a financial analysis of sabarkantha district co-operative milk producers union ltd. himmatnagar

“A FINANCIAL ANALYSIS OF SABARKANTHA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION

LTD. HIMMATNAGAR(2004-2010)”

UNDER THE GUIDENCED OF:-

DEVJIBHAI PATEL(SENIOR ACCOUNTING OFFICER)

SABAR DAIRY

SUBMITED BY:-

UTSAV.H.SUKHADIYAENRLL.NO. -097510592005

SUBMITTED TO:-

TABLE OF CONTENT

SR.NO. PARTICULAR P.g.NO.1 Student Declaration I2 Preface 13 Acknowledgement 24 Project guide certificate5 Executive Summary 36 Dairy Industry Overview 47 Sabar Dairy: - Introduction 9

7.1 Company Profile 107.2 History & Development 137.3 SWOT Analysis 228 Ratio Analysis 29

8.1 Limitation of Ratio Analysis 479 Common Size balance Sheet 4810 Income Statement 4911 Forecasting & Planning 5012 Cash flow Analysis 5313 Leverage 6114 Conclusion & Findings of Study 7015 Bibliography 7416 Appendix 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.

I

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-

Introduction of Dairy Industry

There has been a total revaluation in sector like industries economic situation, political situation and trying to focus to the best to capture the maximum benefits. 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. The dairy industry has come up to the present stage because of the well planned effective co – ordination of national dairy development board and co – ordination of the Government at federation, the nature of every organization in a country regardless of its economics system is to increase. Productivity so as to full fill the wants and needs of its citizens and then to improve the standard of living of the people.

History and Development of Dairy Industry

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. And give the idea to setup Panchmahal Dairy in stage 40 to 50 villages agreed provide milk to the dairy. They collected 21,000 Ltrs. Milk from those villages in the beginning. This dairy is called Panchmahal dairy.

In 1970 National Dairy Development Board (NDDB) was also established in Anand and the state level offices NDDB is in Delhi. The NDDB's chairman is Dr. V. Kurain in beginning on account of inadequate finance the Dairy was selling very less milk. Only few people ware agree to provide milk to the dairy. For Bringing milk the truck or tempo was used.

Panchmahal District is situated in the eastern part of Gujarat state with 1900 in habited villages consisting of 33.2 Lakes (1966 census) of which 9802 thousand represent schedule tribe making sizable 45% of the total human population, which is mainly concentrated in 5 tribal Talukas and 2 pockets the undulated terrain made of hills, rocks and shallows soils. The dependences of agriculture mostly on scarcity rainfalls and merge irrigation facilities and the advises all together make a huge obstacle in the development of the district. The Panchmahal District Co-operatives milk produces union was organization as Godhra in may 1973.initially from 40 villages the dairy Co-operative daily 21000Ltrs. Of milk was produces and delivered to the adjacent district union in Kheda, Baroda on account of two lack of processing facilities at Godhra only bordering villages ware availing these benefits of arrangements so to make it in reach of a larger numbers of deep seated villages. Milk producers a milk processing plant with 30,000Ltrs.capacity holder was established at Godhra in 1977.

-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 Co-operative. At present the dairy production of milk is 4 to 5 lakes liters.

Dairy Industry in India

The dairy industry occupies an important place in the Indian economy. As India is an agriculture oriented economy and around 65% of its people still depending on agriculture and still many farmers use the old method of farming using the cattle, cattle breeding is done on a vast scale. The cattle not only provide the means for cultivation but also it provides milk to the household.

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 gmIndia

1950 132 gm

1997 214 gm

2020 290 gm

-5-

India contributes 35% of total Asian milk

Dairy Industry profile 2010

Human Population 953 million (70 million dairy farmers)

Milk production 74.3 million tons (203.5 million 1 pd)Average annual growth rate

(2006-2010)5.6%

Per capita milk availability 214 gm/day or 78 kg/year

Milch animals 57 million cows;

39 million buffaloes

Milk yield per breedable bovine in milk 1,250kg

Cattle feed production (organized sector) 1.5 million tonnes

Turnover of veterinary pharmaceuticals Rs 550 crores

Dairy plants throughout 20 mlpd

Throughout as percentage of total milk output 10Value of output of milk group

(Based on producers price)Rs 50,051 crores

Value of output of dairy industry

(Based on retail price)Rs 105,000 crores

Milk Composition

Sr.no

Constituents Buffalo Cow Goat Liquid skimmed milk

1 Moisture (gm) 81.00 87.50 86.80 92.10

2 Protein (gm) 4.30 3.20 3.30 2.50

3 Fat (gm) 6.50 4.10 4.50 0.10

4 Minerals (gm) 0.80 0.80 0.80 0.70

5 Carbohydrates (gm)

5.00 4.40 4.60 4.60

6 Energy calories (kcal)

117.00 67.00 72.00 29.00

7 Calcium (mg) 210.00 120.00 170.00 120.00

8 Phosphorus (mg)

130.00 90.00 120.00 90.00

9 Iron (mg) 0.20 0.20 0.30 0.20

-6-

Indian Buffaloes: (Dairy business Directory 2006)

Buffaloes are classified into two categories;

1) Reverine (depending upon variation in their habitat & genome)

2) Swamp

Swamp buffaloes: - 48 chromosomes

South East Asian countries

Stocky animals, marshy land habitat

River Buffaloes: - 50 chromosomes

- Massive in size and curled horns

- Prefer to enter clear water

World’s Buffalo population:

147 million

About 142 millions in Asia & Pacific

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%

-7-

BREEDS

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

Breeds of Buffaloes of Indian Origin and Breeding Tracts:

Group Breed Breeding tract

Murrahtype

Murrah Nili Ravi

Rohtak, Jind,Hisar, Bhiwari, Sonepat(Hariyam)

Ferozepur (Punjab)

Gujarat Surti JaffarabadiMehsana

Kaira and BarodaKutch, Jungarh & Jamnagar dist

Mehsana, sabarkantha, Banaskantha Dist.

UttarPradesh

BhadawariTarai

Bhadawari estate, Beh Tehsil in Agra, Gwalior & Etawah dist. Tarai region of U.P.

Central India Nagpuri PandharpuriKalahandiSambalpur

Nagpur, Akola, Amravati dist. South maharashtra, west A.P., north Karnataka Hilly region of Andra Pradesh and Orissa

Bilaspur dist.

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

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.

Sabar dairy have main four departments are as under:

1. Production department2. Human resource department3. Marketing department4. Finance department

These all four departments their activity efficiently. The human resource department has their main activity like to give to training to a new person for vacancies and select a right person for right job, give promotion to the employee. The Production department has their main activity to collect milk and check it among different according to guaranty distributes it among different sections and manufactured product.

The finance department has a main duty to utilize scare resources effectively and to manage the financial resources. The marketing department does its activity under GCMMF.

-9-

Company profile

Basic information: -

SABARKANTHA DISTRICT CO-OPERATIVE PRODUCER’S UNION LTD.

Boria, Himatnagar 383006

Gujarat, India. Tel.No. (02772)226051 to 226060

Website: www.sabardairy.co.in

Year of Establishment 1964 A.D

Type of Business: - Manufacturing Unit.

Size of the Organization: - Large Scale

Forms of the Organization: - Co-operative union Ltd.

Name of the Auditor: - R.M Aasodiya, Milk Audit office, Himatnagar.

Bankers: - 1. The sabarkantha District Central Co-operative Bank Ltd.

2. Dena Bank

3. State Bank of India

4. Bank of Baroda

5. H.D.F.C Bank

6. I.C.I.C.I Bank

Co-operative union members: -

Sabarkantha, Bharuch, Gandhinagar, Kaira, Mehsana, Surat, Baroda, Banas, Panchmahal, Anand, Mother Dairy, Ahmedabad.

http://www.sabardairy.co.in/

BOARD OF DIRECTORS :-

No Name Designation

1 Jethabhai P. Patel Chairman

2 Jyantibhai B. Patel Vice chairman

3 Khemabhai H. Patel Directors

4 Jashubhai S. Patel Directors

5 Ramabhai G. Patel Directors

6 Bhogibhai R. Patel Directors

7 Kantibhai S. Patel Directors

8 Dhurabhai K. Patel Directors

9 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 District ragistar coop.Societies Directors

20 Kanubhai M. Patel Directors

21 Dr. Babubhai M. Patel M.D.

-11-

History & Development

In 1990, the 'UNISEF' Team visited the Sabarkantha district & they tries to improve milk industry Sabarkantha for this objective they select Himatnagar for establishing milk processing unit. This is their recommendation to start the dairy on Co-operative bases to improve milk industry in Sabarkantha district.

