introduction
TRANSCRIPT
CHAPTER 1
Introduction
1
Introduction
A firm communicates financial information to the users through financial
statement and reports. The financial statements contain summarized information of the
firm’s financial affairs
The amount of information contained in a co-operative financial statement is
voluminous spanning the co-operatives internal operations, its relationship with the
outside world and its relationship with its members. To be useful, this information must
be organized into an understandable, coherent and sufficiently limited set of data.
“Analysis and Interpretation of Financial Statements” can be beneficial in this respect
because it highlights a firm’s strengths and weakness. Financial statements provide
certain basic information that focus on the entity as a whole and meet the common
needs of external users. Three main financial statements are required from businesses:
A statement of financial position (Balance sheet)
A statement of activities (Operation statement)
A statement of cash flows
The balance sheet states the co-operative assets, liabilities and member’s equity
at particular date
The operation statement reveals a co-operative performance during a particular
period of time. It reports revenue from sales and services.
The statement of cash flow indicates cash receipt and cash disbursements during
the accounting year.
According to Myers, “financial statement analysis is largely a study of relationship
among the various financial factors in a business as disclosed by a single set of
statements and a study of the trend of these factors as shown in a series of statement.”
Analysis and interpretation of financial statements refers to such a treatment of the
information contained in the financial statement, so as to diagnosis the profitability and
financial soundness of business. It is the methodical classification of data in the financial
2
statements into simple component parts or elements, establishment of relationship
between the classified component part so as to provide a full diagnosis of the
profitability and the financial strength of a firm.
Objectives of the study
The main objectives of the study in CAMPCO Ltd. Are summarized below:
1. To study the overall financial performance of CAMPCO.
2. To analyze and access the efficiency of the liquidity management.
3. To study the profitability position of CAMPCO Ltd.
4. To examine the long term solvency of CAMPCO Ltd.
5. To analyze the working capital management of the co-operative.
6. To conduct yearly comparison of financial performance.
7. To know how CAMPCO can achieve better growth in coming days.
8. To compare the ratio’s of various periods and offer some suitable suggestions.
Need for the study
Analysis and interpretation of financial statements of co-operative is needed to
provide investors about the actual financial performance of co-operative. Analysis helps
to know easily about the financial strength of the company. Some investors may invest
by looking at financial statements. So it is needed to analyze financial statements.
Analysis may notice about the problems in the organization in planning, organizing,
etc… Analysis made on financial statement helps the management to change its
policies and interpretation may helps in increasing solvency position by increasing
current assets and decreasing current liabilities.
3
Scope of the study
The study is focused towards “analyzing the financial statements of CAMPCO Ltd”
through “Ratio Analysis” is one of the tools of financial analysis. In order to draw
meaningful inference of the co-operative, the data pertaining to the period of 5 years are
selected and study covers mainly 4 types of ratios.
Liquidity Ratio
Leverage Ratio
Activity Ratio
Profitability Ratio
For the purpose of calculation of Ratios, the data pertaining to various divisions of
CAMPCO Ltd are taken. They are:
Areca division
Cocoa division
CAMPCO chocolate Factory, Puttur & Other chocolate units.
Small consumer packaging unit at Yeyyadi, Mangalore.
Lorry division.
Copper sulphate unit.
Materials and methodology of the study
The study is mainly based on primary and secondary data.
1. Primary Data:
Primary data used for the study has been obtained from manager and officers of the
accounting department.
2. Secondary Data:
Secondary data used for the study has been obtained from published annual reports
and other manuals of the company.
4
Social Relevance and contribution
The study on analysis and interpretation of financial statement may help to know
the exact financial position of the co-operative and providing suggestions may help the
co-operative in future planning. The study may helps to bring the attention of the co-
operative towards the performance of assets, etc... A study may help the investor to
select a profitable investment by looking at different ratios. By analysis the co-operative
can bring changes in the management of business so that profits can be maximized. A
study on analysis and interpretation of financial statement depicts the financial position
of the co-operative which can be easily understood by the layman, so that he can make
investment in the co-operative and became a member.
Limitations of the study
1. The accuracy of the study depends on the accuracy of the secondary data.
2. Predictive power of financial ratio relies on analysts perceptive which indicate
subjectivity of the study.
3. The ratio analysis might contain few limitations of the financial statements like
year ended figures are considered for conclusions.
4. The study period confined only to 5 years from 2004-05 to 2008-09. So it is not
possible to have an in-depth study of all the documents and records before
arriving at the conclusions based on the study.
5. The study is mainly based on the available published information, so, it suffers
from limitations. Co-operative executives may not reveal certain facts. So, it is
not possible to make in-depth study of the co-operative.
6. It can give a misleading result as the effects of price changes are not taken into
consideration.
7. The report prepared depicts only monitory figures.
5
CHAPTER 2
Organizational
Profile
6
1. INDUSTRY PROFILE
The story of chocolate, as far as we know it begins with the discovery of America.
Until 1492 the world knew nothing at all about the delicious and stimulating flavor that
was to become the favorite of millions. The word “chocolate” comes from the Aztecs of
Mexico, and is derived from the word xocolatl which is a combination of the words,
xocolli, meaning “bitter”, and alt, which is “water”. The Aztecs associated chocolate with
Xochiquetzal the goddess of fertility. Chocolate is also associated with the Maya god of
fertility. In the new world, chocolate was consumed in a bitter, spicy drink called xocoalt.
