SUMMER TRAINING REPORT ON RATIO ANALYSIS IN The Hisar- jind Co-operative Milk Producers Union Ltd.

MILK PLANT JIND SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF MASTERS DEGREE IN BUSINESS ADMINISTRATION SESSION 2010-2012 UNDER THE GUIDENCE OF: MR. ARUN GUPTA (ASSISTANT MANAGER) HISAR MILK PLANT JIND. SUBMITTED BY: RAJENDER MBA 2010- 12 ROLLNO.95

UNIVERSITY SCHOOL OF MANAGEMENT KURUKSHETRA

DECLARATION
I Rajender studying in University School Of Management do hereby declare that this project titled Ratio Analysis of The Hisar-Jind Co-operative Milk Producers Union Ltd. Milk Plant,Hisar-Jind has been prepared by me, under the guidance of Mr. ARUN GUPTA, Assistant Manager (Accounts), VITA. I further declare that this project report has not been submitted earlier to any other University or Institute for the award of any degree or diploma.

Rajender

ACKNOWLEDGEMENT
The satisfaction and euphoria that accompany the successful completion of any task would be incomplete without mentioning the people who made it possible, whose consistent guidance and encouragement crowned the efforts with success. To begin with I am thankful to The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant jind for giving me an opportunity to do my summer training in the organization. This report is by far the most significant accomplishment in my post graduation and life, it would be impossible without people who supported and believe in me. I have immense pleasure in expressing my sincere sense of gratitude to a Mr Arun gupta

(Assistant Manager) for their excellent guidance, constructive criticism and above all constant encouragement and inspiration which led to successful completion of this project.

RAJENDER USM KUK

PREFACE
Practical training provides a golden opportunity to implement studied rules and regulation. In the absence of Practical knowledge, theoretical knowledge is incomplete. This indented for the experience gained by me during Summer Training in The Hisar-jindCo-operative Milk Producers Union Ltd. Milk Plant Hisar-jind As per the curriculum requirement, I did 7 weeks training in The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant jind Working in such a big concern, no matter for a very small period was really a matter of pride. My area of work in that concern was confined to Account section and moreover it was not possible for me to cover all the areas of Account section in such a short period of time so I concentrated my working on the project assigned to me i.e. RATIO ANALYSIS. So the learning during the training in The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant jind. a report of that is being presented in the following pages. I have also gained confidence to interact with different persons working at reputed posts in the organization. I have also learned how to work efficiently in a stressful environment. During the summer training, in preparing the project report, I have tried my level best effort to make it reliable, compact and accurate.

Rajender

INDEX
CONTENTS CHAPTER 1- INTRODUCTION Company Profile Introduction to Topic
Ratio Analysis

PAGE NO 1-28 2-13 14-28

CHAPTER 2- RESEARCH METHODOLOGY

29-33 30 31 32 33 34-55

Problem Statement Objectives of the Study Database Limitation of the Study

CHAPTER 3- INTERPRETATION & ANALYSIS

Data Analysis Liquidity Ratio Leverage Ratio Activity Ratio Profitability Ratio 35-38 38-44 45-50 50-55 56-59 57 58 59 60-64 61 62-63 64

CHAPTER 4- RESULTS & CONCLUSION

Findings Suggestions Conclusion

CHAPTER 5- ANNEXURES

Balance Sheet Profit & loss A/c Bibliography

CHAPTER -1 INTRODUCTION

COMPANY PROFILE
DESAN MEIN DES HARYANA JIT DUDH DAHI KA KHANA Haryana is the region where milk is an important constituent of the daily fare. The Haryana state came into existence on the 1st day of November 1966 as a separate state of union of India. Earlier to this day, the state was a part of combined Punjab state. For the development of dairy activities, the state govt. formed a corporation in the public sector under the name and style of HARYANA DAIRY DEVLOPMENT CORPORATION LTD (HDDC) with its registered office at Chandigarh. HDDC provided the marketing facilities to the milk producers for their surplus quantity of milk products, the HDDC set up its first milk plant in the heart of the state in the city of JIND with an installed capacity of 50000 liters per day. The JIND plant came into existence in the year 1969 and the infrastructure enabled the milk plant to process the milk and manufacture GHEE, BUTTER and POWDER under the brand name of VITA. It was the time when the success of ANAND PATTERN co-operative milk producers societies was on everyones mind. NATIONAL DAIRY DEVELOPMENT BOARD (NDDB), ANAND AND INDIAN DAIRY CORPOTATION (a govt. of India venture) decided to replicate the ANAND PATTERN for the purpose. It is primarily a three-tier system i.e. state level COOPERATIVE FEDERTION, district level MILK UNIONS and village level MILK SOCIETIES. All these work on the co-operative system.

Organization of village level milk societies on ANAND PATTERN. Purchase of milk testing equipment, stationery and balanced cattle feed etc. from the manufacturers in bulk and supply the same to the societies.

Supervise the working of the societies through its staff.

The union was paid a fixed amount of commission on the quantity of milk so collected by the cooperative societies by the corporation to meet its expenses.

To replicate further the ANAND PATTERN in the state of Haryana, a state federation was formed under the name and style of Haryana Dairy Development Co-operative Federation Ltd. w.e.f. 1.4.1977 and all the milk plants, setup by the corporation, along with the staff were transferred to the federation on lease basis. Even after the formation of state level federation, responsibilities and activities of the milk unions remained the same as before at the district level.

In the year 1982, the federation decided to transfer its P and I activities along with the staff to the ten district milk unions existing at the time, in view of the demand for implementation of ANAND PATTERN in the state in true spirit. But the powers of deciding the policies in regards to milk procurement i.e. milk procurement rates to be given to the societies, rate of commission to the union to meet its expenses and milk processing facilities remained with the federation. Initially the federation was declaring milk procurement rates based on the realization of the value of milk products minus the federation expenses. Milk producers did not consider the rates declared by the federation very remunerative and thus milk procurement remained much below the installed capacity of the plants all the time. Due to lower milk procurement and less rate of commission to the unions, the unions went into heavy losses. Since the procurement was very less as compared to the capacity utilization, the federation also went into the red. There had been heavy losses in the organization at all the levels and in-discipline amongst the staff also grew. To overcome this situation and to bring the organization out of red, the then management of the federation took some hard steps. These included taking disciplinary action against the erring employees, amalgamation of nearby unions into a single union (to reduce overheads by pooling of available sources) and combining of efforts so that the organization could be taken out of red. The main change in the federation policy was to change the milk procurement policy. This was now linked to the market rates of procurement of milk rather than the previous policy of realization value of milk products. Under this decision, following five milk unions were formed in the year 1991: The Ambala district co-operative milk producers union ltd. The karnal & Kurukshetra co-operative milk producers union ltd. The Hissar and Jind co-operative milk producers union ltd.

The Gurgaon and Rohtak co-operative milk producers union ltd. The Sirsa district co-operative milk producers union ltd.

