1.

1 INTRODUCTION

Financial statements are records that provide an indication of the organization’s financial
status. It quantitatively describes the financial health of the company. It helps in the
evaluation of company’s prospects and risks for the purpose of making business decisions.
The objective of financial statements is to provide information about the financial position,
performance and changes in financial position of an enterprise that is useful to a wide range
of users in making economic decisions. Financial statements should be understandable,
relevant, reliable and comparable. They give an accurate picture of a company’s condition
and operating results in a condensed form. Reported assets, liabilities and equity are
directly related to an organization's financial position whereas reported income and
expenses are directly related to an organization's financial performance. Analysis and
interpretation of financial statements helps in determining the liquidity position, long term
solvency, financial viability, profitability and soundness of a firm. There are four basic
types of financial statements: balance sheet, income statements, cash-flow statements, and
statements of retained earnings.

1.2 STATEMENT OF THE PROBLEM

Analysis and interpretation of financial statement is a regular exercise to review the

performance of the company. The study is aims at evaluating the past, current, and
projected conditions and performance of the velinalloor co-operative bank karinganoor.
Horizontal analysis is used to evaluate the trend in the accounts over the years, while
vertical analysis, also called a Common Size Financial Statement discloses the internal
structure of the firm.

1.3 NEED AND SIGNIFICANCE OF THE STUDY

Co-operative banks play very important role in providing banking services to common man
in their area of co-operation. Small depositor or a small borrower feels comfortable in
dealing with the local staff of nationalized banks and private sector banks. Banking is the
life blood of Indian economy and it has three types of sectors, which provide finance to
different sectors i.e. private sector, public sector and co-operative sector.

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1.4 OBJECTIVES OF THE STUDY
The main objectives of the study are as follows:

 To analyze and interpret the financial statements of the bank.

 To evaluate the trend percentages, balance sheet and income statement analysis.
 To suggest MS Excel software at co-operative bank

1.5 METHODOLOGY
The present study is designed as an analytical method. Both primary and secondary data
have been used for study.

 Primary Data: Primary data were collected through observations and discussions
with the staffs at various categories from the Velinalloor Service Co-operative
Bank.
 Secondary Data: Secondary data was collected from books and websites relating
to the area of study annual reports and budget of the organization. The excel
software is used here to analyze the financial performance.
 Data analysis: The data collected for the study have been analyzed with the MS
Excel software.

1.6 LIMITATIONS
The following are the limitations of the study:

 One of the factors of the study was lack of availability of ample information.
Most of the information has been kept confidential and as such as not as assed as
art of policy of the organization.
 Limitations of tools and techniques that have been applied for the analysis are
also worth mentioning
 The study includes all the limitation, which are inherent in the data collected from
the above mentioned source.

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1.7 REIVEW OF LITERATURE
 G Foster (1986) in his study on financial analysis stated that, it is the process of
identifying financial strengths and weakness of the firm by properly establishing
relationships between the items of the balance sheet and profit and loss account.
Financial analysis can be undertaken by management of the firm, on by parties
outside the firm viz., owners, creditors, investors and others.
 M Jayalakshmi (1987-88) in her research, “A study on the Financial statement
analysis of PRICOL diagnosed the financial position and performance of premier
investments and controls limited company with the help of liquidity profitability
and solvency ratios, and suggested to reduce the amount locked excessively in the
form of current assets”.
 Umesh Holani (1988) in his study titled, “Analysis of financial Statements”, has
analyzed cost, income profitability, working capital and financial strength through
ratios.
 Pramod Kumar (1988) in his study titled, “Analysis of financial statement”,
analyzed how the financial statement will prove to be helpful to the various
parties such of the shareholders, financial institutions and other creators and the
employees.
 R.L. Tamiloli (1991) in his study title, “Financial analysis for identification of
business has examined the growth in different aspects such as capital employed,
fixed assets, working capital, business operations and social contribution.
 Srinivasa Rao and Indrasena Reddy (1995) in their study entitled “Financial
Performance in Paper Industry- a Case Study” stated that the financial position of
the company had been improving from year to year. The company’s performance
in relation to generating internal funds in the form of reserves and surplus was
excellent and also was doing well in mobilizing outside funds.
 Gangadhar (1998) has made an attempt on “Financial Analysis of Companies in
Criteria: A Profitability and efficiency focus” one of the objectives of the study is
to analyze the liquidity position of the companies and to point out the factors
responsible for such a position. It is concluded that the liquidity position was quite
alarming since these are facing chronic liquidity problems. Their proportion
3
 current assets in relation to the current liabilities are very low. It is suggested that,
they may be improved by reducing excessive burden of current liabilities or
increasing the level of current assets depending upon the requirements.
 G. Vanitha (2005) concluded that, financial statement analysis is one of the
factors, which provides fast information. But in real business experience, we can
give suggestions to improve the performance of business concern but not able to
provide any concrete or solutions to the business concern, because the possibility
of changes and other factors are highly responsible for judging the financial and
operational efficiency and performance of the business concern, particularly in
banking Industries.
 S. Primal (2005) observed that, “The study was undertaken to analyze the
financial performance is to fulfill the objective of the study, selected profitability
ratio, financial ratio and turnover ratios were calculated and inferences drawn.
The study of research reveals that the effort should be taken to the company trend
in the profits.”
 Prasanta Paul (2011) reported that “Financial Performance Evaluation - A
Comparative Study of Some Selected NBFCs”. In this study, five listed NBFCs
have been considered for analyzing comparative financial performance. It
concludes that the selected companies differ significantly in terms of their
financial performance indicators from one to another, may be for the different
services they provide. There are no significant differences in the last five years in
the management of financial performance of each selected NBFCs, except
marginal deviation in some cases in the year 2006-07 may be for the effect of
general recession in that period .
 Moses Joshua Daniel (2013) in his study “A Study on Financial Status of TATA
Motors Ltd” stated the main objectives to analyzing the overall financial status of
the TATA Motors Ltd by using various financial tools. In order to analyze
financial status in terms of Profitability, Solvency, Activity and Financial stability
various accounting ratios have been used. It is cleared from the study that the
company’s financial performance is satisfactory.

4
 Dharmaraj and Kathirvel (2013) in their study related to “Analyzing the Financial
Performance of Selected Indian Automobile Companies”, suggested that the
financial performance of Auto Ltd, Ashok Leyland, HMT Ltd, Tata Motors Ltd,
and SML ISUZU Ltd are highly improved as compared to the group average
value for all ratios. In India there is a huge scope for automobile companies. They
are financially strong and they are growing at the rate of 17 per cent per annum
and contributing to the Indian economy reasonably. Finally, the study provides
companies with understanding of the activities that would enhance their financial
performances.
 Hari Govinda Rao (2013) in their study entitled “An Empirical Analysis on
Financial Performance of Public Sector Housing Corporation in India: A Case
Study of HUDCO”, stated that the main concept of their study is Profitability and
liquidity management is of crucial importance in financial management decision.
The purpose of this study is to find out the financial position of and know the
significance of them. They suggested that both the institutions under the study
should concentrate on financial profitability.
 Dr.S. Poongavanam, Asst. Professor, AMET Business School, AMET University,
Chennai (October. 2017)“A Study On Comparative Financial Statement Analysis
with Reference to Das Limited “comparative analysis is the study of trend of the
same items and computed items into financial statements of the same business
enterprise on different dates. Efficient management of finance is very important
for the success of an enterprise. While analyzing the financial performance of the
company it is concluded that the expenses ratios and profitability are given more
importance.

5
1.8 CHAPTERISATION

Chapter 1- Introduction: This chapter gives a brief introduction, statement of the problem,
need and significance of study, objectives of the study, methodology, limitations of study,
review of literature and chapterization.

Chapter 2- Theoretical perspectives: this chapter shows theoretical frame work of study.

Chapter 3- Organizational profile: This chapter contains the profile of the company.

Chapter 4- System analysis: It shows the introduction, existing system and its limitations,
proposed system and its advantages, feasibility study, system specification, hardware
specification.

Chapter 5- Data analysis: This chapter deals with the analysis and interpretation of data.

Chapter 6- Summary, Findings and recommendation: This chapter contains the

summary of findings and recommendation.