Until the 1500’s, no European had ever heard of the popular drink from the
Central and South American people. It was not until the Spanish conquest of the Aztecs
that chocolate could be imported to Europe, where it quickly became a court favorite.
To keep up with high demand for this new drink, Spanish armies began enslaving
Mesoamericans to produce cocoa. Even with Cocoa harvesting becoming a regular
business, only royalty and the well connected could afford to drink this expensive
import.
The Spanish began growing cocoa beans on plantations, and using an African
workforce to help manage them. The situation was different in England. Anyone with
money could buy it. The first chocolate house opened in London. When the people saw
the Industrial Revolution arrive, many changes occurred in chocolate.
In the 1700’s mechanical mills were created that squeezed out cocoa butter,
which in turn helped to create hard, durable chocolate. But it was not until the arrival of
the Industrial Revolution that these mills were put to bigger use. Not long after the
revolution cooled down, companies began advertising this new invention to sell many of
the chocolate treats. When new machines were produced, people began experiencing
and consuming chocolate worldwide.
Chocolate is created from the cocoa bean. A cocoa bean is filled with fruit pods
in various stages of ripening. Roughly two-thirds of the entire world’s cocoa is produced
7
in Western Africa. According to the World Cocoa Foundation, some 50 million people
around the world depend on cocoa as a source of livelihood. The industry is dominated
by three chocolate makers, Barry Callebaut, Cargill and Archer Daniels Midland
Company. The first factory for the processing and manufacturing chocolates in India
was started during the World War I at Bilimoria (Bombay Presidency) and when the war
ceased the factory had to shut down due to competition from the imported products.
However, the chocolate confectionary industries at Calcutta, Mumbai and Madras
flourished as they used imported chocolates.
Arecanut:
Arecanut plays an important role in the social, economical and religious life of the
people. Arecanut with the betel leaf is a symbol of auspicious and hostility. Arecanut is
said to possess medicinal properties in it. Chewing of arecanut stimulates the nervous
system and increases the secretion of saliva in the mouth. It aids the digestive system
and possesses the quality of removing bad smell from the mouth.
The cultivation of areca nut has been contributed to the generation of
employment opportunities. Several lakhs of marginal and small farmers are engaged in
its cultivation. A large number of people are engaged in its trade which actually
determines their living condition.
In India, the cultivators of areca nut are mostly confined to Karnataka, Kerala,
Assam where it accounts for about 90% of the area. It is also cultivated in other states
like Meghalaya, Tamil Nadu, West Bengal, Maharashtra, Andhra Pradesh, and in Goa,
Mizoram, Pondicherry and Andaman and Nicobar Islands in smaller quantities. Among
al the districts in Karnataka, Dakshina Kannada and Udupi District consists of 30% of
the total is under cultivation of Areca nut.
8
Brief History of CAMPCO Ltd
Co-operative movement in Undivided Dakshina Karnataka has a long history. In fact,
co-operatives are nothing but a selfless way of tireless services for mutual benefits.
What cannot be achieved in isolations is achieved here through concerted and united
efforts. Particularly, co-operatives are an ideal proportion for agricultural countries like
India with a burgeoning population. A standing example for the co-operative success
story in our own Dakshina Karnataka is “CAMPCO”
Arecanut is an important commercial crop in India and it finds a place in all
religious, cultural and social functions of our people. India is the larger producer of
arecanut in the world. The cultivation of areca is mostly confined to the states of
Karnataka, Kerala and Assam, but consumption is spread all over the country.
Karnataka and Kerala contribute 70% production in India. In the late fifties and the early
sixties, the government had supported areca cultivation as it would be highly
remunerative to the farming communities in those areas. Hence, a large number of
farmers took to areca farming even by converting 3-crop paddy fields into areca
gardens and making huge investment on infrastructure facilities incurring heavy debts.
Initially they are gamble paid off as the price of areca rose steadily. However, in 1969
and for couple of year thereafter, the arecanut prices showed a downward trend. From a
high of Rs.6 per Kg, arecanut prices plummeted to a low of Rs.2 per kg.
The entire areca community was in despair and the state governments were
constrained to find a solution. A committee headed by T.T.Poulose conducted elaborate
studies. The result was “CAMPCO” an institution under the co-operative sector to work
as central marketing agency of areca. The Government of Karnataka and Kerala
contributed Rs. 37.5 lakhs each and Rs.25 lakhs was to be raised from the co-
operatives and individual farmers. CAMPCO was registered on 11th July 1973 under
section 7 of Karnataka co-operative Societies Act, 1942 and entered the market on 12th
November 1973. Since then, except in 1987, the market never looked backward due to
CAMPCO’s stabilizing role. Though the c-operative was meant to focus only on areca, it
later altered by bye-laws and added cocoa business to provide outlet to the areca
farmers who where cultivating cocoa as an inter crop. Since then, CAMPCO has set up
9
a Copper sulphate Unit to meet the requirements of the farmers. The institution is
presently functioning under the Multi State Co-operative Act 1984.
Presently, CAMPCO has refunded the share capital of both Kerala and Karnataka
Governments and the Government of the Kerala and Karnataka withdrawn the
managing director and the secretary of their respective states. The CAMPCO has
appointed their own managing director and secretary within the staff considering their
seniority. A sudden withdrawal by the buyers of the cocoa from the procurements
operations due tom crash in the international market came as the shock cultivators.
Karnataka and Kerala Governments enthused, at this stage, The CAMPCO to enter on
the scene to rescue the farmers from the distress. CAMPCO willing took up the
responsibility to enter the cocoa market and performed a savior’s role.
