“FINANCIAL ANALYSIS

OF
KAIRA DISTRICT CO-OPERATIVE MILK PRODUCER’S UNION LIMITED (AMUL),
ANAND.”

Prepared By: MONAL D. PATEL

Worked At: Sardar Patel Co-op. Credit Society Limited

ABSTRACT: Financial Performance Analysis can be carried out by using various analytical
tools like trend analysis, horizontal analysis, cash flow statement analysis, & various important ratios.
Ratios have evolved substantially over a period of time. I have studied the effect of different variable of
liquidity & profitability of AMUL for last 10 years from 2001-02 to 2010-11 by using Pearson’s
correlation for analysis. The result shows that there is moderate negative correlation between liquidity &
profitability. The purpose of this study is to familiarize the readers with various analytical tools and their
usefulness in the financial analysis of an organization. The idea of this project is to know the short term as
well as long term financial position of AMUL.

KEYWORDS: Trend Analysis, Horizontal Analysis, Cash flow statement Analysis & Correlation.

INTRODUCTION:

AMUL is Asia’s no. 1 and world’s second number co-operative dairy. It has large market and
dairy network in every state of India and across the India, like central Asian countries, Bangladesh,
Thailand, Indonesia, Malaysia, Singapore, etc. It was started with 250 liters of milk and 2 societies and
now, it produces 10 lakhs litters milk per day and has 1113 societies and more than 6 lakes farmer
members. It produces milk and milk products. The main motto of AMUL is to help farmers. Farmers
were the foundation stone of AMUL. The system works only for farmers and for consumers, not for
profit. The main aim of AMUL is to provide quality products to the consumers at minimum cost. The
goal of AMUL is to provide maximum profit in terms of money to the farmers. Vision of AMUL is to
provide and vanish the problems of farmers (milk producers). The AMUL apparition was to run the
organization with the co-operation of four main parties, the farmers, the representatives, the marketers,
and the consumers.

Year Milk procured (in kgs) Sales turnover (Rs. In lack)

2000-01 277840861 50919
2001-02 258692443 46878
2002-03 257957726 48834
2003-04 255856435 54593
2004-05 276150374 60047
2005-06 297436246 70922
2006-07 324410536 81632
2007-08 401718616 107712
2008-09 468587136 137807
2009-10 498033310 169989
2010-11 515900000 211140
OBJECTIVE OF THE STUDY:

 The objective of financial statement is to know information about the financial position,
performance & cash flows of an enterprise with the help of analytical tools.
 To know the Market Position AMUL by taking Market Value Ratios
 To know the tradeoff between Liquidity & Profitability.

DEVELOPMENT OF HYPOTHESIS:
H0: There is no positive relationship between the Liquidity & Profitability of AMUL.
H1: There is positive relationship between the Liquidity & Profitability of AMUL.

TESTING OF HYPOTHESIS:

STEP 1:

Financial Performance on the basis of Profitability & Liquidity Analysis

Relationship Between Current Ratio & Operating Profit Ratio
Years CR OPR
2001-02 2.702 88.380
2002-03 3.240 89.342
2003-04 2.376 90.460
2004-05 2.344 90.199
2005-06 2.136 91.035
2006-07 1.738 90.957
2007-08 2.136 92.178
2008-09 1.652 91.873
2009-10 1.394 92.580
2010-11 1.431 947.906
r -0.415
Relationship Between Current Ratio & Net Profit Ratio
Years CR NPR
2001-02 2.702 0.314
2002-03 3.240 0.405
2003-04 2.376 0.467
2004-05 2.344 0.523
2005-06 2.136 0.461
2006-07 1.738 0.504
2007-08 2.136 0.421
2008-09 1.652 0.419
2009-10 1.394 0.436
2010-11 1.431 0.440
r -0.323
STEP 2: FIVE DIFFERENT CORRELATIONS

1) Strong Negative Correlation (r=-0.933)

2) Moderate Negative Correlation (r=-0.674)
3) Moderate Positive Correlation (r=0.514)
4) Strong Positive Correlation (r=0.909)
5) Virtually No Correlation (r=-0.004)

STEP 3: INTERPRETATION

1) Correlation Result between the Operating Profit & Current Ratio shows a “Moderate
Negative Correlation” between them, & that if the current ratio increases it will have a
negative impact on profitability & it will decreases because there is a correlation
r=-0.41472. Here AMUL’s current ratio is more than standard of 2:1, this indicate
negative reflection towards current assets
2) Correlation Result between the Net Profit & Current Ratio shows a “Moderate Negative
Correlation” between them, & that if the current ratio increases it will have a negative
impact on profitability & it will decreases because there is a correlation r=-0.32255. This
indicates that if CR is increased by 1 Rs on liquidity basis, it reduces NPR by 0.32255
paisa on profitability.
3) Correlation result between Liquidity & Profitability have “Moderate Negative
Correlation”

ANALYSIS & DISCUSSION:

Financial analysis is the starting point for the making plans, before using any
sophisticated forecasting & planning procedures. A number of tools are available in the tool kit
of the analyst for the purpose certain tools are:

1) Trend analysis
2) Horizontal analysis
3) Cash flow statement analysis
4) Ratio analysis

1) TREND ANALYSIS:
4 RESULT FOR THE YEAR
Index in (Times)

Sales & other

3 Income
PBDT
2

1 PBT

0 PAT
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
 QUANTITATIVE DETAIL
4

3
Index in(Times)

2 Production
1 Sales

0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Position at year end

3.5
Gross Block
3

2.5 Net Block

Index in(Times)

