PROJECT REPORT

ON

“RATIO ANALYSIS"
Prepared At
C.0 PUNJAB NATIONAL BANK, DHARAMSHALA

SUBMITTED TO:
SUBMITTED BY:
M rs. Somia Thakur
Deepika Kumari
Asst. Professor
BBA 6th SEM
BBA Department
Roll No: 5210050004

B.T.C D.A.V College, Banikhet (Dalhousie)

Himachal Pradesh 176303

SUBMITTED IN PARTIAL FULFILLMENT OF STUDY OF

“BACHLORS OF BUSINESS ADMINISTRATION°.
(Affiliated to Himachal Pradesh University Sh i mla)

1I age
Edi wiUi VVPS Ofhce
 “RATI
ANALY I “
i
PUNJAB NATI NAL
BAN

2 Page
I take this opportunity to express my deep sense of gratitude, thanks and
regards towards all of those who have directly or indirectly helped me in
the successful completion of this project.
I am also thankful to my guide “ "
for providing valuable information
guidance and consist throughout the training programmed.
I am also thankful to for her valuable guidance and
support in completing my project. Without their support and suggestions,
this project would not have been completed.
I am grateful to all faculty members of D.A.V College Banikhet and
my friends who have helped me in the successful completion of this
project.
Last but not the least I am indebted to my PARENTS who provided me
their time, support and inspiration needed to prepare this report. This
project would not have been possible without the collective support of
all those mentioned above. Thank you for being an integral part of
this academic endeavour.

DEEPIKA KUMARI
21851

3 Page
As a part of Bachelor of business Administration Curriculum and in order
to gain knowledge in the field of Finance, I was required to make a
project report on the topic “ ” The basic objective
behind doing this project report to get knowledge of importance of ratio
analysis in banking field.
In this project, I’ve included various types of ratios that are used to
depict the situation of the banking firm which helps to enlighten about
the performance of the company. Various ratios such as Solvency ratios,
Profitability Ratios, Liquidity ratios are used in this project and relatively
findings and suggestions are given using data provided by me.
Doing this project helped me to enhance my knowledge regarding the
ratio analysis and its importance and how it can be used as a powerful
financial tool to depict the financial performance of the companies.

4 P age
I hereby declare that the project report entitled “RATIO ANALYSIS"
submitted by me to BTC DAV college Banikhet, in partial fulfillment of
the requirement for the award of the degree of B.B.A in BUSINESS
DEPARTMENT is a record of bonafide project work carried out by me
under the guidance of Mrs. Somia Thakur. I further declare that the work
reported in this project has not been submitted and will not be
submitted , either is part or in full , for the award of any other degree or
diploma in this institute or any other institute or university.

ROLL NO. DEEPIKA

21851 KUMAR

This is to certify that the above statement made by the candidate is

correct to the best of my knowledge.

Assistant
professor
BBA
Department

Examiner

5 Page
I am hereby officially confirming successful completion of the project —
“Ratio analysis : A tool of Financial Statement Analysis in Punjab
National Bank" by Deepika Kumari, under my guidance. She had learned
the various Ratios Analysis used by the bank. And, she was provided
with the Bank’s resources for conducting the project. She had completed
her project under my guidance.
Throughout the project, she had demonstrated commendable
dedication, diligence, and a strong commitment to achieving the
project's objectives. Her analytical skills, attention to detail, and ability to
collaborate effectively have significantly contributed to the project's
success. I have reviewed the final deliverables, and I am confident in
stating that she has met or exceeded the expectations set for this
project. The project was completed within the agreed upon timeline, and
the outcomes reflect the high standards of work expected at PNB.
I appreciate her hard work and enthusiasm throughout the project. I
am confident that the skills and knowledge gained during this
experience will serve her well in future endeavours. Please feel free to
contact me if you require any further information or clarification.

