Study of of working capital management in kotak mahindra bank

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MUMBAI UNIVERSITY
PROJECT REPORT ON
“Study of working capital management in Kotak Mahindra bank”
FOR
BACHELOR OF MANAGEMENT STUDIES
SUBMITTED BY
MANALI VIJAY TENDOLKAR
ROLL NO. B1415064
SUBMITTED TO
PROJECT GUIDE
MS. Devyani Belel
INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
THANE (W)
2016 – 17

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MUMBAI UNIVERSITY
PROJECT REPORT ON
“ Study of working capital management in Kotak Mahindra bank”
For
BACHELOR OF MANAGEMENT STUDIES
SUBMITTED BY
ROLL NO. B1415064
SUBMITTED TO
PROJECT GUIDE
MS. Devyani Belel
INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES
THANE (W)
2016 – 17

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DECLARATION
This project entitled Empirical Study on “Study of working capital
management in banking sector” is submitted in partial fulfillment of the
requirement for the award of degree of Bachelor in Management study of
Institutions of Management and Computer Study, Thane. This research work
is done by MANALI TENDOLKAR, .This research work has been done only
for BMS and none of this research work has been submitted for any other
degree.
The assistance and help during the execution of the project has been fully
acknowledged.
Date:-29/9/16
Place:-Thane
Yours faithfully,

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ACKNOWLEDGEMENT
We take this opportunity to express my deep sense of gratitude to all our
friends and seniors who helped and guide me to complete this project
successfully. I am highly grateful and indebted to our project guide Miss.
Devyani Belel, Miss. Vaishanvi Bagul for their excellent and expert guidance
in helping us in completion of project report.
Manali Tendolkar

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INDEX
SR. NO. CONTENTS PAGE NO.
1. List of Tables 8
2. List of diagrams/figures 9
3. Executive Summary 10
4.
Chapter 1 : Introduction 11-16
1.1 Introduction 12
1.2 Objective 13
1.3 scope 14
1.4 Limitations 15
1.5 Research and methodology 16
5.
Chapter 2 : Industry Profile 17-20
2.1 History 18
2.2 Current Trends 19
2.3 Growth & prospective 20
6.
Chapter 3 : Company Profile 21-24
3.1 History 22
3.2 Current Trends 23
3.3 Growth & prospective 24
7.
Chapter 4 : Conceptual Background 25-
4.1 Working capital- overall view 26-27
4.2 Importance of working capital management 28
4.3 Determinants of working capital 29-31
4.4 Circulation system of working capital 32
4.5 Types of working capital 33
4.6 Sources of working capital in banking sector
34-35

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4.7 Performance Cycle of working capital
36-38
4.8 Working capital how help in growth &
development of bank in india. 39-42
8.
Chapter 5: Data Analysis & Interpretation 43-59
5.1Balance sheet of Kotak Mahindra 44-46
5.2 Working capital of Kotak Mahindra 47-51
5.3 Ratio of working Capital 52-59
9.
Chapter 6: Findings, Suggestions &
Conclusion
60-63
10. Bibliography 64-65

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List of Tables
Table No. Title Page No.
4.1 percentage of current assets in last 3 years 28
4.2 Working capital of last 3 year 32
5.1 Balance sheet of Kotak Mahindra bank 44
5.2 Balance sheet of Kotak Mahindra 45
5.3 Balance sheet of Kotak Mahindra 46
5.4 Current assets 47
5.5 Current liabilities 48
5.6 Kotak working capital 50
5.7 Cash and bank balances 53
5.8 Cash balance to total assets 55
5.9 Net profit to total assets 56
5.10 Debtors turnover ratio 57
5.11 Creditor turnover ratio 58
5.12 Working capital turnover ratio 59

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List of Graphs
Graph No. Title Page No.
4.1 percentage of current assets in last 3 years 28
4.2 Working capital of last 3 year 32
5.1 Current assets 47
5.2 Current liabilities 49
5.3 Kotak working capital 51
5.4 Liquidity ratio 52
5.5 Cash and bank balances 54
5.6 Cash balance to total assets 55
5.7 Net profit to total assets 56
5.8 Debtors turnover ratio 57
5.9 Creditors turnover ratio 58
5.10 Working capital turnover ratio 59

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Executive Summary
Banking has been defined by Banking Regulation Act of 1948 as “it is accepting for the purpose
of lending or investment of deposits from the public, repayable on demand on otherwise and
withdraw able by cheque, draft, orders or otherwise”.
So, from this definition we can easily say that banking is a very complicated process. In this
complicated process to run the bank smoothly it is the primary duty of a bank to take care of the
working capital seriously, because the definition of Working capital is defined as “The firm’s
total investment in current assets or assets that it expects to be converted into cash within a year
or less”.
Management of working capital includes consideration for net working capital, by managing
current assets to current liabilities. This means organizations have to factor in a certain amount of
risk-return trade-offs in the decision making process. If an organization does not increase their
net working capital enough, they run more of a risk of struggling to pay their bills. But if they
increase the working capital too much, they are taking away from the profitability of the
organization. In order to avoid problems, organizations have to make good decisions which
overlap, between current assets and how current liabilities are used.

