INTROTION AND DESIGN OF THE STUDY1. INTRODUCTION

Financial statements are prepared primarily for decision making. They played a dominant role in the frame work of managerial decisions. But the information provided in the financial statements are not an end in its as no meaningful conclusion can be drawn from these statements alone. However, the information provided in the financial statement is of immense use in making decision through analysis of interpretation of financial statements.

1.1 FINANCIAL STATEMENT ANALYSISThe term financial statement is also know as analysis and interpretation of financial statements. It referrers to the process of determining financial strength and weakness of the organization, establishing strategic relationship between the items of balance sheet, profit and loss account and other operative data. In simple words, we can say that financial analysis is a study of relationship among the various financial items and their trend as shown in financial statement. It is used to obtain a better understanding of the firms position and performance.According to I.M. Pandey, financial analysis is a process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of balance sheet and profit and loss account.Broadly speaking there are three steps involved in the analysis of financial statements. They are;

1. Selection.

2. Classification.

3. Interpretation.

The first step involves the selection of information relevant to the purpose of analysis of financial statements and the second step involves the methodical classification of the data and the third step is used for drawing of intervenes and conclusions.

1.2 STATEMENT OF THE PROBLEMThe attitude of the government for developing the economy, reach the people through many sources. The major link through which the downtrodden are accessible to the bank. A brief analysis of the Alakode Service Co-operative Bank follows.1.3. IMPORTANCE OF THE STUDY

Without a sound and effecting banking system, Indian cannot have a healthy economy. The banking system of India should only be hassle but also it should be able to meet the challenges posed by the technology and other external and internal factors.Banks have experienced in implementing developmental project involving people from various strata and beneficiary, contrary to the popular perception that bank have funded SSI and nurtured entrepreneurship, they have discovered that the poor are credit worthy and present a huge market for worthy financial products and services. All that they require is right product mix and delivery channels.When one dreams alone, it is just a dream: when the whole nations dreams together, it is the beginning of the reality. It is the time of the banking sector to drawn up on all their resources to play a catalyst role in the economic development of the country by providing a rural focus.

Alakode Service Co-operative Bank (ASCB) has over the years carved in customer service and rural development. The bank is pioneer in microfinance and lending to self-help groups. From the social and economic point of view, it is felt to necessary to focus on the financial growth of ASCB.1.4. SCOPE OF THE STUDY

This is the study has been undertaken mainly to highlight the financial analysis of Alakode Service Co-Operative Bank.1.5 OBJECTIVES OF THE STUDY To review the working of ASCB.

To analyze the financial statement of ASCB.

To analyze the profitability position of ASCB.

To study the short and longterm solvency position of ASCB. To offer the suitable suggestion of improving working of the bank based on the findings.

1.6. RESEARCH METHODOLOGY1.6.1.Research

Research is conscious approach to find out the truth which is hidden and which has not been discovered so far, applying standard procedures.1.6.2 DefinitionRedman and Mory defines research as a systemized effort to gain new knowledge.1.6.3 Research Methodology.Research methodology is a systematic way to solve the reserve problems. It is scientific step that is generally adopted by the Researcher in studying his problems along with the logic behind them. The literary meaning is a careful investigations or inquiry especially through a search for new facts in any branch of knowledge.1.6.4 Primary Data

An informal interview has been conducted with the mangers from finance and account department and additional information was obtained through the discussion with the staff members of the bank.1.6.5 Secondary DataSecondary datas are collected from the published annual reports.

1.6.6 Period of the StudyThe period of the study covers a period from the year 2007-2008 to 2011-2012. The balance sheet and profit and loss account of the bank are taken for the study.1.6.7 Tools for the Study Ratio analysis.

1.6.8 Limitation of the Study The study covers the period of only 5 years and earlier year have not been taken into account. Financial statements are only reports. They are not final because the exact financial position is known only when the business is sold or liquidated.

Time factor was a major constraint to the study and posed hindrance for deeper investigation

Some relevant details of the company were kept confidential.

Despite all the above limitations an earnest effort has been made to filter the data and present it is correctly as possible.REVIEW OF LITERATUREThis chapter attempts to make a review of study dealing the present study. Only a few case studies and articles seem to have been made. It is essential for a researcher to do a review on the literature related to his present study to have a deep knowledge on the subject. It is only though this literature survey that the researcher takes the initial steps of fixing the problem of study. A through review of literature will expose the researcher of previous research conducted on their study etc.

A review of previous studies will help the researcher about the limitations of the study and their by the researcher could take proper measures to overcome them. Present chapter gives the reader, a broader outlook on the earlier studies which have been conducted by various researchers in the area of financial performance. A review of these studies enabled the researcher to formulate the research problem.

