Proj Verka Final

7/30/2019 Proj Verka Final

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CHAPTER 1

INTRODUCTION


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INTRODUCTION TO ORGANISATION

Verka is a Co-Operative Company and is former oriented organization based on Co-Operative

pattern. It is the king of Punjab Region as far as Milk Procurement is concerned. Its daily Milk

production is around 2.00 lacs liters per day on an average and that is why huge amount of Milk

production has become its core competency. It produces many daily products.

"MILKFED" is a group of Milk Union established under operation flood program as the

implementing agency by the government of Ropar and metropolis Chandigarh. The Ropar

district co-operative milk produces union was established in the year of 1980.

Milkfed , Punjab

The Punjab State Cooperative Milk Producers Federation Limited popularly known

as MILKFED Punjab, came into existence in 1973 with a twin objective of providing

remunerative milk market to the Milk Producers in the State by value addition and marketing of

produce on one hand and to provide technical inputs to the milk producers for enhancement of

milk production on the other hand.

Although the federation was registered much earlier, but it came to real self in the year

1983 when all the milk plants of the erstwhile Punjab Dairy Development Corporation Limited

were handed over to Cooperative sector andthe entire State was covered under Operation Flood

to give the farmers a better deal and our valued customers better products. Today, when we look

back, we think we have fulfilled the promise to some extent. The setup of the organization is a

three tier system, Milk Producers Cooperative Societies at the village level, Milk Unions at

District level and Federation as an Apex Body at State level. MILKFED Punjab has

continuously advanced towards its coveted objectives well defined in its byelaws.

The main objectives for its establishment were:

1. To create an organized factor to develop and command a major share ofurban milk market of Chandigarh.
http://milkfed.nic.in/mfed.htmhttp://milkfed.nic.in/mfed.htmhttp://milkfed.nic.in/mfed.htmhttp://milkfed.nic.in/mfed.htm


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2. To provide year around remuneration price to the small rural Milk producersorganized into co-operative.

3. To provide quality milk and milk products to the consumers.

4. The milk plant carries out activities conductive to the economic

development to agriculturist by organizing effective production, process and

marketing of commodities.The milk plant has installed capacity of process

1,00,000 litres of milk per day and it is registered handling capacity of

2,00,000 liters by the year 2008-09. The milk plant is managed by qualified

professionals in the dairy field. The production facility are backed up by

quality assurance, marketing training, financial management, data processing

and other required services, providing a vibrant work environment to its

personnel in pursuit of excellence.

The milk plant is committed to supply quality and safe milk and milk products to

its esteem customers at the right time. The milk plant has introduced ISO

9001:2000. Management system and Indian standard of hazard analysis and critical

points (HACCP)/IS: 15000-1998 to ensure highest quality products with built in

safety to consumers.

Recently, the Verka Milk Plant Mohali of Milkfed Punjab have bagged prestigious

National Productivity Council Award at National level Competition in the field ofdairy processing industries conducted by National Productivity Council of India,

New Delhi.


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1.1 HISTORY AND PRESENT POSITION OF VERKA

A. HISTORY OF VERKA

There is a very long history behind this popularity. In 1959, in a village named 'Verka' near

Amritsar, Chief Minister of Punjab Sardar Partap Singh Kairon established a Dairy Development

Corporation for safeguards of farmers and increase dairy business. After some time four more

Milk Plants were established i.e. in Chandigarh, Mohali, Ludhiana and Bathinda. Thereafter it

progressed and the number of Milk Plants roses to 8 Plants up to 1980. Before 1981 it is fully

under the control of Punjab Govt. But after it in 1981 the Govt. has developed its name from

Punjab State Co-operative Milk Producers Union Ltd. into MILKFED Punjab. All the plants

were controlled by Head Office which is established at Chandigarh. Only one balance sheet was

preparplants in Punjab and Profit & Loss for all the plants was prepared collectively. But in 1981

all plants started to make their own Balance Sheet and calculate Profit & Loss for their own

plant. The fully Co-operative Society System was adopted and presently is in continue.

The company has been well known by its brand name "VERKA" especially In Punjab and

Haryana. Chandigarh Milk Plant was set up in year 1961-1962 to meet the milk initially. But it

was not able to fulfill the growing requirements of Chandigarh City. Due to this reason another

plant set up in September 1980 at Mohali (Punjab), which is adjoining to Chandigarh.

MILK PLANT MOHALI

"The Ropar Distt. Co-op Producer Union"

It is one of the "MILKFED" group located at S.A.S Nagar, Mohali (Punjab). It is registered on

05.07.1978 under Punjab Cooperative Societies Act, 1961. It started its activities on September

1980.

B. PRESENT POSITION OF VERKA

Presently it has 856 Societies and around 46000 members are supplying milk and making their

contribution to the Mohali (Punjab) Plant as follows:-

1. In Ropar District 520 Village Societies.


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2. In S.A.S Nagar, Mohali 164 Societies.

3. In Fatehgarh District 109 Societies.

4. In Patiala District 60 Societies.

5. In UT 3 Societies.

I n Ropar Distri ct three chil li ng centers are situated namely Morinda, Jhin jr i and Nurpur.

The Milk Plant Mohali produces 2 Lakhs to 2.25 Lakhs liters of Milk per day during winter

season and 1.50 Lakhs liters per day in summer season. About 2.00 Lakhs liters pasteurized

liquid milk is being supplied to the citizen of urban area per day. The plant runs throughout 24

hours in three shifts at about 200% of its installed capacity manner with 500 employees.The

plant is supplying milk mainly to the cities Chandigarh, Mohali and Panchkula also covering

some adjoining cities of Himachal Pradesh and Haryana.It also produces PANEER, GHEE,

LASSI, BIOYOGURT, GULAB JAMUN, KHEER, CURD, FLAVOURED MILK etc. All these

products are marketed at the plant under the name "The Punjab State Coperation Milk Producers

Federation Ltd" under the Brand name of 'Verka Milk Plant".

1.2 ORGANISATION NETWORK

For the smooth running of plant, various sections are managed by the management. Each and

every activity is delegated to particular section. It is impossible for top management to take

decision on every problem, so various tasks are delegated to various sections. These sections are

interrelated to have frequent contacts with one another and it is easy to share the information.

These integrated tasks teams handle their problems and make the supervision easy.

The following are the sections in the Verka Organisation:

1. Procurement Section

2. Production Section

3. Quality Control Section

4. Marketing Section

5. Accounts Section


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6. Administrative Section

7. Engineering Section

8. Purchase Section

9. Store Section

10. MIS Section

11. Security Section

1.3 NETWORK

Verka is having an apex body at the state land known as "MILKFED" Punjab, Chandigarh. To

start with functions in various fields of different unions in different Districts and to operate with

Dairying and Dairy Fields that is the operation flood with assistance of National Dairy Co-

operation (NDC) Delhi and later on is launched to operate flood second who is affiliated to

Punjab Milk Fed. It helps to its affiliated Districts Milk Co-operations in 11 Districts.

