Summer Project
-
Upload
riddhi-kakkad -
Category
Documents
-
view
133 -
download
0
Transcript of Summer Project
62
SUMMER TRAINING
PROJECT REPORT
ON
CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPRATIVE BANK LTD.
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE DEGREE OFMASTER OF BUSINESS ADMINISTRATION
AWARDED BY
GUJRAT TECHNOLOGY UNIVERSITY
SUBMITTED BY
TRIVEDI DIMPY L.
MBA [SEM-2]
ROLL NO:[56-B]
UNDER THE GUIDANCE OF
MR.VIKAS PANDYA
SUBMITTED TO:
C.K.PITHAWALLA INSTITUTE OF MANAGEMENT
YEAR-(2010-2011)
62
CERTIFICATE
This is to certify that Project Report entitled “CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPERATIVE LTD.” has been successfully
completed by, TRIVEDI DIMPY, based on her own work.
The Project Report incorporates the result of her study and analysis.
(MR. VIKAS PANDYA)
The Project is forwarded for further evaluation to Gujarat Technological
University , Ahmadabad.
Place: Signature:
Date: (Dr. G.N.Joshi)
62
DECLARATION
I, the undersigned, Miss TRIVEDI DIMPY L. hereby declare that the project work
entitled “CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPERATIVE LTD.”, is based on my work. This is an original piece of work and
references whenever taken have been duly acknowledged. No part of the report
has been copied and without reference.
I further declare that the information collected from the organization has not been
shared with anyone and has been used only for academic purpose or not
submitted to any other university for the any other degree, diploma or
requirement course.
I declare that my training in PRIME CO-OPERATIVE BANK LTD. was good
experience for me & my career. My project report on “CASH OPERATIONAL CYCLE & RATIO ANALYSIS OF PRIME CO-OPERATIVE LTD.” is
acknowledged by me. The report is made by me as a part of my training which is
part of my Master degree in Business Administration.
Place: Surat Yours faithfully,
Date :
62
ACKNOWLEDGEMENT
This Project Report is done in accordance with the Masters of Business
Administration(MBA),the study course prescribed by The Gujarat technological
university, consisting two months Industrial Training in the final year in any of the
esteemed organization, specialized in finance. I have pleasure in grabbing the
opportunity of expressing my gratitude to all those who have helped me directly
or indirectly during the competition of my entire project work. Let me grab this
opportunity to thank Principal Mr.G.N.JOSHI for giving me permission to
undertake the study in finance stream.
I would like to express my whole heartedly thanks to My Project Guide Mr.Vikas Pandya who has helped me in my study and their Guidance, suggestion &
Constant Encouragement throughout the Course of the Project and without his
support completion of the Project was not Possible.
To make anything successful, needs help and co-operation from people involved
directly or indirectly. I wish to thank to all the teaching and non-teaching staff of
B.M. college of BBA for their timely suggestion and guidance. I would like to
appreciate the RM of share khan ltd-Mr. Dharmesh Chorawala for spending his
precious time & helping me in getting information and also to other members of
share khan ltd for providing me the information, valuable data related to my
project & their wonderful suggestion &guidance in completing my project work.
62
EXECUTIVE SUMMARY
As finance student, very curious to gather deep knowledge about Finance but
Finance is very broad and vast. In this, want to gather knowledge of Indian
banking system of especially cash operational cycle. That’s why want to get
deep knowledge about cash operational cycle.
The Project is on cash operational cycle where initially a brief Introduction about
the Introduction of banking system is given and then calculation of the
operational cycle is being done of last three year and then which cash
operational cycle is the best one to purchasing inventories in to cash sales is
suggested.
Ratio analysis is very useful for the marketing forecasting and planning purposes.
It is very useful in making intra comparison. One can know that at what point
banks is lagging behind from its rival in the market.
Thus find out and get practical knowledge from cash operational cycle through
the cash flow and the balance sheet and ratio analysis of the last tree year of
prime co-operative bank.
62
CONTENT
P.NO:
1. Introduction to banking system 1-12
(1.1) Definition of bank 1
(1.2) Banking in India 4
(1.3) Types of co-operative bank in India 12
2. Company profile 15-25
(2.1) Introduction to the prime bank 15
(2.2) Board of directors 20
(2.3) Organization structure 21
(2.4) Service of the prime co-operative bank 25
3. Theoretical aspect of cash operational cycle 27-37
(3.1) What is cash? 27
(3.2) Motives of cash 27
(3.3) Reason for cash surplus 29
(3.4) Definition of cash and operating cycle 33
(3.5) Operating cycle formulas 34
(3.6) Important of cash operational cycle 36
(3.7) Sources of cash flow of prime co-operative bank 37
62
4. Literature Review 40
5. Research methodology 42
(5.1) Objective 42
(5.2) Problem Definition 42
(5.3) Research Design 42
(5.4) Source of data 43
6. Calculation of the cash operational cycle 44
7. Data Analysis and Interpretation 48-55
8. Findings 56
9. Suggestion & Recommendation 58
10. Conclusion 59
11. Bibliography 70
62
62
Definition of Bank:-
An organization, usually a corporation, chartered by a state or federal
government, which does most or all of the following: receives demand deposits
and time deposits, honors instruments drawn on them, and pays interest on
them; discounts notes, makes loans, and invests in securities; collects checks,
drafts, and notes; certifies depositor's checks; and issues drafts and cashier's
checks.
Banking in India
62
Banking in India originated in the last decades of the 18th century. The oldest
bank in existence in India is the State Bank of India, a government-owned bank
that traces its origins back to June 1806 and that is the largest commercial bank
in the country. Central banking is the responsibility of the Reserve Bank of India,
which in 1935 formally took over these responsibilities from the then Imperial
Bank of India, relegating it to commercial banking functions. After India's
independence in 1947, the Reserve Bank was nationalized and given broader
powers. In 1969 the government nationalized the 14 largest commercial banks;
the government nationalized the six next largest in 1980.
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public
sector banks (that is with the Government of India holding a stake), 31 private
banks (these do not have government stake; they may be publicly listed and
traded on stock exchanges) and 38 foreign banks. They have a combined
network of over 53,000 branches and 17,000 ATMs. According to a report by
ICRA Limited, a rating agency, the public sector banks hold over 75 percent of
total assets of the banking industry, with the private and foreign banks holding
18.2% and 6.5% respectively.
Early history:-
Banking in India originated in the last decades of the 18th century. The
first banks were The General Bank of India which started in 1786, and the Bank
of Hindustan, both of which are now defunct. The oldest bank in existence in
India is the State Bank of India, which originated in the Bank of Calcutta in June
1806, which almost immediately became the Bank of Bengal. This was one of the
three presidency banks, the other two being the Bank of Bombay and the Bank of
Madras, all three of which were established under charters from the British East
India Company. For many years the Presidency banks acted as quasi-central
banks, as did their successors. The three banks merged in 1921 to form the
Imperial Bank of India, which, upon India's independence, became the State
Bank of India.
62
Indian merchants in Calcutta established the Union Bank in 1839, but it
failed in 1848 as a consequence of the economic crisis of 1848-49. The
Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint
Stock bank in India. It was not the first though. That honor belongs to the Bank of
Upper India, which was established in 1863, and which survived until 1913, when
it failed, with some of its assets and liabilities being transferred to the Alliance
Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire
from the Confederate States, promoters opened banks to finance trading in
Indian cotton. With large exposure to speculative ventures, most of the banks
opened in India during that period failed. The depositors lost money and lost
interest in keeping deposits with banks. Subsequently, banking in India remained
the exclusive domain of Europeans for next several decades until the beginning
of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s.