Objectives of CAMPCO
1. To procure arecanut and cocoa of the members and if necessary, from other
growers on agency basis or on outright purchase basis.
2. To arrange for sale of arecanut and cocoa and their products to the best
advantages of the members
3. To advance loans to its members on pledge of goods.
4. To undertake processing of arecanut and cocoa and to establish industry for the
manufacturing of finished and semi finished product from areca and cocoa
cultivation.
5. To export arecanut and cocoa and other products.
6. To open branches, depot and godowns, showrooms and factories etc., and close
them if not found viable.
7. To raise funds for business
8. To arrange for the procurement, manufacturing and distribution of pesticides,
fungicides, chemical fertilizer seeds, implements and other industrial
requirements and essential domestic requirements t o the members.
9. To construct, acquire and maintain godown, warehouses and factory building,
etc.,
10.To undertake pooling, packing and standardization of arecanut and cocoa.
10
11.To render technical guidance and advice.
12.To supply market intelligence to the members of the CAMPCO.
13.To supervise the working of indebted affiliated societies.
14.To act as an agent on behalf of the state government, central government or any
institutions or concern for manufacture, procurement and supply.
15.To arrange for training of employees of the CAMPCO and of the affiliated
societies.
16.To promote and develop areca and cocoa production, manufacturing, marketing
and processing and to acquire land on lease or ownership basis for this and such
other purpose.
17.To link the co-operative credit activities of grower members with marketing of
their products.
18.To obtain concessional finance from the NABARD, RBI and other banking
institutions.
Workings of CAMPCO
1. Purchases of Areca and Cocoa
2. Processing of Areca and Cocoa
3. Purchasing of Arecanut and cocoa and dividing on the quality base
4. Fixing a price in different quality base.
5. Producing different products in areca and cocoa based.
Area of operation – Global / National / Regional:
Global:
CAMPCO has been entered into global market. It exports semi finished products,
that is cocoa butter at 60 tons to America and also exports finished products i.e., JOGO
to South Africa. Export has generated a total of 16 million tons over the three year
period. The lending buyers are Malaysia, Korea and USA. CAMPCO produces wide
range of cocoa based products of consistent quality, color and flavor to satisfy the wide
spectrum of customers all around the globe.
11
National:
CAMPCO has its sales office all over India
NORTH EAST WEST SOUTH
Chandigarh Kolkata Ahmadabad Bangalore
Jaipur Cuttack Mumbai Hubble
Ghaziabad Patna Indore Cochin
New Delhi Nagpur Chennai
Lucknow Hyderabad
Jammu Goa
Regional:
The company has regional office throughout Karnataka. It has both dealers and
distributer. The regional offices located at Karnataka are in Mangalore, Puttur, Birur and
Sullia
Vision, Mission and Quality Policy
Vision:
The vision of the CAMPCO is to help the farmers procure more arecanut and cocoa,
thereby helping them to get a market for their products
Mission:
“Co-operation between people
Harmony between faiths…may
The fragrance of peace forever prevails”
12
Quality policy:
“HACCP” (Hazard analysis and critical control point) is quality policy, which is used
for food safety. Food safety is the top concern among food producers for very good
reasons. It is critical for co-operative survival and success. If there is a significance
safety failure; excellence in other areas of co-operate management will be wiped out
and company will loss on,
- Regulatory compliance
- Supply chain performance and contract fulfillment
- Vendor certification
- Cooperative value
Ownership Pattern: The ownership pattern of shares of co-operative
Table 1
Sl.
No
Share Authorized
Share Capital
(Rs. In Lakhs)
Paid up share Capital as on
31/3/2009
No. of
Members
Amount
(Rs. In Lakhs)
1. ‘A” class shares 10,000 shares @ Rs. 1000 per
share 100 548 68.39
2. ‘B’ class shares 10,000 shares @ Rs.1000 per
share 100 3 1.02
3. ‘C’ class shares 6,60,000 shares @ Rs.500 per
share 3300 111680 1983.52
4 ‘D’ class shares 1,50,000 shares @ Rs. 1000 per
share 1500 Nil Nil
Total 5000 112231 2052.93
13
THE CAMPCO LTD., MANGLORE
Functional Synopsis
1. Full Name : The Central Arecanut & Cocoa marketing &
Processing Co-operative Ltd.
2. Status : A Co-operative Society registered Under the
Multi State Co-operative act, 1984.
3. Area of Operation : Karnataka and Kerala states for membership
With operation limits all over India.
4. Main Objects : Procurement Processing/marketing of
Arecanut/cocoa/Rubber/Cocoa &
Rubber based products.
5. Date of Registration : 11-07-1973
6. Date of Commencement
Of business : 12-11-1973
7. Authorized share capital : Rs.50.00 Crores
8. Paid up share capital : Rs. 19.32 Crores as on 31.03.2010
9. No of individual member : 109982
10.No. of member Co-operative : 541
11.Deposits as on 31.3.2010 : Rs.3957.81 lakhs
12.No. of branches and
Depots : 169 all over India
13. Industries owned : 1. CAMPCO chocolate Factory at Puttur.
2. Small consumer Packaging Unit at Yeyyadi,
Mangalore.
14.Annual Sales Turnover : 2007-08 – Rs .491.00 Crores
2008-09 – Rs. 568.98 Crores
2009-10 - Rs. 953.31 Crores
14
15.Working Capital : Under Consortium from the Bankers, presently
Rs.130.00 Crores.
