x 100

Total assets

c) Gross Non-Performing Assets / Total assets ratio:

Here the lower ratio is chosen.

Gross Non-Performing Assets / Total Assets ratio = Gross Non-Performing Assets x 100

Total assets

3) MANAGEMENT

This stands for the capacity of the management to find, monitor, compute and manage the risk. This
ratio takes the subjective analysis to appraise the effectiveness and efficiency of the management.
This parameter is used to find the banks, which are performing better sweep away the banks which
are managed poorly. The following ratios are used to measure this.

a) Total Advance to Total Deposits

 Total advance to deposit ratio is used to assess a bank’s liquidity by comparing a bank’s total
advance to its total deposits for the same periods. Typically the ideal loan to deposit ratio is 80 % to
90%. A loan to deposit ratio of 100 % means a bank loaned one rupee to customers for every rupee
received in deposits it received.

TATD = Total loans x 100

Total deposit

b) PROFIT PER EMPLOYEE

This ratio indicates the employees’ contribution towards the profit of the banks. The larger ratio is
chosen.

Profit per employee = Net profits x 100

Number of employees

c) BUSINESS PER EMPLOYEE

This ratio shows how effectively the human resources are utilized by the business. The Larger the
ratio, the better the human resources are utilized. The higher ratio is chosen.
Business per employee = Total deposits and advances x 100

Number of employees

4) Earning Quality (E)

Profitability of the banks is determined by this. The following proportions will be counted on to
determine the earnings of the Banks:

A) Interest Income to Total Income

This ratio helps in finding out the portion of the income from interest out of income in total. The
higher ratio is chosen.

Net interest / Total income = Interest earned – Interest paid x 100

Total income

b) Net Interest Margin (NIM) to Total Assets Ratio:

It is a profitability metric that measures how much a bank earns in interest compared to the outgoing
expenditures it pays consumers. A positive net margin indicates a bank invests efficiently, while a
negative return implies investment efficiencies.

NIM = Total interest income – Total interest expenses x 100

Total assets

c)Non Interest Income to Total Income

It is a profitability metric that measures how much a bank earns in other income compared to the
total income.

NII = other income x 100

Total income

5) Liquidity (l)

Liquidity shows the ability of the banks to fulfil their short term obligations. Banks should get hold
of the right steps to hedge them against liquidity risk and to ensure that they put in better
investments to generate a higher yield on investment. This will help the banks to get earnings and at
the same time offer the liquidity. The following ratios are considered here.

A) Liquid assets / Total assets:

Cash in hand & with other banks (India and abroad), cash in Reserve Bank of India and money at
call and short notice are called liquid assets. The liquidity position of the bank could be assessed by
this ratio. A higher ratio is chosen.
 Liquid assets / Total assets = Liquid assets x 100

Total assets

B) Liquid Assets / Total Deposit:

The ability of the banks to quickly convert their deposits into cash is measured by thisratio. Total
deposit includes demand, saving, and term deposits and deposits in other institutions. The bank with
higher ratio is chosen.

Liquid assets / Total deposits = Liquid assets x 100

Total deposits

C) Credit Deposit Ratio:

The amount of advances made by the depository financial institution against its total deposits is
measured by this ratio. If the ratio is low, then it shows that the bank is not fully employing its
resources and a higher ratio means the reverse of it. For the lending purpose the higher the ratio is
preferred.

Credit deposit ratio = Total advances x 100

Total deposits

c) Comparative balance sheet

Comparative balance sheet is a balance sheet which provides financial figures of Assets, Liability
and equity for the “two or more period of the same company” or “two or more than two company of
same industry” or “two or more subsidiaries of same company” at the same page format so that this
can be easily understandable and easy to analysis. The comparative balance sheet has two-column
of amount against each balance sheet items; one column shows the current year financial position
whereas another column will show the previous year’s financial position so that investors or other
stakeholders can easily understand and analyze the company’s financial performance against last
year

7. LIMITATIONS
 Ratios are based only on the information which has been recorded in the financial
statements

 Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are
no well accepted standards or rule of thumb for all ratios which can be accepted as norm.

 Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios
have to interpret and different people may interpret the same ratio in different way.

 The inherent limitation of the secondary data may affect the observation analysis and
findings made in this study also.

 The study is confined to the financial statement analysis of the company and findings of
the study will be relevant only for the reference period. Generalization could not be
made.