“The Sabarkantha District Co-operative Milk Producers Union Ltd, Himatnagar" was also known as Sabar dairy in Gujarat. Sabar dairy was established before forty five years that means 27th

November 1964.

Sabar dairy was registered with the name of "The Sabarkantha District Co-operative Milk Producer's Union Ltd., Himatnagar" and also gets the certificate of ISO-9002.

In Gujarat Sabar dairy is one of the leading milk producing unit.

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 day’s 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

To maintain milk at a low temperature so as to prevent any deterioration in quality prior to processing/product manufacture;

To facilitate bulking of the raw milk supply, which will ensure uniform composition;

To allow for uninterrupted operation during processing and bottling;

To facilitate standardization of the milk.

-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;

Light glass and lamp; 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

Summary of utilization of milk in dairy

Items Percentage in relation to

Total milk production Total quantityconverted 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-

Flow diagram of milk processing

RAW MATERIAL

Dump Tank

Clarification

Cooling and storing

Preheating

Standardization

Liquid milk (Optional)

Cream Butter

HomogenizationGhee

Pasteurization

Packing

Cold storage

Distribution

Whole milk (6% fat)

Standard Milk (4.5% fat)

-15-

Toned Milk (3% fat)

Double toned milk (1.5% fat)

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-

National Dairy Development Board (NDDB)

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.In Gujarat, farmer initiatives, supported by the Kaira Union, resulted in significant progress; elsewhere little change occurred. It was about this time that mountains of powder and lakes of butter oil were accumulating in Europe. 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.

Support Role of NDDB

The National Dairy Development Board was created to promote, finance and support producer-owned and controlled organizations.NDDB's programmes and activities seek to strengthen farmer cooperatives and support national policies that are favourable to the growth of such institutions. Fundamental to NDDB's efforts are cooperative principles and cooperative strategies.As the prime mover of the programme, in addition to financing the unions on a grant-cum-loan basis, NDDB provides extensive support for their successful performance.It coordinates its activities with those of the Technology Mission for Dairy Development and other government agencies.NDDB assists the unions in recruitment and training of personnel; technical help is provided in design and selection of equipment as well as in construction of dairy plants on a turnkey basis. Operation Flood's success led to NDDB evolving similar programmes for other commodities. Where potential synergies exist, NDDB has created commercial firms to exploit these for the benefit of rural producers.

-17-

Various entities under NDDB

The various entities which work under NDDB, to whom NDDB provides help are:-1. MDFVPL – Mother Dairy Fruit & Vegetable (P) Ltd., which is the Holding company and whose primary responsibility is to provide direction to all the group companies in Financial, IT and HR activities.2. MDFL – Mother Dairy Foods Ltd., whose primary responsibility is to form JV companies for marketing activities. 3. MDFPL – Mother Dairy Foods Processing Ltd., whose primary responsibility is to procure, process and distribute milk and milk products. It also has the fruits & vegetables unit under it.4. MDDL – Mother Dairy Delhi Ltd., which is a Joint venture between MDFPL & MDFL and responsible for the sales & marketing activities in the Delhi region through milk shops and retailers.5. MDIL – Mother Dairy India Ltd, whose primary responsibility is to sell & market and distribute Products other than milk through distributors throughout India.

During 2001-02, NDDB's outstanding investment in co-operatives has dipped from Rs 1,227.58 crore to Rs 946.70 crore, indicative of the increased profile of subsidiary companies in its operations.

-18-

Latest Controversy in Dairy Industry

Amul wants to take off its Brand from the GCMMF

13/6/2010, the Board of Directors of Amul decided to take off its Amul Brand from the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF). According to the contract made between Board of Directors of GCMMF & Board of Directors of Amul at the time of establishment of GCMMF, Amul must give notice before 1 year to take this Decision.

Amul Dairy will arrange Annual General Meeting on 25th June & may be to take Decision about it. The M.D of the Amul B.M.Vyas resigned from the GCMMF.The responsible factor is the dispute going in the GCMMF & the Amul think that it will affect to the Brand name of the Amul.

There are 12 milk producers’ sales the manufactured product under the Brand name of the Amul. Amul believe that if the milk producers’ sales inferior product under Amul Brand, it will serious affect to the image of the company.

-21-

SWOT ANALYSIS

STRENGTH:-

1. BETTER GEOGRAPHIC LOCATION: - AVAILABILITY OF BETTER ROAD TRANSPORTS FACILITY BECAUSE OF NEAR BY NATIONAL HIGHWAY 8. AVAILABILITY OF LOCAL MARKET OF PRODUCT.

2. DAIRY INDUSTRY MAINLY ON THE BASES OF CO-OPERATIVE AND NOT COMPETITION.

3. CONTINUESLY IMPROVEMENT (KAIZEN) IN PRODUCT & PRODUCTION METHODS AND PROPOSITION.

4. AMUL BRAND ITSELF IS STRENGTH OF THE COMPANY.

5. EARNING PER SHARE INCREASES EVERY YEARS.

6. EFFECTIVE MANAGEMENT INFORMATION SYSTEM.

7. GOOD INFRASTRUCTURAL FACILITIES.

WEAKNESSES: -

1. OVEREMPLOYEMENT IN THE DIFFERENT – DIFFERENT DEPARMENTS OF THE COMPANY.

2. HIGH COST OF PRODUCTION AND/OR OPERATING COST INCLUDING MAINLY TRANSPORT COST, FUEL COST AND ADMINISTRATIVE EXPENSES.

3. SERVICE DELIVERY PERCEPTION IS WEAK.

4. OLD EQUIPMENT NEEDS REPLACEMENT LIKE MODERN COMPUTERIZATION, OLD & TRADITIONAL PRINTERS.

5. LACK OF PROFESSIONALISM IN THE EMPLOYEES.

-22-

OPPORTUNITIES: -

1. NO GOVERNMENT INTERFERANCE IN THE MANAGEMENT OF DAIRY INDUSTRIES.

2. READY STRUCTURE AVAILABLE FOR MARKETING CHANNEL INCLUDING SUPPLY CHAIN, TRANSPORTATION CHANNEL ETC.

3. IT SUPPORT IN ADVERTISEMENT FOR RURAL SECTOR FROM NATIONAL LEVEL.

4. EXPANSION OF WORKING OF THE UNIT IN UTTAR PRADESH & HARIYANA.

THREATS: -

1. THREAT FROM PRIVATE DAIRIES ENTERS IN THE MARKET.

2. LACK OF AWARENESS ABOUT THE CO-OPERATIVE UNIONS IN THE VILLAGES; SOME PEOPLE STILL NOT JOINED TO THE DAIRIES UNION.

3. THE PEOPLE ARE NOT READY TO CHANGE FROM TRADITIONAL SYSTEM OF USING HOUSEHOLD MILK PRODUCE BY OWN CATTEL.

-23-

2008

200

9

1,73

2

3,00

,603

40,9

3,14

,686

991

1,58

,591

2,68

5

209

3,65

,428

1,77

,281

1,88

,147

71,6

60

3,11

,170

328

45,4

04

2007

– 2

008

1,71

4

2,90

,021

36,9

5,19

,96

1 981

1,24

,401

3,00

0

209

3,39

,301

1,58

,807

1,80

,494

57,5

11

3,71

,189

239

21,0

97

2006

-200

7

1,69

8

2,88

,359

32,3

3,67

,731

978

1,06

,743

9,80

5

206

3,09

,502

1,37

,517

1,71

,985

57,6

70

3,89

,659

261

19,0

98

2005

-200

6

1,69

0

2,80

,038

32,2

0,54

,448

980

99,9

57

3,44

5

197

3,05

,504

1,34

,280

1,71

,224

48,5

95

4,29

,025

222

23,6

70

2004

–

2005 1,

670

2,72

,811

30,7

3,52

,636

979

92,9

98 - 187

2,88

,076

1,29

,539

1,58

,537

43,8

84

4,16

,105

164

13,5

71

Part

icul

arM

ilk C

oope

rativ

e So

ciet

ies

Mem

bers

of S

ocie

ties

Milk

col

lect

ed fr

om s

ocie

ties

( in

kgs)

No.

of P

rimar

y So

ciet

ies h

avin

g ow

n B

uild

ing

Sale

of ‘

SAB

AR

DA

N’ C

attle

Fe

ed (i

n M

etric

Ton

es)

Raj

aka

Seed

s sup

plie

d (in

kgs

)

A.I.