16.Bankers : 1. Syndicate Bank – Consortium leader
2. Canara Bank
3. Indian Overseas Bank
17.Net Profit during the year : Rs. 9.40 Crores
ended as o 31.3.2010
18.Areca and Coca Procurement:
During the year 2009-10 areca was purchased 53938 metric tons and the sales
was 50314 metric tons. Arecanut procurement projection for 2010-11 wants to be
59000 metric tons
During the year coca was purchased 10210 metric tons and the consumption
was 20869 metric tons.
19.Small Consumer :
As a part of alternative uses of arecanut, CAMPCO has started the unit in
1997.Presently manufacturing Kaju Supari which is a mixture of cashew nut and
Supari and marketing the same n a small scale packing unit
20.Supply of pesticides :
Mode of supply of copper sulphate by purchasing from outside manufacturer. In
2009-10 copper sulphate was purchased 89 million tons and the sales was 88.48
million tons
21.Other activities of CAMCO :
i) As a part of reducing the cost of production CAMPCO has installed a wind
mill at a cost of Rs 6.57 Crores which has been commissioned already and
generating energy.
ii) Research and Development wing established in the year 1998 under the able
leadership of Dr. D Veerendra Heggade Dharmadhikari,Sri Kshethra
Dharmasthala with an object to research the alternatives usage of arecanut
which has already developed medicinal products on an experimental basis at
SDM Ayurveda College,Udupi and the same is marketed in the name of
15
“Pooja syrup” and “Pooga Trim” .In addition to the above ,the said wing is also
researching the latest technology to introduce the machineries for peeling of
arecanut and to spray the pesticides.
22.Future plan for the diversification of activities
As a measure of diversification of activity CAMPCO has already amended its
bye law for the procurement, processing and, marketing of rubber and rubber
based products .CAMPCO has already approached the competent authority for
obtaining the license and selected personal have been trained up for this
purpose. It will be entering into the market shortly
.
Board Meeting
The CAMPCO Ltd is having yearly conducted board meeting. This includes
business committees, executive committees and board of directors. The quorum for the
meeting of board shall be more than the half of the actual strength of the board. This
meeting will be conducted in the registered office of the company.
Organization and Management :
The management is consisting of a team of Board of Directors duly elected by
the General body once in 5 years...At present there are 16 elected Directors, 8 each
from state of Karnataka and Kerala with one co-opted Director and one managing
director who are elected as per the provisions of bye-laws. Out of the above team, there
is an elected president and Vice president and also separate committees called
“Executive committee” as a part of decision taking body of both Administration and
Business aspects.
Sri.S.R.Rangamurthy is the president and Sri.V.Srikrishna Bhat is the vice-president.
Sri.P.Madhusudhana Rao is the managing director. In order to speed up activities of the
co-operative, the board has framed one executive committee consisting of 7 members
of the board and one business committee consisting of 9 members of the board. The
composition of the committee is as follows
16
Business Committee:
The Business committee consists of President, Vice President, Managing
Director, Two Directors Each from the state of Karnataka and Kerala, out of whom one
each should be representing arecanut and or cocoa marketing co-operative societies
and the senior most head officer of the areca marketing and the head of the Campco
chocolate factory. The Quorum of meeting is 5 and it meets at least once in every 2
months.
.
Executive Committee:
There is an executive committee consisting of President, Vice President, Managing
Director, two government nominees, one from each state of Kerala and Karnataka. Two
directors representing “A”,“B” and “C” class members.
The current President of CAMPCO is Mr. S.R. Ramamurthy, Vice President is Mr. Sri
Krishna Bhat and the Managing Director is Mr. P. Madhusudana Rao.
17
Business Committee
1. President
2. Vice President
3. Managing Director
4. Directors from each State
5. The senior most officer of Areca marketing
6. The Head of CAMPCO Chocolate factory
Executive committee
1. President
2. Vice President
3. Managing Director
4. Directors from each State
Chart 1: ORGANISATIONAL STRUCTURE
18
General Manager
President
Managing Director
Accounts Human ResourceMarketing
D G M
A G M
C M
S M
D O
Officer
Snr Asst
Jnr Asst
D G M
C M
A G M
D O
S M
Officer
Spcl Asst
Supervisor
A S M
R S M
D G M
Jnr Asst
S R M
A G M
S R
T S ISnr Asst
D G M
A G M
Spcl Asst
C M
S M
D O
Officer
` Jnr Asst
Snr Asst
Role of CAMPCO in the field of Cocoa
A sudden withdrawal by the buyers of cocoa from the procurements operations
due to crash in the international market come as a shock to cultivators. Karnataka and
Kerala government enthused, at this stage the CAMPCO to enter on the scene to
rescue the farmers from distress. CAMPCO willingly took up the responsibility to enter
the cocoa market and performed a savior role. As survival in the international scene, the
CAMPCO played a major role in establishing a name for Indian cocoa products from
growers and adopting scientific processing method to market standards, released dry
cocoa beans matching in quality in the world market equal to that off china, Brazil and
other cocoa cultivating nations.
After entering into the cocoa market, the co-operative was able to export cocoa
beans worth Rs. 40 million to European countries in the initial phases of operations.
India was not known as cocoa producer in the international trading community, since
yearly production was hardly 5 to 6 thousand tons which is not even 0.3% of the total
world consumption. Through sustained efforts, CAMPCO has been able to ensure
reasonable prices to cocoa growers.