The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and
another in Bombay in 1862; branches in Madras and Pondicherry, then a French
colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the
most active trading port in India, mainly due to the trade of the British Empire,
and so became a banking center.
TYPES OF BANKING INSTITUTION:-
In India, there are two part of Banking
Organized Department: - Organized Department include Indian Joint Stock
Company, Foreign Exchange Bank, Co-operative Banks, Land
Mortgage Banks, Postal Savings Bank, SBI and RBI.
Unorganized Department: - Unorganized Department includes Sharif Firm,
Shroffs,
62
Today organized money market is about more then 60.
HISTRY OF BANKING INDUSTRY
A bank is a financial institution that provides banking and other
financial services. By the term bank is generally understood an institution that
holds a Banking Licenses. Banking licenses are granted by financial supervision
authorities and provide rights to conduct the most fundamental banking services
such as accepting deposits and making loans. There are also financial
institutions that provide certain banking services without meeting the legal
definition of a bank, a so-called Non-bank. Banks are a subset of the financial
services industry.
The word bank is derived from the Italian banca, which is derived from
German and means bench. The terms bankrupt and "broke" are similarly derived
from banca rotta, which refers to an out of business bank, having its bench
physically broken. Moneylenders in Northern Italy originally did business in open
areas, or big open rooms, with each lender working from his own bench or table.
Typically, a bank generates profits from transaction fees on financial
services or the interest spread on resources it holds in trust for clients while
paying them interest on the asset. Development of banking industry in India
followed below stated steps.
Banking in India has its origin as early as the Vedic period. It is believed
that the transition from money lending to banking must have occurred
62
even before Manu, the great Hindu Jurist, who has devoted a section of
his work to deposits and advances and laid down rules relating to rates of
interest.
Banking in India has an early origin where the indigenous bankers played
a very important role in lending money and financing foreign trade and
commerce. During the days of the East India Company, was the turn of
the agency houses to carry on the banking business. The General Bank of
India was first Joint Stock Bank to be established in the year 1786. The
others which followed were the Bank Hindustan and the Bengal Bank.
In the first half of the 19th century the East India Company established
three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and
the Bank of Madras in 1843. These three banks also known as Presidency
banks were amalgamated in 1920 and a new bank, the Imperial Bank of
India was established in 1921. With the passing of the State Bank of India
Act in 1955 the undertaking of the Imperial Bank of India was taken by the
newly constituted State Bank of India.
The Reserve Bank of India which is the Central Bank was created in 1935
by passing Reserve Bank of India Act, 1934 which was followed up with
the Banking Regulations in 1949. These acts bestowed Reserve Bank of
India (RBI) with wide ranging powers for licensing, supervision and control
of banks. Considering the proliferation of weak banks, RBI compulsorily
merged many of them with stronger banks in 1969.
The three decades after nationalization saw a phenomenal expansion in
the geographical coverage and financial spread of the banking system in
the country. As certain rigidities and weaknesses were found to have
developed in the system, during the late eighties the Government of India
felt that these had to be addressed to enable the financial system to play
its role in ushering in a more efficient and competitive economy.
62
Accordingly, a high-level committee was set up on 14 August 1991 to
examine all aspects relating to the structure, organization, functions and
procedures of the financial system. Based on the recommendations of the
Committee (Chairman: Shri M. Narasimham), a comprehensive reform of
the banking system was introduced in 1992-93. The objective of the
reform measures was to ensure that the balance sheets of banks reflected
their actual financial health. One of the important measures related to
income recognition, asset classification and provisioning by banks, on the
basis of objective criteria was laid down by the Reserve Bank.
CURRENT SCENARIO
The banking industry in India is in a midst of transformation, thanks to the
economic liberalization of the country, which has changed business environment
in the country. During the pre-liberalization period, the industry was merely
focusing on deposit mobilization and branch expansion. But with liberalization, it
found many of its advances under the non-performing assets (NPA) list. More
importantly, the sector has become very competitive with the entry of many
foreign and private sector banks. The face of banking is changing rapidly. There
is no doubt that banking sector reforms have improved the profitability,
productivity and efficiency of banks, but in the days ahead banks will have to
prepare themselves to face new challenges.
For the first quarter ended June 2004, the banking sector recorded a
bottom line growth of 18% to Rs 4852.50 crores. Higher net interest
62
income and lower provisioning were the main reasons for the profit growth
during the quarter. However, the above results were achieved despite
higher operating expenses and a lower rise in non-interest income.
Among banks, public sector banks outperformed private sector banks by
registering a 20% rise in the net profit compared to an 11% growth
reported by private sector banks. This was mainly due to a higher rise in
other income (OI) and a lower increase in operating expenses by public
sector banks compared to a fall in OI and higher operating expenses by
private sector banks. However, at the net interest level, private sector
banks outperformed public sector banks by registering a growth of 36%
compared to a 14% rise reported by public sector banks. .
The net interest income of the overall banking sector during the quarter
rose 17% to Rs 11962.53 crores, mainly due to low cost of funds. The
interest earned rose 4% to Rs 29747.88 crores, contributed mainly by
interest income from core operations (i.e., lending). The interest expenses
decreased by 4% to Rs 17785.35 crores. The interest spread of most
banks witnessed an increase over the corresponding previous quarter, as
the decline of yield on lending was lower than the cost of funds. In the
falling interest rate scenario, the rate on deposits for most banks fell faster
than advances. Thus, interest expenses came down faster to protect
profit.
The sound economic growth, soft interest rate regime, upward migration of
incomes and wider distribution to cover a larger proportion of the
population are expected to increase the demand for retail loans in a
significant manner. The retail credit as a percentage of GDP in India is
only around 5% as compared to levels of 30 - 50% in other Asian
economies and, therefore, offers significant growth opportunities. Also,
62
favorable demographic profile like 69% of the population estimated to be
under 35 years and an increase in upper middle/high income households
are to be the main drivers for retail credit. In the medium term, stronger
demand for credit from the corporate sector is also expected consequent
to the resurgence of this sector. Earlier, banks were seeing lower credit off
take from corporate because of weak business sentiments and lower
credit requirement due to improved operational efficiency
Also, most banks are aggressively augmenting their fee incomes and have
embarked upon cross selling of products. They are also focusing on fuller
utilization of their IT investments such as ATMs by entering into sharing
arrangement with other banks to earn extra OI. Many banks are hopeful of
effecting significant NPA recoveries due to the Securitization Act.
Recoveries from NPAs, which have been provided for, add to OI.
The banking sector is poised to grow in line with the growth of the
economy. However, there are concerns that directed focus on lending to
agriculture and SSI sector may increase NPAs of banks. Further, volatility
and a sharp fall in g-sec prices may lead to trading losses or even
depreciation provision for some banks, going forward.
62
RESERVE BANK OF INDIA
The Reserve Bank of India started function on April 1st, 1935 as a
shareholders bank with a paid up capital of Rs. 5 crores divided into 5 lakh share
of Rs. 100 each. Each share was fully paid up. The government of India also
contributes Rs. 5 crores worth of securities to form its reserve fund. It turned out
that the issue was oversubscribed by 100% through the act provided for the
setting up of an independent central board of directors. Though originally
privately owned, since nationalization in 1949, the Reserve Bank is fully owned
by the Government of India.
