AProject Report

On

“FINANCIAL ANALYSIS OF MADHUR DAIRY”

(Gandhinagar District Co-operative milk producers union limited)

A Project Submitted To

The Bhavnagar University of Bhavnagar in practical fulfillment for the degree

OfBachelor of Business Administration

By, Guided By,Vaghani vishal .m. NETRAMEM (T.Y B.B.A) Roll no: 128

Swami Sahajanand College of commerce & management

Bhavnagar UniversityBhavnagar

Batch2007-10

1

DECLARATIONDECLARATION

I Am Vaghani Vishal Manojkumar.T.Y.B.B.A. Roll no. 128 Here By Me And

It Is My Own Work. It Has Been Carried Out Under The Supervision Of Netramam,

Swami Sahajanand College Of Commerce And Management.

This Work Has Been Previously Submitted To Any University For My

Examination.

Signature

Vaghani Vishal M.

T.Y.B.B.A.

2

PrefacePreface

The Industrial Training From The Practical Study Point Of View Is Very

Important a B.B.A.Student As It Bridge Gap Between The Theoretical Knowledge. The

Word Has Become Practical So, It Is Knowledge, But A Person Also Should Familiar

with Its Practical Aspect.

The Main Object of Particular Training at T.Y.B.B.A. A Level Is To Gain The

Practical Attitude And Ability To Perform Specific Job In And Industrial Every

Management Student Should Have Some Practical Knowledge By Which They Can

Understand The Reality Of Corporate World More Closely.

As A Student Of S.Y.B.B.A.,I Got The Opportunity To Take Industrial

Training For 21 Days With The Help Of My College “Swami Sahajanand College Of

Commerce And Management” On “Gandhinagar District Co-Operative Milk Producers

Union Ltd.Known As ‘MADUR DAIRY’, Situated At K Road ,G.I.D.C.,Sector

25,Gandhinagar .

I Have Tried My Level Best To Collect The Information With In The Training

For Three Week.MADUR DAIRY Situated On Its Own Place In Market For The Quality

Maintain .It Uses The Latest Technology Of Various Plant And Machineries. There

The Departments Like Marketing Department, Human Resource Department, Finance

Department And Other Various Department Are Visited By Me At ‘MADUR DAIRY’.

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AcknowledgementAcknowledgement

It Is My Pleasure To Present This Industrial Training Report Of ‘MADUR

DAIRY’. It Gives Me Great Sense Of Satisfaction That I Am Presenting The Practical

Experience Of My Training At ‘MADUR DAIRY’.

I Have Prepared This Project Report On ‘MADUR DAIRY’ So; I Would Like

To Thank The ‘Madhur Family’ Very Much For Granting Such A Nice Opportunity To

Expand Of Management Ability In My Real Life. I Also Thanks To Everybody For

Getting Me Visit And Provide All Necessary Information For Preparing This Project

Report.

I Am Heartily Thankful To Our Principal Dr. SHILPA Who Has Been Source

Of Inspiration For Me And To Our NETRA MAM.For Her Constant Guidance In

Preparing The Project Work.

I Hope That This Project Report At ‘MADUR DAIRY’ Will Satisfy To You.

Thanking You.

Vaghani Vishal M.

Roll No.128

T.Y.B.B.A.

4

TABLE OF CONTENTS

DECLARATION

Preface

Acknowledgments

Executive summary

CHAPTERISATION

1. GENERAL IONFORMATION

1.1 introduction of Madhur Dairy....................................................... …08 1.2companies profile.......................................................................... ….091.3 history& development of unit............................................................10 1.4 form of organisation...........................................................................121.5 size of the unit ………………………………………………………131.6 organization structure…………………………………………..141.7 manufacturing process…………………………………………171.8 products of unit………………………………………………….18

2. RESERCH METHODOLOGY

2.1 Meaning of research method............................................................21 2.2 Research objective............................................................................22 2.3 Sources of Data..................................................................................23

2.4 The types of research ………………………………………...........242.5 process of research method ………………………………………262.6 research design…………………………………………………….27

3. FINANCIAL Analysis AND INTERPRETATION

3.1 Introduction.......................................……………………………303.2 types of financial analysis………………………………………...31 3.3 Methods of analysis of financial statement................................333.4 procedure of financial analysis…………………………………...353.5 balance-sheets...........................................................................36 3.6 common-sized statement of balance sheet………………..…. 37 3.7 profit and loss account...............................................................393.8 common-sized statement of profit and loss account.................41

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4. Working capital analysis

4.1 introductions........................................................………………..44 4.2 current assets................................................................................46 4.3 current liability................................................................................47

4.4 net working capital………………………………………….........48

5. ratio analysis

5.1 introduction ……………………………. ……………………... 50 5.2 classification of ratios…………………………………………....515.3 advantages of ratio analysis……………………………………535.4 limitation of ratio analysis……………………………………..…545.5 calculation of revenue statement ratios…………………...……565.6 calculation of balance sheet ratios…………………………...…595.7 calculation of balance sheet ratios…………………………..….655.8 calculatio of working capital ratios…………………………........67

6. findings and suggestion ………………………………………………..……..71

7. bibliography……………………………………………………………………..73

8. conclusion………………………………………………………………….……74

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1.1 IntroductionIntroduction

Without Practical Training My Management Study Would Have Remained

Incomplete For The Purpose Of The Practical Training. I Have Visited “Gandhinagar

District Co-Operative Milk Producers Union Ltd”, Known As’MADUR DAIRY’. It Is Very

Well Known Company In Gandhinagar And Gujarat Also .In Addition To This Is An Iso:

9001-2000 Certified Company.

“Gandhinagar District Co-Operative Milk Producer’s Union Ltd.Known As

‘MADUR DAIRY’ Is a Co-Operative Society Situated at Capital City of Gujarat.

At Present Company Has A Wide Range Of Product In Different Segments.

Recently ‘MADUR DAIRY’ Entered In To Manufacturing New Products Like Paneer,

Chocolates, Nankeens, Etc. MADUR DAIRY Related With Procurement Of Milk And

Production Of Milk And Milk Products. Milk is collected from 108 Milk Producer’s Co-

Operative Societies of Gandhinagar Taluka, Which Consist 35,750 Milk Producer

Members. They Are Rearing Buffalos And Cows. From 108 Milk Co-Operative

Societies Milk Is Transported To MADUR DAIRY By 20 Trucks Both Morning &

Evening. 23 Milk Producers Co-Op. Societies Are Management By Female Members

Out Of 108. Milk Producers And There Family Members Are Getting Facilities From

MADUR DAIRY By Life Insurance Policy By Payment Of 70 Vaccination % Premium.

This Organization Is Also Become Helpful To Members Of Milk Societies By Covering

Their Cattle Under L.I.C. Also. Members Are Also Getting Cattle-Feed With

Reasonable Rates And All The Cattle Of Members Are Covered By Also.

The Madhur Milk Has Been Sold Through The Selling Centers Of The

Gandhinagar City Milk Consumers’ Co-Operative Society, Kamdhenu Centers Of The

Milk Union, Madhur Parlors, Kamdhenu Agencies And The Milk Selling Centers

Situated In The Rural Areas. And, Including The Sales Of The Milk Products, Daily,

On An Average, 69,111 Liters Of Milk Has Been Consumed. On An Average, Daily

48,047 Liters Of Milk Has Been Packed Under The Amul Brand, As Desired By The

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Gujarat Co-Operative Milk Marketing Federation. More Than 350 Employees Get

Employment At ‘MADUR DAIRY’. ‘MADUR DAIRY’ Now On Better Progress.

1.2 Profile of the Firm

Name ►Gandhinagar District Co-operative Milk producer’s

Union Ltd. (Madhur dairy).

Address ►Madhur Dairy,

K. Road,

G.I.D.C.,Sector-25,

Gandhinagar-382023

Establishment ►1971 (6/2/1971)

Form of organization ►co-operative Society

Registration ►S. 10807

Brand Name ►Taste of Capital

Phone No ► (091-79) 23287135 to 23287141

Fax No ►0 23287140

E-Mail ►amul – gan – guj @ nic.in

Area ► 5 Acre

Supply ►All over the Gandhi agar district

Year of Incorporation ►1st April to 31st March

Bankers ►(1)Ahmedabad Co-operator Bank Ltd,

(2)Bank of Baroda,

(3)Punjab National bank,

(4)State bank of India,

(5)Dena bank,

(6)Credit bank

Main product ►Milk

Other Product ►Sweet, Butter – milk, Ice- cream, Ghee, Panner, Curd,

Namkeen and “sasti dahin”.

