A Project Report On “FINANCIAL ANALYSIS OF MADHUR DAIRY” (Gandhinagar District Co-operative milk producers union limited) A Project Submitted To The Bhavnagar University of Bhavnagar in practical fulfillment for the degree Of Bachelor of Business Administration By, Guided By, Vaghani vishal .m. NETRAMEM (T.Y B.B.A) Roll no: 128 Swami Sahajanand College of commerce & management Bhavnagar University Bhavnagar Batch 2007-10 1
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AProject Report
On
“FINANCIAL ANALYSIS OF MADHUR DAIRY”
(Gandhinagar District Co-operative milk producers union limited)
A Project Submitted To
The Bhavnagar University of Bhavnagar in practical fulfillment for the degree
I Am Vaghani Vishal Manojkumar.T.Y.B.B.A. Roll no. 128 Here By Me And
It Is My Own Work. It Has Been Carried Out Under The Supervision Of Netramam,
Swami Sahajanand College Of Commerce And Management.
This Work Has Been Previously Submitted To Any University For My
Examination.
Signature
Vaghani Vishal M.
T.Y.B.B.A.
2
PrefacePreface
The Industrial Training From The Practical Study Point Of View Is Very
Important a B.B.A.Student As It Bridge Gap Between The Theoretical Knowledge. The
Word Has Become Practical So, It Is Knowledge, But A Person Also Should Familiar
with Its Practical Aspect.
The Main Object of Particular Training at T.Y.B.B.A. A Level Is To Gain The
Practical Attitude And Ability To Perform Specific Job In And Industrial Every
Management Student Should Have Some Practical Knowledge By Which They Can
Understand The Reality Of Corporate World More Closely.
As A Student Of S.Y.B.B.A.,I Got The Opportunity To Take Industrial
Training For 21 Days With The Help Of My College “Swami Sahajanand College Of
Commerce And Management” On “Gandhinagar District Co-Operative Milk Producers
Union Ltd.Known As ‘MADUR DAIRY’, Situated At K Road ,G.I.D.C.,Sector
25,Gandhinagar .
I Have Tried My Level Best To Collect The Information With In The Training
For Three Week.MADUR DAIRY Situated On Its Own Place In Market For The Quality
Maintain .It Uses The Latest Technology Of Various Plant And Machineries. There
The Departments Like Marketing Department, Human Resource Department, Finance
Department And Other Various Department Are Visited By Me At ‘MADUR DAIRY’.
3
AcknowledgementAcknowledgement
It Is My Pleasure To Present This Industrial Training Report Of ‘MADUR
DAIRY’. It Gives Me Great Sense Of Satisfaction That I Am Presenting The Practical
Experience Of My Training At ‘MADUR DAIRY’.
I Have Prepared This Project Report On ‘MADUR DAIRY’ So; I Would Like
To Thank The ‘Madhur Family’ Very Much For Granting Such A Nice Opportunity To
Expand Of Management Ability In My Real Life. I Also Thanks To Everybody For
Getting Me Visit And Provide All Necessary Information For Preparing This Project
Report.
I Am Heartily Thankful To Our Principal Dr. SHILPA Who Has Been Source
Of Inspiration For Me And To Our NETRA MAM.For Her Constant Guidance In
Preparing The Project Work.
I Hope That This Project Report At ‘MADUR DAIRY’ Will Satisfy To You.
Thanking You.
Vaghani Vishal M.
Roll No.128
T.Y.B.B.A.