Cen

ters

(Fro

zen

Sem

en)

No.

of A

rtific

ial I

nsem

inat

ions

:

1.

Cow

s (w

ith F

roze

n Se

men

)

2.

Buf

falo

es (w

ith F

roze

n se

men

)

3. N

o. o

f Cro

ss-b

read

cal

ves b

orne

Spec

ial V

isits

(Vet

erin

ary

Serv

ices

)

Dai

ry V

isit:

1.

No.

of S

ocie

ties &

Oth

er

Inst

itutio

ns.

2.

No.

of V

isito

rs.

Sr.N

o.

1 2 3 4 5 6 7 8 9 10

Progress of Dairy Activities

-24-

INTRODUCTION:- Financial management is that managerial activity which is concerned with the

Planning and controlling firm’s financial resources. It was a branch of economics till

1980 and as a separate discipline, it is of recent origin. The subject of financial

management is of immense interest to both academicians and practicing managers. The

Financial management includes four important decisions are as under: Dividend decision Financing decision Liquidity decision Investment decision

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.

• Investments:-

Investment made for a long term, hence valued at cost.

• Depreciation:-

Depreciation on fixed assets is calculated as per written down value method.

-25-

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 2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

ANNUALTURNOVER

376.40 351.88 437.75 497.41 503.28 601.15 677.98 795.61 1034.23 1192.38

ANNUAL TURNOVER

376.4 351.88497.41 503.28

1192.381034.23

795.61677.98601.15437.75

0200400600800

100012001400

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

YEARS

RS. I

N CR

ORE

INTERPRETATION: - The Company’s 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 company’s growth rate is highest out of other dairies unions. The Turnover is 1192.38 crore during this financial year.

AVERAGE MILK PROCUREMENT PER DAY

YEARS 2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

AVG. MILK PROCUREMENT

PER DAY

6.08 6.36 7.18 7.40 8.42 8.82 8.86 10.10 11.21 11.15

AVG. MILK PROCUREMENT PER DAY

6.087.4

10.111.21 11.15

8.868.828.427.18

6.36

0

2

4

6

8

10

12

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

YEARS

K.G

. IN

LAKH

-27-

SALES OF SABAR DAN

YEARS 2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

SALES OF SABAR

DAN

49.45 56.98 70.12 78.12 92.99 99.96 106.74 124.40 158.59 167.42

SALES OF SABAR DAN

49.45 56.98

92.99 99.96 106.74

158.59 167.42124.4

78.1270.12

0

50

100

150

200

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

YEARS

THO

USAN

D M

ETRI

C TO

NNS

AVERAGE MILK PRICE

YEARS 2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

AVG. MILK PRICE

188.00 184.60 185.00 212.00 221.00 212.50 242.00 284.00 303.00 345.00

AVG. MILK PRICE

188 184.6 185

284345

221212

303

242212.5

050

100150200250300350400

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

YEARS

RS.

Ratio Analysis

PROFITABILITY RATIO

Gross Profit Ratio = Gross Profit X100 Net Sales

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10GROSS PROFI

T

29,65,27,555 35,32,80,974 32,78,34,809 35,02,45,834 36,16,97,157 38,87,05,342

NET SALES

4,99,47,54,053 5,98,72,07,211 6,73,44,87,700 7,89,63,33,229 10,34,22,51,543 11,79,22,13,840

GROSS PROFI

T RATIO

5.94% 5.90% 4.87% 4.44% 3.50% 3.30%

GROSS PROFIT RATIO

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

GROSS PROFIT RATIO

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 company’s 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-

Net Profit Ratio = Net Profit X 100 Net Sales

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

NET PROFIT

3,08,83,766 2,67,46,048 3,22,45,198 3,37,30,564 3,42,17,707 5,35,28,008

NET SALES

4,99,47,54,053 5,98,72,07,211 6,73,44,87,700 7,89,63,33,229 10,34,22,51,543 11,79,22,13,840

NET PROFIT RATIO

0.62% 0.45% 0.48% 0.43% 0.33% 0.45%

NET PROFIT RATIO

0.00%0.10%0.20%0.30%0.40%0.50%0.60%0.70%

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

NET PROFIT RATIO

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 company’s 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-

Operating Ratio = Operating costs X 100 Net Sales

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10OPERATING

RATIO99.38% 99.55% 99.52% 99.57% 99.67% 99.55%

99.00%

99.20%

99.40%

99.60%

99.80%

100.00%

100.20%

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

NET PROFIT RATIO

OPERATING RATIO

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-

Overall Profitability Ratio = Net Profit X100 Capital Employed

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

NET PROFIT

3,08,83,766 2,67,46,048 3,22,45,198 3,37,30,564 3,42,17,707 5,35,28,008

CAPITAL

EMPLOYED

1,87,88,30,361 1,82,99,25,401 1,89,92,78,325 1.69.83.99.282 3,11,76,84,292 4,73,04,15,740

OVERALL

PROFITABILIT

Y RATIO

1.64% 1.46% 1.70% 1.99% 1.10% 1.13%

OVERALL PROFITABILITY RATIO

1.13%1.10%

1.99%1.70%

1.46%

1.64%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

OVERALLPROFITABILITYRATIO

INTERPRETATION: - It is also called as “Return on Investment”. It indicates the percentage of return on the total capital employed in the business.

The company’s 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.

-32-

Earning Per Share = Net Profit No. Equity Share

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

NET PROFIT

3,08,83,766 2,67,46,048 3,22,45,198 3,37,30,564 3,42,17,707 5,35,28,008

NO. EQUITY SHARES

10,19,666 10,19,293 10,19,106 10,19,106 10,19,125 10,19,125

EPS Rs.30.29 Rs.26.24 Rs.31.64 Rs.33.10 Rs.33.58 Rs.52.52

EPS

26.24

52.52

33.5833.131.6430.29

0102030405060

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

YEARS

RS.

INTERPRETATION: - The Earning per Share helps in determining the Market Value of the equity share of the company. It also helps in estimating the company’s capacity to pay dividend to its equity shareholders.

The company’s 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-

Dividend per Share = Declared dividend X Paid up Value 100

YEARS 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

4.079

6.12 6.12 6.12 6.12 6.12

0

2

4

6

8

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

years

Rs.

DPS

INTERPRETATION: - The Company’s 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 company’s 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 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10NET SALES 4,99,47,54,05

35,98,72,07,21

16,73,44,87,70

07,89,63,33,22

910,34,22,51,5

4311,79,22,13,

840CAPITAL

EMPLOYED1,87,88,30,36

11,82,99,25,40

11,89,92,78,32

51.69.83.99.28

23,11,76,84,29

24,73,04,15,74

0TURN OVER RATIO

2.66 3.27 3.55 4.65 3.32 2.49

Turn over Ratio

2.493.32

4.653.55

2.663.27

012345

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

years

Tim

es

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 company’s 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 doesn’t worry about it.

-35-

Fixed Assets Turnover Ratio = 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

FIXED ASSETS TURN OVER RATIO

32.2 32.26 36.41 33.99

43.441.96

01020304050

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

YEARS

TIM

ES FIXED ASSETS TURNOVER RATIO

INTERPRETATION: - This Ratio indicates the extent to which the investments in fixed assets contributed toward Sales.

