A STUDY ON FINANCIAL PERFORMANCE OF PONLAIT, PUDUCHERRY

SUMMER PROJECT REPORT Submitted by R.JANARTHAN REGISTER NO: 27348314 Under the Guidance of Mr. D.SARAVANAN, M.B.A., M.Phil., (PhD.,) Faculty, Department of Management Studies
in partial fullfilment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

SRI MANAKULA VINAYAGAR ENGINEERING COLLEGE PONDICHERRY UNIVERSITY PUDUCHERRY

SEPTEMBER- 2007

SRI MANAKULA VINAYAGAR ENGINEERING COLLEGE

MADAGADIPET, PUDUCHERRY

DEPARTMENT OF MANAGEMENT STUDIES

BONAFIDE CERTIFICATE

This to certify that the project work entitled A STUDY ON FINANCIAL PERFORMANCE OF PONLAIT, PUDUCHERRY is a bonafide work done by R.JANARTHAN [REGISTER NO: 27348314] in partial fulfilment of the requirement for the award of Master of Business Administration by Pondicherry University during the academic year 2007 2008.

GUIDE

HEAD OF DEPARTMENT

Submitted for Viva-Voce Examination held on

EXTERNAL EXAMINER

ACKNOWLEDGEMENT

First and foremost, I thank the God for his substantial blessing and mercy at all stages in the completion of the project. I take this opportunity to express my deep sense of gratitude to SHRI N.KESAVAN, Founder project. I express my immense gratitude to our Principal Chairman, SHRI M.DHANASEKARAN, Managing Director and SHRI S.V.SUGUMARAN, Vice-Chairman of our college for their good wishes for this

DR. V.S.K.VENKATACHALAPATHY for his support and encouragement for the completion of my project. I extend the immense gratitude to the Head of the Department MR. S.JAYAKUMAR for his motivation, inspiration, and encouragement for the completion for my project. The valuable and unflinching requital support in this Endeavor

MR.D.SARAVANAN my internal guide, Department of Management Studies whose assistance was immeasurable to the completion of this project. I am sincerely thankful to MR. K.RAJARAM, Deputy Manager (Accts) for his kind assistance and MR. R.MOHAMED MALIK, Senior Assistance Gr.I, who were also my External Guides. I would also like to thank all the staff of the organization for helping me directly and indirectly to conclude this work. Last, but not the least, my heart felt gratitude to my parents, relatives and my friends for their constant encouragement, support, help and valuable advice to make this project a success.

ABSTRACT
The Project has been done in The Pondicherry Co-operative Milk Producer Union Ltd. The title of the project is A Study on the Financial Performance of the Ponlait. The study starts with an Companys profile and also the need for study, review of literature and objectives are set out for the study. Research methodology, Data analysis & Interpretation, Findings and Suggestions of the study follow. One of the main areas of the project is the analysis part, where the data are analyzed & interpreted, to find out the financial performance. Some of the tools used in financial performance are regarding to: Ratio Analysis Comparative Financial Statements. Common-Size Statements. Trend Analysis. And then conclusions, limitations & scope for further study were discussed.

CONTENTS
CHAPTER LIST OF TABLES LIST OF CHARTS INTRODUCTION I PROFILE OF THE COMPANY NEED FOR THE STUDY II III IV V REVIEW OF LITERATURE OBJECTIVES OF THE STUDY RESEARCH METHODOLOGY DATA ANALYSIS AND INTERPRETATION FINDINGS OF THE STUDY, SUGGESTION AND RECOMMENDATIONS VII CONCLUSION LIMITATIONS OF THE STUDY SCOPE FOR THE FUTHER STUDY BIBILIOGRAPHY 1 2 9 10 15 16 18 53 56 58 TITLES PAGE NO.

VI

VIII

59 60 61

LIST OF TABLES

TABLE NO. 5.1.1 5.1.1 (a) 5.1.2 5.1.2 (a) 5.1.3 5.1.3(a) 5.1.4 5.1.4 (a) 5.1.5 5.1.5 (a) 5.1.6 5.1.6 (a) 5.1.7 5.1.7 (a) 5.1.8 5.1.8 (a) 5.1.9 5.1.9 (a) 5.1.10 5.1.10 (a) 5.1.11 5.1.11 (a) 5.2.1 5.2.2 5.2.3 5.2.4 5.3.1 5.3.2 5.3.3 5.3.4

NAME OF THE TABLE CURRENT RATIO TREND OF CURRENT RATIO QUICK RATIO TREND OF QUICK RATIO DEBT-EQUITY RATIO TREND OF DEBT-EQUITY RATIO GROSS PROFIT RATIO TREND OF GROSS PROFIT RATIO NET PROFIT RATIO TREND OF NET PROFIT RATIO OPERATING RATIO TREND OF OPERATING RATIO RETURN ON INVESTMENT RATIO TREND OF RETURN ON INVESTMENT RATIO RETURN ON WORKING CAPITAL RATIO TREND OF RETURN ON WORKING CAPITAL RATIO WORKING CAPITAL TURNOVER RATIO TREND OF WORKING CAPITAL TURNOVER RATIO INVENTORY TURNOVER RATIO TREND OF INVENTORY TURNOVER RATIO RECEIVABLE TURNOVER RATIO TREND OF RECEIVABLE TURNOVER RATIO COMPARATIVE INCOME STATEMENTS FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 COMPARATIVE INCOME STATEMENTS FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007 COMPARATIVE BALANCE SHEET FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 COMPARATIVE BALANCE SHEET FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007 COMMON SIZE INCOME STATEMENT OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 COMMON SIZE INCOME STATEMENT OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007 COMMON SIZE BALANCE SHEET OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 COMMON SIZE BALANCE SHEET OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007

PAGE NO. 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 45 47 48 49 51

LIST OF CHARTS

CHART NO. 5.1.1 5.1.2 5.1.3 5.1.4 5.1.5 5.1.6 5.1.7 5.1.8 5.1.9 5.1.10 5.1.11

NAME OF THE CHARTS CURRENT RATIO QUICK RATIO DEBT-EQUITY RATIO GROSS PROFIT RATIO NET PROFIT RATIO OPERATING RATIO RETURN ON INVESTMENT RATIO RETURN ON WORKING CAPITAL RATIO WORKING CAPITAL TURNOVER RATIO INVENTORY TURNOVER RATIO RECEIVABLE TURNOVER RATIO

PAGE NO. 19 21 23 25 27 29 31 33 35 37 39

CHAPTER I 1.1 INTRODUCTION Ratio Analysis is one of the most powerful tools of analysis and interpretation of financial statements. A ratio is simply one number expressed in terms of another. It may be defined as, the relationship between two accounting figures, expressed mathematically.

The preparation of comparative financial and operating statement is an important device of horizontal financial analysis. As their very name suggests, comparative financial statements are statements of the financial position of a business so designed as to provide time perspective to the consideration of various elements of financial position embodied in such statements. Generally, Balance Sheet and Income Statement which alone are prepared in a comparative from because they are the most important statements of financial position. Financial statements when read with absolute figures are not easily understandable. They are even misleading. Each item of assets is converted into percentage to Total Assets and each item of Capital and Liabilities is expressed to Total Liabilities and Capital Fund. Thus the whole Balance Sheet is converted into percentage form. Such converted Balance Sheet is know as Common-Size Balance sheet. Trend analysis is also a important tool of horizontal financial analysis. The comparative and common-size statements suffer from a major limitations. i.e., absence of a basic standard to indicate whether the proportion of an item is normal or abnormal. Trend analysis overcomes these limitations. This method is also an important and useful technique of financial statement analysis.

1.2 PROFILE OF THE COMPANY 1.2.1 ORIGIN AND GROWTH History tells us that Ponlait came to existence as Pondicherry Milk Supply Society registered as 1st Co-operative Society in the Union Territory of Pondicherry on 07-021955. Started in a tiny shed its primary objective and focus was to supply milk to the urban consumers As time passed the supply society has diversified its activity from consumer to producers, and concentrated in increasing the milk production by giving various assistance / incentives to the milk-producing farmers. The Union started procuring milk from the village producers on quality basis from 1970 onwards. To keep pace with the milk production, the Milk Union has also set up a Dairy Plant with 10,000 ltrs capacity for processing on 12.04.1971. During the year 1973 the supply society was converted to co-operative milk producers Union with objective of shifting its focus on the milk producing community and its welfare. With the success of the Amul, the National Dairy Development Board has programmed to replicate the Anand pattern (collecting the quality milk from the members and payment of remunerative price in cash regularly and providing milk production enhancement) all over the nation. The Pondicherry Co- operative Milk Producers Union has also taken up the worlds largest Dairy Expansion Programme, the Operation Flood during the year 1982-1985. With the launching of Operation flood Programme the Dairy Plant was expanded to 50,000 ltrs capacity per day. All the milk primary co-operative societies were converted to Anand pattern societies. Ponlait has entered the MNEMONIC club conceived, implemented, promoted and popularized by the NDDB for the entire Dairy Co-operative of the Nation, with effect from 30.03.2002. Thus Ponlait was committed to improve the economic and social uplift of the rural farming / milk producing community and supplying the urban consumers with good quality milk

 The only institution in Pondicherry is extending more than a crore every month to rural economy in cash for the benefit of farming community, by way of Milk Purchase. 1.2.2 ACTIVITES OF DIFFERENT UNITS OF THE MILK UNION A. MILK PROCURMENT AND INPUT WING Ponlait is operating in the Pondicherry Region with 99 affiliated functional Dairy Cooperative Societies. There are 34798 Cattle owners who became members in the Dairy Co-operative Societies at villages and supplying milk to Ponlait. Milk Supplying members are paid fortnightly in cash with remunerative milk price and inputs in kind. The Primary responsibility of procurement and input section is to procure clean and quality milk from the village cattle owners and carryout milk production enhancement services. To achieve this objective, the procurement & Input wing is conducting various programmes like Clean Milk Production and Quality Milk Procurement at Dairy Cooperative Societies. Besides the main activity, the milk-supplying members milch animals are also providing with cattle feed, green fodder and artificial insemination. B. MILK PROCESSING The present handling capacity of the Dairy plant is 50,000 ltrs per day. However with prudent technical manpower and top managements support an average of 80,000 ltrs of milk is handled per day and 93,000 ltrs of milk handled in peak. 3 varieties of milk namely Tonned Milk, Standardised Milk & Premium Milk are produced as per the consumer requirements. The daily consumer demand is met fully. Present demand is 62,000 to 65,000 liters per day.

