AN ORGANISATIONAL

STUDY AND A STUDY ON FINANCIAL

PERFORMANCE
TOWARDS PRIMARY AGRICULTURAL
CO-OPERATIVE CREDIT SOCIETY IN
GANAPATHYPALAYAM

MAIN PROJECT REPORT

Submitted by
L UMA MAHESWARI
(Reg. No. 732212631045)

In partial fulfillment for the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

IN
DEPARTMENT OF MANAGEMENT STUDIES
NANDHA ENGINEERING COLLEGE
ERODE 638 052
AUGUST- 2013
BONAFIDE CERTIFICATE

NANDHA ENGINEERING COLLEGE

ERODE-638 052
DEPARTMENT OF MANAGEMENT STUDIES
PROJECT WORK
JULY-2013

This is to certify that the project report entitled

AN ORGANISATIONAL STUDY ON FINANCIAL PERFORMANCE
TOWARDS PRIMARYAGRICULTURAL CO-OPERATIVE CREDIT SOCIETY IN
KANAKKAMPALAYAM

is the bonafide record of project work done by

L. UMA MAHESWARI
Reg. No.732212631045
of master of business administration during the year 2013

Project Guide

Head of the department

Viva-voce Examination held on:

INTERNAL EXAMINER

EXTERNAL EXAMINER

Declaration
DECLARATION

I affirm that the project work titled

ON

FINANCIAL

AN ORGANISATIONAL STUDY AND A STUDY

PERFORMANCE

TOWARDS

PRIMARYAGRICULTURAL

COOPERATIVE CREDIT SOCIETY IN KANAKKAMPALAYAM being submitted in

partial fulfilled for the award of master of administration is the original work carried out by
me. It has not formed the part of any other project work submitted for award of any degree/
diploma / either in this or any other university.

Signature of the student

(L. UMA MAHESWARI)
Reg. No. 732212631045

I certify that the declaration made above by the candidate is true.

SIGNATURE OF THE GUIDE.

Mr.J. MAGESWARAN,MBA
Assistant professor
Nandha Engineering College, Erode

Acknowledgement

ACKNOWLEDGEMENT

I express my gratitude to Mr.V.SHANMUGAN Chairman, SRI NANDHA

EDUCATIONAL TRUST, for providing an amazing environment for me to complete
this project successfully.
At the outset, no words are adequate to express my sincere and special thanks to our
Principal Dr. S.ARUMUGAM for granting this opportunity to have a wide spread view and
experience in the form of project work.
Words are inadequate in offering my thanks to Mr. N.DEVARAJ.BE., MBA, (PhD)
Head of Department, Department of Management Studies for his constant encouragement
throughout the tenure of the project. I am indebted to my Guide, Mr.J.MAGESWARAN, MBA,
(Ph.D) Assistant Professor, for her valuable guidance provided during the course of this project.
I am grateful to Mr.P.Mani, P.G.Mahalingam Joint Manager, CHERAN
INDUSTRIES,
Mr.Kamal,
Management
Representative
CHERAN
INDUSTRIES, COIMBATORE for his able guidance and useful suggestions, which helped me
in completing the project work, in time. I take this opportunity to thank Company Employees for
their encouragement and assistance and their valuable inputs.

I thank my faculty members, relatives and friends for their assurance and
encouragement. I am deeply indebted to my loving parents for their endurance and
perseverance during the course of my study.

L.UMA MAHESWARI

contents
CONTENTS
CHAPTER NO.

PARTICULAR
LIST OF TABLES

PAGE NO.

LIST OT CHARTS
CHAPTER I

CHAPTER II

1.INTRODUCTION

1.1 ABOUT THE STUDY

14

1.2 ABOUT THE INDUSTRY

24

1.3 ABOUT THE COMPANY

31

2. MAIN THEME OF THE PROJECT

2.1 OBJECTIVES OF THE STUDY

31

2.2 SCOPE OF THE STUDY

32

LIMITATIONS OF THE STUDY

32

2.3 RESEARCH METHODOLOGY

33

CHAPTER III

ANALUSIS AND INTERPRETATION

41

CHAPTER IV

FINDING AND CONCUSION

4.1 FINDINGS

59

4.2 SUGGESTIONS

60

4.3 CONCLUSION

61

APPENDICES
BIBLIOGRAPHY

List of tables
LIST OF TABLES

S.NO

PARTICULARS

PAGE. NO

The table showing the current ratio

42

3.2

The table showing the liquid ratio

45

3.3

The table showing absolute liquid ratio

48

3.4

The table showing the working capital

ratio

50

3.5

Schedule the working capital

52

3.1

List of CHARTS

LIST OF THE CHARTS

S.NO

PARTICULARS

PAGE. NO

The chart showing the current ratio

43

3.2

The chart showing the liquid ratio

46

3.3

The chart showing absolute liquid ratio

49

3.4

The chart showing the working capital

ratio

51

3.1

Abstract
ABSTRACT

Financial performance analysis is the process of identifying the financial strength and
weakness of the firm by properly established the relationship between the item of balance sheet
and profit and loss account.

