Raghu Ratioanalysis

7/31/2019 Raghu Ratioanalysis

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CONTENTS

CHAPTERS PAGE.NO

CHAPTER-I

INTRODUCTION

SIGNIFICANCE OF THE STUDY

NEED FOR THE STUDY

OBJECTIVES OF THE STUDY

METHODOLOGY

LIMITATIONS OF THE STUDY

CHAPTER-II

PROFILE OF MILK INDUSTRY.

PROFILE OF THE KRISHNA DISTRICT MILK PRODUCERS

MUTUALLY AIDED CO-OP UNION LTD.

CHAPTER-III

PROFITABILITY ANALYSIS

CHAPTER-IV

DATA ANALYSIS

CHAPTER-V

SUMMARY & SUGGESTIONS

BIBLIOGRAPHY


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CERTIFICATE

This is to certify that the project entitled PROFITABILITY

ANALYSIS in THE KRISHNA DISTRICT MILK PRODUCERS

MUTUALLY AIDED CO-OP UNION LTD that is being submitted by

Miss. UJJWALA BETINA partial fulfillment for the award of the MBA

(Master of Business Administration) from VESTAL Institute of

Management and IT to Andhra University under my guidance and

supervision.

Place:

(V. SANDHYA CHOWDARY)

Date: project guide

VESTAL Institute of Management and IT

Eluru.


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DECLARATION

I here by declare that the project work entitled

PROFITABILITY ANALYSIS in THE KRISHNA DISTRICT

MILK PRODUCERS MUTUALLY AIDED CO-OP UNION LTD.

Submitted by me to Department of MBA, VESTAL Institute of

Management and IT, Eluru in partial fulfillment for the award of

degree of Master of Business Administration is my own and has

not been submitted to any other University for any degree or

diploma.

Place: Eluru,

Date: (UJJWALA BETINA)


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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to all those

who have been helpful in the completion of this project during my

summer training in THE KRISHNA DISTRICT MILK PRODUCERS

MUTUALLY AIDED CO-OP UNION LTD.

I am grateful to Mr.Laxmaya, Head-Finance

Department, THE KRISHNA DISTRICT MILK PRODUCERS

MUTUALLY AIDED CO-OP UNION LTD who permitted me and

given me opportunity to under go summer training in this

organization.

.

I am thankful to Mr.T.Veera swamy, director of

VESTAL Institute of Management and IT and Ms.Thanuja jyothi

for their help getting permission to do this project work and Ms.

V.Sandhya for his valuable guidance, constructive suggestions

and encouragement through out the course of study and

preparation of this project report.

(UJJWALA BETINA)


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SIGNIFICANCE OF THE STUDY:

The basis for financial analysis of any firm is financial information. A business

firm prepares its financial statements as they provide useful financial information and are

helpful for the purpose of decision-making. Financial information is needed to predict,

compare and evaluate the firms earning ability. The profit or loss statement shows the

operating profit of the concern and the balance sheet depicts the balance value of

acquired assets and liabilities at a particular point of time. For the purpose of obtaining

the material and relevant information necessary for ascertaining the financial strengths

and weakness to an enterprise, it is necessary to analyze the data depicted in the financial

statement. The analysis is done by properly establishing the relations ship between the

items of balance sheet and profit and loss account.

Financial statement analysis is a meaningful interpretation of Financial

statements for parties demanding financial information. There are certain steps, which

have to be taken into consideration for financial statement analysis. The analysis and

interpretation of financial statements is an important accounting activity. The end users of

financial statements will get further insight about financial strengths and weakness of the

firm. Management will be particularly interested in knowing financial strengths of firm to

make their best use to be able to spot out financial weakness to take suitable corrective

actions also the future plans of firm should be laid down in view of firm's financial

strengths and weakness.

A proper financial analysis must be used to analyze a firm's past performance and

assess its present financial strength for making the better future plans. The financial

resources of every organization are always scarce and therefore require proper planning

and control in order to achieve the best out of funds available. The financial information

of companies consists of three basic financial statements viz; balance sheet, the trading

and profit and loss account, and the profit and loss appropriation account. These


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statements are very useful for evaluating the financial position and performance of a firm

through financial analysis.

The information given in basic financial statements serves no useful purpose

unless it is interpreted and analyzed in some comparable terms.

Need for study:

After the liberalization, many MNCS entered into the market. Financial analysis

must require for a company in this cut through competition. Because of that reason ratio

analysis is used in analyzing the firms position. Known that fact the success of an

organization depends upon the financial management. This situation has created an

interest to study and analysis some of the financial aspects of this corporation. Hence a

study may be undertaken on financial analysis through ratio in KDMPMACU,

Vijayawada.

Objective of the study:

Keeping in view of abovementioned facts, the following are the objectives of

the study.

To analyze the financial performance the firm thorough calculation of variousrations.

To study the financial strengths and weakness of the firm To examine the short-term solvency of the firm. To evaluate the capital structure of the firm through leverage rations To find out the reasons of the problem and to evaluation possible way of the

resolving the problem.


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Methodology of the study:

The data related to the financial statements of the KDMPMACU and information

relating to the Ratio Analysis has been collected using primary and secondary data.

Primary data:

Information, which is not available in annual reports and books of the company, is

collected from the primary data, primary data is collected from discussions with the

executives of the company.

Secondary data:

Data relating to the financial statements of the KDMPAMACU have been

collected from the published annual reports. The other information regarding this topic

has been collected form the various magazines, textbooks and websites.


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Limitation of the study:

The entire study is based on financial data that is provided by the companys

financial statements. Therefore the following are the limitations of the study.

The limitations of ratio analysis are applicable to the study. The study is limited to a period of 8 weeks. Calculate ratio may not be future indicators. Ratio analysis is one of the tools of evaluating the firm.


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CHAPTER - II


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PROFILE OF THE MILK INDUSTRY

India is known to be an agricultural economy. Indian Agriculture supports about

65% of its population. Dairy and livestock sectors play a pivotal role in Indias Agrobased economy. Animal Husbandry and Dairy Development has greater prominence in

Rural Economy. The dairying is subsidiary to agriculture and practiced since time

immemorial.

Milk is the leading agriculture produce worlds most important and versatile food.

There was no market facility for the surplus milk produced in village in the olden days.

The market was in the hands of a middleman called vendor who operates between

producer and consumer in those days. The producer was exploited by the vendors.

The marketable surplus in the rural area and the4 rapid urbanization in the country

led to organize projects for surplus milk procurement from the villages and to supply

pasteurized liquid milk to the needy urban and semi urban consumers.

The age old dairying grew, in organized sector with the governmental control and

support. There were few competitors in the organized sector for milk market. So also

very few small investor owned firms in the Milk Business as we studied.

The Government has taken inspiring initiatives for structural modes nation-wide

for dairy development, animal husbandry and allied industries.

The cooperative movement with its widespread network has made strong grass

roots and insights into the concerns of dairying in India.


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NDDB:

An autonomous National Dairy Development Board (NDDB) under the Ministry

of Agriculture was set up to organize the milk producers cooperatives on AMUL (Anand

Milk Union Limited) pattern. The NDDB was headed by Dr. Verghese KUrien, who

architected the dairy industry in the country. The NDDBS role in bringing about a sea

change in dairying in India since 70s has been credible. It launched, implemented and

fulfilled the OPERATION FLOOD program in two phases in the country (1970-90).

Milk products imports was controlled and canalized by the government mostly on the

advice of NDDB.

This planned correlation of b3eneficial policies, very limited completion and a

well designed and managed program allowed the Dairy Cooperatives movement to

achieve the leading role in dairy development in out nation.

Dairy plants operating in India:

(Source: I&ids-2002-03.)

Dairy Plants Number Capacity0001/day

Cooperative 1223 28394

private 403 32415

Other 63 12170

Total 678 72979


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Anand pattern Dairy Cooperatives:

The Anand pattern Dairy Cooperatives were replicated primarily across the

country to eliminate middlemen in milk business to empower the millions of rural milk

producers to take control over Dairy Cooperatives by setting up cooperatives creating an

institutional structure to enable the farmers to realize maxim share of consumer rupee and

there by; bringing about overall social-economic development at the village level. In

Anand model, a vertically integrated 3 tier Dairy Cooperative structure i.e. 1) Society at

village level, 2)Union at District level and 3)Federation at state level in various States.

The dairy Cooperatives have played an important role in increasing the production of

milk and its handling in organized sector. Farmers are actually encouraged to manage

their own business controlling procurement, processing and most importantly marketing

of their milk and milk products. In the whole value chain marketing is the important only.

