Fundamental Analysis of Hdfc Bank

Profitability ratio Earnings Per Share Book Value per Share Profit margin on sales Return on assets Return on shareholders’ equity Return on Investment: DuPont Model (ROI) Liquidity Ratio Current ratio Quick ratio (acid test) Working Capital 2009 2008 2007

The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measured on critical areas such as profitability, its ability to stay solvent, the amount of debt exposure and the effectiveness in resource utilization, is performing financial analysis where a set of ratios provides a snapshot of company performance and future

Prepare an 8- to 10-page fundamental financial analysis (excluding appendices, title page, abstract, and references page) that will cover each of the following broad areas based on your chosen company’s financial statements:

Valuation Estimates: Actual Price (6/1/07): $21.63 Trailing P/E $9.57 Forward P/E $7.80 PEG $2.92 P/B $54.00 P/EBITDA $28.24 P/FCF $123.39 EV/EBITDA $3.54 Intrinsic Valuations Discounted Dividend Free Cash Residual Income LR ROE AEG Actual $18.40 $29.71 $3.22 $7.21 $8.79

Ratio analysis is a very useful tool when it comes to understanding the performance of the company. It highlights the strengths and the weaknesses of the company and pinpoints to the mangers and their subordinates as to which area of the company requires their attention be it prompt or gradual. The return on shareholder’s fund gives an estimate of the amount of profit available to be shared amongst the ordinary shareholders; where as the return on capital employed measures an organization 's profitability and the productivity with which its capital is utilized. Return on total assets is a profitability ratio that measures the net income created by total assets amid a period.

Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas. Financial ratios are important because they help investors make decisions to buy hold or sell securities.

Price to earnings ration. This ratio is used in conjunction with other metrics to give analyst and investors are quick initial impression of whether a company would make a good investment. (investopedia, 2014)

There are three main tools of Analysis. The first tool is the horizontal analysis. This method reviews a series of a company’s financial statement data over time period. This helps determine if an increase or decrease in sales. The formula for this method is by taken the current year amount subtract by the base amount divided the base year amount. The second method is the vertical analysis. This method evaluates the financial statement by expressing each as a percent of a base amount.

In financial analysis, analysts use the financial data to monitor and evaluate a firm’s financial position, to plan the future financing, and to reallocate the size of the company and its rate of growth. Financial analysis involves examination of the historical data to achieve the information about the current and future the financial health of the company. They may work in the forecasting and profit analysis. They, like the accountants, prepare the reports. They prepare budget report, work in cost and general account. They analyze the changes in production and service to determine the effects on costs. They work on the graphs. They use statistic to compare the standard costs to the actual costs. They also study the significances of alternative ways of investing money in a particular field. They usually work for the large financial institutions. Particularly, they work

One of the analytical tools that we will use is financial ratio analysis. While we will discuss ratios in depth in class, I have included a few financial ratios in the questions below. The last chapter of the text, Chapter 14, contains explanations of

Ratio analysis: Perform trend and ratio analysis on current and fixed assets, current and long term liabilities, owner’s equity, sales revenues, EBIT, net income, and earnings per share. Project these trends

Current ratio Cash Ratio Parts Inventory Turnover in Days WP Inventory Turnover in Days FG Inventory Turnover in Days A/R Turnover in Days A/P Turnover in Days Cash Conversion Cycle Fixed Assets Turnover Total assets Turnover Debt Ratio LT Debt total Capitalization Times Interest Earned Cash Flow Coverage Gross profit Margin Operating profit Margin Net Profit Margin Return on Assets Return on Equity

The analysis will be base on the most important ratios as, Liquidity, Profitability, and Solvency Ratios.

The calculation of ratios is the calculation technique for analyzing a company’s financial performance that divides or standardize one accounting measure by another economically relevant measure. Financial ratios can be used as a tool to demonstrate financial statement users for making valid comparisons of firm operating performance, over time for the same firm and between comparable companies. External investors are mostly interested in gaining insights about a firm’s profitability, asset management, liquidity, and solvency.

Finance – is used to gather data and generate reports such as Overall balance sheets and quarterly financial statements.