Financial analysis can be undertaken by management of the firm, or by parties outside

the firm viz, owners, creditors, investors, and others. The nature of analysis will differ depending
on the purpose of analyst.

Management, creditors, investors and others to firm judgment about the operating
performance and financial position of the firm use the information contained in this statement
can get further insight about financial strength and weakness of the firm to make their best use
and to be able to spot out financial weakness of the firm to take suitable corrective actions.

Chapter-I

Introduction
CHAPTER-I

1. INTRODUCTION

1.1 ABOUT THE STUDY

1.1.1. FINANCE
In the modern money oriented economy, finance is one of the basic foundations of all
kinds of economic activities. It is the master key which provides access to all the sources being
employed in manufacturing and merchandising activities. It has rightly been said that business
needs moneys to make more money.
Finance is specialized function and it draws hazily on other related functions. Finance has
undergone a significant change and is concerned with the flow of funds and decision relating to
business operations affecting the valuation of the firm.
Finance function convers decision relating to investment, financing and organization,
which have to do with management of the flow of cash so that the organization will have to carry
out its objectives as satisfactorily as possible and at the same time meet its obligation as they
become due.
Finance may be defined as that administrative area or set of administrative function in an
organization which related with the arrangement of cash and credit so that the organization may
have that means to carry out its objective as satisfactorily as possible.

FINANCIAL MANAGEMENT
Financial management is broadly concerned with the acquisition and use of fund by a business
firm. Financial management emerged as a distinct field of study at the turn of this country. Its
evaluation may be divided into three broad phases.
1. The traditional phases
2. The transitional phases
3. The modern phases

1.1.3. KEY ACTIVITIES OF FINANCIAL MANAGEMENT

There are three broad activities of financial performance

1. Financial analysis planning and control

1. Assessing the financial performance and condition of the firm.

2. Forecasting and planning the financial future of the firm.
3. Estimating the financial needs of the firm.
4. Instituting appropriate system of control to ensure that the actions of manager
are congruent with the goals of the firm.
II. Management of the firms assets structure
1. Determining the capital budgets
2. Managing the liquid assets.
3. Establishing the credit policy and
4. Controlling the level of inventories.
III. Management of the firms financial structure
1. Establishing the debt-equity ratio or financial leverage.
2.

Determining the divided policy.

1.1.4. FINANCIAL ANALYSIS

The financial statement provides of summary of the accounting of the businessenterprise. To
understand the financial performance and control of a firm, its stockholders look at three
financial statements the balance sheet, the profit and loss accounts and sources and uses of funds
statements.
Balance sheet
it is a statement of financial position of a business at a specified moment of time. It
represents all assets concerned by a firm at a particular moment of time and the equities of the
outsiders against those assets at that time.

Profit and loss accounts

It shows what has happened to business as a result of operations between two balance
sheet dates.
1.1.5. Methods of analysis and interpretation
1. Ratio analysis
2. Working capital
3. Common size balance sheet.

INTRODUCTION TO WORKING CAPITAL MANAGEMENT

Working capital management is concerned with the management of current assets. The goal of
Working capital management is to manage the firms current assets and current liabilities in such
a way that a satisfactory level of Working capital is maintained. If the firm cannot maintain
satisfactory level of Working capital it is to become insolvent and may even be forced to
bankruptcy. The current assets should be large enough to cover is current liabilities in order to
ensure a reasonable margin of safety. Each of the current assets must be managed efficiently in
order to maintain the liquidity of the firm, if the current assets are to high, profitability is
adversely affected. The interaction between current assets and current liabilities is, therefore, the
main theme of the theory of Working capital management.

MEANING OF WORKING CAPITAL

In simple words, Working capital refers to that part of the firms capital which is required for
financing short term or current assets such as, cash, marketable securities, debtors, and
inventories or in other words the Working capital is the excess of current assets over current
liabilities.

