CHAPTER -1

1-Introduction

Financial statement analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account. It also helps in short term and long-term forecasting and
growth can identified with the help of various financial tools in financial performance
analysis. Bank plays crucial role in the development of Indian economy. A sound and an
efficient banking system in developing counties provide the necessary financial inputs to the
economy. It also measures organization deals with the financial strength and weaknesses of
bank accurately establishing a relationship between the balance sheet and income statement.

The main purpose of my study is to analysis the profitability of the company and to examine
the solvency, liquidity and working capital position of the business and with the main is to
determine the receivable management, inventory management of the company in other words
this study heavily relies focuses on the financial performance of the company.

Sources of data this study heavily relies and is based on secondary data. The secondary data
comprised of the annual reports of HDFC bank Ltd. Ranging for period of 2 year 2020-2021
to 2021-2022. Various other reports like magazines, bulletins have also been used. Published
text books like financial management, corporate finance, financial analysis and management
accounting have been used for the purpose of this study. Relevant websites have also been
used. Discussion with concerned personnel in HDFC bank Ltd have also been appropriately
used to supplement the secondary data. Tools data analysis the data collected for the study
was analysis using financial tools and statistical tools. The financial tools of analysis include
ratio analysis covering liquidity ratios, solvency ratio and profitability ratio and also trend
percentage analysis. Statistical tools of analysis include simple average and stepwise
regression analysis have also been used. Diagrammatic representation of data has also been
made in the appropriate places depending upon the need.

The section 2 discusses about the review of literature, section 3 comprises of research and
methodology, section 4 consist of result and discussion and section 5 tells about the
conclusion
 CHAPTER-2

2.0 REVIEW OF LITERATURE

In order to have proper insight into the various aspects of the problem under study. it will be
useful and imperative to review the studies conducted in the past. Till now. many studies
have been conducted on the different aspects to measuring the financial efficiency of public
and private sectors but it has been rarely tried to work on the problems of these undertakings
and suggested for taking out the one or two or some other aspects of finance

Yadav & Jang[2020] analysis Impact of Merger on HDFC Bank Financial Performance:
A CAMEL Analysis Approach. It also found that momentous increment in various
budgetary like operating profit, net profit, earnings per share, interest earned, return on
assets, equity share capital, income on investment etc.

Muruganantham & Nidish[2021] A STUDY ON FINANCIAL PERFORMANCE

ANALYSIS OF HDFC BANK LTD. The findings of the study showed the high growth
rate which is observed in the financial performance of the HDFC Bank after the mergers
and acquisitions.

P Rajendran [2019] This study has been carried out to evaluate the financial performance
of HDFC Bank. The data analysis by ratio analysis such as current ratio, cash position
ratio, fixed assets ratio, debt-equity ratio and proprietary ratio and give interpretation to
each ratio. To conclude this article the financial soundness of the bank is satisfactory
during the study period

Rashmi Sharma (2021) conducted a report on financial analysis and performance of

HDFC bank in which they discovered the performance of the bank by ratio analysis and
trend analysis.

NANDINI THAKUR & SHIVA & VEERAIAH [2020] The financial analysis is the
process of identifying the financial strength and weakness of the firm establishing
relationship between the items of balance sheet and the profit and loss account. Data
analysed through ratio analysis such as current ratio, cash position ratio, fixed asset ratio,
debt-equity ratio, and proprietary ratio, and interpretation of each ratio is given. To
conclude this article, the Bank's financial soundness during the study is satisfactory
Author and Article name Objective Time Methodolog Findings
year period y

