Escolar Documentos
Profissional Documentos
Cultura Documentos
SUBMITED BY:UTSAV.H.SUKHADIYA
ENRLL.NO. -097510592005
SUBMITTED TO:-
TABLE OF CONTENT
SR.NO.
1
2
3
4
5
6
7
7.1
7.2
7.3
8
8.1
9
10
11
12
13
14
15
16
PARTICULAR
Student Declaration
Preface
Acknowledgement
Project guide certificate
Executive Summary
Dairy Industry Overview
Sabar Dairy: - Introduction
Company Profile
History & Development
SWOT Analysis
Ratio Analysis
Limitation of Ratio Analysis
Common Size balance Sheet
Income Statement
Forecasting & Planning
Cash flow Analysis
Leverage
Conclusion & Findings of Study
Bibliography
Appendix
P.g.NO.
I
1
2
3
4
9
10
13
22
29
47
48
49
50
53
61
70
74
75
DECLARATION
I, UTSAV SUKHADIYA, hereby declare that the project titled A Project on Financial Analysis of
Sabar Dairy from 2004-2010 is an original work carried out by me at Sabar Dairy Himatnagar as
partial fulfillment requirement of MBA degree of GTU. Further this project has not been previously
submitted for award of any degree of Institute of Technology and Management of any other
university.
Place: Gandhinagar, Sadra.
UTSAV SUKHADIYA
Date: 25/07/2010
MBA
ROLL: 55
SIM TAJPUR.
PREFACE
The management has wider scope, the important of management expands day to day because, there
is large number of companies in small and large comes into existence. Industrial knowledge likes a
coin, which has two sides. One is theoretical and another is practical knowledge. Both are very
important for the report. But in fact practical knowledge is more important than the theoretical.
Industrial knowledge is an important part of the syllabus for MBA student. Studying only the
management theories does not enough to student in the management field. Personality of the
student industrial knowledge guide the student and play visa role in improving personality of the
student of the business administration and understanding regarding the theories of the management,
management is an important area where practical studies a lot of conceptual clearing and also give
a clear cut understanding of the application of management principles.
This report includes financial analysis of sabar dairy in which Ratio Analysis, Projected
Forecasting and Planning, Projected Cash flow statement, income statement, common size
-Balance sheet, leverage. The main objective of this report is to know about financial conditions of
the company; analysis it and give suggestion to what to do in the future. What type of policy
should be adopted or may be changes by the top management.
For this purpose I collect secondary data from the company like annual report of last six years and
also other qualitative data from the employees of the company; sometimes I was go to the
different- different departments of the company and observe to the employee and noted in the
mind give my views also noted in my project report.
-1-
ACKNOWLEDGEMENT
This report is not the result of a single hand rather various people are involved
directly & indirectly contributing in some way or the other. I am indebted to Mr.Pravesh
Bhadvya Director and Dr.Gajendra samar of the Sabar institute of management for
providing an opportunity of doing Summer Training in Sabar Dairy and allowing me to use the
resources of the institute during this Project.
I am extremely thankful to my Project guide prof. Ishan Pandya of Sabar
institute of management as an internal guide & Mr. Devjibhai Patel Senior Accounting
Officer of Sabar Dairy as an external guide for precious guidance regarding the preparation
format of the Project report & provide other valuable information related to project. They have
been excellent guides & were available at any hour of need; without them friendly and cheerful
guidance, this Project would never materialize. I am also thankful to other staff members of the
Sabar Dairy to give valuable support for this Project.
Last but not least, I extend my sincere thanks to all my friends, colleagues who
provide the source of inspiration for doing better work on project
-2-
EXECUTIVE SUMMARY
Executive summary is an important part of the project report in which I have included all the
information of my project in a short manner. My project title is Financial Analysis of Sabarkantha
Districtive Milk Producers Union Limited from 2004-2010.
Milk industry has undergone a revolution in this century with the development of science and
technology. Milk is most vital nutritious product upon which every human being depends. It is
perishable in nature understanding the nature of perish ability of these product technologists tried
their best to preserve this product so as to ensure its use in products.
Sardar Vallabhbhai Patel gives the first idea to establish and Co-operative business of
milk.
Amul dairy has been established near about us a result at the time in Anand. Amul dairy got the
milk from two Talukas as that time and it had about 1000 societies and it procures about 9000
Ltrs. Milk.
The Sabarkantha Districtive Milk Producers Union Limited, Himatnagar is a milk processing unit
in the Sabarkantha district. It is also known as SABAR Dairy. The main objective of sabar dairy is
to collect milk from sabarkantha district and manufacture different types of milk products and to
customers at a lowest price. Sabar dairy produces the different milk base products but those all
products marketed by GCMMF (Gujarat Co-operative Milk Marketing Federation Limited, Anand),
In short all major activities regarding marketing are done on the priority of the GCMMF.
The National Dairy Development Board (NDDB) was formed in 1965 and was charged with the
responsibility of building cooperative dairies in India on the Anand pattern.
In the beginning, the NDDB faced many obstacles. The Dairy Board had few financial resources;
state governments and departments had little interest in turning over their responsibilities to farmers
and, even more, in becoming employees of farmers. The National Dairy Development Board was
created to promote, finance and support producer-owned and controlled organizations
This report includes financial analysis of sabar dairy in which Ratio Analysis, Projected Forecasting
and Planning, Projected Cash flow statement, income statement, common size -Balance sheet,
leverage. The main objective of this report is to know about financial conditions of the company;
analysis it and give suggestion to what to do in the future. What type of policy should be adopted or
may be changes by the top management.
-3-
-4-
Under operation flood III programmers it as proposed to procedure milk from 725 dcs by 1992.
The procurement expected to be of 90,000 by the end of 1992. The proposed financial outlay under
III programmers for union was Rs.315lakes, which involved investment on chilling center.
Expansion of existing dairy plant technical input services and support to villages dairy Cooperative. At present the dairy production of milk is 4 to 5 lakes liters.
The government of India also helped the industry to develop by giving its full assistance and with
the launching of operation flood in the 7 th 5 year plans the industry got the needed impetus. At
the time if independence the growth rate of the industry was less at around 1% but with the help of
the government the growth rate increased to 4.2%.
Percapita availability:
Recommended 210 gm
India
1950
132 gm
1997
214 gm
2020
290 gm
-5-
Human Population
Milk production
Average annual growth rate
(2006-2010)
Per capita milk availability
Milch animals
57 million cows;
39 million buffaloes
1,250kg
Rs 550 crores
20 mlpd
10
Rs 50,051 crores
Goat
Liquid skimmed
milk
92.10
Protein (gm)
4.30
3.20
3.30
2.50
Fat (gm)
6.50
4.10
4.50
0.10
0.80
0.80
0.80
0.70
5 Carbohydrates 5.00
(gm)
4.40
4.60
4.60
Energy
117.00 67.00 72.00
calories (kcal)
29.00
120.00
Phosphorus
(mg)
90.00
Iron (mg)
4 Minerals (gm)
0.20
0.20
0.30
0.20
India:
Leading most buffalo populated country
78 millions most of reverine
Milk production: About 95% of world buffalo milk (45.3 million tonnes) is produced in Asia
&Pacific, while 64.4% is produced in India (FAO.1992)
From 1950 to 1992 milk production in the world increased by 4.26%
The % of total bovines slaughtered;
Total bovine slaughtered (%)
World 17.1 to 17.4% or - 1.6% per annum
India 15% per annum
Asia 6.6%
-7BREEDS
Classified on phenotypic & geographic locations;
Cockril (1982) = Buffalo river type; two sub groups;
1. Horns are closed and set close to head & are down swept; e.g. Murrah, Ravi, Mehasana,
Jaffarabadi, Sambalpur
2. Horns are sickle shaped and unswept: e.g. Bhadawari, Kalahandi, Kanara, Manda, Nagpuri,
Pandharpuri, Surti, Tarai & Toda
Group
Breed
Breeding tract
Murrah
type
Murrah
Nili Ravi
Gujarat
Surti
Jaffarabadi
Mehsana
Uttar
Pradesh
Bhadawari
Tarai
Central India
Nagpuri
Pandharpuri
Kalahandi
Sambalpur
South India
Toda
South Kanara
Nilgiri Hills
West coast in Kerela
Buffaloes found in the north eastern states and the eastern coastal region of India & in China
South east Asian countries e.g. Philippines, Thailand, Malaysia, Vietnam, Srilanka, Burma, Laos,
Kampuchea, Bangladesh etc. have been classified as swamp buffaloes on the basis of their genetic
constitution (2n=48) & natural habitat. The breeds includes in these groups are Manda &
Palakhemundi.