2
Net Current
1.5 Assets
Net Worth
1

0.5 Share Capital

0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

INTERPRETATION:
1) Consistent rise in sales that shows overall growth in sales of their products in dairy
consumption.
2) Consistent rise in production throughout the year. Consistent rise in sales throughout the
year, but production is more than the sales.
3) Growth in gross block & sales neck to neck that shows high fixed assets efficiency & its
utilization of uses are more. Growth in net worth is neck to neck that shows high leverage
& high dividend distribution around 75% to their consistent farmers

2) HORIZONTAL ANALYSIS:
Gross Profit 16342.74 14314.02 2028.72 14.173
PBDIT 4327.00 3350.05 976.95 29.162
less: Depreciation 1614.63 1121.41 493.22 43.982
EBIT 2712.37 2228.64 483.73 21.705
less: Interest 1569.38 1252.58 316.8 25.292
EBT 1142.99 976.06 166.93 17.102
less: Tax Provision 212.78 255.00 -42.22 -16.557
PAT 930.21 721.06 209.15 29.006
Net Profit 926.67 735.75 190.92 25.949
 Shareholders' Funds: 6826.57 5756.61 1069.96 18.587
Loan Funds: 21227.56 19111.57 2115.99 11.072
FIXED ASSETS (Net Block) 15270.87 14046.24 1224.63 8.719
Investments 1040.58 515.33 525.25 101.925
Current Assets, Loan & Advances: 37290.61 40524.27 -3233.66 -7.980
Current Liabilities & Provisions 27362.69 30422.64 -3059.95 -10.058
Net Current Assets 9927.92 10101.63 -173.71 -1.720

INTERPRETATION:
1) The results: through profit at every stage that is PBDIT, PBIT, PBT is higher in absolute
terms, it has not been able to maintain growth equal to sales. PBT has grown by just 17.10%
2) Tax provision is lower by 16.56% thus improving PAT growth to 29.01% as against PBT
growth. In comparison to sales growth however PAT growth in very positive due to
maintaining material cost, manufacturing cost. It shows increment in net profit.
3) Net worth (shareholder’s fund) up by 18.59% as against lower growth in loan funds by
11.07%. it shows very strong financial position. Net fixed assets higher by only 8.72% where
as net sales grew by 24.69%. it shows very efficient fixed assets utilization.
4) Investment grew by 101.92%. Investment in absolute terms very high. It is much more than
net worth (18.59%). So it shows a very unique feature.

3) DUPONT ANALYSIS:
 OR

3) DU PONT ANALYSIS
RATIO NET PROFIT MARGIN * NET WORTH TURNOVER = RONW
FORMULAE PAT/Net Sales*100 * Net Sales/Net Worth = PAT/Net Worth*100
2001-02 0.31 * 37.09 = 11.65
2002-03 0.41 * 30.13 = 12.20
2003-04 0.47 * 16.89 = 7.89
2004-05 0.52 * 17.22 = 9.01
2005-06 0.46 * 19.06 = 8.79
2006-07 0.50 * 19.72 = 9.94
2007-08 0.42 * 23.89 = 10.06
2008-09 0.42 * 29.67 = 12.43
2009-10 0.44 * 34.48 = 15.03
2010-11 0.44 * 36.49 = 16.06

INTERPRETATION:
1) Increase in ROA contributed by improvement in both the net profit margin as well as net
assets turnover.
2) This finding indicates that an ideal situation for the AMUL.

OVERALL CONCLUSION:
 Financial statement summarizes an AMUL’s financial position at a given moment in time as
well as over longer period. They should reflect any variance between the actual operating
result & the budgeted goals that were previously approved by the company.

REFERENCE:
1. Sorter, G. & Becker, S. (1964),” Accounting and financial decisions and corporate personality‐
some preliminary findings,” Journal of Accounting Research, 183‐196
2. Holdren, G.C. (1964),”LIFO and ratio analysis,” The Accounting Review, 70‐85
3. From Internet
4. Sur & Rakshit (2005) “Working Capital and Liquidity Management in Factoring: A Comparative
Study of SBI and Can Bank Factors”. The Management Accountant May, Vol-39, No.-5
5. Vishnani, S., and Shah, B. K. (2007), “Impact of Working Capital Management Policies on
Corporate Performance An Empirical Study”, Global Business Review, vol. 8, No. 2, pp. 267-
281.
6. Mahindra R Gujarathi,”Sachiko Corporation: A case in International Financial Statement
Analysis.” Issues is Accounting Education; Vol.23, No Feb 2008; 23, 1; ABI/INFORM
GLOBAL pg.77‐101
7. Burhan Pathan: 20th august 2010: Business Category: Times of India”
8. Kumar: 17th may 2011: Business Category: Economic times
9. GCMMF: 22nd June, 2011: Business Category: Times of India
WEBLIOGRAPHY

1. National Dairy Development Board - http://nddb.org/

2. http://www.fas.usda.gov/
3. http://www.cohnwolfe.com/en-insights/whitepapers/greenboardsurvey/
4. http://www.investopedia.com/terms/horizontalanalysis.asp#ixzz1qf9fy8kv/
5. http://www.amul.com/
6. http://www.amuldairy.com/

BIBLIOGRAPHY

1. Ambrish Gupta: “Financial Accounting For Management” Published by pearson-2009.

2. I M Pandey: “Financial Management” Published by Vikas publishing house-2009.
3. Annual reports of AMUL.
4. Ken Black: “business Statistics – for contemporary decision making” Published by Wiley India
Pvt. Ltd.-2006.
5. Pamela Peterson Drake: “financial analysis” Published by Pearson company Ltd.