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CHAPTER:-1
Introduction to
project

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1.1 Introduction
The world is based on hopes and new expectations. It is imperative that we
appreciate the world around us is changing rapidly, throwing open great challenges and
innumerable opportunities. The far-reaching development in world the business have very
important role. The business is based on to essential backbone of the business first is working
capital and second is fixed capital.
The working capital is very imperative source of business. working capital helps to
manage day-to-day expenses of the business. the project is based on working capital
management point of view of banking sector.

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1.2 Objective
1. To study the working capital system.
2. To study how it brings growth and development of the bank in India.
3. To know the performance cycle of working capital systems in banking sectors.
4. To analyses the how the working capital management in bank and their treatment.

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1.3 Scope
The management of working capital helps us to maintain the working capital at
satisfactory level by managing current assets and current liabilities. It also helps to
maintain proper balance between profitability risk and liquidity of the business
significantly.
By managing the working capital current liabilities are paid in time. If the firm make
payment to it creditors for raw material in time it can have the availability of raw material
regularly, which dose not cause any obstacles production process. Adequate working
capital increases paying capacity of the business but the excess working capital causes
more inventory, increases the possibility of delay in realization of debts.

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1.4 Limitation
The scope of the present study has been limited interns of period of study as well sources and
nature of data. The period covered by the study extends over 5 years from 2011/12 to 2014/15.
At the time of study, the data could be available up to 2014/15. The limitation of this study are as
follows:
 The study is ,mainly on secondary data.
 The study follows with specific tools financial ratio analysis.
 The lack of sufficient time and resource is another limitation of the study.
 The study is limited from the point of view submission.

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1.5Research Methodology
The following data is collected from internet, some books, from some web side and from some
people. Taking helps of some people talk with some high levels persons. Also using the various
book for the for fulfilling the project report.
Primary Data
There is no any primary data on this project. The project is full based on secondary data.
The graphs is self complied.
Secondary Data
The mostly the data is secondary. Collected from various web-sides and in company balances
sheet.

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CHAPTER:-2
Industrial profile

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2.1 History
Bank is financial institution that perform several function like accepting deposits,
lending loans agriculture and rural development etc. bank plays an important role in the economy
development of the country.
Banking is originated in the 18th century. The oldest bank existence in India is the
state bank of India, a government-owned 1806. SBI is the largest commercial bank in the county.
After independence, reserve bank of India has nationalized and given wide power. Currently,
India has 96 scheduled commercial banks, 27 public sector banks 31 private banks and 38
foreign banks.

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2.2Current trends
Banking sector policy during 2010-11 remained consistent with the broader
objectives of macroeconomic policy of sustaining economic growth and controlling inflation.
The Reserve Bank introduced important policy measures of deregulation of savings bank deposit
rate and introduction of Credit Default Swap (CDS) for corporate bonds. It initiated the policy
discussions with regard to providing new bank licenses, designing the road-ahead for the
presence of foreign banks and holding company structure for banks. The process of migration to
the advanced approaches under the Basel II regulatory framework continued during 2010-11,
while also facilitating the movement towards the Basel III framework Financial Inclusion
continued to occupy centre stage in banking sector policy with the rolling out of Board-
Approved Financial Inclusion Plans by banks during 2010-11 for a time horizon of next three
years.

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2.3Growth& prospective
Deposit growth has been steady
Total money supply increased at a CAGR of 11.14 per cent during FY06–16*
Between FY06–16*, narrow money supply (M1) rose at a CAGR of 7.69 per cent to US$
392.8 billion, broad money supply (M2) increased at a CAGR of 6.49 per cent to US$
395.3 billion and money supply (M3) grew at a CAGR of 11.14 per cent to US$ 1.8
trillion by the end of October’15
Time deposits with banks have shown highest average growth of 12.9 per cent during
FY06–16*, and stood at US$ 1.44 trillion by the end of October’15
Chart 2.3.1 from banking growth

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Kotak Mahindra
3.1 history
Kotak Mahindra was established in 1985. The Kotak Mahindra group has been one of India’s
most reputed financial conglomerates. In February 2003, Kotak Mahindra finance LTD, the
group’s flagship company was given the license to carry on banking business by the Reserve
Bank of India (RBI). This approval created banking history since Kotak Mahindra finance LTD.
Is the first non-banking finance company in India to convert itself in to a bank as Kotak
Mahindra Bank LTD. Today, the bank is one of the fastest growing bank and among the most
admired financial institution in India.
Kotak Mahindra group, established in 1985 by Uday Kotak, is an Indian financial services
conglomerate.