Their real assets are ownership of cooperatives and brand of their product. The

foundation for success of dairy cooperatives 2wha built through OPERATION FLOOD

91970-90). Only true and effective participation in genuine producer institution gave

Indian farmers their rightful and deserved place in our agricultural economy. The real

strength of Diary cooperative structure lies in the village. The estimated overall surplus

of milk in the country is paving way to find a sustainable domestic and overseas market

by value addition to the produces.

Dairy Cooperative Societies in India


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WHITE REVOLUTION:

The WHITE REVOLUTION popularly down is the first revolution in dairy

sector. It provide dairy cooperative network covering about 12million farmer members

in over 115000 Villages Dairy Cooperatives in 170 Milk sheds spread over 270 District

all across the country.

Total Farmer Members under Cooperatives

0

20000

40000

60000

80000

100000

120000

140000

1980-81 1990-91 2000-01 2005-06 2006-07

RATIO


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(SOURCE: AR, NDDB)

In India Diary industry thus has the saga of success and led to WHITE

REVOLUTION in 80s. Dr.Varghese kurien for his pioneering efforts in this

phenomenon is aptly regarded as FATHER OF WHITE RECOLUTION.

Milk produced by Co. operatives

0

2000

4000

6000

8000

10000

12000

14000

1 2 3 4 5

RATIO


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Milk production in India:

India, the current leader in dairy worlds achieved first rank in milk production

with an annual production of 910 million tones of milk. It is contributing about 30% of

total value of agricultural GDP. The value of milk out put and its products is 17000 core

and that of diary industry as a while is 105000 core rupees. Nearly, 18% of total milk is

being produced by weaker sections of society to supplement their income for livelihood

which ultimately made India the highest production of milk in the world. The fact is that

this highest milk production is due to involvement of 70 million rural milk animal

household maintaining 108 million beads cattle (i.e.64million cows and 44 million

buffaloes).

Buffaloes contribute largest to the milk pool with about 46.5 million tones955%).

Thus the dairying is the main stay of Indian Rural Economy and regarded as one of the

vital instrument of economic and social changes by employment and income generation.Approximately, Rs 300 million is ploughed back to Indian Villages on every single day

by way of milk payment.

After independence several technologies have been evolved for increasing

production, productivity of the crop as well as animals by improving the adoptive

0

5000

10000

15000

20000

25000

1980-81 1990-91 2000-01 2005-06 2006-07

RATIO


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behavior of the farmer. The dairy is the sector where the poor contributes to the growth

directly instead of getting benefit from growth generated elsewhere.

The Indian dairy scenario is so constantly looking ahead and promises to take

grater strides in making dairying more remunerative to the farmers. The problem of rural

employment and poverty broadly correspond to agricultural scenario in the country. The

programs have been restructured dovetailing with many projects under Rural, Animal

Husbandry Departments by the Government. Milk production enhancement schemes

were widely introduced by Animal Husbandry Departments. Animal breed up-gradation,

artificial insemination, etc have extensively organized. There has been a consistent

growth in milk production over the last few decades at a rate of 4%. The National Policy

on Agricultural advises farmers to diversify their risks by avoiding mono-cropping and

take of Animal Husbandry, Dairy and other businesses. Production of 100 million tones

of milk and a per capita milk availability of 245 g/day in 2006-07 is the overall

anticipated target.

Production and per capita availability of Milk

Per

capita availability of milk compare to other animal products

YearProduction

(Million In tones)

Per Capita

Availability ofMilk in Grams

1950-50 17 47.10

1960-61 20 45.60

1973.74 23.20 40.40

1980-81 31.60 46.20

1990-91 53.90 63.70

1992-93 58 66.80

1993-94 61.20 69.20

1994-95 63.50 70.60


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The average milk production from the buffaloes Is more than twice that of

nondescript cow. Buffalo is predominantly a milk animal. It is regarded as a triple

purpose animal also contributing milk, draught and meat as compared to the dual purpose

native cattle. Buffalo milk also fetches a good remunerative price to the farmers because

of its high fat content. The importance of deployment of appropriate technology for

improving the productivity and reducing the cost of milk production as also improving

the quality of mi8lk at producer level is addressed on requited scale with positive results.

Farm level Targets for milk production

Animal product Animal productionPer capita

availability

Milk 84.5 million tones 224ml/day

Eggs 34034millions 34/annum

Meat 4694000tones 4700gms/annsum

Wool 50.70 51r/annum

Farming system category of Dairy stocktargeted production

(kg/day)

Dairy stock under crop livestock integrated system up to 10 kg

Intensive Commercial Dairying

Indigenous milk breeds 10-15 kg

Cross Bred 15.25 kg

Buffaloes 10-15 kg


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The dairying as an integral part of agri-business in India is growing rapidly. The

upsurge in the dairy sector following liberalizations has been a shot in the arms of private

sector in India. The increase in demand for value added products and increasing

investment in the cooperative and private sectors provides grater impetus to the demand

for milk processing equipment simultaneously in the county. There are many large Dairy

engineering companies established in the county providing complete solutions to the

dairy industry to cater to the need of equipment for processing, automation and

packaging. They are successful in the state of the art process technology.

Institutional capacities in India

The traditional dairy products are available commodity group in India because

they result in trade worth of rs.250 billion and play a very significant role in the socio-economic and religious activities of our population. It is estimated that more than half of

total milk produces is converted into variety of Indian Dairy Products by unorganized

sector has remained largely confined to handling of liquid milk and to some extent

production of milk powder and Ghee. The per capita income is naturally increases the

demand for milk and milk products. With an increase in the domestic consumer base and

continuous rise in the Indian ethnic population in many parts of the world, there will be

an increased demand for value added Indian Dairy products particularly those with

extended shelf-life and also which are ready-to-serve and ready-to-reconstitute types in

the present trends. The Indian Dairy Industry is essentially considered to initiate

manufacture of mass market products for domestic as well as export markets. The dairies

are modernizing to manufacture newer products with food safety to meet the every

changing food habits of the consumer.

Institutions handling capacityNumber/capacity of

Handling

Dairy Cooperatives 84289

Rural Milk Procurement 15780 Tones/day

Milk Marketing 9534 Tones/day

Liquid Milk Processing Capacity 27084 Tones/day

Power Manufacturing Capacity 1054 Tones/day


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Dairy Exports

(Source: I&IDS2002-03)

The demand for milk and milk products is hiking fast and projected to be 5

million tones per annum on average over the next 15 years. It is estimated to be 180

million tones per annum by the end of 13th

Five year Plan (2021-21). The draft National

Dairy Plan with an estimated outlay of Rs.173 billion focuses on

1. Productivity measures to enhance milk production at the required place, toensure that demand is met by domestic production and not by imports and

2. Strengthening and expanding infrastructure at village to dairy plant levelto procure, process and market milk through existing and new institutional

structures.

It is envisaged that these two interventions by appropriate authority will enable

the organized dairy sector to increase its share of marketable surplus from a current level

of 3 per to around 65% by 2021-22 and thus ensure a consistent supply of quality milk toconsumers.

Dairy Product

Value

(Rs in Millions)

Milk and Cream (Non-concentrated) 0.60

Milk and Cream (Concentrated) 736.00

Butter Milk, Yogurt, Cream 0.90

Butter and Butte4r Oil 237.40

Whey and Whey Products 37.10

Cheese and Curd 7.50

Total 1019.50


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Liquid Milk marketing under cooperatives

At this juncture, there are few critical and interrelated challenges too for the dairy

industry.

The cooperatives are no longer the only major players in our milk markets. The

entry of private sector and multinationals in the dairy business is no longer regulated

following liberalization policies of the Government. Many privateers made serous

inroads into the best milk sheds and deploying the full range of modern professional

marketing methods. The result is that they are capturing ever increasing share of milk

and milk products market containing the growth of cooperative produce in the market.

The milk procured by the cooperative sector seems to be only about 15% of the

marketable surplus.

In the strengthening Cooperative Business the NDDB conceptualized New

Generation cooperatives called Milk Producers Institutions (MIPS) for better and more

stable incomes in the competitive environment.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1980-81 1990-91 2000-01 2005-06 20006-07

RATIO


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Milk producers Companies incorporated under the producer Company Chapter of

Companies Act, 1956 which retain the character of cooperatives both in spilt and

practice. They are required to adhere to and uphold the basic principles of cooperation.