CLASSIFICATION OF WORKING CAPITAL

Working capital can be classified on the basis of concept and on the basis of time.

KINDS OF WORKING CAPITAL

ON HE BASIS OF TIME

ON THE BASIS OF CONCEPT

Gross working
capital
capital

Regular working capital

Net working capital

permanent or fixed
working capital

temporary
variable working

Working Reserve capital

Seasonal
Working capital

special

Working capital

A. GROSS WORKING CAPITAL:

Gross working capital represents the amount of fund invented in current assets. Current assets
are those assets, which in the ordinary course of business can be converted in to cash within a
short period. Every management is more interested in the current assets with which it has to
operate than the source from which it made available. The gross working capital is the capital
invested in total current assets the gross concepts take in to consideration the fact that every
increase in the funds of the enterprise would increase its working capital.

B. NET WORKING CAPITAL:

Net working capital is the excess of current assets over current liability. New
working capital may be positive or negative.When the current assets exceed current liabilities.
The working capital is positive and negative working capital results when the current
liabilities are more than the current assets current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business with in a short period
C. PERMANENT OR FIXED WORKING CAPITAL:
Permanent or fixed working capital is the minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current assets.
There is always a minimum level of current assets which is continuously required by the
enterprise to carry out its normal business operation. For example every firm has to maintain a
minimum level or raw material, work in progress finished goods, and cash balance. The
permanent working capital can further be classified as regular working capital and reserve
working capital. Regular working capital is the minimum amount working capital required to
ensure circulation of current assets. Reserve working capital is excess amount over the
requirement for regular working capital.

D. TEMPORARY WORKING CAPITAL:

Temporary working capital is the amount of working capital, which is required to meet the
seasonal demand and some special exigencies. It is further classified as seasonal working
capital and special working capital. Additional working capital is needed seasonal & special
needs. Temporary working capital differs from permanent working capital in the sense that it
is required for short period. Permanent working capital is stable or fixed over time while the
temporary or variable working capital fluctuates. Permanent working capital is also increasing
with the passage of time due to expansion of business but even then it does not fluctuate as
variable working capital, which sometimes increases and sometimes decreases.
I. IMPORTANCE OF WORKING CAPITAL
Working capital is the lifeblood and nerve center of a business. Just as circulation of blood in the
human body for maintaining life, working capital is very essential is to maintain smooth running
of the business. No business can run successfully without an adequate amount of working
capital. The main advantages of maintaining adequate working capital are.

Solvency of the business: adequate working capital helps in maintaining solvency of

the business by providing an interrupted flow of production.

Good will: sufficient working capital enables a business concern to make prompt

payment and hence helps in creating and maintaining good will.

Easy loan: A concern having adequate working capital, high solvency good credit

standing can arrange loans easily.

Cash discount: Adequate working capital also enables a concern to avail cash

discount in the purchase and hence it reduces cost.

Raw material: Sufficient working capital enables regular supply of raw material and

continuous production.
Exploitation of favorable material condition: Only concern with adequate working
capital can exploit favorable market condition such as purchasing it requirement in
bulk when the prices are lower and by holding its inventories for high prices.

II. NEED FOR WORKING CAPITAL

The operating cycle can be said to be at the heart of the need for working capital. The continuing
flow from cash to suppliers, to inventory, to accounts receivable and back into cash is called
operating cycle. The length of time between the payments for the purchase of raw materials and
the collection of accounts receivable generated by the sales of the final product. It refers to the
length of the time necessary to complete the following cycle of events.

Conversion of cash into inventory

Conversion of inventory to receivable
Conversion of receivable into cash

In the first phase cash gets converted into inventory. This includes purchase of raw material to
work in progress, finished goods and finally the transfer of goods to stock at the end of the
manufacturing process. Phase I is absent in service organization. In second phase, inventory is
converted into receivables as credit sales are made to customer. In third phase, receivable are
collected and complete the operating cycle and goes on repeating. The speed with which the
working capital completes one cycle determines the requirement of working capital. Longer the
period of the cycle larger is the requirement and working capital.

RATIO ANALYSIS

Ratio analysis is the technique of analysis and INTERPRETATION of financial

statements. It is the process of established and interpreting various for helping making certain
decisions. However it is not an end in itself. It is only a means of better understanding of
financial strengths and weakness of the firm. Calculation of more ratio does not serve any
purpose, unless several appropriate ratio are analyzed and interpreted.