The average milk procurement for 1998-99 was at 45109 LPD at jind. However, the daily hand and jind 110450 LPD respectively. The union has reached a turnover of Rs. 180 crores. Besides custom packing of fluid milk in poly packs for Mother Dairy, Delhi, the union is also manufacturing milk and products like butter, ghee and paneer under the HDDCF brand name of VITA for which the union has a well trained, experienced and committed work force. Close interaction with Mother Dairy, Delhi has opened the gateway to modern management ideas for the workforce, which wants to implement international quality and food safety systems in the milk plants. Milk plant hisar-jind had gone in for modernization and certification under ISO-9002 Quality Management System and IS-15000 Food Safety System (HACCP) in August 1999. A turn around had been achieved and the future is promising with an investment of Rs. 1.46 crores, generated internally by the milk plant, during 1998-99 for up gradation and automation of the plant. During the year 1999-2000 too modernization projects costing Rs. 56 lakhs were implemented. The number of villages of jind district supply milk too the hisar-jind milk plant.such as UCHANA,KHATKAR,JULANA,SHAPAR,KANDELA,NAGURA,NARNAUND,KALTA.IGR A,KAIR KHERI,and many others.

COMPANY LOGO

NATIONAL DAIRY DEVELOPMENT BOARD (NDDB)

The National Dairy Development Board (NDDB) was founded to replace exploitation with empowerment, tradition with modernity, stagnation with growth and transforming dairying into an instrument for the development of India farmers. The National Dairy Development Board was created in 1965 in response to the Prime Minister Lal Bahadur Shastris call to transplant the spirit of ANAND in many other places. He wanted the ANAND MODEL of dairy development with institutions owned by rural producers, which were sensitive to their needs and responsive to their demands replicated in other parts of the country. The Boards creation was routed in the conviction that our nations socio-economic progress lies largely on the development of rural India. Thus NDDBs mandate is to promote, finance and support producer-owned and controlled organizations. NDDBs programmers and activities seek to strengthen farmer co-operatives and support national policies that are favorable to the growth of such institutions. With a mission to make dairying a vehicle for a better future for millions of grassroots milk producers in rural India, the NDDB launched Operation Flood, the worlds largest dairy development programmer, in 1970. It made India the worlds largest milk producing nation and within three decades, Operation Flood led to the creation of more than 100000 village level

diary co-operatives nationwide. These co-operatives procured an average of 25.09 million kg of milk per day and marketed an average of 20.04 million liters of milk per day in the year 2008-09. NDDB has embarked upon a national campaign to create an umbrella brand identity for associated co-operative milk brand. This is based on quality guidelines, standardized presentation and packaging. The Operation Flood Logo Milk Drop has been adopted as the symbol for fresh and pure milk. To enhance visibility, milk pouch designs have been standardized through an established colour code to distinguish different types of milk. The Milk Drop is used on milk sachets, retail signs and distribution vehicles to promote a better recall for all co-operative brands in the marketplace. As a prelude to the campaign, NDDB worked out strict quality guidelines that a participating brand must conform before it qualifies for the campaign. These guidelines relate to improving quality at various levels. At present 16 brands across 15 states and one union territory are participating in the campaign.

HARYANA DAIRY DEVELOPMENT CO-OPERATIVE FEDERATION

HARYANA is one of the most progressive states of Republic of India. In the domain of dairy development it is well known for its productive milk cattle particularly the Murrah Buffaloes and Haryana Cows. The economy of the state is predominantly based on agriculture. People rear and breed cattle subsidiary occupation. Milk production in the state was estimated around 147 lakhs liters per day during 2006-07. The essence of various programmes launched in the State has been to adopt the ANAND PATTERN of Milk Co-operatives. Under this system, all the functions of dairying like milk procurement, processing and marketing are controlled by the Milk producers themselves. It has three tier system comprising milk Producers Societies at the village level, Milk Producers Cooperative Union at the district level and the state Milk Federation as an apex body at the state level. The Haryana Dairy Development Co-operative Federation Ltd. registered under Haryana Co-operative Societies Act came into existence on April 1, 1977. Its authorized share capital is Rs.4000 lakhs. It was established with the primary aim to promote economic interests of the milk

producers of Haryana particularly those belonging to weaker sections of the village community by procuring and processing milk into milk products and marketing thereof by itself or through its unions. In furtherance of the above objects, the Federation undertakes a number of activities such as establishment of milk plants, marketing of VITA BRAND milk products of the Milk Unions. Its turnover during is Rs.768.00 crores. It also extends technical guidance to the Unions in all spheres of personnel, technical, marketing and financial management as well as makes them quality conscious, through use of modern methods of laboratory testing of various products.

Quality VITA the Hallmark of Quality

As part of stringent quality measures, milk required for processing VITA products is procured from Dairy Co-operative Societies only. It is ensured that the milk is transported to chilling canters and plants in clean and sterilized milk cans as quickly as possible. All quality measures as per Standard of Bureau of Indian Standards/ Agmark are being applied before the products are marketed. Well-equipped laboratories are functioning in the chilling centers and milk plants to maintain ideal quality standards. VITA is the endorsement of quality, a commendation we are Proud of. Milk Plant Rohtak, Ballabgarh, Ambala and Jind have obtained ISO-9002 and IS-15000 certificates. Remaining Plants would also obtain ISO-9002 shortly. Each Plant has taken steps for implementing Hazard Analysis and Critical Control Points (HACCP).

DISTRICT MILK PRODUCERS CO-OPERATIVE UNIONS

The Primary Milk Societies (PMS) functioning at the village level join to form a Milk Union for carrying out such activities which are conducive and essential for the socio-economic development of milk producers, by procuring and processing of milk and marketing of milk products. The Board of Directors comprising 8 members elected out of the Chairmen of affiliated Primary Milk Societies run the day-to-day administration through Chief Executive officer. These Unions either process milk at their own level or pass the same to the milk plants of other milk unions for processing. They also organize new Primary Milk Societies at the village level. A brief matrix of the Milk Unions is as follows:

MILK UNIONS IN HARYANA Sr. No. 1 2 3 4 5 6 Name of the Union Date of Regis. 10.03.1973 01.04.2003 10.07.1991 05.07.1991 10.01.1978 01.04.2003

The Ambala District Co-operative Milk Producers Union Ltd., Ambala The Rohtak District Co-operative Milk Producers Union Ltd., Rohtak The Hisar-Jind Co-operative Milk Producers Union Ltd., Jind The Kurukshetra-Karnal Co-operative Milk Producers Union Ltd., Kurukshetra The Sirsa District Co-operative Milk Producers Union Ltd., Sirsa The Ballabgarh Co-operative Milk Producers Union Ltd., Ballabgarh

There are five milk plants operating in the Co-operative Sector in Haryana. These are located at Ambala, Jind, Rohtak, Sirsa and Ballabgarh having a handling capacity of 470000 liters per day.