6
1.9 REFERENCE

 G. Foster., “Financial Statement Analysis‟, Prentice Hall, 1986, pp.2-7. 16.

 M. Jayalakshi, “Research Report on the Financial Statement Analysis of
PRICOL,” 1987 – 88.
 Umesh Holani, “Analysis of Financial statement”, Himalaya publishing House,
1988.
 Pramod Kumar, “Analysis of Financial Statement”, Atlantic publishers and
distributors 1988.
 R.L. Tamiloli, “Financial Analysis for Identification of Business Growth‟‟ Sultan
Chand and Sons, 1991.
 Srinivasa Rao, and Indrasena Reddy, “Financial Performance in Paper Industry- A
Case Study”, the Management Accountant, May 1995, Pp. 327-336.
 Gangadhar, “Financial Analysis of Companies in Criteria: A Profitability and
efficiency focus”, the management Accountant, Vol.33, No.11, November 1998,
Pp.810817.
 G. Vanitha,” A study on financial statement analysis on Lakshmi Vilas Bank Ltd.,
Periyar University, Salem, April 2005.
 S. Primal, “A study on Financial Performance of Dalmia Cements (Bharat)
Limited”, Periyar University, Salem April 2005.
 Prasanta Paul, “Financial Performance Evaluation-A Comparative Study of some
selected NBFCs”, Indian Journal of Finance, May 2011, Pp.13-22.
 Moses Joshuva Daniel, “A Study on Financial Status of Tata Motors Ltd”, Indian
Journal of Applied Research, Volume 3, Issue 4, April 2013 ISSN - 2249-555X,
Pp.320322.
 Dharmaraj and Kathirvel, “Analyzing the Financial Performance of Selected Indian
Automobile Companies”. Global Research Analysis, Volume: 2, Issue 4, April
2013, Pp 18-20.
 Hari Govinda Rao, “An Empirical Analysis on Financial Performance of Public
sector Housing corporation in India: Case study of HUDCO.” International

7
 Journal of Research in Commerce & Management, Volume No. 4, Issue No. 02,
February 2013, Pp. 76-80.
 Dr.S. Poongavanam, Asst. Professor, AMET Business School, AMET University,
Chennai “A Study On Comparative Financial Statement Analysis with Reference
to Das Limited “IOSR Journal of Humanities and Social Science (IOSR-JHSS)
Volume.

8
2.1 INTRODUCTION

Financial statements are formal records of the financial activities of a business, person, or
other entity and provide an overview of a business or person's financial condition in both
short and long term. They give an accurate picture of a company’s condition and operating
results in a condensed form. The process of critical evaluation of the financial information
contained in the financial statements in order to understand and make decisions regarding
the operations of the firm is called ‘Financial Statement Analysis’. It is basically a study
of relationship among various financial facts and figures as given in a set of financial
statements, and the interpretation thereof to gain an insight into the profitability and
operational efficiency of the firm to assess its financial health and future prospects. The
term ‘financial analysis’ includes both ‘analysis and interpretation’. Interpretation means
explaining the meaning and significance of the data. Financial statement analysis is a
judgmental process which aims to estimate current and past financial positions and the
results of the operation of an enterprise, with primary objective of determining the best
possible estimates and predictions about the future conditions.

There are four basic financial statements:

1. Balance sheet: It is also referred to as statement of financial position or
condition, reports on a company's assets, liabilities, and Ownership equity as
of a given point in time.
2. Income statement: It is also referred to as Profit and Loss statement reports
on a company's income, expenses, and profits over a period of time. Profit
&Loss account provide information on the operation of the enterprise. These
include sale and the various expenses incurred during the processing state.
3. Statement of Retained Earnings: It explains the changes in a company's
retained earnings over the reporting period.
4. Cash Flow Statement: It reports on a company's cash flow activities,
particularly its operating, investing and financing activities.

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2.2 NATURE OF FINANCIAL STATEMENTS
The financial statements are prepared on the basis of recorded facts. The recorded
facts are those which can be expressed in monetary terms. The statements are prepared
for a particular period, generally one year. The transactions are recorded in a
chronological order, as and when the events happen. The accounting records and
financial statements prepared from these records are based on historical costs. The
financial statements, by nature, are summaries of the items recorded in the business
and these statements are prepared periodically, generally for the accounting period.
2.3 IMPORTANCE OF FINANCIAL STATEMENTS
The utility of financial statements to different parties is discussed in detail as follows:
1. Management: The management is able to exercise cost control through financial
statements. The efficient and inefficient spots are brought to the notice of the
management. The management is able to decide the course of action to be
adopted in future.
2. Creditors: The trade creditors are to be paid in a short period. This liability is met
out of current assets. The creditors will be interested in current solvency of the
concern. The calculation of current ratio and liquid ratio will enable the creditors
to assess the current financial position of the concern in relation to their debts.
3. Bankers: The banker is interested to see that the loan amount is secure and the
customer is also able to pay the interest regularly. The banker will analyze the
balance sheet to determine financial strength of the concern and profit and loss
account will also be studied to find out the earning position.
4. Investors: The investors are interested in the security of the principal amount of
loan and regular interest payments by the concern. The investors will analyze the
present financial position and study the future prospectus of the concern. .
5. Government: The financial statements are used to assess tax liability of business
enterprises. These statements enable the government to find out whether business
is following various rules and regulations or not.
6. Others: Trade associations, Stock exchange ad public at large may also analyze
the financial statements to judge the financial positions of the concerns.

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2.4 OBJECTIVES OF FINANCIAL STATEMENTS
1. To provide reliable financial information about economic resources and
obligations of a business firm
2. To provide other needed information about changes in such economic resources
and obligations.
3. To assess the past performance
4. To provide financial information that assists in estimating the earning potentials
of business.
5. To help in decision making and control.

2.5 IMPORTANCE OF FINANCIAL ANALYSES

The importance of financial statements depends on to a large extent on the personal
view of the analyst, degree of his interest in the company, and the need for the
depth of enquiry and finally on the amount ad quality of the data available. The
object of the analysis determines the extent, depth and nature of analysis.
The following are the important analysis of financial statements:

1. Efficiency of operation: The earning capacity of a firm varies between periods

due to different factors such as pricing, competition, etc. The analysis of financial
statements helps to estimate the efficiency of operation of the firm. The ratio such
as gross profit ratio, net profit ratio, etc. are calculated and interpreted for the
purpose of measuring the efficiency of the operation of the business.
2. Measure the financial position and financial performance of the firm: The
analysis of the financial statement help to gauge the financial position as on any
particular date and the financial performance of the firm within the period under
review.
3. Long term liquidity of funds: Analysis of the financial statements helps to
determined long term liquidity of funds it helps to make arrangement for the
funds for the future when required.

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 4. Solvency of the firm: Analysis of the Balance sheet figures helps to measure the
solvency of the firm. The solvency measures by studying the value of assets over
liabilities. It shows the debt paying capacity of the firm.
5. Future prospects of the firm: The future prospects of the firm can be ascertained
by studying the trend of activities for the last few years and the expected changes
that may take place in the near future.
6. Progress of the firm: By comparing the profit and loss account and Balance sheet
figures of the current year with those of the previous year’s help to measure the
progress of the firm. Comparative statements are prepared for the purpose of
measuring the progress of the firm.

2.6 LIMITATIONS OF FINANCIAL STATEMENTS

 Financial statements are available after a specific period of time is over.
 Financial statements which are based on financial accounting are interim reports
and cannot be the final accounts.
 Only those transactions are recorded which can be expressed in monetary terms
 Financial statements prepared may be useful for normal users in the normal
conditions.
 Financial statements by them self does not mean anything unless the information
stated therein is properly studied, analyzed and interpreted.

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2.7 TYPES OF FINANCIAL ANALYSIS
The various types of financial analysis are as follows:

1. Internal Analysis: This type of analysis is done by finance and accounting department.
The objective of such analysis is to provide the information to the top management, while
assisting in the decision making process.

2. External Analysis: The external analysis is done on the basis of published financial
statements by those who do not have access to the accounting information, such
as, stockholders, banks, creditors, and the general public.

3. Horizontal Analysis: The comparative financial statements are an example of horizontal

analysis, as it involves analysis of financial statements for a number of years. Horizontal
analysis is also regarded as Dynamic Analysis.

4. Vertical Analysis: it is performed when financial ratios are to be calculated for one year
only. It is also called as static analysis.