They are required to adhere to and uphold the basic principles of cooperation. They

operate with in the same business and regulatory frame work enjoyed by companies.

Cooperatives are also seeking to expand business through horizontal growth often

achieved through alliances and joint ventures with other cooperatives and investor owned

business. This is being followed gradually in some of states in the country with the

active support of the NDDB. The NDDB is taking lead in this direction in spite of

criticism from some quarters that is basically against its constitution. This transformation

to follow all over the county is to be hopefully watched for its results .


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PROFILE OF THE

KRISHNA MILK PRODUCERS MUTUALLY AIDED

CO-OPERATIVE UNION LIMITED

The Krishna District in Andhra Pradesh is endowed with rich agricultural and

livestock wealth, which are two main planks to keep the district ahead of other in the

state. Agriculture and dairying is a subsidiary occupation for the majority of people in

the district. Most of them are marginal, landless, poor farmers and laborers. The Krishna

district has great potential for milk production with a substantial marketable surplus to

tap. The market oriented milk production is the key livestock activity to generate stable

income for the farmer. About 90% of rural households are directly concerned with

livestock production 40% are mainly dairy oriented. It is livelihood security to the rural

poor and buffers the risks due to crop failure.

Cattle Population in Krishna (2006-07)

BREED ABLE

ANIMALS

POPULATION

In Lakes

Buffaloes 4.14

Cows 0.38

Total 4.52

The organized dairying in Krishna District commenced in 1965 by the state

Government with the assistance of UNICEF. (United Nations International Children

Emergency fund). Under a pilot project named INTEGRATED MILK PROJECT-

HYDERABAD AND VIJAYAWADA (1960) a milk supply scheme was introduced in

1965 to organize milk collection from the villages, to Process at Chilling Center and

supply pasteurized milk to the Consumers at Vijayawada and Hyderabad. The Milk

Supply Scheme was a great success with its services to the producers and Quality

supplies to the consumers. The initial procurement network was gradually extended to all

over the district within a span of 5 years. The milk Products Factory first of its kind in

South India was established and commissioned in Vijayawada by 1969.


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Starting with a tiny procurement of 243 liters of milk on 11-02-1965 under the

milk Chilling Center, pamarru, the collection in the District has surpassed one lakes-

installed capacity of Milk Products Factory, Vijayawada with in two years i.e. in 1971

necessitating Additional capacities.

The Units were under Dairy Development Department (1971). The products

manufactured at Milk Products Factory, Vijayawada such as Butter, Ghee, skim Milk

Powder, Whole Milk powder whole Milk Powder and infant Milk Food with the brand

name VIJAYA earned appreciation of consumers all over the county. The VIJAYA

became synonym for superior quality competing AMUL. The Milk Project is a buzzword

among the public all over the region. The expansion of milk Products Factory, to meet

the increased handling needs has been taken up later under OPERATIONFLOOD

programmed by National Dairy Development Board (NDDB).


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Existing infrastructure Facilities in Krishna Union

S.NONAME OF THE

FACILITY

UNIT CAPACITY

MILK CHILLING

1 Pammaru Liters/Day 50000

2 Verrankilock Liters/day 18000

3 Gudlavalleru Liters/day 18000

4 Hanuman Junction Liters/day 18000

5 Chillakallu Liters/day 12000

6 Tirucvur Liters/Day 12000

TOTAL CHILLING 128000

II MILK PROCESSING Lakes liters/Day 2.50

III GHEE Manufacture MITS/Day 18.00

IV Milk Drying MITS/Day 22.00

V U.H.T.Milk MITS/Day 45000

VI CATTLE FEED MIXING FACILITY

1 BUDHAVARAM MITS/Day 30.00

2 Gudlavalleru MITS/Day 18.00

TOTAL 48.00


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Organization

Integrated Milk Project 91960)

Dairy Development Department (1971)

AP Dairy Development Corporation Ltd (1974)

AP Dairy Development Co-op Federation Ltd (1981)

Milk Coop Societies 676

Milk Producers Associations 320

Procurement Routes 35

Women Dairy Coop Societies 103


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There was a big retinue of 1850 staff in different categories working under the

dairy Units in the District under the administrative control of AP Dairy Development

Corporation (APDDC) a State Government Undertaking in 1974.

The nationwide strategic and structural changes organized for Dairy Development

activities across the nation have brought the dairy units under the coo0perative set up In

Andhra Pradesh in 1981.The replication of Anand pattern Dairy Cooperatives in Krishna

District has its beginning with the all out support of NDDB. Primary Milk Producers

Cooperative Society at Village level and District Milk Producers Cooperative Union at

District level and AP Dairy Development Cooperative Federation At state level have

come in to being. Enormous infrastructure financed by NDDB under Operation Flood

program was developed for procurement, processing and marketing in the District.

The structural and institutional reforms that are part and parcel of NDDB took

few years to unfold Krishna Milk Union in 1983 functioning under the AP Dairy

Development Cooperative federation an Apex Body under APCS, 1964. (Andhra

Pradesh Cooperative Societies Act, 1964).The management of dairy units in Krishna

District transferred to the respective democratically elected Bard of management with

assets and liabilities and staff as is where is with effect from 08.02.1985. The producer is

the owner of the business.

Assets and liabilities as on 08-02-1985

S.

PARTICULARS

VALUE

(RS.In lakes)

1 Assets Hyd. From APDDCF 173.96

2 Assets Hyd. From APDDCF 241.37

Total 415.33

1 Loans Transferred from APDDCF 231.21

2 Net Value of Assets Transferred 184.12


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The Union has to function as per the bye-laws. The APDDCF is the Apex Body.

Marketing with in the district is of the union and outside the state, it is controlled by

Federation. The operational area of the Union is restricted to Krishna District only.

The Union with its inherent problems had undergone travails in 80s and 90s for

survival. The performance of federation towards its constituent union was deplorable.

The Federation has been impeded by carious institutional and management weaknesses.

Unfortunately, it has not adopted the view of let us get through the crisis together.

Krishna Union was running with abnormal staff cost of 22 percent over its turnover,

which is un bearable, and against the industrial norms threatening the very existence of

the Union.

The Union ventured to prune the surplus manpower by implementing VRS

(Voluntary Retirement Scheme) in a phased manner with an outlay of Rs.10crores. The

state Government and NDDB funded one third of the total investment.

Staff Cost

Year 1985 1992 2001 2007

No. of Employees 1850 1800 1100 570

Salary Cost per

Annum (in lakes)289 670 1629 2400

Krishna Union adopted several measures to discharge its liabilities and to have a

turnaround so as to herald a new path to get better and assured returns to the member

producer to his produce-MILK building well governed producer centric institutions with

Mission and Vision.


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Voluntary Retirement Scheme

Phase No. of Employees Retired

Fist to Vth 86

Total 736

Mission:

Farmers prosperity through technical innovations and Customer orientation with

specific focus on quality and cost.

Vision:

Dairying in the district to be the major instrument of Strengthening rural economyand making available safe Milk and Milk Products.

Quality Policy:

Aiming to be a technologically advanced dairy with global outlook providing

products and services of highest quality delighting the customers.

The Krishna Union has successfully:

1. Evolved long term policies to encourage and augment milk production andproductivity in the District.

2. Improved efficiency in reducing the cost of operations, at every stage from ruralfarmer to urban customer.

3. Increased the availability of milk and Milk Products every nook and corner ofDistrict.

4. Developed and restructured manpower of organization to achieve competitiveedge.

5. Consolidated the cooperatives structure among the dairy farmer.


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Dairy Cooperatives Organized

2002-03 2003-04 2004-05 2005-06 2006-07

630 634 636 636 676

Farmer Member

Year No. of Farmers

2002-03 118700

2003-04 119000

2004-05 125000

2005-06 128286

2006-07 131272

2007-08 131272


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Procurement Price Increase

YearMilk Price

KG.Fat RS

2002-03 175.00

2003-04 185.00

2004-05 195.00

2005-06 200.00

2006-07 215.00

2007-08 255.00

Most of the villages Dairy Cooperative Societies are viable and managed by the

producer members receiving better technical know-how. The Government has enactedAPMACS Act, 1995. (Andhra Pradesh Mutually Aided Cooperative Societies Act,

1995), which provides autonomy to the cooperatives. As per the policy and directives

from the state Government/Federation, the Dairy Cooperatives registered under APCS

Act, 1964 were converted into APMACS Act, 1995. the Krishna Milk Union also opted

for conversion into APMACS Act, 1995 in July 2001 in consonance with the wishes of

its member producers.