These Districts Union are:-

1. ROPAR

2. PATIALA

3. LUDHIANA

4. FARIDKOT

5. FEROZPUR

6. SANGRUR

7. BATHINDA

8. GURDASPUR

9. HOSHIARPUR

10. JALANDHAR

11. AMRITSAR


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These unions in eleven districts of the state carry out smooth functioning of marketing,

procurement, cattle breeding program though district co-operative unions.

1.4 PLANT AT A GLANCE

Establishment 1980 : The Ropar District Co-operative Milk

Producers Union Milk Plant, Mohali.

Brand Name : Verka

Installed Capacity : 1, 00,000 Liters of Milk Per Day

Production : 2,00,000 Liters of Milk per Day

Status : Co-operative Society

Head Office : Milkfed , Punjab, Sector 34, Chandigarh

Plant : The Ropar District Co-operative Milk

Producers Union Ltd. Milk Plant, S.A.S

Nagar, Mohali


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Abbreviations used:-

DM Deputy Manager S.R" Sale Representative

ASSTT Assistant JDC Junior Dairy Chemist

SUP Supervisor S.K Store Keeper

INC. SEC Incharge Security F.S.R Sales Representative


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RATIO ANALYSIS

The RATIO ANALYSIS is one of the most powerful tools of financial analysis. It is one of the

techniques of the financial analysis where ratios are used as yardsticks for evaluating the

financial condition and performance of the firm. It is with the help of ratios that the financial

statements can be analyzed more clearly and decisions made from such analysis. Analysis and

interpretation of gives a better understanding of the financial conditions of the firm than what

could have obtained only through the perusal of financial statements.

NATURE OF RATIO ANALYSIS

It 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 however ratio

analysis is not an end in itself. It is only the means of better understanding of financial strength

and weaknesses of firm. Calculation of mere ratios does not serve any purpose unless appropriate

ratios are analyzed and interpreted .The ratios may be used as a symptom like blood pressure,

pulse rate, or the body temperature and their interpretation depends on the caliber and the

competence of analyst. Ratios help to summarize large quantities of financial data and to make

qualitative judgments about the firm financial performance. For example current ratio,calculating by dividing the current asset by current liabilities indicates a qualitative relationship

quantified relation between the current asset and current liabilities .This relationship is and index

of yardstick, which permits a qualitative judgement to be formed about the firm ability to meet

its current obligations. It measures the firm liquidity .The greater the ratio the greater is the firms

liquidity and vice versa. The point to note is that the ratio reflecting a quantative relationship

helps to form a qualitative judgement such is the nature of all financial ratios


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MEANING OF RATIO

Ratios are the most frequently used in practice to access the financial performance and condition.

The absolute accounting figure reported in financial statement does not provide any meaningful

understanding unless it is related to some other relevant information ego Rs 500 crore net profits

may look impressive, but firms performance can be said good or bad only when it is related with

investments. The relationship between two accounting figures, expressed mathematically, is

known as a financial ratio.

For a layman ratio means %age of one in terms of other e.g. raw material in terms of sales.

A ratio can be defined as "indicated quotient of two mathematical expressions" and as "titlerelationship between two and more numbers"

According to accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression of the

quantitative relation between two numbers.

According to Kohler a ratio is the relation of amount a to b expressed as a:b.

Ratios can be expressed in two ways:-

Times:- When another divides one value, the unit used to express the quotient is termed as times

Percentage:- If 100 is multiplied to the quotient obtained, the unit of expression is termed as

percentage.


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CLASSIFICATION OF RATIOS

Numerous ratios can be computed from a single set of financial statements; however only a

selected few may be useful in given situation. In general, ratios may be classified on the

following basis:-

1. Classification according to statement from which ratio is derived: The ratio may beclassified on the basis of source of information for computing them.

Balance sheet Ratios: These ratios establish a relation between two items of balancesheet. For example the ratio of current asset to current liabilities; fixed asset to share

holders fund etc.

Income Statement Ratios: The information for computing these ratios is taken fromincome statement. These ratios focus on relationship between two items or group of

items, all of which are derived from the income statement; e.g Gross profit ratio, Net

profit ratio etc.

Inter statement ratios or combined ratios; The ratios present the relationship betweentwo items, one is taken from balance sheet and the other from income statement; debtor

turnover, asset turnover etc.

2. Classification according to importance -.Another way of classifying ratio is classification

according to classification of each ratio. Some ratio are more important than other.

Primary Ratios: The Primary ratio is one, which is of primary importance to theconcern. For e.g. Return on Capital employed.

Secondary Ratios: This classification is done to facilitate inter firm comparison and tofocus on some factors of combinations of factors responsible for the success or failure of

the organization. When such factors are isolated by means of other ratios, they are called

secondary ratios.

3. Functional Classification: According to functional classification ratios are classified

according to the test satisfied by each ratio. The commodity used financial ratios can be

grouped into four categories as follows:


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Liquidity Ratios: Liquidity refers to the ability of the firm to discharge its short termfinancial obligations as they become due. The liquidity of firm depends upon its ability to

arrange cash in case of need. The liquidity ratio portray the capacity of the business to

meet its short term obligations out of its short term resources.

Leverage Ratios/Solvency Ratios: These ratios measures the owners stake in thebusiness Vis a Vis that of outsiders. These ratios through light on long term solvency of

the business as reflected in its ability to assure long term creditors as regard, payment of

interest whenever it falls due and return of principal on maturity.

Profitability Ratios: The profitability ratios highlight the end result of business andthrow light on efficiency in operation. Profitability ratios are computed either comparing

profits with investments or profits with sales.

Activity Ratios: These ratios throw light on the efficiency with which the resources ofthe business are managed.


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INTERPRETATION OF RATIOS

Ratios by themselves do not convey very much .To be of use in decision making ratios require

interpretation based upon logical reasoning and analysis. Broadly, speaking there are six

different ways in which ratios are interpreted.

1. Rules of thumb: A single individual ratio may not be helpful in drawing conclusion aboutthe financial health of the business. But there are certain rules of thumb based upon well

proven conventions, which can be used for making current comparisons of individual ratios.

For example a ratio of 2:1 of current assets to current liabilities is considered reasonably

good. However it may be mentioned that these rules of thumb are at best only

approximations and therefore may not lead to correct conclusions.

2. Group of Related ratios: A group of related may be used for the purpose of interpretation.A single ratio may not lead to correct conclusion. In such cases single ratios supported by

additional ratios become more meaningful. For example ratio of net profit to sales may be

supported by operating expenses to sales ratio, non operating income to sales ratio etc. to

draw more logical conclusions.

3. Temporal analysis: The behaviour of ratios may be studied over time to draw conclusionsabout the trend in the performance of a firm. This analysis depict the direction of change and

reflects, whenever the financial position of the firm has improved, deteriorated or remain

constant over time. However while making this analysis it must be ensured that the

accounting policies of the firm remain unchanged.