1.Edward I Mina (1968) examine the development of tradition ratio analysis is a technique for investigating corporate performance. His topic was financial discriminate analysis and peeling of corporate bank rapidly.2.Yasahly (1976) examined the working capital management aspects of paper manufacturing companies by using annual report data of 19 companies by using for a period of 10 years 1964-1974 several accounting ratios were used in this study.3.Babu S.N. (1992) analyzed the management in tyre companies. It covered two major aspects viz, working capital management of major tyre companies in India and the impact on profitability.3.N. Ramesh (1994) in his study entitled financial analysis of M/S India shoes at Madras has provided the financial analysis of the company in general was good. The company could sources its longterm requirements from the national or state financial institutions rather to approach the banking sector to avoid delay in the expansion schemes.

5.Almee Bower (1998) the working capital management at KLA Tensors Corporations a case analysis. The focus of the assessment of the working capital management at the company focused on the firms financial performance is relation to liquidity and efficiency ratio.6.Jarmsa Verbrugge (1999) examined the state ownership and the financial performance of privatized bank. He concluded that state owned enterprises are less efficient and more risky than private firms.

7.Matha S. Rocha (2003) examined the effects of trucking firms financial performance on safety norms. She concluded that financial performance factors have an importance influence on crash involvement.

8.Cram Koeler (2003) examined the relationship between firms environment performance and financial performance. He concluded that the financial performance is related to the environment performance.9.Gorila J. Johnson (2004) examined the owned manager gender, financial performance and growth amongst Australias business longitudinal survey. She concluded that there are no statistically significant differences between males and females owner managed business.

10.Margarita Tsoutsoura (2004) examined the corporate social responsibility and financial performance of companies. She concluded that must people identify certain benefits for a business being socially responsible but most business being benefits are still barred to quantity and measure.

11.Saranya (2005) in her study, a study on financial performance on cement industries in South India with special reference to Tamilnadu, Karnataka, and Andhra Pradesh focused on ascertaining the profitably and measuring the earning capacity of cement industries. She has suggested that they have to develop their longterm and short term solvency position and increased their total sale by adopting modern marketing technique.INDUSTRY PROFILEIntroduction

In the present chapter it is attempted to provide a brief sketch on the profile of banking industry.

Banking in India has its origin as early as in the vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the Hindu Jurist, who has devoted a section of his work to deposit and advances and laid down rules relating to rates of interest. For the past three decades, Indias banking system has several outstanding achievements to its credit. The most striking is its extensive research. It is no longer confined to only metropolitan cities in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons for Indias growth process. The governments regular policy for Indian bank since 1969 has paid rich dividend with nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or withdrawing his own money. Today, he has a choice. Gone are the days when the most efficient bank transferred money from one branch to other in 2 days. Now it is simple as instant messaging or dialing a pizza. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian banking system can be segregated into three distinct phases. They are mentioned below: Early phase from 1786 to 1969 of Indian banks.

Nationalization of Indian bank up to 1991 and prior to Indian banking sector reforms.

New phase of Indian banking system with a advent of Indian financial and banking sector reforms after 1991.

Phase: 1

The general bank of India was setup in the ear 1786. Next came bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843). As independent units and called them called Presidency banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders bank, mostly European shareholders.

In 1865, Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd was setup in 1894 with headquarters at Lahore between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were setup. Reserve Bank of India came in 1935. During the first phase, the growth was very slow and bank also experienced period failure between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the government of India came up with the banking companies Act, 1949 which was later changed to banking companies regulation Act 1949 which was later changed to banking companies regulation Act 1949 as per amending act 1965 (Act No: 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the central banking authority. During those days, public had lesser confidence in the banks. As a result, deposit mobilization was slow. The savings bank facility covered by the postal department was comparatively safer. Moreover, funds were largely given to traders.

Phase: IIGovernment took major steps in this Indian banking sector reforms after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as principal agent of RBI and handle banking transactions of the union and state governments all over the country.Seven banks forming subsidiary of State Banks of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then prime minister of India Mrs. Indira Gandhi. Fourteen major commercial banks in the country were nationalized. Second phase of nationalization Indian banking sector reforms was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under government ownership.

The following are the steps taken by the government of India to regulate banking institutions in the country:

1949: Enactment of banking regulation Act. 1955: Nationalization of Sate Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance over extended to deposit.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposit over 200 crores.