2.8 TECHNIQUES AND ANALYSIS OF INTERPRETATION:

The most important techniques of analysis and interpretation are:
 Comparative Financial Statements: It is an important method of analysis which is
used to make comparison between two financial statements. Being a technique of
horizontal analysis and applicable to both financial statements, income statement
and balance sheet, it provides meaningful information when compared to the
similar data of prior periods. The comparative statement of income statements
enables to review the operational performance and to draw conclusions, whereas
the balance sheets, presenting a change in the financial position during the period,
show the effects of operations on the assets and liabilities. Thus, the absolute
change from one period to another may be determined.
 Statement of Changes in Working Capital: The objective of this analysis is to
extract the information relating to working capital. The amount of net working
capital is determined by deducting the total of current liabilities from the total of

13
 current assets. The statement of changes in working capital provides
the information in relation to working capital between two financial periods.
 Common Size Statements: The figures of financial statements are converted to
percentages. It is performed by taking the total balance sheet as 100. The balance
sheet items are expressed as the ratio of each asset to total assets and the ratio of
each liability to total liabilities. Thus, it shows the relation of each component to
the whole - Hence, the name common size.
 Trend Analysis: It is an important tool of horizontal analysis. Under this analysis,
ratios of different items of the financial statements for various periods are
calculated and the comparison is made accordingly. The analysis over the prior
years indicates the trend or direction. Trend analysis is a useful tool to know
whether the financial health of a business entity is improving in the course of time
or it is deteriorating.
 Ratio Analysis: The most popular way to analyze the financial statements is
computing ratios. While developing a meaningful relationship between the
individual items or group of items of balance sheets and income statements, it
highlights the key performance indicators, such as, liquidity, solvency and
profitability of a business entity. The tool of ratio analysis performs in a way that
it makes the process of comprehension of financial statements simpler, at the
same time, it reveals a lot about the changes in the financial condition of a
business entity.

2.9 PRESENTATION OF FINANCIAL STATEMENTS

The financial statements are presented either in horizontal or in vertical model.
1. Horizontal Form: The horizontal style is the conventional mode of presenting the
profit and loss account and balance sheet where the statements are prepared in the
’T’ shape. In profit and loss account the incomes are shown on credit side and
expenses are shown on the debit side. In Balance sheets the assets are shown on
the right side and liabilities are shown on left side. The conventional ‘T’ shaped
presentation of assets and liabilities is called as horizontal form of presentation of
balance sheet.

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 2. Vertical form: The vertical form of presentation is a modern technique for the
presentation of the financial position of a company ad is improvement over the
horizontal form of Balance sheet. In vertical form of presentation the balance
sheet is set out in two sections, one under the other. The first section presents the
source of funds and the second section presents the application of funds in the
form of net assets employed in the business.

2.10 FINANCIAL STATEMENT ANALYSIS

In order to ascertain the financial status of the business every enterprise prepares certain
statements, known as financial statements. Financial statements are mainly prepared for
decision making purpose. But the information as is provided in the financial statements is
not adequately helpful in drawing a meaningful conclusion. Thus, an effective analysis and
interpretation of financial statements is required. Analysis means establishing
a meaningful relationship between various items of the two financial statements with each
other in such a way that a conclusion is drawn. By financial statements we mean
two statements:
1. Profit and loss Account or Income Statement
2. Balance Sheet or Position Statement
These are prepared at the end of a given period of time. They are the indicators of
profitability and financial soundness of the business concern. The term financial analysis
is also known as analysis and interpretation of financial statements. It refers to
the establishing meaningful relationship between various items of the two financial
statements i.e. Income statement and position statement. It determines financial strength
and weaknesses of the firm. Analysis of financial statements is an attempt to assess the
efficiency and performance of an enterprise. Thus, the analysis and interpretation of
financial statements is very essential to measure the efficiency, profitability, financial
soundness and future prospects of the business units. Financial statement are:
1. Comparative statement:
Comparative statements are financial that cover a different time frame, but are
formatted in a manner that makes comparing line items from one period to those of
a different period an easy process. This quality means that the comparative

15
 statement is financial that lends itself well to the process of comparative analysis.
Many companies make use of standardized formats in accounting functions that
make the generation of a comparative statement quick and easy.
A comparative statement can be helpful for just about any organization that has
to deal with finances in some manner. Even non-profit organizations can use the
comparative statement method to ascertain trends in annual fund raising efforts. By
making use of the comparative statement for the most recent effort and comparing
the figures with those of the previous year’s event, it is possible to determine where
expenses increased or decreased, and provide some insight in how to plan the
following year’s event.
Features of Comparative Statements:
 It is used to effectively measure the conduct of the business activities.
 Comparative statement analysis is used for intra firm analysis and inters firm
analysis.
 A comparative statement analysis indicates change in amount as well as change
in percentage.
 A positive change in amount and percentage indicates an increase and a negative
change in amount and percentage indicates a decrease.
 It is a popular tool useful for analysis by the financial analysts.
 A comparative statement analysis cannot be used to compare more than two
years financial data.
2. TREND ANALYSIS ( Percentage)

 Trend analysis calculates the percentage change for one account over a period
of time of two years or more.
 To calculate the percentage change between two periods: Calculate the amount
of the increase/ (decrease) for the period by subtracting the earlier year from
the later year. If the difference is negative, the change is a decrease and if the
difference is positive, it is an increase. Divide the change by the earlier year's
balance. The result is the percentage change.

16
Features of Trend Analysis:
 In case of a trend analysis all the given years are arranged in an
ascending order.
 The first year is termed as the “Base year” and all figures of the base year are taken
as 100%.
 Item in the subsequent years are compared with that of the base year.
 If the percentages in the following years is above 100% it indicates an increase
over the base year and if the percentages are below100% it indicates a decrease
over the base year.
 A trend analysis gives a better picture of the overall performance of the business.
 A trend analysis helps in analyzing the financial performance over a period of
time.
 A trend analysis indicates in which direction a business is moving i.e. upward or
downwards.
 For trend analysis at least three years financial data is essential. Broader the base
the more reliable is the data and analysis.

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3.1 CO-OPERATIVE BANKING IN INDIA

The co-operative banks in India have a history of almost 100 years. The co-operative banks
are an important constituent of the Indian Financial System, judging by their role assigned
to them, the expectations they are supposed to fulfil, their number, and the number of
offices they operate. The co-operative movement was originated in the west, but the
important that such bank have assumed in India is rarely paralleled anywhere else in the
world. Their role in rural financing continues to be important event today, and their
business in urban areas also has increased phenomenally in recent years mainly due to the
sharp increase in the number of primary cooperative banks. Co-operative banks in India
are registered under the Cooperative Societies Act. The co-operative banks are also
regulated by the Reserve Bank of India (RBI) and governed by Banking Regulations Act
1949 and Banking Laws (Co-operative Societies) Act, 1955.

Role of Co-operative Banks in India the co-operative banks in India play an important role
even today in rural financing. The businesses of co-operative banks in the urban areas also
have increased phenomenally in recent years due to the sharp increase in the number of
primary co-operative banks. The co-operative banks are expected to perform some duties,
namely, extend all types of credit facilities to customers in cash and kind, advance
consumption loans, extend banking facilities in rural areas, mobilize deposits, supervise
the use of loans etc. The needs of co-operative bank are different.

Problems faced by co-operative banks in India

1. The NPAs of the cooperative banks are higher than those of commercial banks in
NPAs to asset ratios.
2. They are largely depends upon govt. capital than the shareholders contributions.
3. They are facing infrastructural weakness and structural laws. They do not have
potentials in members, deposits and borrowers.
4. The areas of operation of the cooperative banks are restricted and limited.

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3.2 VELINALLOOR SERVICE CO-OPERATIVE BANK –

A PROFILE

Co-operative bank was incorporated on 11 September 1948 under the co-operative credit
society Act 1904.The Velinalloor service co-operative society was registered in the year
23 September 1948 the registration number 2873.There were 25 promoting committee
members in the society and its first member was sree paramupilla sir.

Co-operative banks in India came into existence with the enactment of the Agricultural
credit Co-operative societies Act 1904.Co-operative bank form an integral part of banking
system in India.co-operative banks in India are registered under the co-operative societies
Act. They are governed by the Banking Regulation Act 1949 and Banking Laws (co-
operative societies) Act, 1965. The cooperative credit institutions in the country may be
broadly classified into urban credit cooperatives and rural credit cooperatives.

3.2.1 OBJECTIVES OF CO-OPERATIVE BANKS

1) Engage in rural financing and micro financing

2) Main objectives is to remove the dominance of common man by the middle man
and the money lenders.
3) Ensure credit services to farmers at low rate of interest providing socio-economic
condition of the people.
4) Provide financial support to needy people and farmers.
5) Provide personal finance services for those engaged in the small-scale industries
and self-employment driven activities for people in rural as well as urban areas.
3.2.2 FUNCTIONS OF CO-OPERATIVE BANK

1. The cooperative Banks functions with the objective to fulfilling the credit
requirements and needs of people living in the rural and urban areas.
2. Perform multiple activities and functions at large extent to carry out developments
and regulation in the society that strengthen the cooperative movements.