4. lnter firm comparison: For the purpose of making inter firm comparisons to know therelative position of the different firms the ratio of one firm can be compared with the ratios of

some other selected firms. However while doing analysis two things must be kept in mind ,

firstly the firms must be similar(should be of same size and in same industry) and the

secondly the accounting policies and methods used by the firms being compared should not

be sufficient.


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5. Comparison with Industry Average: The industry averages of the ratios can be used forcomparing the ratios of the firms comprising that industry. The comparison of the firm with

the industry average depict whenever the performance of the firm is below average of above

average.

6. Projected Ratios: Projected ratios can be computed from the data taken from projectedfinancial statements. These projected ratios are used as standards of performance. The ratios

computed from the actual financial statements are compared with the projected ratios. The

analysis helps in evaluating the performance of a firm in relation to its plans.


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GUIDELINES FOR THE USE OF RATIOS

Following guidelines should be kept in mind while interpreting the various ratios:

1. Accuracy of financial statements: The ratios are calculated from the data available infinancial statements. The reliability of the ratios is linked to the accuracy of the

information in the statements. Before calculating the ratios one should see whether the

proper concepts and conventions have been used for preparing the financial statements or

not. The competent auditors should properly audit these statements. The precautions will

establish the reliability of the data given in the financial statement.

2. Objective of the analysis: The type of ratios calculated will depend on the purpose forwhich they are required. If the purpose is to study current financial position, then the

ratios relating to current assets and liabilities will be studied. The purpose of the user is

also important for the analysis of ratios. A creditor ,a banker, a shareholder, all has

different objects for studying the ratios.

3. Selection of ratios: Another precautions to taken is the proper selection of theappropriate ratios. The ratio should match the purpose for which they are required.

Calculations for large number of ratios without determining their need in present context

may confuse the things instead of solving them. Only those ratios be selected which can

through proper light on the matter to be discussed.

4. Use of standards: The ratios will given an indication of financial position only whenthey are discussed with reference to some standards. Unless otherwise these ratios are

compared with the certain standards one will not be able to reach any conclusion. These

standards may be rule of thumb as in case of current ratio (2:l) or acid test ratio(l:l) , past

, industry and projected ratios etc.


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5. Caliber of the analyst: The ratios are only the tools of analysis and their interpretationwill depend upon the caliber of the analyst. He should be familiar with the various

financial statements and the significance of the changes etc. A wrong interpretation my

create havoc for the concern since wrong conclusion may lead to wrong decision. The

utility of the ratios are linked with the expertise of the analyst.

6. Ratios provide only a base: The ratios are only the guidelines for the analyst he shouldnot base his decision entirely on them. He should study any other relevant information,

situation in the concern, general economic environment etc before reaching final

conclusions. A businessman will not afford the single wrong decision because it may

have far reaching impact.


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SIGNIFICANCE OF RATIO ANALYSIS

1. Helps in decision making: Financial statements are prepared primarily for decisionmaking. But the information provided in the financial statement is not an end in itself and

no meaningful conclusions can be drawn from these statements alone. Ratios analysis

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

2. Helps in financial forecasting and planning: Over a period of time a firm or industrydevelops certain norms that may indicate future success or failure. If there is relationship

in firms data over time period, the ratios may provide clues on the trend or the future

problem.

3. Helps in communicating: The financial strength and weakness of the firm arecommunicated in more easy and understandable way by use of ratios the information

contained in these statements is conveyed in more meaningful manner to one for whom it

is meant. Thus ratios help in communication and enhancing the value of the financial

statement.

4. Helps in coordination: Ratio helps in even coordination which of utmost importance inthe business management. Better communication of efficiency weakness of enterprise

results in coordination in enterprise.

5. Helps in control: Ratio analyst helps in making effective control of the business.Standard ratios based on the pro forma financial statements help in calculating variance

or derivations, if any, which can be compared with the standards so as to take corrective

actions at the right time. The weakness, if any, comes to the knowledge of the

management, which helps in effective control of the business.


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6. Shareholders: An investor in the company will like to assess the financial position of theconcern where is going to invest. His first interest will be of his security of his investment

and then the return in the form of dividend against them. The investor will feel satisfied

only if the concern has sufficient amount of assets. Long term solvency ratios will help

them in assessing the financial position of the firm. Profitability ratios on the other hand

will help them in knowing the profitability position.

7. Creditors: The creditors or the supplier extend short term credit to the concern. They areinterested to know whether the financial position warrant their of the current assets. If

current assets are quiet sufficient to meet the current liabilities the creditor will not

hesitate in extending credit facilities. Current and acid test ratios will help them in giving

an idea about the current financial position of the firm.

8. Employees: The employees are also interested in the financial position of the firmespecially profitability. Their wages increase and the amount of fringe benefits are

directly related to the volume of the profits earned by the firm. The employees make use

of the information in the financial statement. Various profitability ratios like gross profit,

operating profit, net profit enable the employee to put forward their views for the increase

in the wages and benefits.

9. Government: Government is interested in the overall strength of the industry. Variousfinancial statements published by the industrial units are used to calculate ratios for

determine the short term, long term and overall financial position of the concern.

Profitability index is also prepared with the help of the ratios. Government may base their

future policies on the basis of the industrial information available from various units. Theratio may be used as the indicator of overall financial strength of public as well as private

sector. In the absence of the reliable economic information, government policies may not

prove successful.


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10.Tax audit Requirement: Section 44AB was interested in the income tax act by thefinance act 1984.Under this section every concern engaged in any business and having

the turnover or gross profit exceeding Rs 40 lacs is required to get the accounts audited

by the chartered accountant and submit the tax audit report before the due date of filing

the return of income under section 139(1). In case the professional a similar report is

required if the gross receipt exceed Rs 10 lacs. Clause 32 of IT act required that the

following accounting ratios be given such as Gross profit turnover/ Net profit turnover,

stock in trade, material consumed, finished goods produced etc.


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LIMITATIONS OF THE RATIO ANALYSIS

The ratio analysis is widely used as the technique to evaluate the financial position of the

company. The following are the limitations of the ratio analysis.

1. Standards for comparison: Ratio of the company have meaning, only when they arecompared with some standard. It is difficult to find out proper basis of comparison.

Usually it is recommended that the ratios are compared industry averages, but they are

not easily available.

2. Company Differences: Not only the industry differs in their nature situations of twosimilar companies also differs in their size, accounting procedures and policies.

Similarly, the factors influencing the performance of company in one year may change

in another year. Thus the comparison of the ratios of two companies become difficult

and meaning less , when they are operating two different situations.

3. Price level Changes: The interpretation and comparisons of the ratios are also invalidby the changing value of money. The accounting figures presented in the financial

statements, are expressed in monetary terms , which is assumed to be remain constant.

In fact ,prices change over year, which affects the accounting earnings. At least three

effects of inflation can be identified:-

I. The nominal Value of inventory increases on account of rising prices, which result intoinventory profit.

II. Assets are stated at original cost in the book of account, because of inflation, their currentvalue or replacement cost will be much higher than book value. Thus the depreciation

calculated on the book value will be very low.