4
TABLE OF CONTENTS
DECLARATION
Preface
Acknowledgments
Executive summary
CHAPTERISATION
1. GENERAL IONFORMATION
1.1 introduction of Madhur Dairy....................................................... …08 1.2companies profile.......................................................................... ….091.3 history& development of unit............................................................10 1.4 form of organisation...........................................................................121.5 size of the unit ………………………………………………………131.6 organization structure…………………………………………..141.7 manufacturing process…………………………………………171.8 products of unit………………………………………………….18
2. RESERCH METHODOLOGY
2.1 Meaning of research method............................................................21 2.2 Research objective............................................................................22 2.3 Sources of Data..................................................................................23
2.4 The types of research ………………………………………...........242.5 process of research method ………………………………………262.6 research design…………………………………………………….27
3. FINANCIAL Analysis AND INTERPRETATION
3.1 Introduction.......................................……………………………303.2 types of financial analysis………………………………………...31 3.3 Methods of analysis of financial statement................................333.4 procedure of financial analysis…………………………………...353.5 balance-sheets...........................................................................36 3.6 common-sized statement of balance sheet………………..…. 37 3.7 profit and loss account...............................................................393.8 common-sized statement of profit and loss account.................41
5
4. Working capital analysis
4.1 introductions........................................................………………..44 4.2 current assets................................................................................46 4.3 current liability................................................................................47
4.4 net working capital………………………………………….........48
5. ratio analysis
5.1 introduction ……………………………. ……………………... 50 5.2 classification of ratios…………………………………………....515.3 advantages of ratio analysis……………………………………535.4 limitation of ratio analysis……………………………………..…545.5 calculation of revenue statement ratios…………………...……565.6 calculation of balance sheet ratios…………………………...…595.7 calculation of balance sheet ratios…………………………..….655.8 calculatio of working capital ratios…………………………........67
6. findings and suggestion ………………………………………………..……..71
7. bibliography……………………………………………………………………..73
8. conclusion………………………………………………………………….……74
6
7
1.1 IntroductionIntroduction
Without Practical Training My Management Study Would Have Remained
Incomplete For The Purpose Of The Practical Training. I Have Visited “Gandhinagar
District Co-Operative Milk Producers Union Ltd”, Known As’MADUR DAIRY’. It Is Very
Well Known Company In Gandhinagar And Gujarat Also .In Addition To This Is An Iso:
9001-2000 Certified Company.
“Gandhinagar District Co-Operative Milk Producer’s Union Ltd.Known As
‘MADUR DAIRY’ Is a Co-Operative Society Situated at Capital City of Gujarat.
At Present Company Has A Wide Range Of Product In Different Segments.
Recently ‘MADUR DAIRY’ Entered In To Manufacturing New Products Like Paneer,
Chocolates, Nankeens, Etc. MADUR DAIRY Related With Procurement Of Milk And
Production Of Milk And Milk Products. Milk is collected from 108 Milk Producer’s Co-
Operative Societies of Gandhinagar Taluka, Which Consist 35,750 Milk Producer
Members. They Are Rearing Buffalos And Cows. From 108 Milk Co-Operative
Societies Milk Is Transported To MADUR DAIRY By 20 Trucks Both Morning &
Evening. 23 Milk Producers Co-Op. Societies Are Management By Female Members
Out Of 108. Milk Producers And There Family Members Are Getting Facilities From
MADUR DAIRY By Life Insurance Policy By Payment Of 70 Vaccination % Premium.
This Organization Is Also Become Helpful To Members Of Milk Societies By Covering
Their Cattle Under L.I.C. Also. Members Are Also Getting Cattle-Feed With
Reasonable Rates And All The Cattle Of Members Are Covered By Also.
The Madhur Milk Has Been Sold Through The Selling Centers Of The
Gandhinagar City Milk Consumers’ Co-Operative Society, Kamdhenu Centers Of The
Milk Union, Madhur Parlors, Kamdhenu Agencies And The Milk Selling Centers
Situated In The Rural Areas. And, Including The Sales Of The Milk Products, Daily,
On An Average, 69,111 Liters Of Milk Has Been Consumed. On An Average, Daily
48,047 Liters Of Milk Has Been Packed Under The Amul Brand, As Desired By The
8
Gujarat Co-Operative Milk Marketing Federation. More Than 350 Employees Get
Employment At ‘MADUR DAIRY’. ‘MADUR DAIRY’ Now On Better Progress.
1.2 Profile of the Firm
Name ►Gandhinagar District Co-operative Milk producer’s
DEBTSAGAINST EXPENDITURE 2.26 2.56 2.96 DUES FROM DEALERS 24.758 25.743 19.504
DEBTS AGAINST PURCHASE 3.082 2.89 3.63 T.D.S. 0.005 0.034 0.030
PROVISIONS FOR INCOMETAX 1.197 1.02 1.32 CASH AND BANK 39.567 22.636 27.99
NET PROFIT 1.361 1.709 1.9
TOTAL 100 100 100 TOTAL 100 100 100
37
We can see that share capital in the year 2006-07 is only 6.75%which increases in the next year and becomes 8.03% of the total assets. In the current year it becomes 9.134%
The reserve funds are only6.35% of the total assets. It increases next year and becomes 7.21% and again increases 7.74%. This can be said a slight increase.