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3.2Current trends
Kotak Wealth Management is proud to present this fifth edition of their path-breaking annual
report 'Top of the Pyramid’.In this year’s report, we have taken last year’s discussion about the
emergence of cities, beyond Mumbai and Delhi, as ultra HNI hubs one step further by
comparing the current lifestyles and investment patterns of ultra HNIs from Ahmedabad,
Chandigarh and Chennai. As the digital world has already become an integral part of ultra
HNI’s lives, we explored the exciting new world of e-commerce entrepreneurs. In this year’s
edition of Top of the Pyramid, we spoke to a few bold first-generation e-commerce
entrepreneurs who have brought about market disruption and helped shape the e-commerce
industry in India.
The Kotak Mahindra Group has come a long way since its early days and now caters to diverse
financial needs of both individuals and the corporate sector, nationally as well as internationally.
The group offers the understanding, the experience, the infrastructure, and most importantly, the
commitment to deliver pragmatic end-to-end solutions that truly work.

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3.3 Growth & prospective
Kotak Mahindra Bank LTD. (KMBL) believes that financial institution play pivotal role in
catalyzing sustainable economic growth that can deliver equitable development for all.
Translating this belief into action, the bank continually strives to intertwine environmental,
social and governance aspects with all facets of business operations and stakeholder dealings.
In order to adhere to the highest levels of governance practices, the bank has set a business
responsibility agenda. It reflects KMBL’s philosophy to create enduring value for all
stakeholders in a responsible manner which also contribution to environment sustainability.
Further, the Bank has also adopted a strong CSR policy, charting out its plan to invest in our
society and its own future.Kotak uses the power of its human and financial capital to enable
transformation of communities into vibrant, desirable places for habitation.

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CHAPTER:- 4
Conceptual background

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4.1 Working capital- overall view :-
working capital management in the management of assets that are current in nature. Current
assets, by accounting definition are the assets normally converted in to cash in a period of one
year. Hence working capital management can be consider as the management of cash, market
securitise receivable, inventories and current liabilities. In fact, the management of current
assets is similar to that of fixed assets the sense that is both in cases the firm analyses their effect
on its probabilities and risk factors, hence they differ on three on major aspects:
 In managing fixed assets, time is an important factor discounting and compounding
aspects of time play and important role in capital budgeting and minor part of in the
management of current assets.
 The large holding of current assets especially cash may strengthen them the firm
liquidity position but is bound to reduce profitability of the as ideal car yield nothing.
 The level of the fixed assets as well as current assets depend upon the expected sales but
it is only current assets add fluctuation in the short run to a business.
To understand working capital better we should have basic knowledge about the various aspects
of working capital. To start with, there are to concepts of working capital.
Gross working capital
Net working capital

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1.Gross working capital :-
Gross working capital, which is also simply known as working capital, refers
to the firm’s investment in current assets. Another aspect of gross working capital points out the
needs of arranging funds to finance the current assets. The gross working capital concept
focuses attention on two aspects of current assets management, firstly optimum investment in
current assets and secondly in financing the current assets. These two aspect will help in
remaining away from the two danger points of excessive or inadequate investment in current
assets. Whenever a need of working capital funds arises due to increase in level of business
activity for any other reason the arrangement should be made quickly and similarly if some
surplus are available they should not be allowed to lie ideal but should be put some effective
use.
2.Net working capital:-
The term net working capital refers to the difference between current assets
and current liabilities. Net working capital can be positive as well as negative. Positive working
capital refers to the situation where current assets exceed on current liabilities. It is negative
where current liabilities is exceed in current assets. The networking helps to comparing the
liquidity of the same firm over time. For purpose of the working capital management, therefore
working can be said to measure the liquidity of the firm. In other words, the goal of working
management is to manage the current assets and liabilities in such a way that a acceptable level
of net working capital is maintained.

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4.2 Importance of working capital management:-
Management of working capital is very important for the success of the
business, it have been emphasized that a business should maintain sound working capital
position and also that there should not been an excessive level of investment in the working
capital components. As pointed out by Ralph Kennedy and Stewart mc Muller, “the inadequacy
or miss-management of working capital in is one of a few landing sauces of business failure.
Current assets, in fast, account for very large portion of the total investment of the firm.
Table showing current asset as percentage of current assets
Year Percentage
2013 45%
2014 32%
2015 50%
Source- book of working capital
It can be visualized from the table that is the first year of our study i.e. 2013 it was 45%
which was reduced to 32% in next year and in 2015 it is 50% show fluctuating trend.
0%
10%
20%
30%
40%
50%
60%
2013 2014 2015
percentage
percentage