The cooperative has the problem of limited internal market and unremunerative
export market. With the setting up of the chocolate manufacturing factory at puttur,
50km from Mangalore, the cooperative has been able to increase local consumption of
cocoa based products and to export value added semi finished product. With a view to
create a permanent demand and steady market for the beans, CAMPCO establish a
chocolate manufacturing factory at Kemmunje village in puttur taluk in Karnataka,
adopting foreign technical advancement in chocolate making. The factory was setup in
1986 at an initial investment of rupees 116.7 millions.
19
Product Profile: At present following products are produced by CAMPCO
CHOCOLATES
1. Melto 27 & 8 gms
2. Cream 27 & 8 gms
3. Turbo 18 gms
4. Treat 18 & 6 gms
5. Megabite 18 gms
6. CAMPCO mini bar 7 gms
7. Éclairs 380 gms & 1.71 kg jar
8. Play time 8 gms
9. Winner(jar) 25 gms
10.Krust 18 gms
11.Krunchos 25 gms
12.Funda (3 flavors) 200 gms
13.Melto Éclairs 1 kg jar & 480 gms
SEMI FINISHED GOODS
1. Cocoa Mass
2. Cocoa Butter
3. Cocoa Powder
4. Chocolate Mass
5. Choco paste
6. Choco Chips – Milk
7. Choco Chips – Dark
8. Dark Chocolate
9. Premium Milk Choco Paste
10.Milk Choco Dip
20
Arecanut Based Products
Arecanut also called as ‘Supari’ is available in different varieties and categorized by
grades SSS, SS, S, JJ, J
1 MORA
2 MOTI
3 SEVARDHAN
4 JAMNAGAR
5 JEENI
6 LINDI
7 JAHAJI
8 JAHAJIJEENI
Latest Products
“Kaju Supari” and “Kaju Khadak Supari” is a latest product from CAMPCO which
has set the Indian consumer market on fire. The ingredients are “Kaju” (cashew nut),
Supari, Sugar and other spices available in this sub-continent. This product s free from
tobacco
Chocolate Factory
CAMOPCO has been rendering service in the growers of areca by getting them
reasonable price and selling all over the country. The cocoa based product encouraged
the growers but when international price of crashed, they resorted to imports leaving
these cocoa growers. The growers approach to the government for help and the
Karnataka and Kerala government in turn requested CAMPCO to help out the farmers
by buying their products.
21
CAMPCO went into cocoa business in1980, after the entry CAMPCO was able to
export cocoa beans worth 4 Crores to European countries in their initial phases of
operation. India’s yearly production was around 5000-6000 tons, which are not even 3%
of the decided establish cocoa, butter and powder processing facilities and chocolate
manufacturing plants as an extension of its current activities for achieving its overall co-
operative objectives safeguarding the interest of cocoa growers with better economic
returns.
CAMPCO chocolate factory is the largest in South East Asia. The factory is the one
of the most modern among other factories and in co-operating the latest technology.
The factory is equipped with service installed by the best form in India and design by
well equipped architects and consultants.
Small Consumer Packing Unit
Reaching the consumer directly has been one of the ambitions of CAMPCO for
long. The small consumer packing unit has been set up in July, 1997 and its own brand
“Mangala Supari” has been launched. A Research unit is also set to explore market
feasibility for roasted arecanut. Preliminary efforts are also on to export arecanut and to
cultivate the arecanut chewing habit in neighboring countries.
Copper Sulphate Factory
CAMPCO has also established a copper sulphate manufacturing unit with 300
metric tons capacity per annum at Sagar in Karnataka State in 1986 to meet the
requirements of its member growers. The arecanut tree’s health is often found affected
by various insects and other micro organism. Copper Sulphate (CuSO4) thus becomes
necessary in Arecanut Plantation Maintenance. It is sprayed on the tree tops once or
twice in a year. To cater to the needs of the growers, CAMPCO decided to have its own
unit to manufacture and supply copper sulphate.
22
Mobile Procurement Unit
Service at the doorsteps of the farmer has always been CAMPCO’s goal. They
have started a Mobile Procurement Unit at Theerthahalli to concentrate on the interior
areas where there is no adequate transportation facility. The mobile van on notified day
will go to the notified place and facilitate the arecanut grower to sell his produce.
Agreement with M/S Nestle India Ltd
Entire ranges of M/S Nestle chocolate products were produced at CCF up to 31 st
Dec 2000. Now they are manufacturing required quantity of Eclairs and White
chocolates in CAMPCO is also supplying Cocoa butter and powder required for their
Ponda factory.
Agreement with M/S Effermint India Ltd
CAMPCO has also entered into an agreement with M/S Effermint India Ltd.,
Cochin to market the toothpaste and allied product as a diversification activity to
maximize utilization of marketing network. Initially, it setup separate marketing network
to market toothpaste and other products in Karnataka and Kerala.
Entry of CAMPCO in online Trading
The Multi Commodity Exchange of India Ltd (MCX) has listed Arecanut in the futures
trading on 28.03.2006. Considering the prospects, the co-operative has also started
online trading in small quantities on trial basis as per with global scenario.