 From the August 2002, the Dairy is supplying 15,000 liters of standardised milk to school children in the morning under Sri Rajiv Gandhi School Children Break fast scheme, 1st of its kind in the nation organized by the government of pondicherry. Besides at present the union is 28,500 liters if milk supplying to the students both in the morning and evening. The Evening milk supply effected from 20-10-2005 as desired by the government of pondicherry. Besides milk processing and grading, the Dairy is equipped to produce 15 MTS of ghee and 1500 kgs of Khoa (milk peda) monthly. The Ponlait ghee and khoa are much sought after products in the pondicherry town. The Dairy is producing 1000-1500 pockets of flavoured milk and 500-1000 of butter milk every day and sells in pondicherry town. The Dairy is also producing Paneer and Curd as per the requirement of the consumer as and when needed. C. QUALITY ASSURANCE BY MAKING PROPER MILK TESTING IN LABORATORY AT DAIRY Since the milk is highly perishable commodity, proper care is taken to maintain quality of the milk right from the point of production to the point of consumption. At the village level, the milk poured by the individual member producer are tested at the primary society. The milk tested for the quality at society level reaches the Dairy Plant. The raw milk is tested organoleptically at the Dairy reception dock for its quality and then the individual society sample are tested for its fat content and other microbial standards. Apart form this, the processed milk is sampled at every point of storage during the process and proper care is taken to maintain quality standards. Finally the different varieties of milk are graded and kept ready for packing to the consumers. The pouched milk samples are randomly taken and tested for its shelf life after dispatch of the consumers. Presently the milk is dispatched to the market at 5 degree centigrade in three varieties viz Toned milk 3.0% Fat 8.5% SNF, Standardised milk 4.5% Fat 8.5% SNF and the Premium milk 5.0% Fat 9.0% SNF. (SNF- Solids Not Fat) Day in and Day out maintaining the quality of milk receives the top priority.

D. MARKETING The Pondicherry Co-operative Milk Producers Union is operating in the Pondicherry market, selling three different varieties of milk catering to the different segments of the market, under its brand name Ponlait. Ponlait is the number one milk brand in the Pondicherry town. Though there are many private players in the market, Ponlait is the major market shareholder. A market survey finding indicates that the present market share of Ponlait is around 52%. The present average market throughput is 62,000 ltrs per day and the sales is in the uptrend. It is anticipated that the sales curve may touch its peak (60,100 ltrs monthly average) during January 2006. To cater the urban population, 180 retail outlets are operated by retail sales agents. The retail outlets are supplied with milk through a network 10 milk distribution routes daily in the morning and the evening. Besides, the Union is also running 9 milk parlours to sell milk and ilk products. Milk is made available to the urban consumers. 24 hours a day through 5 such parlours. E. CATTLE FEED Ponlait owns a Cattle Feed Plant of 5 MT per day capacity in Thattanchavady Industrial Estate, Pondicherry-9 Compounded Cattle Feed is produced with cost effective ingredients and supplied to the members through Dairy Co-operative Societies on non profit motive. Ponlait is extending subsidy of Rs.100/- as provided by the Government of Pondicherry to each bag containing 50 Kgs of Feed out of the total cost of Rs.312/per bag The present monthly production and supply is 235 MTS.

 In addition Ponlait Cattle Feed is supplied to Neighbouring Villupuram Dist. Dairy also. Batch wise the Cattle feed is being tested its quality regularly. The balanced compounded Cattle feed produced in the Ponlait Cattle Feed Plant is proved to be effective for animal health and quality milk production.

F. ADMINISTRATION The Ponlait Administration is vested with the committee of management comprising 12 elected representatives from the Presidents of Dairy Co-operative Societies and a nominee from National Dairy Development Board, Co-operative Department of Animal Husbandry and Managing Director of the Milk Union. Since the committee of management is dissolved, the Administrator manned by a Deputy Registrar form the Co-operative Department is looking after in lieu of the Board of Management with effect from 06.09.2002. As per the order of the High Court, Chennai, an Advisory Board with the following three members has been constituted by the RCS in order to guide the Administrator by making major policy decisions and other administrative matters. 1. Registrar of Co-operative Societies 2. State Director, NDDB, Erode 3. Director, AHD, Pondicherry - Chairman - Members - Members

At present 173 permanent employees in various cadres are working in the Union.

1.2.3 MILESTONES OF THE COMPANY SL.NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 MILESTONES Registred as The Pondicherry Cooperative Milk Supply Society Ltd Foundation stone laid Dairy Plant Commissioned 10000 ltrs capacity Cattle feed Plant commissioned Registred as The Pondicherry Cooperative Milk Producers Union Ltd Artificial Insemination implemented Dairy Plant Expanded 10000 to 30000 ltrs capacity Urea molasses plant implemented Coop. Development Programme implemented Expansion of Dairy Plant to 50,000 ltrs Capacity Internet based Information System (iDIS) implemented Mnemonic symbol adopted Milk supply to School Children under (Rajiv Gandhi Breakfast Scheme) Inaugrated Sofy ice cream sales at Bus stand Parlour (Atchaya Thiruthai) YEARS 1955 1968 1971 1971 1973 1984 1987&1988 1991 1992 1996&1997 2000&2001 2002 2002 2005

Helpers

D.Helpers

Clerical Assts Cashier

D.Helpers

Driver

Sr.Assts

Sr. Assts

D.Helpers

D.Helpers

Sales Supervisor

Tech./ Sr.Asst

1.2.4 COMPANY ORGANIZATION CHART

DEO / Asst.

Supdt (Adm)

Supt.

DA (Bact/chem) AM (BMC) DM (Accts)

Senior Assts

Supdt (Mktg)

Supdt (Store/ Prodct/Tech ) AM (QC) AM (CFU)

MIS (O)

AM (Mktg)

DM (P&O)

Steno PA to MD Managing Director

ADMINISTRATOR

D.Helper/AI

Supdt (P&I)

Extn (Asst) Sr. Asst/Typist

1.3 NEED FOR THE STUDY

Every Company should know its financial performance. By knowing the financial performance they can able to analysis whether the company attains satisfactory level or not. They can able to know the liquidity position, profitability position and the solvency position. (Short term & Long term). The financial performance is done whether the funds of the company is utilized in a effective manner or not. So in order to understand the financial position of the company. I took this Financial Performance as a topic for my project, to give findings and suggestions by adopting and analyzing various Financial Performance techniques and tools.

DM (P&I)

Fodder Dev.Asst

Driver

CHAPTER II REVIEW OF LITERATURE

2.1 FINANCIAL ANALYSIS A financial analyst can adopt the following tools for analysis of the financial statements. These are also termed as methods of financial analysis. 1. Ratio Analysis 2. Trend Analysis 3. Comparative Financial Statements 4. Common Size Statements. 2.2 RATIO ANALYSIS Ratio Analysis is one of the most powerful tools of analysis and interpretation of financial statements. A ratio is simply one number expressed in terms of another. It may be defined as, the relationship between two accounting figures, expressed mathematically. To be more specific, the term ratio is used to describe the significant relationships which exist between figures shown on a Balance Sheet, in a Profit and Loss Account or in any other part of the accounting organization. 2.3 STEPS IN RATIO ANALYSIS The first task of the financial analyst is to select the information relevant to the direction under consideration from the statements and calculates appropriate ratios. The second step is to compare the calculated ratios with the ratios of the same firm relating to past or with the industry rations. This step facilitates in assessing success or failure of the firm. The third step involves interpretation, drawing of inferences and report-writing. Conclusions are drawn after comparison in the shape of report or recommended course of action.

2.4 USES OF RATIO ANALYSIS o Ratio enables masses of data to be summarized and simplified. o Ratio may be used as measures of efficiency. o Past ratios indicate trends in cost, profits, sales & other relevant figures. o The rations help in the control of business operations. o Ideal ratios can be established and the relationship between primary ratios may be used to establish the desirable co-ordination. o Ratios are also used to impart knowledge within the business or to outside shareholders or other interested parties. o It makes it easy to grasp the relationship between various items and helps in understanding the financial statements. o Ratios can effectively communicate what has happened between two accounting dates. o Ratios are very useful for measuring the performance and very useful in cost control. o It helps in a simple assessment of liquidity, profitability, solvency and efficiency of the firm. 2.5 LIMITATIONS OF RATIO ANALYSIS The ratios of different firms cannot be compared, if these firms have different accounting basis Ratios are misleading if they are based on improper accounting data. Ratios are usually meaningless if studied individually. Ratio analysis gives only a good basis for quantitative analysis of financial problems. But is suffers from qualitative aspects. It is not possible to calculate exact and well accepted absolute standard, so a quality range is used for comparison. Ratios are computed from historical accounting records. So they also process those limitations of financial accounting. Ratios are only means of financial analysis, but not an end in themselves. They can be affected with the personal ability and bias of the analyst.

In ratios analysis arithmetical window dressing is possible and firms may be successful in concealing the real position.