Current liabilities are 59% of the total liability which decrease in the next year and becomes 57%% and in the current year it becomes 58%. There is a minor increases and decrease in the current liabilities.
Long term loan of the dairy is 25.59%% of the total assets in the year 2006-07 which decreases in the year 2007-08 and becomes 23.67 % in the next year it again decreases and becomes20.32% of the total assets. This can be said good for dairy as it has enough inner funds for expansion. As its share capital and other funds are increases continuously, it has less need of outside funds.
38
3.7 PROFIT AND LOSS ACCOUNT:
EXPENDITURE 06-07 07-08 08-09 INCOME 06-07 07-08 08-09
We can see that sales of the madhur dairy have a minor increases or decrease in it. In the first year it is 98% , in the next year it
decreases and reaches at 96% , in the current year it becomes 97%.
Net profit of the dairy almost remains constant. I the year 2006-07, it is 0.32%. in the next year it becomes 0.30%, and in the
year 2008-09 it remains as it is.
packing expanses of the dairy shows decreasing trend while the power expanses are increasing. The large part of the the
expanses goes to salary and it is decreasing now. Most of the expanses of the dairy are increasing at a slight rate. This is due to
increases in the sales . With the increases in sales, the cost of sales increases. As the result, it balances the profit on the constant rate.
In short, we can see a slight increase in the operating expanses and on the other hand there is a in increases in the sales . so the profit
of the dairy remains constant during this three years.
42
43
WORKING CAPITAL ANALYSIS
4.1 INTRODUCTIONBusiness capital is broadly divided in to two groups fixed capital
and working capital.fixed capital refers to the funds invested in to such fixed
or permanent asset as land, building, machinary etc.while working capital
refers to the funds locked up in materials, work-in-progress, finished goods,
receables and cash etc.since this asset are known as current asset, in very
simple terms “it will be shown latter, however, this definition of working capital
has become controversial.
Currents asset are those which get converted in to cash within a
period of one year or less. the examples are the stock of raw materials, work-
in-progress and finished products, receivables, cash etc.in addition, working
capital is also required to meet the day-to-day expenses on
wages,salaries,power etc. all the asset are converted in to cash within a short
period of time and cash received is again invested in to these asset. Thus, it
is constantly revolving or circulating. Hence, working capital is also known as
“circulating capital or floating capital.”
The main pint of difference between fixed capital and working
capital is the like this: fixed asset are of long duration and are not converted in
to cash within a period of one year, where current asset are converted in to
cash within a period of one year or less. Hence, the problems of fixed assets
belong to the field of capital budgeting, while the problems of working capital
belong to the field of cash budgeting. The other points to the divisibility of
investment. The investment in current asset ia divisible in to small units to a
large extent as compared to investement in fixed asset.
DEFINATION: “working capital may be defined as capital invested in
current assets.
44
WORKING CAPITAL OF MADHUR DAIRY::PARTICULARS 2007 2008 2009CURRENT ASSETS:ADVANCES&OTHER DUES 56266573 57756295 45642042CLOSING STOCK 15556566 36756647 26929159BANK&CASH 87294563 47678574 58743344TOTAL CURRENT ASSETS 159117702 142191516 131314548
LESSCURRENT LIABILITY:DEPOSITS 3400500 8507288 6954946DEBTS OF MILK CO-OP. SOC 114434917 102936244 104268853 DEBTS AGAINST EXPENDITURE 4986172 5391149 6212879
DEBTS AGAINST PURCHASE 6800064 6088324 7613463PROVISION FOR INCOME TAX 2641507 2146462 2765967TOTAL CURRENT LIABILITIES: 132263160 125069645 127816108
WORKING CAPITALTOTAL APPLICATION OF FUNDS
26854542220624625
17121871210629648
3498440209863751
45
4.2 CURRENT ASSETS:
A current asset means the assets in the form of cash or
can be readily converted in to the cash within a shorter time. They include cash,
bank balance, stock, debtors, bills receivable, prepaid expenses, accrued
income, and readily marketable securities etc.In other word Currant asset are
those which get converted in to cash within a period of one year or less.
