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CONTENTS

CHAPTERS
CHAPTER-I
INTRODUCTION
SIGNIFICANCE OF THE STUDY NEED FOR THE STUDY OBJECTIVES OF THE STUDY METHODOLOGY LIMITATIONS OF THE STUDY

PAGE.NO

CHAPTER-II
PROFILE OF MILK INDUSTRY. PROFILE OF THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP UNION LTD.

CHAPTER-III
PROFITABILITY ANALYSIS

CHAPTER-IV
DATA ANALYSIS

CHAPTER-V
SUMMARY & SUGGESTIONS BIBLIOGRAPHY

CERTIFICATE
This is to certify that the project entitled PROFITABILITY ANALYSIS in THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP UNION LTD that is being submitted by Miss. UJJWALA BETINA partial fulfillment for the award of the MBA (Master of Business Administration) from VESTAL Institute of

Management and IT to Andhra University under my guidance and supervision.

Place: (V. SANDHYA CHOWDARY) Date: project guide VESTAL Institute of Management and IT Eluru.

DECLARATION
I here by declare that the project work entitled PROFITABILITY ANALYSIS in THE KRISHNA DISTRICT
MILK PRODUCERS MUTUALLY AIDED CO-OP UNION LTD.

Submitted by me to Department of MBA, VESTAL Institute of Management and IT, Eluru in partial fulfillment for the award of degree of Master of Business Administration is my own and has not been submitted to any other University for any degree or diploma.

Place: Eluru, Date: (UJJWALA BETINA)

ACKNOWLEDGEMENT
I would like to express my sincere gratitude to all those who have been helpful in the completion of this project during my summer training in THE KRISHNA DISTRICT MILK PRODUCERS
MUTUALLY AIDED CO-OP UNION LTD.

am

grateful

to

Mr.Laxmaya,

Head-Finance

Department, THE KRISHNA DISTRICT MILK PRODUCERS


MUTUALLY AIDED CO-OP UNION LTD who permitted me and

given me opportunity to under go summer training in this organization. . I am thankful to Mr.T.Veera swamy, director of VESTAL Institute of Management and IT and Ms.Thanuja jyothi for their help getting permission to do this project work and Ms. V.Sandhya for his valuable guidance, constructive suggestions and encouragement through out the course of study and preparation of this project report.

(UJJWALA BETINA)

SIGNIFICANCE OF THE STUDY:


The basis for financial analysis of any firm is financial information. A business firm prepares its financial statements as they provide useful financial information and are helpful for the purpose of decision-making. Financial information is needed to predict, compare and evaluate the firms earning ability. The profit or loss statement shows the operating profit of the concern and the balance sheet depicts the balance value of acquired assets and liabilities at a particular point of time. For the purpose of obtaining the material and relevant information necessary for ascertaining the financial strengths and weakness to an enterprise, it is necessary to analyze the data depicted in the financial statement. The analysis is done by properly establishing the relations ship between the items of balance sheet and profit and loss account.

Financial statement analysis is a meaningful interpretation of Financial statements for parties demanding financial information. There are certain steps, which have to be taken into consideration for financial statement analysis. The analysis and interpretation of financial statements is an important accounting activity. The end users of financial statements will get further insight about financial strengths and weakness of the firm. Management will be particularly interested in knowing financial strengths of firm to make their best use to be able to spot out financial weakness to take suitable corrective actions also the future plans of firm should be laid down in view of firm's financial strengths and weakness.

A proper financial analysis must be used to analyze a firm's past performance and assess its present financial strength for making the better future plans. The financial resources of every organization are always scarce and therefore require proper planning and control in order to achieve the best out of funds available. The financial information of companies consists of three basic financial statements viz; balance sheet, the trading and profit and loss account, and the profit and loss appropriation account. These

statements are very useful for evaluating the financial position and performance of a firm through financial analysis.

The information given in basic financial statements serves no useful purpose unless it is interpreted and analyzed in some comparable terms.

Need for study:


After the liberalization, many MNCS entered into the market. Financial analysis must require for a company in this cut through competition. Because of that reason ratio analysis is used in analyzing the firms position. Known that fact the success of an organization depends upon the financial management. This situation has created an interest to study and analysis some of the financial aspects of this corporation. Hence a study may be undertaken on financial analysis through ratio in KDMPMACU, Vijayawada.

Objective of the study:


Keeping in view of above mentioned facts, the following are the objectives of the study.

To analyze the financial performance the firm thorough calculation of various


rations. To study the financial strengths and weakness of the firm To examine the short-term solvency of the firm. To evaluate the capital structure of the firm through leverage rations To find out the reasons of the problem and to evaluation possible way of the resolving the problem.

Methodology of the study:


The data related to the financial statements of the KDMPMACU and information relating to the Ratio Analysis has been collected using primary and secondary data. Primary data:

Information, which is not available in annual reports and books of the company, is collected from the primary data, primary data is collected from discussions with the executives of the company.

Secondary data:

Data relating to the financial statements of the KDMPAMACU have been collected from the published annual reports. The other information regarding this topic has been collected form the various magazines, textbooks and websites.

Limitation of the study:

The entire study is based on financial data that is provided by the companys financial statements. Therefore the following are the limitations of the study.

The limitations of ratio analysis are applicable to the study. The study is limited to a period of 8 weeks. Calculate ratio may not be future indicators. Ratio analysis is one of the tools of evaluating the firm.

CHAPTER - II

PROFILE OF THE MILK INDUSTRY


India is known to be an agricultural economy. Indian Agriculture supports about 65% of its population. Dairy and livestock sectors play a pivotal role in Indias Agro based economy. Animal Husbandry and Dairy Development has greater prominence in Rural Economy. The dairying is subsidiary to agriculture and practiced since time immemorial. Milk is the leading agriculture produce worlds most important and versatile food. There was no market facility for the surplus milk produced in village in the olden days. The market was in the hands of a middleman called vendor who operates between producer and consumer in those days. The producer was exploited by the vendors.

The marketable surplus in the rural area and the4 rapid urbanization in the country led to organize projects for surplus milk procurement from the villages and to supply pasteurized liquid milk to the needy urban and semi urban consumers.

The age old dairying grew, in organized sector with the governmental control and support. There were few competitors in the organized sector for milk market. So also very few small investor owned firms in the Milk Business as we studied.

The Government has taken inspiring initiatives for structural modes nation-wide for dairy development, animal husbandry and allied industries.

The cooperative movement with its widespread network has made strong grass roots and insights into the concerns of dairying in India.

NDDB:
An autonomous National Dairy Development Board (NDDB) under the Ministry of Agriculture was set up to organize the milk producers cooperatives on AMUL (Anand Milk Union Limited) pattern. The NDDB was headed by Dr. Verghese KUrien, who architected the dairy industry in the country. The NDDBS role in bringing about a sea change in dairying in India since 70s has been credible. It launched, implemented and fulfilled the OPERATION FLOOD program in two phases in the country (1970-90). Milk products imports was controlled and canalized by the government mostly on the advice of NDDB.

This planned correlation of b3eneficial policies, very limited completion and a well designed and managed program allowed the Dairy Cooperatives movement to achieve the leading role in dairy development in out nation.

Dairy plants operating in India:

Dairy Plants Cooperative private Other Total

Number 1223 403 63 678

Capacity0001/day 28394 32415 12170 72979

(Source: I&ids-2002-03.)

Anand pattern Dairy Cooperatives:


The Anand pattern Dairy Cooperatives were replicated primarily across the country to eliminate middlemen in milk business to empower the millions of rural milk producers to take control over Dairy Cooperatives by setting up cooperatives creating an institutional structure to enable the farmers to realize maxim share of consumer rupee and there by; bringing about overall social-economic development at the village level. In Anand model, a vertically integrated 3 tier Dairy Cooperative structure i.e. 1) Society at village level, 2)Union at District level and 3)Federation at state level in various States. The dairy Cooperatives have played an important role in increasing the production of milk and its handling in organized sector. Farmers are actually encouraged to manage their own business controlling procurement, processing and most importantly marketing of their milk and milk products. In the whole value chain marketing is the important only. Their real assets are ownership of cooperatives and brand of their product. The foundation for success of dairy cooperatives 2wha built through OPERATION FLOOD 91970-90). Only true and effective participation in genuine producer institution gave Indian farmers their rightful and deserved place in our agricultural economy. The real strength of Diary cooperative structure lies in the village. The estimated overall surplus of milk in the country is paving way to find a sustainable domestic and overseas market by value addition to the produces. Dairy Cooperative Societies in India

140000 120000 100000 80000 60000 40000 20000 0 1980-81 1990-91 2000-01 2005-06 2006-07
RATIO

WHITE REVOLUTION:
The WHITE REVOLUTION popularly down is the first revolution in dairy sector. It provide dairy cooperative network covering about 12million farmer members in over 115000 Villages Dairy Cooperatives in 170 Milk sheds spread over 270 District all across the country.