2.6 TREND ANALYSIS Trend analysis is also a important tool of horizontal financial analysis. The comparative and common-size statements suffer from a major limitations. i.e., absence of a basic standard to indicate whether the proportion of an item is normal or abnormal. Trend analysis overcomes these limitations. This method is also an important and useful technique of financial statement analysis. The calculation of trend ratio involves the ascertainment of arithmetical relationship which each item of several years to the same item of base years. Thus, one particular year out of many years is taken as base. The value of one particular item out of several items shown in the financial statements are converted into ratio or percentage taking of that item in base year as equal to 100. Finally, ratio analysis enables a firm to make the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of a trend analysis of ratios lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favourable or unfavourable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present may be satisfactory but the trend may be a declining one. 2.7 COMPARATIVE FINANCIAL STATEMENT The preparation of comparative financial and operating statement is an important device of horizontal financial analysis. As their very name suggests, comparative financial statements are statements of the financial position of a business so designed as to provide time perspective to the consideration of various elements of financial position embodied in such statements. Generally, Balance Sheet and Income Statement which alone are prepared in a comparative from because they are the most important statements of financial position. In these statements figures for two or more periods are placed side by side to facilitate comparison. These statements render comparison between two periods of time and exhibit the

magnitude and direction of historical changes in the operation results and financial status of a business. Financial statements of two or more firms may also be compared for drawing inferences. This is know as inter-firm comparison. The statement also provides for columns to indicate the change form one year to another in absolute terms and also in percentage form. The following illustration makes clear understanding:

2.8 PROCEDURE FOR INTERPRETATION Ascertain the purpose and the extent of analysis and interpretation. Study the available data contained in financial statements. Get additional information, if needed. Arrange the data in useful manner. Prepare comparative statements, ratios etc. Interpret the facts revealed by the analysis. The interpretation drawn from the analysis are presented.

2.9 OBJECTIVES OF ANALYSIS AND INTERPRETATION The following are the main objectives of analysis and interpretation of financial statements. To estimate the earning capacity of the firm. To assess the financial position of the firm. To decide about the future prospects of the firm. To know the progress of the firm. To judge the solvency of the firm. To measure the efficiency of operations. To Determine debt capacity of the firm. To assess the financial performance of the firm. To have comparative study. To help in making future plans.

Analysis of financial statements should always be tuned to the objective. People use financial statements for satisfying their particular curiosity. Financial accounts are interpreted by different persons in different ways according to their objects. For instance same financial statement may be very good for one : ordinarily good for the other and worst for the third. This is because their views and objects of interpretation differ. For instance : (1) A prospective shareholder would like to know whether the business is profitable and is progressing on sound lines. (2) A supplier who would like to transact business with the firms may be interested in the companys ability to honour its short-term commitments. (3) A financier would like to be satisfied with safety and reliability of return on investment. Thus, the object of the analysis determine the extent, depth and nature of analysis. 2.10 COMMON-SIZE STATEMENT Financial statements when read with absolute figures are not easily understandable. They are even misleading. Each item of assets is converted into percentage to Total Assets and each item of Capital and Liabilities is expressed to Total Liabilities and Capital Fund. Thus the whole Balance Sheet is converted into percentage form. Such converted Balance Sheet is know as Common-Size Balance sheet. When Balance Sheets of the same concern for several years or when Balance Sheets of tow or more than two concerns for the same year are converted into percentage form and presented as such, they are know as Comparative Common Size Balance Sheets. Again, in Profit and Loss Account Sales figure is assumed to be equal to 100 and all other figures are expressed as percentage to sales. Similarly, in Balance Sheet the total of assets or liabilities is taken as 100 and all the figures are expressed as percentage of the total. In another word, Common-Size statements indicate the relationship of various items with some common items, expressed as percentages of the common item. In the Income statements, the sales figure is taken as basis and all other figures considered as percentages of sales.

CHAPTER III OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE To study the financial position of a company.

SECONDARY OBJECTIVES To study the liquidity position, profitability position. To know the solvency position. (Short term & Long term) To study the growth of Ponlait, in terms of comparative analysis, common size analysis and trend analysis of financial statements. To give suggestions in order to improve the financial position of Ponlait.

CHAPTER IV RESEARCH METHODOLOGY

4.1 RESEARCH Research in common place refers to a search for knowledge. Research is defined as systematic and scientific search for pertinent information on specific topic or area of study. 4.2 METHODOLOGY Methodology is a plan of action for a research project and explains in detail how data are collected analyzed and presented, so that they will provide meaning information. 4.3 RESEARCH DESIGN A Research design is purely and simply the framework or plan for the guides the collection and analysis of data. It is the overall operational pattern or framework of the project that stipulated the information to be collected, from which source and what procedures. A Research design might be described as a series of advance decision that taken together from a specific master plan or the model for the conduct of the investigation. The Research Design used in this project is Analytical in nature. 4.4 METHOD OF DATA COLLECTION

The data required for the study were collected from secondary data. The Secondary data were collected mainly from the accounts, annual reports and other publications of Ponlait. A wide reference is also made from books, journals, magazines to review the financial performance concepts followed by the business firm.

4.5 TECHNIQUES AND TOOL ADOPTED The analysis of financial statement consists of a study of relationships and trends to determine whether or not the financial position of the concern and its operating efficiency have been satisfactory. In the process of this analysis, various tools and methods are used to analysis the financial performance. Ratio Analysis Comparative Financial Statements. Common-Size Statements. Trend Analysis.

CHAPTER V DATA ANALYSIS AND INTERPRETATION

5.1 RATIO ANALYSIS Ratio analysis is a widely used tool of financial analysis. It can be used to compare the risk and return relationships of firms of different sizes. It is defined as the systematic use of ratio to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. Forms of Ratios and their Derivations There are many forms of Ratios, which are useful for a business concern as controls to maneuver their operations and business strategies in accordance to the changes in the commercial sector. Some of the important ones, their derivations and interpretations pertaining to M/s the Pondicherry co-operative milk producers union limited are shown below:

5.1.1 CURRENT RATIO: It is a measure of liquidity calculated dividing the current assets by the current liabilities. The current ratio of a firm measures its short-term solvency, that is, its ability to meet short-term obligations.

Current Ratio =

Current assets Current liabilities

TABLE 5.1.1 CURRENT RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: The current ratio of the company is not at a satisfactory level, the desirable position of current ratio is 2:1, but it does not meet the desirable position. In the year 2007, current ratio is 1.24 CURRENT ASSETS 3,55,83,057.01 4,29,70,515.48 3,74,79,451.27 7,05,28,688.45 8,22,47,905.50 CURRENT LIABILITIES 2,24,54,435.52 2,32,21,407.66 2,21,07,474.79 5,25,59,761.97 6,62,61,029.58 RATIO 1.58 : 1 1.85 : 1 1.70 : 1 1.34 : 1 1.24 : 1

CHART 5.1.1 CURRENT RATIO

2 1.5 1 0.5 0

2003

2004

2005

2006

2007

2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.1 (a) TREND OF CURRENT RATIO YEARS (X) 2003 2004 2005 2006 2007 VALUES(Y) 1.58 1.85 1.7 1.34 1.24 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -3.16 -1.85 0 1.34 2.48

y= 7.71

x = 0

x2= 10

xy= 1.19

x = x/n = 0/5 = 0 = y/n = 7.71/5 = 1.54

b = xy n x y

= - 1.19 5 (0) (1.54)

= - 0.119

x2- nx 2

10-5*(0) 2

a = y b x = 1.54 (-0.119) (0) = 1.66 y = a + bx = 1.66 0.119 x = 1.66 0.119 (x-2005) = 1.66 0.119 (2008 2005) = 1.66 0.119 (3) = 1.30 Therefore Current ratio for the year 2008 will be approximately 1.30 : 1

5.1.2

QUICK RATIO: It is a measure of liquidity calculated dividing current assets minus inventory and

prepaid expenses by current liabilities. It is also called as acid test ratio. The term quick assets refers to current asset which can be converted into cash immediately or at a short notice without diminution of value. Quick assets Quick Ratio = Current liabilities TABLE 5.1.2 QUICK RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: The Quick Ratio, desirable position is 1:1, it meets desirable position for the past five year. In the year 2003, the quick ratio is 1.60 which is higher and in the year 2007, is 1.07. QUICK ASSETS 3,00,74,721.31 3,71,74,223.23 2,99,68,982.28 6,05,97,969.67 7,09,06,262.70 CURRENT LIABILITIES 2,24,54,435.52 2,32,21,407.66 2,21,07,474.79 5,25,59,761.97 6,62,61,029.58 RATIO 1.60 : 1 1.40 : 1 1.36 : 1 1.15 : 1 1.07 : 1

CHART 5.1.2 QUICK RATIO

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.2 (a) TREND OF QUICK RATIO YEARS (X) 2003 3004 2005 2006 2007 VALUES(Y) 1.6 1.4 1.36 1.15 1.07 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -3.2 -1.4 0 1.15 2.14

y= 6.58

x = 0

x2= 10

xy= -1.31

x = x/n = 0/5 = 0 = y/n = 6.58/5 = 1.32

b = xy n x y

= -1.31 5 (0) (1.32) = - 0.131 10-5*(0) 2

x2- nx 2

a = y b x = 1.32 (-0.131) (0) = 1.66 y = a + bx = 1.32 0.131 x = 1.32 0.131 (x-2005) = 1.32 0.131 (2008 2005) = 1.32 0.131 (3) = 0.93 Therefore quick ratio for the year 2008 will be approximately 0.93 : 1

5.1.3

DEBT / EQUITY RATIO: It measures the ratio of long-term or total debt to shareholders equity. The relationship

between borrowed funds and owners capital is a popular measure of the long-term financial solvency of a firm.