Rishab Jain
Senior Manager, CRMD
Punjab National Bank
Circle office
Dharamshala

6 Page
 X
Chapter Topics Page
no. no.
1. 8
1.1 Introduction
1.2 Mission and vision
1.3 History of PNB
2. 11
2.1 • Objectives of the study
2.2 • Need of the Study
2.3 • Scope of the study
2.4 • Data collection methods
2.5 • Research Design, Tools and
Techniques used
2.6 • Limitations of the study
3.
3.1 • Introduction to Financial
3.2 ratios
3.3 • Nature of ratio analysis
3.4 • Types of ratios
• Methods of working capital
assessment
4. 23

5. 25

7 Page
 is an Indian public sector bank based in NEW DELHI. It
was founded in May 1894 and is the third largest public sector bank in India in
terms of business volumes, with over 180 million customers,12,248 branches, and
13,00+ ATMs.
Punjab National Bank (PNB), commenced its operations on April 12, 1895 from
Lahore, with an authorized capital of 2 Lac and working capital of 20,000.
The Bank was established by the spirit of nationalism and was the first bank purely
managed by Indians with Indian Capital. During the long history of the Bank, 9 banks
have been merged/ amalgamated with PNB.

8 Page
“To offer quality financial services by leveraging technology to create value for
customers and other stakeholders, opportunities for employees and thus,
contributing to the economic growth of nation.”

“To be globally trusted banking partner through customer-centric innovation,

empowering employees and enriching lives of all stakeholders.”

Born of India’s freedom struggle, PNB was establish in modern-day Lahore, Pakistan,
in 1894, and has coursed through several crests and troughs over its more than 120
years of existences.
PNB was launched by the Swadeshi movement, long before even Mahatma Gandhi
appeared on the scene of the Indian independence movement. The bank was found
in 1894 by Indian leaders and Indian capital.
Notable among the founders were Sardar Dayal Singh Majithia, Lal Harikishen Lal
Chand and Lala Dholan Das. It was their conviction that if India had to grow and
progress when independence came, it should have its own institution, more so
financial institution. It was with such noble intentions that the bank was founded.
PNB was truly India’s first National and swadeshi Bank, though an earlier Bank —
Oudh Commercial Bank was established in 1881 and folded in 1995. PNB opened its
first branch on 12th April 1895 IN Lahore, west Punjab. In the next five years, it
expanded to Sindh and North-West Frontier Province

In 1951, the Bank took over the assets and liabilities of Bharat Bank Ltd. And
became the second largest bank in the private sector.
Dalmias managed to buy the shares of the great PNB from the markets and suddenly
in 1953, the bank was gone from Punjabis into the hands of Dalmias and Jains. Lala

9 Page
Yodh Raj left and Shiriyans Prasad Jain took control of the PNB.
PNB has the privilege of maintaining accounts of the illustrious national leaders like
Mahatma Gandhi, Jawahar Lal Nehru, Lal Bahadur Shastri, Indira Gandhi and
poignantly also the Jallianwala Bagh Committee.

: PNB was founded on May 19, 1894, in Lahore.

: PNB opened for business on 12 April 1895 at Ganpatrai Road in Lahore.
PNB established branches in Karachi and Peshawar.
: PNB acquired Bhagwan Dass Bank Limited.
: Partition of India and Pakistan at Independence. PNB lost its premises in
Lahore but continued to operate in Pakistan.
: PNB amalgamated Indo-Commercial Bank Limited (established in 1933) in a
rescue.
: PNB acquired Universal Bank of India.
: The Government of Burma nationalized PNB’s branch in Rangoon (Yangon).
: PNB opened a branch in London.
: PNB acquired Hindustan Commercial Bank Limited in a rescue.
: PNB set up a representative office in Almaty, Kazakhstan.
: PNB took over Nedungadi Bank (established the bank in 1899), the oldest
private sector bank in Kerala. It was incorporated in 1913 and in 1965 had acquired
selected assets and deposits of the Coimbatore National Bank.

10 P a g e
 • To study and analyse the financial position of PNB through ratio
analysis.
• To analyse the profitability position Of the PNB.
• To determine the long- term solvency position of PNB.
• To find the possible suggestions to improve the overall efficiency of
the PNB.
• To check out how the company has performed in the financial year
(2023).
• To check out the solvency of the firm based on financial ratios.

• The ratio analysis study has great significance and provides benefits to various
parties Whom directly or indirectly with the bank.
• TO express the relationship between different financial aspects in such a way
that allows the user to draw conclusions about the performance, strengths
and weaknesses of the company.
• TO diagnose the information contained in financial statement so as to
judge the profitability Of the bank
• The Ratio analysis study helps to know Liquidity, solvency, profitability and
position of the company.

Regional imbalances in deployment of credit.

•’ Area demarcation for effective
coverage. ' District Credit Plans.

Review of Credit Flows.