-8-
SABAR DAIRY
-9-
Company profile
-10-
Name
Designation
Jethabhai P. Patel
Chairman
Jyantibhai B. Patel
Vice chairman
Khemabhai H. Patel
Directors
Jashubhai S. Patel
Directors
Ramabhai G. Patel
Directors
Bhogibhai R. Patel
Directors
Kantibhai S. Patel
Directors
Dhurabhai K. Patel
Directors
Subhashbhai N. Patel
Directors
10
Lilachandbhai B. Patel
Directors
11
Jesingbhai R. Patel
Directors
12
Vipulbhai R. Patel
Directors
13
Dolatsingh J. Chauhan
Directors
14
Manibhai I. Patel
Directors
15
Jyantibhai V. Patel
Directors
16
Kantibhai D. Patel
Directors
17
M.C.Shah
Directors
18
R.S. Sodhi
Directors
19
Directors
20
Kanubhai M. Patel
Directors
21
M.D.
-11-
Storage
Introduction
Modern milk plants hold both raw and pasteurized milks for a much longer period than before.
Normally the milk storage capacity is equal to one days intake. This allows a more nearly uniform
work-day for processing and bottling operations with less dependence on the time for receiving
raw milk. Storage tanks are used in Milk Plants for the storage of raw, pasteurized, or processed
products, often in very large volumes. Because of the longer periods of holding, storage tanks are
among the most important items of equipment. They must be designed for ease in sanitation,
preferably by the circulation-cleaning method. In addition, the tanks should be insulated or
refrigerated, so that they can maintain the required temperature throughout the holding period.
Agitation should be adequate for homogeneous mixing, but gentle enough to prevent churning and
incorporation of air.
Objectives
-12-
Types of Storage
Insulated or Refrigerated
In the former, there are 5 to 7.5 cm. of insulating material between the inner and outer linings; in
the latter, the space between the two linings is used for circulation of the cooling medium. Another
variation of the refrigerated type is the cold-wall tank.
Horizontal or Vertical
While the former requires more floor space and less headspace, the latter requires less floor space
and more headspace. Modern circulation cleaning methods have made very large vertical storage
tanks practical.
Rectangular, Cylindrical or Oval
Of these, the first suffers from the disadvantage of having dead corners during agitation, while the
other two do not.
Built for gravity flow, air-pressure or vacuum operation
The first is the most common. However, air pressure is sometimes used to evacuate the product.
This requires special construction of the storage tank for greater strength than necessary for
normally operations under gravity flow.
Location
In one system, the storage tanks are located on an upper floor. The milk is pumped from the
receiving room to the floor above. It then flows by gravity to the pre-heater, filter or clarifier,
pasteurizer, cooler and bottling machine. In another system, the milk is pumped from the storage
tanks through a pre heater and filter into the pasteurizer. Hence it may flow by gravity to the
cooler, or it may be pumped to the cooler while hot.
Parts of a Storage Tank
Sight glass;
Safety valve;
Legs;
Ladder;
indicating thermometer;
Volume-meter.
Air vent;
Manhole;
Inlet;
Agitator;
Outlet valve;
-13-
Dairy Products
FLOW CHART OF CONVERSION OF MILK INTO TRADITIONAL DAIRY PRODUCTS
Milk
Cultured
Condensed Acid
Precipitation
1.Shrikhand
1.Mishti dol
1.Paneer
2.Ghee
2.Rabri
2.Sandesh
3.Lassi
3.Kheer
4.Kadbi
4.Khoa
3.Rasgoola
4.Pantoda
Burfi
Pedha
Kalakand
Gulabjamun
5.Rasmalai
Items
Percentage in relation to
Total milk production Total quantity
converted into
milk products
Fluid milk
44.5
Manufactured milk
55.5
(100)
Ghee
32.7
58.9
Dahi
7.8
14.0
Butter
6.3
11.4
Khoa
4.9
8.8
Ice cream
0.7
1.3
Cream
1.9
3.4
Other products
(Mainly chhana)
1.2
2.2
-14-
Dump Tank
Clarification
Preheating
Standardization
Liquid milk
(Optional)
Cream
Butter
Homogenization
Ghee
Pasteurization
Packing
Cold storage
Distribution
-15-
The company has achieved the following national level awards and State level Awards
during different years:
1. The national productivity Award for years 1987-88(2nd rank), 1989-90(1st), and 1990- 91
(1st) and for years1997-98, 1999-2000 (certificate of merit).
2. The Vikas Ratna award for year 1995(1st)
3. The National safety council awards for years 1992 and 2001 (1st rank)
4. The Gujarat safety council Awards for years 1996(1st) and 2000(certificate of merit)
CONCLUSION
After doing the project on sabar dairy conclude that there is very simple distribution channel. The
main competitor has advantage of Personal selling .The marketing of all products manufactured by
sabar dairy are marketed by GCMMF ltd. All the products manufactured sold under the brand
name of "AMUL" .the advertising, distribution of the products and development of the marketing
policies are performed by GCMMF ltd. The main competitors of amul are Nestle, Glexco, Royal,
Cadbury & other private dairy. Local Milkmen are main competitors of the sabar dairy. This is a
good example of co-operative organization.
-16-
It was, just a matter of time until some kindly European gentleman decided that this should be
donated, or sold at subsidised prices, to help the poor people of India. Were that to happen, it
would have been the death knell of our nascent dairy industry.
It was to face this potential threat that the idea arose of using food aid to generate the financial
resources necessary to create Anands throughout India. Fortunately there were individuals of
wisdom and foresight in both India and Europe who supported the idea.
So, commodities were reconstituted as liquid milk and sold at prices comparable to those in the
domestic market. The funds that were generated were used to finance the development of our
cooperative dairy industry. Thus, what was a serious threat was successfully turned into an asset.
in 1987, the NDDB was merged with the Indian Dairy Corporation, and vide an Act of
Parliament it was accorded a statutory status, constituted as a body corporate and declared an
institution of national importance.
NDDB under its umbrella had Mother Dairy (milk unit) and a fruits and vegetables unit. Mother
dairy and fruits & vegetables unit were later merged into a holding company called Mother Dairy
Fruits & Vegetables Ltd.
-18-
CHAIRMAN P.A
|
VICE CHAIRMAN
|
MANAGING DIRECTOR P.A
|
GENERAL MANAGER
|
D.G.M. FINANCE
|
A.G.M. ACCOUNTANT
|
SENIOUR MANAGER
|
MANAGER
|
DEPUTY MANAGER
|
ASSISTANT MANAGER
|
SENIOUR SUPPERITENDENT
-19-|
|
SUPPERITENDENT
|
ASSISTANT SUPPERITENDENT
|
SENIOUR OFFICER
|
OFFICER
|
ASSISTANT OFFICER
|
SENIOUR ASSISTANT
|
ASSISTANT
|
ATTENDENT
|
PEON
-20-
-21-
SWOT ANALYSIS
-22-
-23-
1.