The company’s 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-

Working Capital Turnover Ratio = Net Sales Working Capital

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

NET SALES

4,99,47,54,053 5,98,72,07,211 6,73,44,87,700 7,89,63,33,229 10,34,22,51,543 11,79,22,13,840

W.C 24,79,71,803 23,47,19,181 25,24,88,748 25,75,81,674 24,26,25,119 22,87,12,199W.C.TRATIO

20.14 25.51 26.67 30.66 42.63 51.56

W.C.T RATIO

25.51 26.67

51.5642.63

30.6620.14

0102030405060

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

YEARS

TIM

ES

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 company’s working capital has been utilized effectively in making sales.

-37-

Debtors’ Turnover Ratio = Credit Sales (Debtors’ Velocity) Avg. Accounts Receivable

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10CREDIT SALES

4,99,47,54,053 5,98,72,07,211 6,73,44,87,700 7,89,63,33,229 10,34,22,51,543 11,79,22,13,840

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

D.T RATIO

300 36.78 31.50 36.26 31.17 56.98

D.T RATIO

56.9831.1736.2631.536.78

300

0

100

200

300

400

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

YEARS

TIM

ES

INTERPRETATION: - Debtors is an important constituent of current assets and therefore the quality of debtors to a great extent determines a firm’s liquidity. This Ratio indicates the efficiency of the staff entrusted with collection of book debts.

The Company’s 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.

-38-

Debt Collection Period = Avg. Accounts Receivable X 360 Credit Sales for the year

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

AVG. A\C RECEIV-ABLE

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

4,99,47,54,053

5,98,72,07,211 6,73,44,87,700 7,89,63,33,229 10,34,22,51,543 11,79,22,13,840

DEBT COLLE- CTION

PERIOD

1 day 10 days 11days 10 days 12 days 6 days

1

1011 10

12

6

02468

1012

DAYS

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

YEARS

DEBT COLLECTION PERIOD

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 company’s 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-

Creditors Turnover Ratio = Credit Purchase Avg. A/c Payables

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10CREDIT PURCH

ASE

4,67,57,50,181 4,70,65,54,206 5,41,43,43,893 7,26,16,05,128 8,71,51,00,862 10,24,51,12,203

AVG. A\C PAYE-ABLES

44,95,44,662.5 39,52,29,615 39,83,83,182.5 59,87,09,648.5 1,29,07,77,314 2,04,97,89,521.5

C.T RATIO

10.40 11.90 13.59 12.13 6.75 5.00

10.4 11.9 13.59 12.13

6.755

0

5

10

15

TIMES

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

YEARS

CREDITORS TURNOVER RATIO

INTERPRETATION: - The creditors’ turnover ratio indicates about the promptness in making payment of credit purchases. A higher creditors turnover ratio signifies that the creditors are being paid promptly, thus enhancing the credit worthiness of the company.

The trend of the chart shows that the company’s creditor’s turnover ratio declining i.e. the creditors give more time for payment of debt. So enhancing the credit worthiness of the company by the creditors.

-40-

Credit Period Enjoyed = Avg. A/c Payables X 360 Credit Purchase

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

AVG. A\C PAYE-ABLES

44,95,44,662.5

39,52,29,615 39,83,83,182.5 59,87,09,648.5 1,29,07,77,314 2,04,97,89,521.5

CREDIT PURCHASE

4,67,57,50,181

4,70,65,54,206

5,41,43,43,893 7,26,16,05,128 8,71,51,00,862 10,24,51,12,203

CREDIT PERIOD

ENJOYED

35 days 30 days 26 days 30 days 53 days 72 days

CREDIT PERIOD ENJOYED

35 30 26 30

5372

0

20

4060

80

2004 -05

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

YEARS

DAYS CREDIT PERIOD

ENJOYED

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 company’s 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-

Stock Turnover Ratio = Cost of goods Sold Avg. Inventory

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

COGS 4,69,82,26,498

5,63,39,26,237

6,40,66,52,891 7,54,60,87,395 9,98,05,54,386 11,40,35,08,498

AVG. INVENTRY

42,52,89,029

61,42,06,324.5

37,86,42,106.5 52,39,19,260 67,47,30,328.5 52,61,50,648

STOCK TURNOVER

RATIO

11.05 Times 9.17 Times 16.92 Times 14.40 Times 14.80 Times 21.67 Times

STOCK TURNOVER RATIO

11.05 9.17

16.9214.4 14.8

21.67

05

101520

25

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

YEARS

TIM

ES

INTERPRETATION: - This ratio indicates whether investment in inventory is efficiently used or not. A high inventory turnover ratio indicates high sales. The ratio is, therefore, a measure to discover the possible trouble in the form of overstocking or overvaluation. A low inventory turnover ratio results in blocking of funds in inventory which may ultimately result in heavy losses due to inventory becoming obsolete or lower in quality.

The company’s 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 it’s 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-

Fixed Assets Ratio = Fixed Assets Long term Fund

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

FIXED ASSETS

15,51,03,465 18,55,63,304 18,49,51,116 18,82,08,621 23,83,14,855 34,69,34,808

LONG TERM FUNDS

41,82,41,192 43,95,86,127 45,12,44,356 46,72,49,421 50,19,11,957 52,18,48,289

FIXED ASSTES RATIO

0.37:1OR37%

0.42:1OR42%

0.41:1OR41%

0.40:1OR40%

0.48:1OR 48%

0.66:1OR66%

FIXED ASSTES RATIO

66%

48%40%

41%42%37%

0%

20%

40%

60%

80%

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 company’s 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

CURRENTASSETS

1,14,70,61,128

1,02,51,78,411

1,04,92,55,113

1,45,50,00,971

2,82,41,79,747

4,32,82,91,242

CURRENT LIABILI-

TIES

89,90,89,325 79,04,59,230 79,67,66,365 1,19,74,19,297

2,58,15,54,628

4,09,95,79,043

CURRENT RATIO

1.28:1 1.30:1 1.32:1 1.21:1 1.09:1 1.06:1

CURRENT RATIO

1.28 1.3 1.32 1.21 1.09 1.06

0

0.5

1

1.5

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

YEARS

INTERPRETATION: - This ratio is an indicator of the firm’s commitment to meet its short-term liabilities. Current Assets mean cash or convertible in to cash during the operating cycle of business (which is of not more than a year). Current liabilities mean liabilities payable within a year’s time either out of existing current assets or by creation of new current liabilities. An ideal ratio is 2 and is considered as a safe margin of solvency.

The company’s 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-

Liquidity Ratio = Liquid Assets Current Assets

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

LIQUIDEASSETS

29,48,73,192 41,16,36,961 62,86,93,852 47,86,71,573 1,98,70,53,060

3,62,80,89,611

CURRENT LIABILI-

TIES

89,90,89,325 79,04,59,230 79,67,66,365 1,19,74,19,297

2,58,15,54,628

4,09,95,79,043

LIQUIDITY RATIO

0.33;1 0.52:1 0.79:1 0.40:1 0.77:1 0.88:1

LIQUIDITY RATIO

0.880.77

0.4

0.79

0.52

0.33

0

0.2

0.4

0.6

0.8

1

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10YEARS

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 company’s 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-

Proprietary Ratio = Shareholder’s fund Total tangible Assets

YEARS 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10

SHAREHOLDERS

FUND

10,19,66,600 10,19,29,300 10,19,10,600 10,19,10,600 10,19,12,500 10,19,12,500

TOTAL TANGIBLE ASSETS

20,11,53,155 23,16,12,994 23,10,00,806 24,33,98,311 29,35,04,545 40,21,24,498

PROPRI-ETARY RATIO

51% 44% 44% 42% 35% 25%

PROPRIETARY RATIO

25%

35%42%

44%44%51%

0%

10%

20%

30%

40%

50%

60%

2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10YEARS

INTERPRETATION: - It is a variant of debt-equity ratio It establishes relationship between the proprietors’ or shareholders’ funds and the total tangible assets. This ratio focuses the attention on the general financial strength of the business. It can find out the proportion of shareholders’ funds in the total assets employed in the business. A ratio below 50% may be alarming for the creditors since they may have to lose heavily in the event of liquidation of the company.