11 P a g e
Primary Data:
Information is collected from secondary data and Finance Manager.
Secondary Data:
1) Bank’s financial statements.
2) Bank’s annual reports.
3) Bank’s website.
https://sIbcdeIhi.pnbindia.in/
4) Books:
Financial management — Prasanna Chandra
Management accounting — Shahi K. Gupta

In view of the objects of the study listed above an research design has been
adopted.
is one which is largely interprets and steady available information
and it lays particular emphasis on analysis and interpretation of the existing and
available information.
• To know the financial status of the Bank.
• To know the credit worthiness of the Bank.
• To offer suggestions based on research finding.

Specific way of analysing a sequence of data points over an interval of time.

The study was limited to only annual Financial Data.

The study is purely based on secondary data which were taken primarily
from Published Annual reports of Nestle.
• The ratio is calculated from past financial statements and these are
not indicators of future.
• Different companies operate in different industries each having different
environmental conditions such as regulation, market structure, etc. Such
factors are so significant that a comparison of two companies from
different

12 P a g e
 industries might be misleading.
• Financial accounting information is affected by estimates and assumptions.
Accounting standards allow different accounting policies, which impairs
comparability and hence ratio analysis is less useful in such situations.
• Ratio analysis explains relationships between past information while users
are more concerned about current and future information.

13 P a g e
Ratio is a simple arithmetical expression of the relationship of one number to
another. In simple words one number is expressed in terms of another and can be
worked out by dividing one number into the other.

‘This indicates quotient of two mathematical expression and as, the relationship
between two or more things.“
It evaluates the financial position and performance of the firm. With the help of
ratios one can determine:
k The ability of the firm to meet its current obligations.
6 The extent to which the firm has used its long-term solvency by borrowing
funds.
The efficiency with which the firm utilizing its assets in generating the sales
revenue.
The overall operating efficiency operating efficiency and performance of the
firm.

the same company (trend analysis) or comparing the ratios of one company
to those of similar companies or industry averages.

financial performance.

stakeholders such as investors, creditors, management, and regulatory

authorities.
4. Ratio analysis serves as a diagnostic tool to identify financial problems and
potential areas for improvement.

14 P a g e
Steps:
1. Selection of relevant data from the financial statements depending upon the
objective of the analysis.
2. Calculation of appropriate ratios from the data.
3. Comparison of the calculated ratios with the ratios of the same firm in the
past developed from projected financial statements or the ratios of some
other firms.
4. Interpretation of the ratios.

15 P a g e
16 I age
Edi wiUi VVPS Ofhce
3.3 TYPES OF RATIOS

Liquidity Ratio
• Current Ratio
• Quick Ratio
• Inventory Ratio

Profitability Ratio
• Asset Turnover
• Net Profit Margin
• return on networth
• operating Profit Margin
• Debtor turnover ratio

Solvency Ratios
• Debt to Equity
• Interest coverage ratio
• share equ"ity Ratio
• Debt To Asset

I age
Edit with WPS Office
 Liquidity ratios are financial metrics used to assess a company’s ability to meet its
short-term financial obligations promptly. These ratios measure the firm's ability to
convert its assets into cash to cover its short-term liabilities without causing significant
losses in the asset's value. A very high degree of liquidity is also bad, idle assets earn
nothing. The firm's funds will be unnecessarily tied up in current assets. Therefore it is
necessary to strike a proper balance between high liquidity.
Liquidity ratios can be divided into three types:
w Current Ratio
w Quick Ratio

w Cash Ratio

Current ratio is an acceptable measure of firm’s short1erm solvency Current assets

includes cash within a year, such as marketable securities, debtors and inventors.
Prepaid expenses are also included in current assets as they represent the
payments that will not made by firm in future. All obligations maturing within a year are
included in current liabilities. These include creditors, bills payable, accrued expenses,
short- term bank loan, income 1ax liability in the current year. The current ratio is a
measure of the firm's short- term solvency. It indicated the availability of current assets
in rupees for every one rupee of current liability. A current ratio of is considered
satisfactory. The higher current ratio, greater the margin of safetythelarger the amount of
current assets in relation to current liabilities, then it indicates more the firm's ability
to meet itsobligations. Itisa cured —andquickmeasure of thefirm's liquidity.

Cur rent Assets

current liability
Current Ratio of PNB with value of 5.28 indicates the company has sufficient
current assets to pay off short-term debt obligation.