Current assets:
As the current asset is given in the above table. We can
see that in the year 2007 the current asset is of rs. 159117702 .then in next year
in 2008 the current asset is decrease to 142191516.it decreases in compare to
the previous year. And finally in the year 2009 current assets again decrease by
10876968 and reaches to 131314548.
So we can find that the in the Madhur dairy the current assets
decreases year by year that shows poor working capital management
in Madhur dairy. company should improve its working capital .
2007 159117702
2008 142191516
2009 131314548
46
4.3 CURRENT LIABILITY:
Current liability includes the liability which company have to pay within the
period of one year. It includes creditors, deposits, provision for tax, and all other
provisions.
From the above table we find that in the year 2007 the current liability
was 132263160, in the2008 it increase by 7193515 and reaches to
125069645.the next year in 2009 it increases by 2746463 and reaches to
127816108.
From 2007 to 2008 current liability decrease by 7193515.it ensures the
positive effect to the progress of the company.
Madhur dairy should try to reduce its current liabilities so as to have
the effective working capital for the smooth operating of the business.
2007 132263160
2008 125069645
2009 127816108
47
4.4 WORKING CAPITAL
Business capital is broadly divided in to two groups: fixed capital and
working capital. fixed capital refers to the funds invested in to such fixed or
permanent asset as land, building, machinary etc.while working capital refers to
the funds locked up in materials, work-in-progress, finished goods, receables and
cash etc.since this asset are known as current asset, in very simple terms
“working capital may be defined as capital invested in current assets.” it will be
shown latter, however, this definition of working capital has become
controversial.
As shown in the above table we can see that in 2007 the working
capital of Madhur dairy is 26854542, and the next year in 2008 we can see that
the working capital decreases and reaches to 3498440.
Form the above statement of working capital we can understand that
the working capital decrease day by day in Madhur dairy .Madhur dairy should try
to increase its working capital.
2007 26854542
2008 17121871
2009 3498440
48
49
RATIO ANALYSIS5.1 introduction
A firm’s strength and weaknesses is established by viewing the
relationship between items in the Balance sheet and profit and loss using ratio
analysis.
A ratio is defined as the indicated quotient of two mathematical
expressions. It can also be described as the relationship between two or more
things. It is used as a benchmark for evaluating the financial position and
performance of a firm. Absolute accounting figures reported in the firm’s financial
statements do not provide any meaningful understanding of performance and the
firm’s financial position.
The ratio analysis is one of the most powerful tools of the financial
analysis. It is the process of establishing and interpreting various ratios (quantitative
relationship between figures and groups of the figures). It is with the help of ratio that
the financial statements can be analyzed more clearly and decisions made from
such analysis.
STEPS INVOLVED IN THE RATIO ANALYSIS
(1)Selection of relevant data from the financial statements depending
upon the objective of the analysis.
(2)Calculation of appropriate ratios from the above data.
(3)Comparison of the calculated ratios with the ratios of the same firm in
the past, or the ratios developed from projected financial statements or
the ratios of some other firms or the comparison with the ratio of the
industry to which the firm belongs.
(4).Interpretation of the ratios.
50
5.2 CLASSIFICATION OF RATIOS
The ratios have different use for different people. Therefore ratios can be classified
into different categories. Various ratios can be divided into following categories
depending upon their use.
(A)Traditional classification
Traditional classification or classification according to the statement, from which
ratios are calculated is as follows:
Profit and loss account
Balance sheet ratios
Inter statement ratios
(B)Classification according to the nature of ratios
In this type of ratios more emphasis is given to the nature of ratios, whether these
pertain to sales, earning, inventory etc.
Liquidity or solvency ratio
Debtors ratio
Creditors ratio
Sales ratio
Earning ratios
Cost of expenses ratio
(C)According to importance of ratios
Under this type of ratios, ratios can be divided into two categories as following:
Primary ratios:
1. Return on capital employed
Secondary ratios:
1. Production cost ratios
2. Distribution cost ratios
51
3. Selling cost ratios
(D)According to users of the ratios
(1)Ratios for management
Return on capital employed
Gross profit ratios
Current ratios
(2)Ratios for shareholders
Earning per share
Yield ratios
Payout ratios
(E)Ratios for creditors
Current ratios
Liquid ratios
Debt equity ratio
52
5.3 ADVANTAGES OF RATIO
ANALYSIS
Financial ratios are essentially concerned with the identification of
significant accounting data relationships, which give the decision-maker insights
into the financial performance of a company. The advantages of ratio analysis
can be summarized as follows:
Ratios facilitate conducting trend analysis, which is important for decision
making and forecasting.