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3.2.3 PRODUCTS AND SERVICES
The products offered by the cooperative bank includes:
Deposits
 Savings Bank Account
 Current Account
 Recurring Deposit
 Fixed Deposit
 Cash Certificate
Loans
 Loans to Salaried Employees
 Home Need Loan
 Loan for Pensioners
 Education Loan
 Housing Loan
 Loans under Women Entrepreneur Development scheme
The services offered by the cooperative bank includes:

 Clearing
 Safe Deposit Locker
 Automated Teller Machine(ATM)
 Demand Draft /pay Order

3.2.4 History of Co-operative Banking in India:

Co-operative movement in India was started primarily for dealing with the problem of rural
credit. The history of Indian cooperative banking started with the passing of Co-operative
Societies Act in 1904. The objective of this Act was to establish co-operative credit
societies “to encourage thrift, self-help and co-operation among agriculturists, artisans and
persons of limited means.” Many co-operative credit societies were set up under this Act.
The Co-operative Societies Act, 1912 recognized the need for establishing new
organizations for supervision, auditing and supply of cooperative credit. These

20
organizations were- A union, consisting of primary societies; the central banks; and
Provincial banks.
Although beginning has been made in the direction of establishing co-operative societies
and extending cooperative credit, but the progress remained unsatisfactory in the pre-
independence period. Even after being in operation for half a century, the cooperative credit
formed only 3.1 per cent of the total rural credit in 1951-52.

3.2.5 SOURCES OF FUNDS IN CO-OPERATIVE BANK

Co-operative banks are financial intermediaries only partially. The sources of funds are:
 Central and state government,
 The Reserve Bank of India and NABARD,
 Other co-operative institutions,
 Ownership funds and,
 Deposits or debentures issues.

3.2.6 VISION AND MISSION

Vision: Our Main Vision is to become first in customer satisfaction. The adoption of all
modern technologies for Better, Fast and Squired service will be priority of the bank in
future. The environment of all the branches will match an international standard with easy
operation for our valuable customer.
Mission: We will consistently exceed customer expectation by providing value-adding
solutions through professional and highly motivated people, delivering excellent financial
performance in all markets where we operate. Main focus is to cover the areas which are
not covered by adequate banking facilities. Our Mission is to become a schedule Bank and
to create maximum job opportunity to the people.

21
3.2.7 SERVICES OFFERED BY THE VELINALLOOR CO-
OPERATIVE BANK

The services offered are as follows:

 Neethi store
 Neethi medical store
 Fertilizer trade
 Ambulance services
 Co-operation in the library

3.2.8 FEATURES OF CO-OPERATIVE BANK

1) All the co-operative banks are common features as described below: Customer-
Owned Entities: In a co-operative bank, the needs of the customers meet the
needs of owners, as co-operative bank members are both i.e., customer and
owner. As a consequence, the first aim of the cooperative bank is not to
maximize the profit but to provide the best possible products and services to its
members. Some co-operative banks only operate with their members but most of
them also admit non-member clients to benefit from their banking and financial
services.
2) Democratic Member Control: Co-operative banks are owned and controlled by
the members, who democratically elect the board of the directors. Members
usually have equal voting rights, according to the cooperative principle of “one
person, one vote”.
3) Profit Allocation: In a co-operative bank, a significant part of the yearly profit,
benefits or surplus is usually allocated to constitute reserves. A part of this profit
can also be distributed to the co-operative members, with legal and statutory
limitations in most cases. Profit is usually allocated to members either through
patronage dividend, which is related to the use of co-operative products and
services by each member, or through an interest or a dividend, which is related to
the number of shares subscribed by each member.

22
 Figure 3.1

ORGAISATIONAL CHART

Chairman

Vice Chairman

Managing Director

General Manager

Manager

Assistant Manager

Clerk

Peon

Source: company records

23
4.1 INTRODUCTION
System analysis refers to the process of examining a system with the intention of improving
it through better methods and procedures. Before this planning can be done, must
thoroughly understand the old system and determine how the computer can be used to make
its operations more effective. System analysis is the process of understanding the current
system by gathering and interpreting facts, diagnosing problems, using facts to improve
the current system.

4.2 EXISTING SYSTEM

At present the system used in Velinalloor service co-operative bank is Naive plus software.
Naive plus software is a powerful accounting software. Naive Plus Software Solutions
Private Limited is a Kerala based banking software company developing comprehensive
IT solutions exclusively to the banking institutions in India.
Naive Plus Software Solutions Private Limited specializes in working with co-operative
banking institutions providing them fully integrated software solutions, which are tailored
to the requirements of those clients, at a very reasonable cost.
Powered by over 25 years of experience within the application software industry, we at
Naive Plus Software Solutions Private Limited have built a reputation within co-operative
banking domain by offering consultancy services to over 600 banks.
Naive Plus Software Solutions Private Limited founded in 1989, is headquartered at
Alappuzha, Kerala and is headed by highly experienced industry expert with over 25 years’
experience. Our branch is located in Kottarakara; Kollam and service support centers are
located in all districts across Kerala. These limitations are as follows:
 Difficult to report and interpret data using the software
 Difficulty in comparison of different data
 Need technical knowledge
 It is difficult to analyses the past and present data

24
4.3 PROPOSED SYSTEM
The existing system used by the firm for financial statement analysis is studied and some
difficulties are identified. The proposed system is MS Excel which is user friendly, secured
and simple. It helps in graphical representation of data regarding financial statements. The
main purpose of the proposed system is to overcome drawbacks like graphical
representation, adding of tables and easy reporting of data.

4.3.1 ADVANTAGES OF PROPOSED SYSTEM

1. Excel helps in representing data in graphs and tables which enables easy
comparison of data of different years.
2. Computation of tax return in working capital is easier.
3. It is easy to enter and format data.
4. The company can work on different sheets at the same time.
5. Can work quickly in analyzing large amount of data.

4.4 FEASIBILITY STUDY

The feasibility study is made to see the proposed system in the light of work ability meeting
the users requirement, effective use of resources, effort and time that is spend and of course,
the course effectiveness. The feasibility study is the process of ensuring whether the project
will be feasible for the organization in different aspect. The feasibility study concern with
the consideration made to verify whether the system is fit to be developed in all terms.
Once an idea is to develop software is put forward, the question that rises first will pertain
to be the feasibility aspect.
Thus when a new project is proposed it normally goes to a feasibility study before it is
approved for development. Feasibility study is conducted to test whether the system is
beneficial to the organization.
The feasibility study reports have to address three levels of feasibility

1. Technical feasibility
2. Operational feasibility
3. Economical feasibility

25
4.4.1 Technical Feasibility
Feasibility includes the study of functions, performance and constraints and hardware and
software verifications that ma affects the ability to achieve an acceptable system. The
points that are considered to prove that the project is technically feasible are:
1. The proposed system provides adequate response to the user
2. The present technology is subjected to develop the project
3. The system can be expanded and developed
4.4.2 Operational Feasibility
There is no difficulty in implementing the system. The proposed system is effective, user
friendly and functionally reliable that the user in the company will find the new systems
reducing their hardships. The user of the system must be completely aware of the internal
working of the system so that the user will not face the problem in running the system. The
system thus reduces the responsive time of computer there by the system is found to be
operationally feasible.
4.4.3 Economical feasibility
The proposed system will not cause any expenditure since all requirements are available in
the organization. The organization is already having a group of experts who can undertake
this task without any difficulty.
4.5 SYSTEM SPECIFICATION
System specification describes the functional and nonfunctional requirements posed on a
system element. In order to prepare the system specification the requirements will be
derived from the specification of higher system elements or from the overall system
specification. The specification provides standard and tools for designing and decomposing
the architecture. If changes are required in the course of development of the system
elements the system specification shall be adapted at first. The evaluation specification
elements defines the evaluation cases required for demonstrating their requirements of
interfaces and specification.
The system specification mainly describes the requirements posed on the system elements
and specify the connected interfaces. In addition, requirements and interfaces will be
refined and allocated to lower system elements.

26
4.5 HARDWARE SPECIFICATION
Microprocessor type : Intel(R) CPU
Processor type : 2.40GHz
Random access memory: 1GB
Hard disk drive : 80 GB
Mouse : Optical Mouse
Software specification
OS platform : Windows 7
Software : MS Excel 2016
4.6 ABOUT OPERATING SYSTEM

An operating system is a collection of software that manage computer hardware and

provides common services for computer program. The operating system is a vital
component of the system software in a computer system. Application programs usually
require an operating system of function. This system provides an interface between an
Application program and the computer hardware. So that an application program can
interact with the hardware only by obeying rules and procedures programmed into the
operating system. This system is also a set of services which simplify development and
execution of application programs. Executing an application program involves the creation
of a process by this system which assigns memory space and other resources, establishes a
priority for the process in multi-tasking systems, and loads program binary code into
memory and initiates execution of the application program which then interacts with the
user and with the hardware devices.