Year of Incorporation ►1st April to 31st March.

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1.3 History & Development3 History & Development

‘MADUR DAIRY’ Is Known As “Gandhinagar District Co-Operative Milk Producers’ Union Ltd.Related with Procurement of Milk and Products of Milk.

Milk Is Collected From 108 Milk Producers’ Co-Operative Societies Of

Gandhinagar Taluka, Which Consist 35,750 Milk Producer Members. They Are

Rearing Buffalos And Cows. From 108 Milk Co-Operative Societies Milk Is

Transported To MADUR DAIRY By 20 Trucks Both Morning & Evening. 23 Milk

Producers Co-Op. Societies Are Management By Female Members Out Of 108. Milk

Producers And There Family Members Are Getting Facilities From MADUR DAIRY By

Life Insurance Policy By Payment Of 70 % Premium. This Organization Is Also

Become Helpful To Members Of Milk Societies By Covering Their Cattle Under L.I.C.

Also. Members Are Also Getting Cattle-Feed With Reasonable Rates And All The

Cattle Of Members Are Covered By Vaccination Also. MADUR DAIRY Has A Special

Department For Veterinary Aids For Cattle Of Milk Producer Members And Veterinary

Doctors Remains Ready For 24 Hours For The Treatment Of Animals.

After Reaching The Milk At Plant, Milk Is Processed Under Totally Hygienic

Condition. As You Know Milk Is Very Much Essential Food Which Is Required For

Babies To Oldest Persons Including Patient Also. Our Teams Of Expert Dairy

Technologist Are Taking Keen-Care To Make The Milk And Milk Products Hygienically

Safe For The Health Of Human Being By Destroying And Keeping Away All Most All

Pathogenic Bacteria. Production Has Been Done In Such A Way That All The

Constituent Of Milk Remains In Nature Forms. At Dairy Plant Production Of Various

Types Of Pasteurized Milk, Ice-Cream, Paneer, Shrikhand, Curd, Various Types Of

Sweets And Butter-Milk Are Done.

Now We Should Take A Visit Of Marketing Department Of This

Organization. During The Year (Under Report) Daily, On An Average, 61,983 Liters Of

The Madhur Milk Has Been Sold Through The Selling Centers Of The Gandhinagar

City Milk Consumers’ Co-Operative Society, Kamdhenu Centers Of The Milk Union,

Madhur

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In 1996 The Plant Capacity Is Expanded Up To 60000ltr. And Than In 2003

Plant Capacity Is Again Expanded Up To 200000ltr.

HIGHLIGHTS:

Established In 1971 (Dt. 6.2.1971)

105 Village Milk Producers Co-Operative Societies Are Member Of This

Union.

35000 Milk Producers Are Member Through Village Milk Societies.

This Organization Have An Iso 9001-2000 Certificate & Iso22000

Certificate.

This Organization Is Famous As "MADUR DAIRY" In Gandhinagar

District.

90 % Consumers Are Covered By This Union in Gandhinagar City.

Highest Rate of Milk Is Giving To His Members (Milk Producers) (Rs.300

per Kilo. Fat)

Many Facilities Are Providing To His Members, Like: Medi-Claim, Loan For

Animal, Welfare Fund, Calcium, Animal's Food, Chap-Cutter, And Insurance

For Animals & Members Etc.

Organization Has Latest Un-Touch System Machinery For Milk Products.

Nearly 1, 50,000 Liters Milk Is Collecting Every Day From Milk Producers

Through Milk Co-Op. Societies.

Products Of This Organization Are Pasteurized Cow-Milk, Buffalo-Milk,

Curd, Butter-Milk, Cow-Ghee, Buffalo-Ghee, Milk-Sweets, Ice-Creams, and Flavor

Rose Milk Etc.

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1.4 Form of Organization1.4 Form of Organization

Form Of The Organization Indicates Type Of An Industry. It

Indicates Responsibility, Risk And Control Of Entrepreneur As Well As The Division Of

Profits.Befope Starting Any Types Of Business The Form Of An Organization Must Be

Clear .Form Of Organization Is One Of The Clear Identity Of Any Firm.

Here All Types Of Forms Are Given Which The Choice Can Be Made:

1).Sole Proprietorship,

2).Partnership Firm,

3).Joint Stock Company,

4).Co-Operative Organization,

5).Government Department,

6).Public Organization,

7).Government Company.

From The Above Types Of From We Come To Know That “MADUR DAIRY”

Is Co-Operating Enterprise, Which Is An Integrated And Very Strong Union.

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1.5 Size Of the Unit

The Size of the Organization is determined by invest Capital in it. There are

Some Standard of government regarding the Size of the Organization. How much

capital is invested in enterprise, according to it, Size will be decided.

Basically there are 3 types of business units according to their Size. They

are,

(1) Small Scale Enterprise.

(2) Medium Scale Enterprise.

(3) Large Scale Enterprise.

The types of the enterprise according to the Capital invested in them are

shown in the table as under.

Total Capital Invested Type of the Organization

Up to 5 crore Small Scale enterprise

Between 5 crore to 7 crore Medium Scale enterprise

More than 7 crore Large Scale enterprise

The Madhur dairy is large scale enterprise, because Capital invested is very

much more than criteria, Madhur dairy invested Rs.20,98,63,751/-.

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1.6 Organization Structure

Plans are made for implementation of managerial policy and to put these in

to practice an administrative structure is created. This is called Organization when

large number of people are working for all compiles the objective of the firm, Specific

Understanding and clarity are necessary as to what function are to be performed, who

will perform which function, who will issue orders, who will implement them etc. are

done by the organization.

“Organization Structure refers to determination of entire organization

System of an enterprise determine the limits within which the enterprise has to work

and progress”. Organizations establish authority responsibility relationship. It is the

unit, different parts of which are linked to each other. The human body is the best

example of an organization.

Assignment of authority is the basic of Organization planning is the brain of

a business while organization is its physical Structure. To Clarity the importance of

organization a Successful industrialist notes,

“Take away our plants; take away our business, oh1! Take away our wealth

(Finance) but permit us to retain our organization within no time we shall be on our

feet once again.

There are mainly four forms of any organization,

(1) Line organization

(2) Staff or functional organization

(3) Line and staff organization

(4) Committee organization

Madhur dairy has line organization. The entire business is deluded in to

department are appointed for every department, Officers are appointed according to

the function respective department, under the officer. These senior and Join or officer

working under him. Workers function under these supervision and officers.

The organization, authority flow downward from the top to bottom and

responsibility goes upwards from bottom to top. Every person is responsible to his

immediate superior.

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Organization structure

Chairmandr s.r.rana

Board of director

Managing director

Engineeringm.v.parikh

Productionr.j.mehta

Marketingp.k.desai

A.Hdr.r.j.lalakia

SeniorEngineer

TechnicalOfficer

AssistantManager

AssistantManager

JuniorEngineer

MarketingOrganizerR.R.tanna

VeterinaryOfficer

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General managerg.h.vaghasiya

store and purchasen.m.bhavsar

Co-operativeService

AdministrativeOfficers

AssistantManager

Accountj.a.patel

Officer

The Chart Given In Previous Page Is Indicates The All Organizational

Position Of Different Person Of MADUR DAIRY.

Top Of The Organization Includes Board Of Director. The Board Of Director

Is Top Management All The Authority And Responsibility Are Goes To Top

Management. Top Management Also Considers The Chairman. The Chairman, The

Chairman Of “MADUR DAIRY ” Is Dr.Shankarsinh R.Rana .Top Level Also Consider

The Managing Director Of The Company . The Managing Director Of ‘MADUR DAIRY’

Is Govindbhai .B .Oza . Then Under The Managing Director The Various Type Of

Organizational Persons Are Situated. The General Manager Is Mr.G.H.Vaghasiya .

Accountant Is Mr.J.A.Patel. The Head Of Engineering Department Is Mr.M.V.Parikh.