Long-term debt Debt/Equity Ratio = Shareholders equity

TABLE 5.1.3 DEBT-EQUITY RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: LONG-TERM DEBTS 94,02,004.07 72,64,954.87 32,58,529.76 14,39,302.85 3,31,12,574.48 SHARE HOLDERS EQUITY 3,92,12,960.82 4,20,17,710.93 4,51,54,191.36 5,25,64,223.12 3,32,06,375.86 RATIO 0.23 : 1 0.17 : 1 0.07 : 1 0.03 : 1 1.04 : 1

The debt-equity ratio, acceptable norm for the ratio is 2:1, but the company position is 1.04 in the year 2007. So it does not reaches the desirable position. For the past five year, the acceptable norms of the ratio have not been reached. CHART 5.1.3 DEBT-EQUITY RATIO
1.2 1 0.8 0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.3 (a) TREND OF DEBT-EQUITY RATIO YEARS (X) 2003 3004 2005 2006 2007 VALUES (Y) 0.23 0.17 0.07 0.03 1.04 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -0.46 -0.17 0 0.03 2.08

Y= 1.54

X = 0

X2= 10

XY= 1.48

x = x/n = 0/5 = 0 = y/n = 1.54/5 = 0.308

b = xy n x y x2- nx 2

= 1.48 5 (0) (0.308) = 0.148 10-5*(0) 2

a = y b x = 0.308 0.148 (0) =0.308 y = a + bx = 0.308+ 0.148 x = 0.308+ 0.148 (x-2005) = 0.308+ 0.148 (2008 2005) = 0.308+ 0.131 (3) = 0.752 Therefore debt- equity ratio for the year 2008 will be approximately 0.752 : 1

5.1.4

GROSS PROFIT RATIO: It measures the percentage of each sales rupee remaining after the firm has paid for its

goods. It is also know as gross margin. It is calculated by dividing gross profit by sales.

Gross Profit Ratio =

Gross Profit Sales

* 100

TABLE 5.1.4 GROSS PROFIT RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: The Gross Profit is declining. In the year 2004 it is 12.40 and in the year 2005 it is 8.63 and 2006 it is 9.33 and in the year 2007 it is 4.85. So the gross profit is decreasing. A ratio of 25% to 30% may be considered good. GROSS PROFIT 2,53,02,650.04 3,49,50,442.29 2,64,41,333.10 3,44,77,306.96 1,76,99,459.09 SALES 25,09,94,560 28,18,92,069.53 30,63,29,147.30 36,95,62,069.41 36,50,46,958.66 RATIO 10.08% 12.40% 8.63% 9.33% 4.85%

CHART 5.1.4 GROSS PROFIT RATIO

14 12 10 8 6 4 2 0 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.4 (a) TREND OF GROSS PROFIT RATIO YEARS (X) 2003 3004 2005 2006 2007 VALUES(Y) 10.08 12.40 8.63 9.33 4.85 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -20.16 -12.40 0 9.33 9.70

y= 45.29

x = 0

x2= 10

xy= -13.53

x = x/n = 0/5 = 0 y = y/n = 45.29/5 = 9.06

b = xy n x y

= -13.53 5(0) (9.06) = -1.353

x2- nx 2

10-5*(0) 2

a=ybx y = a + bx

= 9.06 (-1.353) (0) = 9.06 = 9.06- 1.353 x = 9.06- 1.353 (x-2005) = 9.06- 1.353 (2008 2005) = 9.06- 1.353 (3) =5

Therefore Gross Profit ratio for the year 2008 will be approximately 5%

5.1.5

NET PROFIT RATIO: This measures the relationship between net profits and sales of a firm. It is also known as net margin. It indicative of managements ability to operate the business with sufficient success not only to recover from revenues of the period. The ratio of net profit to sales essentially expresses the cost price effectiveness of the operation.

Earnings after interest and taxes (EAT) * 100 Net Profit Ratio = Net Sales

TABLE 5.1.5 NET PROFIT RATIO YEARS 2003 2004 2005 2006 2007 EARNINGAFTERINTERESTAND TAX -32,75,734.30 34,25,281.90 4,33,816.77 12,89,252.87 -1,26,58,725.11 NET SALES 25,09,94,560 28,18,92,069.53 30,63,29,147.30 36,95,62,069.41 36,50,46,958.66 RATIO -1.31% 1.22% 0.14% 0.35% -3.46%

Interpretation: The Net Profit of the company is 1.22% in the year 2004, but in the year 2007, it is -3.46% (it means net loss). The company attains a Net loss.

CHART 5.1.5 NET PROFIT RATIO

1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 -3 -3.5

2003

2004

2005

2006

2007

2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.5 (a) TREND OF NET PROFIT RATIO YEARS (X) 2003 2004 2005 2006 2007 VALUES(Y) -1.31 1.22 0.14 0.35 -3.46 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy 2.62 -1.22 0 0.35 -6.97

y= 3.06

x = 0

x2= 10

xy= -5.17

x = x/n = 0/5 = 0 = y/n = 45.29/5 = 9.06

b = xy n x y

= -5.17 5(0) (0.61) = -0.517 10-5*(0) 2

X2- nx 2

a = y b x = 0.61 - (-0.517) (0) = 0.61 y = a + bx = 0.61 + (-0.517) x = 0.61 - 0.517 (x-2005) = 0.61 - 0.517 (2008 2005) = 0.61 - 0.517 (3) = - 0.94 Therefore Net Profit ratio for the year 2008 will be approximately 0.94%

5.1.6

OPERATING RATIO: This ratio indicates the relationship between total operating expenses and sales.

Cost of sales + Operating expenses * 100 Operating ratio = Net sales Total operating expenses here include cost of goods sold, administrative expenses and selling and distribution expenses. TABLE 5.1.6 OPERATING RATIO COST OF SALES + YEARS 2003 2004 2005 2006 2007 Interpretation: The Operating ratio for the past five year it is higher. In the year 2007, it is 103.87% which is higher when compare to the other years. CHART 5.1.6 OPERATING RATIO OPERATING EXPENSES 25,56,50,702.40 27,85,55,160.7 30,72,88,315.10 36,97,32,832.60 37,91,56,352.20 NET SALES 25,09,94,560.00 28,18,92,069.53 30,63,29,147.30 6,95,62,069.41 36,50,46,958.66 RATIO 101.86% 98.82% 100.31% 100.05% 103.87 %

104 102 100 98 96 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.6 (a) TREND OF OPERATING RATIO YEARS (X) 2003 2004 2005 2006 2007 VALUES(Y) 101.86 98.82 100.31 100.05 103.87 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy 2.62 -1.22 0 0.35 -6.97

y= 504.91

x = 0

x2= 10

xy= 5.25

x = x/n = 0/5 = 0 = y/n = 504.91/5 = 100.98

b = xy n x y

= 5.25 5 (0) (100.98) = 0.525 10-5*(0) 2

x2- nx 2

a = y b x = 100.98 0.525 (0) = 100.98

y = a + bx

= 100.98 + (0.525) x = 100.98 + 0.525 (x-2005) = 100.98 + 0.525 (2008 2005) = 100.98 + 0.525 (3) = 102.56

Therefore Operating ratio for the year 2008 will be approximately 102.56%

5.1.7

RETURN ON INVESTMENT RATIO: It measures the overall effectiveness of management in generating profits with its available assets. There are three broad categories of ROIs. They are return on assets, return on capital employed and return on shareholders equity.

Net Profit Return on Investment Ratio = Capital Account + Net Profit

* 100

TABLE 5.1.7 RETURN ON INVESTMENT RATIO Capital Account + Net Years 2003 2004 2005 2006 2007 Interpretation: When comparing these five years, 2004 to 2006 there is net profit to organization. In the year 2003 and 2007 the organization arises net loss. So there is not return on investment for the last year. CHART 5.1.7 RETURN ON INVESTMENT RATIO Net Profit -32,75,734.30 34,25,281.90 4,33,816.22 12,89,252.87 -1,26,58,725.11 Profit 3,59,37,226.52 4,54,42,992.83 4,51,54,190.81 5,25,64,223.12 4,35,28,421.92 Ratio -9.12% 7.54% 0.96% 2.45% -29.08%

10 5 0 -5 -10 -15 -20 -25 -30 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.7 (a) TREND OF RETURN ON INVESTMENT RATIO YEARS (X) 2003 3004 2005 2006 2007 VALUES(Y) -9.12 7.54 0.96 2.45 -29.08 x=x-2005 -2 -1 0 1 2 4 1 0 1 4 x2 2.62 -1.22 0 0.35 -6.97 xy

y= -27.25

x = 0

x2= 10

xy= -45.01

x = x/n = 0/5 = 0 = y/n = -27.25/5 = -5.45

b = xy n x y

= 5.25 5 (0) (5.45) = -4.50 10-5*(0) 2

x2- nx 2

a = y b x = -5.45 (-4.50) (0) = -5.45

y = a + bx

= -5.45 + (-4.50) x = -5.45 + (-4.50) (x-2005) = -5.45 + (-4.50) (2008 2005) = -5.45 + (-4.50) (3) = -18.95

Therefore Return on Investment ratio for the year 2008 will be approximately -18.95%

5.1.8

RETURN ON WORKING CAPITAL RATIO: Return on working capital can be measured by net profit divided working capital. Net profit Return on working capital = Working capital * 100

TABLE 5.1.8 RETURN ON WORKING CAPITAL RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: The return on working capital in the year 2007 attain very poor condition, it shows a negative values. The firm does not earn a return on working capital when compare to previous year. The performance of the company is bad. Though there is a net loss in the year 2007, the company could not earn return on working capital. CHART 5.1.8 RETURN ON WORKING CAPITAL RATIO NET PROFIT -32,75,734.30 34,25,281.90 4,33,816.77 12,89,252.87 -1,26,58,725.11 WORKING CAPITAL 1,31,28,621.49 1,97,49,107.82 1,57,88,591.66 1,89,34,277.32 1,59,86,875.92 RATIO -24.95% 17.34% 2.75% 6.81% -79.18%

20 0 -20 -40 -60 -80 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.8 (a) TREND OF RETURN ON WORKING CAPITAL RATIO YEARS(X) 2003 3004 2005 2006 2007 VALUES(Y) -24.95 17.34 2.75 6.81 -79.18 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy 2.62 -1.22 0 0.35 -6.97

y= -77.23

x = 0

x2= 10

xy= -118.99

x = x/n = 0/5 = 0 = y/n = -77.23/5 = -15.45

b = xy n x y

= -118.99 5 (0) (-15.45) = -11.89 10-5*(0) 2

x2- nx 2

a=ybx y = a + bx

= -15.45 (-11.89) (0) = -15.45 = -15.45 + (-11.89) x = -15.45 + (-11.89) (x-2005) = -15.45 + (-11.89) (2008 2005) = -15.45 + (-11.89) (3) = -51.12

Therefore Return on Working Capital ratio for the year 2008 will be approximately -51.12%

5.1.9

WORKING CAPITAL TURNOVER RATIO: Working Capital turnover ratio measures the effective utilization of working capital. It also measures the smooth running of business or otherwise. This ratio establishes relationship between cost of sales and working capital.