FUNCTION OF RBI:-
As a Bank of government, state government, commercial and Co-
operative banks.
1. Rule currency notes greater than rupee.
62
2. Monetary regulation.
3. Regulation on exchange value of rupee.
TYPES OF THE BANK
1. Central Bank:-Central Bank is a bank of bankers. This bank has given rights to
published currency notes. The central bank of our country is the Reserve Bank
of India. It’s established in 1934. It keeps supervision and controls the
activities of advances of the other commercial banks and financial incautious
of country. Their main objective is to make the country’s economy very strong
and well managed.
2. Commercial Banks:-
Commercial bank provides various types of services to the
people of country and businesses and industries. The main activity of
commercial bank is to get surplus money from the people as deposits and give
advances to the needy people for businesses and for other matters. It
provides facilities of various types’ accounts like saving accounts, current
account, fixed deposits accounts and recurring deposits accounts.
3. Co-operative Bank:-
The main aim of co-operative bank is develop the feeling of
safety in the common people. It was started in India after passing the Co-
operative credit society act in 1904. It is divided into three types:
State co-operative banks
District co-operative banks
Primary co-operative banks
4. Rural Banks:-
62
This bank provides various advance facilities for manufacturing
activities such as business, industry and for the aim of rural economic
development. The rural bank act is passed in 1974. It has given major
contribution in the development of rural areas.
5. Land development Banks:-This bank act for buying heavy and expensive equipment for
agriculture for long term advances. This bank has given major contribution in
the development of the agriculture. These banks are mainly established on
the basis of co-operative sectors.
6. Exchange Banks:-The main activity of exchange bank is to provide money for
foreign trade. It also works as a normal banking. This bank is foreign
ownership, so it is called as foreign exchange bank. The head office of this
bank is out of India and its currency is in foreign money.
7. Indigenous Bank:-In many countries, traders do banking business with their business
form; there is a special position in Indian money market of indigenous banks
and traders.
8. Industrial Banks:-The main activities of this bank are to provide advances to the
industries. Commercial bank does such business based on the deposit
received from the customers. The working of this bank is such that Industrial
Development Bank of India, Industrial Financial Co-operation of India,
Industrial Credit and Development Corporation of India.
DEFINITION OF CO-OPRATIVE BANK:
Co-operative Bank is one type of organism in which people join willingly to
encourage their equal financial interest.
62
- Hewitt
Kelwert
TYPES OF CO-OPERATIVE BANKS IN INDIA
There are mainly three types of co-operative banks in India.
1) State Co-operative Bank
2) Central Co-operative Bank
3) Primary Co-operative Bank
The explanation of these three types of co-operative banks can be explained as
follows:
1) State Co-operative Bank:-It is a federation of central co-operative banks and acts as a
watchdog of the co-operative banking structure in the state. Its funds are
obtains in the form of capital, deposits, loan and overdraft from the RBI and
State co-operative banks to lend money to central co-operative banks and
primary societies and no directly to farmers.
2) Central Co-operative Bank:-These are the federation of primary credit societies in a district and
are two types those having membership of primary societies as well as
individual. The funds of the bank consist of share capital, deposit loan and
overdraft from co-operative banks and joint stocks. These banks finance
member society within the limit of the borrowing capacity of the society.
3) Primary Co-operative Credit Societies:-It is an association of borrowers and non-borrowers residing in a
particular loyalty. The funds of the society are derived from the share capital
62
and deposits of members and loan from some central co-operative bank.
The borrowing power of the members as well as of the society is fixed. The
loans are given to members for the purpose of the cattle, fertilizers and
practices etc.
Categories:-
There are two main categories of the co-operative banks.
(a) Short term lending oriented co-operative Banks:-
Within this category there are three sub categories of banks viz state co-
operative banks, District co-operative banks and Primary Agricultural co-
operative societies.
(b) Long term lending oriented co-operative Banks:-
Within the second category there are land development banks at three levels
state level, district level and village level.
The co-operative banking structure in India is divided into following main 5
categories:
1. Primary Urban Co-op Banks:
2. Primary Agricultural Credit Societies:
3. District Central Co-op Banks:
4. State Co-operative Banks:
5. Land Development Banks:
62
Structure of Co-operative Bank:-
Reserve Bank of India
Urban Co-operative BanksDistrict Co-operative Banks
Non Scheduled Co-op. Bank
Scheduled Co-op. Bank
62
62
LOGO OF THE PRIME CO-OPERATIVE BANK LTD
INTRODUCTION TO PRIME CO-OPERATIVE BANK
Prime is a name of the bank where the bank is ready to serve its banking
services to all customers under the slogan of “YOUR BANK FOR YOU”
The bank is governed by the Gujarat co-operative societies act, a
legislation enacted by the state of Gujarat in India.
Prime co-operative bank ltd was promoted by an experienced and
visionary entrepreneur named Mr. GOKUL BAKSHI; he is the Founder Chair
person of the bank and continues to supervise its growth and development.
The Bank started off with exemplary combination of talented Board &
potential staff team, stuffed with extreme professionalism and well designed
62
contours of working method. The bank started as a paperless unit employing
tale-banking, remote banking, off-time banking, Sunday banking, holiday banking
and many more allied methodologies from the very beginning right from the D-
day.
62
HISTORY OF THE PRIME BANK
62
1994: Bank was incorporated under the chairmanship of Mr. Gokul Bakshi.
Bank commenced business from a rented location. Retail banking was
the initial activity of the bank. Focus of strategy was stability, market
penetration; resources build up and steady growth
1995: Product development strategy initiated. Bank started financing small
scale industries as recommended by RBI from Goiporia Committee and
Narsimha committee.
1996: “Customer is a king” approach initiated concept of information technology
was used like TELE Banking/Remote Banking with the advent of
computerized operations. Off time banking concept were introduced i.e.
evening 6:00 p.m. to 8:00 p.m. were provided for bank’s retail customer
to reduce their Cash risk and continue as on date.
1997: Branch Expansion Strategy initiated and bank started its first branch
Bhulka Bhavan Branch at Adajan in August 1997 within the very next
month i.e. Sept.97 bank had started another Branch at Katargam GIDC.
1998: Branch Expansion had continued during the year and 3rd branch was
opened in June 98 at M.G.Road, 4th branch was opened in oct-98 at
new sardar market & 5th branch was opened in Dec-98 at bhatar char
rasta.
1999: Bank has taken permission from RBI to accept the NRI deposits.
Introducing “smart cash”a smart alternative of cash named as “prime
purse”. It is useful at 143 places in the entire Surat area and response
encouraging received from valuable class of people of Surat.
2000: Bank started with opening of a new millennium branch at navsari
(millennium branch in feb.2000 first bank in south Gujarat to open its out
62
city branch. Bank has opened another outstation branch at Bharuch in
September- 2000, starting to open D-MAT a/c in November 2000.
2004: Prime completed its 10th anniversary, and introduced schemes like Prime
Sarasvatee, Prime Health Card and Prime Citizen for its valued
customers.
2005: Prime joined its hands with Worlds Number 5 raked Insurance Provider
named AVIVA Insurance, providing Life Insurance and with IFFCO-
TOKIO for providing Marine Insurance and General Insurance to its
customers.
2006: Introduced Schemes like Loan for Gold in partnership with ICICI Bank.