PRIMARY MILK SOCIETY

The Primary Milk Society is the foundation of the Co-operative structure. The efficiency of the movement solely lies in the strength of these Societies. Primary Milk Societies are organized at the rate of one society per village. The purpose of such a society is to promote the economic interests of its members by improving quality, and increasing quantity of milk production per buffalo or cow and to provide necessary guidance and assistance to its members and supply milk to Milk Unions. These societies also supply cattle feed etc. to their members with a view to enhancing milk production. The Managing Committee of the Society comprises members elected by those members who are eligible to participate and vote in the General Body Meeting. GROWTH AT A GLANCE Functional Societies (Avg) Year Nos. 200001 2710 200102 2885 200203 3166 200304 3350 200405 3906 200506 4127 200607 5028 200708 5980 2008-09 6167

Status of Milk Booths under Union As On 31.10.2010 Sr. No. Name of the Union
No. of Booths

1 The Ambala District Co-operative Milk Producers Union Ltd., Ambala 2 The Rohtak District Co-operative Milk Producers Union Ltd., Rohtak 3 The Hisar-Jind Co-operative Milk Producers Union Ltd., Jind 4 The Kurukshetra-Karnal Co-operative Milk Producers Union Ltd., Kurukshetra 5 The Sirsa District Co-operative Milk Producers Union Ltd., Sirsa 6 The Ballabgarh Co-operative Milk Producers Union Ltd., Ballabgarh

85 61 80 26 17 99

SWEETENED FLAVOURED MANGO DRINK DOUBLE TONED MILK

NAMKEEN LASSI MITHI LASSI

TABLE BUTTER

GHEE (AGMARK)

JAL JEERA DAHI

MILK PANEER

KHEER COW MILK GHEE

MILK CAKE

KAJU PINNI

VITA PRODUCTS PRICE HARYANA DAIRY DEVELOPMENT COOPERATIVE FEDRATION LTD. RATES LIST OF VITA MILK AND MILK PRODUCTS AS ON 1.4.10 Sr. No. 1 2 3 4 5 6 7 8 9 10 Product Ghee rates Ghee rates Ghee rates Ghee rates Ghee rates Ghee rates Cow Milk Ghee rates (Sirsa) Cow Milk Ghee rates (Sirsa) Table Butter Table Butter Packing 1 Ltr. MP 1 Ltr. PP 1 Ltr. Tin 2 Ltr. Tin 5 Ltr. Tin 15 Ltr. Tin 1 Ltr. MP 15 Ltr. Tin 100 gm 500 gm Rate w.e.f. 12-2-11 12-2-11 12-2-11 12-2-11 12-2-11 21-4-11 12-2-11 21-4-11 21-4-11 21-4-11 Price 282.00 280.00 286.00 572.00 1390.00 4195.00 292.00 4346.00 24.00 117.00 GHEE (Haryana / CHD / Delhi / HP)

TABLE BUTTER (Haryana / CHD / Delhi)

11 12 13 14 15 SWEETS 16 17 18 19 20 21 22 DAHI 23 24

Table Butter (Un Cartuoned) Liquid Milk (500 ml) Liquid Milk (500 ml) Liquid Milk (500 ml) Liquid Milk (500 ml) Milk Cake (Milk Plant Ambala) Milk Cake (Milk Plant Ambala) Milk Cake (Milk Plant Ambala) Kheer (Milk Plant Ambala) Kaju Pinni (Milk Plant Sirsa) Kaju Pinni (Milk Plant Sirsa) Pinni (Milk Plant Jind) Dahi Dahi

15 Kg Full Cream Standard Tonned Double Tonned 200 gm 450 gm 900 gm 200 gm 900 gm 450 gm 900 gm 200 gm 400 gm

21-4-11 1-8-11 11-4-11 11-4-11 11-4-11 14-8-11 14-8-11 14-8-11 1-6-11 14-8-11 14-8-11 14-8-11 1-4-11 1-4-11

3405.00 19.00 16.00 13.50 12.00 39.00 89.00 174.00 15.00 175.00 90.00 170.00 14.00 24.00

LIQUID MILK

DRINKING DELIGHTS Sweetened Flavored Milk 26 Butter Scotch Flavor Sweetened Flavored llaichi 27 Flavor 28 Plain Lassi 29 30 31 32 33 34 ICE CREAM 35 Kulfi (Pista) Salted Lassi Mithi Lassi Jal Jeera (Jind) Plain Chhachh (BLB) Mango Drink Mango Drink

200 ml Bottle 200 ml Bottle 1 Litre pouch 250 ml pouch 200 ml cup 200 ml pouch 500 ml pouch 500 ml 1000 ml 60 ml

1-4-11 1-4-11 7-5-11 21-6-11 1-4-11 1-4-11 1-4-11 1-5-11 1-5-11 15-6-11

18.00 18.00 20.00 9.00 15.00 6.00 7.00 22.00 38.00 15.00

36 37 38 39 40 41 42 43 Paneer 44 45

Choco Bar Vanila Cup Butter Scotch Cup Kaju Kishmish Brick Tutti Fruity Brick Butter Scotch Brick Vanila Brick Strawberry Brick Paneer Paneer

60 ml 100 ml 100 ml 800 ml 800 ml 800 ml 1000 ml 1000 ml 200 gm 1 kg

2-7-11 23-4-11 23-4-10 23-4-10 23-4-10 23-4-10 23-4-10 23-4-10 1-4-11 1-4-11

13.00 12.00 15.00 54.00 54.00 52.00 52.00 53.00 36.00 165.00

INTRODUCTION TO TOPIC
RATIO ANALYSIS
The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as Percentages Fractions Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined by ratio analysis, Ratio reflects a quantitative relationship helps to form a quantitative judgment. STEPS IN RATIO ANALYSIS The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm. Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action. BASIS OR STANDARDS OF COMPARISON Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types. Past ratios, calculated from past financial statements of the firm.

Competitors ratio, of the some most progressive and successful competitor firm at the same point of time.

Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or pro forma financial statements.

NATURE OF 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. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis. Selection of relevant data from the financial statements depending upon the objective of the analysis. Calculation of appropriate ratios from the above data. 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 ratios of the industry to which the firm belongs. INTERPRETATION OF THE RATIOS The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways. Single absolute ratio Group of ratios Historical comparison Projected ratios

Inter-firm comparison

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios. Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool

LIMITATIONS OF RATIO ANALYSIS Differences in definitions Limitations of accounting records Lack of proper standards

No allowances for price level changes Changes in accounting procedures Quantitative factors are ignored Limited use of single ratio Background is over looked Limited use Personal bias

CLASSIFICATIONS OF RATIOS The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows: Traditional Classification Functional Classification Significance ratios

1. Traditional Classification

Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet.

Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,

Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification

These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.