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III. Inflation affects the accounting profits of the firm, which borrow. If the interest rate isfixed, the shareholders gain at the cost of lenders. The inflation and the accounting profits

do not recognize the profits arising from the borrowing reduce the real value of lenders

obligations.

4. Different definitions of the variable: In practice, the difference exit in the meaning ofdifferent terms. Diversity of the views exits in what should be included in the net worth,

current assets or current liabilities or in the capital employed. Similarly profits means

different to different people.

5. Changing Situations: The ratios do not have much use if they are not analyzed overyears. The ratio at a moment of time suffers from temporary changes. This problem can

be resolved by analyzing the trend of ratios over time but still the analysis is static to

certain extent.

6. Historical data: The basis to calculate the ratios is historical financial statements. Thefinancial analyst is interested in what happens in the future, while the ratios indicate

what happened in past.


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CHAPTER-2

REVIEW OF LITERATURE

Review of literature is the most useful and simple method of formulating the research problem.The researches done by previous researchers are reviewed and their usefulness is evaluated to

serve as basis for further research. Thus researcher reviews builds upon the work of others. The

reviews that are collected by the researcher should give an insight into the field under study. The

reviews must explain the need and scope of the study under consideration. It is not necessary

that the reviews are to be in accordance with the objectives.

Ria Goel (2007): Ratio Analysis Caffe Nero, Ratio Analysis is a tool used to conduct a

quantitative analysis of information in a company's financial statements. Ratios are calculated

from current year numbers and are then compared to previous years, other companies, the

industry to judge the performance of the company. Caff Nero Group plc, the leading

independent UK coffee house operator of 282stores, which has been voted the top rated brand by

consumers for the last six consecutive years. It had another year of solid progress, again

achieving revenue and profit growth. Its revenue gone up by 29% to 90.7 million where as in

year 2005 it was 70.1 million. Earnings before interest, tax , depreciation and amortization has

increased by 38% to 15.6 million whereas it as 11.3million in year 2005. Operating profit

(before prior year goodwill write off) improved by 38% to 8.2 million where as in year 2005 it

was 6.0 million). Overall Operating profit improved by 74% to 8.2m from 4.7million in

2005.


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CHAPTER-3

SCOPE AND OBJECTIVES

OF THE STUDY


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SCOPE OF THE STUDY

The scope of this study to analyze the two years financial reports of the Verka Milk Plant

Mohali. And find out the ratios from balance sheets, profits and loss accounts, and from other

financial papers, after the calculations of ratios compare them with the previous figures . The

second main purpose of this study to give the yearly report to its shareholders, outsiders and to

the management to make the good, sound and essential decision to run the organization in a

smooth and good manner. This project will also helpful to everyone to tell about the financial

condition of the verka milk plant ,mohali . all the study has conducted on the verka milk plant,

mohali. In this study calculated ratios also tells about the performance the plant in the years ,

from 01-04-2009 to 31-03-2011.

This analysis also provides indicators of past performance in terms of critical success factors of a

business. This assistance in decision making reduces reliance on guesswork and intuition and

establishes a basis for a sound judgment. In the project financial techniques are used to calculate

the ratio and do analysis , and do the interpretation of the calculated results.


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OBJECTIVE OF THE STUDY

1. To Analysis F inancial Statements:

To acquire enough knowledge about the profitability and financial health of the business. In

the light of the knowledge so acquired by us, we can take necessary decisions about their

relationships with the concern.

2. To Simpli fy Accounti ng Data:

To simplifies and summaries a long array of accounting data and makes them

understandable. Also to disclose the relationship between two such figures have a cause and

effect relationship with each other.

3. To L ocate the Weak Spots of the Business:

We have calculated two years ratios and compared with each other so that weak spots will

be located and remedial measures will be taken.

4. For E ffective Control of the Enterpr ise:

To disclose the liquidity,solvency and profitability of the enterprise. Such information

enables management to assess the changes that have taken place over a period of time in the

financial activities of the business.

5. To Study the F inancial Soundness:

To disclose the position of business with different viewpoints. With the help of such a study

we can draw conclusions regarding the financial health of the business enterprise.


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CHAPTER-4

RESEARCH METHODOLOGY


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RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done systematically.

According to D. Slesinger and M. StephensonResearch may be defined as the manipulation

of things, concepts or symbols for the purpose of generalizing to extend, correct or verify

knowledge, whether that Knowledge aids in the construction of theory or in the practice of an

art. Thus it is an original contribution to the existing stock of knowledge of making for its

advancement.

RESEARCH

Research is the systematic process of collecting and analyzing information to increase our

understanding of the phenomenon under study. It is the function of the researcher to contribute to

the understanding of the phenomenon and to communicate that understanding to others.

RESEARCH DESIGN

Research design is known as framework within which the whole activity of research and

methods or procedures is clearly mentioned under which the research is to conduct.

Type of Research

Exploratory & Descriptive research design is used for the study.

Sampling technique

Convenience sampling technique is used for the survey.


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DATA COLLECTION

Secondary data is used for the study.

SECONDARY SOURCES:

1. Balance Sheet of the Verka Milk Plant.

2. Books for financial statement analysis.

3. Other financial Accounts.


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CHAPTER 5

ANALYSIS AND INTERPRETATION


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ANALYSIS OF DATA

After data have been collected, the researcher turns to the task of analyzing them. The analysis of

data requires a number of closely related operations such as establishment of categories, the

application of these categories to raw data through tabulation and drawing statically inferences.

The term analysis refers to the computation of certain measure along with searching for patterns

of relationship that exist among data groups. Thus, in the process of analysis, relationships or

differences, supporting or conflicting with original or new data.

After analyzing the data, the researcher should have to explain the findings on the basis of some

theory. It is known as interpretation.

That made possible counting of classified data easy. From the master table various summery

tables were prepared. They have been presented along with their interpretation in this manner.

And we have used many arithmetic methods to test the data in the manner of ratios.

ANALYSIS OF SHORT-TERM FINACIAL POSITION OR TEST OF

LIQUIDITY

The short-term creditors of a company like suppliers of goods of credit providing short-term

loans are primarily interested in knowing the company's ability to meet its current or short-term

obligation as and when these become due.

Two types of ratios can be calculated for measuring short-term financial position or short-term

solvency of a firm.

1. Liquidity Ratios

2. Current Assets Movement or Efficiency Ratios.


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1. L iquidity Ratios:

It refers to the ability of a firm to meet its short-term financial obligations when and as

they fall due.

In fact, analysis of liquidity needs the preparations of cash budgets and cash and fund

flow statements; but liquidity ratios by establishing a relationship between cash and other

current assets to current obligations, provide a quick measure of liquidity.

The main concern of liquidity ratio is to measure the ability of the firm to meet their

short-term maturing obligations. Failure to do this will result in total failure of the

business, as it would be forced into liquidation.