GUIDELINES OR PRECAUTIONS TO RATONS

The calculation of ratio may not be difficult but their use is not easy. The information on
which these are based, the constrains of financial statement, objectives of using them, the caliber
of analyst, etc. It is important factors which influence the use of ratios. Followed guidelines or
factors may be kept, in mind while interpreting various ratios.

Accuracy of financial statement

The reliability of ratios is linked to the accuracy of information in these statements. Before
calculating ratios one should see whether proper concepts and conventions are used for preparing
financial statements or not. The precautions will establish the reliability of data given in financial
statements.

USE AND SIGNIFICANCE OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial analysis. It is used as device to
analyze and interpret the financial health of the enterprise. The use of ratio is not confined to
financial manager only. There are different parties interested in the ratio analysis for knowing the
financial performance of the company. With the use of ratio analysis one can measure the
financial condition of the firm and can point out whether the condition is strong, good,
questionable or poor.

Managerial use of ratio analysis:

The managerial uses of ratio analysis are the following

Helps in decision making

Helps in financial forecasting and planning
Helps in communicating
Helps in co-ordination
Helps in control

Utility to share holder/investors:

An investor in the company will like to assess the financial position of the concern where he is
going to invest. His first interest will be the security of his investment and then a return in the
form of dividend or interest. Ratio analysis will be useful to investor in making up his mind
whether present financial position of the concern warrants further investment or not.
1. Utility to employees:
The employees are also interested in the financial position of the concern. Various
profitability ratio enable employees to put forward their viewpoint for the increase of
wages and other benefits.

LIMITATION OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial management. Though ratio
are simple to calculate and easy to under and they suffer from some limitations.
Limited use of a single ratio
A single ratio, usually, does not convey much sense. To make better INTERPRETATION a
number of ratios have to be calculated which is likely to confuse the analyst than Helps him in
making any meaningful conclusion.
Lack of adequate standards:
There are no well-accepted standards or rules of thumb for all ratios, which can be accepted as
norms. It renders INTERPRETATION of the ratio difficult.
2. Inherent limitation of accounting:
Like financial statements, ratio also suffer from the inherent weakness of accounting
records such as their historical nature. Ratios of the past are not necessary.
3. Personal bias:
Ratio is only means of financial analysis and is not an end in itself. Ratios have to be
interpreted and difficult people may interpret the same ratios in different ways

CLASSIFICATION OF RATIOS
A ratio is a simple arithmetical expression of the relationship of one number to another. The
technique of the ratio analysis can be employed for measuring short-term liquidity or working
capital position of a firm. The following ratios may be calculated for this purpose

a)
b)
c)
d)
e)

Current ratio
Liquidity ratio
Absolute liquidity ratio
Working capital
Fixed ratio

Current ratio
Current ratio may be defined as the relationship between current assets and current liabilities.
This ratio, also known as working capital ratio,is a measure of general liquidity and is most

widely of the firm, it is calculated by dividing the total of current assets by total of the current
liabilities.
Current assets
Current ratio=
Current liabilities
The two basic components of this ratio are: current assets andcurrent liabilities. Current assets
include cash and those assets which can be easily converted into cash with in a short period of
time generally, one year, such as marketable securities, bills receivable sundry debtors,
inventories, work in progress. Prepaid expenses should also be included in current assets because
they represent payments made in advance which will not have to be paid in near future. current
liabilities are those obligations which are payable within a short period of generally one year and
include outstanding expenses, bill payable, sundry creditors, accrued expenses, short-term
advances, income tax payable, etc.

LIQUID RATIO
The ratio between quick asset and current liabilities is called liquid assets.
Liquid assets
Liquid ratio=
Current liabilities
It refer to the assets which can be converted into cash very quickly. They are also called liquid
assets. Here liquidity means the ability of the assets to be quickly converted into cash. Therefore,
it is assumed that if stock-in-trade is excluded from current assets, we may have a measure of
quick or liquid assets.

ABSOLUTE LIQUID RATIO

Although receivable, debtors and bill receivable are general more than inventories, yet there
may be doubts regarding their realization into cash immediately or in time. Hence some

authorities are of the opinion that the absolute liquid ratio should also be calculated together with
current ratio and acid test ratio so as to exclude even receivable from the current assets and find
out the obsolete liquid assets.
Absolute liquid assets
Absolute liquid ratio=
Current liabilities

WORKING CAPITAL RATIO

Working capital of a concern is directly related to sales. The current assets like debtors, bill
receivable, cash, and stock ,etc.. Change with the increase or decrease in sale. The working
capital is taken as:

Working capital = current assets current liabilities

FIXED ASSET RATIO

The ratio establishes the relationship between fixed assets and long term funds. The objective of
calculating this ratio is to ascertain the proportion of long term funds invested in fixed assets.

