Nov 19, 2014
Table of Content Introduction and History of Amul
Vision of Amul
Logo of Amul
Plants of Amul
Three Level organisation of Amul
Board Members
Servicies offered by Amul Finance Department
Introduction
Sales Turnover
Research Methodology
Ratio Analysis Findings Recommendation Conclusion References
INTRODUCTION AND HISTORYIn the year 1946 the first milk union was established.
union was started with 250 liters of milk per day.
In the year 1946 the union was known as KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS’ UNION.
KDCMPU selected the brand name AMUL in 1955.
Today AMUL is collecting 16 lakhs liter of milk everyday.
Today Amul has more than 150 chilling centers in various villages. Milk is collected from almost 1073 societies.
VISION OF AMULThe main Motto of Amul is to help farmer. Amul system works under objective of highest possible price to the milk producers and lowest possible price to consumer. Farmers are paid money in cash payment for the milk. Milk gives them money for daily necessities. Amul is the one who started using their profit for the milk producer common good.
LOGO OF AMUL
Contd…First hand is for the farmer (producers), without whom the organization would do not existed.
Second hand is for the representative of processor by whom the raw milk processed into different finished products.
Third hand is for marketer without whom the product would have not been able to reach to the customer
Fourth hand is for customers without whom the organization could not carry on because they are the people who consume the product.
By co-ordination of this four people the union runs successfully
Plants of AmulAnand Plant: The products are Milk, Buttermilk, Milk Powder, Butter, Ghee, Cheese, and Flavored Milk etc. It is establish in 1973.
Mogar Plant: It is situated on Anand – Vadodara Highway No.8. Its production is chocolates, Nutramul, Amul Lite and Amul Ganthia. This plant establish in 1998.
Kanajari Plant: The product is a cattle feed. Old plant establish in 1964 and new plant in 1980.
Khatraj Plant: It is situated between Nadiad – Mahemdabad. The product is cheese.
Contd…Chilling Center: Kapadvanj, Undel and Balasinor.
Satellite Dairy: Balasinor, Undel , Mumbai.
Three level organisation of Amul
Board MembersShri Ramsinh Prabhatsinh Parmar Chairman
Shri Rajendrasinh Dhirsinh Parmar Vice-Chairman
Shri Dhirubhai Amarsinh Chavda Director
Shri Mansinh Kohyabhai Chauhan Director
Shri Maganbhai Gokalbhai Zala Director
Shri Shivabhai Mahijibhai Parmar Director
Shri Pravinsinh Fulsinh Solanki Director
Shri Chandubhai Madhubhai Parmar Director
Shri Bhaijibhai Amarsinh Zala Director
Shri Bipinbhai Manishankar Joshi Director
Smt. Sarayuben Bharatbhai Patel Director
Smt. Madhuben Dharmsinh Parmar Director
Shri Ranjitbhai Kantibhai Patel Director
Shri B. M. Vyas Managing Director (G.C.M.M.F)
Shri Deepak Dalal District Registrar Co-operative Societies, Govt. of Gujarat.
Shri Rahul Kumar Managing Director
Servicies offered by AmulMedical Facilities for the Cattle Of Farmer:- AMUL provide a medical facility to cattle of farmer at a concessional rate of Rs. 60/- includes medicines, treatment charge. While AMUL bears same services at around Rs. 100 to 150.
Cattle Feeding:- AMUL provide the “Dan” to the cattle of member farmers. AMUL produces the “by pass protein Dan” and “Purk Dan” to the cattle of farmers at reasonable cost.
Artificial Insemination(Cattle Breeding):- AMUL has established “Artificial insemination center” at Ode village near Anand.
Contd…Free Animal Vaccination:- Often Animals are caught up in unknown diseases. To protect the animals from such diseases periodical Vaccination programme are arranged by AMUL.
Farmer Education Programmed:- Generally,farmers believe in superstitions. Further, he is often not aware about how the animal should be taken care which things should be given prime concern while milking the animal. AMUL provide guidance and education through arranging seminar on periodic basis. AMUL also provides scholarship to children of member of society.