Yadav & Impact of Merger The main 2018- ratio analysis It also found that
Jang[2020] on HDFC Bank purpose of 2020 momentous
Financial study is increment in
Performance examining various budgetary
liquidity
solvency and
credit
worthiness of
HDFC BANK
Murugananth A STUDY ON The main 2016- Ratio The findings of
am & FINANCIAL purpose of 2021 analysis the study showed
Nidish[2021] PERFORMANC study is to the high growth
E ANALYSIS OF determine rate which is
HDFC BANK financial observed in the
LTD position of the financial
business performance of
the HDFC Bank
after the mergers
and acquisitions
P Rajendran This study has The main 2015- Ratio To conclude this
[2019] been carried out purpose of 2019 analysis article the
to evaluate the their study is financial
financial to analyse the soundness of the
performance of financial bank is
HDFC Bank performance satisfactory
of banking during the study
company period
Rashmi financial analysis To determine 2016- Ratio The researcher
Sharma and performance financial 2021 analysis used Profitability
(2021) of HDFC bank position of ratio, Liquidity
different Ratio, Leverage and
banking Growth Ratio to
companies. analyse Financial
Performance
NANDINI The Bank's the main 2017- Ratio To conclude
THAKUR & financial purpose of 2020 analysis this article, the
SHIVA & soundness during their study is Bank's
VEERAIAH the study is to analyse the financial
2.1 OBJECTIVE OF THE STUDY

The main purpose of study is analysis the profitability of the company and examine the
solvency, liquidity and working capital position of the business and along with the main
purpose of determine the receivable management inventory management of the company. In
other word this study focuses on the financial performance of the company

CHAPTER 3

3.0 RESEARCH AND METHODOLOG

3.1 data and sample

This study is quantitative nature meaning it primarily deals with financial statement of HDFC
Bank for the past five years. This study is based on secondary data which is taken from banks
website and the annual reports. The data is analysis by the ratio analysis and the performance
of the bank is clearly explained for the study period

Sources of data This study heavily relies and is based on secondary data. The secondary data
comprised of the annual reports of HDFC bank Ltd., ranging for a period of 3 years from
2018-19 to 2021-2022. Various other reports like the company magazines, bulletins have also
been used. Published text books like financial management, corporate finance, financial
analysis and management accounting have been used for the purpose of this study. Relevant
 websites have also been used. Discussions with concerned personnel in HDFC ltd have also
been appropriately used to supplement the secondary data

3.2 Tools and techniques

Tools of data analysis The data collected for the study was analysed using financial tools and
statistical tools. The financial tools of analysis include ratio analysis covering liquidity ratios,
solvency ratios and profitability ratios and also trend percentage analysis. Statistical tools of
analysis include simple average and stepwise regression analysis have also been used.
Diagrammatic representation of data has also been made in the appropriate places depending
upon the need

3.3 analysis and interpretation

Analysis and interpretation refer to a systematic and critical examination of the financial
statements. It not only establishes cause and effect relationship among the various items of
the financial statements but also presents the financial data in a proper manner. The main
purpose of analysis and interpretation is to present the financial data in such a manner that is
easily understandable and self-explanatory. This not only helps the accounting users to assess
the financial performance of the business over period of time but also enables them in
decision making and policy and financial designing process.

Analysis of financial performance of the HDFC limited by using liquidity ratio and Solvency
ratio Through the Balance sheet and profit and loss account of HDFC Limited for the FY
2020-21 & 2021-22 under as follows:

(a)Current ratio : It established the relationship between current assets and current liabilities
of the company. It can calculate by the following formula:

Current ratio = current assets / current liabilities

Year’s Current assets Current liabilities Current ratio

in crores in crores
 2020-2021 45379.50 18132.40 2.50:1
2021-2022 51772.20 23173.70 2.23:1

Cur r ent R ati o

3

2.5

1.5

0.5

0
2020-21 2021-22

Current assets include for the FY 2020-21 in crores, current investments Rs 17495.20,
Inventories Rs.91.00,Trade receivables Rs 8046.20, Cash and cash equivalents Rs 9783.20,
Short term loans and advance Rs.4201.50 and other current assets 5762.40 .And

Current assets include for the FY 2021-22 in crores, current investment Rs 24073.70,
Inventories Rs.87.50, Trade receivables Rs 9295.40,Cash and cash equivalents
Rs.4898.10,Short term loans and advances Rs 1913.00 and other current assets11504.50.

