kmf project viva presentation

8/4/2019 KMF Project Viva Presentation

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Analysis of the firms liquidity and to test

firms efficiency in utilization of its current

assets and resources at Dharwad Milk Union

UMESH .N. ALLANNAVARK.U.D Examination No. MBA10002083

Undertaken at

Dharwad Milk Union,

Dharwad


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Company Profile

Company Name Dharwad Co-operative Milk Producers Union Ltd,

Lakkammanahalli Industrial Area, P.B.Road, Dharwad-

580004

Nature of Business Mfg / Service / Semi-agro based Co-operative UnitType of Ownership Co-operative Unit

Raw Material Milk 80,000 LPD,

Water 5 to 6 lack liters/day,

Coal 4 to 5 tone

Capacity of Plant 1,20,000 liters/day,12 tons milk powder,

10 tons butter,6 tons ghee

Finished Products Milk, Butter, Ghee, Gurtz, Pedha, Milk creams, Curd,

Lassi, Khova etc.Total Investment Rs. 7 croreTotal Societies at Village Level 551 Societies


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Growth of KMF

Particulars Unit 1976 - 77 2009 - 10

Dairy Co-operatives Numbers 416 11520

Membership Numbers 37,000 20,19,265

Milk Procurement Kgs/Day 50,000 31,23,551/

72,460(DMU) per

day

Milk Sales Liters/Day 95,050 23,23,03,026

Daily Payments to Farmers Rs in (Lakhs) 0.90 354

Turnover Rs in (Crs) Not Available 2,850


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Title of the Project:

A Study to analyse the firms liquidity and to test firms efficiency in

utilization of its current assets and resources at Dharwad Milk Union

Objectives of the study:

To examine the establishment, organization and operational dimensions of the

D.M.U.

To know the practices of finance department in D.M.U.

To know the liquidity position of the firm.

To test firms efficiency in utilization of its assets and resources.

Limitations of the study:

1.This study covers only Dharwad Milk Union and not KMF as a whole.

2. The present study covers only 3 years financial data.


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Measurement Techniques / Statistical Tools

Accounting Ratios.

Financial Statements of the Company.

Sources of Data:

The data has been collected from both primary sources as well as

secondary sources.

Primary Sources:Primary data are the data gathered at first hand. It is collected by direct

interviews and discussing the subject matter with the management, staff

employees and academicians.

Secondary Sources:

Secondary data are the data that have been compiled or derived from

other sources meant for some other purpose. It is collected from book records

maintained by administration department, published books and also collected

from the trading and profit and loss accounts and balance sheets of last 3

years of D.M.U.


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Analysis

Sl.No Particulars Formulas 07-08 08-09 09-10

1 Current Ratio Current Assets 1.60 1.30 1.30Current Liabilities

2 Quick Ratio/ Liquidity Ratio Quick current assets 1.04 0.83 1.02Current Liabilities

3 Inventory Turnover Ratio Cost of goods sold 16.20 17.24 24.57Average inventory

4 Inventory Conversion Period No. of Days in a year 23 21 15Inventory Turnover Ratio

5 Debtors Turnover Ratio Total Sales 29.68 27.54 30.51Debtors

6 Debtors Collection Period No. of Days in a year 13 14 12Debtors Turnover Ratio

7 Creditors Turnover Period Net Purchase 48.21 39.36 62.07Average Creditors

8 Creditors Payment Period No. of Days in a year 8 10 6Creditors Turnover Ratio

9 Working Capital Turnover Ratio Cost of goods Sold 13.53 28.63 26.03Net Working Capital

10 Currents Assets Turnover Ratio Total Sales 5.93 8.07 7.48Current Assets

11

Gross Operating Cycle

Inventory Conversion Period + Debtors Collection Period

36

35

27


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Findings

1. The Current Ratio shows that for the year 2009-10, the liquidity position of the Dharwad

Milk Union is less i.e. 1.30. This ratios standard norm is 2:1. So it is struggling to recover thecurrent ratio of the firm.