27
4.7 OVERVIEW OF WINDOWS 2007

Windows is the world popular families of operating system .It comes in many flavors
Windows98,Windows98 SE, Windows2000, Windows NT, Windows XP, and
Windows2007 and so on. It is a GUI Based operating system. It is simple interfaces let
even an average user to operate the computer in every ways. Windows2007 is an operating
system developed by Giant Microsoft which released for public in October 2009. Windows
2007 operating system offers innovative technologies that improve performance. ,
reliability, security and compatibility. It is also offers new capabilities that help
organizations to improve user productivity. Enhance security and reduce operation cost.
Windows 2007 has a 64 bit along with the availability of 32 bit support which enable the
users to use all most of the latest PCs. Windows 7 is a personal computer operating system
developed by Microsoft. It is a part of Windows NT family of operating systems Windows
7 was released to manufacturing on July 22, 29, and become generally available on
October22, 2009, less than three years after the release of its predecessors, Windows Vista.
Windows7s saver counterpart, Windows Server 2008 R2, was released at the same time.
Windows 7 was primarily intended to be an incremental upgrade to the operating system
intending to address Windows Vista poor critical reception while maintaining hardware
and software compatibility. Windows 7 continued improvements on Windows Aero with
be the addition of a redesigned taskbar that allows applications to Home Group and support
for multi-touch input. A new Action Center interface was also added to provide an
overview of system security and maintenance information, and tweaks were made to the
user account control system to make it less intrusive. Windows7 also shipped with updated
versions of several stock applications, including Internet Explorer 8, Windows Media
Player and Windows Media Center.

28
4.8 FEATURES OF WINDOWS 2007

Windows 2007

Windows 2007 is a personal computer operating system developed by Microsoft. It is a

part of the Windows NT family of operating system. Windows 7 was released to
counterpart, windows server 2008 R2, was released at the same time.

 Speed: Even aside incompatibilities and other issues that many people had with
vista, one of the straightest forward was speed-it just felt sluggish compared to
XP. Even on pumped up hardware. Windows 2007 brings a more responsive and
sprightly feel and Microsoft has spent a lot of time and effort getting the start
menu response just right.
Microsoft has also recognized the need for improved desktop responsiveness,
which gives the impression that computer, is responding to the user and that they
are in control. Something that was often lacking with vista.
 Compatibility: Compatibility on Windows 07 will be far better than vista. Many
programs that individuals and companies used on Windows XP did not work on
vista should still run. Windows vista has done most of the hard work for
Windows 07
 Fast boosting: The most glamorous feature of Windows 2007 is booting time. It is
20% faster than Windows Vista. It takes about 27 seconds for login prompt to
appear after boot, in comparison with windows vista which takes 34 seconds for
the same.
 Lower hardware requirements: Vista gained a reputation for making even the best
hardware look rather ordinary. Windows 07 however will run well on lower end
hardware, making the transaction from Windows XP less painful. Microsoft is
even pushing Windows07 for net books. This could provide a replacement for
Windows XP, which has found a new lease of life as the OS of choice of net
books, supplanting Linux.
 Multiple instance of the same: Windows 07 lets to open multiple instance of the
program in the taskbar. Second instance will be open.

29
  Touch: The most whizz-bang visual feature to come to Windows 07 is the touch
capability. It will be available only to those with touch enable PC, such as HPs
touch smart range, but for those suitability equipped it will provide a new way to
interacting with their PC.
 Live media streaming: Window 07 allows to stream live videos, media files
within the windows media file. Streaming is possible on the local network or from
the internet.
4.9ABOUT MICROSOFT EXCEL

Excel is a powerful tool, and although designed for financial use. It lends itself to user
account automaton. The large number of generic user accounts can be copying and pasting
down. In MD Excel formulas are written automatically set the values of certain attributes
based on other attributes. It’s also easy to copy and paste information from database and
other sources of user’s information. Excel provides the ability to calculate large amounts
of data quickly and easily, which makes it a popular choice for business applications such
as accounting, inventory, sales and statistical analysis.

4.10 USES OF MICROSOFT EXCEL

 Microsoft Excel is commonly used to automate financial statements , business

forecasts, transaction registers, inventory control, and account receivable and
payable
 It also provides statistical, mathematical, analytical calculations on the data like
total average etc.
 Microsoft Excel is used in many scientific and engineering environments to
analyze numeric data and present findings.
 Microsoft Excel is a powerful and flexible graphical presentation tool.

30
4.11 CHARACTERITICS OF MICROSOFT EXCEL

Microsoft Excel is a spreadsheet program that is used to record and analyze numerical data.
Think of a spreadsheet as a collection of columns and rows tat form a table. Alphabetical
letters are usually assigned to columns and numbers are usually assigned to rows. The point
where a column and a row meet is called a cell. The address of a cell is given by the letter
representing the column and the number representing a row

 MS-Excel has an interface similar to Windows NT. Like all Windows

applications excels toolbar, shortcut menu, auto correct, online help and wizards.
 In excel, the first thing that is displayed on the screen is workbook. A workbook
is a collection of individual worksheets, each of which can hold data. Keeping all
sheets that are relayed to project in one file reduces the need to maintain different
files. The new share workbook feature lets multiple users open a workbook on a
network and edit in simultaneously.
 Worksheet auditing is a feature that checks a worksheet for errors. It can be used
to relate formulas in different cells and locate the source of calculation error. One
worksheet can contain 255 worksheets.
 Excel worksheets can contain objects, a picture or a video clip. This feature is
known as object linking and embedding.
 Excel 2000 has 65, 5363 rows and 256 columns. A single cell can contain
maximum of 255 characters. So, Excel has large data management capacity.
 Data analysis features like pivot tables: query and data map tools allow users to
present data in different ways to facilitate analysis.
 Excel 2000 provides fast and easy methods for creating web pages by building on
the tools
 Excel 2000 has increased capacity and high end display option give powerful
ways to analyze the data and presentation with chart

31
4.12 CONCLUSION

The chapter four system analysis give complete idea about the study, its relevance and
importance in the present scenario. It consist of the existing system and its limitations,
proposed system and its advantages, advantage of MS EXCEL, feasibility study, technical
feasibility, operational feasibility and economic feasibility. It also involves system
specification, software specification, about the operating system, overview of Windows
2007, features of Windows 2007, about Microsoft Excel, uses of Microsoft Excel,
characteristics of Microsoft Excel. Hence the information seems to be useful and
information which leads to the data analysis and interpretation.

32
5.1 INTRODUCTION
Data analysis is the process of evaluating data using analytical and logical
reasoning to examine each component of the data provided. Ratios are one of the
most powerful and popular financial analysis tools. Ratio analysis is a quantitative
analysis of information contained in a company’s financial statements.
5.2 TREND RATIO (TREND PERCENTAGE)

Trend percentage=

Table: 5.2
Year Sales Profit
Amount Trend percentage Amount Trend percentage

2013-14 1990048 100 360472.4 100

2014-15 626565 31.4 80874.5 22.4
2015-16 900549 45.2 98536.8 27.3
2016-17 2609097.16 131.1 199621 55.3
2017-18 5737593.77 288.3 399724 110.8

Chart: 5.2

Trend Percentage
350

300

250

200

150

100

50

0
2013-14 2014-15 2015-16 2016-17 2017-18

Sales Trend percentage Profit Trend percentage

33
Interpretation:
The above table shows that increase in sales for the last two years. The profit also
increases. But the proportionate increase in sales is much higher than that of
increase in profit. It shows that if the company increase its sales it can earn huge
amount of profit.

5.3 COMPARATIVE STATEMENTS

The financial data will be comparative only when same accounting principles are used in
preparing these statements. In case of any deviation in the use of accounting principles this
fact must be mentioned at the foot of financial statements and the analyst should be careful
in using these statements. The two comparative statements are

 Balance sheet
 Income statement.

Comparative Balance Sheet The comparative balance sheet analysis is the study of the
trend of the same items, group of items and computed items in two or more balance sheet
of the same business enterprise on different dates. The changes in periodic balance sheet
items reflect the conduct of a business. The changes can be observed by comparison of the
balance sheet at the beginning at the end of period and these changes can help in forming
an opinion about the progress of an enterprise. The comparative balance sheet has two
columns for the data of original balance sheets. A third column is used to show increases
in figures. The fourth column may be added for added for giving percentages of increases
or decrease.