Total Farmer Members under Cooperatives

14000 12000 10000 8000 6000 4000


RATIO

2000
0 1 2 3 4 5
(SOURCE: AR, NDDB)
In India Diary industry thus has the saga of success and led to WHITE REVOLUTION in 80s. Dr.Varghese kurien for his pioneering efforts in this phenomenon is aptly regarded as FATHER OF WHITE RECOLUTION.

Milk produced by Co. operatives

25000 20000 15000


RATIO

10000
5000 0 1980-81 1990-91 2000-01 2005-06 2006-07

Milk production in India:


India, the current leader in dairy worlds achieved first rank in milk production with an annual production of 910 million tones of milk. It is contributing about 30% of total value of agricultural GDP. The value of milk out put and its products is 17000 core and that of diary industry as a while is 105000 core rupees. Nearly, 18% of total milk is being produced by weaker sections of society to supplement their income for livelihood which ultimately made India the highest production of milk in the world. The fact is that this highest milk production is due to involvement of 70 million rural milk animal household maintaining 108 million beads cattle (i.e.64million cows and 44 million buffaloes).

Buffaloes contribute largest to the milk pool with about 46.5 million tones955%). Thus the dairying is the main stay of Indian Rural Economy and regarded as one of the vital instrument of economic and social changes by employment and income generation. Approximately, Rs 300 million is ploughed back to Indian Villages on every single day by way of milk payment. After independence several technologies have been evolved for increasing production, productivity of the crop as well as animals by improving the adoptive

behavior of the farmer. The dairy is the sector where the poor contributes to the growth directly instead of getting benefit from growth generated elsewhere.

The Indian dairy scenario is so constantly looking ahead and promises to take grater strides in making dairying more remunerative to the farmers. The problem of rural employment and poverty broadly correspond to agricultural scenario in the country. The programs have been restructured dovetailing with many projects under Rural, Animal Husbandry Departments by the Government. Milk production enhancement schemes were widely introduced by Animal Husbandry Departments. Animal breed up-gradation, artificial insemination, etc have extensively organized. There has been a consistent growth in milk production over the last few decades at a rate of 4%. The National Policy on Agricultural advises farmers to diversify their risks by avoiding mono-cropping and take of Animal Husbandry, Dairy and other businesses. Production of 100 million tones of milk and a per capita milk availability of 245 g/day in 2006-07 is the overall anticipated target.

Production and per capita availability of Milk Production (Million In tones) 17 20 23.20 31.60 53.90 58 61.20 63.50 Per Capita Availability of Milk in Grams 47.10 45.60 40.40 46.20 63.70 66.80 69.20 70.60

Year 1950-50 1960-61 1973.74 1980-81 1990-91 1992-93 1993-94 Per 1994-95

capita availability of milk compare to other animal products

Animal product

Animal production

Per capita availability

Milk Eggs Meat Wool

84.5 million tones 34034millions 4694000tones 50.70

224ml/day 34/annum 4700gms/annsum 51r/annum

The average milk production from the buffaloes Is more than twice that of nondescript cow. Buffalo is predominantly a milk animal. It is regarded as a triple purpose animal also contributing milk, draught and meat as compared to the dual purpose native cattle. Buffalo milk also fetches a good remunerative price to the farmers because of its high fat content. The importance of deployment of appropriate technology for improving the productivity and reducing the cost of milk production as also improving the quality of mi8lk at producer level is addressed on requited scale with positive results.

Farm level Targets for milk production targeted production (kg/day)


up to 10 kg

Farming system category of Dairy stock


Dairy stock under crop livestock integrated system Intensive Commercial Dairying Indigenous milk breeds Cross Bred Buffaloes

10-15 kg 15.25 kg 10-15 kg

The dairying as an integral part of agri-business in India is growing rapidly. The upsurge in the dairy sector following liberalizations has been a shot in the arms of private sector in India. The increase in demand for value added products and increasing

investment in the cooperative and private sectors provides grater impetus to the demand for milk processing equipment simultaneously in the county. There are many large Dairy engineering companies established in the county providing complete solutions to the dairy industry to cater to the need of equipment for processing, automation and packaging. They are successful in the state of the art process technology.

Institutional capacities in India Institutions handling capacity


Dairy Cooperatives Rural Milk Procurement Milk Marketing Liquid Milk Processing Capacity Power Manufacturing Capacity

Number/capacity of Handling
84289 15780 Tones/day 9534 Tones/day 27084 Tones/day 1054 Tones/day

The traditional dairy products are available commodity group in India because they result in trade worth of rs.250 billion and play a very significant role in the socioeconomic and religious activities of our population. It is estimated that more than half of total milk produces is converted into variety of Indian Dairy Products by unorganized sector has remained largely confined to handling of liquid milk and to some extent production of milk powder and Ghee. The per capita income is naturally increases the demand for milk and milk products. With an increase in the domestic consumer base and continuous rise in the Indian ethnic population in many parts of the world, there will be an increased demand for value added Indian Dairy products particularly those with extended shelf-life and also which are ready-to-serve and ready-to-reconstitute types in the present trends. The Indian Dairy Industry is essentially considered to initiate

manufacture of mass market products for domestic as well as export markets. The dairies are modernizing to manufacture newer products with food safety to meet the every changing food habits of the consumer.

Dairy Exports Value (Rs in Millions)


0.60 736.00 0.90 237.40 37.10 7.50 1019.50

Dairy Product
Milk and Cream (Non-concentrated) Milk and Cream (Concentrated) Butter Milk, Yogurt, Cream Butter and Butte4r Oil Whey and Whey Products Cheese and Curd Total

(Source: I&IDS2002-03)

The demand for milk and milk products is hiking fast and projected to be 5 million tones per annum on average over the next 15 years. It is estimated to be 180 million tones per annum by the end of 13th Five year Plan (2021-21). The draft National Dairy Plan with an estimated outlay of Rs.173 billion focuses on 1. Productivity measures to enhance milk production at the required place, to ensure that demand is met by domestic production and not by imports and 2. Strengthening and expanding infrastructure at village to dairy plant level to procure, process and market milk through existing and new institutional structures. It is envisaged that these two interventions by appropriate authority will enable the organized dairy sector to increase its share of marketable surplus from a current level of 3 per to around 65% by 2021-22 and thus ensure a consistent supply of quality milk to consumers.

Liquid Milk marketing under cooperatives

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1980-81 1990-91 2000-01 2005-06 20006-07
RATIO

At this juncture, there are few critical and interrelated challenges too for the dairy industry.

The cooperatives are no longer the only major players in our milk markets. The entry of private sector and multinationals in the dairy business is no longer regulated following liberalization policies of the Government. Many privateers made serous

inroads into the best milk sheds and deploying the full range of modern professional marketing methods. The result is that they are capturing ever increasing share of milk and milk products market containing the growth of cooperative produce in the market.

The milk procured by the cooperative sector seems to be only about 15% of the marketable surplus.

In the strengthening Cooperative Business the NDDB conceptualized New Generation cooperatives called Milk Producers Institutions (MIPS) for better and more stable incomes in the competitive environment.

Milk producers Companies incorporated under the producer Company Chapter of Companies Act, 1956 which retain the character of cooperatives both in spilt and practice. They are required to adhere to and uphold the basic principles of cooperation. They are required to adhere to and uphold the basic principles of cooperation. They operate with in the same business and regulatory frame work enjoyed by companies.

Cooperatives are also seeking to expand business through horizontal growth often achieved through alliances and joint ventures with other cooperatives and investor owned business. This is being followed gradually in some of states in the country with the active support of the NDDB. The NDDB is taking lead in this direction in spite of criticism from some quarters that is basically against its constitution. This transformation to follow all over the county is to be hopefully watched for its results.

PROFILE OF THE KRISHNA MILK PRODUCERS MUTUALLY AIDED CO-OPERATIVE UNION LIMITED
The Krishna District in Andhra Pradesh is endowed with rich agricultural and livestock wealth, which are two main planks to keep the district ahead of other in the state. Agriculture and dairying is a subsidiary occupation for the majority of people in the district. Most of them are marginal, landless, poor farmers and laborers. The Krishna district has great potential for milk production with a substantial marketable surplus to tap. The market oriented milk production is the key livestock activity to generate stable income for the farmer. About 90% of rural households are directly concerned with livestock production 40% are mainly dairy oriented. It is livelihood security to the rural poor and buffers the risks due to crop failure.