The Head Of Production Is Mr.R.J.Mehta . The Head Of Marketing Department Is

Mr.P.K.Desai . Under Heading The Marketing Department There Marketing

Organization Mr.R.R.Tanna . The Head Of The Animal Husbandry Department Is

Dr.R.J.Lalakiya . The Head Of Store And Purchase Department Is Mr.N.M.Bhavsar.

The Head Of Co-Operative Services Is Mr.R.G.Patel.

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1.7 Manufacturing Process1.7 Manufacturing Process

Manufacturing Process Is Very Long And Through Chain Process Of

Different Department Such As Milk Collection Pasteurization Process Packaging

Dispatch To Distribution.

The Diagram of Manufacturing Process

Receive Milk from Co-Operative Society of Milk Milk Tank (Storage)

Taking General Fat and S.N.F

Standardization (Maintain Fat and S.N.F)

Pasteurization

Packaging Dispatch to Distribution

Milk Collection Process Includes During The Year 2007-08.The Union Has

Collected Total 4,93,83,822 Kilos Milk From 35,750 Member Of 108 Milk Producers

Co-Operative Societies Of The Union . Daily Average Of Milk Collection Is 1,34,928

Kilos And Daily Average Of Collection Per Society Comes To 1,261 Kilos.

After Collecting Milk From All Societies The Next Step Of Manufacturing

Process Is Storage, It Means That Kept All Milk In Milk Tank. Then After The Process

Of Taking General F.A.T And S.N.F Comes By Testing With F.A.T And S.N.F. Then

The Process before Pasteurization Is the Step of Standardization .In Standardization

The Maintaining Of Milk Till The Pasteurization Process .Then The Pasteurization

Process Is Made. After The Process of Pasteurization the Packaging Process Is made

.And Then the Milk Pouch Are Dispatch to Distribution.

So This Is The Manufacturing Process Of Milk At MADUR DAIRY.

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1.8 Products of the companyAt present Company has wide range of product in different Segments like,

Milk, sweet, Butter – Milk, Ice – Cream, Ghee, Panel, Curd & Namkin.

Madhur dairy are launching new products & expand capacity in current

product are as follow.

(1) Madhur Skimed Milk Powder.

(2) Madhur Mineral water.

(3) Madhur tea (pati tea).

(4) Madhur Chocolate

(5) Madhur Curd. ( expansion)

(6) Madhur Cattle feed.

(7) Madhur Ready to eat food and Numkins.

Madhur is Manufacturing around 4 type of milk, 7 type of ice – cream, 15

types of sweet, 2 type ghee and other product like. Madhur chhash, Madhur curd,

Madhur shrikhand, Namkin and Madhur has been packed the milk under the amul

brand.

In the current year dairy average of sales of Milk liter is 119207, daily

average of sales of Butter milk liter 14471 daily average of sale of sweet in kg is

159458 daily sale of ice – cream in liter is 86912.

Company’s object is to provide less number of prices of the product and

fully meet the internal and external customer’s requirement. Company has multi stage

quality control from the row – material to the finished products to provide best quality

product to the ultimate consumer.

The wide range of all the products can be differentiated through its

representation. The categories of each and every product will be cleared by it.

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19

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RESEARCH METHODOLOGY

2.1 MEANING

Research is a logical and systematic search for new and particular topic. It

is an Investigation of finding solutions to scientific and social problems through

objective and systematic analysis. It is a search for knowledge, that is, a discovery of

hidden Truths. Here knowledge means information about matters. The information

might be collected from different Sources like experience, human beings, books,

journals, nature, etc. A research can lead to new contributions to the existing

knowledge. Only through research is it possible to make progress in a field. Research

is done with the help of study, experiment, observation, analysis, comparison and

reasoning. Research is in fact ubiquitous. For example, we know that cigarette

smoking is injurious to health; heroine is addictive; cow dung is a useful source of

biogas; malaria is due to the virus protozoan plasmodium.

Research Methodology is a systematically solve the research problem. It has many

dimensions and research methods constitute a part of the research

methodology.

Thus when we talk about research methodology, we do not only talk of the

research methods but also consider the logic behind the methods. We use in

context of our research study, so that research results are capable of being

evaluated either by researcher himself or by others.

To effectively carry out in research, I would use the

following research process, which consists of series of actions or steps.

Research method include following points are as follow,

1) research objective

2) process of research method

3) types of research method

4) source of data

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2.2 THE OBJECTIVES OF FINANCIAL

ANALYSIS:

To judge the financial stability of Madhur dairy.

.To measure the enterprise's short-term and

long-term solvency.

To measure the enterprise's operating efficiency

and profitability.

.Financial statements analysis is an attempt to

determine the significance and meaning of the financial statement data

so that forecast may be made of the future earnings, ability to pay

interest and debt maturities (both current and the long term) and

profitability of a sound dividend policy.

To analyzes an event or process or phenomenon

to identify the cause and effect relationship in MADUR DAIRY.

The main objective of the study concluded is that

to make comparative analysis or the financial position.

The factors affecting the financial health of the

company.

To get in depth knowledge about the financial

position of Madhur dairy.

To know how to maintain finance in business.

The purpose of objective of financial analysis is to diagnose the information

contained in financial statements so as to judge the profitability and financial

soundness of the firm.

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2.3 Sources of Data

The way of classifying the sources of information’s:

(1) PRIMARY DATA:

Information obtains from original sources by researcher. Primary data can

be gathered slowly at the high cost. But it Offers accuracy reliability it is personally

developed, it gives Latest information and it is not published sourced of data. It has to

be created.

Primary data are collected by the following ways:-

Observation

Interview

Schedule

Questionnaire

(2) SECONDARY DATA.

It is complicated by some not other the research for purpose not directly

related to the research currently under consideration. It already exits. It must be

relevant to research understudy. It is readily available for processing. It saves time. It

is chipper sources of dada.

Secondary data are the data that are already collected and are only analyzed by different sources these sources are as follows:-

Corporate magazine.

Manuals of various companies.

Books, journals, newspaper. Employment exchange.

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2.4 types of researchThere are different types of research.

(1)EXPLORATORY RESEARCH

This type of research is carried out at the very beginning when the problem

is not clear or is vague. In exploratory research, all possible reasons which are

very obvious are eliminated, thereby directing the research to proceed further with

limited options.

Sales decline in a company may be due to:

(1) Inefficient service

(2) Improper price

(3) Inefficient sales force

(4) Ineffective promotion

(5) Improper quality

The research executives must examine such questions to identify the most

useful avenues for further research. Preliminary investigation of this type is called

exploratory research.

Expert surveys, focus groups, case studies and observation methods are

used to conduct the exploratory survey.

(2) DESCRIPTIVE RESEARCH

The main purpose of descriptive research is to describe the state of view as

it exists at present. Simply stated, it is a fact finding investigation. In descriptive

research, definite conclusions can be arrived at, but it does not establish a cause

and effect relationship.

This type of research tries to describe the characteristics of the respondent

in relation to a particular product.

Descriptive research deals with demographic characteristics of the

consumer.

(3) APPLIED RESEARCH

Applied research aims at finding a solution for an immediate problem faced

by any business organization. This research deals with real life situations.

Example: “Why have sales decreased during the last quarter”? Market research is

an example of applied research.

(4) PURE/FUNDAMENTAL RESEARCHES OR BASIC RESEARCH

24

Gathering knowledge for knowledge’s sake is known as basic research. It is

not directly involved with practical problems. It does not have any commercial

potential. There is no intention to apply this research in practice. Tata Institute of

Fundamental Research conducts such studies.

(5) CONCEPTUAL RESEARCH

This is generally used by philosophers. It is related to some abstract idea or

theory. In his type of research, the researcher should collect the data to prove or

disapprove his hypothesis. The various ideologies or ‘isms’ are examples of

conceptual research.

(6) CAUSAL RESEARCH

Causal research is conducted to determine the cause and effect relationship

between the two variables.

(7) HISTORICAL RESEARCH

The name itself indicates the meaning of the research. Historical study is a

study of past records and data in order to understand the future trends and

development of the organization or market.

(8) EX-POST FACTO RESEARCH

In this type of research, an examination of relationship that exists between

independent and dependent variable is studied. We may call this empirical

research. In this method, the researcher

(9) ACTION RESEARCH

This type of research is undertaken by direct action. Action research is

conducted to solve a problem. Example: Test marketing a product is an example of

action research. Initially, the geographical location is identified. A target sample is

selected from among the population.

