ANALYSIS OF FINANCIAL

STATEMENTS
Assignment 01

REG NO. 04
AISHA NASEEM
MBA 3.5 (Weekend), 6th Semester, BSB, BBSUL
 SUMMARY
The majority of financial statements focus on companies from industries that make a substantial
contribution to economic statistics or operate in a highly competitive enterprise setting. The
purpose of this article is to analyse how excellent and correct a company's financial performance
utilising rules has been applied. This study examines commercial banking performance between
April-2011 and March-2014.
For the time periods listed, financial statements of the banks Axis, ICICI, Federal banks and
HDFC banks such as CMIE, Prowess, money control and Yahoo finances have been acquired.
Necessary information from the financial statements has been compiled and utilised to calculate
the four-year financial ratios. Financial ratios are measures used by four major Indian
commercial banks to assess their profitability, liquidity and solvency. The aim of this research is
to examine these banks' financial statements by means of liquidity, activity ratios, leverage
ratios, profitability and market value ratios.
The following ratios have been employed for liquidity: current ratio, fast ratio or acid test ratio.
The Inventory sales rate ratio, debtor sales ratio and working capital sales ratios have been
utilised for activity. The ratios following, i.e. debt ratio, equity ratio and interest coverage ratio,
were employed for leverage. For profitability, profit margin, net profit margin, asset return,
equity return and profit per share were utilised. The price-earnings ratio and earnings per share
were utilised for market valuation.
Many investors may be confusing and frightened by the huge figures in a corporation's financial
statements. On the other hand, the financial accounts offer a treasure mine of information,
assuming you know how to examine them. Financial statements are the means by which a firm
reveals financial performance information. Fundamental analysis followers utilise financial
statements information to make investments decisions.
This study report is aimed at measuring Indian banking sectors' financial performance (AXIS,
ICICI, HDFC and FEDERAL banks) with comparative financial proportions for periods April-
2011 to March-2014. As the investigation process, the researcher received from Prowess and the
company's website the financial statements audited for the four periods (2011 to 2014). From
these financial statements the financial information essential for financial ratios was obtained.
These were further aggregated and processed to provide comparable financial ratios utilised in
the analysis stage. Financial ratios were divided into five categories, that is, as used in this study.
LIQUIDITY RATIOS
Current Ratio
This ratio displays the current assets available at the balance sheet date to pay current
obligations. A adequate cushion of current assets over current liabilities should be provided to
indicate the company's capacity to pay its debts on their due date. The current ICICI bank ratio is
virtually stable from 2011-2014. The current Axis/HDFC ratio decreased dramatically from 2011
to 2012 and then remained about the same for 2014. We therefore conclude that the Federal
Bank has more resources to redeem its existing loans.
Quick Ratio
The goal of this fast or acid-testing ratio is to add to the current ratio the more current liquid
assets available for payment of liabilities that are more immediately due. The results are not
considerably altered in terms of the present assets as only inventories are not taken into
consideration here. Initially for ICICI and HDFC, the rapid ratio during 2011-2014 respectively
is virtually stable at around 0.05 and 0.01. However, the Axis Bank ratio rose from 0.02 to 0.06
during 2011-2013 and then dropped to 0.05 in 2014. From 2011 to 2014, the federal bank ratio
rose substantially to 0.13. We thus conclude that the Federal Bank can reimburse its liabilities.
PROFITABILITY RATIOS
Return on Assets
In general, the more effective this ratio is. This ratio shows that assets are used to produce
income. As a rule, it should be regarded effective at least 0.30 times similar to the prior financial
ratio. It may be argued that all four companies use their whole assets in an effective mechanism.
HDFC and Axis banks' assets are almost returned on a comparable level, but only in 2014, i.e.
7.7 and 8.4, is a little difference. The ICICI and federal bank ratios are growing together equally.
We may claim here that Axis Bank might efficiently use its assets to create good profit.
Return on Net Worth
The rate of return on investment net values is measured in this ratio. The most significant
financial ratio as it relates to shareholder return. This is the most important financial relationship.
The greater the RONW, the better the financial success of the company. As a rule. 2014 is a
wonderful year for the stockholders of Axis Bank since RONW increased from 5.6 in 2013 to 8.4
in 2014. Similarly, RONW has increased for ICICI and the federal banks. HDFC often generated
the highest returns on shareholders' equity.
Earnings per Share
This rate shows the ability to create operational income for the company's assets. The larger this
ratio is, in general, the better. It is vital to be aware that the return shareholders really make use
of the current market value for listed shares. In 2014, in the last four years Axis Bank has had its
greatest EPS 180.56. In 2011, EPS increased to 183 in 2013 from 127.01. The bank also reported
that in 2014 the progressive EPS was 479.9, compared to 66.79 in 2011. From 199.12 in 2011 to
601.22 in 2014, the HDFC maintained its earnings per share. Over the previous four years,
Federal has seen its EPS nearly steady.
Price Earnings Ratio
This ratio reveals how many investors are prepared to pay for the stated revenue per peso. From
13.5 to 24.6 from 2010 to 2013, Federal's prices were constantly increasing, whereas HDFC
exhibited up and down from 25.4 to 18.7. The bank rates of Axis and ICICI have dropped
steadily. We may thus infer that Federal has the best value for money for other banks.
Profit Margin
This ratio indicates operational income compared with peso income. As a rule, a greater
operational margin is desired as lesser profit margin may entail higher accounts expenses
compared to a similar company. For Axis and HDFC banks the profit margin was about equal in
2011. The growth rose between 0.26 and 0.36. In 2014, the margin for the Federal Bank grew
from 0.11 in 2011 to 0.17. We may thus infer that Axis and HDFC handle all costs better.
A thorough examination of the financial ratios of the four banks listed above yielded the
following conclusions: When all firms' liquidity ratios are compared, it becomes clear that only
the federal bank has the best current ratio of 2:1. When analysing profitability ratios, business
turnover ratios, asset turnover, leverage ratios, and other company studies, HDFC and Federal
are found to have a very consistent asset turnover ratio, demonstrating their efficient use of
resources in revenue generation. Federal also offers the best value for money when compared to
other banks. The Federal Bank's total asset turnover ratio shows that its assets cover a significant
portion of its debt. Therefore it is concluded that the Federal Bank is in contrast to others the
financially most solid firm.