Dairy Visit:
No. of Societies & Other Institutions.
10
2.
No. of Visitors.
92,998
979
Members of Societies
1,71,224
1,58,537
13,571
164
4,16,105
23,670
222
4,29,025
48,595
1,34,280
1,29,539
43,884
3,05,504
197
3,445
99,957
980
32,20,54,448
2,80,038
1,690
2005 -2006
2,88,076
187
30,73,52,636
2,72,811
1,670
2004 2005
Particular
Sr.No.
2,90,021
1,714
2007 2008
19,098
261
3,89,659
57,670
1,71,985
1,37,517
3,09,502
206
9,805
1,06,743
978
21,097
239
3,71,189
57,511
1,80,494
1,58,807
3,39,301
209
3,000
1,24,401
981
32,33,67,731 36,95,19,961
2,88,359
1,698
2006 -2007
45,404
328
3,11,170
71,660
1,88,147
1,77,281
3,65,428
209
2,685
1,58,591
991
40,93,14,686
3,00,603
1,732
2008 2009
-24-
Accounting Policies and Continuants Liabilities:The Sabar dairy follows the rules and regulation of the accounting standard and system. The
accounting policies are as under:
Accounting system:Accounting systems are maintained on accrued accounting concept and generally accepted
accounting policies.
Fixed Assets:Assets are valued at historical cost including purchase price and cost incurred to put such
assets in its working condition.
Valuation of inventory:- trading stock: cost or expected realizable value whichever is lower.
- Raw-material, packing material: at cost
- Stores and spares: At realizable value
Retirement Benefits to Employees:Contribution toward gratuity and superannuation scheme deposited with the Life Insurance
Corporation of India.
Encashment of leave:As and when requested by the employees the union pay have accounted in the year for
which they demand.
-26-
ANNUAL TURNOVER
YEARS
ANNUAL
TURNOVER
200001
376.40
200102
351.88
200203
437.75
200304
497.41
200405
503.28
200506
601.15
200607
677.98
200708
795.6
1
200809
1034.2
3
200910
1192.38
RS. IN CRORE
ANNUAL TURNOVER
1400
1200
1000
800
600
400
200
0
1034.23 1192.38
677.98
376.4
437.75
351.88
497.41
503.28
795.61
601.15
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
INTERPRETATION: - The Companys Annual Turnover increasing in trend from last ten years. In last
year 158 crore Turnover increases as compare to Annual Turnover of preceding financial year. The
companys growth rate is highest out of other dairies unions. The Turnover is 1192.38 crore during this
financial year.
200001
6.08
200102
6.36
200203
7.18
200304
7.40
200405
8.42
200506
8.82
200607
8.86
200708
10.10
200809
11.21
K.G. IN LAKH
12
8.82
10
8
6
7.18
6.08
7.4
8.86
10.1
11.21
11.15
8.42
6.36
4
2
0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
200910
11.15
-27-
200001
49.45
200102
56.98
200203
70.12
200304
78.12
200405
92.99
200506
99.96
200607
106.74
200708
124.4
0
200809
158.59
200910
167.42
THOUSAND METRIC
TONNS
150
70.12
100
50
49.45
78.12
99.96
92.99
158.59
167.42
106.74
56.98
0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
200001
188.00
200102
184.60
200203
185.00
200304
212.00
200405
221.00
200506
212.50
200607
242.00
200708
284.0
0
200809
303.00
303
345
RS.
284
212
188
184.6
185
221
212.5
242
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
200910
345.00
-28-
Ratio Analysis
PROFITABILITY RATIO
Gross Profit Ratio = Gross Profit X100
Net Sales
YEARS
GROSS
PROFIT
NET
SALES
GROSS
PROFIT
RATIO
2004 -05
29,65,27,555
2005 -06
35,32,80,974
2006 -07
32,78,34,809
2007 -08
35,02,45,834
2008 -09
36,16,97,157
2009 -10
38,87,05,342
4,99,47,54,05
3
5.94%
5,98,72,07,21
1
5.90%
6,73,44,87,70
0
4.87%
7,89,63,33,22
9
4.44%
10,34,22,51,54
3
3.50%
11,79,22,13,840
3.30%
INTERPRETATION: - Gross profit ratio expresses relationship between Gross Profit &
Net Sales. The Gross Profit should be adequate to cover operating expenses and to provide for
fixed charges, dividends & building up of reserves.
The companys Gross Profit Ratio decline as per Six Years Data which is given above;
this is because of Cost of Production increase continuously every years. Especially that the
Packaging Cost, Power & Fuel Cost increasing day by day; and the raw material Cost is also
increase every years.
The company should focused on research & development on new & innovative
Packaging style, size, methods which can reduce cost of Packaging; and also try to find out
substitute of fuel i.e. use biogas or natural gas instead of solid fuel which can reduce power &
fuel cost and also it is helpful to the environment.
-29-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
NET
PROFIT
NET
SALES
NET
PROFIT
RATIO
3,08,83,766
2,67,46,048
3,22,45,198
3,37,30,564
3,42,17,707
5,35,28,008
4,99,47,54,05
3
0.62%
5,98,72,07,21
1
0.45%
6,73,44,87,70
0
0.48%
7,89,63,33,22
9
0.43%
10,34,22,51,54
3
0.33%
11,79,22,13,8
40
0.45%
INTERPRETATION: - Net Profit Ratio helps in determining the efficiency with which
affairs of the business are being managed. This Ratio is thus an effective measure to check
the Operational efficiency the profitability of a business.
The companys Net Profit Ratio is very irregular. The company earns Avg.
Profit of Rs.0.45 against Net Sales of Rs.100 as per six years data given above. The reason is
only high cost of Operations. The Major Portion of the revenue covered by operational
cost.
-30-
2004 -05
99.38%
2005 -06
99.55%
2006 -07
99.52%
2007 -08
99.57%
2008 -09
99.67%
2009 -10
99.55%
100.20%
100.00%
99.80%
99.60%
OPERATING RATIO
99.40%
99.20%
99.00%
2004 - 2005 - 2006 - 2007 - 2008 - 2009 05
06
07
08
09
10
INTERPRETATION: - This ratio is a complementary of Net Profit ratio. That means the
Net Profit Ratio is 0.45%, the Operating Ratio is 99.55%. Operating Costs include the cost
of direct material, direct labor and other overheads, viz., factory, office or selling, financial
charges such as interest, provision for taxation, etc.
The company can reduce Administrative Expenses & other Financial Expenses
by effective utilization of Resources. The company should remove over staffing in the
company by encouraging employees to use VRS scheme. The company should also
attention on reduce wastage of stationary and other material.
-31-
Net Profit
X100
Capital Employed
YEARS
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
NET
PROFIT
CAPIT
AL
EMPLO
YED
OVERA
LL
PROFIT
ABILIT
Y
RATIO
3,08,83,766
2,67,46,048
3,22,45,198
3,37,30,564
3,42,17,707
5,35,28,008
1,87,88,30,36
1
1,82,99,25,40
1
1,89,92,78,32
5
1.69.83.99.28
2
3,11,76,84,292
4,73,04,15,740
1.64%
1.46%
1.70%
1.99%
1.10%
1.13%
1.64%
1.70%
1.99%
1.13%
1.50%
1.00%
1.46%
1.10%
OVERALL
PROFITABILITY
RATIO
0.50%
0.00%
2004 - 2005 - 2006 - 2007 - 2008 - 2009 05
06
07
08
09
10
Net Profit
No. Equity Share
YEARS
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
NET
PROFIT
NO.