(10) EVALUATION RESEARCH

This is an example of applied research. This research is conducted to find

out how well a planned programme is implemented. Therefore, evaluation research

deals with evaluating the performance or assessment of a project. Example: “Rural

Employment

(11) LIBRARY RESEARCH

This is done to gather secondary data. This includes notes from the past

data or review of the reports already conducted. This is a convenient method

whereby both manpower and time are saved.

25

2.5 Research PROCESS

1).Formulating the research Problem.

2).Research design & Sample Design.

3).Analysis of data gathered

4).Data analysis comparison

5).Graphics and interpret

A plan of what data to gather, from whom, how and when to collect the data,

and how to analyze the data obtained

A systematic plan to guide archaeological research according to the

scientific method and take full advantage of the information potential.

26

2.6 Research Design

Research design is the plan structure and strategy of investigation

conceived as to obtain answers to research questions and to control variance.

“Research design is the blueprint for the collection measurement and

analysis of data.” It aids the scientist in the allocation of his limited to include

experiments interviews. Observation, the analyses of records, stimulation or some

combination research situation or some combination of it.

PROBLEM IDENTIFICATION:

Find out Ratios of MADHUR DAIRY and compare

financial statements for judging the financial performance.

Find deviation of calculated ratios from standard or

Norms

Calculating the working capital analysis of Madhur

dairy.

INFORMATION NEEDED:

Information about firm’s assets, liabilities, revenue,

expenditure, bankers, investment etc.

Information about firm’s loan, security, stock level &

other financial information.

DATA COLLECTION:

My data collection source was secondary i.e.

Annual reports of companies

Balance sheet

Profit & Loss Accounts

27

ANALYSIS & INTERPRETATION:

The data collected and analysed subjectively as well as graphically where it

is possible. The analysis is based upon available information & interpreted

accordingly.

CONCLUSION:

On the basis of analysis conclusion has been drawn.

SUGGESTION:

Suggestion has been given in order to improve performance of the firm.

LIMITATION:

My scope of study is limited to the annual reports, Balance sheet of units &

within the Madhur dairy’s last 3 years data for analysis.

28

29

financial ANALYSIS AND

INTERPRETATIOn

3.1INTRODUCTIONInformation contained in Financial Statements that is Balance sheet, profit

and loss account or income and expenditure etc is usually used by management,

creditors, investors, and others to form judgment about the company’s operating

performance and financial position.’ the end of the financial accounting processing in a

set of reports which are called financial statements’. Users of the financial statements

can get better insight about the financial strength and weaknesses of the firm if they

properly analyze the information reported in these statements.

Meaning:

According to Metcalf and Titard, “Analyzing financial statements is the

process of evaluating the relationship between the component parts of the financial

statements to obtain a better understanding of a firm’s position and performance.”

In the words of Myers, “Financial statement analysis is largely a study of

relationship among the various financial factors in a business as disclosed by a single

set of statements, and a study of the trend of these factors as shown in a series of

statements

Definition:

Financial analysis is the process of identifying a firm’s strength and

weaknesses by establishing relationships between the items of the Balance sheet and

profit and loss account.

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3.2 TYPES OF FINANCIAL ANALYSIS

However, we can classify various types of financial analysis into different

categories depending upon (i) the material used, and (ii) the method of operation

followed in the analysis or the modus operandi of analysis.

(i) On the basis of Material used:

a. External analysis

b. Internal analysis

a. External analysis

This analysis is done by outsiders who do not have access detailed internal

accounting records of the business firm. These outsiders include investors, potential

investors, creditors, potential creditors, government agencies, credit agencies, and the

general public. For financial analysis, these external parties to the firm depend almost

entirely on the published financial statements.

b. Internal analysis

The analysis conducted by persons who have access to the internal

accounting records of a business firm is known as internal analysis. Such an analysis

can therefore, be performed by executives and employees of the organization as well

as government agencies which have statutory powers vested in them. Financial

31

Types of Financial Analysis

On the basis of material used

On the basis of modus operandi

External analysis

Internal analysis

Horizontal analysis

Vertical analysis

analysis for managerial purposes is the internal type of analysis that can be affected

depending upon the purpose to be achieved.

(ii) On the basis of modus operandi

a. Horizontal analysis

b. Vertical analysis

a. Horizontal analysis

Horizontal analysis refers to the comparison of financial data of a company

for several years. The figure for this type of analysis are presented horizontally over a

number of columns. The figures of the various years are compared with standard or

base year. A base year is a year of analysis is also called ‘Dynamic analysis’ as it is

based on the data from year to year rather than on data of any one year.

b. Vertical analysis

Vertical analysis refers to relationship of the various items in the financial

statements of one accounting period. In this type of analysis the figures from financial

statements of the year are compared with a base selected from the same years

statement. It is also known as ‘static analysis’. Common size financial statements and

financial ratios are the two tools employed in vertical analysis. Since vertical analysis

considers data for one time period only. It is not very conducive to a proper analysis of

financial statements.

32

3.3 METHODS OF ANALYSIS OF FINANCIAL STATEMENTS

The analysis and interpretation of financial statements is used to determine

the financial position and results of operations as well. A number of methods or

devices are used to study the relationship between different statements. The following

methods of analysis are generally used:

1. Comparative statements

2. Trend analysis

3. Common size statements

4. Funds flow analysis

5. Cash flow analysis

6. Ratio analysis

These are explained as follows:

1. Comparative statements

The comparative financial statements are statements of the financial

position at different periods of time. The elements of financial position are shown in a

comparative form so as to give an idea of financial position at two or more periods.

Any statement prepared in a comparative form will be covered in comparative

statements. From practical point of view. Generally, two financial statements (Balance

Sheet and the Income Statement) are prepared in comparative form for financial

analysis purposes.

2. Trend analysis

The financial statements may be analyzed by computing trends of series of

information. This method determines the direction upwards or downwards and

involves the computation of the percentage relationship that each statement items

bears to the same in the base year. The information for a number of years is taken up

and one year, generally taken for the base year. In figures for the base year are taken

as 100 and trend ratios for other years are calculated on the basis of the base year.

The analyst is able to see the trend of the figures, whether upward or downward.

33

3. Common size statements

The common size statements, balance sheet and the income statements

are shown in analytical percentages. The figures are shown as percentages of total

assets, total liabilities and the total sales. The total sales are taken as 100 and

different assets are expressed as a percentage of the total. Similarly various liabilities

are taken as a part of the total liabilities. These statements are also known as

component percentage as 100 percent statements because every individual item is

stated as a percentage of the total 100.

4. Funds flow analysis

The fund flow statement is a statement, which shows the movement of the

funds and is the report of the financial operations of the business undertaking. It

indicates various means by which funds were obtained during a particular period and

the ways in which these funds were employed. In simple words, it is a statement of

sources and application of funds.

5. Cash flow analysis

Cash flow statement is a statement, which describes the inflow (sources)

and outflow (uses) of the cash and cash equivalents in an enterprise during the

specified period of time. Such a statement enumerates net effects of the various

business transactions on cash and its equivalents and takes into account receipts and

disbursements of cash. A cash flow statement summarizes the causes of changes in

cash position of a business enterprise between the dates of the two balance sheets.

6. Ratio analysis

Ratio 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. However ratio is not end itself. It is only a means of better

understanding of financial strengths and weaknesses of a firm. A ratio is a simple

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

as the indicated quotient of the two mathematical expressions.

34

3.4 Procedure of financial analysisThere are three steps involved in the analysis of financial statements. These

are (i) selection (ii) classification (iii) interpretation.

The first step involves selection of information (data) relevant to the purpose

of analysis of financial statements. The second step involved is the methodical

classification of the data and the third step includes drawing of inferences and

conclusion.

The following procedure is adopted for the analysis and interpretation of

financial statements: -

(1)The analyst should acquaint himself with the principles and postulants of

accounting. He should know the plans and policies of the management so

that he may be able to find out whether these plans are properly executed or

not.

(2)The extent of analysis should be determined so that the sphere of work may

be decided. If the aim is to find out the earning capacity of the enterprise then

analysis of income statement will be undertaken. On the other hand, if

financial position is to be studied then Balance sheet analysis will be

necessary.