3. Significance ratios Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios. IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE Liquidity ratio Leverage ratio Activity ratio Profitability ratio

1. LIQUIDITY RATIOS Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-term current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be calculated Current ratio Quick (or) Acid-test (or) Liquid ratio Absolute liquid ratio (or) Cash position ratio

(a) CURRENT RATIO:

Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm. Current Assets Current Ratio = Current Liabilities

Components of Current Ratio CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses (b) QUICK RATIO Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash within a short period without loss of value. Quick or Liquid Assets Quick Ratio = Current Liabilities Components of Quick or Liquid Ratio QUICK ASSETS Cash in hand CURRENT LIABILITIES Outstanding or accrued expenses CURRENT LIABILITIES Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

Cash at bank Bills receivable Sundry debtors Marketable securities Temporary investments

Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

(c) ABSOLUTE LIQUID RATIO Although receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets. Absolute Liquid Assets Absolute Liquid Ratio = Current Liabilities Components of Absolute Liquid Ratio ABSOLUTE LIQUID ASSETS Cash in hand Cash at bank Interest on Fixed Deposit CURRENT LIABILITIES Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable 2. LEVERAGE RATIOS The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations. Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings. The following ratio serves the purpose of determining the solvency of the concern.

Debt Equity Ratio Debt to total Funds Ratio Proprietary Ratio Fixed Assets to Proprietors Fund Ratio Capital Gearing Ratio Interest Coverage Ratio

(a) DEBT EQUITY RATIO Debt-Equity ratio, also known as External Internal Equity ratio is calculated to measure the relative claims of outsiders and the owners (i.e., shareholders) against the firms assets. This ratio indicates the relationship between the external equities or the outsider funds and the internal equities or the shareholders funds. Outsiders Funds Debt-Equity Ratio = Shareholder Funds Components of Debt-Equity Ratio OUTSIDERS FUND Debentures Mortgage loan Bank loan Loan from financial institutions Public deposits (b) DEBT TO TOTAL FUNDS RATIO The ratio establishes a link between the long term funds raised from outsiders and total long term funds available in the business. Debt Debt to Total Funds Ratio = Equity + Debt SHAREHOLDERS FUND Share capital Reserves & Surplus

Components of Debt to Total Funds Ratio SHAREHOLDERS FUND Share capital Reserves & Surplus TOTAL CAPITALISATION Debentures Mortgage loan Bank loan Loan from financial institutions Public deposits Share capital Reserves & Surplus (c) PROPRIETARY RATIO A variant to the debt-equity ratio is the proprietary ratio which is also known as equity ratio. This ratio establishes relationship between shareholders funds to total assets of the firm. Shareholder Funds Proprietary Ratio = Total Assets Components of Proprietary Ratio SHAREHOLDERS FUND Share capital Reserves & Surplus Fixed assets Current Assets Cash in hand & at bank Bills receivable Inventories Marketable securities Short-term investments Sundry debtors Prepaid expenses TOTAL ASSETS

(d) FIXED ASSETS TO PROPRIETORS FUND RATIO The ratio establishes the relationship between fixed assets and shareholders funds, i.e., share capital plus reserves, surpluses and retained earnings. Fixed Assets Fixed Assets to Proprietors Ratio = Proprietors Funds

Components of Proprietary Ratio FIXED ASSETS Machinery Buildings Plant Vehicles (e) CAPITAL GEARING RATIO The term capital gearing is used to describe the relationship between equity share capital including reserves and surpluses to preference share capital and other fixed interest-bearing loans. If preference share capital and other fixed interest bearing loans exceed the equity share capital including reserves, the firm is said to be highly geared. Equity Share Capital + Res. & Sur. Capital Gearing Ratio = Fixed Cost Bearing Capital Components of Capital Gearing Ratio EQUITY SHAREHLDER FUND Equity share capital Reserves & Surplus FIXED COST BEARING CAPITAL Preference capital Debentures Long term loans PROPRIETORS FUNDS Share capital Reserves & Surplus

(f) INTEREST COVERAGE RATIO Net income to debt service ratio or interest coverage ratio is used to test the debt-servicing capacity of a firm. The ratio is also known as Fixed Charges Cover or Times Interest Earned. This ratio is calculated by dividing the net profit before interest and taxes by fixed interest charges. Net Profit (before Interest and taxes) Interest Coverage Ratio = Fixed Interest Charges 3. 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. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are converted or turned over into sales. Stock Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working capital turnover ratio Fixed assets turnover ratio

(A) STOCK TURNOVER RATIO Stock turnover ratio is also known as inventory stock ratio is normally calculated as sales/ average inventory or cost of goods sold/ average inventory. It would indicate whether inventory has been efficiently used or not. The purpose is to see whether only the required minimum funds have been locked up in inventory. Inventory Turnover Ratio (I.T.R.) indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. Cost of Goods Sold Stock Turnover Ratio =

Average Stock Cost of Goods Sold = Net Sales Gross Profit Opening Stock + Closing Stock Average Stock = 2 (b) DEBTORS TURNOVER RATIO Debtors turnover ratio indicates the velocity of debt collection of firm. In simple words, it indicates the number of times average debtors are turned over during a year. Net Credit Sales Debtors Turnover Ratio = Average Trade Deb. Trade Deb. = Sundry Deb. + Bill Receivables Opening Trade Deb. + Closing Trade Deb. Avg. Trade Debtors = 2 (c) CREDITORS TURNOVER RATIO A supplier of goods, i.e., creditor, is naturally interested in finding out how much time the firm is likely to take in repaying its trade creditors. The analysis for creditors turnover is basically the same as of debtors turnover ratio except that in place of trade debtors, the trade creditors are taken as one of the components of the ratio and in place of average daily sales, average daily purchases are taken as the other component of the ratio. Net Credit Purchases Creditors Turnover Ratio = Average Trade Cr. Trade Creditors = Sundry Cr. + Bill Payable Opening Trade Cr. + Closing Trade Cr. Avg. Trade Creditors = 2 (d) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales. It indicates the velocity of the utilization of net working capital. This indicates the no. of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio indicates inefficient utilization. Cost of Sales Working Capital Turnover Ratio = Working Capital Working Capital = Current Assets - Current Liabilities Components of Working Capital CURRENT ASSETS Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses (e) FIXED ASSETS TURNOVER 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. Cost of Sales Fixed Assets Turnover Ratio = Net Fixed Assets Cost of Goods Sold = Net Sales Gross Profit Net Fixed Assets = Fixed Assets - Depreciation CURRENT LIABILITIES Outstanding or accrued expenses Bank overdraft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

4. PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. Generally, profitability ratios are calculated either in relation to sales or in relation to investment. The various profitability ratios are discussed below. GENERAL PROFITABILITY RATIO Gross Profit Ratio Net Profit Ratio Operating Ratio

PROFITABILITY RATIO BASED ON INVESTMENT Return on Capital Employed Return on Shareholders Funds