Finance DepartmentIn AMUL to handle the finance related matter there is an Account Department. It contains 4 Division for different function.
Account Division:-The function of this Division is prepare voucher, bills. It also issue Check for the payment.
ESTA Division:-The function of this division is to prepare payroll of employee.
Purchase Bill Division:-The function of this division is issue Check or Draft to party from whom they purchse raw material
Contd…MIS Division:-The function of this division is handle Data related Account. They have a data base system for that. They have Accounting sofyware system Telly 6.3. in which they input all information related Accounting.
Sales Turnover
Research MethodologyPROBLEM RECOGNITION :-To know the financial position of the company through various ratios.Is Amul is able to meets its current liability against its current assets?
OBJECTIVE OF STUDY :-To check the financial position of Amul.To study the liquidity position through various working capital related ratios.To check the return on equity and return on capital employed of Amul.To check the profitability of Amul.To derive findings,conclusions and means to improve various ratios.
Connt…METHOD OF DATA COLLECTION:-Secondary Data
LIMITATIONS:-The research is of five years only.No comparision with competitors.The entire study is based on secondary data.No avalibality of data for the separate products of Amul..
Ratio Analysis of AmulMEANING OF RATIO: Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the fined statement, so that the strengths & weakness of the forms as well as its historical performance & current financial condition can be determined. The term ratio refers to the number or quantitative relationship between two items or variables.
DEFINITION OF RATIO :The term “Ratio” refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as• Percentages• Fractions• Proportion of numbers
Liquididy RatioLiquidity ratio includes,
Current ratio
Liquid ratio
Quick or Acid test ratio
Current RatioCurrent ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm.The standard Current Ratio is 2:1.
CURRENT RATIO = CURRENT ASSETS CURRENT LIABILITY
YEAR RATIO
2005-06 2.119
2006-07 1.64
2007-08 2.087
2008-09 1.622
2009-10 1.332
TABLE 1
Graph 1
INTERPRETATION :-From above graph we can see that current ratio of Amul for the year 2006-07, 2008-09 and 2009-10 are lower than previous year and also lower than standard ratio.
This happened because of increase in current liabilities.This ratio can be improved byIncrease in equity share capital.Retaining profits in business.
Liquid RatioAlthough receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.
The standard Liquid Ratio is 1.5:1.
LIQUID RATIO = LIQUID ASSETS LIQUID LIABILITY
TABLE 2
YEAR RATIO
2005-06 1.228
2006-07 1.067
2007-08 1.117
2008-09 0.705
2009-10 0.827
Graph 2
INTERPRETATION :-This ratio shows that the liquidity position of the AMUL is rising slowly in 2009-10.And from graph we can see that the liquidity position of the Amul is declining in 2008-09 as compared to previous year but this year though it is higher than previous year, it is not up to standard ratio. This ratio can be improved by reducing proportion of inventories and increasing proportion of bank borrowings for working capital in current liabilities.
Quick RatioQuick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash with in a short period without loss of value.
The standard Liquid Ratio is 1:1.
QUICK RATIO = QUICK ASSETS LIQUID LIABILITY
TABLE 3
YEAR RATIO
2005-06 1.187
2006-07 1.037
2007-08 1.088
2008-09 0.675
2009-10 0.817
Graph 3
INTERPRETATION :- Form above graph we can summarize that the quick ratio for the 2008-09 is lowest but in 2009-10 again it rises slowly.In 2005-06 Amul has strongest position in terms of liquidity. During 2005-06, 2006-07 and 2007-08 , this ratio is good as compared to standard ratio but in last two years, i.e. in 2008-09 and 2009-10, it is below the standard ratio. To improve this ratio, Amul should retain its profit in business.
Profitability RatioProfitability ratio includes,
Gross Profit Ratio
Net Profit Ratio
Operating Ratio
Return On Capital Employed
Return On Shareholders Fund
Gross Profit RatioThis ratio measures the gross earning of the company as compare to its net sales .If the ratio is less it shows the in efficiency of companies management.