(3)The financial data given in the statements should be re-organized and re-

arranged. It will involve the grouping of similar data under same heads,

breaking down of individual components or statements according to the

nature. The data is reduced to a standard form.

(4)A relationship is established among financial statements with the help of tools

and techniques of analysis such as ratios, trends, common size, funds flow

etc.

(5)The information is interpreted in a simple and understandable way. The

significance and utility of financial data is explained for helping decision

taking.

The conclusions drawn from interpretation are presented to the management in the form of reports.

35

3.5 BALANCESHEET

FUNDS AND DEBTS 31- 3-07 31-3-08 31-3-09 PROPERTIES&DUES 31-3-07 31-3-08 31-3-09

PAID UP SHARE CAPITAL

MEMBERS FEES

RESERVE AND OTHER FUND

LOANS

14892400 16909300 19169300 PROPERTIES 51897663 58378872 68489943

11800 12500 13900 INVESTMENT 9609260 10059260 10059260

14004400 15181669 16242864 STOCK 15556566 36756647 26929159

56449875 49856125 42637375 ADVANCES&OTHERDUES:

ADVANCE TAX

STAFF ADVANCE

DEPOSIT

DUES FROM DEALERS

T.D.S.

CURRENT DEBTS&PROVISIONS:

DEPOSITS

DEBTS OF MILK CO-OP. SOC

DEBTSAGAINST EXPENDITURE

DEBTS AGAINST PURCHASE

PROVISIONS FOR INCOMETAX

765000 1502904 1843731

3400500 8507288 6954946 ---------- 112760 31962

114434917 102936422 104268853 867117 1845917 2774546

4986172 5391149 6212879 54623781 54222306 40932472

6800064 6088324 7613463 10675 72408 59334

2641507 2146462 2765967 CASH AND BANK 87294563 47678574 58743344

NET PROFIT 3002990 3600409 3984204

TOTAL 220624625 210629648 209863751 220624625 210629648 209863751

36

3.6 COMMON SIZED STATEMENT OF BALANCESHEET:

FUNDS AND DEBTS 31-3-07 31-3-08 31-3-09 PROPERTIES&DUES 31-3-07 31-3-08 31-3-09

PAID UP SHARE CAPITAL 6.750 8.03 9.134 PROPERTIES 23.523 27.716 32.64

MEMBERS FEES 0.005 0.006 0.007 INVESTMENT 4.355 4.775 4.793

RESERVE AND OTHER FUND 6.35 7.21 7.74 STOCK 7.052 17.45 12.831

LOANS 25.59 23.67 20.32 ADVANCES&OTHER DUES

CURRENT DEBTS&PROVISIONS: ADVANCE TAX 0.346 0.713 0.878

DEPOSITS 1.541 4.038 3.32 STAFF ADVANCE --------- 0.053 0.015

DEBTS OF MILK CO-OP. SOC 51.868 48.87 49.68 DEPOSIT 0.394 0.876 1.322

DEBTSAGAINST EXPENDITURE 2.26 2.56 2.96 DUES FROM DEALERS 24.758 25.743 19.504

DEBTS AGAINST PURCHASE 3.082 2.89 3.63 T.D.S. 0.005 0.034 0.030

PROVISIONS FOR INCOMETAX 1.197 1.02 1.32 CASH AND BANK 39.567 22.636 27.99

NET PROFIT 1.361 1.709 1.9

TOTAL 100 100 100 TOTAL 100 100 100

37

We can see that share capital in the year 2006-07 is only 6.75%which increases in the next year and becomes 8.03% of the total assets. In the current year it becomes 9.134%

The reserve funds are only6.35% of the total assets. It increases next year and becomes 7.21% and again increases 7.74%. This can be said a slight increase.

Current liabilities are 59% of the total liability which decrease in the next year and becomes 57%% and in the current year it becomes 58%. There is a minor increases and decrease in the current liabilities.

Long term loan of the dairy is 25.59%% of the total assets in the year 2006-07 which decreases in the year 2007-08 and becomes 23.67 % in the next year it again decreases and becomes20.32% of the total assets. This can be said good for dairy as it has enough inner funds for expansion. As its share capital and other funds are increases continuously, it has less need of outside funds.

38

3.7 PROFIT AND LOSS ACCOUNT:

EXPENDITURE 06-07 07-08 08-09 INCOME 06-07 07-08 08-09

OP. STOCK(1-4-08) 11257114 15556566 36756647 SALES 905510046 1140552306 1279339009

PURCHASE 809471680 1043171966 111411167 MISC. INCOME 314147 1037826 657318

EXPENDITURES: DIVIDEND 1151250 1151250 1155000

PACKAGING 19754878 22946537 25258106 INTEREST ON

DEPOSITES

1548348 3936116 1754473

POWER&FUEL 17921034 21832679 27975221 CLOSING

STOCKS

15556566 36756647 26929159

PROCESSING 3554828 6745355 133383369

MARKETING 3445551 4901445 6698552

RENT&TAXES 363216 620962 644739

P.F&FACILITY TO

STAFF

3772814 5100627 7332688

SALARY 22536440 24266687 27927167

MAINTAINANCE 2872165 6018873 12516293

TELEPHONE&STAT

IONARY

910806 1718262 2615466

PREM.OF

INSURANCE

290070 221277 200943

MISC.EXPANCES 1924117 2806713 3262630

BANK 3268556 2907387 2608009

39

INTEREST&COMMI

SSION

AUDIT

FEES&RESEARCH

881428 1039090 921498

DEPRECIATION 12572708 11522765 13105685

DEVELOP.OF CO-

OPRATION

5079962 6456545 8382063

PRO.FOR INCOME

TAX

1200000 2000000 2150000

NET PROFIT 3002990 3600409 3984204

TOTAL 924080357 1183434145 1309834959 TOTAL 924080357 1183434145 1309834959

40

3.8 COMMOMSIZED STATEMENT OF PROFIT AND LOSS ACCOUNT:

EXPENDITURE 06-07 07-08 08-09 INCOME 06-07 07-08 08-09

OP. STOCK(1-4-08) 1.22 1.31 2.81 SALES 98.00 96.38 97.67

PURCHASE 87.6 88.15 85.1 MISC. INCOME 0.03 0.08 0.05

EXPENDITURES DIVIDEND 0.12 0.09 0.08

PACKAGING 2.14 1.94 1.93 INTEREST ON DEPOSITES 0.17 0.35 0.13

POWER&FUEL 1.94 1.84 2.14 CLOSING STOCKS 1.69 3.1 2.82

PROCESSING 0.38 .57 1.02

MARKETING 0.37 0.41 0.51

RENT&TAXES 0.04 0.05 0.05

P.F&FACILITY TO STAFF 0.14 0.43 0.56

SALARY 2.44 2.05 2.13

MAINTAINANCE 0.31 0.51 0.96

TELEPHONE&STATIONAR 0.10 0.15 0.20

PREM.OF INSURANCE 0.03 0.02 0.02

MISC.EXPANCES 0.21 024 0.25

BANK INTEREST&COMMISSION 0.35 0.25 0.20

AUDIT FEES&RESEARCH 0.10 0.09 0.07

41

DEPRECIATION 1.36 0.93 1.00

DEVELOP.OF CO-OPRATION 0.55 0.55 0.64

PRO.FOR INCOME TAX 0.13 0.17 0.16

NET PROFIT 0.32 0.30 0.30

TOTAL 100 100 100 TOTAL 100 100 100

We can see that sales of the madhur dairy have a minor increases or decrease in it. In the first year it is 98% , in the next year it

decreases and reaches at 96% , in the current year it becomes 97%.

Net profit of the dairy almost remains constant. I the year 2006-07, it is 0.32%. in the next year it becomes 0.30%, and in the

year 2008-09 it remains as it is.

packing expanses of the dairy shows decreasing trend while the power expanses are increasing. The large part of the the

expanses goes to salary and it is decreasing now. Most of the expanses of the dairy are increasing at a slight rate. This is due to

increases in the sales . With the increases in sales, the cost of sales increases. As the result, it balances the profit on the constant rate.

In short, we can see a slight increase in the operating expanses and on the other hand there is a in increases in the sales . so the profit

of the dairy remains constant during this three years.