After the nationalization of banks, the branches of public sector banks India rose to approximately 800 percentage in deposit and advances took a huge jump by 11000 percentage.Phase: III

This phase has introduced many more products and facilities in the banking sector in it reforms measure. In 1991, under chairmanship of M. Narasimham, a committee was setup by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and Net banking is introduced. The entire system became more convenient and swift. Time is more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macro economic shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.COMPANY PROFILEProfile of Alakode Service Co-Operative Bank

The Alakode Service Co-Operative Bank Ltd.no.c.239 is registered as a co-operative society under the Madras Co-Operative Act VI of the 1932 and now functioning under Kerala State Co-Operative societies Act, 21 of 1969. Its address is P.O. Alakode and its area of operation is extent to whole of the Alakode village.. Alakode Service Co-operative Bank, the pioneer bank in the co-operative sector came into existence on 1st February 1972 and playing vital in the overall development of the village. Its head office at Alakode is the central financing agency in the three tier co-operative credit structure. It commenced functioning on 1st February 1972 and since its inception it could achieve a steady and consistent progress in all spheres of activities.

The bank has net work of 5 branches including 2 evening branches of the 5 branches, some of the branches are fully computerized and the bank planned to computerize the remaining branches as early as possible. The function of the bank spread all over the village in an extent to PACS as well as individual for varied purpose given emphasis on priory sector advances. The 5 branches usually have 8 to 10 staffs. These include the branch manager, branch inspector or field supervisor, cashers, accountants, and attendants. Total no of staff of the bank is 48. The no of staff depends on the size of the branch.

In addition to the banking activities the bank is extending many welfare activities like aid for medical treatment for the down trodden, complimenting students in their meritorious achievements etc. Pension to the building and other construction workers is also channelized through the bank. Bank is also extends its support to major events of public interest in the region WELFARE ACTIVITIES

In addition to the banking activities, the bank provides various welfare activities like aid for medical treatment for the downtrodden, complimenting students in their meritorious achievements in SSLC, +2 etc. Collection of contribution from the members of different welfare fund boards such as Kerala Toddy workers welfare fund, Kerala construction workers welfare fund board etc. Pension to the building and other constructions workers and to the members of the board are channelized through the bank. The bank throughout Kerala and also all over India issue demand draft. The bank also deals in general insurance. Business in tie up with National Insurance Company and also extends its support to all major events of public interest in the region.

BOARD OF DIRECTORSK.P SabuPresident

A.G. Ramakrishnan PillaiDirector

Joseph Antony Director

Mini Raju

Director

Balakrishan P.C.Director

V.T. Cherian Director

BabuDirector

Jacob ChakoDirector

Koren Thoyen Director

KEY PERSONSSelin Mathew Secretory

K.V. Velayudan Assistant secretory

E.A. Joseph Manager

POWERS OF THE BOARD OF DIRECTORS To raise funds necessary for the purpose of carrying out the functions of the bank, in the form of deposits and loans on such terms and conditions as they may determine. To grant loans and advances to members on such terms and conditions as they may determine from time to time.

To sanction extensions of the period of loans. This became due for repayment, after recording the reason for such extension in each case.

To sanction investment of the funds of the banks.

To admit members and allot shares and to approve transfer of shares.

To scrutinize and put up the annual budget to the general body.

To make arrangements for the efficient supervision of affiliated societies.

To prescribe and regulate from time to time, the strength of the office and field staff and their salaried allowances.

To maintain such accounts and registers as specified by the registrar from time to time.

To place before the general meeting of the bank to registrar notes of audit and of inspection.

To incur expenditure as may be necessary for the management of the bank.

BRANCHES 1. Alakode.

2. Karthikapuram

3. Udayagiri

4. Rayrome

5. Alakode Evening

6. Nellipara EveningBANK LOANS FARM SECTOR Kisan credit card Plantation development loan

Farm mechanization loan

Animal husbandry loan

Agriculture produce loan

Minor irrigation loan

NON FARM SECTOR Retail credit card Industrial credit

Housing loan

Education loan

Self-help group finance

Loans to voluntary agencies

LOANS FOR COMMERCIAL BUILDING.

GOLD LOANS

DATA ANALYSIS AND INTERPRETATION

The term financial statement analysis include both analysis and interpretation and therefore a distinction should be made between the two terms. While the analysis is used to mean the simplification of financial data by methodical classification of the data given in the financial statements, interpretation means explaining the meaning and significant of the data simplified. However, analysis and interpretation are interlinked and complimentary to each other. Analysis is useless without interpretation and analysis is difficult or even impossible.

The financial statements provide a summarized view of financial position and operation of the firm. Therefore much can be learned about a firm from a careful examination of its financial statements as performance report; financial analysis is the starting point for making plans, before using any sophisticated and planning procedures.Understanding the past is a pre-requisite for anticipating the future. Financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of balance sheet and profit and loss account. Financial analysis can be undertaken by the management of the firm, or by parties outside the firm, viz, owners, creditors, investors and others.

The factors like deposit, advances, expenses, profit are considered and their increase and decrease are predicted 2007-2008 as the base yearsThe following is the tool applied to analyze the financial performance.