Elections are being held as per byelaws to the Board of Management of Krishna

Union under APMACS Act, 1995.


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General Body

Board of Union

Managing Committee

Village Society

Member Producer

In the Society


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The Board of Management is translating its concepts into realities as we study

further.

The Union was under tremendous pressure at a stage to reformulate independently

under the APMACS Act, 1995 since 2001. Both the state Federation and Government

have adopted different stance towards the Union under the APMACS Act as the

Federation can no longer exercise control over the Union as they enjoy autonomy in their

affairs. The cooperation and coordination to the Union from the APDDCF is lacking.

Relations between Union and Federation stained. Several hurdles were crated in

marketing activities of the Union in order to affect its fiscal status to organize the

business. The State Government has finally promulgated an Ordinance in Feb 2006 de-

linking the Dairy cooperatives only from the APMACS Act, 1995 and bringing them

back into the APCS Act, 1964 under which they can have full administrative control.

The Union approached the High Court in the matter and their appeal was allowed and

dismissed the Ordinance issued as unconstituti0oanl since then the Government and the

Federation were adopted a vindictive attitude towards the Union in all its spheres. The

Krishna Milk Union is taking tentative steps to address the potent yet potential volatile

question of autonomy under the APMACS Act.

The farmers of Krishna District have so much faith and trust in Krishna Milk

Union and giving their produce in maximum in spite of private players. The Union has

sustained share of 70% in procurement and 60% in liquid milk marketing. The Krishna

Union is distinctly placed in the dairy map of Andhra Pradesh by its continuous growth.

The union is trying to maintain a long time e position with regard to short-term

difficulties faced in organizing the union and the industry in the district. It is poised to

avail of the producers confidence, the resources and the network to pursue its mission of

serving the Producers there by socioeconomic growth dairy and industry in general.

The Krishna Union is translating its concepts into reality as we go in detail.


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The Krishna Union has the Salient Features

1. Turnover of Business reached to Rs.164 Cores in 2006-07.

2. Dairy Average Milk Procurement 185000 Lts.

3. Highest Milk Procurement 310000 Lts.

4. Dairy Average Milk Sales 164000 Lts.

5. Obtained ISO; 9001:2000 and HACCA.

Milk is inherently one of the best Good for You foods in todays

market place.

Changing consumer food habits, preferences increasing health consciousness and

also the upsurge in the economy are leading to dramatic change in the market trends

frequently.

Demand is a phenomenon based primarily on need of the consumers purchasing

power and product quality.

Vijaya the renowned brand of Krishna Milk Union has strong equity among

consumers. It has been able to make an impact despite the premium pricing. The brand

offer, good margin to the traders. Union has a direct liquid milk market of 80% out of itsprocurement. It is converting surplus milk into diverse products.


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PRODUCT MIX OF UNION

Market Milk

Vijaya Gold * Vijaya Special * Vijaya Premium

Vijaya Economy *Vijaya Low Fat

Long Life Products

UHT Milk in 1 it pack * UHT Milk in 200ml pack * UHT Low Fact Milk.

Fresh Milk Products

Basundi * Curd * Lassie * Butter Milk * Sterilized Flavored Milk

Fresh Milk Products

Cooking Butter * Milk Cake * Skim Milk Powder * Paneer * Doodh Peda

* Ghee


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With its wise-policies maintaining equilibrium between supply and demand

through out the year without imposing restrictions in the supplies of milk and milk

products.

Milk Production has risen but productivity is low. Effort is on for quality in milk

production upstream of the processing plant. Union is involved in producing good

products establishing quality by upstream integration with Good Hygiene practices given

by cooperatives. For Downstream side, the checks at plant and market level too exist.

Quality is equally valued by one and all in the set up. The employees quality

consciousness and commitment makes the products superior in spite of stiff completion

from carious other brands in the domestic market. After initial focus on the homemarkets, and attaining considerable national market is now targeting on the overseas

market.

The union is publishing a Monthly News Magazine titled; Krishna Ksheeravani

a media on carious aspects of dairying to the member producers.


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The dairy and livestock development is very much linked with veterinary. The

Stable sustained income being provided by Krishna Union to the Dairy farmers is

creating an enthusiasm among the farmers to rear quality breed for higher yield.

Comparing to the cattle population the scale of our veterinary services to the needy

farmer is not up to the mark for various reasons. The increasing shortage of qualified

veterinary and Para-medical staff, inadequate veterinary dispensaries restricted budgetary

allocations for Animal Husbandry and paucity of funds for Vet-Medicare are a few

co0nstraints that need to be addressed with by state Government.

The Krishna Union realizing the importance of input services to the farmers for

sustained milk production is

1. Deploying retired veterinarians at each Milk Chilling Center for animal healthcare services in the clustered villages.

2. Imparting training to the staff of Dairy Cooperative in Veterinary First Aid andArtificial Insemination.

3. Providing fodder seed and slips.

4. Supplying balance feed for animals.

5. Organizing Mass veterinary camps.

6. Subsidizing cattle insurance premium.

7. Inducting Murrah breeding bull to upgrade the local breed.

Women empowerment

Women are exclusively manning 104 Dairy Cooperatives, which provides them

empowerment.


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MILK PRODUCTS FACTORY FUNCIONAL CHART

Raw Milk Reception Dock:

Receives Raw Milk Chilled Milk from different sources.

Tests initial Keeping quality accepts for further process and weighs milk received.

Collects Samples for Fat & SNF analysis by QCL for determination of valuepayable.

Pumps to processing section for further treatment of milk.

PROCESSING:

Pasteurization Cream separation Homogenization Standardization/ Toning of milk as per different standards for marketing. Reconstitution and Recombining of milk. Stores milk for other operations / utilities.

BUTTER:

Obtains cream and ripens for Butter Making. Produces white Butter, packs in 20kg blocks and stores.


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GHEE:

Converts Butter and Cream into Ghee maintaining, AG Mark standards.

Packs in Bulk Packs (15Kg) and small consumer packs for market.

POWDER:

Draws milk from processing section and spray dry into SMP, WMP.

Packs in 25Kg poly liners for future disposal.ASEPTIC PACKAGING STATION:

Treats milk at Ultra High Temp and packs aseptically for long shelf life with outrefrigeration.

Undertakes custom packaging of beverages.

PRE PACK:

Packaging of different quality types of milk in sachets and in cans for market.

Storage of satiated milk for distribution.

BI-PRODUCTS:

Manufactures various traditional products to meet market demand.


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CIP: (Cleaning in-place)

Cleaning all daily equipment after each days operation to ensure hygieneand sanitation for further operation.

FG section: (Finished Goods)

Stocks all finished products for subsequent release as per requirementindents.

STORES: (General and Mechanical)

Keeps inventory, supplies packing materials for different products,chemicals, equipment, spares required in the dairy operations regularly.

ENGINEERING DEPARTMENT:

BOILER: General steam required for dairy operations.

ELECTRICAL: Monitors power supplies for all operational needs.

REFREIGERATION: Meets refrigeration requirements of the Dairy.

MAINTENANCE: Look-after both the trouble shooting and preventive maintenance

of dairy plant for smooth and uninterrupted opera ions.


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QUALITY CONTROL LABORATORY (QCL):

Oversees ensuring rigorous quality control checks as per relative Laws/Acts at various level of production and Operations.

Product gets out after the clearance by QCL.

Stringent checks adopted on purchases and supply of stress material of theorganization.

CIVIL:

Executes all civil nature of works for up-keeping of units.

TRANSPORT:

Provides limited transport facilities.

SECURITY: Shoulders responsibility of security and vigilance in the dairy and units to

prevent untoward incidents of any nature.


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CHAPTERIII


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FINANCIAL ANALYSIS:

The analysis and interpretation of financial statements is an important

accounting activity. The end users of financial statements will get further insight

about financial strengths and weakness of the firm. Management will be

particularly interested in knowing financial strengths of firm to make their best use

to be able to spot out financial weakness to take suitable corrective actions also the

future plans of firm should be laid down in view of firm's financial strengths and

weakness.

A proper financial analysis must be used to analyze a firm's past

performance and assess its present financial strength for making the better future

plans. The financial resources of every organization are always scarce and

therefore require proper planning and control in order to achieve the best out of

funds available.

The financial information of companies consists of three basic financial

statements viz; balance sheet, the trading and profit and loss account, and the

profit and loss appropriation account. These statements are very useful for

evaluating the financial position and performance of a firm through financial

analysis.

