ACCOUNTING FOR

MANAGERS
ASSIGNMENT

Amity Institute Of Competitive Intelligence and Strategic

Management

Submitted to: Submitted By

Ms. Rashmi Dwivedi Harshit Verma
MBA (BA)
 COMPARATIVE PROFIT AND LOSS
OF HDFC BANK
FOR THE YEAR ENDED 31ST MARCH, 2007
COMPERATIVE INCOME
STATEMENT
for the year ended 31st march 2008

PARTICULARS 2007 2008 INC/DEC %INC/DEC

INT INCOME 8303.34 12354.41 4051.07 48.78
(-)Cost of sales 2371.06 3663.56 1292.5 54.51
G.P(A) 5932.28 8690.85 2758.57 46.5
OPERATING EXP
Selling Exp 74.88 114.73 39.85 53.21
Adm EXP 1519.32 2247.48 728.16 47.92
Total Operating Exp(B) 1594.2 2362.21 768.01 48.17
Operating income(A-B) 4338.08 6328.64 1990.56 45.88
(+)O.Income 2855.79 3846.77 990.98 34.7
T.Inc 7193.87 10175.41 2981.54 41.44
(-)O.Exp 3956.31 6188.47 2232.16 56.42
Net income 3237.56 3986.94 749.38 23.14
(-)Tax 497.7 690.9 193.2 38.81
Net Profit 2739.86 3296.04 556.18 20.29
 RATIO ANALYSIS

VARIOUS CALCULATED RATIOS OF NLL

 Current Ratio

Current ratio may be defined as the relationship between current assets and
current liabilities.

Current ratio = Current assets/current liabilities

Year 2006 2007 2008

Current Ratio 1.10 1.07 1.08

C.R

1.11 1.10
1.10
1.09 1.08
C.R

1.08 C.R
1.07
1.07
1.06
1.05
2006 2007 2008
Years

Interpretation
If the C.R. is less than 2 : 1, it indicates lack of liquidity and shortage of
working capital. But a much higher ratio, even though it is beneficial to the
short-term creditors, is not necessarily good for the company. A much higher
ratio than 2 : 1 may indicate the poor investment policies of the
management. So liquidity of Bank is satisfactory.
Interest coverage/debt service ratio
= Net profit (before interest and taxes)/ Fixed interest
charge

Interest coverage ratio(times)

2.5
2.38
2.4
2.3
2.2
ICR

2.09 Interest coverage

2.1 ratio(times)
2
2
1.9
1.8
2005-06 2006-07 2007-08
Years

Interpretation :
Since this Ratio indicates the interest paying capability of firm and ideal
Ratio is 6 to 7 times. So interest paying capacity of the firm is moderate.
Operating ratio= (Operating cost / Net income )*100

Operating ratio(%)

50.5
50
50
49.5
49
49
OR

Operating ratio(%)
48.5
48
48
47.5
47
2005-06 2006-07 2007-08
Years

Interpretation :
Operating Ratio is a measurement of the efficiency and profitability of the
business enterprise. The ratio indicate the extent of sales that is absorbed by
the cost of goods sold and operating expenses. Lower the operating ratio, the
better it is , because it will leave higher margin of profit on sales.
Return on gross capital employed=(Net profit / Gross capital
employed) * 100
Gross capital employed= fixed assets + current assets

Return on gross capital employed(%)

Return on gross capital

29 28
28
27
employed

26
26 Return on gross capital
25 employed(%)
24
24
23
22
2005-06 2006-07 2007-08
Years

Interpretation :
Since profit is the overall objective of a business enterprise, this ratio is a
barometer of the overall performance of the enterprise. It measures how efficiently
the capital employed in the business is being used.
Return on shareholders=(Net profit / Shareholders funds) *100

Return on shareholders(%)

20 17.74
Return on Shareholders

16.43
15 13.83
funds

Return on
10
shareholders(%)

0
2005-06 2006-07 2007-08
Years

Interpretation :
This Ratio indicates what amount of return has been given to the Share
holders of the firm which help in building the good will firm.
Interest expense ratio= (Interest expense / income) * 100

Interest expenses ratio(%)

49 48.32
48.5 47.83
48
47.5
47
IER

Interest expenses
46.5
46 45.61 ratio(%)
45.5
45
44.5
44
2005-06 2006-07 2007-08
Years

Interpretation :
This Ratio indicates that what is the Ratio of Total Interest Expenses to the
Income. So that we can know about profitability of firm.
Net profit ratio = (Net profit / Net income) * 100

Net profit ratio(%)

25
20.58
20 17 15.72
15
NPR

Net profit ratio(%)

10
5
0
2005-06 2006-07 2007-08
Years

Interpretation :
This Ratio measures the rate of net profit earned on sales. It helps in
determining the overall efficiency of the business operations. An increase in
the ratio over the previous year shows improvement in the overall efficiency
and profitability of the business.
Operating profit ratio= (Operating profit / Income) * 100

Operating profit ratio (%)

42
40.98
41
40
38.57
OPR

39
Operating profit ratio (%)
38 37.22
37
36
35
2005-06 2006-07 2007-08
Years

Interpretation :
Operating Ratio and Operating Profit Ratio are inter-related and total of both
these Ratio is 100. Both Ratios indicated the profitability of firm.
Return on net capital employed = (Net profit / Net capital
employed) * 100
Net capital employed = Total assets- Current liability

Return on net capital employed(%)

32
31
Return on Net capital

31
employed

30
29 Return on net capital
29
28 employed(%)
28
27
26
2005-06 2006-07 2007-08
Years

Interpretation :
This Ratio indicates how well the Capital employed is being use in business.
Even the performance of two Dissimilar firms may be compared with the
help of this Ratio.
Operating expenses ratio= (Operating Expenses /Income)
*100

Operating expenses ratio(%)

41 39.98
40
39
38
OER

37.03 Operating expenses

37 36.41 ratio(%)
36
35
34
2005-06 2006-07 2007-08
Years

Interpretation :
This Ratio indicates the how much expenses has been spent on selling and
administration use of organization.
EPS = Net profit after interest, tax & preference dividend /
No. of equity shares

EPS

40 34.6
35
29.08
30
25 22.6
EPS

20 Years
15
10
5
0
2006 2007 2008
Years

Interpretation :
This ratio is helpful in the determination of the market price of the equity
share of the company. The ratio is also helpful in estimating the capacity of the
company to declare dividends on equity shares.
DPS = Dividend paid to equity shareholders / No. of equity
shares

DPS

9.00 8.50
8.00 7.0
7.00
6.00 5.50
DPS

5.00
DPS
4.00
3.00
2.00
1.00
0.00
2006 2007 2008
Years

Interpretation :
This Ratio indicates how much profit has been given in hand to the equity
share holders. This represents higher the ratio more is the good will of the firm.
P.E Ratio = Market price per share / Earning per share
P.E Ratio(%)

28.80
29
28.5
28 27.74
P.E Ratio(%)

27.5
27 P.E Ratio(%)
26.5 26.29
26
25.5
25
2006 2007 2008
Years

Interpretation :
This ratio shows how much is to be invested in the market in this company’s
shares to get each rupee of earning on its shares. The ratio is used to measure
whether the market price of a share is high or low.