Current liabilities include for the FY 2020-2021 in crores, Short term borrowing Rs
5791.20,Trade payables Rs 4348.50, Other current liabilities Rs 6705.30 and short term
provisions Rs 1287.40. and

Current liabilities include for the FY 2021-2022 in crores, short term borrowing Rs 7673.40,
Trade payables Rs 4685.10, other current liabilities Rs 9446.90 and short term provisions Rs
1368.30.

( b) Quick ratio:
 Quick ratio is otherwise called Liquid ratio or acid test ratio. It established the relationship
between Quick assets and current liabilities. Quick assets are those assets which can be
converted into cash within a short period of time without loss of value of the firm. It can be
calculated by the following formula:

Quick ratio = Quick ratio/ current liabilities

Year’s Quick assets in Current Quick ratio

crores liabilities in
crores
2020-2021 45379.50 18132.40 2.50:1
2021-2022 51772.20 23173.70 2.23:1

Quick Ratio
3

2.5
Quick assets include for the year 2020-2021 in crores, All the current assets (i.e. current
2
investments Rs 17495.20, Inventories Rs.91.00,Trade receivables Rs 8046.20, Cash and cash
1.5
equivalents Rs 9783.20, Short term loans and advance Rs.4201.50 and other current assets
1
5762.40) except closing stock and prepaid expenses.
0.5
Quick assets include for the year 2021-2022 in crores, All the current assets (i.e. current
0
2020-21
investment 2021-22Rs.87.50, Trade receivables Rs 9295.40,Cash and cash
Rs 24073.70, Inventories
equivalents Rs.4898.10,Short term loans and advances Rs 1913.00 and other current
assets11504.50.) except closing stock and prepaid expenses.

(c ) Absolute liquid ratio :It otherwise called cash ratio. It established the relationship
between Absolute liquid assets and current liabilities. It is calculated by dividing the absolute
assets and current liabilities.

Absolute liquid ratio= Absolute liquid assets / current liabilities

Absolute liquid assets include for the FY 2020- 2021 in crores, Cash and cash equivalents Rs
9783.20, and Investment Rs 17495.20,

Absolute liquid assets include for the FY 2021-2022 in crores , cash and cash equivalents
Rs.4898.10. and Investment Rs. 24073.70.

Year’s Absolute liquid Current liabilities Absolute liquid

assets in crores in crores ratio
2020-2021 27278.4 18132.40 1.50:1
2021-2022 28971.80 23173.70 1.25:1

Absolute Quick Ratio

3

2.5

1.5

0.5

0
2020-21 2021-22

Interpretations:

It is clear from the analysis of liquidity ratios of the F.Y 2020-2021 &2021-2022 of HDFC
Limited. The firm has highest current ratio of 2.50 in the year 2020-21 and lowest current
ratio of 2.23 in the year 2021-22. The standard form of current ratio is 2:1. From the analysis,
during the study period, current ratio is higher than the standard ratio so it is found that the
company has good liquidity position. The company utilize their liquidity for their
development.

The firm has highest liquid ratio of 2.50 in the year 2020-21and lowest liquid ratio of 2.23 in
the year 2021-22. The liquid ratio is higher than the standard ratio of 1:1. Which shows that
the company’s liquid position is good and it is clear that liquid ratio is satisfied.
The absolute liquid ratio is higher than the standard ratio of 0.5:1. The Absolute liquid ratio is
highest during the year 2020-2021 with the ratio of 1.50 and it has decline to 1.25 during the
year 2021-2022. This shows that the absolute liquid ratio is satisfied.