The standard Gross Profit Ratio is 25%
GROSS PROFIT RATIO = GROSS PROFIT X 100 NET SALE
TABLE 4
YEAR RATIO
2005-06 20.53
2006-07 20.29
2007-08 18.68
2008-09 18.55
2009-10 17.52
Graph 4
INTERPRETATION: Gross profit ratio shows the declining position of Amul year by year. During all five years it is not satisfactory level. This happened because of decline in gross profit year by year.To improve this ratio, Amul should try to reduce sales price of its products.
Net Profit RatioNet Profit Ratio measures the net earnings of the company as compared to net sales of the company. The ratio is valuable for the purpose of ascertain the overall profitability of business and shows the efficiency or otherwise of operating the business. “The higher the ratio the better will be the profitability.
The standard Net Profit Ratio is 10 to 12
Net Profit Ratio = Net Profit x100 Net Sales
TABLE 5
YEAR RATIO
2005-06 0.46
2006-07 0.5
2007-08 0.42
2008-09 0.42
2009-10 0.44
Graph 5
INTERPRETATION:-Net profit ratio is very low of Amul then the ideal ratio.Net Profit Ratio is rises for the year 2009-10. Amul is a co-operative society and so it distributes its profit to farmers. So the net profit of Amul is not very high in all five years and because of this net profit ratio shows declining position of the Amul. Favorable change can take place due to reduction in tax rate, obtaining of some relief/allowance/reduction in tax liability
Operating RatioIt is ratio showing relationship between cost of goods sold, operating expense and net sales. It shows the efficiency of the management.
The standard Operating Ratio is 75 to 85%.
Operating Ratio= cost of goods sold+operating expenses x100 Net Sales
TABLE 6
YEAR RATIO
2005-06 98.52
2006-07 98.53
2007-08 99.09
2008-09 98.8
2009-10 97.66
Graph 6
INTERPRETATION :-Operating expense of the Amul is more than the ideal ratio for the all five years.Amul has also reduced its operating expense for this year. It is nearer to 97to98% for all five years
Return on Capital EmployedThis ratio shows the relationship between net profit before interest to capital employed of the company.The term capital employed includes all assets except fictitious assets.
RETURN ON = NET PROFIT BEFORE INTEREST AND TAX X 100 CAPITAL EMPLOYED CAPITAL EMPLOYED
YEAR RATIO
2005-06 7.12
2006-07 8.18
2007-08 8.38
2008-09 9.11
2009-10 20.99
TABLE 7
Graph 7
INTERPRETATION :-Return on Capial Employed increases from year to year. This ratio shows the better position to give return to is share holders and borrowed capital.The improvement in ratio can be brought about by improving profit before tax, reduction in tax rate, reduction in long term funds including equity.
Return on Shareholder’s fundIt measures the return that the share holder gets as compared to their investment.
This ratio explains the relationship between the total profits earned by the business and total assets employed. This ratio thus measures the overall efficiency of the business operations
Return on Shareholders fund = Net profit after tax x100 shareholders fund
YEAR RATIO
2005-06 8.79
2006-07 9.94
2007-08 10.06
2008-09 12.44
2009-10 15.02
TABLE 8
Graph 8
INTERPRETATION :-From above graph we can see that every year Return on Shareholders Fund increases. It shows that every year Amul is giving more and more return to its shareholders. It helps to create goodwill in the market.
Leverage Ratio
Leverage Ratio includes,
Debt Equity Ratio
Proprietary Ratio
Interest Coverage Ratio
Debt Equity RatioThis ratio is only another form the proprietary ratio and establishing relationship between outside long term Liabilities and owner’s fund. It shows the proportion of long term external liabilities and owner’s fund
The higher the ratio means that outside creditors have a larger claim than the owners of the business. The pressure from creditors would increase and their interference would also increase. This ratio shows the proportion of long term external liabilities and equities i.e. proportion of funds provided by share holder or proprietors.