Ratio analysisRATIO ANALYSISRatio analysis is power tool of financial analysis. A ratio analysis is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things. In financial analysis, a ratio is used as bench mark for evaluating the financial position and performance of a firm. An accounting figure conveys meaning when it is related to some other relevant information. The relationship between two accounting figures expressed mathematically is known as financial ratio. Ratio helps summarize the large quantizes of financial data into make quantitative judgment about the firms financial performance.

TYPES OF RATIOS

Several ratios calculated from the accounting data can be grouped into various classes, according to the financial activity or the function to be evaluated. Following are the classifications.

Liquidity ratios

Solvency ratios

Profitability ratios

Activity ratios

1. LIQUIDITY RATIOLiquidity ratio measures the ability of the firm to meet its current obligations. A firm should ensure that it does not suffer from lack of liquidity, and also that it does not have excess liquidity. If current asset are sufficient to pay off current liabilities, then liquidity position will be satisfactory.Current Ratio or Working Capital Ratio.

Quick Ratio (Acid Ratio)

Absolute Liquidity Ratio.

2. LONG TERM SOLVENCY RATIO

Solvency means the ability of the business to repay its outside labilities. Here, the term solvency ratio has been used to mean long term financial position of the business. Solvency ratio also measures the relationship between external equities and internal equates.2.1 Debit Equity Ratio.

2.2 Fixed Asset to Proprietors Fund.

2.3 Interest Coverage Ratio.

3. PROFITABILITY RATIO

A company should earn profits to survive and grow over a long period of time. Profits are essential but it would be wrong to assume that every action initiated by management of the firm should be aimed at maximizing the profit. Profits are the differences between the revenue and expense. They are the ultimate output of the company. Therefore, the financial manager should continuously evaluate the company in term of profits. Following are the important profitably ratios.3.1 Net Profit Ratio.

3.2 Gross Profit Ratio.

3.3 Operating Ratio

4. ACTIVITY RATIOS

Activity ratio highlights up on the activity and operational efficiency of the business concern. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. These are also called turnover ratios. Following are the important activity ratios.

4.1 Total Assets Turnover Ratio.

4.2 Fixed Assets Turnover Ratio.

4.3 Current Assets Turnover Ratio.

4.4 Working Capital Turnover Ratio.

1.1 CURRENT RATIOCurrent ratio can be defined as the ratio of current assets to current liabilities and shows relation between total current assets and current liabilities. This ratio is also know as working capital ratio as it is a measure of general liquidity and is most widely used to make the analysis of a short term financial position or liquidity of a firm.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time as and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties

Current Assets

Curent Ratio=

______________

Current Liabilities

1.2 ABSOLUTE LIQUIDITY RATIO This ratio is obtained by dividing cash (of course cash in hand and cash at bank) and marketable securities with liabilities. It is also known as cash position ratio.

Cash + Marketable SecuritiesAbsolute Liquidity Ratio=___________________________

Current Liabilities2.1 DEBT-EQUITY RATIO

This ratio establishes relationship between long-term debt and owners funds. This ratio indicates the relative claims of creditors and shareholders against the assets of the concern. A considerable degree of risk is involved when a business in financed to a large extent by outsiders.

Long Term Debt

Debt-Equity Ratio =__________________________

Shareholders Fund2.2 FIXED ASSET TO PROPRIETORS FUNDThis ratio acts as supplement to the proprietary ratio and is obtained by dividing the value of fixed assets by the amount of proprietors fund. Normally it is the duty of the shareholders to finance the purchase of fixed assets. The ratio is good test of long-term solvency. If the proprietors fund more than fixed assets, financial condition of the enterprise is sound and good.

Fixed Assets

Fixed Assets to Proprietors Ratio=________________________

Proprietors Fund2.3 INTEREST COVERAGE RATIOThis ratio is significant for the long term creditors since it indicates whether the business earned sufficient profit to pay periodic interest charges. This ratio is also termed as Debt Service Ratio. Higher the ratio is better is the solvency.

EBIT

Interest Coverage Ratio = ___________________

Interest3.1 GROSS PROFIT RATIO

Gross Profit Ratio expresses the relationship between gross profit and sales. This ratio is calculated by dividing gross profit by net sales. The gross profit ratio indicates the extent to which selling price of goods per unit may be decline with out resulting in losses on operations of a firm. It reflects the efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from the net sales, higher the gross profit ratio better is the result.

Gross Profits

Gross Profit Ratio = _______________________ X 100Net Sales3.2 NET PROFIT RATIO

Net Profit ratio is the balance of profit and loss account after adjusting interest, tax, all non operating expense and income. Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. It is the measure of overall profitability. This ratio also indicated the firms capacity to face adverse economic conditions such as price competition, low demand etc. Obviously, higher the ratio, the better is the profitability.