EQUITY
SHARES
EPS
3,08,83,766
2,67,46,048
3,22,45,198
3,37,30,564
3,42,17,707
5,35,28,008
10,19,666
10,19,293
10,19,106
10,19,106
10,19,125
10,19,125
Rs.30.29
Rs.26.24
Rs.31.64
Rs.33.10
Rs.33.58
Rs.52.52
RS.
EPS
60
50
40
30
20
10
0
52.52
30.29
31.64
33.1
2006 -07
2007 -08
33.58
26.24
2004 -05
2005 -06
2008 -09
2009 -10
YEARS
INTERPRETATION: - The Earning per Share helps in determining the Market Value of
the equity share of the company. It also helps in estimating the companys capacity to pay
dividend to its equity shareholders.
The companys EPS is increasing every year, especially in the last year the
EPS is highest forever. This is because of the company issues debentures as well as
borrowings external funds from Bank & N.D.D.B Loan.
The company should use maximum external fund instead of issuing new
equity share, The Company should raise fund from short term loan for meeting to working
capital. And if Company wants to purchase new Assets, they can borrowings from Long
term Loans from Bank or N.D.D.B.
-33-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
DPS
4.079
6.12
6.12
6.12
6.12
6.12
DPS
8
Rs.
6.12
6.12
6.12
6.12
6.12
4.079
DPS
2
0
2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
years
INTERPRETATION: - The Companys dividend per Share Ratio almost constant every
years. The company pays almost Rs.6 per Share every year. The Company declared 15%
dividend from the Net Profit and rest of the earnings are accumulated in the reserves &
surplus.
The companys authorized capital is Rs. 25, 00, 00,000 but paid up capital is
less than that. The company issues Share from the Authorized Capital when needed.
-34-
TURNOVER RATIO
Turnover Ratio =
Sales
S
Capital Employed (Total Assets)
YEARS
NET SALES
CAPITAL
EMPLOYED
TURN
OVER
RATIO
2004 -05
4,99,47,54,05
3
1,87,88,30,36
1
2.66
2005 -06
5,98,72,07,21
1
1,82,99,25,40
1
3.27
2006 -07
6,73,44,87,70
0
1,89,92,78,32
5
3.55
2007 -08
7,89,63,33,22
9
1.69.83.99.28
2
4.65
2008 -09
10,34,22,51,5
43
3,11,76,84,29
2
3.32
2009 -10
11,79,22,13,
840
4,73,04,15,74
0
2.49
Times
5
4
3
2
2.66
3.27
3.55
4.65
3.32
2.49
1
0
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
years
INTERPRETATION: - The Turnover Ratio or Activity Ratio indicate the efficiency with
the capital employed is rotated in the business. Higher the rate of rotation, the greater will
be the profitability.
The companys Turnover Ratio is overall good. The sales of the company is
increases every year, the assets of the company somewhat constant between 2004-2008, but
last two years saw that the Assets of the company increases rapidly, therefore the Turnover
Ratio decline, but it doesnt worry about it.
-35-
Net Sales
Fixed Assets
YEARS
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
FIXED ASSETS
TURN OVER
RATIO
32.20
32.26
36.41
41.96
43.40
33.99
TIMES
41.96 43.4
32.2 32.26
36.41
33.99
FIXED ASSETS TURN
OVER RATIO
INTERPRETATION: - This Ratio indicates the extent to which the investments in fixed
assets contributed toward Sales.
The companys Fixed Assets Turnover Ratio is good. The company can properly
utilized its Fixed Assets, and get good return from it. The trend of Fixed Assets Turnover
Ratio almost constants, it indicates good performance to utilization of Fixed Assets of the
company.
-36-
Net Sales
Working Capital
YEARS
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
NET
SALES
4,99,47,54,053
5,98,72,07,21
1
6,73,44,87,70
0
7,89,63,33,22
9
10,34,22,51,54
3
11,79,22,13,8
40
W.C
W.C.T
RATIO
24,79,71,803
20.14
23,47,19,181
25.51
25,24,88,748
26.67
25,75,81,674
30.66
24,26,25,119
42.63
22,87,12,199
51.56
TIMES
W.C.T RATIO
60
50
40
30
20
10
0
51.56
42.63
30.66
20.14
25.51
26.67
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
YEARS
INTERPRETATION: - This Ratio indicates whether or not working capital has been
effectively utilized in making sales.
The trend of the Ratio saw that company use its working capital properly. As
per six years data the working capital turnover ratio increases every years. The direction of
W.C.T Ratio saws positive. It indicates that the companys working capital has been
utilized effectively in making sales.
-37-
=
Credit Sales
Avg. Accounts Receivable
YEARS
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
CREDIT
SALES
4,99,47,54,053
5,98,72,07,21
1
6,73,44,87,70
0
7,89,63,33,22
9
10,34,22,51,54
3
11,79,22,13,8
40
AVG.
A\C
RECEI
VABLE
D.T
RATIO
1,66,46,651.5
16,27,90,122.
5
21,38,11,517
21,77,50,871.
5
33,18,53,240
20,69,47,721
300
36.78
31.50
36.26
31.17
56.98
D.T RATIO
TIMES
400
300
300
200
56.98
100
36.78
36.26
31.5
31.17
0
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
YEARS
-38-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
AVG.
A\C
RECEIVABLE
1,66,46,651.
5
16,27,90,122.
5
21,38,11,517
21,77,50,871.
5
33,18,53,240
20,69,47,721
CREDIT
SALES
4,99,47,54,0
53
1 day
5,98,72,07,21
1
10 days
6,73,44,87,70
0
11days
7,89,63,33,22
9
10 days
10,34,22,51,54
3
12 days
11,79,22,13,8
40
6 days
DEBT
COLLECTION
PERIOD
10
11
10
12
6
1
2004 - 2005 - 2006 - 2007 - 2008 - 2009 05
06
07
08
09
10
YEARS
INTERPRETATION: - This ratio indicates the extent to which the debts have been
collected in time. It gives the average debt collection period. The Ratio is very helpful to the
lenders because it explains to them whether their borrowers are collecting money within a
reasonable time. An increase in the period will result in greater blockage of funds in
debtors.
The companys Debt collection period increasing as per the above chart, because of
the company becomes very lenient toward his debtors. The company gives more periods to
repayment of the debt. The company should be aware of its working capital requirements, and
then make the policy of the credit period allow to its customer.
-39-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
CREDIT
PURCH
ASE
4,67,57,50,181
4,70,65,54,20
6
5,41,43,43,89
3
7,26,16,05,12
8
8,71,51,00,862
10,24,51,12,2
03
AVG.
A\C
PAYEABLES
C.T
RATIO
44,95,44,662.5
39,52,29,615
39,83,83,182.
5
59,87,09,648.
5
1,29,07,77,314
2,04,97,89,52
1.5
10.40
11.90
13.59
12.13
6.75
5.00
10.4 11.9
13.59
12.13
6.75
10
5
0
-40-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
AVG. A\C
PAYEABLES
44,95,44,66
2.5
39,52,29,615
39,83,83,182.
5
59,87,09,648.
5
1,29,07,77,314
2,04,97,89,52
1.5
CREDIT
PURCHASE
4,67,57,50,1 4,70,65,54,20
81
6
35 days
30 days
5,41,43,43,89
3
26 days
7,26,16,05,12
8
30 days
8,71,51,00,862
10,24,51,12,2
03
72 days
CREDIT
PERIOD
ENJOYED
53 days
DAYS
80
72
60
40
20
53
35
30
26
30
CREDIT PERIOD
ENJOYED
0
2004 - 2005 - 2006 - 2007 - 2008 - 2009 05
06
07
08
09
10
YEARS
INTERPRETATION: - The Debt collection period enjoyed ratio indicates about the
promptness in making payment of credit purchases. A lower credit period enjoyed ratio
signifies that the creditors are being paid promptly, thus enhancing the credit worthiness of
the company.