To measure the liquidity of a firm, the following ratios can be calculated:

I. Current Ratio

II. Quick or Acid Test or Liquid Ratio

I. Curr ent Ratio:

This ratio explains the relationship between Current Assets and Current Liabilities of a business.

The formula for calculating the ratio is:-

Curr ent Ratio= Curr ent Assets/ Cur rent L iabili ties

'Current Assets' includes those Assets which can be converted into cash within a YEAR'S time

like Cash in Hand, Cash at Bank, B/R, Short-term Investments, Debtors, Stock, and Inventories

etc.

'Current Liabilities' include those liabilities which are repayable in a YEAR'S time like Bank

O/D, B/P, Creditors, Provision for Taxation, Proposed Dividends, Outstanding Expense and

Loans payable with in a year etc.


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SIGNIFICANCE:-

This ratio is used to assess the firm's ability to meet its short term liabilities on time. According

to accounting principals, a current ratio of 2:1 is supposed to be an IDEAL RATIO. It means that

Current Assets of a business should, at least, be twice of its Current Liabilities. The higher the

ratio, the better it is, because the firm will be able to pay its Current Liabilities more easily. The

reason of assuming 2:1 as the Ideal Ratio is that the Current Assets includes such Assets as

Stock, Debtors etc. from which full amount cannot be realized in case of need, hence even if half

the amount is realized from the Current Assets on time, the firm can still meet its Current

liabilities.

If the Current Ratio is less than 2:1, it indicates lack of liquidity and shortage of working capital.

But a much higher ratio, even though it is beneficial to' the short term creditors, is not

necessarily good for the company. A much higher ratio than 2:1 may indicate the poor

investment policies of the management.

While calculating Current Ratio, we have taken Loans & Advances as Debtors in the

Current Assets.

In Current Liabilities, we included the Provisions to calculate Total Current Liabilities.


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RATIO ANALYSIS OF VERKA PLANT FOR THE LAST TWO YEARS

CURRENT RATIO (in times):(Figures in rupees)

Particulars 2009-10 2010-11

Cash in Hand 73309 158191.37

Cash at Bank 162457956 184842721.20

Short term 0 0

Securities

Short term 0 0

Investment

Bill Receivable 0 0

Debtors 12508666 10219882.37

Closing stock 4606562 7430239.32

(Raw Material)

Closing stock 159543257 207136418.75

(Milk Products)

Inventories 10731382 19839137.61

Loans & 4606563 7430239.32

Advances

Total Current 395976115 503551937.4


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Assets

Current 229107072 324365864.69

Liabilities

Provisions 9913434 12028333

Total Current 239020506 336394197.69

Liabilities

Current Ratio 1.66 1.49


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ANALYSIS OR INTERPRETATION:

In 2009-10: The Current Ratio is 1.66 times, it shows current assets more than current liabilities

are considered to be satisfactory.

In 2010-11: Thecurrent ratio is 1.49 times, it has been decreased from last year,again the current

assets are more than current liabilities which signifies good condition of the company.

1.4

1.45

1.5

1.55

1.6

1.65

1.7

2009-10 2010-11

current ratio


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I I QUICK OR ACID TEST OR LI QUID RATIO:

Quick Ratio indicates whether the firm is in a position to pay its current liabilities within a month

or immediately. As such the quick ratio is included by dividing liquid assets (Quick Assets) by

current Liabilities:-

Quick Ratio or Acid Test Ratio = L iquid Assets/Curr ent L iabili ties

'Liquid Assets'means those assets which will yield cash very shortly. All current assets except

stock and prepaid expenses are included in liquid assets. Stock is excluded from liquid assets

because it has to be sold before it can be converted into cash. Prepaid expenses too are excluded

from the list of liquid assets because they are not expected to be converted into cash. Liquid

assets thus include cash, debtors, bill receivable and short term securities.

SIGNIFICANCE:

An ideal quick ratio is said to be 1:1. if it is more, it is considered to be better. The idea is that for

every rupee of current liabilities, there should be at least one rupee of liquid assets. This ratio is

better test of short-term financial position of the company than the current ratio, as it considers

only those assets which can be easily converted into cash. Stock is not included in liquid assetsas it may take a lot of time before it is converted into cash.

Quick ratio thus is more rigorous test of liquidity than the current ratio and when used together

with current ratio, it gives a better picture of the short term financial position of the firm.

While calculating Quick Assets, we have deducting Inventories assuming as a stock -from

Current Assets so that Quick Assets are obtained.


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RATIO ANALYSIS OF VERKA PLANT FOR THE LAST TWO

YEARS

Quick Ratio (in times): (Figures in rupees)


Current Assets 395976115 502551937.4

Closing stock (Raw Material) (4606562) (7430239.32)

Closing stock (Milk Products) (159543257) (207136418.75)

Inventories (10731382) (19839137.61)

Total Quick Assets 221094914 268146141.72

Total Current Liabilities 239020506 336394197.69

Quick Ratio 0.93 0.79


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In 2009-10: The quick ratio is .93 times. It is not as per standard ratio of 1:1.

In 2010-11: The quick ratio is .79 times. Current liabilities has decreased but still there are no

assets to cover these liabilities .

0.7

0.75

0.8

0.85

0.9

0.95

2009-10 2010-11

quick ratio

quick ratio


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2. CURRENT ASSETS MOVEMENT OR EFFICIENCY/ACTIVITY RATIOS:

Funds are invested in various assets in business to make sales and earn profits. The efficiency

with which assets are managed directly affects the volume of sales. The better the managementof assets, the larger is the amount of sales and profits. Activity ratios measure the efficiency or

effectiveness with which a firm manages its resources or assets. These ratios are also called

turnover ratios because they indicate the speed with which assets are converted or turned over

into sales.

For example: Inventory turnover ratio indicates the rate at which the funds invested in

inventories are converted into sales. Depending upon the purpose, a number of turn over ratios

can be calculated, as Debtors or Receivable Turnover, Average Collection Period, Stock/Inventory Turnover, Creditors/Payable Turn over, Average Payment Period, Working Capital

Turnover Ratio.

I. Inventory/Stock Turnover Ratio:

This ratio indicates the relationship between the cost of goods sold during the year

and average stock kept during that year.

Stock Turnover Ratio= COGS/Average Stock

Cost of Goods Sold= Opening Stock + Purchases + Carriage +

wages + other direct charges - Closing Stock OR Net Sales - Gross profit.

Average Stock= (Opening Stock + Closing Stock)/ 2

SIGNIFICANCE:

This ratio indicates whether stock has been efficiently used or not. It shows the speed with which

the stock is rotated into sales or the number of times the stock is turned into sales during the year.

The higher the ratio the better it is. Since it indicates that the stock is selling quickly. In a

business, where stock turnover ratio is high, goods can be sold at a lower margin of profit and

even the profitability may be quite high. A low stock turnover ratio indicates that stock does not


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sell quickly and remains lying in the godown for a long time. This results in increased storage

cost, blocking of funds and losses on account of goods becoming obsolete. This ratio can be

compared with the previous year, the management can access whether the stock has been more

efficiently used or not.