Ratio analysis helps in the assessment of the liquidity, operating efficiency,
profitability and solvency of a firm.
Ratio analysis provides a basis for both intra-firm as well as inter-firm
comparisons.
The comparison of actual ratios with base year ratios or standard ratios
helps the management analyze the financial performance of the firm.
53
5.4 Limitations in Using Ratio Analysis
I. Standards of comparisons
Ratios of a company have meaning only when they are compared with some
standards. It is recommended that ratios should be compared with industry averages
however the industry averages are not easily available.
II. Company differences
The situations of two companies are never the same and the factors influencing the
performance of a company in one year may change in another year.
III. Price level
The interpretation and comparison of ratios are rendered invalid by the changing
value of money. The accounting figures presented in the financial statements are
expressed in the monetary unit which is assumed to remain constant.
IV. Different definition
Diversity of views exists as what is to be included in net worth or shareholders
equity, current assets and current liabilities. For instance, whether preference share
capital and current liabilities should be included in debt in calculating the debt equity
ratio, should the intangible assets be excluded to calculate the rate of return on
investment, or if included how will they be valued? Similarly the definition of profit is
not uniform to all.
V. Changing situations
The ratios do not have much use if they are not analyzed over years. The ratio at a
moment in time may suffer from temporary changes. This problem can be resolved
by analyzing trends of ratios over years.
VI. Past data
The basis to calculate ratios is historical financial statements. The financial
analyst is more interested in what happens in future while the ratios indicate what
happened in the past
54
5.5 CALCULATION OF REVENUE
STATEMENT RATIOS
1).GROSS PROFIT RATIO:
Gross profit represents the margin between the ‘Net Sales’ and ‘Cost
of Goods Sold’. The larger this gap, the greater is the scope of absorbing various
expenses on administration, maintenance, arranging finance, selling and distribution
and creating necessary provision for anticipated expenses, and yet leaving net profit
for the proprietors or share holders.
Its formulation is as below:
Gross Profit Ratio=Gross Profit* 100
Sales
Gross Profit = Sales – Cost of Goods
2007 2008 2009
59421227 *100
905510046
68095676 *100
1140552306
85399777 *100
12793339009
6.56 5.97 6.675
From the above calculation of ratio that shows in 2006-07 the ratio is
6.56% , in 2007-08 the ratio is 5.97% we can see that the ratio is decrease in 2007-
08.And in 2008-09 the ratio is 6.675 %.the gross profit ratio is increase in 2008-09.
This ratio of Madhur dairy is low it indicates that the cost of sales is
high or that the purchasing is inefficient. In such case the management of Madhur
dairy must investigate the causes and try to bring up this ratio.
55
2).OPERATING RATIO:
It is a ratio showing relationship between cost of sales goods sold plus
operating expenses and net sales. It shows the efficiency of the management. the
higher ratio, the less will be the margin available to proprietors. this ratio is also
usually expressed as a percentage.
Its formulation is as below:
Cost of goods sold +operating expenses * 100
Operating ratio= Net sales
2007 2008 2009
846088819+13578739*100
905510046
1072456630+16287554*100
1440552306
1241725983*100
1279339009
94.94% 75.578% 97.06%
The ratio displayed in above table we find that in 2006-07 the
operating ratio is 94.94% then it decreases to 75.578% and in the year 2008-
09 it increases to 97.06%.there is no specific trend in above 3 year in madhur
dairy.
In year 2006-07 the operating ratio shows that is 94.94% it means
that the operating expense is 95 rs per 100rs goods .in 2007-08 the ratio is
75.578% that shows very good operating position the less ratio wiil be gives
higher profit. In 2008-09 the ratio increases to 97.06% so it is not good
position Madhur dairy should try to decreases operating ratio.
56
3).NET PROFIT RATIO:
Net profit margin ratio establishes a relationship between the net
profit and sales and indicates management’s efficiency in manufacturing
administering and selling the products. This ratio is the overall measure of the
firm’s ability to turn each rupee sales into net profit.