Cattle Population in Krishna (2006-07)


BREED ABLE ANIMALS Buffaloes Cows tt Total POPULATION In Lakes 4.14 0.38 4.52

The organized dairying in Krishna District commenced in 1965 by the state Government with the assistance of UNICEF. (United Nations International Children Emergency fund). Under a pilot project named INTEGRATED MILK PROJECT-

HYDERABAD AND VIJAYAWADA (1960) a milk supply scheme was introduced in 1965 to organize milk collection from the villages, to Process at Chilling Center and supply pasteurized milk to the Consumers at Vijayawada and Hyderabad. The Milk Supply Scheme was a great success with its services to the producers and Quality supplies to the consumers. The initial procurement network was gradually extended to all over the district within a span of 5 years. The milk Products Factory first of its kind in South India was established and commissioned in Vijayawada by 1969.

Starting with a tiny procurement of 243 liters of milk on 11-02-1965 under the milk Chilling Center, pamarru, the collection in the District has surpassed one lakesinstalled capacity of Milk Products Factory, Vijayawada with in two years i.e. in 1971 necessitating Additional capacities.

The Units were under Dairy Development Department (1971). The products manufactured at Milk Products Factory, Vijayawada such as Butter, Ghee, skim Milk Powder, Whole Milk powder whole Milk Powder and infant Milk Food with the brand name VIJAYA earned appreciation of consumers all over the county. The VIJAYA became synonym for superior quality competing AMUL. The Milk Project is a buzzword among the public all over the region. The expansion of milk Products Factory, to meet the increased handling needs has been taken up later under OPERATIONFLOOD programmed by National Dairy Development Board (NDDB).

Existing infrastructure Facilities in Krishna Union

S.NO

NAME OF THE FACILITY

UNIT

CAPACITY

MILK CHILLING 1 2 3 4 5 6 Pammaru Verrankilock Gudlavalleru Hanuman Junction Chillakallu Tirucvur TOTAL CHILLING Liters/Day Liters/day Liters/day Liters/day Liters/day Liters/Day 50000 18000 18000 18000 12000 12000 128000

II III IV V VI 1 2

MILK PROCESSING GHEE Manufacture Milk Drying U.H.T.Milk

Lakes liters/Day MITS/Day MITS/Day MITS/Day

2.50 18.00 22.00 45000

CATTLE FEED MIXING FACILITY BUDHAVARAM Gudlavalleru TOTAL MITS/Day MITS/Day 30.00 18.00 48.00

Milk Coop Societies Milk Producers Associations Procurement Routes Women Dairy Coop Societies

676 320 35 103

Organization Integrated Milk Project 91960)


Dairy Development Department (1971) AP Dairy Development Corporation Ltd (1974) AP Dairy Development Co-op Federation Ltd (1981)

There was a big retinue of 1850 staff in different categories working under the dairy Units in the District under the administrative control of AP Dairy Development Corporation (APDDC) a State Government Undertaking in 1974. The nationwide strategic and structural changes organized for Dairy Development activities across the nation have brought the dairy units under the coo0perative set up In Andhra Pradesh in 1981.The replication of Anand pattern Dairy Cooperatives in Krishna District has its beginning with the all out support of NDDB. Primary Milk Producers Cooperative Society at Village level and District Milk Producers Cooperative Union at District level and AP Dairy Development Cooperative Federation At state level have come in to being. Enormous infrastructure financed by NDDB under Operation Flood program was developed for procurement, processing and marketing in the District.

The structural and institutional reforms that are part and parcel of NDDB took few years to unfold Krishna Milk Union in 1983 functioning under the AP Dairy Development Cooperative federation an Apex Body under APCS, 1964. (Andhra

Pradesh Cooperative Societies Act, 1964).The management of dairy units in Krishna District transferred to the respective democratically elected Bard of management with assets and liabilities and staff as is where is with effect from 08.02.1985. The producer is the owner of the business.

Assets and liabilities as on 08-02-1985 S. NO 1 2 VALUE (RS.In lakes)


173.96 241.37 415.33 231.21 184.12

PARTICULARS
Assets Hyd. From APDDCF Assets Hyd. From APDDCF Total

1 2

Loans Transferred from APDDCF Net Value of Assets Transferred

The Union has to function as per the bye-laws. The APDDCF is the Apex Body. Marketing with in the district is of the union and outside the state, it is controlled by Federation. The operational area of the Union is restricted to Krishna District only.

The Union with its inherent problems had undergone travails in 80s and 90s for survival. The performance of federation towards its constituent union was deplorable. The Federation has been impeded by carious institutional and management weaknesses. Unfortunately, it has not adopted the view of let us get through the crisis together. Krishna Union was running with abnormal staff cost of 22 percent over its turnover, which is un bearable, and against the industrial norms threatening the very existence of the Union.

The Union ventured to prune the surplus manpower by implementing VRS (Voluntary Retirement Scheme) in a phased manner with an outlay of Rs.10crores. The state Government and NDDB funded one third of the total investment.

Staff Cost
Year
No. of Employees Salary Cost per Annum (in lakes)

1985
1850

1992
1800

2001
1100

2007
570

289

670

1629

2400

Krishna Union adopted several measures to discharge its liabilities and to have a turnaround so as to herald a new path to get better and assured returns to the member producer to his produce-MILK building well governed producer centric institutions with Mission and Vision.

Voluntary Retirement Scheme Phase


Fist to Vth Total

No. of Employees Retired


86 736

Mission:
Farmers prosperity through technical innovations and Customer orientation with specific focus on quality and cost.

Vision:
Dairying in the district to be the major instrument of Strengthening rural economy and making available safe Milk and Milk Products.

Quality Policy:
Aiming to be a technologically advanced dairy with global outlook providing products and services of highest quality delighting the customers.

The Krishna Union has successfully:


1. Evolved long term policies to encourage and augment milk production and productivity in the District. 2. Improved efficiency in reducing the cost of operations, at every stage from rural farmer to urban customer. 3. Increased the availability of milk and Milk Products every nook and corner of District. 4. Developed and restructured manpower of organization to achieve competitive edge.

5. Consolidated the cooperatives structure among the dairy farmer.

Dairy Cooperatives Organized


2002-03 2003-04 2004-05 2005-06 2006-07

630

634

636

636

676

Farmer Member
Year 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 No. of Farmers 118700 119000 125000 128286 131272 131272

Procurement Price Increase


Year 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Milk Price KG.Fat RS 175.00 185.00 195.00 200.00 215.00 255.00

Most of the villages Dairy Cooperative Societies are viable and managed by the producer members receiving better technical know-how. The Government has enacted APMACS Act, 1995. (Andhra Pradesh Mutually Aided Cooperative Societies Act,

1995), which provides autonomy to the cooperatives. As per the policy and directives from the state Government/Federation, the Dairy Cooperatives registered under APCS Act, 1964 were converted into APMACS Act, 1995. the Krishna Milk Union also opted for conversion into APMACS Act, 1995 in July 2001 in consonance with the wishes of its member producers.

Elections are being held as per byelaws to the Board of Management of Krishna Union under APMACS Act, 1995.

General Body Board of Union Managing Committee Village Society Member Producer In the Society

The Board of Management is translating its concepts into realities as we study further.

The Union was under tremendous pressure at a stage to reformulate independently under the APMACS Act, 1995 since 2001. Both the state Federation and Government have adopted different stance towards the Union under the APMACS Act as the Federation can no longer exercise control over the Union as they enjoy autonomy in their affairs. The cooperation and coordination to the Union from the APDDCF is lacking. Relations between Union and Federation stained. Several hurdles were crated in

marketing activities of the Union in order to affect its fiscal status to organize the business. The State Government has finally promulgated an Ordinance in Feb 2006 delinking the Dairy cooperatives only from the APMACS Act, 1995 and bringing them back into the APCS Act, 1964 under which they can have full administrative control. The Union approached the High Court in the matter and their appeal was allowed and dismissed the Ordinance issued as unconstituti0oanl since then the Government and the Federation were adopted a vindictive attitude towards the Union in all its spheres. The Krishna Milk Union is taking tentative steps to address the potent yet potential volatile question of autonomy under the APMACS Act.

The farmers of Krishna District have so much faith and trust in Krishna Milk Union and giving their produce in maximum in spite of private players. The Union has sustained share of 70% in procurement and 60% in liquid milk marketing. The Krishna Union is distinctly placed in the dairy map of Andhra Pradesh by its continuous growth.