The information given in basic financial statements serves no useful

purpose unless it is interpreted and analyzed in some comparable terms.


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Tools and techniques of financial statements:

A host of methods or techniques is used to study the relationship between

different statements. However, the following methods of analysis are generally

used:

1. Comparative financial statements2. Common-size statement3. Trend analysis4. Ratio analysis

1. Comparative financial statements :

Comparative financial statements are statements of financial position at different

periods of time. Usually , two financial statements(balance sheet and income statement)

are prepared in a comparative form placing figures for two or more periods side by side.

Comparative statement analysis refers to comparison of financial statement pertaining to

two different periods by putting them side-by-side and finding out the changes in

absolute and relative changes.

Points to be noted:

a. The financial date that is to be compared be properly defined. A particular

account head must have the same connotation for all periods of comparison.

b. The accounting policies followed during the period of comparison should

be uniform if there are any changes in any policies, the figure should be

uniform if there are any changes in any policies, the figure should be

adjusted to ensure uniformity.

c. It is preferable to present financial information in vertical statement form.

The comparative financial statement must reveal changes in both absolute and

relative measures.


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2. Common-size statements :

Common size statement facilitates comparison of financial statement not

only of a single firm over a period of time, but also comparison of financial

statement of different companied for any given time. Under, this method, all the

items of the statement are presented as a percentage of a particular item.

Therefore, even if the related absolute figures are in respect of vastly differently

scale of operations, a common base for comparison is created.

Incase of a common size income statement, all the items are presented as a

percentage of new sales. A common size balance sheet shows each item as a percentage

of total assets or total liabilities. A common size statement helps. In determining the

relative efficiency and soundness of a firm and helps in understanding its financial

strategy.

The common-size statements (balance sheet and income statement) are

generally shown in analytical percentages. Common-size are those in which

figures are stated after converting them into percentage to some common base.

These statements are often called component percentages or 100 percent

statements because each statement is reduced to the total of 100 and each

individual item is stated as a percentage of the total of 100.

3. Trend analysis:

Trend analysis involves computation of index numbers of movements of

various financial items in the financial statement for a number of periods. It helps

in understanding the nature and rate of movements in various financial factors.


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However, conclusions should not be drawn on the basis of a single trend.

Trends of related items should be carefully studied. Due weight age should be

given to extraneous factors such as government policy, economic conditions etc.

they can affect the trend significantly.

Points to be noted:

a. The accounting policies for the entire period should be uniform.b. Trend value must be read along with absolute values.c. Non - financial factors should be considered while interpretation.

Absolute value of the item for the periodTrend Analysis = ------------------------------------------------------------- X 100

Absolute value of the item in the base period

4. RATIO ANALYSIS:

Financial statements are prepared primarily for decision making. They play a

dominant role in setting the frame work of managerial decisions. Financial analysis is

the process of identifying the financial strengths and weakness of the firm by properly

establishing relationship between the items of the balance sheet and the profit and loss

account. There are various methods or techniques used in analyzing financial

statements, such as comparative statements, schedule of changes in working capital

statements, such as comparative statements, schedule of changes in working capital,

common size percentage, funds analysis, trend analysis and ration analysis. The ratio

analysis is the most powerful tool of financial analysis.

MEANAING OF RATIO:

According to accountants hand book by WIXON, KEL AND BEDFORD,a

ratio is an expression of the quantitative relationship between two numbers. A ratio is

simple arithmetical expression of the relationship of one number to another. It may be


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defined as the indicated quotient of two mathematical expressions. Ratio provides clues

to the financial position of a concern. One can draw conclusions about the exact financial

position a concern with the help of ratios. Ration analysis is a technique of analysis and

interpretation of financial statements. It is the process of establishing and interpreting

various ratios for helping in making certain decisions.

PURPOSE OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial Analysis. It is

used as a device to analyses and interpret the financial statements can be analyzed more

clearly and decisions made from such analysis.By the use of ratio analysis one can

measure the financial conditions of a firm and can point out whether the conditions is

strong, good, questionable or poor.

USES:

Financial statements are prepared primarily for decision making. Ratio analysis

helps in making decision from the information provided in financial statements.

Ratio analysis is of much help in forecasting and planning. Meaningful conclusions canbe drawn for future from these ratios.

Financial strength and weakness of a firm are communicated in an easier manner

by using ratios. Ratios help in communication and enhance the value of the financial

statements.

Ratios even in coordination which is of utmost importance in effective business

management. Ratio analysis also helps in making effective control of the business.

Standard ratios can be based upon preformed financial statements and variances ordeviations, if any, can be found by comparing the actual with the standards so as to take a

corrective action at the right time. Ratios are of immense importance in the analysis and

interpretation of financial statements as they bring out the strength or weakness of a firm.


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INTER-FIRM COMPARISON:

Ratios of one firm can also be compared with the ratios of some other selected

firms in the same industry at the same point of time. This kind of comparison helps in

evaluating relative financial position and performance of the firm.

INTRA-FIRM COMPARISON;

Ratios of various departments in the same firm or organization were compared in

intra firm comparison.

LIMITATIONS OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial management.

Through ratios are simple of calculate and easy to understand, they from some serious

limitations.

Limited use of single ratio: A single ratio, usually, does not convey much of a sense.

To make a better interpretation a number of ratios have to be calculated which is likely to

confuse the analyst than help him in making any meaningful conclusion.

Lack of adequate standards: There are no well accepted standards or rules of thumb for

all rations which can b e accepted as norms. It renders interpretation of the ratios

difficult.

Inherent limitations of accounting: Like financial statements, ratios also suffer from the

inherent weakness of accounting records such as their historical nature. Ratios of the past

are not necessarily true indicators of the future.

Change of accounting procedure: Change in accounting procedure by a firm often

makes ratio analysis misleading. E.g., a change in the calculation of methods ofinventors form FIFO to LIFO increase the cost of sales and reduces considerable the

value of closing stocks which makes stock turnover ratio to be lucrative and an

unfavorable gross profit ratio.


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Personal Bias: Ratios are only means of financial analysis and not an end in itself.

Ratios have to be interpreted and different people may interpret the same ratios in

different ways.

Classifications of ratios:

The use of ratio analysis is not confined to financial manager only. There are

different parties interested in the ration analysis for knowing the financial position of a

firm for different purposes. In view of various users of ratios. There are many types of

ratios which can be calculated from the information given in the financial statements.

They might must be used for financial analysis

1. Balance sheet ratios 1. Liquidity ratios 1. Primary2. Profit & loss statements 2. Leverage ratios 2. Secondary3. Mixed ratios 3. Activity ratio

a. Creditors Turnover 4. Profitability ratiosb. Return on capitalc. Inventory Turnoverd. Return on Total Ratiose. Earning Per Sharef. Price of Earning

Ratios

Traditional

classificaiton

Functional

classificationSignificance


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Types of ratios:

Several ratios calculating from the accounting data can be grouped into the

various classes according to the financial activities or function to be evaluated. The

various parties that are generally under taken financial analysis to measure solvency andprofitability of the firm. Management is interested in evaluating every aspect of all

parties and see that the firm grows profitability. In view of the requirements of the

various users of ratios, we may classify them into following four important categories.

Liquidity Leverage

Activity ratio

Profitability ratioLiquidity ratio:

Liquidity ratio measure the ability of the firm to meet its current obligations.

Analysis of liquidity needs the preparation of cash, budgets and cash funds flow

statements. But liquidity ratios by establishing relation cash and other current assets to

current obligations provide a quick measure of liquidity. A firm should ensure that it

does not suffer from lack of liquidity, and also that it is not too much highly liquid. The

failure of company to meets it obligations due to lack of sufficient liquidity will result in

bad credit image. A very high degree of liquidity is also bad. Ideal assets ear nothing.

The firms funds will be un necessarily tied up in current assets. Therefore it is

necessarily to strike proper balance between liquid and lack of liquidity.

The most common ratios, which indicate the extent of liquidity or lack of,

It, are:

Current ratio Quick ratio Absolute ratio


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Current ratio:

It is called by dividing current assets by current liabilities,

Current Assets

Current ratio = -----------------

Current Liabilities

The ratio greater than one means that the firm has more current assets than current

ration of 2 to 1 or more is considered satisfactory. The current ratio represents a margin

of safety for credits.