The companys credit worthiness increasing from last three years as per the
above chart shows. The company enjoyed almost two and half months credit period. The
company gives credit worthiness to its debtors very lower than enjoyed period; this situation
is in fever of the company.
-41-
2004 -05
COGS
AVG.
INVENTRY
STOCK
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
4,69,82,26,4 5,63,39,26,23
98
7
6,40,66,52,89
1
7,54,60,87,39
5
9,98,05,54,386
11,40,35,08,4
98
42,52,89,02
9
11.05 Times
37,86,42,106.
5
16.92 Times
52,39,19,260
67,47,30,328.5
52,61,50,648
14.40 Times
14.80 Times
21.67 Times
61,42,06,324.
5
9.17 Times
TURNOVER
RATIO
STOCK TURNOVER RATIO
25
21.67
16.92
TIMES
20
15
11.05
10
14.4
14.8
2007 -08
2008 -09
9.17
5
0
2004 -05
2005 -06
2006 -07
2009 -10
YEARS
The companys stock turnover ratio is overall good but very irregular in nature. As
per the last six years data there are lot of variation shown, so its difficult to know how much stock
should be keep in future. As per the last year figure shows highest stock turnover of the company.
-42-
2004 -05
2005 -06
2006 -07
FIXED
ASSETS
15,51,03,465
18,55,63,304
18,49,51,116
LONG
TERM
FUNDS
41,82,41,192
43,95,86,127
45,12,44,356
FIXED
ASSTES
RATIO
0.37:1
OR
37%
0.42:1
OR
42%
0.41:1
OR
41%
Fixed Assets
Long term Fund
2007 -08
2008 -09
2009 -10
23,83,14,855
34,69,34,808
46,72,49,421
50,19,11,957
52,18,48,289
0.40:1
OR
40%
0.48:1
OR
48%
0.66:1
OR
66%
18,82,08,621
66%
37%
42%
41%
40%
20%
48%
0%
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
YEARS
INTERPRETATION: - 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. The ideal
ratio is 0.67 or 67%.
The companys Fixed Assets Turnover Ratio is less than 1 as per the above chart.
The last year Ratio is very ideal. The trend of the ratio shows that the large part of the
working capital financed through long-term funds like N.D.D.B Loan and Debenture or
long term Bank Loan.
-43-
FINANCIAL RATIO
Current Ratio = Current Assets
Current Liabilities
YEARS
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
CURRENT
ASSETS
1,14,70,61,12
8
1,02,51,78,41
1
1,04,92,55,11
3
1,45,50,00,97
1
2,82,41,79,74
7
4,32,82,91,24
2
CURRENT
LIABILITIES
CURRENT
RATIO
89,90,89,325
79,04,59,230
79,67,66,365
1,19,74,19,29
7
2,58,15,54,62
8
4,09,95,79,04
3
1.28:1
1.30:1
1.32:1
1.21:1
1.09:1
1.06:1
CURRENT RATIO
1.5
1.28
1.3
2004 -05
2005 -06
1.32
1.21
1.09
1.06
2008 -09
2009 -10
1
0.5
0
2006 -07
2007 -08
YEARS
The companys current ratio is more than 1 but it is continuously decline over a period of
time. The current liabilities increase higher rate than current assets. The reason is that the
company raise short term loan from bank in last three years.
-44-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
LIQUIDE
ASSETS
29,48,73,192
41,16,36,961
62,86,93,852
47,86,71,573
1,98,70,53,06
0
3,62,80,89,61
1
CURRENT
LIABILITIES
89,90,89,325
79,04,59,230
79,67,66,365
1,19,74,19,29
7
2,58,15,54,62
8
4,09,95,79,04
3
LIQUIDITY
0.33;1
0.52:1
0.79:1
0.40:1
0.77:1
0.88:1
RATIO
LIQUIDITY RATIO
1
0.79
0.8
0.6
0.4
0.77
0.88
0.52
0.4
0.33
0.2
0
2004 -05
2005 -06
2008 -09
2009 -10
INTERPRETATION: - This ratio is also termed as acid test ratio or quick ratio.
Liquid assets mean which are immediately convertible into cash without much loss. The
ratio is an indicator of short term solvency of the company. The ideal ratio is 1:1.
The companys liquid ratio is irregular and less than 1. It shows weak liquid
situation of the company, but last year figure maintained liquidity, it is somewhat nearby
ideal ratio.
-45-
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
SHARE
HOLDERS
FUND
TOTAL
10,19,66,600
10,19,29,300
10,19,10,600
10,19,10,600
10,19,12,500
10,19,12,500
20,11,53,155
23,16,12,994
23,10,00,806
24,33,98,311
29,35,04,545
40,21,24,498
51%
44%
44%
42%
35%
25%
TANGIBLE
ASSETS
PROPRIETARY
RATIO
60%
51%
50%
PROPRIETARY RATIO
44%
44%
35%
40%
42%
30%
25%
20%
10%
0%
2004 -05
2009 -10
-46-
-47-
2004 - 05
2005 - 06
2006 - 07
2007- 08
2008 - 09
2009 - 10
5.43%
5.57%
5.37%
4.31%
2.66%
1.84%
16.83%
18.45%
18.39%
15.44%
10.42%
7.60%
28.24%
-
31.32%
-
32.59%
-
28.22%
-
18.78%
-
14.39%
1.00%
CURRENT LIABILITIES
DEPOSITS
SUNDRY CREDITORS
CREDITORS SOCIETIES
CREDITORS FOR GOODS
BANK LOANS
NET PROFIT (P & L A/C)
2.30%
18.85%
20.04%
6.67%
1.64%
2.30%
16.37%
20.26%
4.26%
1.46%
2.39%
12.90%
21.68%
4.98%
1.70%
2.13%
14.46%
15.04%
6.29%
12.68%
1.43%
1.31%
12.06%
21.01%
5.25%
27.08%
0.89%
0.57%
7.78%
18.45%
4.40%
43.00%
0.97%
TOTAL
100%
100%
100%
100%
100%
100%
FIXED ASSETS
SHARE INVESTMENT
STOCK
TRADING STOCK
STORES
ADVANCES &
RECEIVABLE
DEPOSITES
ADVANCES
SUNDRY DEBTORS
DUE FROM SOCIETIES
TRADE DEBTORS
CASH & BANK BALANCE
FIXED & CALL DEPOSITS
CURRENT BANK A/C
CASH ON HAND
36.50%
2.45%
41.46%
2.52%
42.33%
2.42%
36.17%
2.33%
25.00%
1.44%
20.67%
1.00%
39.10%
5.14%
26.99%
5.46%
13.87%
6.93%
33.15%
6.54%
14.72%
4.25%
8.82%
3.13%
0.31%
0.66%
0.15%
0.01%
0.64%
0.31%
0.77%
0.17%
0.03%
16.50%
0.31%
1.03%
0.22%
0.03%
20.92%
0.67%
0.90%
0.13%
0.04%
16.67%
0.53%
2.31%
0.05%
14.41%
0.40%
0.31%
0.01%
0.36%
6.41%
14.69%
0.34%
0.01%
5.27%
0.50%
0.02%
11.63%
0.28%
0.02%
2.23%
1.14%
0.02%
36.66%
0.64%
0.006%
58.74%
0.14%
0.005%
TOTAL
100%
100%
100%
100%
100%
100%
-48-
INCOME STATEMENT
PARTICULAR
NET SALES
LESS: COST OF GOODS
SOLD
GROSS PROFIT
2004 -05
100%
94.06%
2005 06
100%
94.10%
2006 - 07
100%
95.13%
2007 - 08
100%
95.56%
2008 - 09
100%
96.5%
2009 - 10
100%
96.7%
5.94%
5.90%
4.87%
4.44%
3.50%
3.30%
4.22%
4.39%
3.53%
3.20%
2.30%
1.88%
OPERATING PROFIT
LESS: INTEREST &
DEPRECIATION
INCOME TAX
1.72%
1.10%
1.51%
1.03%
1.34%
0.79%
1.24%
0.76%
1.20%
0.82%
1.42%
0.89%
0.03%
0.07%
0.05%
0.05%
0.08%
0.62%
0.45%
0.48%
0.43%
0.33%
0.45%
LESS: SELLING,
GENERAL
-ADMINISTRATIVE
EXP.