The union is trying to maintain a long time e position with regard to short-term difficulties faced in organizing the union and the industry in the district. It is poised to avail of the producers confidence, the resources and the network to pursue its mission of serving the Producers there by socioeconomic growth dairy and industry in general.

The Krishna Union is translating its concepts into reality as we go in detail.

The Krishna Union has the Salient Features

1. Turnover of Business reached to Rs.164 Cores in 2006-07.

2. Dairy Average Milk Procurement 185000 Lts.

3. Highest Milk Procurement 310000 Lts.

4. Dairy Average Milk Sales 164000 Lts.

5. Obtained ISO; 9001:2000 and HACCA.

Milk is inherently one of the best Good for You foods in todays market place.

Changing consumer food habits, preferences increasing health consciousness and also the upsurge in the economy are leading to dramatic change in the market trends frequently. Demand is a phenomenon based primarily on need of the consumers purchasing power and product quality.

Vijaya the renowned brand of Krishna Milk Union has strong equity among consumers. It has been able to make an impact despite the premium pricing. The brand offer, good margin to the traders. Union has a direct liquid milk market of 80% out of its procurement. It is converting surplus milk into diverse products.

PRODUCT MIX OF UNION Market Milk


Vijaya Gold * Vijaya Special * Vijaya Premium Vijaya Economy *Vijaya Low Fat

Long Life Products


UHT Milk in 1 it pack * UHT Milk in 200ml pack * UHT Low Fact Milk.

Fresh Milk Products


Basundi * Curd * Lassie * Butter Milk * Sterilized Flavored Milk

Fresh Milk Products


Cooking Butter * Milk Cake * Skim Milk Powder * Paneer * Doodh Peda * Ghee

With its wise-policies maintaining equilibrium between supply and demand through out the year without imposing restrictions in the supplies of milk and milk products.

Milk Production has risen but productivity is low. Effort is on for quality in milk production upstream of the processing plant. Union is involved in producing good products establishing quality by upstream integration with Good Hygiene practices given by cooperatives. For Downstream side, the checks at plant and market level too exist. Quality is equally valued by one and all in the set up. The employees quality

consciousness and commitment makes the products superior in spite of stiff completion from carious other brands in the domestic market. After initial focus on the home markets, and attaining considerable national market is now targeting on the overseas market.

The union is publishing a Monthly News Magazine titled; Krishna Ksheeravani a media on carious aspects of dairying to the member producers.

The dairy and livestock development is very much linked with veterinary. The Stable sustained income being provided by Krishna Union to the Dairy farmers is creating an enthusiasm among the farmers to rear quality breed for higher yield. Comparing to the cattle population the scale of our veterinary services to the needy farmer is not up to the mark for various reasons. The increasing shortage of qualified veterinary and Para-medical staff, inadequate veterinary dispensaries restricted budgetary allocations for Animal Husbandry and paucity of funds for Vet-Medicare are a few co0nstraints that need to be addressed with by state Government.

The Krishna Union realizing the importance of input services to the farmers for sustained milk production is 1. Deploying retired veterinarians at each Milk Chilling Center for animal health care services in the clustered villages.

2. Imparting training to the staff of Dairy Cooperative in Veterinary First Aid and Artificial Insemination.

3. Providing fodder seed and slips.

4. Supplying balance feed for animals.

5. Organizing Mass veterinary camps.

6. Subsidizing cattle insurance premium.

7. Inducting Murrah breeding bull to upgrade the local breed.

Women empowerment
Women are exclusively manning 104 Dairy Cooperatives, which provides them empowerment.

MILK PRODUCTS FACTORY FUNCIONAL CHART


Raw Milk Reception Dock:
Receives Raw Milk Chilled Milk from different sources.

Tests initial Keeping quality accepts for further process and weighs milk received.

Collects Samples for Fat & SNF analysis by QCL for determination of value payable.

Pumps to processing section for further treatment of milk.

PROCESSING:
Pasteurization Cream separation Homogenization Standardization/ Toning of milk as per different standards for marketing. Reconstitution and Recombining of milk.

Stores milk for other operations / utilities. BUTTER:


Obtains cream and ripens for Butter Making.

Produces white Butter, packs in 20kg blocks and stores.

GHEE:
Converts Butter and Cream into Ghee maintaining, AG Mark standards.

Packs in Bulk Packs (15Kg) and small consumer packs for market.

POWDER:
Draws milk from processing section and spray dry into SMP, WMP.

Packs in 25Kg poly liners for future disposal. ASEPTIC PACKAGING STATION:
Treats milk at Ultra High Temp and packs aseptically for long shelf life with out refrigeration.

Undertakes custom packaging of beverages.

PRE PACK:
Packaging of different quality types of milk in sachets and in cans for market.

Storage of satiated milk for distribution.

BI-PRODUCTS:
Manufactures various traditional products to meet market demand.

CIP: (Cleaning in-place)


Cleaning all daily equipment after each days operation to ensure hygiene and sanitation for further operation.

FG section: (Finished Goods) Stocks all finished products for subsequent release as per requirement
indents.

STORES: (General and Mechanical)

Keeps inventory, supplies packing materials for different products, chemicals, equipment, spares required in the dairy operations regularly.

ENGINEERING DEPARTMENT:
BOILER: General steam required for dairy operations.

ELECTRICAL:

Monitors

power supplies for all operational needs.

REFREIGERATION: Meets refrigeration requirements of the Dairy.

MAINTENANCE:

Look-after both the trouble shooting and preventive maintenance of dairy plant for smooth and uninterrupted opera ions.

QUALITY CONTROL LABORATORY (QCL):

Oversees ensuring rigorous quality control checks as per relative Laws/ Acts at various level of production and Operations.

Product gets out after the clearance by QCL.

Stringent checks adopted on purchases and supply of stress material of the


organization.

CIVIL: Executes all civil nature of works for up-keeping of units.

TRANSPORT:
Provides limited transport facilities.

SECURITY: Shoulders responsibility of security and vigilance in the dairy and units to
prevent untoward incidents of any nature.

CHAPTER III

FINANCIAL ANALYSIS:

The analysis and interpretation of financial statements is an important accounting activity. The end users of financial statements will get further insight about financial strengths and weakness of the firm. Management will be particularly interested in knowing financial strengths of firm to make their best use to be able to spot out financial weakness to take suitable corrective actions also the future plans of firm should be laid down in view of firm's financial strengths and weakness.

A proper financial analysis must be used to analyze a firm's past performance and assess its present financial strength for making the better future plans. The financial resources of every organization are always scarce and therefore require proper planning and control in order to achieve the best out of funds available.

The financial information of companies consists of three basic financial statements viz; balance sheet, the trading and profit and loss account, and the profit and loss appropriation account. These statements are very useful for evaluating the financial position and performance of a firm through financial analysis.

The information given in basic financial statements serves no useful purpose unless it is interpreted and analyzed in some comparable terms.

Tools and techniques of financial statements:


A host of methods or techniques is used to study the relationship between different statements. However, the following methods of analysis are generally used:

1. Comparative financial statements 2. Common-size statement 3. Trend analysis 4. Ratio analysis

1. Comparative financial statements :


Comparative financial statements are statements of financial position at different periods of time. Usually , two financial statements(balance sheet and income statement) are prepared in a comparative form placing figures for two or more periods side by side. Comparative statement analysis refers to comparison of financial statement pertaining to two different periods by putting them side-by-side and finding out the changes in absolute and relative changes.

Points to be noted: a. The financial date that is to be compared be properly defined. A particular account head must have the same connotation for all periods of comparison. b. The accounting policies followed during the period of comparison should be uniform if there are any changes in any policies, the figure should be uniform if there are any changes in any policies, the figure should be adjusted to ensure uniformity. c. It is preferable to present financial information in vertical statement form.
The comparative financial statement must reveal changes in both absolute and relative measures.

2. Common-size statements :

Common size statement facilitates comparison of financial statement not only of a single firm over a period of time, but also comparison of financial statement of different companied for any given time. Under, this method, all the items of the statement are presented as a percentage of a particular item. Therefore, even if the related absolute figures are in respect of vastly differently scale of operations, a common base for comparison is created.

Incase of a common size income statement, all the items are presented as a percentage of new sales. A common size balance sheet shows each item as a percentage of total assets or total liabilities. A common size statement helps. In determining the relative efficiency and soundness of a firm and helps in understanding its financial strategy.

The common-size statements (balance sheet and income statement) are generally shown in analytical percentages. Common-size are those in which figures are stated after converting them into percentage to some common base. These statements are often called component percentages or 100 percent statements because each statement is reduced to the total of 100 and each individual item is stated as a percentage of the total of 100.