GENERAL PROFITABILITY RATIO (a) GROSS PROFIT RATIO Gross profit ratio measures the relationship of gross profit to net sales and is usually represented as a percentage. Thus, it is calculated by dividing the gross profit by sales. Gross Profit Gross Profit Ratio = Net Sales Net Sales = Sales Sales Return (b) NET PROFIT RATIO Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm. Net Profit after Tax Net Profit Ratio =

Net Sales Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax Net Sales = Sales Sales Return (c) OPERATING PROFIT RATIO Operating ratio establishes the relationship between cost of goods sold and other operating expenses on the one hand and the sales on the other. Operating Cost Operating Ratio = Net Sales Operating Profit Operating Profit Ratio = Sales Operating Profit = Net sales - Operating cost PROFITABILITY RATIO BASED ON INVESTMENT (d) RETURN ON CAPITAL EMPLIYED Return on capital employed establishes the relationship between profits and the capital employed. It is the primary ratio and is most widely used to measure the overall profitability and efficiency of a business. Adjusted Net Profits Return on Capital Employed = Capital Employed Adjusted Profits = Profits before Interest, Tax and Dividends Capital Employed = Fixed Assets + Working Capital (e) RETURN ON SHAREHOLDERS FUNDS Return on shareholder funds is the relationship between net profits (after interest & tax) and the proprietors funds. The two basic components of this ratio are net profits and shareholders

funds. Shareholders funds include equity share capital, preference share capital and reserves. Net profits are arrived at after deducting interest on long-term borrowing and income tax, because those will be the only profits available for shareholders. Net Profits after Int. & Tax Return on Shareholders Fund= Shareholders Funds

CHAPTER 2 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Research is a voyage of discovery, a movement from unknown to known. In common parlance, it refers to a scientific and systematic search for pertinent information on a specific topic. It is the pursuit of truth with the help of study, observation, comparison and experiment. Research methods may be understood as all those method / techniques that are used by the researcher during the course of studying his research problem. Research methodology is a way to solve the problem scientifically and systematically. In this we study the various steps that are generally adopted by researcher in studying his research problem along with the logic behind them. When we talk about research methodology, we not only talk of the research methods but also the comparison of the logic behind the method we use in the context of our research study and explain why we are using a particular method and why not others.

OBJECTIVES OF THE STUDY

The major objectives of the resent study are to know about financial strengths and weakness of The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant JIND through FINANCIAL RATIO ANALYSIS. The objectives of the study are to evaluate the performance and efficiency of the company by using ratios as a yardstick. To understand the liquidity, profitability and efficiency positions of the company during the study period and to evaluate and analyze various financial performance facts of the company. Make comparisons between the ratios during different periods. OBJECTIVES

To study the present financial system at The Hisar-jindCo-operative Milk Producers Union Ltd. Milk Plant jind.

To determine the Profitability, Liquidity Ratios. To analyze the capital structure of the company with the help of Leverage ratio. To offer appropriate suggestions for the better performance of the organization.

DATA BASE
The information needed for fulfilling the objective of the study is collected both from primary as well as secondary sources of data with regard to time, cost and sources available. Primary Sources: Primary data is collected through observation and direct communication with Finance Manager and other employees of Finance department. Secondary Sources: Annual Reports & Records of the company are used for the purpose of report. Number of books for the purpose has been studied for better understanding and preparing the report in a simple, unambiguous and precise manner. Annexure, schedules & other pertinent details from various sources are also used. Company Journal, Company Website and Special record that is maintained by accountants has been studied while making this report.

Limitations of the Study

The study is bound up with some limitations and constraints which made efficiency of the same extend deviate it from its main line of thought. Though no stone was left unturned to make the study more precise, accurate and relevant to the objectives, yet there are some limitations and general problems, which are note worthy to make study meaningful. 1. Time Constraint The time was the major constraint for conductive the study. The time for conducting the project was comparatively inadequate. 2. Limited Scope The study of me was limited only to a company. 3. Lack of Deep Knowledge Lack of deep knowledge was another limitation. To analyze the financial statements in depth one should possess the deep knowledge of the financial analysis. 4. Only the Partial Fulfillment of the Degree The study is carried only for the partial fulfillment of the degree of Master of Business Administration (Finance). Due to this the researcher did not provide the whole and sole concentration of his on the study. 5. Results cannot be generalized In our analysis we used the trend analysis and comparative financial statements. So the results cannot be generalized.

CHAPTER 3 INTERPRETATION & ANALYSIS

DATA ANALYSIS
1. LIQUIDITY RATIOS Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-term current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be calculated Current ratio Quick (or) Acid-test (or) Liquid ratio Absolute liquid ratio (or) Cash position ratio LIQUIDITY RATIO A. CURRENT RATIO (Amount in `) Current Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Current Assets 123296313.00 132443503.49 205860507.99 305913637.70 493669302.07 Current Liabilities 54330888.59 50127148.94 71297804.34 52604159.71 30760257.42 Ratio 2.27 2.64 2.89 5.82 16.05

GRAPHICAL REPRESENTATION

Interpretation As a rule, the current ratio with 2:1 or more is considered as satisfactory position of the firm. As we can see that in the year 2010-2011 current ratio is 16.05:1 which has reached very high as compared to previous five years which shows that the company is not utilizing the liquid funds properly and company is in a position to pay its current liabilities out of its current assets in time. As per the rule this ratio is good. But very high ratio is not good for the company. B. QUICK RATIO (Amount in `) Quick Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Quick Assets 41284005.02 65105975.12 135540557.70 219156085.82 381937673.10 Current Liabilities 54330888.59 50127148.94 71297804.34 52604159.71 30760257.42 Ratio 0.76 1.30 1.90 4.17 12.42

GRAPHICAL REPRESENTATION

Interpretation As a rule, the quick ratio with 1:1 or more is considered as satisfactory position of the firm. As we can see that in the year 2010-2011 quick ratio is 12.42:1 which has reached very high as

compared to previous five years which shows that company is able to pay off current obligations immediately. As per the rule this ratio is good. But very high ratio is not good for the company. C. ABSOULTE LIQUIDITY RATIO (Amount in `) Absolute Liquidity Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Absolute Liquid Assets 8687164.94 5538256.14 6497389.09 10052927.09 32755145.63 Current Liabilities 54330888.59 50127148.94 71297804.34 52604159.71 30760257.42 Ratio 0.16 0.11 0.09 0.19 1.06

GRAPHICAL REPRESENTATION

Interpretation Absolute Liquid Ratio of 0.5:1 or more is supposed to be an ideal ratio. As we can see that in the year 2010-2011 current ratio is 1.06:1 which has reached very high as compared to previous five years which shows that companys short-term financial position is good. As per the rule this ratio is good and it is also good for the company. 2. LEVERAGE RATIOS The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations. Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings. The following ratio serves the purpose of determining the solvency of the concern.