(ii) Solvency ratio: This ratio established the relationship between total liability to outsiders
and total assets of a firm. It can be calculated by the following formula:

Solvency ratio = Total liability to outsiders / Total assets of the firm *100

Year’s Total liability to Total assets in Solvency ratio

outsiders in crores crores
2020-2021 20,494.70 65,736.30 31.17
2021-2022 26,032.10 80382.80 32.39

32.5
Solvency Ratio

32

31.5

31

30.5
2020-21 2021-22

Total liability includes for the FY 2020-21 in crores, Long term borrowings Rs 14.10,
Differed tax liabilities Rs130.50, Other long term liabilities Rs 2129.20, Long term provision
Rs 88.50, Short term borrowing Rs 5791.20,Trade payables Rs 4348.50, Other current
liabilities Rs 6705.30 and short term provisions Rs 1287.40. and

Total liability includes for the FY 2021-22 in crores, Long term borrowings Rs 5.70, Differed
tax liabilities Rs 0.000, Other long term liabilities Rs 2788.60, Long term provision Rs
64.10 , short term borrowing Rs 7673.40, Trade payables Rs 4685.10, other current liabilities
Rs 9446.90 and short term provisions Rs 1368.30.
Total assets includes for the FY 2020-2021 in crores, Tangible assets Rs 6578.70, Intangible
assets Rs 709.40, Capital work –in-progress Rs 1848, other assets 0.000, Non- current
investments Rs 8206.70,Deferred tax assets (net) 47.40, Long term loans and advances Rs
0.000, other non-current assets 2966.60, current investments Rs 17495.20, Inventories
Rs.91.00,Trade receivables Rs 8046.20, Cash and cash equivalents Rs 9783.20, Short term
loans and advance Rs.4201.50 and other current assets 5762.40 .And

Total assets includes for the FY 2021-2022 in crores, Tangible assets Rs7386.60, Intangible
assets Rs 651.10,Capital work –in-progress Rs 1584.50, other assets 0.000, Non- current
investments Rs16557.20 ,Deferred tax assets (net) 53.30, Long term loans and advances Rs
0.000, other non-Current Assets2377.90, current investment Rs 24073.70, Inventories
Rs.87.50, Trade receivables Rs 9295.40,Cash and cash equivalents Rs.4898.10,Short term
loans and advances Rs 1913.00 and other current assets11504.50.

Interpretation:
It is clear from the analysis of Solvency ratio of the F.Y 2020-2021 &2021-2022 of HDFC
Limited. The firm has highest Solvency ratio of 1.50 in the year 2020-21 and lowest
solvency ratio of 1.25 in the year 2021-22. . From the analysis, during the study period, we
found that the solvency position of the company is very well both the year.

CHAPTER -5

REFERENCES

1-Shweta Yadav & Jonghag Jang “Impact of Merger on HDFC Bank Financial Performance”
Vol. 13, No. 8; 2021 ISSN 1916-971X E-ISSN 1916-9728

2-Mr. S. Muruganantham & Mr. S. K. Nidish “ A STUDY ON FINANCIAL PERFORMANCE

ANALYSIS OF HDFC BANK LTD” Volume: 7, Issue: 6, June 2021. Journal DOI:
10.36713/epra2013. SJIF Impact Factor 2021: 8.047, ISI Value: 1.188
3- Mr. P Rajendran & Dr. B Sudha “A STUDY ON FINANCIAL ANALYSIS AND
PERFORMANCE OF HDFC BANK” Volume XI, Issue XI, November-2019, ISSN NO:
0039-3347

4- Prof. DR. Rashmi Sharma “A STUDY ON FINANCIAL ANALYSIS AND PERFORMANCE OF HDFC BANK”
August 2021 vol.04, Issue 03, ISSN: 2395-1664 (online) pp 793-799

5- NANDINI THAKUR & SHIVA & VEERAIAH “A Study on Financial Statement Analysis
of HDFC Bank” Mukt Shabd Journal, Volume - 5, Issue- 7,87- 93. Issn No: 2347-3150