Net Profit Margin = Profit after Tax * 100
Sales
From the above calculation we find that in 2006-07 the ratio is 0.3316
and in 2007-08 is 0.3156 and in the year 2008-09 the net profit ratio is 0.3110.
We can find that the ratio trend slaps down word from the above figure.
The higher ratio, the batter will be the profitability in order to have batter idea of
profitability
Madhur dairy’s net profit decreases continuously it shows the
negative features towards progress of the Madhur dairy.Madhur dairy should
make effort to improve its net profit either by increases it sales or by decreases
its operating expenses.
2007 2008 2009
3002990 * 100
905510046
3600409 * 100
1140552306
3984204 * 100
1279339009
0.3316 0.3156 0.3110
57
4).STOCK TURN OVER RATIO:
This ratio is very important in judging the ability of management with
which it can move the stock
Stock turnover ratio refers the number of time the average stock is
turned over during the year it is computed by dividing the cost of goods sold by
the average stock in the business.
Stock turnover = cost of goods sold
Average stock
Stock turnover in 2006-07 is 63.11 it means that total turnover of goods
is 63 times in a year in 2007-08 the ratio is 33.68 and in the year 2008-09 the
ratio is 33.41
The higher turnover, the more profitable the business would be. The
farm in such a case , will be able to trade on small margin of gross profit.
We can see that the growing trend in stock turnover is negative.
Madhur dairy should increase it’s selling to improve it’s stock turnover ratio.
2007 2008 2009
846088819
13406840
1072456630
31842903
1193939232
36842903
63.11 33.68 32.41
58
5.6 Calculation of BALANCE SHEET RATIOS
1).CURRENT ASSETS RATIO:
This ratio is an indicator of the firm’s commitment to meet its short-term
liabilities. Current assets means assets that will either be used up or converted into
cash within a years’ time or norms, operating cycle or the business,
Current asset ratio = current assets
Current liability
2007 2008 2009
159117702
56266573
14219191516
57756295
131314548
45642045
2.83 2.46 2.88
in 2006-07 the current assets ratio is 2.83 and it is decreases to 2.46 in
the year 2007-08 the current assets ratio in 2008-09 it increases to 2.88.
The adequacy of this ratio depends upon a number of factors like the
nature of business, the efficiency of collection department etc. if the turnover is quick
and the collection is efficient, the business may be successfully carried on with a low
current ratio.
The current ratio of Madhur dairy is considered as satisfactory level the
ratio of 2.88 shows that for the payment of the one liability the company had 2.88 rs
it’s shows the strong financial position of Madhur dairy.
59
2) QUICK RATIO:
This ratio establishes a relationship between quick or liquid assets and current
The above table shows that in 2006-07 the quick ratio is 0.67.in 2007-
08 the ratio decreases and become 0.39 and in the year 2008-09 the ratio is
0.48.
The measure of absolute liquidity may be obtained by comparing only
cash and bank balance as well as readily marketable securities with liquid
liabilities this is very exacting standard of liquidity and it is satisfactory if the ratio
is 0.5:1.
The satisfactory standard of ratio is 0.5:1 so we can see that in 2006-
07 the quick ratio is satisfactory where as in 2008-09 it needs to improve.
2007 2008 2009
88161682
132263160
49524491
125069645
61517890
127816108
0.666 0.3959 0.4813
60
3).EQUITY RATIO / PROPRIETORY RATIO:
It is variant of debt – equity ratio. It is an important test to judge the
long-term solvency of a concern. It establishes relationship between the
proprietor or shareholder’s funds and the total assets. It may be expressed as:
Proprietor’s fund or Net worth = Equity Share Capital + Reserve and
Surplus + Preference Share Capital.
Total Assets = Total Equities or Total Resources of the concern.
Equity ratio =Proprietor’s funds
Total Assets
In the proprietary ratio is13.1%.it increase in 2007-08 and becomes
15.2%.it again increase in 2008-09 and becomes 16.9%.
The ratio shows increasing trend in proprietor’s funds but it is not
enough. the current ratio of 16.9% shows that only 26.74% amount of funds a
provided by proprieties to purchase the fixed assets. There is need to improve this
ratio for increasing owners cap business.