3. Trend analysis:

Trend analysis involves computation of index numbers of movements of various financial items in the financial statement for a number of periods. It helps in understanding the nature and rate of movements in various financial factors.

However, conclusions should not be drawn on the basis of a single trend. Trends of related items should be carefully studied. Due weight age should be given to extraneous factors such as government policy, economic conditions etc. they can affect the trend significantly.

Points to be noted: a. The accounting policies for the entire period should be uniform. b. Trend value must be read along with absolute values. c. Non - financial factors should be considered while interpretation.

Absolute value of the item for the period Trend Analysis = ------------------------------------------------------------- X 100
Absolute value of the item in the base period

4. RATIO ANALYSIS:
Financial statements are prepared primarily for decision making. They play a dominant role in setting the frame work of managerial decisions. Financial analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. There are various methods or techniques used in analyzing financial

statements, such as comparative statements, schedule of changes in working capital statements, such as comparative statements, schedule of changes in working capital, common size percentage, funds analysis, trend analysis and ration analysis. The ratio analysis is the most powerful tool of financial analysis.

MEANAING OF RATIO:
According to accountants hand book by WIXON, KEL AND BEDFORD, a ratio is an expression of the quantitative relationship between two numbers. A ratio is simple arithmetical expression of the relationship of one number to another. It may be

defined as the indicated quotient of two mathematical expressions. Ratio provides clues to the financial position of a concern. One can draw conclusions about the exact financial position a concern with the help of ratios. Ration analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions.

PURPOSE OF RATIO ANALYSIS:


The ratio analysis is one of the most powerful tools of financial Analysis. It is used as a device to analyses and interpret the financial statements can be analyzed more clearly and decisions made from such analysis.By the use of ratio analysis one can measure the financial conditions of a firm and can point out whether the conditions is strong, good, questionable or poor.

USES:

Financial statements are prepared primarily for decision making. Ratio analysis helps in making decision from the information provided in financial statements. Ratio analysis is of much help in forecasting and planning. Meaningful conclusions can be drawn for future from these ratios. Financial strength and weakness of a firm are communicated in an easier manner by using ratios. Ratios help in communication and enhance the value of the financial statements. Ratios even in coordination which is of utmost importance in effective business management. Ratio analysis also helps in making effective control of the business. Standard ratios can be based upon preformed financial statements and variances or deviations, if any, can be found by comparing the actual with the standards so as to take a corrective action at the right time. Ratios are of immense importance in the analysis and interpretation of financial statements as they bring out the strength or weakness of a firm.

INTER-FIRM COMPARISON:
Ratios of one firm can also be compared with the ratios of some other selected firms in the same industry at the same point of time. This kind of comparison helps in evaluating relative financial position and performance of the firm.

INTRA-FIRM COMPARISON;
Ratios of various departments in the same firm or organization were compared in intra firm comparison.

LIMITATIONS OF RATIO ANALYSIS:


The ratio analysis is one of the most powerful tools of financial management. Through ratios are simple of calculate and easy to understand, they from some serious limitations. Limited use of single ratio: A single ratio, usually, does not convey much of a sense. To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any meaningful conclusion. Lack of adequate standards: There are no well accepted standards or rules of thumb for all rations which can b e accepted as norms. It renders interpretation of the ratios difficult. Inherent limitations of accounting: Like financial statements, ratios also suffer from the inherent weakness of accounting records such as their historical nature. Ratios of the past are not necessarily true indicators of the future. Change of accounting procedure: Change in accounting procedure by a firm often makes ratio analysis misleading. E.g., a change in the calculation of methods of

inventors form FIFO to LIFO increase the cost of sales and reduces considerable the value of closing stocks which makes stock turnover ratio to be lucrative and an unfavorable gross profit ratio.

Personal Bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to be interpreted and different people may interpret the same ratios in different ways.

Classifications of ratios:
The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ration analysis for knowing the financial position of a firm for different purposes. In view of various users of ratios. There are many types of ratios which can be calculated from the information given in the financial statements. They might must be used for financial analysis

Ratios Traditional classificaiton


1. Balance sheet ratios 2. Profit & loss statements 3. Mixed ratios a. Creditors Turnover b. Return on capital c. Inventory Turnover d. Return on Total Ratios e. Earning Per Share f. Price of Earning

Functional classification
1. Liquidity ratios 2. Leverage ratios 3. Activity ratio 4. Profitability ratios

Significance
1. Primary 2. Secondary

Types of ratios:
Several ratios calculating from the accounting data can be grouped into the various classes according to the financial activities or function to be evaluated. The various parties that are generally under taken financial analysis to measure solvency and profitability of the firm. Management is interested in evaluating every aspect of all parties and see that the firm grows profitability. In view of the requirements of the various users of ratios, we may classify them into following four important categories.

Liquidity Leverage Activity ratio

Profitability ratio

Liquidity ratio:
Liquidity ratio measure the ability of the firm to meet its current obligations. Analysis of liquidity needs the preparation of cash, budgets and cash funds flow statements. But liquidity ratios by establishing relation cash and other current assets to current obligations provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity, and also that it is not too much highly liquid. The failure of company to meets it obligations due to lack of sufficient liquidity will result in bad credit image. A very high degree of liquidity is also bad. Ideal assets ear nothing. The firms funds will be un necessarily tied up in current assets. necessarily to strike proper balance between liquid and lack of liquidity. The most common ratios, which indicate the extent of liquidity or lack of, It, are: Therefore it is

Current ratio Quick ratio


Absolute ratio

Current ratio:
It is called by dividing current assets by current liabilities,

Current Assets Current ratio = ----------------Current Liabilities The ratio greater than one means that the firm has more current assets than current ration of 2 to 1 or more is considered satisfactory. The current ratio represents a margin of safety for credits.

Quick ratio: Quick ratio is used as a measure of the companys ability to meet its current obligations. Theis ratio is calculated as a supplement to the current ratio in analyzing the liquidity of the firm. This can be calculated as Quick Assets Quick ratio = -------------------Quick Liabilities

Quick Assets

Current Assets Stock and Pre Paid expenses

Quick Liabilities

Current Liabilities - Bank OD

A normal standard of 1 ; 1 acceptable quick ratio. A very high or very how ratio is not desirable. It is used to measure the ability of the company to meet its current liabilities at short notice.

Absolute Liquid ratio:


Absolute liquid ratio is also be calculated together with current ratio and acid test ratio as to exclude even receivables from the current assets and find out the absolute liquid assets.

Absolute liquid assets Absolute liquid ratio = -----------------------------Current liabilities

Capital structure / leverage ratios / Long-term solvency ratio:


The long-term financial stability of a firm is considered as dependent upon its ability to meet all its liabilities. The ratios, which are measuring the long-term solvency, are: Debt Equity ratio Share holders equity / property ratio Fixed assets to long term funds ratio Debt to net converge ratio Interest coverage ratio

Debt equity ratio:


Debt equity ratio indicates the relationship between long-term debts and shareholders funds, it helps in knowing the soundness of the long-term financial policies of a company. It is calculated as:

Long-term debt Debt Equity = ---------------------------Share holders funds

Interest coverage ratio:


Interest coverage ratio shows how many interest. The ratio is calculated as:

Long term debt Interest coverage ratio = -------------------------Share holders funds

Interest coverage ratio:


Interest coverage ratio shows how many interest. The ratio is calculated as: EBIT Interest coverage ratio = ----------Interest

Activity ratios:
Activity ratios measure how efficiency the firm employees its resources. These ratios involve comparison between the level of sates and investment in various accounts such as inventories, debtors, creditors, fixed assets etc., Activity ratios are used to measure the speed with which various accounts are converted into sales are cash. Every turnover ratio is calculated by dividing cost of goods sold or net sales by respective account and each ratio gives the speed in which it turns cash or sales. Cost goods sold (CGS): Sales Gross Profit

The Major Turnover Ratios are: Inventory turnover ratio Debtors turnover ratio Creditors turnover ratio

Capital turnover ratio Working capital turnover ratio Fixed assets turnover ratio Total assets turnover ratio

1. Inventory turnover ratio:


Inventory turnover ratio indicates the number of times the stock has been turnover during the paid and evaluates the efficiency with which a firm is able to manager its inventory. Cost of goods sold Inventory turnover ratio = --------------------------Average inventory

Average inventory

Opening stock + Closing Stock/2

2. Debtors turnover ratio:


It used to show how the capital employed is efficiency use in the business. It indicates the firms ability to generate sales per rupee capital employed. Net sales Capital turnover ratio = -----------------------Working employed Capital employed preferential share = Long-term funds + Reserve & Surplus +