As per the above chart, the company’s 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.

-46-

LIMITATION OF RATIO ANALYSIS

1. COMPARATIVE STUDY REQUIRED: - I do not considered comparative study with the result of similar business. However, such a comparison only provides a glimpse of the past performance and forecasts for future may not prove correct since several other factors like management policies, some External and/or Internal factors, etc., may affect the future operations. The comparison of one firm with another on the basis of ratio analysis without taking into account the fact of companies having different accounting policies, will be misleading and meaningless. Or may be possible the firm itself may change its accounting policies from one period to another.

2. LIMITATIONS OF FINANCIAL STATEMENTS: - These Ratios are based on the information which has been recorded in the financial statement. Ex. Like non-financial charges also important for the business are not revealed by the financial statements. If the management of the company changes, Different accounting policies may be adopted by management of different companies regarding valuation of inventories, depreciation, research and development expenditure and treatment of deferred revenue expenditure, etc.

3. RATIOS ALONE ARE NOT ADEQUATE: - Ratios cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen. Ratios may be linked to rail road, they tell the analyst, “stop, look and listen.”

4. WINDOW DRESSING: - It means manipulation of accounts in a way so as to conceal vital facts and present the financial statements in away to show a better or bed position than what it actually is.

5. PROBLEM OF PRICE LEVEL CHANGES: - Financial analysis based on accounting ratios will give misleading results if the effects of changes in price level are not taken into account. Price of plant & machinery when set up a company and the method adopted of depreciation charges, price of product changes may saw the change in amount of sales of the company.

6. NO FIXED STANDERDS: - The standard of the Ratio may be different from company to company according to the nature & size of the business.

-47-

COMMON SIZE BALANCE SHEET

PARTICULAR 2004 - 05 2005 - 06 2006 - 07 2007- 08 2008 - 09 2009 - 10LIABILITIES

EQUITY SHARE CAPITALOF RS.100 EACH

5.43% 5.57% 5.37% 4.31% 2.66% 1.84%

RESERVE FUND &OTHER FUND

16.83% 18.45% 18.39% 15.44% 10.42% 7.60%

DEPRECIATION FUND 28.24% 31.32% 32.59% 28.22% 18.78% 14.39%DEBENTURES & N.D.D.B LOANS

- - - - - 1.00%

CURRENT LIABILITIESDEPOSITS 2.30% 2.30% 2.39% 2.13% 1.31% 0.57%

SUNDRY CREDITORS 18.85% 16.37% 12.90% 14.46% 12.06% 7.78%CREDITORS –SOCIETIES 20.04% 20.26% 21.68% 15.04% 21.01% 18.45%CREDITORS FOR GOODS 6.67% 4.26% 4.98% 6.29% 5.25% 4.40%

BANK LOANS - - - 12.68% 27.08% 43.00%NET PROFIT (P & L A/C) 1.64% 1.46% 1.70% 1.43% 0.89% 0.97%

TOTAL 100% 100% 100% 100% 100% 100%

FIXED ASSETS 36.50% 41.46% 42.33% 36.17% 25.00% 20.67%SHARE INVESTMENT 2.45% 2.52% 2.42% 2.33% 1.44% 1.00%

STOCKTRADING STOCK 39.10% 26.99% 13.87% 33.15% 14.72% 8.82%

STORES 5.14% 5.46% 6.93% 6.54% 4.25% 3.13%ADVANCES & RECEIVABLE

DEPOSITES 0.31% 0.31% 0.31% 0.67% 0.53% 0.40%ADVANCES 0.66% 0.77% 1.03% 0.90% 2.31% 0.31%

SUNDRY DEBTORS 0.15% 0.17% 0.22% 0.13% 0.05% 0.01%DUE FROM SOCIETIES 0.01% 0.03% 0.03% 0.04% - 0.36%

TRADE DEBTORS 0.64% 16.50% 20.92% 16.67% 14.41% 6.41%CASH & BANK BALANCEFIXED & CALL DEPOSITS 14.69% 5.27% 11.63% 2.23% 36.66% 58.74%

CURRENT BANK A/C 0.34% 0.50% 0.28% 1.14% 0.64% 0.14%CASH ON HAND 0.01% 0.02% 0.02% 0.02% 0.006% 0.005%

TOTAL 100% 100% 100% 100% 100% 100%

-48-

INCOME STATEMENT

PARTICULAR 2004 -05 2005 – 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10NET SALES 100% 100% 100% 100% 100% 100%

LESS: COST OF GOODS SOLD

94.06% 94.10% 95.13% 95.56% 96.5% 96.7%

GROSS PROFIT 5.94% 5.90% 4.87% 4.44% 3.50% 3.30%

LESS: SELLING, GENERAL -ADMINISTRATIVE EXP.

4.22% 4.39% 3.53% 3.20% 2.30% 1.88%

OPERATING PROFIT 1.72% 1.51% 1.34% 1.24% 1.20% 1.42%LESS: INTEREST &

DEPRECIATION1.10% 1.03% 0.79% 0.76% 0.82% 0.89%

INCOME TAX - 0.03% 0.07% 0.05% 0.05% 0.08%

NET PROFIT (EAT) 0.62% 0.45% 0.48% 0.43% 0.33% 0.45%

-49-

FINANCIAL PLANNING AND FORCASTING

FINANCIAL PLANNING IS PART OF A LARGER PLANNING SYSTEM IN THE FIRM.THE PLANNING PROCESS BEGINS WITH A STATEMENT OF THE FIRM’S MISSION, WHICH IS USUALLY STATED IN QUALITATIVE TERMS.

A LONG-TERM FINANCIAL PLAN REPRESENTS A BLUEPRINT OF WHAT A FIRM PROPOSES TO DO IN THE FUTURE.TYPICALLY IT COVERS A PERIOD OF THREE TO TEN YEARS; MOST COMMONLY IT SPANS A PERIOD OF FIVE YEARS.

NATURALLY, PLANNING OVER SUCH AN EXTENDED TIME HORIZON TENDS TO BE IN FAIRLY AGGREGATIVE TERMS. CERTAIN COMMON ELEMENTS:

1. ECONOMIC ASSUMPTIONS: - INTEREST RATE, TAX RATE, INFLATION RATE, GROWTH RATE, AND EXCHANGE RATE.

2. SALES FORCAST: - IT IS STARTING POINT OF THE FINANCIAL FORCASTING EXERCISE.

3. PRO FORMA STATEMENTS: - THE HEART OF FINANCIAL PLANS IS THE (FORECAST) PROFIT & LOSS A/C AND BALANCE SHEET.

4. ASSETS REQUIREMENTS: - THE FINANCIAL PLAN SPELLS OUT THE PROJECTED CAPITAL INVESTMENTS AND WORKING CAPITAL REQUIREMENTS OVER TIME.

5. FINANCIAL PLAN: - THE CAPITAL BUDGETING DECISION, WORKING CAPITAL DECISION, CAPITAL STRUCTURE DECISION, AND DIVIDEND DECISION HAVE TO BE ESTABLISHED FOR DEVELOPING AN EXPLICIT FINANCIAL PLAN.

LIMITATIONS: -

1. Forecasting is only based on the trend going on from last six years.

2. Do not considered price change of the product frequently in the market; and also impact of inflation in the economy of the country.

3. Some statistics taken based on my judgment and assumption.

4. Some statistics taken same over time period in Projected P&L a/c and balance sheet.

-50-

FORECASTING & PLANNING

PROJECTED

PROFIT & LOSS A/C

PARTICULAR 2010 – 11 2011 - 12 2012 – 13NET SALES 14,02,23,57,321 16,67,42,65,537 19,82,77,02,635

LESS: COST OF GOODS SOLDS

13,36,89,15,470 15,89,72,44,763 18,90,37,31,690

GROSS PROFIT 65,34,41,851 77,70,20,774 92,39,70,945LESS: SELLING ,

GENERAL – ADMINISTRATIVE

EXP.