Net Profit after TaxNet Profit Ratio

=____________________X 100

Net Sales

3.3 OPERATING RATIOThis ratio measures the extent to operating cost incurred for making sales. It is an important ratio that is used to discuss the general profitability of the concern. It is calculated by dividing the total operating cost by net sales. Lower the ratio, the more profitable are the operation indicating an efficient control over cost and an appropriate selling price.Operating Cost

Operating Ratio=_____________________X 100

Net Sales

4.1 ASSET TURNOVER RATIO

Asset turnover ratio is calculated by dividing the value of total asset with that of net sales. This ratio indicates the utilization of total asset. A high ratio indicates over trading of total asset while lower ratio indicates the over investment in asset and non utilization of capacityNet Sales

Asset Turnover Ratio=

____________________

Total Asset4.2 FIXED ASSET TURNOVER RATIO

Fixed asset turnover ratio shows the relationship between sales and fixed asset. It shows whether fixed asset are full utilized that is measures the efficiency with which a firm is utilizing its fixed asset in generating sales.

Net Sales

Fixed Asset Turnover Ratio=_________________

Fixed Asset4.3 CURRENT ASSET TURNOVER RATIO

This ratio is supposed to measure the efficiency with which current assets are employed. A high ratio indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of assets.Sales

Current Asset Turnover Ratio=____________________

Current Asset

4.4 WORKING CAPITAL TURNOVER RATIOWorking capital turnover ratio is arrived at by dividing the net sales by average working capital. This ratio also indicates the velocity of the utilization of net working capital. This ratio also indicates the number of times the working capital hired over

This ratio measures the efficiency with which the working capital is being used by a firm. This ratio indicates the number of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio is not a good situation for any firm and hence care must be taken while interpreting the ratio.Sales

Working Capital Turnover Ratio=____________________

Working Capital

ANALYSIS AND INTERPRETATION

1. RATIO ANALYSISTABLE 1.1

TABLE SHOWING CURRENT RATIO

YearCurrent AssetCurrent LiabilityRatio

2007-20081030881761093391.69

2008-20091849157767670122.75

2009-20102283212674209493.08

2010-20112690585794318582.85

2011-201233847642113329832.99

Total13.36

Average2.67

INTERPRETATION:

The acceptable level of current ratio can be taken as 2:1. The current ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 1.69, 2.75, 3.08, 2.85 and 2.99 respectively. The average current ratio of this period is 2.67.

It is concluded that the short term solvency of the bank is satisfactory.CHART 1.1CHART SHOWING CURRENT RATIO

TABLE 1.2

TABLE SHOWING ABSOLUTE LIQUIDITY RATIO

YearAbsolute AssetsCurrent LiabilityRatio

2007-2008418182561093390.68

2008-2009491866067670120.73

2009-2010663331374209490.89

2010-2011981637894318581.04

2011-201216091940113329831.42

Total4.76

Average0.95

INTERPRETATION:

A ratio of 0.75:1 may be usually considered to be satisfactory. The Absolute Liquidity Ratios of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 0.68, 0.73, 0.89, 1.04 and 1.42 respectively. The average Absolute Liquidity of this period is 0.95It is concluded that the absolute liquidity position of the bank is satisfactory level.

CHART 1.2CHART SHOWING ABSOLUTE LIQUIDITY RATIO

TABLE 1.3

TABLE SHOWING DEBT EQUITY RATIO

YearLong Term DebtShareholders Fund Ratio

2007-2008388265014400272.70

2008-2009639375115755554.06

2009-2010603960317957963.36

2010-2011476108620806432.29

2011-20121027833422283504.61

Total17.02

Average3.40

INTERPRETATION:

A ratio of 3:1 may be usually considered to be satisfactory, although there cannot be any rule of thumb or standard norms for all type of business. The Debt Equity Ratios of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 2.70, 4.06, 3.36, 2.29 and 4.61 respectively. The average Debt Equity Ratio of this period is 3.40

It is concluded that the longterm solvency position of the bank satisfactory.

CHART 1.3CHART SHOWING DEBT EQUITY RATIO

TABLE 1.4

TABLE SHOWING FIXED ASSET TO SHAREHOLDERS FUND

YearFixed AssetShareholders Fund Ratio

2007-20089379214400270.07

2008-200913512015755550.09

2009-201016579117957960.09

2010-201119072620806430.09

2011-201217960022283500.08

Total0.42

Average0.08

INTERPRETATION:

A ratio of 1:1 may be usually considered to be satisfactory, although there cannot be any rule of thumb or standard norms for all type of business in a banking company the investment on fixed asset will be very low, which shows a very low ratio. The fixed asset to proprietors ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 0.07, 0.09, 0.09, 0.09 and 0.08 respectively. The average Fixed Asset to Proprietors Fund Ratio of the bank for this period is 0.08.