Quick ratio:

Quick ratio is used as a measure of the companys ability to meet its

current obligations. Theis ratio is calculated as a supplement to the current

ratio in analyzing the liquidity of the firm. This can be calculated as

Quick Assets

Quick ratio = --------------------

Quick Liabilities

Quick Assets = Current AssetsStock and Pre Paid expenses

Quick Liabilities = Current Liabilities - Bank OD

A normal standard of 1 ; 1 acceptable quick ratio. A very high or very

how ratio is not desirable. It is used to measure the ability of the company to meet its

current liabilities at short notice.


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Absolute Liquid ratio:

Absolute liquid ratio is also be calculated together with current ratio and acid test

ratio as to exclude even receivables from the current assets and find out the absolute

liquid assets.

Absolute liquid assets

Absolute liquid ratio = ------------------------------

Current liabilities

Capital structure / leverage ratios / Long-term solvency ratio:

The long-term financial stability of a firm is considered as dependent upon its

ability to meet all its liabilities. The ratios, which are measuring the long-term solvency,

are:

DebtEquity ratio Share holders equity / property ratio Fixed assets to long term funds ratio

Debt to net converge ratio

Interest coverage ratio

Debt equity ratio:

Debt equity ratio indicates the relationship between long-term debts and

shareholders funds, it helps in knowing the soundness of the long-term financial policies

of a company. It is calculated as:

Long-term debt

DebtEquity = ----------------------------

Share holders funds


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Interest coverage ratio:

Interest coverage ratio shows how many interest. The ratio is calculated as:

Long term debt

Interest coverage ratio = --------------------------

Share holders funds

Interest coverage ratio:

Interest coverage ratio shows how many interest. The ratio is calculated as:

EBIT

Interest coverage ratio = -----------

Interest

Activity ratios:

Activity ratios measure how efficiency the firm employees its resources. These

ratios involve comparison between the level of sates and investment in various accounts

such as inventories, debtors, creditors, fixed assets etc., Activity ratios are used to

measure the speed with which various accounts are converted into sales are cash.

Every turnover ratio is calculated by dividing cost of goods sold or net sales by

respective account and each ratio gives the speed in which it turns cash or sales.

Cost goods sold (CGS): SalesGross Profit

The Major Turnover Ratios are:

Inventory turnover ratio Debtors turnover ratio Creditors turnover ratio


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Capital turnover ratio Working capital turnover ratio Fixed assets turnover ratio Total assets turnover ratio

1. Inventory turnover ratio:

Inventory turnover ratio indicates the number of times the stock has been turnover

during the paid and evaluates the efficiency with which a firm is able to manager its

inventory.

Cost of goods sold

Inventory turnover ratio = ---------------------------

Average inventory

Average inventory = Opening stock + Closing Stock/2

2. Debtors turnover ratio:

It used to show how the capital employed is efficiency use in the business. It

indicates the firms ability to generate sales per rupee capital employed.

Net sales

Capital turnover ratio = ------------------------

Working employed

Capital employed = Long-term funds + Reserve & Surplus +

preferential share Capital + Equity Share Capital


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3. Working capital turnover ratio:

Working capital of a concern is directly related to sales. The current assets like

debtors, bills debtors, bills receivables, cash stock etc., changing with increase or

decrease in sales.

Sales

Working capital turnover ratio = --------------------

Working capital

Working capital = Current assetsCurrent liabilities

4.Fixed assets turnover ratio:

Fixed assets turnover ratio shows a relation between sales and fixed assets.

Sales

Fixed assets turnover ratio = ---------------

Fixed assets

5. Total assets turnover ratio:

Total assets turnover ratio shows a relation between sales total assets.

Net sales

Total assets turnover ratio = ----------------

Fixed assets


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Profitability ratio:

Profitability is the overall measure of the companies with regard to efficient and

effective utilization of resources at their command. It indicates in a nutshell the

effectiveness of the decisions taken by the management from time to time.

Profitability ratios are of utmost importance for a concern. These ratios are

calculated to enlighten the end results of business activities which is the sole criterion of

the overall efficiency of a business concern.

Profitability ratio helps in assessing the adequacy of profits earned by the

company and also discovers whether profitability is increasing or decreasing.

Profitability ratios are measured with respect to sales, capital employed total assets

employed shareholders funds etc., and the major profitability ratios are,

Return on investment Return on capital employed Return on share holders funds Return on total assets Gross profit ratio Net profit ratio Operating profit ratio

1. Gross profit ratio:

Gross profit ratio measure the gross margin on the total net sales of company.

This ratio measure the efficiency of companys operation and can be sued to compare

with previous years results. Higher the gross profit ratio, better is for the company.

Gross profit * 100

Gross profit ratio = -----------------------

Net sales


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Gross profit = SalesCost of goods sold

Net Sales = Sales - Sales Returns

This ratio is designed to focus attention on the net profit margin arising from

business operations after interest and tax.

Net Profit

Net profit ratio = -------------

Sales * 100

2. Operating profit ratio:

This ratio is calculated by dividing earnings before tax and interest by sales. This

ratio is calculated as:

Net profit after interest and tax * 100

Return on capital employed= ------------------------------------------------

Capital employed

Return of total assets:

It established relationship between profit before interest and tax .

EBIT * 100

Return on total assets = ---------------

Total assets

Return on share holders funds:

I establish the relations hip between the net profit after tax and to share holders

equity.

NAPT * 100

Return on shareholders funds = ---------------------------

Share holders equity


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CHAPTER - IV


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I. PROFITABILITY RATIOS

Gross Profit Ratio:

The gross profit ratio indicates the extent to which selling prices of goods per unit

may decline without resulting the losses on operations of a firm. This reflects the

efficiency with which the firm produces its products. There is no standard norm of the

Gross Profit Ratio.

Gross profit * 100

Gross profit ratio = -----------------------

Net sales

Year Gross Profit Net Sales Ratio

2003-04 254067403 1136973196 22.35

2004-05 249110668 1257182689 19.81

2005-06 263510297 1367480960 19.27

2006-07 291057212 1573930933 18.49

2007-08 326551326 1628286699 20.05


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Interpretation:

We observe the above analysis it can be clearly find out that the profitability firm

is very good. The is the ratio in 2003-04 it was 22.38 it shows the good position of the

firm. In the later year in 2004-05 it was 19.81 and in 2005-06 it is 19.27 and in 2006-07 it

is 18.49 but is 2007-08 the ratio is 20.05 it was a in increase trend. It is advisable to the

firm to maintain in the ratio of in 2003-04 by that the firm will be more profitability

position.

Operating Ratio:

0

5

10

15

20

25

2004 2005 2006 2007 2008

Ratio

Years

rat


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Operating ratio indicates the percentage of net sleds the is consumed by the

operating cost. Obviously, higher the operating ratio, the less interest, income-tax,

dividend and reserves. There is no rule f thumb for this ratio as it may differ from firmto depending upon the mature of the business and the capital structure however, 75% to

85% may be considered to be a good ratio in the case of manufacturing undertaking,

operating ratio is considered to be a yardstick of operating efficiency.

Net profit after interest and tax * 100

Return on capital employed = ------------------------------------------------

Capital employed

Year Operating Cost Net Sales Ratio

2003-04 935081812 1136973196 82.60

2004-05 1052129915 1257182689 83.69

2005-06 1208938534 1367480960 88.41

2006-07 1305164294 1573930933 82.93

2007-08 1401241487 1628286699 86.06


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Interpretation:

It can be clearly understood that the operating efficiency of the firm was

satisfactory in the 2003-04 the ratio is 2.6 in the later gradually increased in the year

2005-06 it is 8.41 in the later gradually decrease in year 2006-07 it is the ratio was 82.93

but in 2007-08 the ratio is 86.06 it reached the satisfactory position. So it was advisable

to the firm to maintain the ratio as 2007-08 by that the firm can maintain in the

satisfactory position.

Operating Profit Ratio:

79

80

81

82

83

84

85

86

87

88

89

2004 2005 2006 2007 2008

Ratio

Years

ratios


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Operating Profit

Operating Profit = ------------------------- * 100

Net sales

Year Operating Profit Net Sales Ratio

2003-04 131210561 1136973196 11.54

2004-05 228179650 1257182689 17.91

2005-06 248830945 1367480960 18.19

2006-07 122962511 1573930933 7.81

2007-08 154783110 1628286699 9.50


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Interpretation:

It can be clearly understood that the operating profit ratio is 11.54 in 2003-04,

after it reaches 17.91 in 2004-05 & 18.19 in 2005-06, after that there is big fall in the

ratio 7.81 in 2006-07 & 9.50 in 2007-08.