45,57,26,613 54,19,13,630 64,44,00,336

OPERATING PROFIT 19,77,15,238 23,51,07,144 27,95,70,609LESS: INTEREST &

DEPRECIATION12,62,01,216 15,00,68,390 17,84,49,324

INCOME TAX PRO. 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

INTERPRETATION – The Sales forecasting is based on Quantitative Techniques; it taken from Historical data as per the balance sheet of the company. The calculation of average sales percentage of last six years and this percentage multiply with the last year Sales. The Cost of Goods Sold is also taken by this method. The NET PROFIT shows increasing trends from 2010-11 to 2012-13.

-51-

PROJECTED

BALANCE SHEET

PARTICULAR 2010 - 11 2011 - 12 2012 – 13

NET SALES 14,02,23,57,321 16,67,42,65,537 19,82,77,02,635ASSETS

FIXED ASSETS (NET BLOCK)

38,72,50,768 46,04,87,633 54,72,44,590

INVESTMENT 6,61,44,845 6,61,44,845 6,61,44,845CURRENT ASSETS,

LOANS & ADVANCESCASH & BANK 1,24,51,85,330 1,48,06,74,780 1,76,06,99,995RECEIVABLES 57,86,55,945 68,80,91,360 81,88,84,120INVENTORIES 1,33,21,23,945 1,58,40,55,225 1,88,36,31,750PREPAID EXP. 6,82,42,138 8,11,48,090 9,71,55,740

DEBTORS 28,03,412 50,27,593 51,28,363TOTAL 3,68,04,06,383 4,36,91,80,540 5,17,88,89,408

LIABILITIESSHARE CAPITAL 10,19,12,500 10,19,12,500 10,19,12,500

RESERVE & SURPLUSS 68,28,88,805 81,20,36,730 96,56,09,120SECURED LOAN

DEBENTURE 4,97,13,400 4,97,13,400 4,97,13,400BANK BORROWINGS 86,50,00,000 1,05,00,00,000 1,26,00,00,000

CURRENT LIABILITIES 1,91,77,91,070 2,28,04,83,715 2,71,24,29,725

NET PROFIT 6,31,00,608 7,50,34,195 8,92,24,663TOTAL 3,68,04,06,383 4,36,91,80,540 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 FLOWANALYSIS

MEANING OF CASHFLOW ANALYSIS

A Cash Flow Statement is useful for short term planning. A business enterprise needs sufficient cash to meet its various obligations in the near future such as payment for purchase of fixed assets, payment of debts maturing in the near future, expenses of the business, etc. A historical analysis of the different sources and application of cash will enable the management to make reliable cash flow projection for the immediate future.

UTILITY OF CASH FLOW ANALYSIS

1. HELP IN EFFICIENT CASH MANAGEMENT 2. HELPS IN INTERNAL FINANCIAL MANAGEMENT: - e.g., possibility of repayment

of long term debts, dividend policies, planning replacement of plant and machinery, etc.3. DISCLOSES THE MOVEMENTS OF CASH4. DISCLOSES SUCCESS OR FAILURE OF CASH PLANNING

LIMITATIONS OF 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-

DIFFERNCE BETWEEN CASH FLOW & FUND FLOW ANALYSIS

1. A Cash flow Analysis is concerned only with the change in cash position while a Fund Flow Analysis is concerned with change in working capital position.

2. A Cash Flow Statement is merely a record of cash receipt and disbursements. While studying the short-term solvency of a business one is interested not only in cash balance but also in the assets which can be easily converted into cash.

3. Cash is part of working capital and, therefore, an improvement in cash position result in improvement in the funds position but reverse is not true. Sound funds position does not necessarily means sound cash position but a sound cash position generally means sound funds position.

4. Cash flow analysis is more useful to the management as a tool of financial analysis in short-period as compared to funds flow analysis. The shorter period covered by the analysis, greater is the importance of cash flow analysis.

-54-

REPORT FORM OF BALANCE SHEET

SOURCES OF FUND

2009 -10 2008 -09 INCREASE DECREASE

RS. RS. RS. RS.SHARE HOLDERS’

FUND10,19,12,500 10,19,12,500 - -

RESERVE & SURPLUSS 41,99,35,789 39,99,99,457 1,99,36,332 -

LOANS:-N.D.D.B LOAN 57,47,000 - 57,47,000 -

DEBENTURES 4,97,13,400 - 4,97,13,400 -CURRENT

LIABILITIES:-DEPOSITES (TAKEN) 3,13,06,188 5,04,39,703 - 1,91,33,515

SUNDRY CREDITORS 42,97,44,890 46,28,83,170 - 3,31,38,280CREDITORS SOCIETIES 1,01,97,09,775 80,66,30,505 21,30,79,270 -

CREDITORS FOR GOODS

24,33,56,871 20,15,98,003 4,17,58,868 -

BANK BORROWINGS 2,37,54,61,319 1,06,00,03,247 1,31,54,58,072 -NET PROFIT 5,35,28,008 3,42,17,707 1,93,10,301 -

APPLICATION OF FUNDS

FIXED ASSETS 34,69,34,808 23,83,14,855 10,86,19,953 -INVESTMENT 5,51,89,690 5,51,89,690 - -

CURRENT ASSETSBANK A/C 78,20,235 2,47,27,136 - 1,69,06,901

INVENTORIES 66,03,43,003 72,81,59,591 - 6,78,16,588ADVANCES 1,71,11,365 8,85,39,404 - 7,14,28,039

DEPOSITS (GIVEN) 2,21,33,204 2,04,27,692 17,05,512 -DUE FROM SOCIETIES 1,99,72,295 - 1,99,72,295 -

CASH ON HAND 2,55,649 2,43,369 12,280 -TRADE DEBTORS 35,40,64,519 55,29,33,258 - 19,88,68,739FIXED DEPOSITES 3,24,59,76,913 1,40,73,43,171 1,83,86,33,742 -

-55-

PROJECTED CASH FLOW STATEMENT

2010-11

SOURCES OF CASH AMOUNT RS.

INCREASE IN RESERVE & SURPLUSS 1,99,36,332INCREASE IN N.D.D.B LOAN 57,47,000INCREASE IN DEBENTURES 4,97,13,400INCREASE IN BANK LOAN 1,31,54,58,072

INCREASE IN CREDITORS SOCIETIES 21,30,79,270INCREASE IN CREDITORS FOR GOODS 4,17,58,868

INCREASE IN NET PROFIT 1,93,10,301DECREASE IN STOCK 6,78,16,588

DECREASE IN ADVANCES (GIVEN) 7,14,28,039DECREASE IN TRADE DEBTORS 19,88,68,739

DECREASE IN BANK A/C 1,69,06,901

TOTAL SOURCES 2,02,00,23,510

USES OF CASH

DECREASE IN DEPOSITES (TAKEN) 1,91,33,515DECREASE IN SUNDRY CREDITORS 3,31,38,280

INCREASE IN FIXED ASSETS 10,86,19,953INCREASE IN DEPOSITES GIVEN 17,05,512

INCREASE IN DUE FROM SOCIETIES 1,99,72,295INCREASE IN FIXED DEPOSITS 1,83,86,33,742

TOTAL USES 2,02,12,03,297CASH ON HAND 2,55,649

SUBSTRACT FROM CASH BALANCE -11,79,787NET CASH REQUIRE -9,24,138

INTERPRETATION: - AS PER THE PROJECTED CASHFLOW, THE COMPANY WILL BE REQUIRE Rs.9, 24,138 TO MEETS ITS CONTIGENCY LIABILITIES.

THE COMPANY ALREADY TAKES A BIG LOAN FROM THE BANK & FROM N.D.D.B. THE COMPANY SHOULD DECREASE THE CREDIT PERIOD GIVEN TO ITS CUSTOMER.

-56-


SOURCES OF FUND 2011 -12 2010 -11 INCREASE DECREASERS. RS. RS. RS.