Debt equity Ratio = Debt Equity
YEAR RATIO
2005-06 3.14
2006-07 2.18
2007-08 3.77
2008-09 3.41
2009-10 3.6
TABLE 9
Graph 9
INTERPRETATION :-There is ups and downs in five years in Debt Equity ratio. The ratio shows that for every ownership capital of re.1, there is 3.14 Rs. Borrowed capital in 2005-06 and likewise. This does not shows the good position of the company. It increases the financial risk of the Amul.
Properitary RatioThis ratio indicates the relationship between proprietor’s fund and total assets. The proprietor’s fund includes equity share capital, preference share capital, reserves and accumulated surplus. Total assets include fixed, current and fictitious assets.
This ratio is very important for creditors because they know the share of proprietor’s fund in the total assets and how fair their loan is secured. The highest ratio the more safety will be to the creditors.
Proprietary Ratio = Proprietor’s fund x 100 Total assets
YEAR RATIO
2005-06 15.02
2006-07 16.12
2007-08 12.55
2008-09 12.74
2009-10 8.88
TABLE 10
Graph 10
INTERPRETATION:-There is ups and downs in the propritory ratio during last five years. During 2009-10, this ratio is much less than the previous years. This ratio means that for every 100 Rs. Total assets, there is 8.88 shareholders fund employed for fixed assets in 2009-10.this give less security to the creditors.
Interest Coverage RatioThe ratio indicates as to how many times the profit covers the payment of interest on debentures and other long-term loans.It measures the debt service capacity of the firm in respect of fixed interest on long-term debts.Higher the ratio more sound is the financial strength of the company.
INTEREST = NET PROFIT BEFORE INTEREST AND TAX COVERAGE RATIO INTEREST
YEAR RATIO
2005-06 1.41
2006-07 1.58
2007-08 1.55
2008-09 1.51
2009-10 1.59
TABLE 11
Graph 11
INTERPRETATION:-This ratio is better in this year than last four years. This shows good position of the Amul. This means that Amul is able to pay interest on borrowed capital. This shows financially strong position of the company.
Activity RatioActivity Ratio includes,
Inventory Turnover Ratio
Receivable Ratio
Debtors Turnover ratio
Fixed Assets Turnover Ratio
Payable Ratio
Inventory Turnover RatioThe number of times the average stock is turned over during the year is known as stock turnover.It is computed by dividing the cost of goods sold by average stock in the business.
INVENTORY TURNOVER RATIO = cost of goods sold Average inventory
YEAR RATIO
2005-06 7.75
2006-07 8.75
2007-08 8.53
2008-09 7.5
2009-10 8.79
TABLE 12
Graph 12
INTERPRETATION :-There are no far changes in the inventory turnover ratio. It is lowest in 2008-09. This year means in 2009-10 it has been increased. This means that inventory is turned over for 8.79 times during this year. This shows increase in sales of products so it is good position of the Amul.
Receivable Ratio(Collection Period)This ratio gives us idea about in how many days we are able to collect the payment from our debtors.This ratio can be obtained dividing debtors by credit sales and also multiplied by 365 days. So our answer will come in days.
RECEIVABLE RATIO = Debtors x 365 days Credit Sales
YEAR RATIO
2005-06 37
2006-07 29
2007-08 30
2008-09 13
2009-10 23
TABLE 13
Graph 13
INTERPRETATION :- This ratio shows the average days in which we will able to get a payment from our debtors. The lower the days, it shows good position of the company. It is lowest in 2008-09. In 2009-10, it increases by10 days i.e. 23 days. Compared to previous year it is not the good position but comparing with 2005-06, 2006-07 and 2007-08, this year the position of the company is good.
Fixed Assets Turnover RatioTo ascertain the efficiency and profitability of business the total fixed assets the more compared to sales. The more the sales in relation to the amount invested in fixed assets the more efficient is the use of fixed assets. It indicates higher efficiency.
If sales are less as composed to investments in fixed assets it means that fixed asset are not adequately utilized in business. An excessive sale is an indication of over trading which is dangerous.