Sales Accounts Working Capital Turnover Ratio = Working capital TABLE 5.1.9 WORKING CAPITAL TURNOVER RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: The effective utilization of working capital is 27.88 times in the year 2007, Higher sales in comparison to working capital indicate overtrading, whereas lower sales to working capital indicate undertrading. SALES ACCOUNT 25,09,94,560 28,18,92,069.53 30,63,29,147.30 36,95,62,069.41 44,56,34,802.33 WORKING CAPITAL 1,31,28,621.49 1,97,49,107.82 1,57,88,591.66 1,89,34,277.32 1,59,86,875.92 RATIO 19.12 14.27 19.40 19.52 27.88

CHART 5.1.9 WORKING CAPITAL TURNOVER RATIO

30 25 20 15 10 5 0 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.9 (a) TREND OF WORKING CAPITAL TURNOVER RATIO YEARS (X) 2003 3004 2005 2006 2007 VALUES(Y) 19.12 14.27 19.40 19.52 27.88 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -38.24 -14.27 0 19.52 55.76

y= 100.19

x = 0

x2= 10

xy= 22.77

x = x/n = 0/5 = 0 = y/n = 100.19/5 = 20.04

b = xy n x y

= 22.77 5 (0) (20.04) = 2.27 10-5*(0) 2

x2- nx 2

a = y b x = 20.04 (2.27) (0) = 17.77 y = a + bx = 17.77 + (2.27) x = 17.77 + (2.27) (x-2005) = 17.77 + (2.27) (2008 2005) = 17.77 + (2.27) (3) = 24.58 Therefore Working Capital ratio for the year 2008 will be approximately 24.58

5.1.10 INVENTORY TURNOVER RATIO: This ratio is also called as stock velocity ratio. It is calculated to ascertain the efficiency of inventory management in terms of capital investment. It shows the relationship between the cost of goods sold and the cost of average stock inventory. Sales Account Inventory Turnover Ratio = Closing Account TABLE 5.1.10 INVENTORY TURNOVER RATIO YEARS 2003 2004 2005 2006 2007 Interpretation: The inventory turnover ratio, decrease it seen from the above calculation. The company was able to sell Rs.48.63 by investing rupee one in stock in the year 2004 and it sales Rs.39.29 by investing rupee one in stock in the year 2007. So it shows a decrease in the inventory turn over ratio. Thus we can clearly found the company could not maintain the inventory effectively. CHART 5.1.10 INVENTORY TURNOVER RATIO SALES ACCOUNT 25,09,94,560.00 28,18,92,069.53 30,63,29,147.30 36,95,62,069.41 44,56,34,802.33 CLOSING STOCK 55,08,335.70 57,96,292.25 75,10,468.99 99,30,718.78 1,13,41,642.80 RATIO 45.57 48.63 40.79 37.21 39.29

50 40 30 20 10 0 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.10 (a) TREND OF INVENTORY TURNOVER RATIO YEARS (X) 2003 2004 2005 2006 2007 VALUES(Y) 45.57 48.63 40.79 37.21 39.29 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -91.14 -48.63 0 37.21 78.58

y= 211.49

x = 0

x2= 10

xy= -23.98

x = x/n = 0/5 = 0 = y/n = 211.49/5 = 42.30

b = xy n x y

= -23.98 5 (0) (42.30) = -2.40 10-5*(0) 2

x2- nx 2

a = y b x = 42.30 (-2.40) (0) = 42.30

y = a + bx

= 42.30 + (-2.40) x = 42.30 + (2.40) (x-2005) = 42.30 + (2.40) (2008 2005) = 42.30 + (2.40) (3) = 35.10

Therefore Inventory Turnover ratio for the year 2008 will be approximately 35.1

5.1.11 RECEIVABLE TURNOVER RATIO: Receivable Turnover in days means it measures the liquidity of a firms debtors in the average collection period. This is, in fact, interrelated with, and dependent upon, the receivables turnover atio.

Days in a year Receivable Turnover Ratio = Debtors turnover

TABLE 5.1.11 RECEIVABLE TURNOVER RATIO YEARS 2003 2004 2005 2006 2007 DAYS IN YEAR 365 365 365 365 365 DEBTORS TURNOVER 20.32 15.84 16.54 12.19 8.56 RATIO 17.96 days 23.04 days 22.06 days 29.94 days 42.64 days

Interpretation: The Receivable turnover ratio, indicates, that the debt collection period is increasing year by year. In the year 2003, 17.96 days and in the year 2007 it shows 42.64 days. So it shows that company does not concentrate in debt collection period. CHART 5.1.11 RECEIVABLE TURNOVER RATIO

45 40 35 30 25 20 15 10 5 0 2003 2004 2005 2006 2007 2008

TREND ANALYSIS Y = a + bx Where a= y bx; b = xy n x y

x2- nx

TABLE 5.1.11 (a) TREND OF RECEIVABLE TURNOVER RATIO YEARS (X) 2003 3004 2005 2006 2007 VALUES(Y) 17.96 23.04 22.06 29.94 42.64 x=x-2005 -2 -1 0 1 2 x2 4 1 0 1 4 xy -35.92 -23.04 0 29.94 85.28

y= 135.64

x = 0

x2= 10

xy= 55.36

x = x/n = 0/5 = 0 = y/n = 135.64/5 = 27.13

b = xy n x y

= 55.36 5 (0) (27.13) = 5.536 10-5*(0) 2

x2- nx 2

a = y b x = 27.13 (5.536) (0) = 27.13 y = a + bx = 27.13 + (5.536) x

= 27.13 + (5.536) (x-2005) = 27.13 + (5.536) (2008 2005) = 27.13 + (5.536) (3) = 43.74 Therefore Receivable Turnover in days for the year 2008 will be approximately 43.74 days.

5.2 COMPARATIVE INCOME STATEMENTS TABLE 5.2.1 COMPARATIVE INCOME STATEMENTS FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 Y ear Ending 31st March 2005 30,63,29,147.3 0 27,98,87,814.2 0 2,64,41,333.10 1,71,423.08 7,47,459.48 9,259.00 4,38,670.66 1,09,499.35 0 14,76,311.57 6,18,168.00 2,49,68,348.41 18,13,984.49 0 0 0 0 2,74,00,500.90 5,17,143.77 Year Ending 31st March 2006 Increase Or Decrease in (Rs.) Increase Or Decrease in (Percentage) +20.64 +19.72 +30.39 +78.13 +43.05 -100.00 -100.00 -15.95 0 -0.66 -33.19 +25.74 +7.05 0 0 0 0 +26.45 +150.58

PARTICULARS

Net Sales Less: Cost of Goods Sold Gross Profit Operating Income: Interest Earned Miscellaneous Income Profit on sale of assets Reserve for Bad Debts Reversed Capital Grant Released Loss Recoverable Total Operating Income Operating Expenditure: Interest paid and due Establishment & Contingent Depreciation Provision for bad debts Provision for Income Tax Reserve for loss to be recovered Loss brought forward Total Operating Expenditure Net Profit before Tax

36,95,62,069.4 1 +6,32,32,922.10 33,50,84,762.4 5 +5,51,96,948.20 3,44,77,306.96 +80,35,973.86 3,05,358.95 10,69,244.49 0 0 92,037.65 0 14,66,641.09 4,12,991.00 3,13,95,141.64 19,41,816.54 0 8,98,121.00 0 0 3,46,48,070.18 12,95,877.87 +1,33,935.87 +3,21,785.01 -9,259.00 -4,38,670.66 -17,461.70 0 -9,670.48 -2,05,177.00 +64,26,793.23 +1,27,832.05 0 +8,98,121.00 0 0 +72,47,569.28 +7,78,734.10

Less: Income Tax Net Profit Interpretation:

83,327.00 4,33,816.77

6,625.00 12,89,252.87

-76,702.00 +8,55,436.10

-92.04 +197.19

The above statement shows, sales have gone up in 2006, the rate of Gross Profit increase to 30.39%. The cost of goods sold is also increase to 19.72. The operating expenditure increase to Rs.72,47,569.28. The operating income have been decreased to Rs.9,670.48 but the Net Profit increase to Rs.8,55,436.

TABLE 5.2.2 COMPARATIVE INCOME STATEMENTS FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007 Y ear Ending 31st March 2006 36,95,62,069.4 1 33,50,84,762.4 5 3,44,77,306.96 3,05,358.95 10,69,244.49 0 0 92,037.65 0 14,66,641.09 4,12,991.00 3,13,95,141.64 19,41,816.54 0 8,98,121.00 0 0 3,46,48,070.18 12,95,877.87 6,625.00 year ending 31st march 2007 Increase Or Decrease in (Rs.) Increase Or Decrease in (Percentage) -1.22 +3.66 -48.66 +229.48 -28.61 0 0 -100 0 +29.09 +7.01 -6.17 -1.64 0 -100 0 0 -8.19 -842.69 +6581.09

PARTICULARS

Net Sales Less: Cost of Goods Sold Gross Profit Operating Income: Interest Earned Miscellaneous Income Profit on sale of assets Reserve for Bad Debts Reversed Capital Grant Released Loss Recoverable Total Operating Income Operating Expenditure: Interest paid and due Establishment & Contingent Depreciation Provision for bad debts Provision for Income Tax Reserve for loss to be recovered Loss brought forward Total Operating Expenditure Net Profit before Tax Less: Income Tax

36,50,46,958.6 6 -45,15,110.80 34,73,47,499.5 7 +1,22,62,737.10 1,76,99,459.57 -1,67,77,847.87 10,06,082.00 7,63,365.46 1,23,843.00 0 0 0 18,93,290.46 4,41,961.00 2,94,56,891.66 19,10,000.00 0 0 0 0 3,18,08,852.66 1,22,16,103.11 4,42,622.00 +7,00,723.05 -3,05,879.03 +1,23,843.00 0 -92,037.65 0 +4,26,649.37 +28,970.00 -19,38,249.98 -31,816.54 0 -8,98,121.00 0 0 -28,39,217.52 -1,09,20,225.24 +4,35,997.00

Net Profit/Loss Interpretation:

12,89,252.87

1,26,58,725.11

-1,13,69,472.24

-881.87

The above statement shows sales have declined in the year 2007, the cost of goods sold increase to Rs.1,22,62,737.10 due to this the rate of Gross Profit decrease. The operating income increase to Rs.4,26,649.37 and the operating expenses decrease to Rs.-28,39,217.52. Due to the sales decrease and the gross profit decrease, it results in Net loss of Rs.1,13,69,472.24.