Capital + Equity Share Capital

3. Working capital turnover ratio:


Working capital of a concern is directly related to sales. The current assets like debtors, bills debtors, bills receivables, cash stock etc., changing with increase or decrease in sales. Sales Working capital turnover ratio = -------------------Working capital Working capital = Current assets Current liabilities

4.Fixed assets turnover ratio:

Fixed assets turnover ratio shows a relation between sales and fixed assets. Sales Fixed assets turnover ratio = --------------Fixed assets

5. Total assets turnover ratio:

Total assets turnover ratio shows a relation between sales total assets. Net sales Total assets turnover ratio = ---------------Fixed assets

Profitability ratio:
Profitability is the overall measure of the companies with regard to efficient and effective utilization of resources at their command. It indicates in a nutshell the

effectiveness of the decisions taken by the management from time to time. Profitability ratios are of utmost importance for a concern. These ratios are calculated to enlighten the end results of business activities which is the sole criterion of the overall efficiency of a business concern. Profitability ratio helps in assessing the adequacy of profits earned by the company and also discovers whether profitability is increasing or decreasing. Profitability ratios are measured with respect to sales, capital employed total assets employed shareholders funds etc., and the major profitability ratios are,

Return on investment Return on capital employed Return on share holders funds


Return on total assets

Gross profit ratio Net profit ratio Operating profit ratio

1. Gross profit ratio:


Gross profit ratio measure the gross margin on the total net sales of company. This ratio measure the efficiency of companys operation and can be sued to compare with previous years results. Higher the gross profit ratio, better is for the company. Gross profit * 100 Gross profit ratio = ----------------------Net sales

Gross profit Net Sales

= =

Sales Cost of goods sold Sales - Sales Returns

This ratio is designed to focus attention on the net profit margin arising from business operations after interest and tax. Net Profit Net profit ratio = ------------Sales * 100

2. Operating profit ratio:


This ratio is calculated by dividing earnings before tax and interest by sales. This ratio is calculated as: Net profit after interest and tax * 100 Return on capital employed= -----------------------------------------------Capital employed

Return of total assets:


It established relationship between profit before interest and tax. EBIT * 100 Return on total assets = --------------Total assets

Return on share holders funds:


I establish the relations hip between the net profit after tax and to share holders equity. NAPT * 100 Return on shareholders funds = --------------------------Share holders equity

CHAPTER - IV

I. PROFITABILITY RATIOS
Gross Profit Ratio:
The gross profit ratio indicates the extent to which selling prices of goods per unit may decline without resulting the losses on operations of a firm. This reflects the efficiency with which the firm produces its products. There is no standard norm of the Gross Profit Ratio.

Gross profit * 100 Gross profit ratio = ----------------------Net sales

Year

Gross Profit

Net Sales

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

254067403 249110668 263510297 291057212 326551326

1136973196 1257182689 1367480960 1573930933 1628286699

22.35 19.81 19.27 18.49 20.05

25

20

Ratio

15

10

ratios

0 2004 2005 2006 2007 2008

Years

Interpretation:
We observe the above analysis it can be clearly find out that the profitability firm is very good. The is the ratio in 2003-04 it was 22.38 it shows the good position of the firm. In the later year in 2004-05 it was 19.81 and in 2005-06 it is 19.27 and in 2006-07 it is 18.49 but is 2007-08 the ratio is 20.05 it was a in increase trend. It is advisable to the firm to maintain in the ratio of in 2003-04 by that the firm will be more profitability position.

Operating Ratio:

Operating ratio indicates the percentage of net sleds the is consumed by the operating cost. Obviously, higher the operating ratio, the less interest, income-tax, dividend and reserves. There is no rule f thumb for this ratio as it may differ from firm to depending upon the mature of the business and the capital structure however, 75% to 85% may be considered to be a good ratio in the case of manufacturing undertaking, operating ratio is considered to be a yardstick of operating efficiency.

Net profit after interest and tax * 100 Return on capital employed = -----------------------------------------------Capital employed

Year

Operating Cost

Net Sales

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

935081812 1052129915 1208938534 1305164294 1401241487

1136973196 1257182689 1367480960 1573930933 1628286699

82.60 83.69 88.41 82.93 86.06

89 88 87 86 85 84 83 82 81 80 79

Ratio

ratios

2004

2005

2006

2007

2008

Years

Interpretation:
It can be clearly understood that the operating efficiency of the firm was satisfactory in the 2003-04 the ratio is 2.6 in the later gradually increased in the year 2005-06 it is 8.41 in the later gradually decrease in year 2006-07 it is the ratio was 82.93 but in 2007-08 the ratio is 86.06 it reached the satisfactory position. So it was advisable to the firm to maintain the ratio as 2007-08 by that the firm can maintain in the satisfactory position.

Operating Profit Ratio:

Operating Profit Operating Profit = ------------------------- * 100 Net sales

Year

Operating Profit

Net Sales

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

131210561 228179650 248830945 122962511 154783110

1136973196 1257182689 1367480960 1573930933 1628286699

11.54 17.91 18.19 7.81 9.50

20 18 16

14
12
Ratio

10 8 6 4 2 0
2004 2005 2006 2007 2008

ratios

Years

Interpretation:
It can be clearly understood that the operating profit ratio is 11.54 in 2003-04, after it reaches 17.91 in 2004-05 & 18.19 in 2005-06, after that there is big fall in the ratio 7.81 in 2006-07 & 9.50 in 2007-08.

Net Profit Ratio:

Net profit Ratio establishes a relationship between the net profit and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of true firm. This ratio is overall measure of firms profitability. The ratio is very useful as if the profit is not sufficient, the firm shall not be also to achieve a satisfactory return on its investments

Net Profit Net profit ratio = ------------Sales * 100

Year

Net Profit

Net Sales

Ratio

2003-04

1462125

1136973196

0.12

2004-05

2524495

1257182689

0.20

2005-06

933498

1367480960

0.06

2006-07

806059

1573930933

0.05

2007-08

2627248

1628286699

0.16

0.2 0.18 0.16 0.14 0.12

Rato

0.1 0.08 0.06 0.04 0.02 0 2004 2005 2006 2007 2008

ratios

Years

Interpretation:
It we observe the analysis the firm 2003-04 the net profit ratio is 0.128 and it was gradually increases 0.20 in the year it was decline that is 2005-06 it was 0.06 and in 2006-07 0.051 it is but in 2007-08 the net profit ratio is 0.16. So it is advisable to the firm to maintain the ratio as in 2004-05 and in a increasing trend by that it can reach satisfactory position

Return on Share Holders Investment:


RIO is relationship between net profits and proprietors funds. Here the net profits are visualized from the view-point of owners. This is the most important ratio used for measuring the overall efficiency of the firm. As the primary objective of the business of the business is to maximize its earnings. This ratio indicates the extent to which this primary objective of business is being achieved. This ratio is of great

importance to the present and prospective share holders as well as the management of the company N.P. after Tax

------------------------------ * 100
Share holders Equity

Year

N.P. after Tax

Share holders Equity

Ratio

2003-04

1462125

33347902

4.38

2004-05

2524495

42557565

5.93

2005-06

933498

50919771

1.83

2006-07

806059

59043558

1.37

2007-08

2627248

68692536

3.82

Ratio

ratios
2

0 2004 2005 2006 2007 2008

Years

Interpretation:
It we observe the analysis it can be clearly found out that the return investment at the present year satisfactory and there return may also decreased when ever the firm face adverse economic conditions in 2004-05 it reaches the better position i.e 5.93 lter it was gradually decline. But in 2007-08 is 3.82. It is advisable to the firm to maintain increasing trend to get the best results.

II. LIQUIDITY RATIOS

CURRENT RATIO: Current ratio always known as working capital ratio. Current ratio indicates, in
rough fashion, the liquidity of current assets or the ability of a business to meet its maturing current obligations. The ideal form of the ratio is two top one (2:1 that means two times of current assets to one time of current liabilities. If there is shrinkage or hand loans etc. Will decline,

Current Assets

Current ratio

--------------------Current Liabilities

Year

Current Assets

Current Liabilities

Ratio

2003-04

23,34,60,276

12,02,20,399

1.94

2004-05

23,95,57,366

12,38,42,895

1.93

2005-06

27,87,73,455

15,83,85,610

1.76

2006-07 2007-08

29,69,44,630 34,63,20,481

15,18,90,249 16,96,38,535

1.95 2.04

2.05 2 1.95 1.9 1.85 1.8 1.75 1.7 1.65 1.6 2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:
Current Ratio of the company assets are performing their job efficiency and effectively by maintain the current assets for current liabilities in current manner that is 2:1 ratio. 2003-2004 the ratio is the1.94later gradually increased in 2007-2008 but in 2005-06 there was a slight decline in ratio i.e. 1.76.Ultimately it is advised for the company to maintain the same level of current ratio is obtained 2006-2007 i.e 1.95 but in 2007-08 the ratio is 2.04 current assets double the current liabilities are considered to be satisfactory for the firm.