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STOCK TURNOVER RATIO (in times):

(Amount in figures)


Cost of Goods Sold 2750292468 3501358726.1

Opening Stock

Raw Material 2602243 4606563

Milk Products 141409710 159543258

Closing Stock

Raw Material 4606562 7430239

Milk Products 159543257 207136419

Total Stock 308161772 378716479

Average

Stock

154080886 189358240

Stock Turn Over Ratio 17.84 18.49


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In 2009-10: The Stock Turnover Ratio is 17.84 times more than its average stock. It means how

efficiently stock is being utilized in the company to convert into COGS or sales. The higher the

ratio the better it is. So it indicates that stock is selling quickly, it is a good indicator for company

that stock is being efficiently used in the company.

In 2010-11: The Stock Turnover Ratio is 18.49 times more than its average stock, it has been

increased from previous year. This shows that company is now utilizing their stock into sales.

High turnover suggests efficient inventory control, sound sales policies reputation in the market,

better competitive capacity.

17.4

17.6

17.8

18

18.2

18.4

18.6

2009-10 2010-11

STOCK TURNOVER RATIOS

STOCK TURNOVER RATIOS


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ANALYSIS OF LONG-TERM FINANCIAL POSITION OR TEST OF

SOLVENCY

These ratios are calculated to assess the ability of the firm to meet its long term liabilities as and

when they become due. Long term creditors including debentures holders are primarily

interested to know whether the company has ability to pay regularly interest due to them and to

repay the principle amount when it become due. Solvency ratios disclose the firm's ability to

meet the interest cost regularly and long term indebtedness at maturity.

Solvency ratios include the following ratios:

1. Debt-Equity Ratio

2. Solvency Ratio

3. Capital gearing ratio

1. Debt-Equity Ratio:

This ratio expresses the relationship between long term debt and shareholders funds. It indicates

the proportion of the funds which are acquired by long term borrowings in comparison to

shareholders funds. This ratio is calculated to ascertain the soundness of the long term financial

policies of the firm. The Debt-Equity can be calculated are as follows:

Debt-Equity= Outsiders Funds/ Shareholders Funds

OR External Equities/ Internal Equities

Outsiders Funds:

These refer to long term liabilities which mature after one year. These include debentures,

mortgage loans, public deposits etc.


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Shareholder's funds:

These include equity share capital, preference capital, share premium, general reserve and other

reserves and credit balance of profit and loss account. However accumulated losses and fictitious

assets remaining to be written off like preliminary expenses, underwriting commission, share

issue expenses should be deducted.

SIGNIFICANCE:

This ratio is calculated to assess the ability of the firm to meet its long term liabilities. Generally

Debt-Equity Ratio is of 2:1 is considered safe, if this is more than that it shows a rather risky

financial position from the long term point of view as it indicates that more and more funds are

invested in the business; are provided by long term lenders. The lower this ratio the better it is

for long term lenders because they are more secure in that case. Lower than 2:1 Debt-Equity

Ratio provides sufficient protection to long term lenders. A high Debt-Equity Ratio which that

the claims of Creditors are greater than those of owners, may not be considered by the time of

liquidation of the firm.

Current liabilities:

These are taken as an Outsider's Funds. As Current Liabilities which mature after one year so

Current Liabilities are treated as Outsider's Funds.

In order to calculate Shareholder's Funds, we include Share Capital and Reserves & Surplus. We

deduct Depreciation Reserve Fund as it is included in Reserve and Surplus.


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DEBT-EQUITY RATIO (in times):

(amount in rupees)


Current Liabilities (outsiders)239020506.84 336394197.68

Share Capital 38364500 50141600

Reserve & Surplus 251300481.54 270401123.54

Depreciation Reserve Fund 103720892.39 112722830.18

Shareholder's Funds 185944089 207819892.36

Debt-Equity Ratio 1.29 1.62


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In 2009-10: The Debt-Equity Ratio is 1.29 times. It shows risky-financial position from the long

term point of view as it indicates that more and more funds invested in the business are provided

by long term lenders.

In 2010-11: The debt equity ratio is 1.62 times. Good for company as debt is being maintained

as in the previous years.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2009-10 2010-11

DEBT EQUITY RATIOS

DEBT EQUITY RATIOS


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2. SOLVENCY RATIO OR THE RATIO OF TOTAL ASSETS:

This ratio indicates the relationship between the total liabilities to outsiders to total assets of a

firm and can be calculated as follows:

Solvency Ratio= Total Liabilities to Outsiders/ Total Assets

SIGNIFICANCE:

As this ratio represents the relationship between the total liabilities to outsiders to total assets,

more satisfactory of stable is the long-term solvency position of firm.

Total liabilities to outsiders are assumed as current Liabilities.


SOLVENCY RATIO (in times):

(Amount in rupees)


Current Liabilities (Outsiders) 239020506 336394197.69

Total Assets 496217457.71 616920122.78

SOLVENCY RATIO (in times): 0.48 0.54


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In 2009-10: The Solvency Ratio is 0.48 times more than its total assets.

In 2010-11: The Solvency Ratio is 0.54 times more than its total assets. It is also increasing from

the last year and we can say that it is not a healthier signal. It indicates that the company has to

pay more liabilities compared to last year.

solvency ratios93.97

93.98

93.99

94

94.01

94.02

2009-10

2010-11

solvency ratios

solvency ratios


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3. CAPITAL GEARING RATIO:

This ratio establishes the relationship between equity share capital including reserve and

surpluses to preference share capital and other fixed interest bearing loans. This ratio is

calculated as follows:

Capital Gearing Ratio= Fixed Income Bearing Funds/Long term Debt Bearing Fixed

Interest

SIGNIFICANCE:

Capital Gearing ratio is very important leverage ratio Gearing Should be kept in such a. way that

the company is able to maintain a steady rate of dividend. High Gearing ratio is not good for a

new company or a company in which future earnings are uncertain.

There is no preference capital so we have not included in it. We have also taken long-term debt

bearing fixed interest as secured loans (long-term Loans).


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(RATIO ANALYSIS OF VERKA PLANT FOR THE LAST TWO YEARS)

CAPITAL GEARING RATIO (in times):


Equity Share Capital 38364500 50141600

Reserve & Surplus 251300481.54 270401122.54

Fixed Income Bearing Funds 289664981.54 320542722.54

Secured loans (long term

Loans)

7703910 1200000

CAPITAL GEARING RATIO

(in times):

37.6 267.11


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In 2009-10: The Capital Gearing Ratio is 37.6 times.

In 2010-11: The Capital Gearing Ratio is 267.11 times.

High Gearing ratio is not good for the company or a company in which future earnings are

uncertain. It has been increasing from last year. It shows that company has no good signal about

its profitability and its financial position.