SHARE HOLDERS’ FUND 10,19,12,500 10,19,12,500 - -RESERVE & SURPLUSS 81,20,36,730 68,28,88,805 12,91,47,925 -

DEBENTURES 4,97,13,400 4,97,13,400 - -BANK BORROWINGS 1,05,00,00,000 86,50,00,000 18,50,00,000 -

CURRENT LIABILITIES 2,28,04,83,715 1,91,77,91,070 36,26,92,645 -NET PROFIT 7,50,34,195 6,31,00,608 1,19,33,587 -



CURRENT ASSETSBANK A/C 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-


2011-12

SORCES OF CASH AMOUNT RS.INCREASE IN RESERVE & SURPLUSS 12,91,47,925

INCREASE IN CURRENT LIABILITIES 36,26,92,645

INCREASE IN BANK BORROWINGS 18,50,00,000

INCREASE IN NET PROFIT 1,19,33,587

TOTAL SOURCES 68,87,74,157

APPLICATION OF CASH AMOUNT RS.INCREASE IN FIXED ASSETS 7,32,36,865

INCREASE IN BANK A/C 23,50,91,664

INCREASE IN INVENTORIES 25,19,31,280

INCREASE IN RECEIVABLES 10,94,35,415

INCREASE IN PREPAID EXP. 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 39,48,800TOTAL CASH ON HAND 42,70,002

INTERPRETATION: - AS PER THE PROJECTED CASHFLOW, THE COMPANY WILL HAVE EXCESS AMOUNT OF CASH OF RS. 42, 70,002. THE COMPANY’S POSITION WILL BECOME GOOD THAN 2010-11. THE LIQUIDITY OF THE COMPANY WILL BE MAINTAINED IN 2011-12 AND WILL MEETS ITS CONTINGENCY LIABILITIES.

-58-


SOURCES OF FUND 2012 -13 2011 -12 INCREASE DECREASERS. RS. RS. RS.

SHARE HOLDERS’ FUND 10,19,12,500 10,19,12,500 - -RESERVE & SURPLUSS 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 -



CURRENT ASSETSBANK 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 -

-59-


2012-13

SORCES OF CASH AMOUNT RS.INCREASE IN RESERVE & SURPLUSS 15,35,72,390

INCREASE IN CURRENT LIABILITIES 43,19,46,010

INCREASE IN BANK BORROWINGS 21,00,00,000

INCREASE IN NET PROFIT 1,41,90,468

TOTAL SOURCES 80,97,08,868

APPLICATION OF CASH AMOUNT RS.INCREASE IN FIXED ASSETS 8,67,56,957

INCREASE IN BANK A/C 27,95,52,199

INCREASE IN INVENTORIES 29,95,76,525

INCREASE IN RECEIVABLES 13,07,92,760

INCREASE IN PREPAID EXP. 1,60,07,650

INCREASE IN DEBTORS 1,00,770

TOTAL USES 81,27,86,861

CASH ON HAND 3,21,202

SUBSTRACT FROM CASH -30,77,993TOTAL CASH REQUIRED -27,56,791

INTERPRETATION: - AS PER THE PROJECTED CASHFLOW, THE COMPANY WILL BE REQUIRE Rs.27, 56,791 TO MEETS ITS CONTIGENCY LIABILITIES.

THE COMPANY ALREADY TAKES A BIG LOAN FROM THE BANK & FROM N.D.D.B. THE COMPANY SHOULD DECREASE THE CREDIT PERIOD GIVEN TO ITS CUSTOMER.

-60-

LEVERAGE

FINANCIAL & OPERATING LEVERAGE

INTRODUCTION: -

LEVERAGE IS THE EMPLOYMENT OF AN ASSETS/ SOURCE OF FINANCE FOR WHICH FIRM PAYS FIXED COST/ FIXED RETURN.

THE MANAGER OF THE COMPANY SHOLD TAKE MAINLY THREE DICISION i.e. INVESTMENT DECISION, FINANCING DECISION & DIVIDEND DECISION.

FINANCING DECISION INCLUDE TO DECIDE RAISING OF THE FUNDS FOR THE COMPANY. SHOLD A COMPANY EMPLOYS EQUITY OR DEBT OR BOTH? WHAT ARE IMPLICATIONS OF THE DEBT-EQUITY MIX? WHAT IS AN APPROPRIATE MIX OF DEBT AND EQUITY?

THE CAPITAL STRUCTURE DECISION PROCESS

CAPITAL BUDGETING DECISION

|NEED TO RAISE FUNDS

|CAPITALSTRUCTURE

DECISION | | | |EXISTING CAPITAL - DESIRED DEBT – EQUITY - PAYOUT POLICY STRUCTURE MIX

| | | EFFECT ON RETURN EFFECT ON RISK

| | |

EFFECT ON COST OF CAPITAL|

VALUE OF THE FIRM

-61-

MEANING OF FINANCIAL LEVERAGE

The use of the fixed charges sources of fund, such as Debt & Preference capital along with the owners’ equity in the capital structure, is described as financial leverage.

The financial leverage employed by a company is intended to earn more return on the fixed charge funds than their costs. Companies differ in the use of financial leverage since it depends on a number of factors such as the size, nature of product, capital intensity, technology, market conditions, management attitude etc.

Operating leverage affects a firm’s operating profit (EBIT), while financial leverage affects profit after tax or the earning per share. The combined effect of two leverages can be quite significant for the earnings available to ordinary shareholders’.

Operating risk: - Risk of not able to cover fixed operating costs by firm.

DEGREE OF OPERATING LEVERAGE:-

The DOL is defined as the % change in the earnings before interest and taxes relative to a given % change in sales.

DEGREE OF OPRATING LEVERAGE = % change in EBIT % change in Sales

OR

DEGREE OF OPRATING LEVERAGE = CONTRIBUTION EBIT

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

DEGREE OF COMBINE LEVERAGE: -

DEGREE OF COMBINE LEVERAGE = DOL X DFL

-62-

LEVERAGE

2004-05

NET SALES Rs.4,99,47,54,053

LESS:- VARIABLE COST Rs.4,70,30,03,654

CONTRIBUTION Rs.29,17,50,399

LESS:- FIXED COST Rs.26,08,66,633

NET PROFIT (EAT) Rs.3,08,83,766

NO.OF EQUITY SHARE 10,19,666

EPS Rs.30.29

RETURN ON EQUITY 0.30%


= 29, 17, 50,399 3, 08, 83,766

= 9.45 TIMES

INTERPRETATION: - DOL of 9.45 implies that for a given change in company’s sales, EBIT was change by 9.45 Times.

The DOL depends on fixed operating costs, the larger the fixed cost, the higher is the firm’s 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

NET SALES Rs.5,98,72,07,211




EBIT Rs.3,22,46,048

PBT Rs.3,22,46,048

LESS:- TAX Rs.20,00,000

EAT Rs.2,67,46,048

NO.OF EQUITY SHARE 10,19,293EPS Rs.26.24



= 32, 58, 70,133 3, 22, 46,048

= 11.34 TIMES

INTERPRETATION: - DOL 11.34 of implies that for a given change in company’s sales, EBIT was change by 11.34 Times.

The company’s 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.

-64-

LEVERAGE

2006-07

NET SALES Rs.6,73,44,87,700




EBIT Rs.3,47,45,198LESS:- INTEREST -

PBT 3,47,45,198LESS:- TAX 25,00,000

EAT 3,22,45,198NO.OF EQUITY SHARE 10,19,106

EPS Rs.31.64



= 31, 07, 19,179 3, 47, 45,198

= 8.94 TIMES

INTERPRETATION: - DOL of 8.94 implies that for a given change in company’s sales, EBIT was change by 8.94 Times; which is less than previous years; because of the contribution is slightly less than previous year and the EBIT is also higher.

The DOL depends on fixed operating costs, the larger the fixed cost, the higher is the firm’s operating leverage and its operating risk.

In 2006-07 also the financial leverage & combined leverage is 1 because there is no debt in the financial structure.