Fixed assets turnover Ratio = sales Total assets
YEAR RATIO
2005-06 14.13
2006-07 15.2
2007-08 17.51
2008-09 19.92
2009-10 12.03
TABLE 14
Graph 14
INTERPRETATION :-The Fix Assets Turnover ratio was consequently increasing during the last four years but this year has been declined. This does not show a good position of Amul. It causes because of either increase in total assets or decrease in net sales.
Payable Ratio(in days)The number of days within which we make payment to our creditors for credit purchase its obtained by creditors ratio.
PAYABLE RATIO = CREDITORS X 365 DAYS CREDIT PURCHASE
YEAR RATIO
2005-06 3
2006-07 2
2007-08 2
2008-09 1
2009-10 18
TABLE 15
Graph 15
INTERPRETATION:-Payable ratio shows that how many days the creditors are giving us for payment. During last four years it was much lesser but in this year, it has been tremendously increased. This shows good position of Amul. This may happen because of increase in the goodwill of Amul.
FindingsLiquidity position of Amul is going down every year.Quick ratio and Current ratio decreases in year 2009-10 i.e.this year.
Gross Profit Ratio is also shows the declining trend from year to year.
Net profit of Amul is very low because Amul is a co-operative society and so they distribute the profit to the farmers as a bonus.
Operating Ratio for all five year is very high.It is near about 97 to 98 percentage in all five year.
Operating expense is also high for all five years.
Contd…Return on Capital employed shows increasing trend which is good for the company. It shows the stronger position of the company.
Net profit for the year 2009-10 increasing, which has positive effects on some ratios.
Return on shareholders fund is also shows increasing trend.For 2009-10 it is highest so shareholders will get more return on their share.
Proprietary Ratio of the Amul decreases in 2009-10, which is again not good for the company.
Contd…Receivable ratio increases in 2006-10 from the previous year, which has positive effects on liquidity position of the company.Payable ratio shows that Amul gets more days then in previous year in payment to its creditors.
RecomendationAmul should try to decrease the price of the products.
Operating expenses of Amul should be reduced by reducing the unnecessary expenses.
Amul should retain some amount of money as a reserve to meet its current liabilities and for the liquidity purpose.
Company should raise funds through short term sources for short term requirement of funds, which comparatively economical as compare to long term funds
Amul should increase its marketing efforts for the products like Amul Bread, Amul Chocolates. So that sales of these products can be increased.
Contd…Amul should increase the commission to agents who are selling their products. Other competitors give good commission and it will help the company to increase in its sales.
For the product Amul Kool, Amul should reuse the bottles to reduce the expenses. This will help to reduce the prices and increase in sales.
Amul is now going to launch Amul Tea for the rural market. So, Amul should distribute the sample packets to get the response of the rural people.
The quality of Amul Tea should be good because as per our survey, rural people are conscious about quality and price.
Contd…Profitability can be increased by reduction in cost of power and fuel, higher utilization of labour, use of higher skilled labour etc.
ConclusionAmul is a successful co-operative dairy and it becomes a household name in India and abroad, we visited this unit. So we feel satisfactory on our modest efforts. During my visit in this unit. I observed the Amul is more progressive sector; at present its biggest dairy in Asia. The unit has bright future because if it’s scientific and flexible management. The unit turnover is increase day by day. From the ratio we can see that overall position of the company is good and strong.Sales and Net Profit also shows increasing trend from last year but the Amul should worry about controlling operating expense.
ReferencesWWW.AMUL.COM WWW.NDDB.COM WWW.WIKIPEDIA.COM PERSONAL DISCUSSION WITH VARIOUS DEPARTMENT HEAD. ANNUAL REPORTS OF LAST FIVE YEARS FINANCIAL MANAGEMENT BY PRASSUN CHANDRA,5TH EDITION. I. M. Pandey – FINANCIAL MANAGEMENT - VIKAS PUBLISHING HOUSE PVT.LTD. 9TH EDITION. M.Y. KHAN and P.K. JAIN, FINANCIAL MANAGEMENT ,VIKAS PUBLISHING HOUSE PVT.LTD. NEW DELHI. OLD REPORTS OF PREVIOUS TRAINEES.