Also opened a Bill Collection Centre at its Bharuch Branch for collecting
Gas Bills of Gujarat Gas Co. Ltd. To make payment system quicker RBI
has launched RTGS scheme for scheduled bank, Prime has joined
hands with Kalupur Commercial Bank to help its customers to have the
advantages of RTGS.
Prime has done a remarkable job as Baroda District Industrial Co-
operative Bank’s merger with Prime Co-operative Bank, placing its
management on its 7 branches, which has increased area of its working
up to Chotta Udaipur in Gujarat just 72 km away from the MP border.
2007: Prime has done a remarkable job as Adajan Nagrik Co-Op.
Bank's merger with Prime Co operative Bank, placing its management on
it, which has increased area of its working in Surat city.
Prime Bank has started business of Mutual Funds on a referral basis.
Bank has tied with Principal PNB Mutual Fund, UTI, Benchmark, ICICI
Prudential, Reliance, SBI, Lotus, Birla, Kotak, and Sundaram ETC.
62
2008: Prime Bank has received Category-2 License to carry out Foreign
Exchange Business
“Prime Bank had done Hat trick in Merger of weak Banks."
- In June 2006 Vadodara's 50 year old bank with its
7 branches, 'Baroda Industrial Co-Op. Bank.'
- In June 2007 Surat's 'Adajan Nagrik Co-Op. Bank' an
- In June 2008 Nadiad's 38 year old bank with its 3 branches 'United
Mercantile Co-Op.Bank.
2009:Tie-up with Paul Merchants for foreign inward remittance facility
through Western Union Money Transfer.
Two branches opened on 1-06-2009 – one at Bodeli dist. Bodeli and
another one at Vyara District Tapi.
Fourth merger taken place on 22-09-09. Sanand Urban Co-op. Bank Ltd., Sanand taken into merger
2.3 BOARD OF DIRECTORS
62
Sr. Position Name
1. Chairman Shri. Gokulbhai Bakshi.
2. Vice Chairman Shri. Mukeshbhai Bombaywala
3. Mg. Director Shri. Dharmeshbhai Chorawala
4. Director Shri. Kanubhai Tailor.
5. Director Shri. Radhykishan Ruchandani.
6. Director Smt. Champaben Makwana
7. Director Shri. Kishor Brahmbhatt
8. Director Shri Rajnikantbhai Kapadia
9. Director Shri Dhiraj Shah
10. Director Shri. Parimal Vyas
ORGANISATIONAL STRUCTURE
In Prime Co-operative Bank, organizational structure is not very
formal. In each department, there is an officer and under him, there are two
clerks helping him. The structure is given below.
62
Chairman
Director
CEO
Administration Office
______________________________
GM Credit Administration Manager All Branches
The main branch has systematic hierarchy because it has various
responsibilities to be handled, so its own hierarchy, which is as under:
GM
Senior Manager
Manager
Assistant Manager
PRIME BANK ADMINISTRATIVE WING
62
Sr. No. Wing Name with AddressPhone No.
1. Control Centre
2nd floor, Meridian Tower,
Udhna Darwaja, Ring Road,
Surat
0261-2369089
0261-2351485
2. Service Cell
Kailashdeep Complex,
Opp. Sub Jail, Ring Road,
Surat
0261–2345250
3. Central Gujarat Area Office
Prof Manekrao Road,
Dandia Bazaar,
Vadodara – 390001
0265–2459198
MOTTO & VISION OF THE PRIME BANK
MOTTO OF THE BANK:-
“Operation stops in the evening
62
What continues is………
OUR RELATIONSHIP”
VISION OF THE BANK:-
A fully equipped one stop high-tech “Banking Super Market.”
FUTURE PLANS OF THE BANK:-1) Branch Expansion To Ahmadabad To Vapi
2) ATM Installation
3) Core banking Solution
4) Schedule Status
ACHIEVEMENTS
BEST PERFORMING CO.OPERATIVE BANK
AWARD RECEIVED FOR SECURING 3RD
RANK IN GUJARAT AND 6TH RANK IN INDIA
BASED ON LAST THREE YEARS FINANCIAL
PERFORMANCE.
OTHER AWARDS
1St prize of non-schedule multiple branch Bank Award Received15th
November 2008.
62
For dedicated and exemplary services rendered to the Citizens of Surat.
Award Received 18th October 2008.
National award winner for “Frontiers In Co-operative Banking Awards
2008” received three awards in different categories. National competition
arranged by “Banking Frontier” – National Magazines for banking.
Best performing co-operative bank award received at Bangkok- Thailand
in 17th international achievers summit.
My favorite bank award received on 18/05/2008 for the year 2008.
SERVICES OF THE BANK
62
Life Insurance: The Prime bank is first Co-operative Bank of South Gujarat Area
who has tie up & start Life Insurance Products Business with Aviva Life Insurance
Co. India Ltd. as a “Bank Assurance”. (Corporate Basis)
General Insurance: The Prime bank is first Co-operative Bank of South Gujarat
Area who has tie up & start Life Insurance Products Business with Iffco Tokyo
General Insurance Co. Ltd. as a “Bank Assurance”.
Stamp Franking Services: They provides stamp franking service at following
branches:
Main Branch, Kadodara, Surat.
Dandia Bazaar Branch, Baroda.
Sayajigunj Branch, Baroda.
Mutual Funds: They are first & only Co-operative bank of South Gujarat Area
who has been staring business of Mutual Funds as a referral basis.
Prime Lockers: There is one & only Co-operative bank of the South Gujarat –
Prime Bank has been offered Rent Free Locker Facility to the customers since
the inception of the Prime Bank.
Prime Fore. Exch.: We can cater Foreign Exchange (Letter of Credit & Bank
Guarantee) through Inducing Bank. Now, we have been doing the business of
Money Exchange/Changing Business.
Prime Dmate: We can cater Dmate account facility through HDFC Bank.
Prime RTGS: Now you can Transfer you fund or to receive the fund from any
City or place of India (RTGS-Real Time Gross Settlement).
Mobile Banking: They are a first & only Co-operative High Tech Banking Super
Market to cater your Bank’s inquiry on your finger tips in South Gujarat Area. You
62
can also get cheque status on your mobile phone. You can also get lass
three transactions on you cell.
Prime ABB: They are a first & only Fully Equipped, High Tech, Professional
Banking Super Market of South Gujarat offered Any Branch Banking. You can
make Cash, Clearing & Transfer Transaction from any of Prime Bank’s Branch.
You can also get Statement of your account or pass book of your savings bank
account. So you are not a Customer of specific Branch of Prime Bank but you
are Customer of Prime Bank.
Seven Day working our various branches working for 7 days.
1) Bhulka Bhavan, Branch
2) Bhatar Road, Branch.
62
What is CASH?
According to Sydney Robbins ,
62
“Cash what a strange commodity! A business wants to get hold of
it in shortest possible time but to keep the least possible quantity on hand.
Increased sophistication in the handling of cash has enabled companies to cut
down the balance needed to sustain any level of given operation.”
Sources and used of cash:
1) Sources:
Decrease in assets
Increase in liabilities
Sale proceeds from an ordinary or preference share issue.
2) Uses:
The less from operation
Increase in assets
Decrease in liabilities
Redemption of redeemable preference share
Cash dividend
MOTIVES OF CASH:
The main motives of maintaining cash balance are as under:
1) Transaction motive:-Business unit has to carry on a large number of day to day transactions.