TABLE 5.2.3 COMPARATIVE BALANCE SHEET FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 Year Ending 31st March 2005 Assets Current Asset: Accrued Income Interest Accrued Prepaid Expenses Closing Stock Deposits (Asset) Sundry Debtors Cash-in-hand Bank Accounts Advance Income Tax Total Current Assets Fixed Assets: Office Machines Other Assets Buildings Equipments&Fittings Furnitures Land Plant&Machinery Year Ending 31st March 2006 Increase Or Decrease in (Rs.) Increase Or Decrease in (Percentage)

PARTICULARS

98,880.70 1,54,009.00 11,36,194.00 75,10,468.99 6,05,699.00 1,85,08,276.7 4 18,35,154.91 55,77,164.93 20,53,603.00 3,74,79,451.2 7 10,78,774.23 5,02,804.60 77,00,629.10 36,86,281.57 7,14,875.47 42,942.69 1,69,65,935.2 7

1,00,880.70 +2,000.00 2,44,230.00 +99,221.00 17,69,186.00 +6,32,992.00 99,30,718.78 +24,20,249.79 2,06,09,699.00 +2,00,04,000.00 3,02,98,983.61 +1,17,90,706.87 12,84,308.19 -5,50,846.72 42,37,079.17 -13,40,085.76 20,53,603.00 0 7,05,28,688.45 +3,30,49,237.18 11,43,174.23 10,64,713.60 77,76,090.10 40,13,977.32 7,74,201.47 42,942.69 1,88,44,156.37 +64,400.00 +5,61,909.00 +75,461.00 +3,27,695.75 +59,236.00 0 +18,78,221.10

+2.02 +58.58 +55.71 +32.23 +3302.63 +63.71 -30.02 -24.03 0 +88.18 +5.97 +111.75 +0.98 +8.89 +8.30 0 +11.07

Vehicles Total Fixed Assets Investments: National savings certificates Reserve Fund in PSCB Shares in CWC Shares in other coop instns Total Investments Total Assets

13,91,033.71 3,20,83,276.4 4 10,000.00 4,16,468.00 1000.00 5,30,000.00 9,57,468.00

13,95,433.71 3,50,54,689.49 0 4,45,410.00 1000.00 5,33,500.00 9,79,910.00

+4,400.00 +29,71,413.05 -10,000.00 +28,942.00 0 +3,500.00 +22,442.00

+0.32 +9.26 -100.00 +6.95 0 +0.66 +2.34 +51.11

7,05,20,195.9 1 10,65,63,287.94 +3,60,43,091.99

Liabilities Capital Account: Reserves&Surplus Share Capital Total Capital Account Loans (Liability): Loans & Deposits Bank OD A/c Total Loans Current Liabilities: Interest due outstanding expenses Sales Tax due Provisions Sundry Creditors Provision for bonus&exgratia Stock Verification fees due Total Current Liabilities Profit & Loss A/c 3,71,06,374.5 9 76,14,000.00 4,47,20,374.5 9 65,15,204.25 -32,56,674.49 32,58,529.76 8,01,747.00 21,22,950.44 -2,70,426.41 0 1,75,22,552.7 6 19,21,851.00 8,800.00 2,21,07,474.7 9 4,33,816.77 4,33,39,970.25 79,35,000.00 5,12,74,970.25 90,74,315.25 -76,35,012.40 14,39,302.85 6,72,285.00 28,71,861.27 -7,279.58 4,42,622.00 +62,33,595.66 +3,21,000.00 +65,54,595.66 +25,59,111.00 -43,78,337.91 -18,19,226.91 -1,29,462.00 +7,48,910.83 -2,63,146.83 +4,42,622.52 +16.80 +4.22 +14.66 +39.28 -134.44 -55.83 -16.15 +35.28 -97.31 0 +162.60 +33.09 -5.68 +137.75 +197.19

4,60,14,215.28 +2,84,91,662.52 25,57,758.00 +6,35,907.00 8,300.00 -500.00 5,25,59,761.97 +3,04,52,287.18 12,89,252.87 +8,55,436.10

Total Liabilities Interpretation:

7,05,20,195.9 1

10,65,63,287.9 4 +3,60,43,091.99

+51.11

When comparing 2005 and 2006 the financial position of the company increase in the year 2006. The Net profit of the company has been increased by Rs.8,55,436.10. It shows the performance of the company increase form 2005 to 2006. It attains the Normal position.

TABLE 5.2.4 COMPARATIVE BALANCE SHEET FOR THE YEAR ENDING 31STMARCH 2006 AND 2007 Y ear Ending 31st March 2006 Assets Current Asset: Accrued Income Interest Accrued TDS- Interest Earned Prepaid Expenses Closing Stock Deposits (Asset) Sundry Debtors Cash-in-hand Bank Accounts Advance Income Tax Total Current Assets Fixed Assets: Year Ending 31st March 2007 Increase Or Decrease in (Rs.) Increase Or Decrease in (Percentage)

PARTICULARS

1,00,880.70 2,44,230.00 0 17,69,186.00 99,30,718.78 2,06,09,699.00 3,02,98,983.61 12,84,308.19 42,37,079.17 20,53,603.00 7,05,28,688.45

1,00,880.70 0 1,72,108.00 -72,122.00 13,643.00 +13,643.00 15,95,252.00 -1,73,934.00 1,13,41,642.80 +14,10,924.02 72,80,529.00 -1,33,29,170.00 5,20,14,572.15 +2,17,15,588.54 14,18,138.25 +1,33,830.06 59,97,536.60 +17,60,457.43 23,13,603.00 +2,60,000.00 8,22,47,905.50 +1,17,19,217.05

0 -29.53 0 -9.83 +14.21 -64.67 +71.67 +10.42 +41.55 +12.66 +16.62

Office Machines Other Assets Buildings Equipments&Fittings Furnitures Land Plant&Machinery Vehicles Total Fixed Assets Investments: National savings certificates Reserve Fund in PSCB Shares in CWC Shares in other coop instns Total Investments Total Assets

11,43,174.23 10,64,713.60 77,76,090.10 40,13,977.32 7,74,201.47 42,942.69 1,88,44,156.37 13,95,433.71 3,50,54,689.49 0 4,45,410.00 1000 5,33,500.00 9,79,910.00 10,65,63,287.9 4

23,65,991.23 +12,22,817.00 9,24,203.60 -1,40,510.00 78,69,338.10 +93,248.00 45,29,650.80 +5,15,673.48 8,58,049.47 +83,848.00 35,62,891.69 +35,19,949.00 2,70,03,703.02 +81,59,546.65 20,02,139.51 +6,06,705.80 4,91,15,967.42 +1,40,61,277.93 500 4,81,107.00 1000 7,33,500.00 12,16,107.00 13,25,79,979.9 2 +500 +35,697.00 0 +2,00,000.00 +2,26,197.00 +2,60,166.92

+106.97 -13.2 +1.2 +12.85 +10.83 +8196.85 +43.3 +43.48 +40.11 0 +8.01 0 +37.49 +24.1 +24.41

Liabilities Capital Account: Reserves&Surplus Share Capital Total Capital Account Loans (Liability): Loans & Deposits Bank OD A/c Total Loans Current Liabilities: Interest due outstanding expenses Sales Tax due Provisions Sundry Creditors Provision for bonus&exgratia Stock Verification fees due Total Current Liabilities Profit & Loss A/c

4,33,39,970.25 79,35,000.00 5,12,74,970.25 90,74,315.25 -76,35,012.40 14,39,302.85 6,72,285.00 28,71,861.27 -7,279.58 4,42,622.00 4,60,14,215.28 25,57,758.00 8,300.00 5,25,59,761.97 12,89,252.87

4,79,60,147.03 82,27,000.00 5,61,87,147.03

+46,20,176.78 +2,29,000.00 +49,12,176.78

+10.66 +3.68 +9.58 +29.14 +380.2 +2200.60 -63.57 +2.00 +892.09 0 +30.24 +3.52 0 +26.07 -1882.49

1,17,18,889.25 +26,44,574.00 2,13,93,685.23 +2,90,28,697.63 3,31,12,574.48 +3,16,73,271.63 2,44,922.00 -4,27,363.00 29,29,199.51 +57,338.24 57,660.81 +64,940.39 4,42,622.00 0 5,99,30,632.26 +1,39,16,416.98 26,47,693.00 +89,935.00 8,300.00 0.00 6,62,61,029.58 +1,37,01,267.61 -2,29,80,771.17 -2,42,70,024.04

Total Liabilities Interpretation:

10,65,63,287.9 4

13,25,79,979.9 2

+2,60,166.92

+24.41

When comparing 2006 and 2007 the financial position of the company decrease in the year 2007. It shows that the company attain a net loss in the year 2007 amounting to Rs.2,42,70,024.04 due to a decrease in the volume of sales.