CAMPCO is proposing for a franchise arrangement with MCX/NBHC for:
1. Utilization of CAMPCO warehouses
2. Grading of CAMPCO warehouses
3. Commission Agency
23
Capital Structure
a) Share Capital
As the end of the 31st March 2009, the authorized capital of CAMPCO stands at
Rs.50 Crores and paid up share capital is 17.41 Crores
Share Capital of CAMPCO ltd 2005 to 2010
Table 2
Year Authorized Share Capital Paid up Share Capital
2005-06 35 Crores 11.02 Crores
2006-07 35 Crores 13.26 Crores
2007-08 35 Crores 16.34 Crores
2008-09 50 Crores 17.41 Crores
2009-10 50 Crores 19.32 Crores
b) Deposit
The CAMPCO ltd continues to accept deposits considering the trend in the
interest rate increase in all the commercial banks. They increased the deposit
interest rate to 10% for the fixed deposit for one year and above and they request
the member to keep their surplus amount the co-operative.
Deposit of CAMPCO Ltd.2005 to 2010
Table 3
Year Deposit Increase/Decrease
2005-06 41.74 Crores -------
2006-07 35.11 Crores -6.63 Crores
2007-08 45.70 Crores 10.59 Crores
2008-09 36.89 Crores -8.81 Crores
2009-10 39.58 Crores 2.69 Crores
Note: Base year is 2005-06
c) Reserves and Surplus
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The reserves and other funds of the CAMPCO Ltd from 2005 to 2010 are as
follows
Reserves and other funds of the CAMPCO Ltd from 2005 to 2010
Table 4
Year Reserves Increase/Decrease
2005-06 43.93 Crores --------
2006-07 44.70 Crores 0.77 Crores
2007-08 45.70 Crores 1.00 Crores
2008-09 34.63 Crores 11.07 Crores
2009-10 51.92 Crores 17.29 Crores
Note: Base year is 2005-06
Future Growth and Prospects
CAMPCO has a better scope for expansion of its activities in relation to cocoa products
in order to safeguard and strengthening of its function more effectively
1. It is the target of CAMPCO to open at least one sales depot in each state.
2. The future plan about production is to maximize output without sacrificing
quantity, reducing the cost, improving the efficiency, etc.
3. They also now introducing new product like Winner bars, Coated bar with
different flavors
4. CAMPCO also planned to increase sales by advertisement
5. Capture international market by latest technologies
6. Conducting market research for knowing customer tastes
7. Improving the quality of wrappers CAMPCO chocolates
8. Enlargement of transportation and warehousing facilities with safety precaution
9. Expanding the service of Mobile Procurement Unit
10.Providing scientific knowledge to farmers of arecanut
Initiative and Development
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After succeeding in the stabilization of arecanut of arecanut prices, CAMPCO stated
catering to the other requirements of the areca farmers. A copper sulphate unit was
opened in Sagar during the year 1982 to manufacture the most required pesticide. The
next step was to start activities in the field of cocoa procurement, processing and
marketing. Cocoa an intercrop with arecanut was a source of supplementary income to
the farmers. Because of the vagaries of the market, the returns from cocoa came down
and CAMPCO stepped into check the trend. It started purchasing and processing the
cocoa and this result in the establishment of a chocolate factory in Puttur in 1986.
Cocoa has been added in the name of CAMPCO.
The processing of arecanut was the next in the line of attention, which gave birth to a
small consumer packing unit at Yeyyadi, Mangalore. CAMPCO has constituted a
Research and Development Wing in a tie-up with SDM Ayurveda College, Udupi.
CAMPCO made its advent as savior of areca farmers. With the dynamic leadership of
the President, the Board of Directors and the management, unstinted support of the
CAMPCO’s grower members, exemplary and selfless service rendered by the staff and
the co-operation extended by the traders and purchasers together with the support
offered by the areca and cocoa growers, the institution has acquired a unique status in
the country. It is hoped that the collective Endeavour of the management, the staff and
particularly the areca and cocoa farmers will enable CAMPCO to emerge as a leader in
the nation’s co-operative sector
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CHAPTER 3
INTRODUCTION TO
RATIO ANALYSIS
Ratio Analysis
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Ratio analysis is a powerful tool of financial analysis. The financial statement
contains items or figures relating to the profit and loss and financial position of the
concern. But the items and figures contained in the financial statement will not be of
much use if they are considered independently. The items appearing in the financial
statements are really meaningful and useful to the executives, owners creditors, etc.,
only when they are analyzed in such a way that one item can be compared with another
item. Ratio is simply one number expressed in terms of another number. Ratio analysis
is the technique of calculating number of account ratio from the data found in the
financial statement.
According to Myers, “Ratio analysis of financial statements is a study of relationship
among various financial factors in a business as disclosed by a single set of statements
and a study of trend of these factors as shown in a series of statements.”
The bottom line on the income statement is not the only important figure on the financial
statements, and may not even be the most important. There is another whole dimension
of valuable information that can be obtained from the data reported in the financial
statements. Ratio analysis is one of many tools that can be used to evaluate a
company’s performance, its current status, and its evolution over time. And if you are
the owner of the business, this type of analysis can help you make the right decisions to
improve your operations and make your business stronger and more successful.
For the purpose of the analysis and interpretation ratios are classified as:
Liquidity Ratio
Activity Ratio
Solvency Ratio
Profitability Ratio
1. Liquidity/short-term Solvency Ratio
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The importance of adequate liquidity in the sense of the ability of a firm to meet
current/short term obligations when they become due for payment can hardly be
overstressed. In fact, liquidity is a prerequisite for the survival of a firm. The short term
creditors of the firm are interested in short term solvency or liquidity of a firm. But
liquidity implies, from the viewpoint of utilization of the fund of the firm, that funds are
idle or they earn very little. The liquidity ratios measures the ability of a firm to meet its
short term financial strength / solvency of a firm
The important liquidity ratios are explained below:
Current Ratio
Quick / Liquid / Acid Test Ratio
Net Working Capital Ratio
Absolute Liquid / Cash ratio
a) Current ratio:
Current ratio expressed the relationship between current assets and current
liabilities. The actual ratio ascertained has to be compared with the standard ratio of
2:1. If the actual ratio is 2:1 or more it can be reasonably be taken as sign of liquidity or
the short term solvency of the concern.