34
 Table 5.3.1
Comparative Balance sheet for the year 2012-13-2014
Comparative Balancesheet
year ending 31st march increase(+)/decrease
2012-13 2013-14 Amount Percentage
ASSETS
Fixed Assets:
Furniture and fittings 4787551.56 5900903.65 1113352.09 23.2
Land&Building 1442711.25 7848928.56 6406217.31 444
Total fixed asset 6230262.81 13749832.21 7519569.4 120
Current Assets:
Cash in hand 6745345.5 7793298 1047952.5 15.5
Bank deposits 130702079.8 157942766 27240686.2 20.8
Govt.security 3773 3773 0 0
share in other institutions 1141600 6141600 5000000 437.9
PF and security deposits 2914267 2104605 -809662 -27.7
special BDR 53426.52 61548.52 8122 15.2
Loan in members 498580599.4 558478688.4 59898089 12
Interest receviable 46519394 67590939 21071545 45.2
MDS 101264750 156818000 55553250 54.8
Chitty 86310 86310 0 0
Dead stock 0 0.64 0.64 0
Stock deficit 21289.93 16543.88 -4746.05 -22.2
closing stock 678557.5 303915.85 -374641.65 -55.2
Advance due to 24300640.98 7824737.75 -16475903.2 -67.8
Net loss 204861 0 -204861 -100
Total Current Assets 813216894.6 965166726 151949831 18.6
Total Assets 819447157.4 978916558.2 159469401 19.4
LIABILITIES
Capital and Long Term Liability:
share 7531805 9666505 -2134700 -28.3
Reserves 6319840 15114379.75 -8794539.75 -71.8
Reserves for interest due 7084975 20409654 -13324679 -53.1
Bank loan 37983159 604852 37378307 98.4
Total 58919779 45795390.75 13124388.3 22.2
Current Liabilities:
Deposit 629451826.2 779653630.3 -150201804 -23.8
Interest payable 22784356 20308267 2476089 10.8
Grand&subsidy 15813 15813 0
pf and security deposits 2556084 2887138 -331054 -12.9
special BDR 53426.52 61548.52 -8122 -15.2
Chitty 6762 6762 0 0
MDS 92139350 110317350 -18178000 -19.7
Advance due by 13519761.49 19423937.9 -5904176.41 -43.6
Net profit 0 446720.72 -446720.72 0
Total Current Liabilities 760527379.2 933121167.5 -172593788 -22.6
Total Liabilities 819447158.2 978916558.2 -159469400 -19.4

35
Interpretation:

The above table shows that current assets have an increase of 18.6% were as current
liabilities shown an decrease of -22.6%. It shows that the working capital is in an
uncomfortable and bad position. Fixed assets have increase in 120% proportion to the
decrease in 22.2% capital and long-term liabilities. It is a good sign of proper utilization
of fund.
Table 5.3.1
Comparative income statement for the year 2012-2013

comparative income statement

Year ending Increase/Decrease
2012-13 2013-14 Amount Percentage
Net sales 3526108.7 1990048 -1536060.7 -43.5
Less:Cost of good sold 3001497.7 1629575.6 -1371922.1 -45.7
Gross profit 524611 360472.4 -164138.6 -31.2
Operating expenses:
Establishment and contingencies 9156741.6 12170095.34 3013353.72 32.9
Depreciation charge 285669.97 538241.72 252571.75 88.4
Interest due by 57166647 0 -57166647.3 -100
Reserve for interest due 7084975 20409654 13324679 188.1
Bad debt reserve 4828670 2942740.2 -1885929.8 -39.1
reserve for MDS due 2132500 2796500 664000 31.13
Total operating expenses 80655204 38857231.26 -41797972.6 -51.8
Operating profit -80130593 -38496758.9 41633834 -51.9
less:interest paid 57166647 77015563.94 19848916.67 34.7
Less:reserve for additional interest paid 0 31031 0 0
Net profit 5205259.1 446720.72 4758538.37 91.4

Interpretation:
The above table shows that net sales have a decrease of -43.5% were as gross profit
percentage have decreased by -31.2% and the disproportionate decrease in gross profit ratio
is mainly because of the contribution of operating expenses to it. The operating expense
have increased by -51.8%.

36
 Table 5.3.2

Comparative balance sheet for the year 2013-14-2015

Comparative Balancesheet
year ending 31st march increase(+)/decrease
2013-14 2014-15 Amount Percentage
ASSETS
Fixed Assets:
Furniture and fittings 5900903.65 10367647.65 4466744 76
Land&Building 7848928.56 8113576.56 264648 3.3
Total fixed asset 13749832.21 18481224.21 4731392 34.4
Current Assets:
Cash in hand 7793298 7306378 486920 6.2
Bank deposits 157942766 219597582.2 -61654816.3 -39
Govt.security 3773 3773 0 0
share in other institutions 6141600 11141600 -5000000 -81
PF and security deposits 2104605 1520152 584453 28
special BDR 61548.52 66814.52 0
Loan in members 558478688.4 569705701.4 11227013 2.1
Interest receviable 67590939 84021773 16430834 24.3
MDS 156818000 181517900 24699900 16
Chitti 86310 86310 0 0
Dead stock 0.64 0.64 0 0
Stock deficit 16543.88 16543.88 0 0
closing stock 303915.85 502120.35 198204.5 65.2
Advance due to 7824737.75 8538995.95 714258.2 9.1
Total Current Assets 965166726 1084025645 118858919 12.3
Total Assets 978916558.2 1102506869 123590311 13
LIABILITIES
Capital and Long Term Liability:
share 9666505 12258090 -2591585 -27
Reserves 15114379.75 34919603.47 -19805223.7 -131
Statutory reserve not deposit 0 187622 -187622
Reserves for interest due 20409654 15058335 5351319 26.2
Bank loan 604852 5010000 -4405148 -728
Total 45795390.75 62423650.47 -16628259.7 -36
Current Liabilities:
Deposit 779653630.3 878055065.4 -98401435.1 -13
Interest payable 20308267 30460867 -10152600 -50
Grand&subsidy 15813 15813 0 0
pf and security deposits 2887138 3423070 -535932 -19
Professional education fund 0 22336 -22336 0
special BDR 61548.52 66814.52 -5266 -9
Affiliation fees 0 1000 -1000 0
Chitti 6762 6762 0 0
MDS 110317350 99396250 10921100 10
Advance due by 19423937.9 21697853.9 -2273916 -12
Undistributed profit 0 214426.72 -214426.72 0
Net profit 446720.72 1712960.14 -1266239.42 -283
Total Current Liabilities 933121167.5 1035073219 -101952051 -11
Total Liabilities 978916558.2 1097496869 -118580311 -12.1

37
Interpretation:

The above table shows the current assets show an increase of 12.3%, whereas, current
liabilities show an increase of only -11%. It shows that the working capital is in a
comfortable and better position.
The fixed assets have shown a 34.4%, whereas the capital fund and long term liabilities
have shown a decrease of -36.3%. It means that the amount raised by creating long term
liabilities have not been utilized for acquiring fixed assets. It may be due to wrong financial
management.
Table 5.3.2
Comparative Income Statement for the year 2013-14-2015
comparative Income Statement
Year ending Increase/Decrease
2013-14 2014-15 Amount Percentage
Net sales 1990048 626565 1363483 68.5
Less:Cost of good sold 1629575.6 545690.5 1083885.1 66.5
Gross profit 360472.4 80874.5 279597.9 77.5
Operating expenses:
Establishment and contingencies 12170095.34 14731242.54 2561147.2 21.1
Depreciation charge 538241.72 573676.52 35434.8 6.5
Air condition recurit 0 19500 19500 0
Locker recuritment 0 41629.6 41629.6 0
Reserve for interest due 20409654 15058335 -5351319 -26.2
Bad debt reserve 2942740.2 3308837.8 366097.6 12.4
reserve for MDS due 2796500 21547455 18750955 670.5
reserve for vegetable sale loss 0 18950 18950 0
repayment for safe deposit 0 41629.6 41629.6 0
Total operating expenses 38857231.26 55341256.06 16484024.8 42.4
Operating profit -38496758.9 -55260381.56 -16763623 43.5
less:interest paid 77015563.94 90981070.6 13965506.7 18.1
Less:reserve for additional interest paid 31031 34415 3384 10.9
Net profit 115543353.8 146275867.2 30732513.4 26.5
Interpretation:
The above table shows the net sales have increased by 68.5%, whereas, the gross profit has
increased by 77.5% and operating profit by 43.5%.The disproportionate decrease in
operating profit might be due to the contribution made by the operating expenses, which
has decreased by 42.4%.