Cash is needed for the payment of such transaction. Moreover, cash
balance is needed for the payment of wage, electricity bills, telephone bills,
maintenance expenses, interest, dividend, rent etc. If there is
synchronization between cash receipt and cash payment, cash management
is not of much importance. Therefore, maintenance of cash balance is highly
important so that necessary transactions can be carried on.
2) Precautionary motive:-
62
Explosion in the factory, breakdown of machines, fire, flood, earthquake etc
create need for cash. Such events happen very rarely, however, as a
precaution the company has to maintain sufficient cash balance to meet
contingency expenses.
3) Speculative Motive:-Speculative Motive is the motive of earning profit from price fluctuations.
When the company makes purchasing of raw materials at current low prices
in anticipation of rise price in the near future, it is speculative purchasing.
Such opportunities of speculative gains do come in the life of company. But
its advantages can be only when the company has enough cash balance to
make speculative cash buying.
4) Compensatory Motive:-Commercial banks provide services to their customers free of charge. In
order to compensate the cost of free services they desire that every
customer should maintain minimum cash balance with the bank. Generally,
minimum cash balance is prescribed by the bank for saving and current
accounts. If that minimum balance is not maintained the bank levies charge
certain amount. Therefore, a bank customer is required to maintain minimum
cash balance.
REASON FOR CASH SURPLUS:-
Cash surplus arise for many reasons and for last varying time period. Some of
the reasons are:
62
1) Low capital expenditure
2) Absence of profitable avenues
3) Sale of a part of business
4) Conservative dividend distribution policy
The firm may keep surplus fund in liquid form for the following reasons:
1) To buy back shares in near future
2) To enhance the dividend payment to shareholders
3) Waiting for strategic opportunities to arise like acquisition and takeover of
weak unit.
REASON FOR CASH FLOW PROBLEMS:-
The continuous deficit in cash flow will show the signal for forthcoming situation
of financial distress. The cash flow problems may arise from the following
reasons:
1) Continuous operating losses will cause deficit in cash flows. A bank which
cannot able to cover the depreciation charge but is in the surplus state of
cash is the potential unit for cash starvation.
2) When the rate of inflation is higher, the need for cash also increase and it will
cause excessive outflow of cash than inflow.
3) Non recurring expense or payments may cause cash flow problems.
4) Over trading is one of the reasons which cause cash flow problems. A firm
which do business more than its working capital can absorb, will create cash
flow problems
5) Usiness growth of a firm may lead to continuous cash requirements to
support its production and working capital shortage.
62
CASH FORECAST:-
1) SHORT TERM CASH FORECAST:
Methods for short term cash forecast are as follows:
I. Receipts and Disbursement Method: This method is essential a projection of the cash records
wherein the forecast includes detailed listing of the sources of cash
receipts and the nature of cash disbursements. This method is by
companies exercise a close control over cash because it traces the
movement of cash through each item of income and expenditure. Receipts
and disbursements forecasts are often short range forecast.
II. Adjusted Income Method:
This method is consists of a forecast of net income and correction of this
figure by any other transactions that are necessary in order to adjust it to
cash basis. The profit and loss budget constitutes the primary basis for the
62
forecast; the data are supplements by forecasts of balance sheet items.
This method involves the establishment of expected net income over some
future period and then adjusted of this figure to a cash basis by various
addition and deductions. This method is best suited for those have stable
business volume and earning power. Since this method is based on
difference between income and expenditure rather than on aggregate
transactions. The main advantage of this method is that it provides a very
accurate estimate of cash position at a given point of time, because it takes
in to account the effect of cash on changes of working capital and other
non-operating balance sheet items. It does not offer much day to day
control over cash, for it does not trace the actual flow of monies. For this
reason, it is unsatisfactory for companies in which operating cash is tight
for those which are rigorously investing surplus cash.
2) LONG TERM CASH FORECAST:
It attempts only to give a rough sketch of a company’s distance financing
requirements. It pinpoints a company’s future money needs’ especially in
working capital requirements. If a firm experience a serious cash drain, the
forecast will give it some idea of how rapidly this is happening and why.
Another use of it is that it enables a firm to appraise its proposed capital
projects.
The method of long term cash forecast is as follow:
The Cash Book Method of Analysis:
It is designed to measure the cash flow on the basis of the classified entries which
appear in cash book. When a firm receives or pays out cash or cheques in the
course of the daily conduct of its business affairs, each receipts or payment is
recorded in the cash book. The receipts may be:
62
a) From customers or debtors
b) For cash sales
c) For miscellaneous, repetitive and non-repetitive sources.
The payment may be related:
a) Suppliers of materials
b) Employee payments
c) For miscellaneous, repetitive and non-repetitive payments
d) Tax liabilities
e) Capital expenditure
f) Financial obligations such as interest or dividend payments.
62
DEFINATION OF OPERATING AND CASH CYCLE:
Operating cycle and cash cycle are two important component of working capital
management.
Cash cycle: cash cycle is the time period from when cash is paid out to when
cash is received,
62
Operational cycle: it refers the delay between the buying of raw material
and the receipt of cash from sales proceeds. In other words, operational cycle
refers to the number of days taken for the conversion of cash to inventory which
cash is engaged in inventory and account receivable. If an operational cycle is
long then there is lower accessibility to cash for satisfying liabilities for the short
term.
Cash operating cycle is the length of time between company’s outflow of
material, wages and other expenditure and inflow of cash from the sales of
goods. It reflects a company’s investment in working capital. The faster the cycle,
lower is the investment in working capital. The investment increases from raw
material to labour, OH, WIP up to final collection of cash from trade receivables.
The length of cycle depends upon balancing liquidity and profitability.
Shortening cash cycle may have an adverse effect on sales because customers
buy from that supplier who gives more credit period so there should be an
optimum level of cash operating cycle.
He Operating cycle definition, also known as cash operating cycle or cash
conversion cycle or asset conversion cycle, establishes how many days it takes
for a company to turn purchases of inventory into cash receipts from its eventual
sale. Operating cycle has three components of payable turnover days, inventory
turnover days and accounts receivable turnover days. These come together to
form the complete measurement operating cycle days. The operating cycle
formula and operating cycle analysis stems logically from these.
OPERATING CYCLE FORMULA:
Operating cycle calculations are completed simply with this formula:
Operating cycle = DIO + DSO - DPO
Where,
62
DIO represents days inventory outstanding
DSO represents day sales outstanding
DPO represents days payable outstanding
Operating Cycle Calculation:
Calculating operating cycle may seem daunting but results in extremely valuable
information.
DIO = (Average inventories / cost of sales) * 365
DSO = (Average accounts receivables / net sales) * 365
DPO = (Average accounts payables / cost sales) * 365
Example: What is the operating cycle of a business? A company has 90
days in day’s inventory outstanding, 60 days in days sales outstanding
and 70 in days payable outstanding.
Operating cycle = 90 + 60 - 70 = 80
This means that on average it takes 80 days for a company to turn
purchasing inventories into cash sales. In regards to accounting, operating
cycles are essential to maintaining levels of cash necessary to survive.
Maintaining a beneficial net operating cycle ratio is a life or death matter.
Cash outflow for operating charges:
This expenditure is simple: we count the cash operating charges (if we pay them
entirely with cash & bank) and, of course, we don't have to worry about the
amortization which is a "non-cash" operating charge (the cash of the investment
62
was paid at another time, or perhaps even not yet paid, but it's not taken into
account here).
Salary + fringes = 150
Rent = 50
other cash charges = 50
So the cash outflow for operating charges is 250.