Debt Equity Ratio Debt to total Funds Ratio Proprietary Ratio Fixed Assets to Proprietors Fund Ratio Capital Gearing Ratio Interest Coverage Ratio LEVERAGE RATIOS

A. DEBT EQUITY RATIO (Amount in `) Debt Equity Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Outsider Funds 112631760.87 52861168.90 61744210.40 71158277.79 261000000.00 Shareholder Funds 54450607.74 63194048.10 63296365.79 66921073.19 71813190.97 Ratio 2.07 0.84 0.98 1.06 3.63

GRAPHICAL REPRESENTATION

Interpretation Debt Equity Ratio of 2:1 or less is supposed to be an ideal ratio. As we can see that from the year 2006-2007 to 2008-2009 the ratio is less than 2:1 but in the last year 2009-2010 this ratio is 3.63:1 which is higher than ideal ratio which show that company claims of outsiders in long term (creditors) are greater than those of owners. As per the rule this ratio is not good and it is also not good for the company.

B. DEBT TO TOTAL FUNDS RATIO (Amount in `) Debt to Total Funds Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Outsider Funds 112631760.87 52861168.90 61744210.40 71158277.79 261000000.00 Total Capitalization 167082368.61 116055217.00 125040576.19 138079350.98 332813190.97 Ratio 0.67 0.46 0.49 0.52 0.78

GRAPHICAL REPRESENTATION
Interpretation Debt to total funds Ratio of 0.67:1 or less is supposed to be an ideal ratio. As we can see that from the year 2007-2008 to 2010-2011 ratio is continuously increasing which shows that company has relied much on outside sources for raising long-term funds. As per the rule this ratio is not good hence it is also not good for the company.

C. PROPRIETARY RATIO (Amount in `) Proprietary Ratio Year 2006 07 2007 08 2008 09 2009 10 Share Holders Funds 54450607.74 63194048.10 63296365.79 66921073.19 Total Assets 226207675.78 257932727.77 331894935.48 433418563.96 Ratio 0.24 0.25 0.19 0.15

2010 11

71813190.97

625356345.33

0.12

GRAPHICAL REPRESENTATION

Interpretation In Proprietary Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that from the year 2006-2007 to 2010-2011 ratio is continually decreasing which shows that companys long-term solvency position is not better. As per the rule this ratio is not good hence it is also not good for the company.

D. FIXED ASSETS TO PROPRIETORS FUNDS (Amount in `) Fixed Assets to Proprietors Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Fixed Assets 90848300.09 109970071.59 106193589.80 105278921.57 107153312.57 Shareholders Funds 54450607.74 63194048.10 63296365.79 66921073.19 71813190.97 Percentage 167% 174% 168% 157% 149%

GRAPHICAL REPRESENTATION Interpretation Fixed Assets to proprietors Ratio of 65% or less is better for the company. As we can see that from the year 2006-2007 to 2010-2011 ratio is continuously decreasing which show that company is improving this ratio but it is much higher to normal ratio this shows that owners funds are not sufficient to finance the fixed assets and company has to depend upon outsiders to finance the fixed assets.

As per the rule this ratio is not good hence it is also not good for the company. E. CAPITAL GEARING RATIO (Amount in `) Capital Gearing Ratio Fixed Cost Bearing Equity Shareholder Fund Capital 54450607.74 112631760.87 63194048.10 63296365.79 66921073.19 71813190.97 52861168.90 61744210.40 71158277.79 261000000.00

Year 2006 07 2007 08 2008 09 2009 10 2010 11

Ratio 0.48 1.20 1.03 0.94 0.28

GRAPHICAL REPRESENTATION

Interpretation In Capital Gearing Ratio there are no rules of thumb lesser the ratio better it is for the company. As we can see that from the year 2006-2007 to 2009-2010 ratio is continuously decreasing which show that company capital gearing ratio is good. As per the rule this ratio is good hence it is also good for the company.

F. INTEREST COVERAGE RATIO (Amount in `) Interest Coverage Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 EBIT 7965269.89 14538426.10 8705714.40 9554336.83 11216940.37 Fixed Interest Charges 6712032.68 9958071.00 4580355.10 8070006.02 6325295.00 Ratio 1.19 1.46 1.90 1.18 1.77

GRAPHICAL REPRESENTATION

Interpretation In Interest Coverage Ratio higher the ratio better it is for the company. As we can see that from the year 2005-2006 to 2010-2011 ratio is increasing except the year 2008-2009 which shows that company is able to meet its commitment of fixed interest charges. As per the rule this ratio is good hence it is also good for the company.

3. 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. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are converted or turned over into sales. Stock Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working capital turnover ratio Fixed assets turnover ratio ACTIVITY RATIOS A. STOCK TURNOVER RATIO (Amount in `) Stock Turnover Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Cost of Goods Sold 989246756.66 1379748713.93 1740902881.50 2044892769.85 2273758620.65 Average Stock 58569423.02 55985834.36 47855588.69 54447919.21 73474740.16 Ratio 16.89 24.65 36.38 37.56 30.95

GRAPHICAL REPRESENTATION

Interpretation In Stock Turnover Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that in the year 2005-2006 to 2008-2009 the ratio is continuously increasing except last year 2009-2010 ratio which show that companys previous year trends are good but in last year the ratio is decreasing which is not good. As per the rule this ratio is not good hence it is also not good for the company. B. DEBTORS TURNOVER RATIO (Amount in `) Debtors Turnover Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Net Credit Sales 1031504291.53 1425577500.72 1781031869.07 2088598137.00 2323788901.21 Avg. Trade Dr. 18586934.78 28007884.85 58293047.64 137320364.22 194850640.46 Ratio 55.50 50.90 30.55 15.21 11.93 Collection Period 7 days 7 days 12 days 24 days 31 days

GRAPHICAL REPRESENTATION
Interpretation In Debtors Turnover Ratio there are no rules of thumb higher the ratio better it is for the company. But as per the company policy all the sales is done on cash basis except government organisations. As we can see that in the year 2005-2006 to 2009-2010 ratio is continuously decreasing it is due to the credit sales given to the govt. institutions.