0

50

100

150

200

250

300

2009-10 2010-11

RATIOS

RATIOS


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ANALYSIS OF PROFITABILITY OR PROFITABILITY RATIOS

The main object of all the business concerns is to earn profit. Profit is the measurement of the

efficiency of the business. Equity shareholders of the company are mainly interested in the

profitability of the company. Profitability Ratios measure the various aspects of the profitability

of a company such as

1. What is the rate of the profit on sales?

2. Whether the profits are increasing or decreasing?

And if decreasing, then it helps in finding out the cause of their decrease.

3. Whether an adequate return is being obtained on capital employed?

The following ratios are known as profitability ratios:

I. Gross Profit Ratio

II. Operating Ratio

III. Operating Profit Ratio

IV. Expenses Ratio

V. Net Profit Ratio


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I. Gross Profi t Ratio:

This ratio shows the relationship between gross profit and sales.

Gross Profit Ratio= Gross Profit/Net Sales*100

Net Sales= Sales- Sales Return

SIGNIFICANCE:

This ratio measures the margin of profits available on sales. The higher the ratio, the better it is.

The ratio should be adequate enough not only to cover the operating expenses but also to provide

for the depreciation, interest on loans, dividends and reserves. The ratio is compared with earlier

ratio and important conclusion is drawn from such comparison for instances if there is a decline

in gross profit ratio in comparison to previous year it may be concluded that:

I. Price of material purchased, freight, wages and direct changes may have gone up but selling

price may not have gone up in proportion to increase in the cost.

II. The selling price may have fallen but the price of the materials, freight, wages and other direct

charges may have not fallen relatively.

III. There is a fall in sales of more profitable variety of goods.


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GROSS PROFIT RATIO (in %):

(Amount in Rupees)


In 2009-10: The Gross Profit Ratio is 5.98%.

In 2010-11: The Gross Profit Ratio is 6 %. Gross profit must be sufficient to provide for

operating expenses, interest on loans, depreciation and dividends otherwise company will not

operate in this environment. It must generate sufficient profits. Higher the ratio better it is.

5.97

5.975

5.98

5.985

5.99

5.995

6

6.005

2009-10 2010-11

A

xisTitle

Axis Title

GP ratio


Gross Profit 174840479 223873759.55

Net Sales 2925132950 3725232485.65

GROSS PROFIT RATIO (in %): 5.98 6


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II. OPERATING RATIO:

It establishes the relationship between cost of goods and other operating expenses on the one

hand and the sales on the other hand. It measures the cost of operations by dividing operating

costs with the net sales.

Operating Ratio= Operating Cost/Net sales*100 Operating

Cost= COGS+ Operating expenses

SIGNIFICANCE:

This ratio indicates the percentage of net sales that is consumed by operating cost. Obviously,

higher the operating ratio, the less favorable it is, because it would have margin (operating profit)to cover interest, income-tax dividend and reserves. There is no rule of thumb for this ratio as it

may differ from to firm depending upon the nature of its business and its capital structure.

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST TWO YEARS OPERATING

RATIO (in %):

(Amount in Rupees)


Cost of Goods Sold 2750292468 3501358726.11

Operating Expenses:-

Administrative Exp. 43822922.39 69379777.21

Store Exp. 19740308.84 30153398.61

Distribution Exp. 22110411.69 29799704.65

Operating Cost 2835966110.9 3657691606.58

Net Sales 2925132950 3725232485.65

OPERATING RATIO (in %): 96.95 98.18


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In 2009-10: Operating Ratio of the company is 96.95 %.

In 2010-11: Operating Ratio of the company is 98.18%.

In 2009-10 GP ratio is lower than 2010-11,so in 2009-10 companys position is better than 2010-

11.because lower the operating ratio, better is the position because greater is the profitability and

management efficiency of the concern.

96.2

96.4

96.6

96.8

97

97.2

97.4

97.6

97.8

98

98.2

98.4

2009-10 2010-11

AxisTitle

Axis Title

operating ratio


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III. OPERATING PROFIT RATIO:

This ratio is calculated by dividing operating profit by sales. This ratio is calculated are as

follows:

Operating profit ratio = Operating profit x 100

Sales

Operating Profit = Net sales - Operating Cost

Operating Cost = Cost of goods sold + Administrative and office expenses + selling and

distributive expenses.

OPERATING PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST TWOYEARS)

(amount in Rupees)


Sales 2925132950 3725232485.65

Operating Cost 2835966110.9 3657691606.58

Operating Profit 89166840 67540879.09

Net Sales 2925132950 3725232485.65

COST OF GOODS SOLD

RATIO (in %):

3.05 1.81


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In 2009-10: The operating profit ration is 3.05%

In 2010-11:The operating profit ration is 1.81%

0 0.5 1 1.5 2 2.5 3 3.5

2009-10

2010-11

RATIOS

RATIOS


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(IV) EXPENSES RATIOS:

Expenses ratios indicate the relationship of various expenses to net sales. Expenses ratios are

calculated by dividing each item of expenses with the net sales to analyse the cause of several of

the operating ratio. The ratio can be calculated for each individual item of expenses like cost of

sales ratio, administrative expenses ratio, selling expenses ratio, material consumed ratio, etc.

SIGNIFICANCE:-

This ratio indicates the relationship of various expenses to net sales. The lower the ratio, the

greated is the profitability and higher the ratio, lower is the profitability. While interpreting the

ratio, it must be remembered that for a fixed expenses like rent, the ratio will fall if sales increase

and for a variable expense, the ratio in proportion to sales shall remain nearly the same.


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EXPENSES RATIO MAY BE CALCULATED AS:

Cost of goods sold ratio:

Cost of goods sold/ Sales

COST OF GOODS SOLD RATIO

(OF VERKA MILK PLANT FOR THE LAST TWO YEARS)

(amount in Rupees)


Cost of goods sold 2750292468 3501358726.11

Net Sales 2925132950 3725232485.65

COST OF GOODS SOLD

RATIO (in %):

94.02 93.99


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ANALYSIS AND INTERPRETATION:

93.97 93.98 93.99 94 94.01 94.02 94.03

2009-10

2010-11

RATIOS

RATIOS


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(I) Cost of goods sold ratio:

The cost of goods sold ratio of the company in 2009-10 is 94.02% ,2010-11 is 93.99% . This

shows that company has decreased their ratio because lower the ratio, better it is for the

company.

2. OTHER PROFITABILITY RATIOS:Profits are the measures of overall efficiency of a business. The Higher the profits, the more

efficient are the business considered. Following are the important overall profitability ratios

or measures of Return on Investments:

I Return on Shareholder's Investment

II Capital Turnover Ratio

1. Return on Shareholder's Investment or Net Worth:

This ratio establishes the relationship between net profits (after interest and taxes) and the

proprietor's funds. Thus

ROI= Net profits(after interest and taxes)/ Shareholder's funds

SIGNIFICANCE:

This ratio reveals how well the resources of a firm are being used, higher the ratio, better are the

results. This ratio is calculated as a percentage by multiplying with 100.