Current Asset Current Ratio = Current Liabilities
b) Quick/Liquid/Acid Test Ratio:
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The acid test ratio is a measure of liquidity designed to overcome this defect of the
current ratio. It is often referred to as quick ratio because it is measurement of a firm’s
ability to convert its current assets quickly into cash in order to meet current liabilities.
Thus it is a measure of quick or acid liquidity. The Acid test ratio between current assets
and current liabilities and it is calculated by dividing quick assets by the quick liabilities.
A liquid ratio of 1:1 is considered satisfactory
Quick Assets Quick Ratio = Current Liabilities
Quick Assets = current assets – Inventories/stock – Prepaid expenses
c) Net Working Capital Ratios
Net working capital represents the excess of current assets over current liabilities.
Although net working capital is really not a ratio, it is frequently employed as a measure
of a company’s liquidity position. An enterprise should have sufficient net working
capital in order to be able to meet the claims of the creditors and the day to day needs
of business. This ratio establishes a relationship between net working capital and net
asset of a concern
Net working capital ratio = Net working capital Net asset
d) Absolute Liquid / Cash ratio:
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Absolute liquidity is represented by cash and near cash items. It is a ratio of
absolute liquid assets to current liabilities. In the computation of this ratio only the
absolute liquid assets are compared with the liquid liabilities. The absolute liquid assets
are cash, bank and marketable securities. It is to be observed that receivables
(debtors/accounts receivables and bills receivables) are eliminated from the list of liquid
assets in order to obtain absolute 4 liquid assets since there may be some doubt in their
liquidity.
Absolute Liquid Ratio
Cash Ratio =
Current Liabilities
2. Turnover / Activity / Efficiency Ratio:
Activity ratios are measures how well assets are used. Activity ratios, which are
for the most part, turnover ratios, can be used to evaluate the benefit produced by
specific assets, such as inventory or accounts receivable. Or they can be use to
evaluate the benefits produced by all a company’s assets collectively.
These measures help us gauge how effectively the company is at putting its
investment to work. A company will invest in assets and then use these assets to
generate revenues. The greater the turnover, the more effectively the company is at
producing a benefit from its investment in assets.
Important turnover ratios are follows
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Stock turnover ratio / Stock Velocity
Debtors Turnover Ratio
Fixed Asset Turnover Ratio
Working Capital Turnover Ratio
Cash Turnover Ratio
Current Asset Turnover Ratio
Total Asset Turnover Ratio
a) Stock turnover ratio / Stock Velocity
It is computed by dividing the cost of goods sold by the average inventory.
Cost of goods sold Inventory turnover ratio = Average stock
The cost of goods sold means sales minus gross profit. The average inventory refers to
the simple average of the opening and closing stock. The ratio indicates how fast stock
is sold. A high ratio is good form the viewpoint of liquidity and vice versa. A low ratio
would signify that stock does not sell fast and stays on the shelf or in the warehouse for
long time. The ideal stock turnover ratio is 8 times in a year. If it is more than 8 times,
the logical conclusion is more sales are affected
b) Debtors Turnover Ratio:
A concern may sell goods on cash as well as on credit. Credit is one of the
important elements of sales promotion. The volume of sales can be increased by
following a liberal credit policy. The effect of a liberal credit policy may result in tying up
substantial funds of a firm in the form of trade debtors (or receivables). Trade debtors
are expected to be converted into cash within a short period of time and are included in
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current assets. Hence, the liquidity position of concern to pay its short term obligations
in time depends upon the quality of its trade debtors.
Debtors’ turnover ratio or accounts receivable turnover ratio indicates the velocity of
debt collection of a firm. In simple words it indicates the number of times average
debtors (receivable) are turned over during a year.
Net Credit Sales
Debtors Turnover Ratio = Average debtors
Opening Debtors + Closing Debtors Average debtors =
2
No. of days in a year Average Collection Period = Debtors turnover Ratio
c) Fixed Asset Turnover Ratio
The fixed-asset turnover ratio measures a company's ability to generate net sales
from fixed-asset investments- specifically property, plant and equipment, net of
depreciation. A higher fixed-asset turnover ratio shows that the company has been
more effective in using the investment in fixed assets to generate revenues. This ratio is
often used as a measure in manufacturing industries, where major purchases are made
for property, plant and equipment to help increase output. When companies make these
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large purchases, prudent investors watch this ratio in following years to see how
effective the investment in the fixed assets was.
Net Sales
Fixed Asset Turnover Ratio =
Net Fixed asset
d) Working Capital Turnover Ratio
.A Company uses working capital (current assets - current liabilities) to fund
operations and purchase inventory. These operations and inventory are then converted
into sales revenue for the company. The working capital turnover ratio is used to
analyze the relationship between the money used to fund operations and the sales
generated from these operations.
A measurement comparing the depletion of working capital to the generation of
sales over a given period. This provides some useful information as to how effectively a
company is using its working capital to generate sales. In a general sense, the higher
the working capital turnover, the better because it means that the company is
generating a lot of sales compared to the money it uses to fund the sales.