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4.3 Determinants of working capital
There is no specific method two determine working capital requirement for a business. There
are number of factors affecting the working capital requirement. These factors have different
importance in different business and it different times. So a thorough analysis of all these factors
should be made before trying to estimate the amount of working capital needed. Some of the
different factors are mentioned here below :-
4.3.1 Nature of business :-
Nature of business is an important factor in determining the working
capital requirement. There are some businesses which require a very nominal amount to
be invested in fixed assets but large chunk of the total investment is in the form of
working capital. There businesses, for example, are of the trading and financing type.
There are businesses which require large investment in fixed assets investment in the
form of working capital.
4.3.2 Size of business :-
It is another important factor in determining the working capital requirements of
a business. size is usually measured in terms of scale of operating cycle. The amount of
working capital needed is directly proportional to the scale of operating cycle i.e the
large the scale of operating cycle the large will be the amount working capital and vice
versa.
4.3.3 Business fluctuation :-
Most business experience cyclical and seasonal fluctuation in demand for the
their goods and services. These fluctuation affect the business with respect to working

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capital because during the time of boom, due to an increase in business activity the
amount of working capital requirement increases and the reverse is true in the case of
recession. Financial arrangement for seasonal working capital requirement are to be
made in advance.
4.3.4 Production policy :-
As stated above, every business has to cope with different types of
fluctuations. Hence it iss but obvious that production policy has to be cope with different
types of fluctuation. No two companies can have similar production policy in all respect
because it depends upon the circumstances of an individual company.
4.3.5 Firm’s credit policy :-
The credit policy of a firm affects working capital by influencing the level of
book debts. The credit term is fairly constant in an industry but individuals also have
their role in framing their credit policy. A liberal credit policy will lead to more amount
being committed to working capital requirements whereas a stem credit policy may
decrease the amount of working capital requirement appreciably but the repercussion of
the two are not simple. Hence a firm should always frame a rational credit policy based
on the credit worthiness of the of the customer.
4.3.6 Availability of credit :-
The terms on which a company ia able to avail credit from its suppliers of goods
and service also affecting the working capital requirement. If a company in a position to
get credit on liberal terms and in a short span of time then it will be in a position to work
with less amount of working capital. Hence the amount of working capital needed will
depend upon the terms a firm is granted credit by its creditors.

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4.3.7 Growth and Expansion activities :-
The working capital needs of a firm increases as it grows in terms of sale or
fixed assets. There is no precise way to determine the relation between the amount of
sales and working capital requirement but one thing is sure that an increase in sales
never precedes the increase in working capital but it is always the other way round. So in
case of growth or expansion the aspect of working capital needs to be planned in
advance.
4.3.8 Price level changes :-
Generally increase in price level makes the commodities dearer. Hence
with increase in price level the working capital requirements also increases. The
companies which are in a position to alter the price of these commodities in accordance
with the price level changes will face fewer problems as compared to others. The
changes in price level may not affect all the firms in same way. The reactions of all firms
with regards to price level changes will be different from one other.

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4.4 Circulation system of working capital
In the beginning the funds are obtained by issuing, often supplemented by long term
borrowings. Much of these collected funds are used in purchasing fixed assets and remaining
funds are used for day operation as pay for raw material, wages, overheads expense. After this
finished goods either account of profit is used for paying taxes, dividend and the balance is
ploughed in the business.
Working capital is considered to efficiently when it turn over quickly. As circulation
increases, the investment in current assets will decrease. Current assets turnover ratio speaks
about the efficiency of Kotak Mahindra in the utilization of current assets. Fast turnover current
assets result in a better rate on investment.
Table no – 2
Year Ratio (in times)
2013 1.78
2014 2.98
2015 1.98
Source-from book
Chart no - 2
0
1
2
3
2013 2014 2015
ratio
ratio

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4.5Types of working capital
4.5.1 Permanent working capital :-
There is always minimum level of working capital which is continuously
required by a firm in order to maintain its activities like cash, stock and other current
assets in order to meet its business requirements irrespective of level of operation.
Also known as fixed working capital, it is that level of net working capital below
which it has never gone on any day in the financial year. Net working capital (NWC)
means current assets less current liabilities.
4.5.2 Temporary working capital :-
Over and above the permanent working capital the firm may also required
additional working capital in order to meet the requirements arising out of fluctuation
in sale value. This extra working capital needed to support the increased volume of
sales is known as temporary or fluctuating working capital.