Fixed asset
Fixed asset ratio =
Long term funds

1.2 ABOUT THE INDUSTRY

The author discusses the development of agriculture in India, and the strategy followed over at 1899,
which has made India self-sufficient in meeting its food-grains requirement. Needless to say agricultural

credit, improved technologies and institutional access to markets and development programs have played
an instrumental role in meeting these objectives of self-sufficiency. He discusses the development and
evolution of co-operative societies in India since 1904 when the first co-operative law was enacted, and
the role played by primary agricultural credit societies (PACS) in the overall agricultural development of
the country. He then discusses the relationship between the primary agricultural credit societies, the
District central co-operative bank, the state co-operative banks and the National Bank of Agriculture and
Rural Development (NABARD). He argues that in spite of the leading role that has been played by the
NABARD in meeting the agricultural credit needs, the future of agricultural credit societies leaves a
question mark especially because the relationship between the primary societies and their federal
structures has not evolved organically and the dependence of primaries on NABARD credit is getting
more pronounced. Moreover, primaries are not focusing on their basic task of mobilizing and distributing
resources locally, and there is a distict more away from member centrality. While in the short term, there
is no effect on the agricultural co-operative scenario, in the long run this dependence on NABARD may
have a rather negative effect on the primaries.

The paper is divided into following sections:

1. Agriculture in India
2. Organization of Co-operative Societies in India
3. Institutional Credit for Agriculture in India
4. Dependence on NABARD and effect on Primaries
5. Role of Commercial Banks in Agricultural Credit
6. Challenges to the Indian Co-operative Sector in the competitive environment.

FLOW OF INSTITUTIONAL CREDIT FOR AGRICULTURAL

DEVELOPMENT
The general policy on agricultural credit has been one of progressive institutionalization aimed at
providing timely and adequate credit to farmers for increasing agricultural production and productivity.
Providing better access to institutional credit for the small and marginal famers and other weaker sections
to enable them to adopt modern technology and improved agricultural practices has been a major concern
of the policy. In pre-independent India the majority of the population was impoverished and lived in subhuman conditions.
The land improvement loans Act of 1883 was the first consolidated law intended to provide
advancement of agriculture. The co-operative Land Mortgage Banks were created for providing long-term
loans to agriculturists for redemption of debts. This was followed by the enactment of Co-operative Credit
Societies Act of 1904 to meet the short-term credit needs of the farmers. In fact, the major thrust in the
area of agricultural credit during this period was more the prevention of exploitation of the peasants by
moneylenders, rather than the promotion of capital formation in agriculture. The fact that agricultural
sector would require an organized flow of funds to break the `inertia came to focus the only when the All
India Rural Credit Survey Committee (ARCSC): 1954 came to the conclusion that the existing structure
of primary credit societies was not sufficient to meet the credit requirements of the Indian peasants
especially those of a small and marginal farmers. It was in this context that the Reserve Bank of India
(RBI) and Government of India (GoI) thought of the `state partnership with co-ops, and there was a
massive infusion of funds to the sector. Not only was funding provided, managerial assistance and
restructuring of PACs was initiated to make the system viable. The primaries therefore became
instruments of government policy - they started performing an important development task but in the
process the loss of autonomy also started. However, this should not negate the very positive role that the
PACs performed.
The Primary Agricultural Credit Societies (PACS) constitute the `hub of the Indian co-op movement.
Every fourth co-operative in India is a primary credit society. The main objectives of a PACS are:

To raise capital for the purpose of giving loans and supporting the essential activities of the
members.

To collect deposits from members with the objective of improving their savings habit.

To supply agricultural inputs and services to members at remunerative prices.

To arrange for supply and development of improved breeds of livestock for the members.

To make all necessary arrangements for improving irrigation on land owned by members.

To encourage various income-augmenting activities such as horticulture, animal husbandry,

poultry, bee-keeping, pisciculture and cottage industries among the members through supply of
necessary inputs and services.

Human Resource and Financial Indicators of Primary Agricultural

Co- operative Societies

Years

Numbers
of
societies

Member
(in thou)

Deposits
(in thou
Rs.)