Net Sales Working Capital Turnover Ratio =
Working capital
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e) Cash Turnover Ratio
Indicates a firm's efficiency in its use of cash for generation of sales revenue. It is
the inverse of cash-to-sales ratio. Formula: Sales revenue (at the end of a period) ÷
average cash balance (in the same period).
Net Asset Sales Cash Turnover Ratio =
Cash
f) Current Asset Turnover Ratio:
Ratio that indicates how efficiently a firm is using its current assets to generate revenue.
Formula: Sales revenue ÷ Average current assets.
Net Sales Current Asset Turnover Ratio =
Current Asset
g) Total Asset Turnover Ratio:
This is a measure of how well assets are being used to produce revenue. This ratio
also called asset turnover. We can find the ratio through Net sales divided by total
assets.
Net Sales
Total Asset Turnover Ratio=
Total Asset
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3. Leverage / Capital Structure / Long term Solvency Ratio
Ratio analysis is equally useful for assessing the long-term financial viability of
a firm. This aspect of the financial position of a borrower is of concern to long term
creditors, security analysts and the present and potential owners of a business. The
long term solvency of a firm can be examined by using leverage or capital structure
ratios. The leverage or capital structure ratios may be defined as financial ratios which
throw light on the long term solvency of a firm as reflected in its ability to assure the long
term creditors with regard to periodic payment of interest during the period of the loan
and repayment of principal on maturity or in predetermined installments at due date.
Important Leverage Ratios are follows
Solvency Ratio
Debt – equity ratio
Fixed asset ratio
Total debt ratio
a. Solvency Ratio
Solvency ratios are measures to assess a company’s ability to meet its long-term
obligations and thereby remain solvent and avoid bankruptcy. These ratios basically tell
whether a company owns more than it owes. The higher the ratio, the more solvent the
company.
Total Assets
Solvency Ratio =
Total Liabilities
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b. Debt – Equity Ratio
The relationship between borrowed funds and owner’s capital is popular measure of the
long-term financial solvency of a firm. This relationship is shown by the debt equity ratios.
This ratio reflects the relative claims of creditors and share holders against the assets of the
firm. Alternatively, this ratio indicates the relative proportions of debt and equity in financing
the assets of a firm. The relationship between outsiders claims owners capital can be shown
in different ways and, accordingly, there are many variants of the debt equity ratio
Total debtDebt Equity Ratio =
Shareholders fund
c. Fixed Asset Ratio
The fixed assets ratio measures how fixed assets are used to generate capital
employed, by comparing capital employed to net fixed assets. This interactive tutorial
walks you through the calculations as well as where to find the numbers on your financial
statements
Fixed Assets Fixed Asset Ratio =
Capital Employed
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d. Total Debt Ratio:
This ratio shows how much your business is in debt, making it an excellent way to
check your business’s long-term solvency. The lower the debt ratio, the less total debt
the business has in comparison to its asset base. On the other hand, businesses with
high total debt ratios are in danger of becoming insolvent and/or going bankrupt
Total debt Total Debt Ratio =
Total Asset
4. Profitability Ratio
Apart from the creditors, both short term and long term, also interested in the
financial soundness of a firm are the owners and management or the company itself.
The management of the firm is naturally eager to measure its operating efficiency.
Similarly the owner invests their funds in the expectation of reasonable returns. The
operating efficiency of a firm and its ability to ensure adequate returns to its
shareholders depends ultimately on the profits earned by it. The profitability of a firm
can be measured by its profitability ratios.
The important profitability ratios are
Gross Profit Ratio
Net Profit ratio
Operating profit ratio
Return on total asset ratio
Net Profit Net Worth Ratio
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a) Gross Profit Ratio
Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a
percentage. It expresses the relationship between gross profit and sales. The basic
components for the calculation of gross profit ratio are gross profit and net sales. Net
sales means that sales minus sales returns. Gross profit would be the difference
between net sales and cost of goods sold. C ost of goods sold in the case of
manufacturing concern, it would be equal to the sum of the cost of raw materials,
wages, direct expenses and all manufacturing expenses. In other words, generally the
expenses charged to profit and loss account or operating expenses are excluded from
the calculation of cost of goods sold.
Gross Profit
Gross Profit Ratio = x 100
Net sales
b) Net Profit Ratio
Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as
percentage. The two basic components of the net profit ratio are the net profit and
sales. The net profits are obtained after deducting income-tax and, generally, non-
operating expenses and incomes are excluded from the net profits for calculating this
ratio. Thus, incomes such as interest on investments outside the business, profit on
sales of fixed assets and losses on sales of fixed assets, etc are excluded.
Net Profit
Net Profit Ratio = x 100
Net Sales
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c) Operating Profit Ratio
Operating profit means profit earned by the concern from its business operation and not
from the other sources. This helps to know about its business income from its business
operation. The two basic components for the calculation of operating profit ratio are
operating profit to net sales.
Operating Profit
Operating Profit Ratio = x 100
Net Sales
d) Return on Total Asset Ratio
An indicator of how profitable a company is relative to its total assets. ROTA gives an
idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company's annual earnings by its total assets, ROTA
is displayed as a percentage. Sometimes this is referred to as "return on investment".
Net Profit
Return on Total Asset = x 100
Total Assets
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e) Net Profit to Net Worth Ratio
The Return on Equity of a company measures the ability of the management of the
company to generate adequate returns for the capital invested by the owners of a
company. Generally a return of 10% would be desirable to provide dividends to owners
and have funds for future growth of the company
Net profit
Net profit to net worth ratio= x 100
Net Worth
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