-65-

LEVERAGE

2007-08

NET SALES Rs.7,89,63,33,229




EBIT Rs.3,77,30,564

PBT Rs.3,77,30,564

LESS:- TAX Rs.40,00,000

EAT Rs.3,37,30,564




= 33, 97, 89,680 3,77,30,564

= 9.005 TIMES


The company’s sales increases but the variable cost and fixed cost are also increases so the company’s 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

NET SALES Rs.10,34,22,51,543




EBIT Rs.3,82,17,707

PBT Rs.3,82,17,707

LESS:- TAX Rs.40,00,000

EAT Rs.3,42,17,707




= 37, 32, 47,614 3,82,17,707

= 9.77 TIMES


Same things happens here also that the company’s sales increases but the variable cost and fixed cost are also increases so the company’s 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

NET SALES Rs.11,79,22,13,840




EBIT Rs.6,37,30,153

LESS:- INTEREST Rs.2,01,145

PBT Rs.6,35,29,008

LESS:- TAX Rs.1,00,01,000

EAT Rs.5,35,28,008




= 42, 65, 98,583 6, 37, 30,153

= 6.69 TIMES

DEGREE OF FINACIAL LEVERAGE = EBIT PBT

= 6, 37, 30,153 6, 35, 29,008

=1.003 TIMES

DEGREE OF COMBINE LEVERAGE = DOL X DFL

=6.69 X 1.003

=6.72 TIMES-68-


The company’s operating leverage decreases from last three years it is indicated that the company’s 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.

About the company

4. The location of the sabar dairy is main strength of it; because of ready infrastructure available at their, local market demands etc.

5. The sabar dairy is doing kaizen production processing system for improving product quality proposition.

6. The Amul brand name is strength of the sabar dairy.

7. As per the findings of ratio analysis, the gross profit and net profit are declining and varied respectively over a period of six years. The cost of goods sold increases every year and also other administrative expenses increasing. So the avg. net profit of the company is Rs.0.45 against Rs.100 sales.

8. The company should 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.

-70-

9. The company’s 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 company’s 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 company’s 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 doesn’t 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 company’s working capital has been utilized effectively in making sales.

13. The Company’s 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 company’s creditor’s 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 company’s 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 company’s 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 it’s 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 company’s 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 company’s 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 company’s 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 company’s 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 company’s sales, EBIT was change by 9.45 Times. The company’s 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 company’s sales, EBIT was change by 11.34 Times. The company’s 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 company’s 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 company’s sales, EBIT was change by 9.005 Times. The company’s sales increases but the variable cost and fixed cost are also increases so the company’s 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 company’s sales, EBIT was change by 9.77 Times. Same things happens here also that the company’s sales increases but the variable cost and fixed cost are also increases so the company’s 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 company’s sales, EBIT was change by 6.69 Times. The company’s operating leverage decreases from last three years it is indicated that the company’s 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 decisionFinancial & operating leverage p.g.289; Part 5 financial & profit analysisFinancial 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 decisionLeverage

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, AnandFirst 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-

http://www.sabardairy.co.in/

http://www.amul.co.in/

અમૂલ બ્રાન્ડ પરત ખંેચાશે?Bhaskar News, AnandFirst Published 03:11 AM [IST](13/06/2010)Last Updated 3:41 AM [IST](13/06/2010)૨૫મી જૂને સામાન્ય સભામાં નિનર્ણ� યની શક્યતા

ગુજરાત કો-ઓપ. મિ�લ્ક �ાક� ટિ�ંગ ફેડરેશન (જીસીએ�એ�એફ)�ાં છેલ્લા કે�લાંક સ�યથી ચાલી રહેલી સત્તાની ખંેચતાણ�ાં અ�ૂલને ખરાબ અસર થઇ રહી છે. આથી શનિનવારે �ળેલી બેઠક�ાં ખેડા જિજલ્લા સહકારી દૂધઉત્પાદક સંઘ જિલ. (અ�ૂલ ડેરી)ના સંચાલકો દ્વારા અ�ૂલની બ્રાન્ડ પરત ખંેચી લેવાની ચચા8 નિવચારણા કરી હોવાનંુ જાણવા �ળે છે.

જેાકે આ અંગે ૨૫�ી જૂને અ�ૂલ ડેરી�ાં યોજાનારી સા�ાન્ય સભા�ાં નિનણ8ય લેવાય તેવી શક્યતા છે. એ�. ડી. બી. એ�. વ્યાસે આપેલા રાજીના�ાનો ચેર�ેન પરથીભાઈ ભ�ોળે બોડ8 ના અન્ય સભ્યોને નિવશ્વાસ�ાં લીધા

નિવના સ્વીકાર કયો8 હોવાનંુ કારણ પણ જવાબદાર હોવાનંુ ચચા8 ઈ રહ્યું છે.

આધારભૂત સૂત્રોના જણાવ્યા અનુસાર અ�ૂલ ડેરીના ચેર�ેન રા�સિસંહ પર�ાર દ્વારા જીસીએ�એ�એફ�ાં ચાલી રહેલા નિવખવાદના પગલે તાત્કાજિલક એક બેઠક બોલાવવા�ાં આવી હતી. બેઠક�ાં વાઈસ ચેર�ેન રાજેન્દ્રસિસંહ પર�ાર સનિહત બોડ8 ના સભ્યો, બોડ8 ના જુના સભ્યો ઉપરાંત દૂધ �ંડળીઓના ચેર�ેન ઉપસ્થિIત રહ્યા હતા. બેઠક�ાં જીસીએ�એ�એફ�ાં ચાલી રહેલા ધ�સાણના પગલે અ�ૂલ પર થઈ રહેલી �ાઠી અસર પર ચચા8 - નિવચારણા કરાઇ હતી.

રાજ્યના તેર દૂધઉત્પાદક સંઘોના દૂધ અને દૂધની બનાવ�ોનંુ વેચાણ અ�ૂલ બ્રાન્ડ હેઠળ થાય છે. ફેડરેશનના અન્ય દૂધઉત્પાદક સંઘો દ્વારા ખરાબ દૂધનંુ વેચાણ કરવા�ાં આવે તો ‘અ�ૂલ’નંુ ના� ખરાબ થતંુ હોવાનંુ કહેવાય છે. કે�લાક દૂધઉત્પાદક સંઘોના ચેર�ેન �ન�ાની ચલાવી દાદાગીરી કરતાં હોવાનંુ અ�ૂલ ડેરીના સત્તાધીશો �ાની રહ્યા છે.અમૂલનંુ નામ ખરાબ થઈ રહ્યું છે

અ�ૂલ ડેરીના વાઈસ ચેર�ેન રાજેન્દ્રસિસંહ પર�ારે જણાવ્યંુ હતંુ કે, ‘જીસીએ�એ�એફ�ાં જે કંઈ ચાલી રહ્યું છે તેનાથી અ�ૂલનંુ ના� ખરાબ થઈ રહ્યું છે. જેથી અ�ૂલની બ્રાન્ડ જીસીએ�એ�એફને ઉપયોગ �ા�ે આપવી કે નહીં તે અંગે ચચા8 - નિવચારણા કરવા બેઠક યોજી હતી.

એક વર્ષ� ની નોટિ)સ બાદ બ્રાન્ડ પરત ખંેચી શકાય

‘અ�ૂલ’ બ્રાન્ડ પરત ખંેચી લેવાની અ�ૂલ ડેરીના સત્તાધીશોની નિહલચાલ અંગે જીસીએ�એ�એફના જાણકાર વતુ8ળો પાસેથી �ળેલી �ાનિહતી અનુસાર જીસીએ�એ�એફની Iાપના સ�યે થયેલા કરાર �ુજબ જીસીએ�એ�એફના બોડ8 ઓફ ડિડરેક્�સ8 અને અ�ૂલ ડેરીના બોડ8 ઓફ ડિડરેક્�સ8 બંનેની સહ�તી સધાય ત્યારબાદ એક વર્ષ8 ની નોડિ�સ બાદ જ આવંુ શક્ય બની શકે છે.

a financial analysis of sabarkantha district co-operative milk producers union ltd. himmatnagar

Documents