But it is decreasing at a higher rate which is not good for the company. C. CREDITORS TURNOVER RATIO (Amount in `) Creditors Turnover Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Net Credit Purchase 862304398.38 1218063363.76 1569377942.91 1849566173.60 2048746839.00 Avg. Trade Cr. 33008439.08 34102557.54 41298110.38 35204283.19 14528146.83 Ratio 26.12 35.72 38.00 52.54 141.02 Payment Period 14 days 10 days 10 days 7 days 3 days

GRAPHICAL REPRESENTATION
Interpretation In Creditors Turnover Ratio there are no rules of thumb lesser the ratio better it is for the company. But as per the company policy all the purchases of raw milk will be done on 10 days payment basis. As we can see that from the year 2005-2006 to 2009-2010 ratio is continuously increasing which shows that company pays the credit amount very fast. As per the rule this ratio is not good hence it is also not good for the company. D. WORKING CAPITAL TURNOVER RATIO (Amount in `) Working Capital Turnover Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Cost of Sales 989246756.66 1379748713.93 1740902881.50 2044892769.85 2273758620.65 Working Capital 68965424.41 82316354.55 134562703.65 253309477.99 462909044.65 Ratio 14.34 16.76 12.94 8.07 4.91

GRAPHICAL REPRESENTATION Interpretation In Working Capital Ratio there are no rules of thumb higher the ratio better it is for the company but a high working capital turnover ratio is not a good situation for company. This ratio should be compared with ratios of other firms doing similar business and making a better interpretation of the ratio. As we can see that in the year 2006-2007 to 2009-2010 ratio is continuously decreasing which shows that companys working capital ratio is not good. E. FIXED ASSETS TURNOVER RATIO (Amount in `) Fixed Assets Turnover Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Cost of Sales 989246756.66 1379748713.93 1740902881.50 2044892769.85 2273758620.65 Net Fixed Assets 51349925.28 63995092.77 62018721.87 58639581.77 57137107.77 Ratio 19.26 21.56 28.07 34.87 39.79

GRAPHICAL REPRESENTATION Interpretation In Fixed Assets Turnover Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that from the year 2006-2007 to 2009-2010 ratio is continuously increasing which show that company fixed assets turnover ratio is good. As per the rule this ratio is good hence it is also good for the company.

4. PROFITABILITY RATIOS The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise. Generally, profitability ratios are calculated either in relation to sales or in relation to investment. The various profitability ratios are discussed below. GENERAL PROFITABILITY RATIO Gross Profit Ratio Net Profit Ratio Operating Ratio

PROFITABILITY RATIO BASED ON INVESTMENT Return on Capital Employed Return on Shareholders Funds

A. GROSS PROFIT RATIO (Amount in `) Gross Profit Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Gross Profit 42257534.87 45828786.79 40128987.57 43705367.15 50030280.56 Net Sales 1031504291.53 1425577500.72 1781031869.07 2088598137.00 2323788901.21 Percentage 4.10% 3.22% 2.25% 2.09% 2.15%

GRAPHICAL REPRESENTATION

Interpretation In Gross Profit Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that from the year 2005-2006 to 2009-2010 ratio is continuously decreasing which shows that companys gross profit ratio is not good. As per the rule this ratio is not good hence it is also not good for the company. B. NET PROFIT RATIO (Amount in `) Net Profit Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Net Profit After Tax 1142222.89 2029708.61 2723149.30 2676137.83 3112890.69 Net Sales 1031504291.53 1425577500.72 1781031869.07 2088598137.00 2323788901.21 Percentage 0.11% 0.14% 0.15% 0.13% 0.13%

GRAPHICAL REPRESENTATION

Interpretation In Net Profit Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that from the year 2005-2006 to 2007-2008 ratio is continuously increasing but in

2008-2009 and 2009-2010 the ratio has decreased which shows that companys net profit ratio is not good. As per the rule this ratio is not good hence it is also not good for the company.

C. OPERATING PROFIT RATIO (Amount in `) Operating Profit Ratio Year 2006 07 2007 08 2008 09 2009 10 2010 11 Operating Profit 18066022.69 19822396.49 21065818.48 14107379.66 15700499.56 Net Sales 1031504291.53 1425577500.72 1781031869.07 2088598137.00 2323788901.21 Percentage 1.75% 1.39% 1.18% 0.68% 0.68%

GRAPHICAL REPRESENTATION Interpretation In Operating Profit Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that from the year 2005-2006 to 2009-2010 ratio is continuously decreasing which shows that companys operating profit ratio is not good. As per the rule this ratio is not good hence it is also not good for the company. D. RETURN ON CAPITAL EMPLOYED (Amount in `) Return on Capital Employed Year 2006 07 2007 08 2008 09 Adjusted Profit 7965269.89 13014861.61 8705714.40 Capital Employed 159813724.50 192286426.14 240756293.45 Percentage 4.98% 6.77% 3.62%

2009 10 2010 11

9554336.83 11216940.37

358588399.56 570062357.22

2.66% 1.97%

GRAPHICAL REPRESENTATION Interpretation In Return on Capital Employed Ratio there are no rules of thumb higher the ratio better it is for the company. As we can see that from the year 2006-2007 to 2009-2010 ratio is continuously decreasing which shows that companys return on capital employed ratio is not good. As per the rule this ratio is not good hence it is also not good for the company.

E. RETURN ON SHAREHOLERS FUND (Amount in `) Return on Shareholders Fund Year 2006 07 2007 08 2008 09 2009 10 2010 11 Adjusted Profit 7965269.89 13014861.61 8705714.40 9554336.83 11216940.37 Shareholders Funds 54450607.74 63194048.10 63296365.79 66921073.19 71813190.97 Percentage 14.63% 20.60% 13.75% 14.28% 15.62%

GRAPHICAL REPRESENTATION

Interpretation In Return on Shareholders Fund Ratio there are no rules of thumb higher the ratio better it is for the company. This ratio should be compared with ratio of other firms doing similar business and making a better interpretation of the ratio. As we can see that from the year 2006-2007 and

2007-2008 ratio is decreasing but after that in 2008-2009 and 2009-2010 it is again increasing which show that resources of company are well used. As per the rule this ratio is good hence it is also good for the company.

CHAPTER 4 RESULTS & CONCLUSION

FINDINGS
Like a traveler, who after completing his long and arduous journey reaches his destination and looks back upon the area covered by him for recalling the important landmarks and experiences he came across; similarly, it would be desirable to review the various aspects of the present study. So prior to winding up this study, an attempt is made to summarize its major findings on the basis of forgoing chapters which deals with the analysis and interpretation of the financial statements. To conclude, The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant jind short term, long term and solvency financial position can be regarded as not good which is shown through under mentioned facts and figures: Liquidity position of Milk Plant Hisar-jind is not good because Quick ratio and Current ratio is very high in previous year as compared to the last years which is due to the idle funds. Gross Profit Ratio also shows the declining trend from year to year. Net profit of Milk Plant Hisar-jind is very low because Milk Plant jind is a co-operative society. Operating Profit Ratio is also showing a declining trend from year to year. Return on Capital employed shows decreasing trend which is not good for the company. It shows the weaker position of the company. Return on shareholders fund shows increasing trend which is good for the company. Proprietary Ratio of the Milk Plant jind shows decreasing trend, which is again not good for the company. Receivable ratio show decreasing trend which has negative effect on liquidity position of the company. Payable ratio shows that Milk Plant Hisasr-jind gets less days in previous year for payment to its creditors.