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4.6 Sources of working capital in banking sector
Working capital refers to the funds needed by a business to conduct its daily operations, such as
payment of wages, purchase of raw material, covering overhead costs and offering credit
services. Working capital can be subdivided into two areas: regular working capital that
provides a steady base for overall business objectives; and short-term working capital used to
facilitate the day-to-day business operations. Sources of finance for working capital include
bank loans, retained earnings, credit from suppliers, long-term loans from financial institutions,
or proceeds from sale of assets.
4.6.1 Long-Term Loans:-
A loan is the amount of money that is given to an individual or a company on
the agreement they will repay the amount borrowed in a period that exceeds 12 months and at
predetermined interest rates. Long-term loans are usually secured against certain assets and are
offered by commercial banks, the government and financial institutions. This type of loan
provides the long-term working capital for the business.
4.6.2 Short-Term Loans :
Short-term loans are loans that are to be repaid within a year from the time
they are borrowed. Savings banks, cooperatives and the government through the Small Business
Administration are some of the institutions that offer these loans. Bank overdraft is one such
source of business finance. A bank overdraft is a withdrawal made by a business that exceeds
the amount of balance in its bank account, although the amount of money does not exceed a set
limit.
4.6.3 Line of Credit:-
This is a form of a loan agreement between the bank and the borrower that
enables the borrower to acquire some amount of the funds on demand, but the borrower does not
have to take the loan. A business may secure working capital through this service if it has
recurring expenses at regular intervals.

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4.6.4 Trade Credit :-
This credit service offered by suppliers allows businesses to get goods and
pay for them later. This is a source of working capital that may be acquired from all suppliers
depending on the business arrangements, the type of business you conduct and the worth of the
credit to be offered.
4.6.5 Asset-Based Financing:-
A business may use its assets to secure working capital from financial institutions that offer
asset based loans. The asset includes machinery, vehicle or accounts receivable. Accounts
receivable are financial documents of people or companies that owe money to the business and
they may be traded in to finance working capital at discounting companies.
4.5.6 Inventory Financing:-
These loans are secured with the business` inventory acting as the security. Finance for working
capital may be acquired through its inventory although the business cannot sell it until the loan
is repaid because the lender has the right to the inventory until the loan has been repaid.

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4.7 Performance Cycle of working capital
 Conversion of cash into raw material.
 Conversion of raw material into work-in-progress.
 Conversion of work in progress into account receivable (debtors) through sale.
 Conversion of account receivables into cash.
cash
raw
material
work-in-
progress
finished
stock
debtors

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 Cash :-
Cash is the most liquid asset in any business. It is very crucial assets in day-to-day operation of
a business firm. Cash is the basic input required to run the business continuously and at the
time it is also the ultimate output expected to be realized by selling the service or product
manufactured by the firm. A firm has to strike a balance between maintaining a very high cash
balance and a very small amount of cash balance.
 Raw material :-
Raw materials are materials or substances used in the primary production or manufacturing of
goods. Raw materials are often referred to as commodities, which are bought and sold on
commodities exchanges around the world. Raw materials are sold in what is called the factor
market, because raw materials are factors of production along with labor and capital.
 Work-in-progress:-
sometimes referred to as work in process, is the sum of all costs put into the production process
to manufacture products that are partially completed. WIP refers to raw materials, labor and
overhead costs incurred for products that are at various stages of the production process. WIP is
a component of the inventory asset account on the balance sheet, and these costs are transferred
to the finished goods account and eventually to cost of sales.

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 Finish stock:-
A good purchased as a "raw material" goes into the manufacture of a product. A good only
partially completed during the manufacturing process is called "work in process". When the
good is completed as to manufacturing but not yet sold or distributed to the end-user, it is called
a "finished good". This is the last stage for the processing of goods. The goods are ready to be
consumed or distributed.
 Debtors :-
A debtor can be an entity, a company or a person of a legal nature that owes money to someone
else – your business for example. If you have one or more debtors, that makes you a creditor. To
put it simply, the debtor-creditor relationship is complimentary to the customer-supplier
relationship. Generally speaking, a debtor is a customer who has purchased a good or service
and therefore owes their supplier money in return. Therefore, on a fundamental level, almost all
companies and people will be debtors at one time or another. For accounting purposes,
customers/suppliers are referred to as debtors/creditors.

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4.8 Working capital how help in growth & development of bank in india.
 Employment Growth is boosted by financial system:-
The presence of financial system will generate more employment
opportunities in the country. The money market which is a part of financial system, provides
working capital to the businessmen and manufacturers due to which production increases,
resulting in generating more employment opportunities. With competition picking up in various
sectors, the service sector such as sales, marketing, advertisement, etc., also pick up, leading to
more employment opportunities. Various financial services such as leasing, factoring, merchant
banking, etc., will also generate more employment. The growth of trade in the country also
induces employment opportunities. Financing by Venture capital provides additional
opportunities for techno-based industries and employment.
 Venture Capital:-
There are various reasons for lack of growth of venture capital companies in India.
The economic development of a country will be rapid when more ventures are promoted which
require modern technology and venture capital. Venture capital cannot be provided by individual
companies as it involves more risks. It is only through financial system, more financial
institutions will contribute a part of their invest table funds for the promotion of new ventures.
Thus, financial system enables the creation of venture capital.