42

43

WORKING CAPITAL ANALYSIS

4.1 INTRODUCTIONBusiness capital is broadly divided in to two groups fixed capital

and working capital.fixed capital refers to the funds invested in to such fixed

or permanent asset as land, building, machinary etc.while working capital

refers to the funds locked up in materials, work-in-progress, finished goods,

receables and cash etc.since this asset are known as current asset, in very

simple terms “it will be shown latter, however, this definition of working capital

has become controversial.

Currents asset are those which get converted in to cash within a

period of one year or less. the examples are the stock of raw materials, work-

in-progress and finished products, receivables, cash etc.in addition, working

capital is also required to meet the day-to-day expenses on

wages,salaries,power etc. all the asset are converted in to cash within a short

period of time and cash received is again invested in to these asset. Thus, it

is constantly revolving or circulating. Hence, working capital is also known as

“circulating capital or floating capital.”

The main pint of difference between fixed capital and working

capital is the like this: fixed asset are of long duration and are not converted in

to cash within a period of one year, where current asset are converted in to

cash within a period of one year or less. Hence, the problems of fixed assets

belong to the field of capital budgeting, while the problems of working capital

belong to the field of cash budgeting. The other points to the divisibility of

investment. The investment in current asset ia divisible in to small units to a

large extent as compared to investement in fixed asset.

DEFINATION: “working capital may be defined as capital invested in

current assets.

44

WORKING CAPITAL OF MADHUR DAIRY::PARTICULARS 2007 2008 2009CURRENT ASSETS:ADVANCES&OTHER DUES 56266573 57756295 45642042CLOSING STOCK 15556566 36756647 26929159BANK&CASH 87294563 47678574 58743344TOTAL CURRENT ASSETS 159117702 142191516 131314548

LESSCURRENT LIABILITY:DEPOSITS 3400500 8507288 6954946DEBTS OF MILK CO-OP. SOC 114434917 102936244 104268853 DEBTS AGAINST EXPENDITURE 4986172 5391149 6212879

DEBTS AGAINST PURCHASE 6800064 6088324 7613463PROVISION FOR INCOME TAX 2641507 2146462 2765967TOTAL CURRENT LIABILITIES: 132263160 125069645 127816108

WORKING CAPITALTOTAL APPLICATION OF FUNDS

26854542220624625

17121871210629648

3498440209863751

45

4.2 CURRENT ASSETS:

A current asset means the assets in the form of cash or

can be readily converted in to the cash within a shorter time. They include cash,

bank balance, stock, debtors, bills receivable, prepaid expenses, accrued

income, and readily marketable securities etc.In other word Currant asset are

those which get converted in to cash within a period of one year or less.

Current assets:

As the current asset is given in the above table. We can

see that in the year 2007 the current asset is of rs. 159117702 .then in next year

in 2008 the current asset is decrease to 142191516.it decreases in compare to

the previous year. And finally in the year 2009 current assets again decrease by

10876968 and reaches to 131314548.

So we can find that the in the Madhur dairy the current assets

decreases year by year that shows poor working capital management

in Madhur dairy. company should improve its working capital .

2007 159117702

2008 142191516

2009 131314548

46

4.3 CURRENT LIABILITY:

Current liability includes the liability which company have to pay within the

period of one year. It includes creditors, deposits, provision for tax, and all other

provisions.

From the above table we find that in the year 2007 the current liability

was 132263160, in the2008 it increase by 7193515 and reaches to

125069645.the next year in 2009 it increases by 2746463 and reaches to

127816108.

From 2007 to 2008 current liability decrease by 7193515.it ensures the

positive effect to the progress of the company.

Madhur dairy should try to reduce its current liabilities so as to have

the effective working capital for the smooth operating of the business.

2007 132263160

2008 125069645

2009 127816108

47

4.4 WORKING CAPITAL

Business capital is broadly divided in to two groups: fixed capital and

working capital. fixed capital refers to the funds invested in to such fixed or

permanent asset as land, building, machinary etc.while working capital refers to

the funds locked up in materials, work-in-progress, finished goods, receables and

cash etc.since this asset are known as current asset, in very simple terms

“working capital may be defined as capital invested in current assets.” it will be

shown latter, however, this definition of working capital has become

controversial.

As shown in the above table we can see that in 2007 the working

capital of Madhur dairy is 26854542, and the next year in 2008 we can see that

the working capital decreases and reaches to 3498440.

Form the above statement of working capital we can understand that

the working capital decrease day by day in Madhur dairy .Madhur dairy should try

to increase its working capital.

2007 26854542

2008 17121871

2009 3498440

48

49

RATIO ANALYSIS5.1 introduction

A firm’s strength and weaknesses is established by viewing the

relationship between items in the Balance sheet and profit and loss using ratio

analysis.

A ratio is defined as the indicated quotient of two mathematical

expressions. It can also be described as the relationship between two or more

things. It is used as a benchmark for evaluating the financial position and

performance of a firm. Absolute accounting figures reported in the firm’s financial

statements do not provide any meaningful understanding of performance and the

firm’s financial position.

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

analysis. It is the process of establishing and interpreting various ratios (quantitative

relationship between figures and groups of the figures). It is with the help of ratio that

the financial statements can be analyzed more clearly and decisions made from

such analysis.

STEPS INVOLVED IN THE RATIO ANALYSIS

(1)Selection of relevant data from the financial statements depending

upon the objective of the analysis.

(2)Calculation of appropriate ratios from the above data.

(3)Comparison of the calculated ratios with the ratios of the same firm in

the past, or the ratios developed from projected financial statements or

the ratios of some other firms or the comparison with the ratio of the

industry to which the firm belongs.

(4).Interpretation of the ratios.

50

5.2 CLASSIFICATION OF RATIOS

The ratios have different use for different people. Therefore ratios can be classified

into different categories. Various ratios can be divided into following categories

depending upon their use.

(A)Traditional classification

Traditional classification or classification according to the statement, from which

ratios are calculated is as follows:

Profit and loss account

Balance sheet ratios

Inter statement ratios

(B)Classification according to the nature of ratios

In this type of ratios more emphasis is given to the nature of ratios, whether these

pertain to sales, earning, inventory etc.

Liquidity or solvency ratio

Debtors ratio

Creditors ratio

Sales ratio

Earning ratios

Cost of expenses ratio

(C)According to importance of ratios

Under this type of ratios, ratios can be divided into two categories as following:

Primary ratios:

1. Return on capital employed

Secondary ratios:

1. Production cost ratios

2. Distribution cost ratios

51

3. Selling cost ratios

(D)According to users of the ratios

(1)Ratios for management

Return on capital employed

Gross profit ratios

Current ratios

(2)Ratios for shareholders

Earning per share

Yield ratios

Payout ratios

(E)Ratios for creditors

Current ratios

Liquid ratios

Debt equity ratio

52

5.3 ADVANTAGES OF RATIO

ANALYSIS

Financial ratios are essentially concerned with the identification of

significant accounting data relationships, which give the decision-maker insights

into the financial performance of a company. The advantages of ratio analysis

can be summarized as follows:

Ratios facilitate conducting trend analysis, which is important for decision

making and forecasting.

Ratio analysis helps in the assessment of the liquidity, operating efficiency,

profitability and solvency of a firm.

Ratio analysis provides a basis for both intra-firm as well as inter-firm

comparisons.

The comparison of actual ratios with base year ratios or standard ratios

helps the management analyze the financial performance of the firm.

53

5.4 Limitations in Using Ratio Analysis

I. Standards of comparisons

Ratios of a company have meaning only when they are compared with some

standards. It is recommended that ratios should be compared with industry averages

however the industry averages are not easily available.

II. Company differences

The situations of two companies are never the same and the factors influencing the

performance of a company in one year may change in another year.

III. Price level

The interpretation and comparison of ratios are rendered invalid by the changing

value of money. The accounting figures presented in the financial statements are

expressed in the monetary unit which is assumed to remain constant.

IV. Different definition

Diversity of views exists as what is to be included in net worth or shareholders

equity, current assets and current liabilities. For instance, whether preference share

capital and current liabilities should be included in debt in calculating the debt equity

ratio, should the intangible assets be excluded to calculate the rate of return on

investment, or if included how will they be valued? Similarly the definition of profit is

not uniform to all.