It is concluded that the Fixed Asset to Proprietors Fund Ratio of the bank is not bad.

CHART 1.4CHART SHOWING FIXED ASSET TO SHAREHOLDERS FUND

TABLE 1.5

TABLE SHOWING INTEREST COVERAGE RATIO

YearEBITInterestRatio

2007-20089147207436691.23

2008-2009118991329745411.22

2009-2010172659314374921.20

2010-2011227449718768101.21

2011-2012237322921330581.11

Total5.97

Average1.19

INTERPRETATION:

A higher the ratio, better it is. If the interest charges are covered 3 to 5 times, the ratio is considered to be satisfactory. But it may not be applicable for nonmanufacturing industries like banks. The Interest Coverage ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 1.23, 1.22, 1.20, 1.21 and 1.11 respectively. The Average Operating Ratio of the bank for this period is 1.19.

It is concluded that the Interest Coverage Ratio of the bank is satisfactory.CHART 1.5CHART SHOWING FIXED ASSET TO SHAREHOLDERS FUND

TABLE 1.6

TABLE SHOWING GROSS PROFIT RATIO

YearGross ProfitNet SalesRatio (%)

2007-2008171051149339911.45

2008-2009215372184936711.65

2009-2010289101234576212.32

2010-2011397687296240813.42

2011-201224017132081967.49

Total56.33

Average11.27

INTERPRETATION:

A higher the ratio is always considered good and serves as an index of higher profitability. There is no standard for this ratio. It varies from business to business. The Gross Profit Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 11.45%, ll.65%, 12.32%, 12.42% and 7.49% respectively. Here we can see a continuous increase in G/P ratio except last year. The Average G/P Ratio of the bank for this period is 11.27%.

It is concluded that the Profitability Position of the bank is good.CHART 1.6CHART SHOWING GROSS PROFIT RATIO

TABLE 1.7

TABLE SHOWING NETT PROFIT RATIO

YearNet ProfitNet SalesRatio (%)

2007-2008170353149339911.4

2008-200915082818493678.14

2009-201022023823457629.39

2010-201128485029624089.62

2011-201214770732081964.66

Total43.21

Average8.64

INTERPRETATION:

A higher the Net Profit ratio, better is the operational efficiency of the concern. There is no standard for this ratio. It varies from business to business. The Net Profit Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 11.40%, 8.14%, 9.39%, 9.62% and 4.66% respectively. It is observed that the net profit in terms of Net sales is gradually declining. The Average Net Profit ratio the bank for this period is 8.64%.The management of the bank has to analyze the cause for decline in N/P ratio and take steps to increase the N/P percentage.CHART 1.7CHART SHOWING NET PROFIT RATIO

TABLE 1.8

TABLE SHOWING OPERATING RATIO

YearOperating CostNet SalesRatio (%)

2007-2008525298149339935.17

2008-2009566577184936730.64

2009-2010612336234576226.10

2010-2011674214296240822.76

2011-2012744779320819623.21

Total137.88

Average27.58

INTERPRETATION:

Low operating ratio indicates an efficient control over the cost. Higher the operating ratio, lower the efficiency of the management. An Operating Ratio Ranging between 75% and 80% is generally considered as ideal. But it may not be applicable for all type of business. The Operating Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 35.17%, 30.64%, 26.10%, 22.76% and 23.21% respectively. The average Operating Ratio of the bank for this period is 27.58%.

It is concluded that the efficiency of controlling the costs of the Alakode Service Co-operative Bank is very satisfactory.CHART 1.8CHART SHOWING OPERATING RATIO

TABLE 1.9

TABLE SHOWING TOTAL ASSET TURNOVER RATIO

YearNet SalesTotal AssetsRatio

2007-20081493399183219690.08

2008-20091849367228501670.08

2009-20102345762273459290.08

2010-20112962408316698780.09

2011-20123208196419908290.08

Total0.41

Average0.08

INTERPRETATION:

A high ratio indicates over trading of total assets while a low ratio indicates the over investment in assets and non utilization of capacity. Hence we cant say that a particular ratio is standard for all types of business. The Assets Turnover Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 0.08, 0.08, 0.08, 0.09 and 0.08 respectively. The average Ratio of the bank for this period is 0.08.

It is concluded that the Assets Turnover Ratio of Alakode Service Co-operative Bank is not bad as we consider Total income earned as net sales.