5.3 COMMON SIZE INCOME STATEMENTS TABLE 5.3.1 COMMON SIZE INCOME STATEMENT OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 PARTICULARS 2005 Amount(Rs.) 30,63,29,147.3 0 27,98,87,814.2 0 2,64,41,333.10 1,71,423.08 7,47,459.48 9,259.00 4,38,670.66 1,09,499.35 0 14,76,311.57 2006 Amount(Rs.) 36,95,62,069.4 1 33,50,84,762.4 5 3,44,77,306.96 3,05,358.95 10,69,244.49 0 0 92,037.65 0 14,66,641.09

Percentage 100.00 91.37 8.63 0.06 0.24 0.003 0.14 0.04 0 0.48

Percentage 100.00 90.67 9.33 0.08 0.29 0 0 0.02 0 0.40

Net Sales Less: Cost of Goods Sold Gross Profit Operating Income: Interest Earned Miscellaneous Income Profit on sale of assets Reserve for Bad Debts Reversed Capital Grant Released Loss Recoverable Total Operating Income

Operating Expenditure: Interest paid and due Establishment & Contingent Depreciation Provision for bad debts Provision for Income Tax Reserve for loss to be recovered Loss brought forward Total Operating Expenditure Net Profit before Tax Less: Income Tax Net Profit Interpretation:

6,18,168.00 2,49,68,348.41 18,13,984.49 0 0 0 0 2,74,00,500.90 5,17,143.77 83,327.00 4,33,816.77

0.20 8.15 0.59 0 0 0 0 8.94 0.16 0.03 0.14

4,12,991.00 3,13,95,141.64 19,41,816.54 0 8,98,121.00 0 0 3,46,48,070.18 12,95,877.87 6,625.00 12,89,252.87

0.11 8.5 0.53 0 0.24 0 0 9.38 0.35 0.001 0.35

The Gross Profit have been increased from 8.63% to 9.33% due to increase in the sales to Rs.36,95,62,069.41. The operating income has been decreased from 0.48% to 0.40%. The operating expenditure has been increased from 8.94% to 9.38%. But the Net Profit increase from 0.14% to 0.35%.

TABLE 5.3.2 COMMON SIZE INCOME STATEMENT OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007 PARTICULARS 2006 Amount(Rs.) 36,95,62,069.41 33,50,84,762.45 3,44,77,306.96 3,05,358.95 10,69,244.49 0 0 92,037.65 0 14,66,641.09 Percentage 100.00 90.67 9.33 0.08 0.29 0 0 0.02 0 0.40 2007 Amount(Rs.) 36,50,46,958.6 6 34,73,47,499.5 7 1,76,99,459.57 10,06,082.00 7,63,365.46 1,23,843.00 0 0 0 18,93,290.46 Percentage 100.00 95.15 4.85 0.28 0.21 0.03 0 0 0 0.52

Net Sales Less: Cost of Goods Sold Gross Profit Operating Income: Interest Earned Miscellaneous Income Profit on sale of assets Reserve for Bad Debts Reversed Capital Grant Released Loss Recoverable Total Operating Income Operating Expenditure:

Interest paid and due Establishment & Contingent Depreciation Provision for bad debts Provision for Income Tax Reserve for loss to be recovered Loss brought forward Total Operating Expenditure Net Profit before Tax Less: Income Tax Net Profit/Loss Interpretation:

4,12,991.00 3,13,95,141.64 19,41,816.54 0 8,98,121.00 0 0 3,46,48,070.18 12,95,877.87 6,625.00 12,89,252.87

0.11 8.50 0.53 0 0.24 0 0 9.38 0.35 0.001 0.35

4,41,961.00 2,94,56,891.66 19,10,000.00 0 0 0 0 3,18,08,852.66 -1,22,16,103.11 4,42,622.00 -1,26,58,725.11

0.12 8.07 0.52 0 0 0 0 8.71 -3.35 0.12 -3.47

The Gross Profit have been decreased from 9.33% to 4.85% due to decrease in the sales by Rs.45,15,110.80. The operating income have been increased from 0.40% to 0.52%. The operating expenditure have been decreased from 9.38% to 8.71%. The company arises Net Loss of -3.47%.

TABLE 5.3.3 COMMON SIZE BALANCE SHEET OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2005 AND 2006 PARTICULARS Assets Current Asset: Accrued Income Interest Accrued Prepaid Expenses Closing Stock Deposits (Asset) Sundry Debtors Cash-in-hand Bank Accounts Advance Income Tax Total Current Assets 2005 Amount(Rs.) 2006 Amount(Rs.)

Percentage

Percentage

98,880.70 1,54,009.00 11,36,194.00 75,10,468.99 6,05,699.00 1,85,08,276.7 4 18,35,154.91 55,77,164.93 20,53,603.00 3,74,79,451.2

0.14 0.22 1.61 10.65 0.86 26.25 2.60 7.91 2.91 53.15

1,00,880.70 2,44,230.00 17,69,186.00 99,30,718.78 2,06,09,699.00 3,02,98,983.61 12,84,308.19 42,37,079.17 20,53,603.00 7,05,28,688.45

0.09 0.23 1.66 9.32 19.34 28.43 1.21 3.98 1.93 66.18

7 Fixed Assets: Office Machines Other Assets Buildings Equipments&Fittings Furnitures Land Plant&Machinery Vehicles Total Fixed Assets Investments: National savings certificates Reserve Fund in PSCB Shares in CWC Shares in other coop instns Total Investments Total Assets 10,78,774.23 5,02,804.60 77,00,629.10 36,86,281.57 7,14,875.47 42,942.69 1,69,65,935.2 7 13,91,033.71 3,20,83,276.4 4 10,000.00 4,16,468.00 1000.00 5,30,000.00 9,57,468.00 7,05,20,195.9 1 1.53 0.71 10.92 5.23 1.01 0.06 24.06 1.97 45.50 0.01 0.60 0.001 0.75 1.36 11,43,174.23 10,64,713.60 77,76,090.10 40,13,977.32 7,74,201.47 42,942.69 1,88,44,156.37 13,95,433.71 3,50,54,689.49 0 4,45,410.00 1000.00 5,33,500.00 9,79,910.00 1.07 1.00 7.30 3.77 0.73 0.04 17.68 1.31 32.90 0 0.42 0.0009 0.50 0.92 100.00

100.00 10,65,63,287.94

Liabilities Capital Account: Reserves&Surplus Share Capital Total Capital Account Loans (Liability): Loans & Deposits Bank OD A/c Total Loans Current Liabilities: 3,71,06,374.5 9 76,14,000.00 4,47,20,374.5 9 65,15,204.25 -32,56,674.49 32,58,529.76 52.62 10.8 63.41 9.24 -4.62 4.62 4,33,39,970.25 79,35,000.00 5,12,74,970.25 90,74,315.25 -76,35,012.40 14,39,302.85 40.67 7.45 48.12 8.52 -7.16 1.35

Interest due outstanding expenses Sales Tax due Provisions Sundry Creditors Provision for bonus&exgratia Stock Verification fees due Total Current Liabilities Profit & Loss A/c Total Liabilities

8,01,747.00 21,22,950.44 -2,70,426.41 0 1,75,22,552.7 6 19,21,851.00 8,800.00 2,21,07,474.7 9 4,33,816.77 7,05,20,195.9 1

1.14 3.01 -0.38 0 24.85 2.73 0.008 31.35 0.62 100

6,72,285.00 28,71,861.27 -7,279.58 4,42,622.00 4,60,14,215.28 25,57,758.00 8,300.00 5,25,59,761.97 12,89,252.87 10,65,63,287.94

0.63 2.7 -0.006 0.42 43.18 2.4 0.007 49.32 1.21 100

Interpretation: The percentage of current asset is more than the percentage of current liabilities in both the year. So there is a adequacy of working capital. The Fixed asset and investment have been increased by Rs.29,71,413.05 and Rs.22,442. The Reserve &surplus and share capital has also been increased to Rs.65,54,595.66. So it show that company retaining the funds. The loans have been increased by Rs.25,59,111 and Bank O/D has been raised to -76,35,012.40. The net profit of the company has been increased by Rs.8,55,436.10.

TABLE 5.3.4 COMMON SIZE BALANCE SHEET OF A PONLAIT FOR THE YEAR ENDING 31ST MARCH 2006 AND 2007 PARTICULARS Assets Current Asset: Accrued Income 2006 Amount(Rs.) 2007 Amount(Rs.)

Percentage

Percentage

1,00,880.70

0.09

1,00,880.70

0.08

Interest Accrued TDS-Interest Earned Prepaid Expenses Closing Stock Deposits (Asset) Sundry Debtors Cash-in-hand Bank Accounts Advance Income Tax Total Current Assets Fixed Assets: Office Machines Other Assets Buildings Equipments&Fittings Furnitures Land Plant&Machinery Vechiles Total Fixed Assets Investments: National savings certificates Reserve Fund in PSCB Shares in CWC Shares in other coop instns Total Investments Total Assets

2,44,230.00 0 17,69,186.00 99,30,718.78 2,06,09,699.00 3,02,98,983.61 12,84,308.19 42,37,079.17 20,53,603.00 7,05,28,688.45 11,43,174.23 10,64,713.60 77,76,090.10 40,13,977.32 7,74,201.47 42,942.69 1,88,44,156.37 13,95,433.71 3,50,54,689.49 0 4,45,410.00 1000.00 5,33,500.00 9,79,910.00 10,65,63,287.9 4

0.23 0 1.66 9.32 19.34 28.43 1.21 3.98 1.93 66.18 1.07 1.00 7.30 3.77 0.73 0.04 17.68 1.31 32.90 0 0.42 0.0009 0.50 0.92 100.00

1,72,108.00 13,643.00 15,95,252.00 1,13,41,642.80 72,80,529.00 5,20,14,572.15 14,18,138.25 59,97,536.60 23,13,603.00 8,22,47,905.50 23,65,991.23 9,24,203.60 78,69,338.10 45,29,650.80 8,58,049.47 35,62,891.69 2,70,03,703.02 20,02,139.51 4,91,15,967.42 500.00 4,81,107.00 1000.00 7,33,500.00 12,16,107.00 13,25,79,979.9 2

0.13 0.01 1.20 8.55 5.49 39.23 1.07 4.52 1.75 62.04 1.78 0.70 5.94 3.42 0.65 2.69 20.37 1.51 37.05 0.0003 0.36 0.0007 0.55 0.92 100.00