Quick Ratio establishes a relationship between quick or liquid assets and current
liabilities. An asset is liquid if it can be converted into cash immediately or reasonably

18 P a g e
soon without a loss of value. Cash is the most liquid asset, other assets that are
considered to be relatively liquid asset and included in quick assets arc debtors and
bills receivables and marketable securities (temporary quoted investments).
Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial
condition. Quick ratio is a more penetrating test of liquidity than thecurrent ratio, yet
it should be used cautiously. A company with a high value of quick ratio can suffer from
the shortage of funds if it has slow—paying. doubtful and long duration outstanding debtors.
Quick assets: current assets- stock- prepaid expenses. Quick liabilities: current liabilities-
bank overdraft-cash credit

quick assets
quick liability

Quick Ratio of PNB with value of 0 indicates company has highly illiquid
balance sheet to pay its obligation

Inventory turnover is the rate at which a company replaces inventory in a given period
due to sales. Calculating inventory turnover helps businesses make better pricing,
Well-managed inventor
show that a company's sales are at the desired level, and costs are
controlled. The Inventory Turnover Ratio is a measure of how well a company
generates sales from its inventory.

cost of goods Net Sales

sold avg inventory
inventory

The asset turnover ratio measures the efficiency of a

company's assets in generating revenue or sales. It compares the dollar amount of
sales (revenues) to its total assets as an annualized percentage. One variation on
this metric considers only a company's fixed assets (the FAT ratio) instead of total
assets. Generally, a higher ratio is favoured because it implies that the company is
efficient in generating sales or revenues from its asset base. A lower ratio indicates
that a company is not using its assets efficiently and may have internal problems.

19 P a g e
 revenue
(Beginning assets-I-Closing assets )/2
Asset Turnover Ratio of PNB with value of 7.00 means shows the
company does not utilize its assets efficiently to make profits.

The operating margin measures how much profit a company makes on a dollar of
sales after paying for variable costs of production, such as wages and raw materials,
but before paying interest or tax. It is calculated by dividing a company’s operating
income by its net sales. Higher ratios are generally better, illustrating the company
is efficient in its operations and is good at turning sales into profits.

operating Earning
revenue
Operating Margin Ratio of PNB Bank with value of 21.33
indicates that the company earns enough money from its core business
operations to cover the costs involved in maintain it.

Net profit margin is calculated by dividing the net profits by net sales, or by dividing
the net income by revenue realized over a given time period. Similarly, sales and
revenue are used interchangeably. Net profit is determined by subtracting all the
associated expenses, including costs towards raw material, labour, operations,
rentals, interest payments, and taxes, from the total revenue generated.

Profit After tax

sale of products
Net Profit Ratio of PNB Bank is 2.94%

Return on equity (ROE) is a measure of financial performance calculated by

20 P a g e
dividing net income by shareholders' equity. Because shareholders' equity is equal
to a company’s assets minus its debt, ROE is considered the return on net
assets. ROE is considered a gauge of a corporation's profitability and how
efficient it is in generating profits.

Profit after Tax

Average equity
Return on Net worth ratio of PNB Bank is 2.74%

also called as shows how

quickly the credit sales are converted into the cash. This ratio measures the
efficiency of a firm in managing and collecting the credit issued to the customers.

Debtor Turnover Ratio of PNB Bank is increased by 68.2%, +12.1% in

The interest coverage ratio is a debt and profitability ratio used to determine how
easily a company can pay interest on its outstanding debt. The interest coverage
ratio is calculated by dividing a company's earnings before interest and taxes (EBIT)
by its interest expense during a given period.

The interest coverage ratio is sometimes called the times interest earned (TIE) ratio.
Lenders, investors, and creditors often use this formula to determine a company's
riskiness relative to its current debt or for future borrowing.

NTEREST EXPENSE

Interest Coverage Ratio of PNB has fallen by -0.829% compared to

previous Financial Year.

21 P a g e
The debt-to-assets ratio measures a company’s total debt to its total assets. It
measures a company's leverage and indicates how much of the company is funded
by debt versus assets, and therefore, its ability to pay off its debt with its available
assets. A higher ratio, especially above 1.0, indicates that a company is significantly
funded by debt and may have difficulty meetings its obligations.

Debt
Assets

Debt to equity Ratio of PNB has grown by 12.07% compared to previous

Financial Year.