CHART 1.9CHART SHOWING TOTAL ASSETS TURNOVER RATIO

TABLE 1.10

TABLE SHOWING FIXED ASSET TURNOVER RATIO

YearNet SalesFixed AssetsRatio

2007-200814933999379215.92

2008-2009184936713512013.69

2009-2010234576216579114.15

2010-2011296240819072615.50

2011-2012320819617960017.86

Total77.12

Average15.42

INTERPRETATION:

If the Fixed Asset Turnover Ratio is too high, it indicates that the firm is over trading on its fixed assets, but in case of low ratio, it signifies that the firm has an excessive investment in fixed assets. So the standard ratio will be different according to the nature of business. The investment on fixed assets by a manufacturing company will be very high comparing to a banking company.

The Fixed Assets Turnover Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 15.92, 13.69, 14.14, 15.50 and 17.86 respectively. The average Ratio of the bank for this period is 15.42.

It is concluded that the ability of Alakode Service Co-operative Bank in utilizing fixed asset is very good. CHART 1.10CHART SHOWING FIXED ASSETS TURNOVER RATIO

TABLE 1.11

TABLE SHOWING CURRENT ASSETS TURNOVER RATIO

YearNet SalesCurrent AssetsRatio

2007-20081493399103088170.14

2008-20091849367184915770.10

2009-20102345762228321260.10

2010-20112962408269058570.11

2011-20123208196338476420.09

Total0.54

Average0.11

INTERPRETATION:

The Current Assets turnover Ratio is very much significant for nom manufacturing concern or for concern using lesser amount of fixed assets. This ratio indicates the efficiency in using current assets. There is no standard for this ratio

The Current Assets Turnover Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 0.14,0.10, 0.10, 0.11 and 0.09 respectively. The average Ratio of the bank for this period is 0.11.

It is concluded that the ability of Alakode Service Co-operative Bank in utilizing Current asset is very much satisfactory.

CHART 1.11CHART SHOWING CURRENT ASSETS TURNOVER RATIO

TABLE 1.12

TABLE SHOWING WORKING CAPITAL TURNOVER RATIO

YearNet SalesWorking CapitalRatio

2007-2008149339996713950.15

2008-20091849367176900600.10

2009-20102345762222532990.11

2010-20112962408261364140.11

2011-20123208196330196830.10

Total0.57

Average0.11

INTERPRETATION:

A high Working capital turnover ratio indicates a presence of over trading and needs for additional funds. A low ratio indicates under trading and the presence of more funds which cant be put in to reasonable use. The Working Capital Turnover Ratio of Alakode Service Co-operative Bank for the last 5 year (2007-2008, 2008-2009, 2009-2010, 2010-2011, and 2011-2012) are 0.15,0.10, 0.11, 0.11 and 0.10 respectively. The average Ratio of the bank for this period is 0.11 (11%).

It is concluded that the working capital turn over ratio of Alakode Service Co-operative Bank is satisfactory.CHART 1.12CHART SHOWING WORKING CAPITAL TURNOVER RATIO

FINDINGS, SUGGESTIONS AND CONCLUSIONFindings The Average Current Ratio of Alakode Service Co-Operative Bank during the period of study is 2.67. It shows a better position of the bank to meet the short term obligations. The Average Absolute Liquidity Ratio of the bank during the period of the study is 0.95. It shows that the absolute liquidity position of the bank is satisfactory level.

The average debt equity ratio acquired by the bank during the period of study is 3.4. It shows that the longterm solvency position of the bank is very satisfactory.

The average ratio of Fixed Asset to Shareholders fund required by the bank during the period of study is 0.08. It shows that the Fixed Asset to Proprietors Fund ratio of the bank is not bad, as the investment on fixed asset by the bank will generally be very low.

The average operating ratio of the bank during the period of study is 1.19. It shows that the interest coverage ratio of the bank is okay.

The average Gross Profit ratio of the bank during the period of study is 11.27%. It shows that the profitability position of the bank is good.

The average net profit ratio of the bank during the period study is 8.64. It shows that the profitability position of the bank is good. The average Operating Ratio of the bank during the period of study is 27.85%. It shows the efficiency of controlling cost of the bank is very satisfactory.

The Average Asset Turnover ratio of bank during the period of study is 0.08%. It shows the efficiency the Asset Turnover Ratio of Alakode Service Co-operative Bank is not bad as we consider the total income earned as net sales.

The Average Fixed Asset Turnover Ratio of the bank during the period of study is 15.42. It shows that the ability of Alakode Service Co-operative Bank in utilizing its fixed asset is very good.

The Average Current Asset Turnover Ratio of the bank during the period of study is 0.11. It shows that the ability of Alakode Service Co-operative Bank in utilizing is its current asset is very much satisfactory. The average Working Capital Turnover Ratio of the bank during the period of study is 0.11. It shows that the Working Capital Turnover ratio of Alakode Service Co-operative Bank is very satisfactorySuggestions

1. The interest coverage ratio of the bank is low. Repayment of part or full loan improving the operating efficiency or both will improve the financial strength of the bank.