-49-
-50-
2010 11
2011 - 12
2012 13
NET SALES
LESS: COST OF
GOODS SOLDS
14,02,23,57,321
13,36,89,15,470
16,67,42,65,537
15,89,72,44,763
19,82,77,02,635
18,90,37,31,690
GROSS PROFIT
LESS: SELLING ,
GENERAL
ADMINISTRATIVE
EXP.
65,34,41,851
45,57,26,613
77,70,20,774
54,19,13,630
92,39,70,945
64,44,00,336
OPERATING PROFIT
LESS: INTEREST &
DEPRECIATION
INCOME TAX PRO.
19,77,15,238
12,62,01,216
23,51,07,144
15,00,68,390
27,95,70,609
17,84,49,324
84,13,414
1,00,04,559
1,18,96,622
NET PROFIT
6,31,00,608
7,50,34,195
8,92,24,663
-51-
PROJECTED
BALANCE SHEET
PARTICULAR
2010 - 11
2011 - 12
2012 13
NET SALES
ASSETS
FIXED ASSETS (NET
BLOCK)
INVESTMENT
CURRENT ASSETS,
LOANS & ADVANCES
CASH & BANK
RECEIVABLES
INVENTORIES
PREPAID EXP.
DEBTORS
TOTAL
14,02,23,57,321
16,67,42,65,537
19,82,77,02,635
38,72,50,768
46,04,87,633
54,72,44,590
6,61,44,845
6,61,44,845
6,61,44,845
1,24,51,85,330
57,86,55,945
1,33,21,23,945
6,82,42,138
28,03,412
3,68,04,06,383
1,48,06,74,780
68,80,91,360
1,58,40,55,225
8,11,48,090
50,27,593
4,36,91,80,540
1,76,06,99,995
81,88,84,120
1,88,36,31,750
9,71,55,740
51,28,363
5,17,88,89,408
LIABILITIES
SHARE CAPITAL
RESERVE & SURPLUSS
SECURED LOAN
DEBENTURE
BANK BORROWINGS
CURRENT LIABILITIES
10,19,12,500
68,28,88,805
10,19,12,500
81,20,36,730
10,19,12,500
96,56,09,120
4,97,13,400
86,50,00,000
1,91,77,91,070
4,97,13,400
1,05,00,00,000
2,28,04,83,715
4,97,13,400
1,26,00,00,000
2,71,24,29,725
NET PROFIT
TOTAL
6,31,00,608
3,68,04,06,383
7,50,34,195
4,36,91,80,540
8,92,24,663
5,17,88,89,408
INTERPRETATION As per the above projected balance sheet FIXED ASSETS requirement
will increase for expansion of the existing unit. The CURRENT ASSETS including cash& bank,
debtors, inventories, receivable etc; will increase as per future requirement and also the
CURRENT LIABILITIES will increases especially that bank borrowing and sundry debtors.
-52-
CASH FLOW
ANALYSIS
1. Cash flow statement cannot be equated with the Income Statement. An Income Statement
takes into account both cash as well as non-cash items and, therefore, net cash does not
necessarily mean net income of the business.
2. The cash balance as disclosed by the cash flow statement may not represent the real
liquid position of the business since it can be easily influenced by postponing purchases
and other payment.
3. Cash flow statement cannot replace the income Statement or the Funds Flow Statement.
-53-
-54-
2009 -10
2008 -09
INCREASE
DECREASE
RS.
10,19,12,500
RS.
10,19,12,500
RS.
-
RS.
-
41,99,35,789
39,99,99,457
1,99,36,332
57,47,000
57,47,000
DEBENTURES
CURRENT
LIABILITIES:-
4,97,13,400
4,97,13,400
DEPOSITES (TAKEN)
SUNDRY CREDITORS
CREDITORS SOCIETIES
3,13,06,188
42,97,44,890
1,01,97,09,775
5,04,39,703
46,28,83,170
80,66,30,505
21,30,79,270
1,91,33,515
3,31,38,280
-
CREDITORS FOR
GOODS
24,33,56,871
20,15,98,003
4,17,58,868
BANK BORROWINGS
NET PROFIT
2,37,54,61,319
5,35,28,008
1,06,00,03,247
3,42,17,707
1,31,54,58,072
1,93,10,301
34,69,34,808
5,51,89,690
23,83,14,855
5,51,89,690
10,86,19,953
-
78,20,235
66,03,43,003
1,71,11,365
2,21,33,204
1,99,72,295
2,55,649
35,40,64,519
3,24,59,76,913
2,47,27,136
72,81,59,591
8,85,39,404
2,04,27,692
2,43,369
55,29,33,258
1,40,73,43,171
17,05,512
1,99,72,295
12,280
1,83,86,33,742
1,69,06,901
6,78,16,588
7,14,28,039
19,88,68,739
-
SHARE HOLDERS
FUND
RESERVE & SURPLUSS
LOANS:N.D.D.B LOAN
APPLICATION OF
FUNDS
FIXED ASSETS
INVESTMENT
CURRENT ASSETS
BANK A/C
INVENTORIES
ADVANCES
DEPOSITS (GIVEN)
DUE FROM SOCIETIES
CASH ON HAND
TRADE DEBTORS
FIXED DEPOSITES
-55-
SOURCES OF CASH
AMOUNT RS.
1,99,36,332
57,47,000
4,97,13,400
1,31,54,58,072
21,30,79,270
4,17,58,868
1,93,10,301
6,78,16,588
7,14,28,039
19,88,68,739
1,69,06,901
TOTAL SOURCES
2,02,00,23,510
USES OF CASH
DECREASE IN DEPOSITES (TAKEN)
DECREASE IN SUNDRY CREDITORS
INCREASE IN FIXED ASSETS
INCREASE IN DEPOSITES GIVEN
INCREASE IN DUE FROM SOCIETIES
INCREASE IN FIXED DEPOSITS
1,91,33,515
3,31,38,280
10,86,19,953
17,05,512
1,99,72,295
1,83,86,33,742
TOTAL USES
CASH ON HAND
SUBSTRACT FROM CASH BALANCE
NET CASH REQUIRE
2,02,12,03,297
2,55,649
-11,79,787
-9,24,138
-56-
2011 -12
2010 -11
INCREASE
DECREASE
RS.
RS.
RS.
RS.
10,19,12,500
81,20,36,730
4,97,13,400
1,05,00,00,000
2,28,04,83,715
7,50,34,195
10,19,12,500
68,28,88,805
4,97,13,400
86,50,00,000
1,91,77,91,070
6,31,00,608
12,91,47,925
18,50,00,000
36,26,92,645
1,19,33,587
APPLICATION OF
FUNDS
FIXED ASSETS
INVESTMENT
CURRENT ASSETS
BANK A/C
46,04,87,633
6,61,44,845
38,72,50,768
6,61,44,845
7,32,36,865
-
1,47,81,73,641
1,24,30,81,977
23,50,91,664
INVENTORIES
1,58,40,55,225
1,33,21,23,945
25,19,31,280
RECEIVABLES
68,80,91,360
57,86,55,945
10,94,35,415
PREPAID EXP.