Net Profit Ratio:

0

2

4

68

10

12

14

16

18

20

2004 2005 2006 2007 2008

Ratio

Years

ratios


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Net profit Ratio establishes a relationship between the net profit and sales and

indicates the efficiency of the management in manufacturing, selling administrative and

other activities of true firm. This ratio is overall measure of firms profitability. The

ratio is very useful as if the profit is not sufficient, the firm shall not be also to achieve a

satisfactory return on its investments

Net Profit

Net profit ratio = -------------

Sales * 100

Year Net Profit Net Sales Ratio

2003-04 1462125 1136973196 0.12

2004-05 2524495 1257182689 0.20

2005-06 933498 1367480960 0.06

2006-07 806059 1573930933 0.05

2007-08 2627248 1628286699 0.16


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Interpretation:

It we observe the analysis the firm 2003-04 the net profit ratio is 0.128 and it was

gradually increases 0.20 in the year it was decline that is 2005-06 it was 0.06 and in

2006-07 0.051 it is but in 2007-08 the net profit ratio is 0.16. So it is advisable to the firm

to maintain the ratio as in 2004-05 and in a increasing trend by that it can reach

satisfactory position

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

2004 2005 2006 2007 2008

Rato

Years

ratios


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Return on Share Holders Investment:

RIO is relationship between net profits and proprietors funds. Here the net

profits are visualized from the view-point of owners. This is the most important ratio

used for measuring the overall efficiency of the firm. As the primary objective of the

business of the business is to maximize its earnings. This ratio indicates the extent to

which this primary objective of business is being achieved. This ratio is of great

importance to the present and prospective share holders as well as the management of the

company

N.P. after Tax= ------------------------------ * 100

Share holders Equity

Year N.P. after Tax Share holders Equity Ratio

2003-04 1462125 33347902 4.38

2004-05 2524495 42557565 5.93

2005-06 933498 50919771 1.83

2006-07 806059 59043558 1.37

2007-08 2627248 68692536 3.82


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Interpretation:

It we observe the analysis it can be clearly found out that the return investment at

the present year satisfactory and there return may also decreased when ever the firm face

adverse economic conditions in 2004-05 it reaches the better position i.e 5.93 lter it was

gradually decline. But in 2007-08 is 3.82. It is advisable to the firm to maintain

increasing trend to get the best results.

0

1

2

3

4

5

6

2004 2005 2006 2007 2008

Ratio

Years

ratios


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II. LIQUIDITY RATIOS

CURRENT RATIO:

Current ratio always known as working capital ratio. Current ratio indicates, in

rough fashion, the liquidity of current assets or the ability of a business to meet its

maturing current obligations. The ideal form of the ratio is two top one (2:1 that means

two times of current assets to one time of current liabilities. If there is shrinkage or hand

loans etc. Will decline,

Current Assets

Current ratio = ---------------------

Current Liabilities

Year Current Assets Current Liabilities Ratio

2003-04 23,34,60,276 12,02,20,399 1.94

2004-05 23,95,57,366 12,38,42,895 1.93

2005-06 27,87,73,455 15,83,85,610 1.76

2006-07 29,69,44,630 15,18,90,249 1.95

2007-08 34,63,20,481 16,96,38,535 2.04


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Interpretation:

Current Ratio of the company assets are performing their job efficiency and

effectively by maintain the current assets for current liabilities in current manner that is

2:1 ratio. 2003-2004 the ratio is the1.94later gradually increased in 2007-2008 but in

2005-06 there was a slight decline in ratio i.e. 1.76.Ultimately it is advised for the

company to maintain the same level of current ratio is obtained 2006-2007 i.e 1.95 but in

2007-08 the ratio is 2.04 current assets double the current liabilities are considered to be

satisfactory for the firm.

1.6

1.651.7

1.75

1.8

1.85

1.9

1.952

2.05

2003-04 2004-05 2005-06 2006-07 2007-08


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QUICK RATIO:

Quick ratio is used as a measure of the companys ability to meet its

current obligations. This ratio is calculated as a supplement to the current

ratio in analyzing the liquidity of the firm. This can be calculated as

Quick Assets

Quick ratio = --------------------

Quick Liabilities

Year QUICK ASSETS Current Liabilities Ratio

2003-04 11,90,85,679 12,02,20,399 0.99

2004-05 13,22,21,296 12,38,42,895 1.07

2005-06 13,34,81,280 15,83,85,610 0.84

2006-07 16,58,05,298 15,18,90,249 1.09

2007-08 19,12,76,260 16,96,38,535 1.13


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Interpretation:

The quick ratio for K.D.M.P.M.A.C.U.L is table during the period of study. The

idea norms at this ratio are 1:1 in 2003-04 its ratio is 0.99 it way going on increasing in

2004-05 it reached 1.07 ratios on 2006-07 it reached 1.09 in 2005-06 there was a slight

decline in the ratio i.e. 0.83 but in 2007-08 the ratio is 1.13 it was increased.

By observing the above graph we can know that can reach 1 norm in fourth

coming year it is fallows the increasing trend as 2007-2008.

0

0.2

0.4

0.6

0.8

1

1.2

2003-04 2004-05 2005-06 2006-07 2007-08

RATIO


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ABSOLUTE LIQUIDITY RATIO:

The absolute liquidity ratio is also known as super quick ratio. Through

receivable are generally more liquid in nature than inventories. There may be doubts

regarding the real stability of debts. Therefore, absolute liquidity ratio relates the sum of

cash and marketable securities to the total current liabilities.

ABSOLUTE LIQUID ASSETS

ABSOLUTE LIQUIDITY RATIO = ------------------------------------

Current Liabilities

YearABSOLUTE

LIQUID ASSETSCurrent Liabilities Ratio

2003-04 3,57,17,842 12,02,20,399 0.29

2004-05 5,43,33,642 12,38,42,895 0.43

2005-06 5,78,46,870 15,83,85,610 0.37

2006-07 11,65,82,542 15,18,90,249 0.77

2007-08 14,27,11,671 16,96,38,535 0.84


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Interpretation:

Absolute liquidity ratio of K.D.M.P.M.A.C.U.L is presented in table during the

period of study. The desirable norms of this ratio are 1:2 in 2003-2004. Ratio is 0.297. As

in the above graph there where many fluctuating in the liquidity position of the company

2005-06 ratio is 0.37 and 2006-07 ratio is 0.77 in 2007-08 the absolute liquidity ratio it

was increased trend.By observing this we can say the firm is not marinating the perfect

norms of the cash balance in companion with the current liabilities in 2007-08 it was

marinating good ratio.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2003-04 2004-05 2005-06 2006-07 2007-08

RATIO


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III. LEVERAGE RATIOS

DEBT EQUITY RATIO:

The debt equity ratio is the measure of relative claims of creditors and owners

against the firms assets. There are various interpretations of debt and equity and there

fore debt-equity may be calculated in number of ways. The term debt considered here is

exclusive of current liabilities and equity refers to own funds. A low ratio implies a

greater claim of owners that of creditors. An ideal norm of the ratios is 1:1

OUT SIDER FUNDS

DEBT EQUITY RATIO= -------------------------------- * 100

SHARE HOLDERS FUNDS

YEAR OUT SIDER FUNDS SHARE HOLDERS

FUNDS

RATIO

2003-04 18370913.5 33347902 5.51

2004-05 159661514 42557565 3.75

2005-06 152930946 50919771 3.00

2006-07 169216284 59043558 2.87

2007-08 207885478 68692536 3.03


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Interpretation:

The debt equity ratio of K.D.M.P.M.A.C.U.L is presented in table during the

study an ideas norms of this ration is 1:1 in 2003-04 ratio in 5.51 through there are

fluctuating in this ratio. This ratio is always above the norms of 1:1 in 2005-06 ratio in

3.00 and 2006-07 ratio is 2.87 but in 2007-08 ratio is 3.03 it was increased by 3.03. By

observing the above position of ratio we can say that owns are putting in relatively lessmoney or there own and were relying on heavy debt the firm should flow the ratio as in

2007-08 i.e 3.03 by that reach it ides norm i.e. 1:1.

0

1

2

3

4

5

6

2003-04 2004-05 2005-06 2006-07 2007-08

RATIO


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PROPRETARY RATIO:

As equity ratio represents the relationship of owners funds to total assets, higher

the ratio or the share holders in total capital of the company better is the long term

solvency position of the company can be lost without affecting the interest of the

credito0rs of the company. This ratio is indirectly indicating that the company is highly

relied on the creditors of the company.