2007 2008 2009
28896800 *
100
220624625
32090969 *
100
210629648
35412164 *
100
209863751
13.1% 15.2% 16.9%
61
4).DEBT EQUITY RATIO:
The ratio is also called ‘External Internal Equity Ratio’. It indicates the
comparative claims of outsiders and owner in the concern’s total equities the
claim of depositors, mortgagors, bondholders, suppliers, and other creditors are
matched with those of owner, i.e. shareholders or proprietors. The management
has to keep healthy balance between the two equities: external and internal.
Debt Equity Ratio = out side debt * 100
Share holders fund
This ratio upto 100% may be considered reasonable. A higher ratio shows the out side creditors have a larger claim, then the owner of the business. If this ratio is lower, it is not profitable from the view point of equity share holders.
In the year 2006-07 the ratio is 652.8% which decreases in 2007-08 and reaches to 155.30%.in the current year the ratio become 365.82%.
This means the Madhur dairy needs to reduce this ratio upto 100% for balancing the debt and equity of the firm.
2007 2008 2009
188713035 * 10028908600
49856125 * 10032103469
129313516 * 10035426064
652.8 155.30% 365.82%
62
5).LONG TERM FUNDS TO FIX ASSET RATIO:
Long term funds to fix asset ratio is very important for any business or any firm. Normally, the fixed assets of must be purchased out of fixed capital only, which includes share capital, reserves and long term liability. Therefore this ratio shows relationship between fixed capital and fixed asset.
Formula: share capital+reserves+long term liabilityFixed asset
From the above table we find that in the year 2006-07 the long term funds to fix asset ratio is 1.6445 and in the next year in decreases to 1.4037.in the year 2008-09 the long term funds to fix asset ratio is again decreases to 1.1390.the ratio trend slaps down word in three year.
The ratio 1:1 may be considered a reasonable. The ratio of Madhur dairy is satisfactory but shows continuously decreasing trend during this three year.Madhur dairy should try to maintain the ratio 1:1.
2007 14892400+56449875+1400440051897663
1.6445
2008 16909300+15181669+4985612558378872
1.4037
2009 19169300+16242864+4263737568489943
1.1390
63
6).LIQUID RATIO:
A variant of current ratio is the liquid ratio or quick ratio which is designed to show the amount of cash available to meet immediate payments. It is obtained by dividing the liquid asset by liquid liability.
Formula:::: liquid asset Liquid liability
The above table shows that in 2006-07 the quick ratio is 0.67.in 2007-08 the ratio decreases and become 0.39 and in the year 2008-09 the ratio is 0.48.
The measure of absolute liquidity may be obtained by comparing only cash and bank balance as well as readily marketable securities with liquid liabilities this is very exacting standard of liquidity and it is satisfactory if the ratio is 0.5:1.
The satisfactory standard of ratio is 0.5:1 so we can see that in 2006-07 the quick ratio is satisfactory where as in 2008-09 it needs to improve.
2007 2008 2009
88161682132263160
49524491125069645
61517890127816108
0.666 0.3959 0.4813
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5.7 calculation of COMPOSITE RATIO
1).RETURN ON CAPITAL EMPLOYED RATIO:
It is an index of profitability of business and is obtain by comparing net profit with capital employed. This ratio is normally expressed in the percentage .the term capital employed includes share capital, reserves and long term loans such as debenture.
Formula::: net profit * 100 Capital employed
In the year 2006-07, the return on capital employed ratio is 3.52% which increases in 2007-08 and finally in the current year in 2008-09 the return on capital employed ratio becomes 5.10%.
This ratio shows growing trend in progress of company. The ratio increases year by year .
In the year 2008-09 it gives 5.10% return on capital employed .as it is co-operative society the return is enough .but it has still need to improve the rate of return in Madhur dairy.
2007 2008 2009
3002909 * 100 85346675
3600409 * 100 81947094
3984204 * 100 78049539
3.52% 4.4% 5.1047%
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2). FIX ASSET TURN OVER RATIO:
It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets
To ascertain the efficiency and profitability of business, the total fixed assets are compared to sales.the more the sales in relation to the amount invested in fixed assets.it includes higher efficiency.The ratio is expressed as follows:
The ratio should not be more than 1 if it is less than 1, it shows that a part of the working capital has been financed through long-term funds. This is desirable to some extent because a part of working capital is termed, as “Core Working Capital” is more or less of a fixed nature.