38
 Table 5.3.3
Comparative Balance sheet for the year 2014-15-2016
Comparative Balance sheet
Year Ending 31st March Increase/ Decrease
2014-15 2015-16 Amount Percentage
ASSETS
Fixed Assets:
Furniture and fittings 10367647.65 4793497.37 5574150.28 53.7
Land&Building 8113576.56 3966101.25 4147475.31 51.1
Total fixed asset 18481224.21 8759598.62 9721625.59 52.6
Current Assets:
Cash in hand 7306378 7689202 382824 5.2
Bank deposits 219597582.2 294893197.3 75295615.11 34.2
Govt.security 3773 3773 0 0
share in other institutions 11141600 11141600 0 0
PF and security deposits 1520152 2678667 1158515 76.2
special BDR 66814.52 72628.52 5814 8.7
Loan in members 569705701.4 587315730.4 17610029 3.1
Interest receviable 84021773 92302735 8280962 9.8
MDS 181517900 189151000 7633100 4.2
Chitti 86310 86310 0
Dead stock 0.64 16544.52 16543.88 258
Other assets 0 10968636.05 10968636.05 0
Stock deficit 16543.88 0 -16543.88 -100
closing stock 502120.35 349770.15 -152350.2 -30.3
Advance due to 8538995.95 9237241.9 698245.95 8.1
Total Current Assets 1084025645 1205907036 121881390.9 11.2
Total Assets 1102506869 1214666635 112159765.3 10.1
LIABILITIES
Capital and Long Term Liability:
share 12258090 14589340 -2331250 -19.1
Reserves 34919603.47 40538759.36 -5619155.89 -16.1
Reserves for investments 0 539920 539920 0
Statutory reserve not deposit 187622 0 -187622 -100
Reserves for interest due 15058335 17058335 -2000000 -13.2
Bank loan 5010000 5010000 0 0
Total 62423650.47 77736354.36 -15312703.89 -24.5
Current Liabilities:
Deposit 878055065.4 975506943.9 -97451878.49 -11.1
Interest payable 30460867 29065355 1395512 4.5
Grand&subsidy 15813 15813 0 0
pf and security deposits 3423070 73000 3350070 97.8
Professional education fund 22336 107984 -85648 -383.4
special BDR 66814.52 72628.52 -5814 -8.7
Affiliation fees 1000 0 1000 100
Chitty 6762 6762 0 0
MDS 99396250 106707200 -7310950 -7.3
Advance due by 21697853.9 22385692.4 -687838.5 -3.1
Undistributed profit 214426.72 0 214426.72 100
Net profit 1712960.14 2988901.34 -1275941.2 -74.4
Total Current Liabilities 1035073219 1136930280 -101857061.5 -9.8
Total Liabilities 1097496869 1214666635 -117169765.4 0.6

39
Interpretation:
The above table shows that current assets have an increase of 11.2% were as current
liabilities shown a decrease of -9.84%. It shows that the working capital is in a comfortable
and in a better position. The capital fund and long term liabilities have increase in
proportion to the increase in fixed assets. It is better utilization of fund.

Table 5.3.3
Comparative income statement for the year 2014-15-2016
Comparative Income Statement
Year Ended 31st March Increase/ Decrease
2014-15 2015-16 Amount Percentage
Net sales 626565 900549 273984 43.7
Less:Cost of good sold 545690.5 802012.2 256321.7 46.9
Gross profit 80874.5 98536.8 17662.3 21.8
Operating expenses:
Establishment and contingencies 14731242.54 20972738.2 6241495.66 42.3
Depreciation charge 573676.52 390529.4 -183147.12 -31.9
Air condition recurit 19500 19500 0 0
Locker recuritment 41629.6 83021.33 41391.73 99.42
Reserve for interest due 15058335 17058335 2000000 13.2
Bad debt reserve 3308837.8 3308837.8 100
reserve for MDS due 21547455 21955900 -408445 -1.8
reserve for vegetable sale loss 18950 18950 100
repayment for safe deposit 41629.6 41629.6 0 0
Total operating expenses 55341256.06 60521653.53 5180397.47 9.3
Operating profit -55260381.6 60423116.73 115683498 -209.3
less:interest paid 90981070.6 97619341 6638270.4 7.2
Less:reserve for additional interest paid 34415 0 -34415 -100
Net profit 1712960.14 2988901.34 88026584.3 513

Interpretation:

The above table shows that net sales have shown an increase were as gross profit
percentage decrease and net profit have increase over the previous year. The operating
expense have increased only by 9.3%.

40
 Table 5.3.4
Comparative Balance sheet for the year 2015-16-2017
Comparative Balance sheet
Year Ended 31st March Increase/ Decrease
2015-16 2016-17 Amount Percentage
ASSETS
Fixed Assets:
Furniture and fittings 4793497.37 4258320.64 -535176.73 -11.1
Land&Building 3966101.25 0 3206002.67 81
Total fixed asset 8759598.62 4258320.64 -1587494.7 -18.1
Current Assets:
Cash in hand 7689202 7661016.5 -28185.5 -0.3
Bank deposits 294893197.3 397764964 102871766.4 35
Govt.security 3773 3773 0
share in other institutions 11141600 12125300 983700 9
PF and security deposits 2678667 3061734 383067 14.3
special BDR 72628.52 79356.52 6728 9.2
Loan in members 587315730.4 559117569 -28198161 -5
Interest receviable 92302735 107112398 14809663 16
MDS 189151000 194632250 5481250 3
Chitty 86310 86310 0 0
Dead stock 16544.52 0 -16544.52 -100
Stock deficit 10968636.05 0 10968636.05 100
Other income 0 16016124.7 -16016124.7
closing stock 349770.15 1015617.6 665847.45 190.3
Advance due to 9237241.9 12828997.1 3591755.16 39
Total Current Assets 1205907036 1311505410 105598374.5 9
Total Assets 1214666635 1315763731 101097096.6 8.3
LIABILITIES
Capital and Long Term Liability:
share 14589340 16226080 -1636740 -11.2
Reserves 40538759.36 57622638.6 -17083879.3 -42.1
Statutory reserve not deposit 539920 0 539920 100
Reserves for inestment 0 1287145 -1287145
Reserves for interest due 17058335 23767115 -6708780 -39.3
Bank loan 5010000 10000 5000000 100
Total 77736354.36 98912978.6 -21176624.3 -27.2
Current Liabilities:
Deposit 975506943.9 1037405205 -61898261.1 -6.3
Interest payable 29065355 35865269 -6799914 -23.3
Grand&subsidy 15813 15813 0
pf and security deposits 73000 0 73000 100
Professional education fund 107984 257429 -149445 -138.3
special BDR 72628.52 4305076.52 -4232448 -5827
Agricultural credit 0 605072 -605072 0
Chitti 6762 6762 0 0
MDS 106707200 118450400 -11743200 -11
Advance due by 22385692.4 24175998.9 -1790306.5 -8
Undistributed profit 0 2856600.2 -2856600.2 0
Net profit 2988901.34 178230.74 2810670.6 94
Total Current Liabilities 1136930280 1224121856 -87191576.2 -8
Total Liabilities 1214666635 1323034835 -108368200 -9

41
Interpretation:
The above table shows that current assets have a decrease of -9.3% whereas current
liability shows an increase of 7.8%. It shows that the working capital is
uncomfortable and bad position. Fixed assets have shown an increase of 51.3%
whereas the capital and long term liability have increased only by 27.2%. It means
the amount raised by creating fixed asset have not been fully utilized for acquiring
long term liabilities.

Table 5.3.4
Comparative income statement 2015-16-2017
Comparative Income Statement
Year ended 31st March Increase/ Decrease
2015-16 2016-2017 Amount Percentage
Net sales 900549 2609097.2 1708548.16 189.7
Less:Cost of good sold 802012.2 2409476.2 1607463.96 200.4
Gross profit 98536.8 199621 101084.2 102.5
Operating expenses:
Establishment and contingencies 20972738.2 9102567 11870171.2 56.5
Depreciation charge 390529.4 1143172.4 -752643.04 -192.7
Air condition recurit 19500 4900 14600 74.8
Locker recuritment 83021.33 41630 41391.33 49.8
Reserve for interest due 17058335 23767115 -6708780 -39.3
reserve for MDS due 21955900 36788340 -14832440 -67.5
repayment for safe deposit 41629.6 41629.6 100
Total operating expenses 60521653.53 70847724 -10326071 -17.1
Operating profit -60423116.7 -36588719 -23834398 39.4
less:interest paid 97619341 97765233 -145892.3 -0.1
Net profit 2988901.34 -134353952 -137342854 -459
Interpretation:

The above table shows that net sales have increased by 189.7%, whereas, the gross profit
has increased only by 102.5% and operating profit by 39.4%.The disproportionate increase
in operating profit might be due to the contribution made by the operating expenses, which
has decreased by -17.1%.