SUGGESTIONS
A companys performance is reflected through its turnover, profitability and long term & short term financial position. From the above analysis it is clear that the financial position of the plant is not sound. There is a need to apply long term as well as immediate stern steps. To improve the financial position of the company, following measures are suggested: Efforts should be made to improve internal equity over external equity. Proper utilization of fixed assets is required. Current assets management should be checked & its level should be decreased to overcome the problem of idle funds. To control the cost of goods sold, the purchase policy should be revised and purchases should be made on favorable basis. To reduce administration expenses. Proper utilization of employees and workforce should be made. There is a need to recruit and retain more efficient employees in the plant. To control operating cost, cost of goods sold & administration expenses should be reduced. There is also a need of better inventory management, effective steps should be taken to control inventory conversion period. To improve the sales, the plant should move along with the advanced technology by modifying its sales policies, so that stock can be easily converted into sales. Receivable and payable ratio is also to control by extending the payment period and receive the payment as fast as possible. Profitability can be increased by reduction in cost of power and fuel, higher utilization of labour, use of higher skilled labour etc.

The company has idle funds which system.

can be utilized by improving the management

CONCLUSION
Success is achieved by those who try where there is nothing to lose by trying and a great deal to gain if successful, by all means try W. Clement Ston The overall conclusion of study is that the overall position of Milk Plant Hisar-jind is not good. This is due to the taking of long term unsecured loan which also effect the bank balance of the current asset that effect the overall ratios of the study. Hence, we can say that the short term, long term and solvency positions of Milk Plant Hisar-jind are not good as compared to the previous years.

CHAPTER 5 ANNEXURES

BALANCE SHEET
The Hisar-jindCo-operative Milk Producers Union Ltd. BALANCE SHEET AS AT 31ST MARCH 2006, 2007, 2008, 2009, 2010 & 2011

BALANCE SHEET OF LAST FIVE YEARS 2006-07 LIABILITIES

Share Capital Reserves & Surplus Grant & Subsidies Unsecured Loans Current Liabilities & Provisions TOTAL 1338487.21 39923513.64 10522791.53 112631760.87 54330888.59 230793825.84 14764221.84 46400117.65 96336511.89 52861168.90 50127148.94 260489169.22 15973199.73 44600016.76 138112996.40 61744210.40 71297804.34 331728227.63 17180431.73 47064503.63 242568345.42 71158277.79 52604159.71 430575718.28 18258876.65 50441423.63 258940051.26 261000000.00 30760257.42 619400608.96

2007-08

2008-09

2009-10

2010-11

ASSETS
Fixed Assets Investments Current Assets 90848300.09 12063062.69 123296313.00 109970071.59 15519152.69 132443503.49 106193589.80 19840837.69 205860507.99 105278921.57 22226004.69 305913637.70 107153312.57 24533730.69 493669302.07

Losses
Upto Last Year Profit/Loss A/C During the Year Profit/Loss A/C TOTAL 5728372.95 -1142222.89 230793825.84 4586150.06 -2029708.61 260489169.22 2556441.45 -2723149.30 331728227.63 -166707.85 -2676137.83 430575718.28 -2842845.68 -3112890.69 619400608.96

PROFIT & LOSS ACCOUNT

TheHisar-jind Co-operative Milk Producers Union Ltd. PROFIT & LOSS FOR THE YEAR ENDING 31ST MARCH 2006, 2007, 2008, 2009, 2010 & 2011 P&L ACCOUNT OF LAST FIVE YEARS
2000000222222222006622222 2007-08 22222222222222

2008-09

2009-2010 2009-10 (` In Thousands)

REVENUE INCOME
Sale of Milk & Milk Prod Sale of Trading Goods Sale of Scrap 980536.32 49750.59 1217.37

1336611.8 1650720818. 1933704108. 2182890.2 3 33 79 6 87824.78 1140.88 129134919.5 153455194.2 139477.80 5 4 1176131.19 1438833.97 1420.82

Closing Stock
Finished Goods Trading Goods SUB TOTAL Misc Income Income From TIP By Gross Profit TOTAL 61121.15 3461.56 1096087.00 793.78 13.53 42257.53 43064.85 45626.77 46996890.46 58079612.47 84402.19 1762.18 1325328.52 2494006.98 1973.66

47388.95 48322218.98 60573619.45 86375.86 1364.40 26.62 1729965.42 6050.00 1962865.04 0.00 1682.34 0.00

45828.78 40128987.57 43705367.15 50030.28 1474357.4 1831090103. 2151134621. 2411847.1 8 47 49 1

REVENUE EXPENSES
O-Stock Finished Good O-Stock Trading Goods 51406.93 1149.20 61121.15 3461.56 4562.67 1762.18

(` In Thousands)
46996.89 1325.32 58079.61 2494.00

R-Material Consumed Manufactu ring Exp. Procureme nt Exp. Purchase of Tar. Good Gross Profit SUB TOTAL Administra tive Exp. Selling Exp. Prior Period Exp.
NON OPERATIN G EXP.

814172.43 99081.12 30173.59 57846.17 42257.53 1096087.00 14049.98 10092.36 49.15

1128694.5 1434723.76 1 124271.56 35714.41 73874.46 45828.78 132558.35 38529.72 136024.29 40128.98

1703316.02 153400.95 43094.31 157332.87 43705.36 2149171.75 20564.63 9033.35 0.00

1895842.3 9 175994.79 48496.64 179227.03 50030.28 2410164.7 6 25545.32 8784.45 0.00

2900104.1 3618579.18 3 18250.36 7756.02 0.00 17498.80 10140.27 -1564.36

Royalty Paid Lease Money Depreciati on Int. on Loan HDDC Int. on Cash Cr. Limit Net Profit Before I. Tax Income Tax on Profits Add Back I. Tax of Pre. Year Net Profit after I. Tax TOTAL

551.00 4438.28 5918.79 187.80 6137.49 1639.97 -497.75 0.00 1142.22 43064.85

500.00 1221.96 6476.60 9958.07 0.00 3056.79 -1027.08 0.00 2029.70

500.00 1221.96 5362.60 4580.35 0.00 4125.35 -1402.21 0.00 2723.14

500.00 1221.96 4793.94 5500.19 0.00 4054.14 -1378.00 306.60 2676.13 2151134.62

551.50 1221.96 4392.44 307.78 6404.24 4504.90 -1392.01 0.00 3112.89 2411847.1 1

1474357.4 1831090.10 8

BIBLIOGRAPHY
In completing this project report many books, annual reports of The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant jind and many websites are being used. I pay my respect and thanks to them.

Annual report of The HISAR-JIND Co-operative Milk Producers Union Ltd. Milk Plant Rohtak for the last 5 years.

GUPTA, Arun gupta, and Sharma, R.K., Management Accounting, 11nt ed., New Delhi, Kalyani Publishers, 2009

Kothari, C.R., Research Methodology Methods & Techniques, 2nd ed., New Delhi, New Age International (P) Limited Publishers, 2008

Pandey, I.M., Financial Management, 9th ed., Vikas Publishing House Pvt. Ltd., 2007 Websites referred

www.vitaindia.com www.google.com www.wikipedia.com www.nddb.org