QUICK RATIO: Quick ratio is used as a measure of the companys ability to meet its current obligations. This ratio is calculated as a supplement to the current ratio in analyzing the liquidity of the firm. This can be calculated as Quick Assets Quick ratio = -------------------Quick Liabilities

Year

QUICK ASSETS

Current Liabilities

Ratio

2003-04

11,90,85,679

12,02,20,399

0.99

2004-05

13,22,21,296

12,38,42,895

1.07

2005-06

13,34,81,280

15,83,85,610

0.84

2006-07

16,58,05,298

15,18,90,249

1.09

2007-08

19,12,76,260

16,96,38,535

1.13

1.2

RATIO

0.8

0.6

0.4

0.2

0 2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:
The quick ratio for K.D.M.P.M.A.C.U.L is table during the period of study. The idea norms at this ratio are 1:1 in 2003-04 its ratio is 0.99 it way going on increasing in 2004-05 it reached 1.07 ratios on 2006-07 it reached 1.09 in 2005-06 there was a slight decline in the ratio i.e. 0.83 but in 2007-08 the ratio is 1.13 it was increased.

By observing the above graph we can know that can reach 1 norm in fourth coming year it is fallows the increasing trend as 2007-2008.

ABSOLUTE LIQUIDITY RATIO:


The absolute liquidity ratio is also known as super quick ratio. Through

receivable are generally more liquid in nature than inventories. There may be doubts regarding the real stability of debts. Therefore, absolute liquidity ratio relates the sum of cash and marketable securities to the total current liabilities.

ABSOLUTE LIQUID ASSETS

ABSOLUTE LIQUIDITY RATIO =

-----------------------------------Current Liabilities

Year

ABSOLUTE LIQUID ASSETS

Current Liabilities

Ratio

2003-04

3,57,17,842

12,02,20,399

0.29

2004-05

5,43,33,642

12,38,42,895

0.43

2005-06

5,78,46,870

15,83,85,610

0.37

2006-07

11,65,82,542

15,18,90,249

0.77

2007-08

14,27,11,671

16,96,38,535

0.84

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2003-04 2004-05 2005-06 2006-07

RATIO

2007-08

Interpretation:
Absolute liquidity ratio of K.D.M.P.M.A.C.U.L is presented in table during the period of study. The desirable norms of this ratio are 1:2 in 2003-2004. Ratio is 0.297. As in the above graph there where many fluctuating in the liquidity position of the company 2005-06 ratio is 0.37 and 2006-07 ratio is 0.77 in 2007-08 the absolute liquidity ratio it was increased trend. By observing this we can say the firm is not marinating the perfect norms of the cash balance in companion with the current liabilities in 2007-08 it was marinating good ratio.

III. LEVERAGE RATIOS


DEBT EQUITY RATIO:
The debt equity ratio is the measure of relative claims of creditors and owners against the firms assets. There are various interpretations of debt and equity and there fore debt-equity may be calculated in number of ways. The term debt considered here is exclusive of current liabilities and equity refers to own funds. A low ratio implies a greater claim of owners that of creditors. An ideal norm of the ratios is 1:1

OUT SIDER FUNDS

DEBT EQUITY RATIO=

-------------------------------- * 100
SHARE HOLDERS FUNDS

YEAR

OUT SIDER FUNDS

SHARE HOLDERS FUNDS 33347902 42557565 50919771 59043558 68692536

RATIO

2003-04 2004-05 2005-06 2006-07 2007-08

18370913.5 159661514 152930946 169216284 207885478

5.51 3.75 3.00 2.87 3.03

RATIO

0 2003-04 2004-05 2005-06 2006-07 2007-08

Interpretation:
The debt equity ratio of K.D.M.P.M.A.C.U.L is presented in table during the study an ideas norms of this ration is 1:1 in 2003-04 ratio in 5.51 through there are fluctuating in this ratio. This ratio is always above the norms of 1:1 in 2005-06 ratio in 3.00 and 2006-07 ratio is 2.87 but in 2007-08 ratio is 3.03 it was increased by 3.03. By observing the above position of ratio we can say that owns are putting in relatively less money or there own and were relying on heavy debt the firm should flow the ratio as in 2007-08 i.e 3.03 by that reach it ides norm i.e. 1:1.

PROPRETARY RATIO:
As equity ratio represents the relationship of owners funds to total assets, higher the ratio or the share holders in total capital of the company better is the long term solvency position of the company can be lost without affecting the interest of the credito0rs of the company. This ratio is indirectly indicating that the company is highly relied on the creditors of the company.

SHARE HOLDERS FUNDS

Proprietary ratio

-------------------------------TOTAL ASSETS

YEAR

SHARE HOLDERS FUNDS

TOTAL ASSETS

RATIO

2003-04

33347902

436970850

763

2004-05

42557565

431966652

9.85

2005-06

50919771

471839951

10.79

2006-07

59043558

494379304

11.94

2007-08

68692536

562759715

12.21

14

12

10

RATIO

Ratio

0 2003-04 2004-05 2005-06 2006-07 2007-08

Years

Interpretation: The proprietary ratio of K.D.M.P.C.U.L. is presented table. Of you examine


above analysis it can be found in proper way. This is in 2003-04 ratio is increasing year by year in 2005-2006 it was 10.79 and 2005-06 ratio are 11.94 but in 2007-08 the ratio is 12.21. By observing this we can say that this type of slow development is not all advisable if company always the ratio is as in 2007-08 hat is 12.21 can reach the satisfactory.

IV. ACTIVITY RATIOS

INVENTORY TURN OVER RATIOS:


The inventory turnover ratio is also known are stock turnover ratio. This ratio usually establishes relationship between the cost of goods sold during the period and the average amount of inventory outstanding during that period. The ratio also indicates the number of time inventory is replaced during the year. This inventory turnover ratio has no fixed norm. Cost of Goods Sold

Inventory turn over ratios

-----------------------Average Stock

Year

Cost of Goods Sold

Average Stock

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

882905793 1008072021 1103970663 128287372 1301735372

98702222 87509747 97491725 105791846 112736262

8.95 11.52 11.35 12.13 11.55

14

12

10

RATIO

Ratio

0 2003-04 2004-05 2005-06 2006-07 2007-08

Years

Interpretation:
It is clear firm from the above analysis that the ratio are in an increasing trend 2003-04 it was 8.95 and slight design in 2005-06 it was 11.32 and 2007-08 11.55 it was decreased the company has maintain growth. This type of growth should be maintained by the firm in the succeeding years. It is advisable that it is better if some more times it is increased in inventory turnover ratio is higher the operating cycle is very past and it is very profitable for the firm.

Debtors Turnover ratio:


The debtors turnover ratio is also called as receivables turnover ratio. This ratio indicated the number of times on the average the receivables are turnover in each year. The higher value of the ratio, the more is the efficient management of debtors. However, this is not immediately apparent from the debtors turnover ratio and therefore it has to be supplemented by average collection period

Net Sales

Debtors Turnover ratio

-----------------------------Average Trade Debtors

Year

Net sales

Average trade debtors

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

1136973196 1257182689 1367480960 1573930933 1628286699

71375346 70141034 69709699 44201029 39900771

15.93 17.92 19.62 35.61 40.81

14

12

10

RATIO

Ratio

0 2003-04 2004-05 2005-06 2006-07 2007-08

Years

Interpretation:
By observing the above analysis it can be interpreted that the company officially are not efficiently and effectively maintaining the debtors turnover ratio in the proceeding years. The ratio in 2003-04 is 15.93 it was not at all advisable in the proceeding year the ratio was in the increasing trend. Ultimately it is advisable to the firm to increase the debtors turnover ratio is succeeding year by increasing the quality trade debtors leading to sale promotion in the product of the firm and increasing the liquidity position of the concern this was also yield great benefit to the firm.

AVERAGE COLLECTION PERIOD:


The average collection period represents the average number of days for which a firm has to wait before its receivables are converted into cash. Generally the average collection period the better is the quality of the debtors as a short collection period implied quick payment to debtors. No. of Days

Average collection period

----------------------------Average Collection Period

Year

No. of Days

Average Collection Period

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

360 360 360 360 360

23 days 20 days 18 days 10 days 8 days

15.93 17.92 19.62 35.61 40.81

45 40 35 30 25 ratio 20 15 10 5 0 2004 2005 2006 2007 2008

ratios

years

Interpretation:
By observing this we can say that shorter the average collections period the better in the quality of debtors as a short collection period implies quick payment to debtors in 2003-04 collection period 23 days form 2003-04 the collection period is going on decreasing in 2006-07 the collection period years to days. But in 2007-08 the collection period is 8 days it was decreases. As shown above is the collection period decreased it is benefit to the firm it is advisable to the firm to maintain the same decreasing trend in collection period.