The shareholder equity ratio indicates how much of a company's assets have been
generated by issuing equity shares rather than by taking on debt. The lower the ratio
result, the more debt a company has used to pay for its assets. It also shows how
much shareholders might receive in the event that the company is forced
into liquidation.

total shareholder equity

Total Assets

The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and
is calculated by dividing a company’s total liabilities by its shareholder equity.
The D/E ratio is an important metric used in corporate finance. It is a measure of
the degree to which a company is financing its operations through debt versus
wholly owned funds. More specifically, it reflects the ability of shareholder equity to
cover all outstanding debts in the event of a business downturn. The debt-to-equity
ratio is a particular type of gearing ratio.
Total Liabilities
total shareholders equity

22 Page
Turnover Method was recommended by the Nayak Committee ,Which we also called
Nayak Committee Norms.
The Bank assigns a sanctioned limit based on the working capital requirement that is,
What is the maximum working capital you are eligible for ?
For Small Scale Industries Units : Upto Rs. 5 cr.
For Others : Upto Rs. 1 cr.
Assumption : 4 Operating Cycle p.a
Working Capital Requirement = 25% of sales , Margin = 5%

• CURRENT ASSETS (CA) — Inventories(RM,WIP,FG),Accounts Receivables.

• CURRENT LIABILITIES (CL) — Creditors, Bank Borrowings.
• OTHER CURRENT LIABILITIES (OCL) — CL — Bank Borrowings.
• WORKING CAPITAL GAP(WCG) — CA — OCL

23 P a g e
MPBF = WCG — Margin MPBF = WCG - Margin
Margin=25 â of WCG
O
Margin = 25% of CA
MPBF= 75% WCG

• Applicable for Cyclical (Seasonal) Industries.

• Order may come in one season, Cash Realization, may be spread out..
• Unlike other methods, W.C limit is calculate based on projected cash
flows and not on projected Current Assets & Current Liabilities.
• Banks take Past 1 Year’s Actual and Future 1 year projected Cash Flow
Statement.
• Working Capital Requirements during cash deficit periods.
• Bank assigns Working Capital Requirement based on peak Cash Deficit.

24 P a g e
With regard to banking products and services, consumers respond at different rates,
depending on the consumer’s characteristics. Hence, PNB should try to bring their
new product and services to the attention of potential early adopters.
Due to the intense competition in the financial market, PNB should adopt
better strategies to attract more customers.
Return on investment company reputation and premium outflow are most
preferred attributes that are expected by the respondents. Hence greater
focus should be given to these attributes.
PNB should adopt effective promotional strategies to increase the awareness
level among the consumers.
PNB should ask for their consumer feedback to know whether the consumers
are really satisfied or dissatisfied with the service and product of the bank. If
they are dissatisfied, then the reasons for dissatisfaction should be found out
and should be corrected in future.
The PNB brand name has earned a lot of goodwill and enjoys high brand
equity. As there is intense competition, PNB should work hard to maintain its
position and offer better service and products to consumers.
The bank should try to increase the Brand image through performance and
service then, only the customers will be satisfied
Majority of the people find banking important in their life, so PNB should employ the
strategies to convert the want in to need which will enrich their business.

25 P a g e
On the basis of various techniques applied for the financial analysis of PNB Bank we
can arrive at a conclusion that the financial position and overall performance of the
bank is satisfactory. The income of the bank has increased over the period but not in
the same pace of expenses. But the bank has succeeded in maintaining a
reasonable profitability position. The bank has succeeded in increasing its share
capital also which has increased around 50% in the last 3 years. Individuals are the
major shareholders. The major achievement of the bank has been a tremendous
increase in its deposits, which has always been its main objective. Fixed and current
deposits have also shown an increasing trend. Equity shareholders are also enjoying
an increasing trend in the return on their capital. Though current assets and liabilities
(current liquidity) of the bank is not so satisfactory but bank has succeeded in
maintaining a stable solvency position over the years.

As far as the ratio of external and internal equity is concerned, it is clear that bank
has been using more amount of external equity in the form of loans and borrowings
than owner’s equity. Bank’s investments are also showing an increasing trend. Due
to increase in advances, the interest received by the bank from such advances is
proving to be the major source of income for the bank.

26 P a g e
 CHAPTER - 5

REFERENCE
WEBSITE :-
httD://www.qooqIe.com/
httD://www.Dnbindia.in/
http://www.wikipedia.com/
http://www.scribd.com/

BOOKS;-
Kishore M. Ravi, (2007),FinanciaI Management,
Pandey I.M (2006), Financial Management.

2T I a g e
Edi wiUi VVPS Ofhce