SHARE HOLDERS FUNDS

Proprietary ratio = --------------------------------

TOTAL ASSETS

YEAR SHARE HOLDERS

FUNDSTOTAL ASSETS RATIO

2003-04 33347902 436970850 763

2004-05 42557565 431966652 9.85

2005-06 50919771 471839951 10.79

2006-07 59043558 494379304 11.94

2007-08 68692536 562759715 12.21


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Interpretation:

The proprietary ratio of K.D.M.P.C.U.L. is presented table. Of you examine

above analysis it can be found in proper way. This is in 2003-04 ratio is increasing year

by year in 2005-2006 it was 10.79 and 2005-06 ratio are 11.94 but in 2007-08 the ratio is

12.21. By observing this we can say that this type of slow development is not all

advisable if company always the ratio is as in 2007-08 hat is 12.21 can reach the

satisfactory.

IV. ACTIVITY RATIOS

0

2

4

6

8

10

12

14

2003-04 2004-05 2005-06 2006-07 2007-08

Ratio

Years

RATIO


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INVENTORY TURN OVER RATIOS:

The inventory turnover ratio is also known are stock turnover ratio. This ratio

usually establishes relationship between the cost of goods sold during the period and the

average amount of inventory outstanding during that period. The ratio also indicates the

number of time inventory is replaced during the year. This inventory turnover ratio has

no fixed norm.

Cost of Goods Sold

Inventory turn over ratios = ------------------------

Average Stock

YearCost of Goods

SoldAverage Stock Ratio

2003-04 882905793 98702222 8.95

2004-05 1008072021 87509747 11.52

2005-06 1103970663 97491725 11.35

2006-07 128287372 105791846 12.13

2007-08 1301735372 112736262 11.55


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Interpretation:

It is clear firm from the above analysis that the ratio are in an increasing trend

2003-04 it was 8.95 and slight design in 2005-06 it was 11.32 and 2007-08 11.55 it was

decreased the company has maintain growth. This type of growth should be maintained

by the firm in the succeeding years. It is advisable that it is better if some more times it is

increased in inventory turnover ratio is higher the operating cycle is very past and it is

very profitable for the firm.

0

2

4

6

8

10

12

14

2003-04 2004-05 2005-06 2006-07 2007-08

Ratio

Years

RATIO


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Debtors Turnover ratio:

The debtors turnover ratio is also called as receivables turnover ratio. This ratio

indicated the number of times on the average the receivables are turnover in each year.

The higher value of the ratio, the more is the efficient management of debtors. However,

this is not immediately apparent from the debtors turnover ratio and therefore it has to be

supplemented by average collection period

Net Sales

Debtors Turnover ratio = ------------------------------

Average Trade Debtors

Year Net sales Average trade debtors Ratio

2003-04 1136973196 71375346 15.93

2004-05 1257182689 70141034 17.92

2005-06 1367480960 69709699 19.62

2006-07 1573930933 44201029 35.61

2007-08 1628286699 39900771 40.81


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Interpretation:

By observing the above analysis it can be interpreted that the company officially

are not efficiently and effectively maintaining the debtors turnover ratio in the proceeding

years. The ratio in 2003-04 is 15.93 it was not at all advisable in the proceeding year the

ratio was in the increasing trend. Ultimately it is advisable to the firm to increase the

debtors turnover ratio is succeeding year by increasing the quality trade debtors leading

to sale promotion in the product of the firm and increasing the liquidity position of the

concern this was also yield great benefit to the firm.

0

2

4

6

8

10

12

14

2003-04 2004-05 2005-06 2006-07 2007-08

Ratio

Years

RATIO


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AVERAGE COLLECTION PERIOD:

The average collection period represents the average number of days for which a

firm has to wait before its receivables are converted into cash. Generally the average

collection period the better is the quality of the debtors as a short collection period

implied quick payment to debtors.

No. of Days

Average collection period = -----------------------------

Average Collection Period

Year No. of DaysAverage Collection

PeriodRatio

2003-04 360 23 days 15.93

2004-05 360 20 days 17.92

2005-06 360 18 days 19.62

2006-07 360 10 days 35.61

2007-08 360 8 days 40.81


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Interpretation:

By observing this we can say that shorter the average collections period the better

in the quality of debtors as a short collection period implies quick payment to debtors in

2003-04 collection period 23 days form 2003-04 the collection period is going on

decreasing in 2006-07 the collection period years to days. But in 2007-08 the collection

period is 8 days it was decreases. As shown above is the collection period decreased it is

benefit to the firm it is advisable to the firm to maintain the same decreasing trend in

collection period.

Total Assets turnover Ratio:

0

5

10

15

20

25

30

35

40

45

2004 2005 2006 2007 2008

ratio

years

ratios


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The relationship between sales with total assets is called Total Assets Turnover

Ratio. The Total Assets Turnover Ratio is calculated by dividing the value of the total

assets into that of net sales. A high ratio indicates over trading of fixed assets while a

low ratio shows excessive investment a symptom of idle capacity. The traditional

standard for the ratio is two times.

Net Sales

Total Assets turnover Ratio = -----------------------

Total Assets

Year Net Sales Total Assets Ratio

2003-04 1136973196 436970850 2.60

2004-05 1257182689 431966652 2.89

2005-06 1367480960 471839951 2.89

2006-07 1573930933 494379304 3.18

2007-08 1628286699 562759715 2.89


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Interpretation:

This table observing the total turnover ratio of K.M.P.M.A.C.U.L. during the

period of study it can be observed that in 2003-04 the ratio was increasing 2.6 to 3.18 in

2006-07 but in 2007-08 the ratio is 2.89 it was decreased that means the present position

of the firm is unsatisfactory. The firm is marinating a fair level of assets to the turnover.

Working Capital Turnover Ratio:

0

0.5

1

1.5

2

2.5

3

3.5

2004 2005 2006 2007 2008

Ratio

Years

ratios


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Working capital turnover ratio indicates the velocity of the utilization of net

working capital. This ratio indicates the number of times the working capital is turnover

in the course of year. This ratio measures the efficiency with which the working capital

is being used by the firm.

Cost of Goods Sold

Working Capital Turnover Ratio = -----------------------

Working Capital

Year Cost of Goods Sold Working Capital Ratio

2003-04 882905793 113239877 7.80

2004-05 1008072081 115714471 8.71

2005-06 1103970663 120387845 9.17

2006-07 1282873721 145054381 8.84

2007-08 1301735372 176681946 7.37


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Interpretation:

The table observe the working capital turnover ratio of the K.D.M.P.M.A.C.U.L.

the ratio 2003-04 7.80 the ratio is increasing year by year. In 2006-07 there was slight

decline in the ratio i.e 8.81 again there was a decreased in the ratio ie. Is 7.37 in 2007-08

so the company falls to increased trend is the firm falling increasing trend the firm

position will be satisfactory. So it advisable to the firm to maintain the grated level of

working capital is regard as the very important demand.

Fixed Assets Turnover Ratio:

0

1

2

3

4

5

6

7

8

9

10

2003-04 2004-05 2005-06 2006-07 2007-08

Ratios


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Sales

Fixed Assets Turnover = ------------------

Fixed Assets

Year Sales Fixed Assets Ratio

2003-04 882905793 148498928 5.945

2004-05 1008072021 137397639 7.343

2005-06 1103970663 148565345 7.430

2006-07 128287372 159807179 8.043

2007-08 1301735372 180894785 7.196


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Interpretation:

This table observe the fixed assets turnover ratio, in 2003-04 it 5.94, after the ratio

is increasing gradually it reaches 8.043 in 2006-07, and it fluctuates between 7 to 8%.

0

1

2

3

4

5

6

7

8

9

2004 2005 2006 2007 2008

Ratio

Years

ratios


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CHAPTER - 5

Summary


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About the Work:

We have done the project work at K.D.M.P.M.A.C.U.Ltd, Vijayawada to knowthe financial position of the firm through the analysis of ratios.

Objectives:

The main objectives of the work are

To know the financial performance and financial position of the firm. To company the relationship with items of financial statements. To company the relationship with items of financial statements. To judge the long-term financial solvency of the concern. To measure the enterprise ability to pay the interest regularly and to repay the

principal on maturity.

Sample:

We have taken the Xerox copies of balance sheets, P & L Account,

Trading Account, Manufacturing Account for the period from 2005 2008 from primarysource. We used this secondary data for conducting project work of ratio analysis.

Broad Observations:


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It is suggested that the company should try to create more

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