8,11,48,090
6,82,42,138
1,29,05,952
DEBTORS
50,27,593
28,03,412
22,24,181
-57-
SORCES OF CASH
AMOUNT RS.
12,91,47,925
36,26,92,645
18,50,00,000
1,19,33,587
TOTAL SOURCES
68,87,74,157
APPLICATION OF CASH
AMOUNT RS.
7,32,36,865
23,50,91,664
INCREASE IN INVENTORIES
25,19,31,280
INCREASE IN RECEIVABLES
10,94,35,415
1,29,05,952
INCREASE IN DEBTORS
22,24,181
TOTAL USES
68,48,25,357
CASH ON HAND
3,21,202
ADD TO CASH
TOTAL CASH ON HAND
39,48,800
42,70,002
-58-
2012 -13
2011 -12
INCREASE
DECREASE
RS.
RS.
RS.
RS.
10,19,12,500
10,19,12,500
96,56,09,120
81,20,36,730
15,35,72,390
DEBENTURES
4,97,13,400
4,97,13,400
BANK BORROWINGS
1,26,00,00,000
1.05.00.00.000
21,00,00,000
CURRENT LIABILITIES
2,71,24,29,725
2,28,04,83,715
43,19,46,010
NET PROFIT
8,92,24,663
7,50,34,195
1,41,90,468
FIXED ASSETS
54,72,44,590
46,04,87,633
8,67,56,957
INVESTMENT
6,61,44,845
6,61,44,845
BANK A/C
1,75,77,25,840
1,47,81,73,641
27,95,52,199
INVENTORIES
1,88,36,31,750
1,58,40,55,225
29,95,76,525
RECEIVABLES
81,88,84,120
68,80,91,360
13,07,92,760
PREPAID EXP.
9,71,55,740
8,11,48,090
1,60,07,650
DEBTORS
51,28,363
50,27,593
1,00,770
APPLICATION OF
FUNDS
CURRENT ASSETS
-59-
SORCES OF CASH
AMOUNT RS.
15,35,72,390
43,19,46,010
21,00,00,000
1,41,90,468
TOTAL SOURCES
80,97,08,868
APPLICATION OF CASH
AMOUNT RS.
8,67,56,957
27,95,52,199
INCREASE IN INVENTORIES
29,95,76,525
INCREASE IN RECEIVABLES
13,07,92,760
1,60,07,650
INCREASE IN DEBTORS
1,00,770
TOTAL USES
81,27,86,861
CASH ON HAND
3,21,202
-30,77,993
-27,56,791
-60-
LEVERAGE
|
NEED TO RAISE FUNDS
|
CAPITALSTRUCTURE
DECISION
|
|
EXISTING CAPITAL
STRUCTURE
PAYOUT POLICY
|
|
EFFECT ON RETURN
EFFECT ON RISK
|
EFFECT ON COST OF CAPITAL
|
VALUE OF THE FIRM
-61-
DEGREE OF FINACIAL LEVERAGE:The DFL is defined as the % change in EPS due to a given % change in EBIT.
DEGREE OF FINACIAL LEVERAGE = % change in EPS
% change in EBIT
OR
DEGREE OF FINACIAL LEVERAGE = EBIT
PBT
LEVERAGE
2004-05
LESS:LESS:-
NET SALES
Rs.4,99,47,54,053
VARIABLE COST
Rs.4,70,30,03,654
CONTRIBUTION
Rs.29,17,50,399
FIXED COST
Rs.26,08,66,633
Rs.3,08,83,766
10,19,666
EPS
Rs.30.29
RETURN ON EQUITY
0.30%
INTERPRETATION: - DOL of 9.45 implies that for a given change in companys sales,
EBIT was change by 9.45 Times.
The DOL depends on fixed operating costs, the larger the fixed cost, the higher is the firms
operating leverage and its operating risk.
But it is not worried to the company because the sales are increases every year.
Therefore, high operating leverage is good when revenues are rising.
In 2004-2005 the financial leverage & combined leverage is 1 because there is no debt in the
financial structure.
-63-
LEVERAGE
2005-06
LESS:LESS:-
LESS:-
NET SALES
Rs.5,98,72,07,211
VARIABLE COST
Rs.5,66,13,37,078
CONTRIBUTION
Rs.32,58,70,133
FIXED COST
Rs.29,71,24,085
EBIT
Rs.3,22,46,048
PBT
Rs.3,22,46,048
TAX
Rs.20,00,000
EAT
Rs.2,67,46,048
10,19,293
EPS
RETURN ON EQUITY
Rs.26.24
0.26%
-64-
LEVERAGE
2006-07
LESS:LESS:-
NET SALES
Rs.6,73,44,87,700
VARIABLE COST
Rs.6,42,37,68,521
CONTRIBUTION
Rs.31,07,19,179
FIXED COST
Rs.27,59,73,981
EBIT
LESS:INTEREST
PBT
LESS:TAX
EAT
NO.OF EQUITY SHARE
Rs.3,47,45,198
3,47,45,198
25,00,000
3,22,45,198
10,19,106
EPS
Rs.31.64
RETURN ON EQUITY
0.32%
-65-
LEVERAGE
2007-08
LESS:LESS:-
LESS:-
NET SALES
Rs.7,89,63,33,229
VARIABLE COST
Rs.7,55,65,43,549
CONTRIBUTION
Rs.33,97,89,680
FIXED COST
Rs.30,20,59,116
EBIT
Rs.3,77,30,564
PBT
Rs.3,77,30,564
TAX
Rs.40,00,000
EAT
Rs.3,37,30,564
10,19,106
EPS
RETURN ON EQUITY
Rs.33.10
0.33%
INTERPRETATION: - DOL 9.005 of implies that for a given change in companys sales,
EBIT was change by 9.005 Times.
The companys sales increases but the variable cost and fixed cost are also increases so the
companys present sales are not sufficient to cover up a operating cost. The company
should cut down its variable cost to increase the proportion of contribution.
-66-
LEVERAGE
2008-09
LESS:LESS:-
LESS:-
NET SALES
Rs.10,34,22,51,543
VARIABLE COST
Rs.9,96,90,03,929
CONTRIBUTION
Rs.37,32,47,614
FIXED COST
Rs.33,50,29,907
EBIT
Rs.3,82,17,707
PBT
Rs.3,82,17,707
TAX
Rs.40,00,000
EAT
Rs.3,42,17,707
10,19,125
EPS
RETURN ON EQUITY
Rs.33.57
0.33%
INTERPRETATION: - DOL 9.77 of implies that for a given change in companys sales,
EBIT was change by 9.77 Times.
Same things happens here also that the companys sales increases but the variable cost and
fixed cost are also increases so the companys present sales is not sufficient to cover up an
operating cost. The company should cut down its variable cost to increase the proportion of
contribution.
-67-
LEVERAGE
2009-10
LESS:LESS:LESS:LESS:-
NET SALES
Rs.11,79,22,13,840
VARIABLE COST
Rs.11,36,56,15,257
CONTRIBUTION
Rs.42,65,98,583
FIXED COST
Rs.36,28,68,430
EBIT
Rs.6,37,30,153
INTEREST
Rs.2,01,145
PBT
Rs.6,35,29,008
TAX
Rs.1,00,01,000
EAT
Rs.5,35,28,008
10,19,125
EPS
RETURN ON EQUITY
Rs.52.52
0.52%
INTERPRETATION: - DOL 6.69 of implies that for a given change in companys sales, EBIT
was change by 6.69 Times.
The companys operating leverage decreases from last three years it is indicated that the
companys present sales is not sufficient to cover up a operating cost.
In 2009-2010 the financial leverage is 1.003 times & combined leverage is 6.72. the EPS of the
company increases every years. So it is good news for the equity holders to increase the
efficiency per share and get more return per share.