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 Financial system ensures Balanced growth:-
Economic development requires a balanced growth which means growth in all the
sectors simultaneously. Primary sector, secondary sector and tertiary sector require adequate
funds for their growth. The financial system in the country will be geared up by the authorities in
such a way that the available funds will be distributed to all the sectors in such a manner, that
there will be a balanced growth in industries, agriculture and service sectors.
 Financial system helps in fiscal discipline and control of economy:-
It is through the financial system, that the government can create a
congenial business atmosphere so that neither too much of inflation nor depression is
experienced. The industries should be given suitable protection through the financial system so
that their credit requirements will be met even during the difficult period. The government on its
part, can raise adequate resources to meet its financial commitments so that economic
development is not hampered. The government can also regulate the financial system through
suitable legislation so that unwanted or speculative transactions could be avoided. The growth of
black money could also be minimized.
 Financial system’s role in Balanced regional development:-
Through the financial system, backward areas could be developed by providing
various concessions or sops. This ensures a balanced development throughout the country and
this will mitigate political or any other kind of disturbances in the country. It will also check
migration of rural population towards towns and cities.
 Role of financial system in attracting foreign capital:-

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Financial system promotes capital market. A dynamic capital market is capable of
attracting funds both from domestic and abroad. With more capital, investment will expand and
this will speed up the economic development of a country.
 Financial system’s role in Economic Integration:-
Financial systems of different countries are capable of promoting economic
integration. This means that in all those countries, there will be common economic policies, such
as common investment, trade, commerce, commercial law, employment legislation, old age
pension, transport co-ordination, etc. We have a standing example of European Common Market
which has gone to the extent of creating a common currency, representing several countries in
Western Europe.
 Role of financial system in Political stability:-
The political conditions in all the countries with a developed financial system will be
stable. Unstable political environment will not only affect their financial system but also their
economic development.
 Financial system helps in Uniform interest rates:-
The financial system is capable of bringing an uniform interest rate throughout the
country by which there will be balanced movement of funds between centers which will ensure
availability of capital for all kinds of industries.

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 Financial system role in Electronic development:-
Due to the development of technology and the introduction of computers in the
financial system, the transactions have increased manifold bringing in changes for the all round
development of the country. The promotion of World Trade Organization (WTO) has further
improved international trade and the financial system in all its member countries.

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CHAPTER:-5
Data analysis and
interpretation

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Balance sheet of Kotak Mahindra bank
Table no-5..1
Table no 5.2 balance sheet of kotak Mahindra
Current year
2015
Previous
year 2014
Income
Sales 903.92 1134.22
Other Income 34.09 25.32
987.04 1159.54
Expenditure
Material Consumed 621.23 738.73
Personal Expenses 104.58 87.33
Mfg expenses 172.48 166.27
Depreciation 34.38 30.01
As at Dec
31/2013
As at Dec
31/2014
Less : Current liabilities provision
Current Liabilities 137.02 143.68
Provisions 15.73 8.56
152.75 152.24
Net current assets 142.18 199.38
Miscellaneous Expenditure (Total extent not written off
adjusted)
45.23 51.09
Profit 368.39 324.23
953.33 1076.11

44
Financial charges 30.57 26.72
Excise duty 120.04 130.87
Mis Expenditure w/off 20.28 18.33
1224.32 1198.26
Loss for the year before extra ordinary items and price
period adjustment
(116.88) (38.72)
Extra ordinary items
Expenses on abandoned project w/off - -
Assets w/off - -
Balance sheet as on 31 Dec 2014
Table no-5.3
As on 31th
dec 14
As on 31th dec
13
Souces of funds
Share holder funds
Share capital 734.20 834.20
Reserav and surplus 21.00 -
755.20 855.20
Loan funds
Secured loan 198.09 217.96
Unsecured loan 0.04 2.95
198.13 220.91
953.33 976.11
Application of funds
fixed assets
Gross block 520.94 493.93

45
Less Depreciation 125.09 95.21
395.85 398.72
Capital W.I.P 1.58 2.69
Net book value 397.43 401.41
Investment 0.10 -
Current assets loance and advance
Inventorise 93.87 129.57
Sundry debtors 123.22 82.75
Cash balance & bank balaance 10.64 82.20
Others current assets 20.14 11.42
Loan & advances 47.06 45.68
294.93 351.62

46
Current assets
Table no:- 5.4
Fiscal
year
Sundry
Debtors
Cash
balance
Loan &
advance
Other c.sa Total
2011/12 639,948 3,515,993 76,970 1,148,475 5,381,386
2012/13 1,089,070 2,186,908 130,275 2,022,560 5,298,538
2013/14 1,341,359 4,285,098 2,344,020 2,344,020 8,217,555
2014/15 1,223,706 4520,165 170,660 3,832,457 9,746,988
Sources:- Annual Report of kotak from 2011/12 to 2014/15
Chart no – 5.1
Interpretation:-
As stated in the above figure the current assets of Kotak increases all the four year from
FY 2008/09 to 2011/12. In the cash of FY 2008/09. But the overall increasing trend of
current assets is higher.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
2011/12 2012/13 2013/14 2014/15
cash balance
loan and advance
other C.A
debtors