V. Changing situations

The ratios do not have much use if they are not analyzed over years. The ratio at a

moment in time may suffer from temporary changes. This problem can be resolved

by analyzing trends of ratios over years.

VI. Past data

The basis to calculate ratios is historical financial statements. The financial

analyst is more interested in what happens in future while the ratios indicate what

happened in the past

54

5.5 CALCULATION OF REVENUE

STATEMENT RATIOS

1).GROSS PROFIT RATIO:

Gross profit represents the margin between the ‘Net Sales’ and ‘Cost

of Goods Sold’. The larger this gap, the greater is the scope of absorbing various

expenses on administration, maintenance, arranging finance, selling and distribution

and creating necessary provision for anticipated expenses, and yet leaving net profit

for the proprietors or share holders.

Its formulation is as below:

Gross Profit Ratio=Gross Profit* 100

Sales

Gross Profit = Sales – Cost of Goods

2007 2008 2009

59421227 *100

905510046

68095676 *100

1140552306

85399777 *100

12793339009

6.56 5.97 6.675

From the above calculation of ratio that shows in 2006-07 the ratio is

6.56% , in 2007-08 the ratio is 5.97% we can see that the ratio is decrease in 2007-

08.And in 2008-09 the ratio is 6.675 %.the gross profit ratio is increase in 2008-09.

This ratio of Madhur dairy is low it indicates that the cost of sales is

high or that the purchasing is inefficient. In such case the management of Madhur

dairy must investigate the causes and try to bring up this ratio.

55

2).OPERATING RATIO:

It is a ratio showing relationship between cost of sales goods sold plus

operating expenses and net sales. It shows the efficiency of the management. the

higher ratio, the less will be the margin available to proprietors. this ratio is also

usually expressed as a percentage.

Its formulation is as below:

Cost of goods sold +operating expenses * 100

Operating ratio= Net sales

2007 2008 2009

846088819+13578739*100

905510046

1072456630+16287554*100

1440552306

1241725983*100

1279339009

94.94% 75.578% 97.06%

The ratio displayed in above table we find that in 2006-07 the

operating ratio is 94.94% then it decreases to 75.578% and in the year 2008-

09 it increases to 97.06%.there is no specific trend in above 3 year in madhur

dairy.

In year 2006-07 the operating ratio shows that is 94.94% it means

that the operating expense is 95 rs per 100rs goods .in 2007-08 the ratio is

75.578% that shows very good operating position the less ratio wiil be gives

higher profit. In 2008-09 the ratio increases to 97.06% so it is not good

position Madhur dairy should try to decreases operating ratio.

56

3).NET PROFIT RATIO:

Net profit margin ratio establishes a relationship between the net

profit and sales and indicates management’s efficiency in manufacturing

administering and selling the products. This ratio is the overall measure of the

firm’s ability to turn each rupee sales into net profit.

Net Profit Margin = Profit after Tax * 100

Sales

From the above calculation we find that in 2006-07 the ratio is 0.3316

and in 2007-08 is 0.3156 and in the year 2008-09 the net profit ratio is 0.3110.

We can find that the ratio trend slaps down word from the above figure.

The higher ratio, the batter will be the profitability in order to have batter idea of

profitability

Madhur dairy’s net profit decreases continuously it shows the

negative features towards progress of the Madhur dairy.Madhur dairy should

make effort to improve its net profit either by increases it sales or by decreases

its operating expenses.

2007 2008 2009

3002990 * 100

905510046

3600409 * 100

1140552306

3984204 * 100

1279339009

0.3316 0.3156 0.3110

57

4).STOCK TURN OVER RATIO:

This ratio is very important in judging the ability of management with

which it can move the stock

Stock turnover ratio refers the number of time the average stock is

turned over during the year it is computed by dividing the cost of goods sold by

the average stock in the business.

Stock turnover = cost of goods sold

Average stock

Stock turnover in 2006-07 is 63.11 it means that total turnover of goods

is 63 times in a year in 2007-08 the ratio is 33.68 and in the year 2008-09 the

ratio is 33.41

The higher turnover, the more profitable the business would be. The

farm in such a case , will be able to trade on small margin of gross profit.

We can see that the growing trend in stock turnover is negative.

Madhur dairy should increase it’s selling to improve it’s stock turnover ratio.

2007 2008 2009

846088819

13406840

1072456630

31842903

1193939232

36842903

63.11 33.68 32.41

58

5.6 Calculation of BALANCE SHEET RATIOS

1).CURRENT ASSETS RATIO:

This ratio is an indicator of the firm’s commitment to meet its short-term

liabilities. Current assets means assets that will either be used up or converted into

cash within a years’ time or norms, operating cycle or the business,

Current asset ratio = current assets

Current liability

2007 2008 2009

159117702

56266573

14219191516

57756295

131314548

45642045

2.83 2.46 2.88

in 2006-07 the current assets ratio is 2.83 and it is decreases to 2.46 in

the year 2007-08 the current assets ratio in 2008-09 it increases to 2.88.

The adequacy of this ratio depends upon a number of factors like the

nature of business, the efficiency of collection department etc. if the turnover is quick

and the collection is efficient, the business may be successfully carried on with a low

current ratio.

The current ratio of Madhur dairy is considered as satisfactory level the

ratio of 2.88 shows that for the payment of the one liability the company had 2.88 rs

it’s shows the strong financial position of Madhur dairy.

59

2) QUICK RATIO:

This ratio establishes a relationship between quick or liquid assets and current

liabilities.

Quick ratio is also known as acid-test ratio.

Quick Assets = Current Assets – Inventories (i.e. stock) – prepaid expenses

Quick Ratio =Quick Assets

Quick Liabilities

The above table shows that in 2006-07 the quick ratio is 0.67.in 2007-

08 the ratio decreases and become 0.39 and in the year 2008-09 the ratio is

0.48.

The measure of absolute liquidity may be obtained by comparing only

cash and bank balance as well as readily marketable securities with liquid

liabilities this is very exacting standard of liquidity and it is satisfactory if the ratio

is 0.5:1.

The satisfactory standard of ratio is 0.5:1 so we can see that in 2006-

07 the quick ratio is satisfactory where as in 2008-09 it needs to improve.

2007 2008 2009

88161682

132263160

49524491

125069645

61517890

127816108

0.666 0.3959 0.4813

60

3).EQUITY RATIO / PROPRIETORY RATIO:

It is variant of debt – equity ratio. It is an important test to judge the

long-term solvency of a concern. It establishes relationship between the

proprietor or shareholder’s funds and the total assets. It may be expressed as:

Proprietor’s fund or Net worth = Equity Share Capital + Reserve and

Surplus + Preference Share Capital.

Total Assets = Total Equities or Total Resources of the concern.

Equity ratio =Proprietor’s funds

Total Assets

In the proprietary ratio is13.1%.it increase in 2007-08 and becomes

15.2%.it again increase in 2008-09 and becomes 16.9%.

The ratio shows increasing trend in proprietor’s funds but it is not

enough. the current ratio of 16.9% shows that only 26.74% amount of funds a

provided by proprieties to purchase the fixed assets. There is need to improve this

ratio for increasing owners cap business.

2007 2008 2009

28896800 *

100

220624625

32090969 *

100

210629648

35412164 *

100

209863751

13.1% 15.2% 16.9%

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4).DEBT EQUITY RATIO:

The ratio is also called ‘External Internal Equity Ratio’. It indicates the

comparative claims of outsiders and owner in the concern’s total equities the

claim of depositors, mortgagors, bondholders, suppliers, and other creditors are

matched with those of owner, i.e. shareholders or proprietors. The management

has to keep healthy balance between the two equities: external and internal.

Debt Equity Ratio = out side debt * 100

Share holders fund

This ratio upto 100% may be considered reasonable. A higher ratio shows the out side creditors have a larger claim, then the owner of the business. If this ratio is lower, it is not profitable from the view point of equity share holders.

In the year 2006-07 the ratio is 652.8% which decreases in 2007-08 and reaches to 155.30%.in the current year the ratio become 365.82%.

This means the Madhur dairy needs to reduce this ratio upto 100% for balancing the debt and equity of the firm.