(Remember that all these were, simply enough, credits in the cash &Bank
account)
Outflow for interest charges, taxes and dividends.
Here we take into account the "buffering" liability account "other creditors". The
variation of the "other creditors" is 90 - 50 = 40.
So the cash outlay for interest charges, taxes and dividends is 10 + 20 + 30 - 40
= 20.
IMPORTANCE OF CASH OPRATING CYCLE:
Cash cycle is very important for the health of business.
62
A powerful tool for assessing how well a company is managing its working
capital.
To determine more easily why and when the business needs more ash to
operate.
When and how it will be able to repay the cash.
The measure illustrates.
How quickly a company can convert its product to cash through sales.
The shorter the cycle, the less time capital is tied up in the business
process.
It allows the company to take advantage of the working capital sooner.
Longer operational cycle causes cash crunches.
An upward trend is a negative signal.
A downward trend shows increase in efficiency.
SOURCES OF THE CASH FLOW FROM PRIME CO-OPRATIVE BANK: -
Current Account
Saving Account
62
Locker With the reliance gold policy for marketing strategies.
Fixed deposit
various types of loan
How can used making an efficient cash flow in prime co-operative bank?
-To provide customer service.
-Increase the cash by opening bank account.
-Increase cash by short and long term fixed deposit.
-Increase loan with higher rate and earn interest.
WHAT IS THE CASF FLOW?
Revenue or expense stream that changes a cash account over a given period. Cash
inflows usually arise from one of three activities - financing, operations or investing -
62
although this also occurs as a result of donations or gifts in the case of personal finance.
Cash outflows result from expenses.
INVESTMENT OF CASH:-
62
The Prime Co-operative Bank Ltd invest their cash in various banks such as
nationalized bank, State co-operative banks, District co-operative bank, Sate
Government Security, Central Government Security.
Guidelines of RBI for the Investment:-
1. The Total amount of funds placed as inter-bank deposits shall not
exceed 10% of DTL as on March 31 of the previous year.
2. Non SLR investment (except Inter-bank deposits) not to exceed 10%
of total deposits as on March 31 of the previous year.
3. Exposure to any single bank or to any single PSU/FI should not
exceed 2% of NDTL as on March 31 of the previous year.
4. Total investment in Bonds/Debenture/MF products not to exceed 10%
of total deposits as on March 31 of the previous year.
Objectives of the cash flow and fund flow statement:
After you have studied this unit, you should be able to:
Understand the idea of funds flowing through a business in a dynamic situation
Appreciate the role of working capital in the operations of a business
Understand the sources and uses of working capital as well as cash during an
accounting period from the financial statements
Understand and interpret changes in working capital identifying the causes of
these changes
Use the funds flow statement and the cash flow statement as analytical tools
62
(1)
62
AutoZone Cash Conversion Cycle: A Competitive Advantage?
Source:-http://www.oppapers.com/essays/Literature-Review/710859
According to, Shin & Soenen, 1998
In intention to discover the relationship between efficient working capital
management and firm’s profitability(Shin & Soenen, 1998) used net-trade cycle
(NTC) as a measure of working capital management. NTC is basically equal to
the CCC whereby all three components are expressed as a percentage of sales.
The reason by using NTC because it can be an easy device to estimate for
additional financing needs with regard to working capital expressed as a function
of the projected sales growth. This relationship is examined using correlation and
regression analysis, by industry and working capital intensity. Using a Compustat
sample of 58,985 firm years covering the period 1975-1994, in all cases, they
found, a strong negative relation between the length of the firm's net-trade cycle
and its profitability. In addition, shorter NTC are associated with higher risk-
adjusted stock returns. In other word, (Shin & Soenen, 1998) suggest that one
possible way the firm to create shareholder value is by reducing firm’s NTC.
The study of (Shin & Soenen, 1998) consistent with later study on the same
objective that done by (Deloof, 2003) by using sample of 1009 large Belgian non-
financial firms for the period of 1992-1996. However, (Deloof, 2003) used trade
credit policy and inventory policy are measured by number of days accounts
receivable, accounts payable and inventories, and the cash conversion cycle as
a comprehensive measure of working capital management. He founds a
significant negative relation between gross operating income and the number of
days accounts receivable, inventories and accounts payable. Thus, he suggests
62
that managers can create value for their shareholders by reducing the number of
days accounts receivable and inventories to a reasonable minimum. He also
suggests that less profitable firms wait longer to pay their bills.
(2)
ACCORDING TO, Timo SalmiProfessor of Accounting and Business Finance
Teppo MartikainenAssociate Professor of Accounting and Business Finance
A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis
Abstract
This paper provides a critical review of the theoretical and empirical basis of four
central areas of financial ratio analysis. The research areas reviewed are the
functional form of the financial ratios, distributional characteristics of financial
ratios, classification of financial ratios, and the estimation of the internal rate of
return from financial statements. It is observed that it is typical of financial ratio
analysis research that there are several unexpectedly distinct lines with research
traditions of their own. A common feature of all the areas of financial ratio
analysis research seems to be that while significant regularities can be observed,
they are not necessarily stable across the different ratios, industries, and time
periods. This leaves much space for the development of a more robust
theoretical basis and for further empirical research.
62
62
Research Methodology
PROBLEM STATEMENT:
The research problem is to know the “CASH OPERATIONAL CYCLE
OF PRIME CO-OPERATIVE BANK LIMITED”.
OBJECTIVE OF STUDY: To know the cash retention limit of bank.
To know the cash flow of prime bank.
To know the loans and deposit of bank.
To know the liquidity level of the bank.
To find out the days in inventory outstanding in prime co-operative
bank.
To find out the days sales outstanding in prime co-operative bank.
To find out the days payables outstanding in prime co-operative bank.
To know the days of operating cycle.
To know the ratio analysis.
62
RESEARCH DESIGN:
The nature of research design is the descriptive research design.
DATA COLLECTION:
There are two types of data:
a. Primary Data
b. Secondary Data
62
[1] DAYS IN INVENTORY OUTSTANDING:-
62
Day’s inventory outstanding ratio, explained as an indicator of inventory turns, is
an important financial ratio for any company with inventory. It shows how quickly
management can turn inventories into cash. In general, a decrease in day’s
inventory outstanding (DIO) is an improvement to working capital, and an
increase is deterioration.
Also known as days inventory outstanding (DIO). It is calculated by this formula:
DIO = AVRAGE INVENTORY/COST OF SALES*365
YEAR AVRAGE INVENTOY COST OF SALES DIO
2008-2009 944360.79 146556743.1 2.35
2009-2010 1140868.73 178587974.3 2.33
2010-2011 1529274.44 322673109.4 1.73
Interpretation: This means that on average it takes in 2009, 2.35 and 2010,
2.33 and 2011, 1.73 for a bank to turn purchasing inventories into cash sales.
[2] DAYS SALES OUTSTANDING:
62
A measure of the average of days that a company takes to collect revenue after
a sale has made. A low DSO number means that a company Fewer Days to
collect its account receivable high DSO number shows that a Company is selling
its product to customer on credit and taking longer to collect money.
Days sales outstanding are calculated as:
DSO =AVERAGE ACCOUNT RECEIVABLE/NET SALES*365
YEAR AVRAGE ACCOUNT RECEIVABE
NET SALES DSO
2008-2009 37623740.11 30485609 450.46
2009-2010 36830676.35 38790565 346.56
2010-2011 28873037.65 34027774 309.71
Interpretation: This means that on average it takes in 2009,450 days and
2010,346 days and 2011,310 days for a bank to turn days in outstanding into
cash sales.