47
Components of current liabilities
Current liabilities is the a short-term obligation which is payable within a year. The
compositions of current liabilities or the main components of current liabilities. Tax
provision, staff bonus, proposed dividend payable and other liabilities are included in
other current liabilities. The following table shows the amount of deposit and other
account. Short term loan, bills payable and other current liabilities of Kotak.
Table no – 5.5
Fiscal year Creditors deposit Bill payable Other C.L Total
2011/12 2,249,357 3,318,900 87,607 2,396,492 8,052,356
2012/13 3,701,079 4,129,900 195,168 2,49,564 10,518711
2013/14 3,281,079 4,430,900 98,372 1,690,564 9,500,915
2014/15 4,246,440 4,142,491 97,087 2,368,827 10,654,854

48
Chart no – .5.2
Interpretation:-
In the above figure shows that the current liabilities of the company is increasing I fiscal
year 2008/09 the total amount of liabilities is Rs. 8,052,356 for the increasing impact of
deposits and other current liabilities. In all four deposits and other current liabilities are
increased.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
2011/12 2012/13 2013/14 2014/15
deposit
bills payable
other C.L
creditors

49
Working capital of Kotak Mahindra
Working capital is required to run business smoothly and efficiently in the context of set
objective. It is no doubt that no organization can achieve its goal without proper use of working
capital. It means money invested on working capital should be neither more nor less because
both the position of the working capital affects not only liquidity but also profitability of the
organization. The investment decision should be made on any type of current by considering
their role in company and determining which one is more beneficial to the company and which is
not. The following table shows the amount of working capital of kotal of the study period.
Table no- .5.6
Fiscal year Total C.A Total C.L WC=CA-CL
2011/12 5,381,386 8,052,356 4,470,970
2012/13 5,298,538 9,500,915 4,202,377
2013/14 8,217,555 10,518,711 2,301,156
2014/15 9,746,988 10,654,854 907,866

50
Chart no – .5.3
Source- self complied
Interpretation:-
In the above figure we clearly show the current assets, current liabilities and working capital
condition of kotak from fiscal year 2011/12 to 2014/15. All the year of the study period the
working capital of the company is negative.
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2011/12 2012/13 2013/14 2014/15
Total C.A
total C.L
C.A -C.L

51
1. Liquidity Ratio:-
Chart no – 5.4
The above table shows the CA, CL and current ratio of the Kotak. The current ratio of the
Kotak is fluctuating over the year. The highest current ratio is in fiscal year 2014/15
0.91 and in all year it is increasing. The average ratio is 0.74.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2011/12 2012/13 2013/14 2014/15
.
.

52
2. Cash and bank balance to current assets:-
The cash balance is almost liquids from the current assets, this ratio shows the percentage
of readily available fund within the bank. It can be calculated by dividend cash and bank
balance by current assets, which is giving below.
Cash balance
Current assets
This ratio also shows that the percentage of current assets cover cash balance. The
following table and figure shows the cash balance to current assets ratio of Kotak over
the study period.
Table no – 5.7
Fiscal year Cash balance Current assets Ratio (%)
2011/12 3,552,963. 5,381,386 0.67
2012/13 2,186,908 5,298,538 0.41
2013/14 4,385,098 8,217,555 0.53
2014/15 4,382,396 9,746,988 0.44

53
Chart no -.5.5
Interpretation:-
Cash balance to current assets ratio of the company 2012/13 decreased and in 2013/14 it
again increased and 2014/15 it again.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2011/12 2012/13 2013/14 2014/15
.
.

54
3. Cash balance to total assets:
The ratio shows the ability of bank immediate funds to cover their deposit. It can be
calculated by dividing cash balance by deposits. The ratio can be expressed as:
Table no – .5.8
Fiscal year Cash balance Total deposits Ratio
2011/12 3,552,963 2,318,900 1.53
2012/13 2,186,908 2,123,900 1.03
2013/14 4,385,098 2,899,500 1.51
2014/15 4,382,396 3,857000 1.14
Chart no – .5.6
Interpretation:-
The above figure state that the cash balance to total deposits of Kotak has been slightly
decreasing in FY 2011/12, 2012/13, 2013/14.
0
0.5
1
1.5
2
2011/12 2012/13 2013/14 2014/15
ratio
ratio