Total Assets turnover Ratio:

The relationship between sales with total assets is called Total Assets Turnover Ratio. The Total Assets Turnover Ratio is calculated by dividing the value of the total assets into that of net sales. A high ratio indicates over trading of fixed assets while a low ratio shows excessive investment a symptom of idle capacity. standard for the ratio is two times. The traditional

Net Sales

Total Assets turnover Ratio

----------------------Total Assets

Year

Net Sales

Total Assets

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

1136973196 1257182689 1367480960 1573930933 1628286699

436970850 431966652 471839951 494379304 562759715

2.60 2.89 2.89 3.18 2.89

3.5 3 2.5

ratios

Ratio

2 1.5 1 0.5 0 2004 2005 2006 2007 2008

Years

Interpretation:
This table observing the total turnover ratio of K.M.P.M.A.C.U.L. during the period of study it can be observed that in 2003-04 the ratio was increasing 2.6 to 3.18 in 2006-07 but in 2007-08 the ratio is 2.89 it was decreased that means the present position of the firm is unsatisfactory. The firm is marinating a fair level of assets to the turnover.

Working Capital Turnover Ratio:

Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio indicates the number of times the working capital is turnover in the course of year. This ratio measures the efficiency with which the working capital is being used by the firm. Cost of Goods Sold

Working Capital Turnover Ratio =

----------------------Working Capital

Year

Cost of Goods Sold

Working Capital

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

882905793 1008072081 1103970663 1282873721 1301735372

113239877 115714471 120387845 145054381 176681946

7.80 8.71 9.17 8.84 7.37

10 9 8 7 6 5 4 3 2 1 0 2003-04 2004-05 2005-06 2006-07 2007-08

Ratios

Interpretation:
The table observe the working capital turnover ratio of the K.D.M.P.M.A.C.U.L. the ratio 2003-04 7.80 the ratio is increasing year by year. In 2006-07 there was slight decline in the ratio i.e 8.81 again there was a decreased in the ratio ie. Is 7.37 in 2007-08 so the company falls to increased trend is the firm falling increasing trend the firm position will be satisfactory. So it advisable to the firm to maintain the grated level of working capital is regard as the very important demand.

Fixed Assets Turnover Ratio:

Sales Fixed Assets Turnover = -----------------Fixed Assets

Year

Sales

Fixed Assets

Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

882905793 1008072021 1103970663 128287372 1301735372

148498928 137397639 148565345 159807179 180894785

5.945 7.343 7.430 8.043 7.196

9 8 7 6

Ratio

5 4 3 2 1 0 2004 2005 2006 2007 2008

ratios

Years

Interpretation:

This table observe the fixed assets turnover ratio, in 2003-04 it 5.94, after the ratio is increasing gradually it reaches 8.043 in 2006-07, and it fluctuates between 7 to 8%.

CHAPTER - 5

Summary

About the Work: We have done the project work at K.D.M.P.M.A.C.U.Ltd, Vijayawada to know the financial position of the firm through the analysis of ratios.

Objectives:
The main objectives of the work are To know the financial performance and financial position of the firm. To company the relationship with items of financial statements. To company the relationship with items of financial statements. To judge the long-term financial solvency of the concern. To measure the enterprise ability to pay the interest regularly and to repay the principal on maturity.

Sample:
We have taken the Xerox copies of balance sheets, P & L Account, Trading Account, Manufacturing Account for the period from 2005 2008 from primary source. We used this secondary data for conducting project work of ratio analysis.

Broad Observations:

It is suggested that the company should try to create more Current Assets for reducing the Risk. The company should try to maintain leverage between debt & equity, that which reduces the debt. The company should try to transfer a portion of profits as retained earning to shareholders funds. The company should focus on decreasing the current liabilities for marinating good networking capital ratio. The company should focus on control the operating costs for getting reasonable net profit. The company should maintain more cash balance to meet the current obligations. This company is not receiving subsidy and grants from Govt. of A.P. and other financial institution. Hence, there is requirement of maintaining excessive liquidity.

FINDINGS

1.

Current Ratio of K.D.P.M.A.C.U.L. is presented in table during the period of study. By this analysis, in 2007-08 the ratio is 2.04 current assets double the current liabilities are considered to be satisfactory for the firm.

2.

The quick ratio for K.D.M.P.M.A.C.U.L is table during the period of study. By observing the above graph we can know that can reach 1 norm in fourth coming year it is fallows the increasing trend as 2007-2008.

3.

Absolute liquidity ratio of K.D.M.P.M.A.C.U.L is presented in table during the period of study. By observing this we can say the firm is not maintaining the perfect norms of the cash balance in companion with the current liabilities in 2007-08 it was marinating good ratio.

4.

The debt equity ratio of K.D.M.P.M.A.C.U.L is presented in table during the study. By observing the above position of ratio we can say that owns are putting in relatively less money or there own and were relying on heavy debt the firm should flow the ratio as in 2007-08 i.e 3.03 by that reach it ides norm i.e. 1:1.

5.

The proprietary ratio of K.D.M.P.C.U.L. is presented table. By observing this we can say that this type of slow development is not all advisable if company always the ratio is as in 2007-08 hat is 12.21 can reach the satisfactory.

6.

It is clear firm from the above analysis that the ratio are in an increasing trend 2003-04 it was 8.95 and slight design in 2005-06 it was 11.32 and 2007-08 11.55 it was decreased the company has maintain growth. This type of growth should be maintained by the firm in the succeeding years.

It is advisable that it is better if some more times it is increased in inventory turnover ratio is higher the operating cycle is very past and it is very profitable for the firm.

7.

By observing the above analysis it can be interpreted that the company officially are not efficiently and effectively maintaining the debtors turnover ratio in the proceeding years. in the product of the firm and increasing the liquidity position of the concern this was also yield great benefit to the firm.

8.

As shown above is the collection period decreased it is benefit to the firm it is advisable to the firm to maintain the same decreasing trend in collection period.

9.

This table observing the total turnover ratio of K.M.P.M.A.C.U.L. during the period of study it can be observed that in 2003-04 the ratio was increasing 2.6 to 3.18 in 2006-07 but in 2007-08 the ratio is 2.89 it was decreased that means the present position of the firm is unsatisfactory. The firm is maintaining a fair level of assets to the turnover.

10.

In 2006-07 there was slight decline in the ratio i.e 8.81 again there was a decreased in the ratio ie. Is 7.37 in 2007-08 so the company falls to increased trend is the firm falling increasing trend the firm position will be satisfactory.

11.

In the later year in 2004-05 it was 19.81 and in 2005-06 it is 19.27 and in 2006-07 it is 18.49 but is 2007-08 the ratio is 20.05 it was a in increase trend.

12.

in year 2006-07 it is the ratio was 82.93 but in 2007-08 the ratio is 86.06 it reached the satisfactory position.

13.

that is 2005-06 it was 0.06 and in 2006-07 0.051 it is but in 2007-08 the net profit ratio is 0.16.

14.

in 2004-05 it reaches the better position i.e 5.93 lter it was gradually decline. But in 2007-08 is 3.82. It is advisable to the firm to maintain increasing trend to get the best results.

SUGGESTIONS

It is suggested that the company should try to create more Current Assets for reducing the risk.

The company should try to maintain leverage between debt & equity, that which refuses the debt.

The company should try to transfer a portion of profits as retained earning to shareholders funds.

The company should focus on decreasing the current liabilities for maintaining good networking capital ratio.

The company should focus on control the operating costs for getting reasonable net profit.

The company should maintain more cash balance to meet the current obligations.

This company is not receiving subsidy and grant from Govt. of A.P and other financial institution. liquidity. Hence, there is requirement of maintaining excessive

BIBLOGRAPHY

BOOKS: Financial Management KHAN & JAIN Financial Management I.M.PANDY Financial services SHASHI K.GUPTA NISHA AGGARWAL Managerial Accounting JAMES JIAMBALVO Management Accounting KHAN & JAIN Booklet and other Publications on the Progress of KDMPMACUL.

JOURNALS:
The Indian Economic Survey 2006 by the Hindu. Annual audit

Reports of Vijaya Dairy.

WEB SITES:
www.Indiandaity.com www.VijayaDaity.com