The company acquire N.D.D.B loan of Rs.57, 47,000 at the rate of 3.5%; and issues debentures
of Rs.4, 97, 13,400. It is appreciable when the company acquired funds from outside to
magnifying the effect on the EPS i.e. increases EPS when the external funds acquired by firm
and also financial leverage increases.
The combine leverage is product of operating & financial leverage. Total risk is associated with
combined leverage.
-69-
CONCLUSION/FINDING OF STUDY
About dairy industry
1. The Indian dairy industry mainly on the bases of co-operative and not competitive. Of
course there are many private small scale (sole proprietary) dairy exist in the market
but nothing worried about it because major part of the market share of the dairy
industry have GCMMF in Gujarat.
2. The main objective of the dairy unions is to help the poor and individual milk producer.
Put together of each and every individual milk producers in a way that the benefits out
of these activities distributed to every ones.
3. The effect of economic meltdown do not affect to the dairy industry; because milk &
other relevant products are essential products. So the dairy industry never affected by
business cycle fluctuation. Yes, of course the company may sometimes suffer from
declining sales of products by any internal or external hurdles or weaknesses of it. Ex.
Like management policy or mismanagement in the company, low efficiency, threat
from private entrants.
-70-
9. The companys overall profitability is very irregular as per six years data. This Ratio
trend expresses inefficiencies of the company. The Net Profits are very low in every
year than invested in total assets. Total Assets include Fixed as well as Current Assets
but excluded Fictitious Assets. The Assets of the company do not properly utilize, some
part of the assets may be underutilized. The company should properly manage its total
assets, especially Fixed Assets.
10. The companys EPS is increasing every year, especially in the last year the EPS is
highest forever i.e. Rs.52. This is because of the company issues debentures as well as
borrowings external funds from Bank & N.D.D.B Loan. The company should use
maximum external fund instead of issuing new equity share, The Company should raise
fund from short term loan for meeting to working capital. And if Company wants to
purchase new Assets, they can borrowings from Long term Loans from Bank or
N.D.D.B.
11. The companys Turnover Ratio is overall good. The sales of the company is increases
every year, the assets of the company somewhat constant between 2004-2008, but last
two years saw that the Assets of the company increases rapidly, therefore the Turnover
Ratio decline, but it doesnt worry about it.
12. The trend of the Ratio saw that company use its working capital properly. As per six
years data the working capital turnover ratio increases every years. The direction of
W.C.T Ratio saws positive. It indicates that the companys working capital has been
utilized effectively in making sales.
13. The Companys Debtors Turnover Ratio saw Fed pattern i.e. in 2004-05 is high and
then drastically declining in next immediate year. This situation indicates the company
becomes very lenient in collection of book debt. The company wants to increase its sales
by giving more credit period to its customers.
14. The companys creditors turnover ratios declining i.e. the creditors give more time for
payment of debt. So enhancing the credit worthiness of the company by the creditors.
The companys credit worthiness increasing from last three years as per the above
chart shows. The company enjoyed almost two and half months credit period. The
company gives credit worthiness to its creditor very lower than enjoyed period; this
situation is in fever of the company.
-71-
15. The companys stock turnover ratio is overall good but very irregular in nature. As per
the last six years data there are lot of variation shown, so its difficult to know how
much stock should be keep in future. As per the last year figure shows highest stock
turnover of the company
16. The companys Fixed Assets Turnover Ratio is less than 1 as per the above chart. The
last year Ratio is very ideal. The trend of the ratio shows that the large part of the
working capital financed through long-term funds like N.D.D.B Loan and Debenture or
long term Bank Loan.
17. The companys current ratio is more than 1 but it is continuously decline over a period
of time. The current liabilities increase higher rate than current assets. The reason is
that the company raise short term loan from bank in last three years.
18. The companys liquid ratio is irregular and less than 1. It shows weak liquid situation
of the company, but last year figure maintained liquidity, it is somewhat nearby ideal
ratio.
19. The companys proprietary ratio is decline steadily. It is dangerous to the creditor who
gives more credit period to the company for making payment of the debt.
20. As per the above projected balance sheet FIXED ASSETS requirement will increase for
expansion of the existing unit. The CURRENT ASSETS including cash& bank, debtors,
inventories, receivable etc; will increase as per future requirement and also the
CURRENT LIABILITIES will increases especially that bank borrowing and sundry
debtors.
21. DOL of 9.45 implies that for a given change in companys sales, EBIT was change by
9.45 Times. The companys sales are increases every year. Therefore, high operating
leverage is good when revenues are rising. In 2004-2005 the financial leverage &
combined leverage is 1 because there is no debt in the financial structure.
22. DOL 11.34 of implies that for a given change in companys sales, EBIT was change by
11.34 Times. The companys sales are increases every year. Therefore, high operating
leverage is good when revenues are rising. Same is here In 2005-2006 the financial
leverage & combined leverage is 1 because there is no debt in the financial structure.
-72-
23. DOL of 8.94 implies that for a given change in companys sales, EBIT was change by
8.94 Times; which is slightly less than previous years; because of the contribution is
slightly less than previous year and the EBIT is also higher. In 2006-07 the financial
leverage & combined leverage is 1 because there is no debt in the financial structure.
24. In 2007-08 DOL of 9.005 of implies that for a given change in companys sales, EBIT
was change by 9.005 Times. The companys sales increases but the variable cost and
fixed cost are also increases so the companys present sales are not sufficient to cover up
a operating cost. The company should cut down its variable cost to increase the
proportion of contribution.
25. In 2008-2009 DOL of 9.77 of implies that for a given change in companys sales, EBIT
was change by 9.77 Times. Same things happens here also that the companys sales
increases but the variable cost and fixed cost are also increases so the companys
present sales is not sufficient to cover up an operating cost. The company should cut
down its variable cost to increase the proportion of contribution.
26. DOL 6.69 of implies that for a given change in companys sales, EBIT was change by
6.69 Times. The companys operating leverage decreases from last three years it is
indicated that the companys present sales is not sufficient to cover up a operating cost.
In 2009-10 the financial leverage is 1.003 times & combined leverage is 6.72. the EPS of
the company increases every years. So it is good news for the equity holders to increase
the efficiency per share and get more return per share. The company acquire N.D.D.B
loan of Rs.57,47,000 at the rate of 3.5%; and issues debentures of Rs.4,97,13,400. It is
appreciable when the company acquired funds from outside to magnifying the effect on
the EPS i.e. increases EPS when the external funds acquired by firm and also financial
leverage increases. The combine leverage is product of operating & financial leverage.
Total risk is associated with combined leverage.
-73-
BIBLIOGRAPHY
1. FINANCIAL MANAGEMENT Prasanna Chandra; ch. Financial planning & forecasting
p.g.105
2. FINANCIAL MANAGEMENT I M Pandey; Part 3: - financing decision
Financial & operating leverage p.g.289; Part 5 financial & profit analysis
Financial statement & cash flow analysis p.g.489
3. FINANCIAL MANAGEMENT M Y Khan & P K Jain; Part 2: - cash flow
statement p.g.5.3 5.38; Ratio analysis p.g.6.1 6.72; Part 5 financing decision
Leverage
4. A Text Book of Accounting for management S.N & S.K Maheshwari Financial
Statement: - Analysis & Interpretation; p.g.2.1 2.61, p.g.2.103 2.136
5. Bhaskar News, Anand
First Published 03:11 AM [IST] (13/06/2010)
Last Updated 3:41 AM [IST] (13/06/2010)
6. www.amul.co.in
7. www.sabardairy.co.in
8. Annual report of 2004 to 2010
-74-
?
Bhaskar News, Anand
First Published 03:11 AM [IST](13/06/2010)
Last Updated 3:41 AM [IST](13/06/2010)
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