[3] DAYS PAYABLE OUTSTANDING:-
62
Days payable outstanding (DPO), defined also as days purchase outstanding,
indicates how many days on average a company pay off its accounts payables
during an accounting period. A useful tool to measure and manage DPO is a
Flash Report.
Day’s payable outstanding means the activity ratio that measures how well a
business is managing its accounts payable. The lower the ratio, the quicker the
business pays its liabilities. It also shows the average payment terms granted to
a company by its suppliers. The higher the ratio, the better credit terms a
company gets from its suppliers. From a company’s prospective, an increase in
DPO is an improvement and a decrease is deterioration. It is the calculated as
below:
DPO = AVRAGE ACCOUNT PAYABLE/COST OF SALES*365
YEAR AVRAGE ACCOUNT PAYABLE
COST OF SALES DPO
2008-2009 3233956.87 146556743.1 8.05
2009-2010 4477607.25 178587974.3 9.15
2010-2011 1590630.04 322673109.4 1.79
Interpretation: This means that on average it takes in 2009, 8.05 and 2010,
9.15 and 2011, 1.79 for a bank to account payable.
CASH OPEARTIONAL CYCLE:
62
OPERATING CYCLE= DIO + DSO – DPO
YEAR: DIO DSO DPO COC:
2008-2009 2.35 450.46 8.05 444.8
2009-2010 2.33 346.56 9.15 339.7
2010-2011 1.73 309.71 1.79 309.6
Interpretation:
This means that on average it takes 2008, 445.days & 2009, 339 days &
2010, 309 days for a bank to turn purchasing inventories into cash sales. In
regards to accounting, operating cycles are essential to maintaining levels of
cash necessary to survive.
RATIO RELATING TO CASH CYCLE:-
62
1) LOAN TO DEPOSITS RATIO: - This ratio is a comparison of funds
generation and its funds mobilization indicates the total loans sanctioned by
the bank in relation to total amount of money deposited with the bank.
Loan to Deposits ratio =
2008-2009 = = 36.89%
2009-2010 = = 52.84%
2010-2011 = = 45.25%
62
Interpretation:-As per this ratio bank has grow over the year continuously. In
2008-09 is 36.89 % and in 2009-10 is 53.64% and 2010-11 is 45.25%.2009-10 is
the beneficial for bank.
2) LOAN TO ASSET RATIO:- The loan to assets ratio measures the total loans outstanding as a
percentage of total assets.
Loan to Assets Ratio =
2008-2009 = = 42.58%
2009-2010 = = 42.67%
2010-2011 = = 46.19%
62
Interpretation:-
The higher the ratio, the more risky a bank may be to higher defaults.
As the ratio is high, it is not good for the bank and collection activity should
increase to maintain the liquidity. In 2008-09 is 42.58 %. In 2009-10 is
42.67% & 2010-11 is 46.19%.
3) RETURN ON AVERAGE ASSETS RATIO:- This ratio measures how effectively a company has generated profit
from its available assets.
Return on Average Asset Ratio=
2008-2009 = = 7.81%
2009-2010 = =7.64%
2010-2011 = =7.53%
62
Interpretation:-
From this ratio, we can know that what % are getting on return on Assets.
But here the (%) is decreasing next year so it isnot in favour of bank. In 2008-09it
is 7.81%, in 2009-10 it is 7.64% & 2010-11 it is 7.53%.
4) CASH RATIO:- From the cash ratio it is easy to know that out of total deposits that
bank gets from public, what (%) bank keep as cash in hand and cash
at other bank.
Cash Ratio =
2008-2009 = = 8.19 %
2009-2010 = = 7.69 %
62
2010-2011 = = 6.53 %
Interpretation:-
In 2008-09, out of total deposit, Prime Bank has cash in hand & at bank is
of 8.09%. But in next year 2009-010, it is decreasing to 7.69% & 2010-11 is
6.53%.
5) INTEREST EXPENSE TO INTEREST EARNED RATIO:-
This ratio shows the picture of interest paid and interest earned for the
period.
Interest Expense to Interest Earned Ratio =
2008-2009 = = 53.55 %
62
2009-2010 = = 59.84 %
2010-2011 = = 64.53 %
Interpretation:-
Interest paid is increasing over the years. Percentage is going up
every year.
In 2008-09 is 53.55%. In 2009-10 is 59.84% & 2010-11 is 64.53%.
Interest paid over the interest earned is high every year.
6) OTHER INCOME TO TOTAL INCOME RATIO:- This ratio gives the sign of part other income in the total income. It
means that what percentage part of other income included in total income.
Other Income to Total Income =
62
2008-2009 = = 9.81%
2009-2010 = = 8.71%
2010-2011 = = 8.38%
Interpretation:-
Around 9% is the other income in total income. So the bank is earning
other income apart from the interest income. In 2008-09 is 9.81%. In 2009-10 , it
decreases and became 8.71%and 2010-11 is 8.38%.
(7)NET INTEREST INCOME TO TOTAL ASSETS:-It is the ratio of net interest income with total assets. On total assets
what are rate of net interest income is received.
62
Net interest income to total assets=
2008-2009 = = 3.49%
2009-2010 = = 2.98%
2010-2011 = = 2.50%
Interpretation:-
In 2008-09, the Prime bank has earned 3.49% of net interest income out
of total assets, it is decreasing every year. & in 2009-10 the rate is 2.98%&
2010-11 is 2.50%.
62
(8)NON INTEREST INCOME TO TOTAL ASSETS:-This ratio indicates the bank able to manage few non interests
earning compare to its Non operating income.
Non Interest Income to Total Assets=
2008-2009 = = 0.82 %
2009-2010 = = 0.71 %
2010-2011 = = 0.64 %
62
Interpretation:-
In 2008-09, this ratio is highest as compare to the 2009-10 & 2010-
11. But it is not adequate from the banking perspective. Therefore the bank
should increase more noninterest revenue from additional sources.
62
FINDINGS
COMPARISION OF THREE YEARS CASH OPERATING CYCLE OF PRIME CO-
OPERATIVE BANK:
YEAR: OPERATING CYCLE:
2008-2009 445 days
2009-2010 340 days
2010-2011 310 days
62
Days inventory outstanding that on average it takes in 2009,
2.35 and 2010, 2.33 and 2011, 1.73 for a bank to turn purchasing
inventories into cash sales.
Days sales(advances) outstanding that on average it takes in
2009,450 days and 2010,346 days and 2011,310 days for a bank
to turn days in outstanding into cash sales.
Days payables outstanding that on average it takes in 2009, 8.05
and 2010, 9.15 and 2011, 1.79 for a bank to account payable.
Cash operational cycle means that on average it takes 2008,
445.days & 2009, 339 days & 2010, 309 days for a bank to turn
purchasing inventories into cash sales. In regards to accounting,
62
operating cycles are essential to maintaining levels of cash
necessary to survive.
COMPARISION OF THREE YEARS RATIO ANALYSIS OF PRIME CO-OPERATIVE BANK:
1) I have done ratio analysis relating to the cash management of The Prime Co-
operative Bank Ltd.
2) Loan to Deposit ratio of the bank has increased over the years and decrease
for 2010-11. It has gone from the 36.89% to 52.84%. It jumped almost 16% in
just 2 years.it has decrease for 45.25%.
3) Loan to Assets ratio is also incresaes from 42.58% to 42.67% and 46.19%.