2. The Quick Ratio of the Dharwad Milk Union for the year 2009-10 is 1.02.This ratios

standard norm is 1:1. So DMU seems to have maintained good quick ratio in its financial

activities.

3. The Inventory Turnover Ratio of the Dharwad Milk Union has shown a considerable

increase over the years and shows 24.57 for the year 2009-10. To substantiate this, we can also

see that the company has improved its inventory conversion period from year to year and

shows 15 days for the year 2009-10. It indicates the fast conversion of inventories & the faster

sale of its goods.

4. In the year 2009-10, the debts turnover ratio is 30.50 and it is higher compared to other 2

years. To substantiate this, we can also see that for the year 2009-10, the debts collection

period seems to have decreased by 2 days. This shows prompt payment made by the customers

compared to the previous years and the more efficient management of debtors or more liquid

the debtors are.


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5. Though there have been ups & downs in the credit turnover ratio, for the year 2009-10, it

has increased to 62.07.To substantiate this we can also see that for the year 2009-10

creditors payment period has been decreased by 4 days compared to last year. It indicates

that D.M.U has been paying credit properly.

6. There are ups and downs in the working capital and current assets turnover ratio and has

decreased for the year 2009-10. This calls for a focus on utilisation of working capital and

current assets.

7. The gross and net operating cycles have improved over the years and have shown better

performance.


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Suggestions

1. It is suggested that the Dharwad Milk Union (DMU) has to increase its current ratio and has

to also maintain stability in its quick ratio.

These ratios are affected by the piling up of inventory, inefficiency in collection of debtors, highbalances in cash and bank accounts without proper investment. So these ratios which are

indicators of liquidity position can be improved by taking care of the above mentioned factors

and by efficient performances in the above areas.

2. The firms performance is better in selling its products. So it is suggested that the Dharwad

Milk Union (DMU) has to maintain the same stability in managing its inventory turnover ratio

and conversion period and improve still better if possible.

It can do so by adopting other inventory management methods such as ABC analysis method,

Just-In-Time method along with the existing FIFO ( First In First Out ) method which is being

practiced there as DMU has at least 4,000 different inventories of different kinds ranging from

mechanical, spares, packing items to animal drugs and satisfactory and veterinary drugs.

3.The higher debtors turnover ratio and the shorter debt collection period shows the more

efficient management of debtors or conveys more liquid the debtors are . For the recent year, the

firm has shown better debtors turnover ratio and debt collection period which shows prompt

payment by debtors.

So firm has to maintain that stability and improve over time which can happen by having credit

policy which is neither too liberal nor too restrictive and by having efficient collection efforts .


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4.A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are

being paid promptly. This situation enhances the credit worthiness of the company. It seems

that the firm has maintained high creditors turnover ratio and lower credit period for the recentyear accordingly.

So along with managing the credit worthiness of the company, firm has to also make efficient

usage of credit policy offered by the suppliers as the operation of the company are being

financed interest free by suppliers of funds.

5.For the recent year, there has been a decrease in the working capital turnover ratio comparedto last year. This may be remedied by increasing sales or by disposing of certain assets or both.

DMU can increase its sales by undertaking sales promotion measures like free home delivery to

urban consumers. This also helps to increase the market share through increased sales.

6. Dharwad Milk Union (DMU) should have to appoint skilled and qualified employees and

also new technology in machineries. It increases efficiency and quality of the firm.

7. DMU should have to computerize all the departments in order to increase efficiency and

productivity of employees


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Conclusion

The study on Liquidity position and utilisation of current assets and

resources in DMU was satisfactory. The study of the last three years liquidity

position of the company is better. In the last three years, company has faced

several ups and downs in finance, marketing & promotional activities. D.M.U

has suffered losses due to less quantity of milk supply and increased competition

in the previous years but in the recent year it sounds to be in better position. Itshows that D.M.U has been improving its financial conditions and also has been

utilizing its assets and resources properly. If D.M.U continues the same

performance in the current financial year, it can earn more profits.


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Thank You

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