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RETURN ON SHAREHOLDER'S INVESTMENT OR NET

WORTH

(OF VERKA MILK PLANT FOR THE LAST TWO YEARS)


Net Profit after Tax 50918638.7 56402944.73

Shareholder's Funds 185944089 207819892.36

RETURN ON

SHAREHOLDER'S

INVESTMENTS (in%):

27.38 27.14


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In 2009-10: The Company's ROI ratio is 27.38 %.

In 2010-11: The Company's ROI ratio is 27.14%.

This ratio reflects the over-all profitability of the business. It has been reduced from the previous

year which shows that it has been reduced on total capital employed.

27 27.05 27.1 27.15 27.2 27.25 27.3 27.35 27.4

2009-10

2010-11

RATIOS

RATIOS


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2. Capital Turnover Ratio:This ratio establishes the relationship between cost of goods sold and the capital employed. This

ratio is calculated to measure the efficiency of effectiveness with which a firm utilizes its

resources or the capital employed. As capital is invested in a business to make sales and earn

profits, this ratio is a good indicator of overall profitability of a concern.

Capital Turnover Ratio= COGS/Capital Employed

CAPITAL TURNOVER RATIO


(Amount in Rupees)


COGS 2750292468 3501358726.11

Net Capital Employed 257196969.71 280525925.09

CAPITAL TURNOVER

RATIO (in

10.69 12.48


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In 2007-08: The Company's- Capital Gearing Ratio has been increased with than last year. This

shows that how much times the capital is turned over into sales.

9.5 10 10.5 11 11.5 12 12.5 13

2009-10

2010-11

RATIOS

RATIOS


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FINDINGS AND SUGGESTIONS


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FINDINGS:

1. The company's short term financial positions is sound and satisfactory because itscurrent as well as quick ratio is double than its current liabilities of the company each

year, which means company's creditors secured each year.

2. From the point of view of long term financial position of the company Debt Equityratio, debts are always less than equity in two years. It means company is less

dependent on outside loans.

3. Proprietory ratio is high, increased and decreased, higher ratio indicates better longterm solvency position of the company.

4. Gross profit ratio decreased in 2009-10 but again increased to 6%.Higher ratio showsthe firms good profit earning capacity.


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SUGGESTIONS:

1. The company's capital turnover ratio has been decreasing each year. It must beimproved. If the capital turnover ratio is low , it will indicate that capital is lying ideal.

Now this time it is decreasing otherwise company will suffer.

2. The company's gross profit ratio is decreased. But now the ratio is increased because ofreduce in direct expenses. It must be reduced otherwise profits will not increased in

future.


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BIBLIOGRAPHY


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BALANCE SHEET OF FIVE YEARS OF VERKA MILK PLANT, MOHALI.Balance sheet from 01-04-2006 to 31-03-2007,

Balance sheet from 01-04-2007 to 31-03-2008,



Balance sheet from 01-04-2010 to 31-03-2011

Kothari, C.R., Research Methodology: Method and Techniques, Wishwa Prakashan,1990, New Delhi.

I.M.Pandey, Financial management Vikas Publishing House, 2004. Khan and Jain, Financial management Himalaya Publishing House, 1999, Mumbai. MY Khan , P.K Jain Management accounting Tata Mc Graw Hills ,2001,Noida. I.M Pandey, Finance, a guide for managing company funds and profits, prentice hall of

India, 2005.

ShashiK.Gupta and R.K.Sharma,Financial management, Kalyani publishers, 2009,New Delhi.


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PROJECT REPORT

ON

RATIO ANALYSIS OF

VERKA MILK PLANT, MOHALI

Submitted by:

Deepinder Kaur

Univ. Roll No.1174391

In partial fulfillment of the Degree

of

Master of Business Administration

IN FINANCE

SUBMITTED TO:

LUDHIANA GROUP OF COLLEGES

(Affiliated To Punjab Technical University)

2011-13


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ACKNOWLEDGEMENT

Heartily thanks to all those who supported me

Acknowledging any one in mere words is a very difficult job. I would like to pay my sincere thanks to all

those people who helped me during this project work with their guidance and invaluable advice.

The process of preparing this report on RATIO ANALYSIS OF VERKA MILK PLANT, LUDHIANA

was a learning experience for me. During the course of my preparation of this report I had to delve deeply

into many details and thus was able to enlighten myself.

Foremost of all, I express my sincere in debtness to the Almighty for bestowing me with favorable

circumstances and keeping me in the high spirits. This project is the end product of valuable contribution

of the many persons to whom, I remain indebted.

I am Thankful to Dr. Leenu Narang (HOD) & Ms. Gauri Dhir (project guide), and for their support and

encouragement throughout the completion of my project. I am thankful for their active co-operation and

his keen involvement in my project. I am indebted to their for understanding and appreciating my

problems, which emerged during the course of my project.

I am highly privileged to all the people, related directly or indirectly and the respondents for being

cooperative and sparing a few moments from their busy schedule; without their help this project wouldnt

have proven meaningful.

Deepinder Kaur


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PREFACE

This report is at Verka Milk Plant, Mohali. Final project is an integral part of MBA course and

efficient utilization of material, time and resources are very much important for successful

completion of any task. Above to this, coordination is must, which determines the degree of

success. In order to competent, the entire student is required to take a real time project work.

This exposure to project work will help them to know that how academic knowledge is applied

in actual business situation.

Keeping all this in view, the project given to me was to "Evaluate the Financial position ofverka

milk plant and to find out various ratios." The all rounded encouraging support by many personstowards this report has created confidence in me regarding the approval for the subject matter.

Actually this report is a result of an assignment, to improve myself and gain confidence. In this, I

have done my best to make it genuine study. But as well all know a maxim" TO ERR IS

HUMAN." Therefore there is a chance for few mistakes. Also a critical appraisal by anyone will

be heartily welcomed.


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DECLARATION

I, hereby declare that the project entitled to me RATIO ANALYSIS OF VERKA MILK PLANT,

LUDHIANA has been carried out submitted to Punjab technical university impartial fulfillment of the

requirement for the award of the degree Master of Business Administration under the guidance of

honorable Dr. Leenu Narang (HOD) & Ms. Gauri Dhir.

This report is original & based on data collected through Annual Reports of the company.

Dated Deepinder Kaur


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CERTIFICATE

This is to certify that Project report on RATIO ANALYSIS OF VERKA MILK PLANT, MOHALI

has been submitted for the partial fulfillment of the degree of Masters of Business Administration of

Punjab Technical University. This research is a bonafied work carried out by Deepinder Kaur under mysupervision. She has shown keen interest and put her best efforts to make this project a success.

Date Major Advisor

Asst Prof. Gauri

(Management Dept.)

LGC

LUDHIANA


77/77

CONTENTS

Chapter No. Topics Page No.

1. INTRODUCTION 1-21

2. REVIEW OF LITERATURE 22

3. OBJECTIVES 23-25

4. RESEARCH METHODOLOGY 26-28

5. ANALYSIS AND INTERPRETATION 29-66

6. FINDINGS AND SUGGESTIONS 67-69

7. BIBLIOGRAPHY 70-71

ANNEXURE

Proj Verka Final

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