2007 2008 2009

188713035 * 10028908600

49856125 * 10032103469

129313516 * 10035426064

652.8 155.30% 365.82%

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5).LONG TERM FUNDS TO FIX ASSET RATIO:

Long term funds to fix asset ratio is very important for any business or any firm. Normally, the fixed assets of must be purchased out of fixed capital only, which includes share capital, reserves and long term liability. Therefore this ratio shows relationship between fixed capital and fixed asset.

Formula: share capital+reserves+long term liabilityFixed asset

From the above table we find that in the year 2006-07 the long term funds to fix asset ratio is 1.6445 and in the next year in decreases to 1.4037.in the year 2008-09 the long term funds to fix asset ratio is again decreases to 1.1390.the ratio trend slaps down word in three year.

The ratio 1:1 may be considered a reasonable. The ratio of Madhur dairy is satisfactory but shows continuously decreasing trend during this three year.Madhur dairy should try to maintain the ratio 1:1.

2007 14892400+56449875+1400440051897663

1.6445

2008 16909300+15181669+4985612558378872

1.4037

2009 19169300+16242864+4263737568489943

1.1390

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6).LIQUID RATIO:

A variant of current ratio is the liquid ratio or quick ratio which is designed to show the amount of cash available to meet immediate payments. It is obtained by dividing the liquid asset by liquid liability.

Formula:::: liquid asset Liquid liability

The above table shows that in 2006-07 the quick ratio is 0.67.in 2007-08 the ratio decreases and become 0.39 and in the year 2008-09 the ratio is 0.48.

The measure of absolute liquidity may be obtained by comparing only cash and bank balance as well as readily marketable securities with liquid liabilities this is very exacting standard of liquidity and it is satisfactory if the ratio is 0.5:1.

The satisfactory standard of ratio is 0.5:1 so we can see that in 2006-07 the quick ratio is satisfactory where as in 2008-09 it needs to improve.

2007 2008 2009

88161682132263160

49524491125069645

61517890127816108

0.666 0.3959 0.4813

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5.7 calculation of COMPOSITE RATIO

1).RETURN ON CAPITAL EMPLOYED RATIO:

It is an index of profitability of business and is obtain by comparing net profit with capital employed. This ratio is normally expressed in the percentage .the term capital employed includes share capital, reserves and long term loans such as debenture.

Formula::: net profit * 100 Capital employed

In the year 2006-07, the return on capital employed ratio is 3.52% which increases in 2007-08 and finally in the current year in 2008-09 the return on capital employed ratio becomes 5.10%.

This ratio shows growing trend in progress of company. The ratio increases year by year .

In the year 2008-09 it gives 5.10% return on capital employed .as it is co-operative society the return is enough .but it has still need to improve the rate of return in Madhur dairy.

2007 2008 2009

3002909 * 100 85346675

3600409 * 100 81947094

3984204 * 100 78049539

3.52% 4.4% 5.1047%

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2). FIX ASSET TURN OVER RATIO:

It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets

To ascertain the efficiency and profitability of business, the total fixed assets are compared to sales.the more the sales in relation to the amount invested in fixed assets.it includes higher efficiency.The ratio is expressed as follows:

The ratio should not be more than 1 if it is less than 1, it shows that a part of the working capital has been financed through long-term funds. This is desirable to some extent because a part of working capital is termed, as “Core Working Capital” is more or less of a fixed nature.

Formula:: sales Fixed assets

From the above table we can see that in the year 2006-07 the fixed asset turn over ratio is 17.45. In the year 2007-08 it becomes 19.54. And in the year 2008-09 18.68.

This ratio is higher it means the fixed assets are being used effectively to earn profit in Madhur dairy. The ratio in next year 2007-08 increases in compare to the previous year 2006-07.and in the current year ratio remains 18.68 this ratio is good in good position in Madhur dairy.

2007 2008 2009

90551004651897663

114055230658378872

127933900968489943

17.45 19.54 18.68

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5.8 WORKING CAPITAL RATIO

1).WORKING CAPITAL TO SALES RATIO:

Working capital to sales ratio is very important for any business or firm. Working capital to sales ratio is calculated with dividing working capital with total sales revenue. We can know that how much working capital available in relation to the total sales revenue from this ratio.

Formula:: working capital Sales revenue

2007 2008 2009

26854542905510046

171218711140552306

34984401279339009

0.0296 0.015 0.0027

In the year 2006-07 working capital to sales revenue is 0.0296. in 2007-08 the ratio is becomes 0.015 and the current year 2008-09 the ratio is 0.0027.the working capital to sales ratio slaps down word within this three years.

This ratio continuously decreases year by year .the low ratio shows that there is lack of working capital in Madhur dairy. Madhur dairy should increase its working capital.

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2).SALES TO CASH RATIO:

Sales to cash ratio calculated by dividing sales by cash. Sales to cash ratio in very important because we can found that how much cash available in compare to sales in the business.

Formula::: sales cash

As we can see from the above table that in year 2006-07 the sales to cash ratio is 10.373 an d in the year 2007-08 it incerases rapidly and reaches at 23.9216.in the year 2008-09 the sales to cash ratio decreases to 21.778.

The ratio incerases year by year that means in madhur dairy sales incereases in respct to cash.

2007 2008 2009

90551004687294563

114055230647678574

127933900958743344

10.373 23.9216 21.778

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3).WORKING CAPITAL TURN OVER RATIO:

working capital turn over raito is calculated by dividing working capital with total asset.it shows the circulation of working capital during the given priod.

Formula: working capital Total asset

In the year 2006-07 working capital to total assets is 0.1217. in 2007-08 the ratio is becomes 0.0812 and the current year 2008-09 the ratio is 0.01667.the working capital to sales ratio slaps down word within this three years.

This ratio continuously decreases year by year .the low ratio shows that there is lack of working capital in Madhur dairy. Madhur dairy should increase its working capital.

2007 2008 2009

26859542220624625

17121871210629648

3498440209863751

0.1217 0.0812 0.01667

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Findings:

o The current ratio has shown in a fluctuating trend as 2.83, 2.46, 2.88, during 2007 to 2009 of which indicates a continuous increase in both current assets and current liabilities.

o The quick ratio is also in a fluctuating trend through out the period 2007 – 09 resulting as 0.666, 0.3959 and 0.4813. The company’s present liquidity position is not satisfactory.

o The proprietary ratio has shown a increasing trend. The proprietary ratio is increased compared with the last year. So, the long term solvency of the firm is increased.

o The working capital decreased from 26854542 to 3498440in the year 2007 to 2009.

o The fixed assets turnover ratio is in a fluctuating trend from the year 2007 – 09 (17.45, 19.54, and 18.68). It indicates that the company is efficiently utilizing the fixed assets.

o The net profit ratio is in fluctuation manner. It decreased in the current year compared with the previous year form 0.3156 to 0.3110.

o There is decrease in gross profit of the company due to increase in cost of goods sold but there is decrease in net profits due to increase in non operating expense.

o There is continuously growth in equity share capital.

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Suggestion:MADHUR DAIRY need to improve its current assets or on the other

hand needs to decrease the current liability to maintain the adequate

amount of working capital.

MADHUR DAIRY needs to decrease its operating expanses so that the

net profit can be enhanced.

Dairy should increase the proprietors capital. it reduces the burden of

interest, the Dairy liable to pay and as a result it enhances the net

profit.

There is a training need in the employees of MADHUR DAIRY.

Dairy should try to decrease the cost of selling the goods .so that net

profit can be increased.

Dairy need to improve its advertisement. It should try to cover as much

as possible.

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BIBLIOGRAPHY“Financial Management “Mahajan Publication

House Author “DR.HITESH SHUKLA”.

Elements of Financial management, AUTHOR,”I.M.PANDEY” Second edition.

Advanced financial management publication” B.S.SHAH”

Research Methodology author “C.R.KOTHARI”.

Annual report of “ Madhur dairy “of year 2007-08,2008-09.

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Conclusion

The working capital position of the company is sound and the various sources

through which it is funded.

The company has used its dividend policy, purchasing, financing and

investment decisions to good effect can be seen from the inferences made in

the project.

The returns have been affected by a marked growth in working capital and

though a 2% in2008- 2009 , but it got reduced as compared to 22% return in

2007-2008.

The various ratios calculated are an indicator as to the fact that the

profitability of the firm and sales are on a rise and also the deletion of the

inefficiencies in the working capital management.

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