Liabilities Capital Account: Reserves&Surplus Share Capital Total Capital Account Loans (Liability): Loans & Deposits

4,33,39,970.25 79,35,000.00 5,12,74,970.25 90,74,315.25

40.67 7.45 48.12 8.52

4,79,60,147.03 82,27,000.00 5,61,87,147.03 1,17,18,889.25

36.17 6.21 42.38 8.84

Bank OD A/c Total Loans Current Liabilities: Interest due outstanding expenses Sales Tax due Provisions Sundry Creditors Provision for bonus&exgratia Stock Verification fees due Total Current Liabilities Profit & Loss A/c Total Liabilities

-76,35,012.40 14,39,302.85 6,72,285.00 28,71,861.27 -7,279.58 4,42,622.00 4,60,14,215.28 25,57,758.00 8,300.00 5,25,59,761.97 12,89,252.87 10,65,63,287.9 4

-7.16 1.35 0.63 2.70 0.006 0.42 43.18 2.40 0.007 49.32 1.21 100.00

2,13,93,685.23 3,31,12,574.48 2,44,922.00 29,29,199.51 57,660.81 4,42,622.00 5,99,30,632.26 26,47,693.00 8,300.00 6,62,61,029.58 -2,29,80,771.17 13,25,79,979.92

16.14 24.98 0.18 2.21 0.04 0.33 45.20 2.00 0.006 49.98 -18.31 100.00

Interpretation: The percentage of current asset is more than the percentage of current liabilities in both the year. So there is a adequacy of working capital. The Fixed asset and investment have been increased by Rs.1,40,61,277.93 and Rs.2,36,197. The reserve & surplus and share capital has also been increased to Rs.49,12,176.78. The loans have been increased by Rs.26,44,574 and Bank O/D has been raised to Rs.2,13,93,685.23. The company arises a Net loss for the year 2007 of Rs.-2,42,70,024.04.

CHAPTER VI 6.1 FINDINGS OF THE STUDY

The current ratio of the company is not at a satisfactory level, the desirable position of current ratio is 2:1, but it does not meet the desirable position. In the year 2007, current ratio is 1.24.

 The Quick Ratio, desirable position is 1:1, it meets desirable position for the past five year. In the year 2003, the quick ratio is 1.60 which is higher and in the year 2007, is 1.07. The debt-equity ratio, acceptable norm for the ratio is 2:1, but the company position is 1.04 in the year 2007. So it does not reaches the desirable position. For the past five year, the acceptable norms of the ratio has not been reached. The Gross Profit is declining. In the year 2004 it is 12.40 and in the year 2005 it is 8.63 and 2006 it is 9.33 and in the year 2007 it is 4.85. So the gross profit is decreasing. A ratio of 25% to 30% may be considered good. The Net Profit of the company is 1.22% in the year 2004, but in the year 2007, it is -3.46% (it means net loss). The company attain a Net loss. The Operating ratio for the past five year it is higher. In the year 2007, it is 103.87% which is higher when compare to the other years. When comparing these five years, 2004 to 2006 there is net profit to organization. In the year 2003 and 2007 the organization arises net loss. So there is not return on investment for the last year. The return on working capital in the year 2007 attain very poor condition, it shows a negative values. The firm does not earn a return on working capital when compare to previous year. The performance of the company is bad. Though there is a net loss in the year 2007, the company could not earn return on working capital. The effective utilization of working capital is 27.88 times in the year 2007, Higher sales in comparison to working capital indicate overtrading, whereas lower sales to working capital indicate undertaking. The inventory turnover ratio, decrease it seen from the above calculation. The company was able to sell Rs.48.63 by investing rupee one in stock in the year 2004 and it sales Rs.39.29 by investing rupee one in stock in the year 2007. So it shows a decrease in the inventory turn over ratio. Thus we can clearly found the company could not maintain the inventory effectively. The Receivable turnover ratio, indicates, that the debt collection period is increasing year by year. In the year 2003, 17.96 days and in the year 2007 it shows 42.64 days. So it shows that company does not concentrate in debt collection period. Sales have gone up in 2006, the rate of Gross Profit increase to 30.39%. The cost of goods sold is also increase to 19.72. The operating expenditure increase to

Rs.72,47,569.28. The operating income has been decreased to Rs.-9,670.48 but the Net Profit increase to Rs.8,55,436. Sales have declined in the year 2007, the cost of goods sold increase to Rs.1,22,62,737.10 due to this the rate of Gross Profit decrease. The operating income increase to Rs.4,26,649.37 and the operating expenses decrease to Rs.-28,39,217.52. Due to the sales decrease and the gross profit decrease, it results in Net loss of Rs.1,13,69,472.24. When comparing 2005 and 2006 the financial position of the company increase in the year 2006. The Net profit of the company has been increased by Rs.8,55,436.10. It shows the performance of the company increase form 2005 to 2006. It attains the Normal position. When comparing 2006 and 2007 the financial position of the company decrease in the year 2007. It shows that the company attain a net loss in the year 2007 amounting to Rs.-2,42,70,024.04 due to a decrease in the volume of sales. The Gross Profit have been increased from 8.63% to 9.33% due to increase in the sales to Rs.36,95,62,069.41. The operating income have been decreased from 0.48% to 0.40%. The operating expenditure have been increased from 8.94% to 9.38%. But the Net Profit increase from 0.14% to 0.35%. The Gross Profit have been decreased from 9.33% to 4.85% due to decrease in the sales by Rs.45,15,110.80. The operating income have been increased from 0.40% to 0.52%. The operating expenditure have been decreased from 9.38% to 8.71%. The company arises Net Loss of -3.47%. The percentage of current asset is more than the percentage of current liabilities in both the year. So there is a adequacy of working capital. The Fixed asset and investment have been increased by Rs.29,71,413.05 and Rs.22,442. The Reserve &surplus and share capital has also been increased to Rs.65,54,595.66. So it show that company retaining the funds. The loans have been increased by Rs.25,59,111 and Bank O/D has been raised to -76,35,012.40. The net profit of the company has been increased by Rs.8,55,436.10. The percentage of current asset is more than the percentage of current liabilities in both the year. So there is a adequacy of working capital. The Fixed asset and investment have been increased by Rs.1,40,61,277.93 and Rs.2,36,197. The reserve & surplus and share capital has also been increased to Rs.49,12,176.78. The loans have

been increased by Rs.26,44,574 and Bank O/D has been raised to Rs.2,13,93,685.23. The company arises a Net loss for the year 2007 of Rs.-2,42,70,024.04.

6.2 SUGGESTIONS AND RECOMMENDATIONS

 In order to achieve the satisfactory level in current ratio, increase the working capital by way of cash in hand, bank, marketable securities, etc. So it increase the working capital. The performance of quick ratio is at desirable position. The debt-equity ratio or leverage ratio, have to increase the long term funds in order to meets its desirable position 2:1 by way of issuing debenture, borrowing loans. The Gross Profit can be increase volume of sales or whether it should decrease the cost of goods by effective utilization of factors of productions. So it make the Gross Profit ratio to increasing level. In order to over come the Net loss, the company has to reduce the trade charges and other expenditure (Operational expense) i.e selling expenses, financial expenses, Administration expenses. The above suggestion will increase the gross profit, it automatically increase the net profit. The percentage of operating cost can be reduce by reducing financial expenses or selling expenses by these way the operating cost can be reduced. To increase the percentage of return on investment, the long term funds of owner and creditors have be used efficiently and the net profit will be increased. So it helps to attain return on investment. There should not be a net loss to the company. So it may affect the return on working capital. In order to attain Net profit, the company should reduces the trading charge and operational expenses. There should be higher sales in comparison to working capital. So the working capital ratio shows increasing trend. If it continues the same the firm will attain the profit in future.

 We can find that the company could not maintain inventory effectively. So it is advisable to the company to maintain the inventory effectively by using EOQ, safety stock, etc. The company has to give important to debt collection period. If the company reduces the debt collection period, it can get the funds quickly. So It helps to operate the business easily by increase the cash inflow. Reducing the operating expenditure by effective uses of funds helps to increase the operating income. It also helps to attain optimum level of Net Profit. Due to the sales decrease, the company faces net loss. So it is suggest to increase the sales for attaining Net Profit. The company has to increase the volume of sales. So it avoid the Net loss for the company. It also suggest that company should reduces it cost of goods sold. The net profit of the company increase. So it shows the performance of the company for the year 2005 and 2006 is attain a normal position. But in the year 2006 and 2007, the company arises Net loss in the year 2007. Due to the decrease in the sales. So the company has to increase the volume of sales.

CHAPTER-VII CONCLUSION
On the basis of the above study analysis shows that the overall companys financial position is not satisfactory level. The company attains net loss in the last year due to decrease in the sales. Further the company has to improve the volume of sales in order to attain a Net profit and also the company should concentrate on mobilizing the funds and allocation of funds to attain the satisfactory level.

CHAPTER VIII 8.1 LIMITATIONS OF THE STUDY

The entire study applies only to the Pondicherry Co-operative Milk Producers Union Ltd, Puducherry. The study takes into account only the quantitative data and the qualitative aspects were not taken into account. Ratio analysis suffers from certain limitations. They are Inadequacy of standards, Ratios alone are not adequate, Difficulty in Comparison, Problems of price level changes. The study does not take into the account for the inflation.

8.2 SCOPE FOR THE FURTHER STUDY

To analyse and interpret the relevant data of the company in a balanced way by ratio analysis. To provide a valuable suggestions and recommendations to the company on the basis of analysis & interpretation. To do the study in a logical and systematic way. Project helps to deal with forecasting in ratios. It helps to develop the policies for the executives in company.

BIBLIOGRAPHY
REFERENCES BOOKS

M Y Khan P K Jain Financial Management 4th edition Tata McGraw Hill. R.S.N. Pillai V. Bagavathi Management Accounting S Chand & Co. Dr.S. Ganeson S.R. Kalavathi Management Accounting Thirumalai Publication.

WEB SITES

www.google.com www.wekipedia.com
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