Table 5.3.5

42
Comparative Balance sheet for the year 2016-17-2018

Comparative Balance sheet

Year Ended 31st March Increase/ Decrease
2016-17 2017-18 Amount Percentage
ASSETS
Fixed Assets:
Land&Building 7172103.92 4258320.64 -2913783.28 -41
Total fixed asset 7172103.92 4258320.64 -2913783.28 -41
Current Assets:
Cash in hand 7661016.5 9044306 1383289.5 18.1
Bank deposits 397764964 391285030 -6479933.5 -1.6
Govt.security 3773 3773 0 0
share in other institutions 12125300 12125300 0 0
PF and security deposits 3061734 3774479 712745 23.2
special BDR 79356.52 86145.52 6789 8.5
Loan in members 559117569 567065109 7947540 1.4
Interest receviable 107112398 105300951 -1811446.6 -2
MDS 194632250 203663100 9030850 5
Chitty 86310 86310 0 0
Security inestment for members 0 43240 43240 0
Other assets 0 8755884.57 8755884.57 0
Other income 16016124.7 0 -16016124.7 -100
closing stock 1015617.6 697470.78 -318146.82 -31.3
District bank interest receivable 0 14580478 14580478 0
Advance due to 12828997.1 14385759.7 1556762.6 12
Total Current Assets 1311505410 1330897338 19391927.1 1.4
Total Assets 1318677514 1335155658 16478143.82 1.2
LIABILITIES
Capital and Long Term Liability:
share 16226080 17822470 -1596390 -10
Reserves 57622638.6 55201388.1 2421250.51 4.2
Contingent liabilities 0 1000000 -1000000 0
Reserves for investment 1287145 1331703 -44558 -3.4
Reserves for interest due 23767115 51872003.4 -28104888.4 -118
Bank loan 10000 10000 0 0
Total 98912978.6 127237565 -28324585.9 -29
Current Liabilities:
Deposit 1037405205 1019684657 17720547.98 1.7
Interest payable 35865269 33839812 2025457 5.6
Grand&subsidy 15813 15813 0 0
Other liabilities 0 7154270.94 -7154270.94 0
Professional education fund 257429 266341 -8912 -3.4
special BDR 4305076.52 86145.52 4218931 97.9
Depreciation fund 0 8564420.18 -8564420.18 0
Member relief fund 0 262495 -262495 0
Agricultural credit 605072 372876 232196 38.3
Chitti 6762 6762 0 0
MDS 118450400 111992050 6458350 5.45
Advance due by 24175998.9 25594347.4 -1418348.5 -5.8
Undistributed profit 2856600.2 0 2856600.2 100
Net profit 178230.74 78103.59 100127.15 56.1
Total Current Liabilities 1224121856 1207918094 16203762.71 1.3
Total Liabilities 1323034835 1335155658 -12120823.2 -0.9

Interpretation:
43
The above table shows that current assets have an increase of 1.4% whereas
current liability shows a decrease of 1.3%. It shows that the working capital is
comfortable and better position. Fixed assets have shown a decrease of -41%
whereas the capital and long term liability have increased by -29%. It means the
amount raised by creating long term liability have not been fully utilized for
acquiring fixed assets.

Table 5.3.5
Comparative Income sheet for the year 2016-17-2018
Comparative Income Statement
Year ended 31st March Increase/ Decrease
2016-2017 2017-2018 Amount Percentage
Net sales 2609097.16 573793.77 -2035303.39 -78
Less:Cost of good sold 2409476.16 419858.82 -1989617.34 -82.5
Gross profit 199621 153934.95 -45686.05 -23
Operating expenses:
Establishment and contingencies 9102567 21969422 12866855 141.3
Depreciation charge 1143172.44 274831.88 -868340.56 -76
Air condition recurit 4900 1864140.67 1859240.67 379
Locker recuritment 41630 0 -41630 -100
Reserve for loan due 0 6925241 6925241 0
Advance due to 0 1373434.72 1373434.72 0
Reserve for interest due 23767115 51872003.4 28104888.4 118.2
reserve for MDS due 36788340 34555415 -2232925 -6.1
Other reserves 0 1384778.6 1384778.6 0
Total operating expenses 70847724.44 96110872.72 25263148.28 36
Operating profit -36588719 -95956937.77 -59368218.8 162.2
less:interest paid 97765233.3 85219234 -12545999.3 -13
Net profit -134353952.3 -181176171.8 -46822219.5 35

Interpretation:
The above table shows that net sales have decreased by -78%, whereas, the gross profit
has increased by -22.8% and operating profit by 162.2%.The disproportionate decrease in
operating profit might be due to the contribution made by the operating expenses, which
has decreased by 35.6%.

44
6.1 FINDINGS

According to our survey and calculating important points are:

 Financial position of co-operatives bank is not much satisfactory.
 The trend analysis of sales shows an increase in trend in the last two years of the
study.
 The trend analysis shows an increase in trend.
 A comparative balance sheet of Velinalloor co-operative bank for the five years
reveals that both increase and decrease trend in various asset and liability for the
period of study.
 The share capital of the bank is firmly increasing year over year. There is a growth
in the share capital of the bank; a positive trend can be inferred.
 Comparative income statement shows a decrease in gross profit for the five years
period of study.

 The net profit of the bank is decreasing year over year. The bank is in bad
profitability position.

45
6.2 RECOMMENDATIONS

1. The bank should obtain marketing executives and try to build brand image in the
minds of general public.
2. The bank should make some improvement in investment activities; the bank
should invest more in government bonds so as to increase the return and for safety
of funds.
3. The bank should improve its cash position which is a main source of working
capital.
4. The bank should use modern technique like installation of ATM machines at least
in some of the commercial places and main branches so as to reduce the time
involved in going to bank office for deposits and withdrawals.
5. The bank should consider opening new branches in areas where commercial
activities is more in order to provide assistance to business people and increase its
profit.
6. Efforts should be made for better utilization of fixed assets.
7. The branch manager should be given target for both deposits and advances and
they may be made accountable for recovery so that the each branch makes profit
center.
8. Flexible credit procedure and credit standards for each segment should be derived.
9. To increase profits and brand image the bank can increase the scope of bills of
exchange and re-discounting on bills of exchange and re-discounting on bills of
exchange.
10. Increase functions like investment in government securities in debt instrument
must be handled by well qualified and experienced professionals so that
investment would not result in losses.

46
6.3 SUMMARY

Financial statement refers to the critical assessment of efficiency and effectiveness of

various activities in different areas of operation of an organization. A careful consideration
and critical analysis of financial statement can be yardstick and basis for operation at
performance of a concern. The principle financial statement are balance sheet and income
statement of a business enterprise. The analysis of these statements helps in the
performance appraisal and helps in the causes and effect study of efficiency and
effectiveness in the use of resources available in an organization. The present study was
analyzed the financial statement of the company by using Trend percentage, comparative
balance sheets and comparative income statements.

The project Analysis and Interpretation of Financial Statement of Velinalloor Co-operative

Bank Ltd is done to find out the financial strength and weakness from time to time. So it is
easy to find this through Microsoft Excel. The MS Excel helps to the quantitative analysis
of information in the company financial statement and it is useful to find out the Trend
percentage and comparative balance sheet and income statements. Naïve plus is the
existing system at Velinalloor Service Co-operative Bank and it has the limitation of
comparison of different data and difficulty in analyzing the past and present data. Through
this study, it has been found that MS Excel overcomes the limitations of Naive plus and
hence it is more suitable for the organization.

47
CONCLUSION

In this study an analysis on the structure of the asset and liabilities of the Velinalloor
service co-operative bank Ltd is made. The bank has a sound long term and short term
solvency. The contribution of various assets towards the profitability of the branch is found
that contribution of some asset is increasing and some are not up to the requirement of the
bank. The bank can make effective utilization of funds by keeping in mind high safety
profitability and, liquidity of for present and future requirements.

Various suggestions have been given with reference to the balance sheet and general. The
bank may effectively utilize the suggestions and turn each branch into even more profit
earning center. The overall financial position of the bank is fine for sustain growth. More
and more promotional activities must be undertaken to create awareness about the bank
and its offering in order to create a brand image among the general public and loyalty
among its shareholders. It is appreciable that the Velinalloor co-operative bank is still
functioning according to the policies framed by its founding fathers. It is heartening to
know that its goals are more of service oriented than profit oriented.

48