2. The Gross Profit Ratio of the bank in 2011-2012 is very low. So the bank should analyze the cause and should take steps to increase its gross profit

3. The management of the bank has to analyze the cause for declining the net profit and takes steps to increase the net profit percentage. 4. The bank should control its operating expenses to improve its operating ratio.5. The total Asset Turnover ratio of the bank is very low which indicates over investment in asset and non-utilizing of capacity. So the bank should have proper policies to overcome this problem.

6. The retained earning of the bank having increasing with which the bank can reinvest.

7. The bank should come forward in tracing out new prospective borrowers and help in the development of the nation.CONCLUSION

The study entitled a study on financial performance of Alakode Service Co-operative Bank, Kerala, is done on the financial statement of Alakode Service Co-operative Bank for the last 5 years (from 2007-2008 to 2011-2012). Financial statements represent the snap shot of concerns activities at the end of a particular period.Financial statements reveal how a business has prospered under the leadership of management personnel. Financial appraisal is a technique to evaluate the past, current and projected performance of the concern.

The present study was undertaken with object of evaluating financial stability of ASCB. The data for the present study were obtained from the published annual reports of the Alakode Service Co-operative Bank.

Bank can go even for diversification and expansion of the product. The retained earnings of the bank have been increasing, with which the bank can reinvest to increase its earning.

The bank has sound liquidity position because the current and absolute liquidity ratios are very satisfactory. The solvency ratio of the bank also in a satisfactory level. ASCB has also got a good profitability position.Thus, Alakode Service Co-operative Bank shows a satisfactory position for the period of study (from 2007-2008 to 2011-2012).

BIBLIOGRAPHY

Books Referred1. Research methodology - Methods and techniques, CR Kothari.2. Financial Management - by IM Pandey.3. Financial Management by Shashi K. Gupta and P.K. Sharma.4. Principles of Management Accounting Dr. S.N. Maheshwari.ReportsFive year Annual Reports of Alakode Service Co-operative Bank (from 2007-2008 to 2011-2012)

Websitewww.wikipedia.com

www.rbi.com

www.ascb.comBalance Sheet Of Alakode Service Co-Operative Bank For The Period Of Study

(from 2007-2008 to 2011-2012)Capital and LiabilitiesAs on

31-03-2008As on

31-03-2009As on

31-03-2010As on

31-03-2011As on

31-03-2012

Capital1000010000100001000010000

Share Capital Deposit 6414364143641436414364143

Reserve and Surplus13658841501412172165020065002154207

Deposit1236187014079344189317062405870628656186

Borrowings388265063937516039603476108610278334

Other Labilities And Provi637422801517578827769443827959

TOTAL 1832196922850167273459293166987841990829

ASSETS

Cash & Balance with RBI9670841173806168884114471411471524

Balance with bank and Money at call short notice 29611022466515692426724137158116

Investments 29186313520189478754856968247462300

Advances1357017217082194201401232103540823010990

Fixed Assets93792135120165791190726179600

Other Assets4761807141934067026273662708299

TOTAL1832196922850167273459293166987841990829

Source: Annual reports of ASC Bank.Profit & Loss Accounts Of ASC Bank For The Period Of Study(from 2007-2008 to 2011-2012)

As on

31-03-2008As on

31-03-2009As on

31-03-2010As on

31-03-2011As on

31-03-2012

INCOME

Interest earned14231811709005220487826258893021825

Other Income69607140362105610336519186371

Provision trfd Back611 035274 0 0

TOTAL 1493991849367234576229624083208196

EXPENDITURE

Interest expended743669974541143749218768102133058

Operating expenses525298566577612336674214744779

Provi. & contingencies533819287768331369790188

TOTAL1322348163399520566125647212968025

PROFIT/LOSS

Net Profit before

Taxation171051215371289101397687240171

Less: Prior period

Adjustments698812 0 0 0

Less: Fringe Benefit TaxPaid 0640321099 1392 0

Less: IT for the FY 0 0 67764111445924641

Net Profit after Tax170353150528220238284850147707

Source: Annual reports of ASC Bank.2007-2008

3.5

3

2.5

2

1.5

1

0.5

0

2.99

2.85

3.08

2.75

1.69

2008-2009

2009-2010

2010-2011

2011-2012

Ratio

2009-2010

2008-2009

2007-2008

5

4.5

4

3.5

3

2.5

2

1.5

1

0.5

0

4.61

2.29

3.36

4.06

2.7

2010-2011

2011-2012

Ratio

Ratio

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

0.1

0.09

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0

0.08

0.09

0.09

0.09

0.07

0.68

0.73

0.89

1.04

1.42

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

1.23

1.22

1.2

1.21

1.11

1.04

1.06

1.08

1.1

1.12

1.14

1.16

1.18

1.2

1.22

1.24

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

Ratio

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