55
4. Net Profit To Total Assets :
Net profit after tax
Total assets
Table no – 5.9
year Net Profit Total Assets Ratio
2011/12 5,605,846 5,336,042 1.05
2012/13 6,182,978 5,298,538 1.17
2013/14 10,387,412 8,217,555 1.26
2014/15 23,499,431 9,746,988 2.41
Chart no – 5.7
Net profit increasing the slightly in all the year. In 2011 is 1.05 and then goes on
increasing.
0
1
2
3
2011/12 2012/13 2013/14 2014/15
ratio
ratio

56
5. Debtors turnover ratio:-
Net credit sale
Average debtors
Table no – .5.10
year Credit sale Average debtors Ratio
2011/12 102,199,181 19,080,194 5.35
2012/13 132,858,985 27,192,101 4.88
2013/14 171,671,451 36,302837 4.72
2014/15 221,246,824 42,584,634 5.19
Interpretation:-
The ratio is more in 2011/12 and in then 2012/13 is decreasing and 2014/15 it again
increasing.
4.4
4.5
4.6
4.7
4.8
4.9
5
5.1
5.2
5.3
5.4
2011/12 2012/13 2013/14 2014/15
ratio
ratio

57
6. Creditors turnover ratio :-
Net credit purchase
Average creditors
Table no – 5.11
Year Credit purchase Average creditors Ratio
2011/12 96,724,469 82,074,994 1.17
2012/13 127,553,897 112,554,643 1.13
2013/14 165,680,148 146,617,013 1.13
2014/15 213,323,185 189,501,666 1.12
Chart no – 5.9
Interpretation:-
In 2011/12 the creditors are more but after 2011/12 the creditors are decreasing slightly.
1.09
1.1
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
2011/12 2012/13 2013/14 2014/15
ratio
ratio

58
7. Working capital turnover ratio:-
Net sale
Net working capital
Table no –.5.12
Year Net sales Net working capital Ratio
2011/12 102,199,181 20,229,751 5.05
2012/13 132,858,985 23,244,807 5.72
2013/14 171,671,451 36,879,727 4.68
2014/15 221,246,824 32,265,850 6.86
Chart no – 5.10
Interpretation:-
In 2011/12 the working capital ratio is 5.02 which is less than next year. Means the ratio
of working capital is increasing in next year. In year 2013/14 the ratio is again decreasing
and again increasing in year 2014/15.
0
1
2
3
4
5
6
7
8
2011/12 2012/13 2013/14 2014/15
ratio
ratio

60
6.1Findings
1. Current assets for the year2011/12 is decreases and its application for the company
and current liabilities of the company is increased by 2,466,355 and by putting
formula (WC = C.A – C.L) working capital of company for the year 2011/12 is
4,470,970
.
2. Current assets of the year 2011/12 is increasing and it is good condition for the
company and current liabilitiesf the company is decreased by 1,017,796 that’s
show the working capital of the company is increased. Here debtors increased
means cash balance of the company decreased.
3. Current assets for the year 2011/12 is increases and it is good condition for the
company is increased by 1,153,939 that’s shows working capital of the company
decreased. Here debtors decreased show that’s good for the company it increased
the cash in the operation.
4. Cash balance to current assets ratio of the company is in 2011/12 it increased and
again in 2014/15 is decreased.

61
6.2Suggestion
On the basis of the analysis and observation an attempt made to present some suggestion.
In the year 2011/12 the current assets of the company has declined and current liability of
the company has increases therefore the net working capital declined. Therefore for the
current ratio has declined. The net working capital of the company has increased in
remaining year.
The company has able to repay the liability of the creditors because the profit of the
company has increase every year.
Because of the current assets has declined in the year 2012/13. But profit of the company
has increase in the year 2011/12. Therefore current is high.
Company has able to fulfill the standard level of current ratio that is 2:1 therefore the
company has able to repay the liability and loan of company.

62
6.3Conclusion
Banking has become one of the most important tools for the success of
any country. It has become a backbone of any countries growing economy. Banking over
the year, in India has seen lots of ups and downs. Today due to liberalization of the
economy, more and more sectors are becoming more and more competitive. Banking is
no different.
Bank like kotak Mahindra and others banks in India are doing terrifies
job in banking sector handling better human resources, adopt new technology, and bring
new concept and managing standard.
Banking sector has seen a lot of transformation in the past post
liberalization period, it has became very important for bank to give services best to their
capabilities. If the customer are not satisfied with the service provided by the bank, they
will transfer their account to some other bank. Result is loss of revenue for the bank and
the loss of goodwill.
New technology needs to be introduction in the banking sector it is
utmost clear that people are not only expecting normal banking services but they want to
be as their business partners and help accordingly.

64
BIBLIOGRAPHY
 Various Books
 Web Sites:-
 www.netmba.com
 www.wikipedia.com
 www.kotak.com
 News Papers
 Fact Sheet and Statement
 Television Channel

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