Formula:: sales Fixed assets
From the above table we can see that in the year 2006-07 the fixed asset turn over ratio is 17.45. In the year 2007-08 it becomes 19.54. And in the year 2008-09 18.68.
This ratio is higher it means the fixed assets are being used effectively to earn profit in Madhur dairy. The ratio in next year 2007-08 increases in compare to the previous year 2006-07.and in the current year ratio remains 18.68 this ratio is good in good position in Madhur dairy.
2007 2008 2009
90551004651897663
114055230658378872
127933900968489943
17.45 19.54 18.68
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5.8 WORKING CAPITAL RATIO
1).WORKING CAPITAL TO SALES RATIO:
Working capital to sales ratio is very important for any business or firm. Working capital to sales ratio is calculated with dividing working capital with total sales revenue. We can know that how much working capital available in relation to the total sales revenue from this ratio.
Formula:: working capital Sales revenue
2007 2008 2009
26854542905510046
171218711140552306
34984401279339009
0.0296 0.015 0.0027
In the year 2006-07 working capital to sales revenue is 0.0296. in 2007-08 the ratio is becomes 0.015 and the current year 2008-09 the ratio is 0.0027.the working capital to sales ratio slaps down word within this three years.
This ratio continuously decreases year by year .the low ratio shows that there is lack of working capital in Madhur dairy. Madhur dairy should increase its working capital.
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2).SALES TO CASH RATIO:
Sales to cash ratio calculated by dividing sales by cash. Sales to cash ratio in very important because we can found that how much cash available in compare to sales in the business.
Formula::: sales cash
As we can see from the above table that in year 2006-07 the sales to cash ratio is 10.373 an d in the year 2007-08 it incerases rapidly and reaches at 23.9216.in the year 2008-09 the sales to cash ratio decreases to 21.778.
The ratio incerases year by year that means in madhur dairy sales incereases in respct to cash.
2007 2008 2009
90551004687294563
114055230647678574
127933900958743344
10.373 23.9216 21.778
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3).WORKING CAPITAL TURN OVER RATIO:
working capital turn over raito is calculated by dividing working capital with total asset.it shows the circulation of working capital during the given priod.
Formula: working capital Total asset
In the year 2006-07 working capital to total assets is 0.1217. in 2007-08 the ratio is becomes 0.0812 and the current year 2008-09 the ratio is 0.01667.the working capital to sales ratio slaps down word within this three years.
This ratio continuously decreases year by year .the low ratio shows that there is lack of working capital in Madhur dairy. Madhur dairy should increase its working capital.
2007 2008 2009
26859542220624625
17121871210629648
3498440209863751
0.1217 0.0812 0.01667
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Findings:
o The current ratio has shown in a fluctuating trend as 2.83, 2.46, 2.88, during 2007 to 2009 of which indicates a continuous increase in both current assets and current liabilities.
o The quick ratio is also in a fluctuating trend through out the period 2007 – 09 resulting as 0.666, 0.3959 and 0.4813. The company’s present liquidity position is not satisfactory.
o The proprietary ratio has shown a increasing trend. The proprietary ratio is increased compared with the last year. So, the long term solvency of the firm is increased.
o The working capital decreased from 26854542 to 3498440in the year 2007 to 2009.
o The fixed assets turnover ratio is in a fluctuating trend from the year 2007 – 09 (17.45, 19.54, and 18.68). It indicates that the company is efficiently utilizing the fixed assets.
o The net profit ratio is in fluctuation manner. It decreased in the current year compared with the previous year form 0.3156 to 0.3110.
o There is decrease in gross profit of the company due to increase in cost of goods sold but there is decrease in net profits due to increase in non operating expense.
o There is continuously growth in equity share capital.
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Suggestion:MADHUR DAIRY need to improve its current assets or on the other
hand needs to decrease the current liability to maintain the adequate
amount of working capital.
MADHUR DAIRY needs to decrease its operating expanses so that the
net profit can be enhanced.
Dairy should increase the proprietors capital. it reduces the burden of
interest, the Dairy liable to pay and as a result it enhances the net
profit.
There is a training need in the employees of MADHUR DAIRY.
Dairy should try to decrease the cost of selling the goods .so that net
profit can be increased.
Dairy need to improve its advertisement. It should try to cover as much