4) Here the Cash Ratio is decreasing from 8.19% to 7.69% and 6.93% which is
not in the favor of the bank.
5) The Prime Bank’s net interest income over the total assets is decreasing from
3.49% to 2.98% & 2.50% which is very less for the bank.
62
SUGGESTION
The prime bank should increase their cash limits for each bank because
in main branch it is very higher as compare to other branch.
Bank should increase the efforts to give the loans, in investible
instrument. So interest earning is increase.
HOW CAN IMPROVE CASH OPERATINAL CYCLE IN CO-OPERATIVE BANK:
1. Increase the deposit of interest in current account.
2. Proper cash management in every day.
62
3. Fast Loan recovery.
4. Proper loan given by the bank to their customer so that customer gives
more loans in bank.
5. Bank’s every days expense like light bills, salary of staff, director
recommendations etc.
6. Use latest computerized system so that every transaction would be
transparent.
7. Un-requirement stationary stocks don’t purchase.
8. Repairing maintenance will be used easily, beneficial, and others
expenses without any other expense.
9. Director and staff can work their work very nicely so bank reputation would
be high on their customer.
10. Unless staff would not be recruited.
62
CONCLUTION
During my training in prime co-operative bank. I want to conclude that the
operating cycle of the cash is better way because they are investing their cash in
many banks like state co-operative bank, district co-operative bank, nationalized bank
etc. ssssAll employees give good response during my training. where I ask question
that give answer with respect. Managers also give guidance for preparing the report.
Thus my experience during training period was very good.
62
62
GROWTH GRAPHICS OF LAST THREE YEAR:
GROSS NPA:
62
GROSS PROFIT AND NET PROFIT:
DEPOSITS:
62
ADVANCES:
62
ANNEXURE
Performance for the period ended March 2011 (RS. IN LACS)
62
Quarter ended Year ended
Audited Unaudited Audited Unaudited
Mar. 10 Mar. 11 Mar. 10 Mar.11
Interest on advances 552.72 675.10 2097.34 2543.46
Interest on investment 386.53 527.00 1541.49 1907.86
Commission & Exchange 29.09 30.77 88.92 97.73
Other Income 38.03 41.88 127.78 126.95
Profit on sale of security 6.35 - 9.94 16.26
Total Income 1012.72 1,274.75 3,865.47 4,692.25
Interest on deposits 687.63 865.42 2350.09 2937.67
Interest on borrowing 0.41 7.50 1.82 11.33
Other expenses 226.96 244.81 839.55 1016.30
Service Tax 8.21 11.79 26.57 29.76
Fringe Benefit Tax 0.00 - 0.13 0
Total Expenses 923.21 1,129,52 3218.16 3,995.06
Interest Spread 251.21 329.18 1286.92 1,502.31
Profit before dep.& Provision 89.51 145.23 647.31 697.19
62
Provision 60.00 45.51 60.00 45.51
Depreciation 56.63 83.19 56.64 83.28
Loss/profit (-) on sale of assets 0.00 5.10 -57.21 -1.98
Capital expenses written off 0.33 1.07 -0.42 1.07
Excess provisions written back 0.00 - 0.00 0.00
BDIC/Adajan Loss written off 93.34 94.74 93.34 94.74
Profit after dep.& Provision -120.79 (84.38) 494.12 474.57
Income Tax 50.00 92.64 154.00 177.64
Net Profit -170.97 (177.02) 340.12 296.93
Deposits 40245.14 50059.26
Advances 20850.07 25514.91
Investment 2191.64 27119.27
Gross NPA 507.62 392.91
Gross NPA % 2.46% 1.54%
Net NPA 0.0% 0.00%
CASH FLOW STAEMENT OF PRIME CO-op. BANK Ltd FOR THE YEAR ENDED 31 st MARCH 2009
62
PARTICULARS AMOUNT
Net interest earned during the year 1170
Add: other income 134
1305
Less:
Operating expense 645
Income tax, service tax and fringe benefit 214
Cash profit generated from operation 446
Increase in deposit 7331.84
Decrease (+) increase (-) fixed assets -99.81
Decrease (+) increase (-) other assets -198.8
Increase (-) in advance -4072.67
increase (+) decrease (-) in other liabilities 1910.62
Net cash flow from banking operation 4527.91
Cash flow from investing activities:
increase (-) decrease (+) government securities investment -3946.93
Profit from sale of government security 60.65
Net cash flow from investing activities 3886.29
Cash flow from financing activity
increase in share capital 127
Dividend provided last year 54.41
62
Increase in borrowing -303.79
Reserve utilized (net) -208.51
Net cash used in financing activities -330.75
Net increase in cash and cash equivalent 443.25
Cash and cash equivalents as on 1st April 2009 1995.90
Cash and cash equivalents as on 31- 03- 2009 2439.15
CASH FLOW STAEMENT OF PRIME CO-op. BANK Ltd FORTHE YEAR ENDED 31 st MARCH 2010
62
PARTICULARS AMOUNT
Net Interest earned during the year 1038.85
Other income (excluding Security trading) 216.59
1255.44
Less:-
Operating expense 561.30
Income Tax, Service Tax and Fringe Benefit tax 226.58
Cash Profit generated from operations 467.56
Increase in deposits 4436.87
Decrease(+)/increase(-) in fixed assets -20.35
Decrease(+)/increase(-) in other assets -825.41
Increase(-) in advances -2344.80
Increase(+)/decrease(-) in other liabilities 814.80
Net Cash Flow from banking operation 2528.67
Cash flows from investing activities:-
Increase(-) / decrease(+) in Government securities /
investment
-2329.67
Profit from sale of Government securities 26.79
Net cash from investing activities -2302.88
Cash flows from financing activities
62
Increase in share capital 63.93
Dividend provided last year -44.89
Increase in borrowing 69.04
Reserve utilized (net) -2.27
Net cash used in financing activities -52.27
Net increase in cash and cash equivalent 173.52
Cash and cash equivalents as on 1st April 2009 1822.38
Cash and cash equivalents as on 31- 03- 2009 1995.90
Fund flow statement of prime co-operative bank year 2010:-
DETAILS OCT (2010) NOV (2010) DEC (2010)
62
(a) cash receipts
commission 49216.86 51647.86 56489.86
Other receipts 402932.65 435106.10 554690.20
Interest 12789264.25 15045393.35 17512814.25
(a)total income 13241411.76 15532147.31 18123994.31
(b)cash payments
Current account 18460 18460 23905
Salaries 1132095 1280847 1489162
Rent and taxes 220434 253942 304747
Postage and
telecom
17640 17970 26242
Repairing 41970 48972 56110
Other expenditure 296419.50 325023.50 345406.50
Interest 1673462.13 16949219.30 2485207.81
Printing and
stationary
6241 6106 8079
Other payment 6064797 6064797 6064797
(b)total payment 9471524.63 9711646.85 10806656.31
Total cash
balance(a-b)
3769887.13 5821100.5 7317338
Add: opening 2448387.20 6218274.33 12039374.83
62
balance
Closing balance 6218274.33 12039374.83 19356712.83
62
62
Website
http://www.primebankindia.com/
http://www.investopedia.com/terms/c/cashconversioncycle.asp
http://www.investopedia.com/terms/c/cashflow.asp
http://finance.mapsofworld.com/corporate-finance/management/operating-
cycle-and-cash-cycle.html
REPORT:-
Bank annual report 2008, 2009 , 2010 , 2011