Loans from Loans

governmen from
t
central
bank
&CFAs

1950-55

115462

5154

44829

4265

187843

1956-65

159939

7791

70469

10148

417849

1966-75

212129

17041

145800

38617

1747216

1976-85

191904

26135

344918

90908

3444092

1986-90

160780

30963

694558

98819

6354271

1991-95

134678

876788

967899

1235786

6789980

1996-01

178554

987665

1235678

1978656

9778689

Cooperative Credit Societies Act, 1904 - The First Incorporation

Taking cognizance of these developments and to provide a legal basis for cooperative societies,
the Edward Law Committee with Mr. Nicholson as one of the members was appointed by the
Government to examine and recommend a course of action. The Cooperative Societies Bill,
based on the recommendations of this Committee, was enacted on 25th March, 1904. As its name
suggests, the Cooperative Credit Societies Act was restricted to credit cooperatives. By 1911,
there were 5,300 societies in existence with a membership of over 3 lakhs. The first few cooperative societies registered in India under the 1904 Act in the first 5-6 years are as follows:
Rajahauli Village Bank, Jorhat, Jorhat Cooperative Town Bank and Charigaon Village Bank,
Jorhat, Assam (1904), Tirur Primary Agricultural Cooperative Bank Ltd., Tamil Nadu (1904),
Agriculture Service Cooperative Society Ltd., Devgaon, Piparia, MP (1905), Bains Cooperative
Thrift & Credit Society Ltd., Punjab (1905), Bilipada Service Cooperative Society Ltd., Orissa
(1905), Government of India, Sectt. Cooperative Thrift & Credit Society (1905),
KanginhalVyvasayaSevaSahakari Bank Ltd., Karnataka (1905), KasabeTadvale Cooperative
Multi-Purpose Society, Maharashtra (1905), Premier Urban Credit Society of Calcutta, West
Bengal (1905), Chittoor Cooperative Town Bank, Andhra Pradesh (1907), Rohika Union of
Cooperative Credit Societies Ltd., Bihar (1909). Under this Act, several non-credit initiatives
also came up such as the Triplicane society in Madras which ran a consumer store, weaver credit
cooperatives in Dharwar and Hubli, which gave credit in the form of yarn etc. However, these
were registered as Urban Credit Societies.
The 1904 Act provided for constitution of societies, eligibility for membership,
registration, liabilities on members, disposal of profits, shares and interests of members,
privileges of societies, claims against members, audit, inspection and enquiry, dissolution,

exemption from taxation and rule making power. All other operational and managerial issues
were left to the local governments namely to formulate suitable rules and model bye-laws of the
cooperative societies. The institution of the Registrar, visualized as a special official mechanism
to be manned by officers with special training and appropriate attitudinal traits to prompt and
catalyze cooperative development was the result of the Cooperative Societies Act of 1904.

Cooperative Societies Act, 1912

The developments in terms of growth in the number of cooperatives, far exceeding
anticipation, the Cooperative Societies Act of 1912 became a necessity and cooperatives could be
organized under this Act for providing non-credit services to their members. The Act also
provided for Federations of cooperatives.
This enactment, in the credit sector, urban cooperative banks converted themselves into
Central Cooperative Banks with primary cooperatives and individuals as their members.
Similarly, non-credit activities were also cooperatively organized such as purchase and sales
unions, marketing societies, and in the non-agricultural sector, cooperatives of handloom
weavers and other artisans.
Maclagen Committee on Cooperation (1914)
The Banking Crisis and the First World War both affected the growth of cooperatives. Al though member deposits in cooperatives increased sharply, the war affected the export and prices
of cash crops adversely, resulting in increased over-dues of loans of primary agricultural
societies. To take stock of the situation, in October, 1914 a Committee on Cooperation under Sir
Edward Maclagen was appointed by the Government, in October 1914, to study the state of, and
make recommendations for the future, of cooperatives. The

Committees recommendations,

which are detailed in Annexure-3, are basically related to credit cooperatives. It recommended
building up a strong three-tier structure in every province with primaries at the base, the Central
Cooperative Banks at the middle tier and the Provincial Cooperative Bank at the apex, basically
to provide short-term and medium-term finance. Considerable emphasis was laid on ensuring the

cooperative character of these institutions and training and member education, including training
of the Registrar and his staff.
After the 1912 Act, the first Cooperative Housing Society, the Madras Cooperative Union in
1914, the Bombay Central Cooperative Institute in 1918 and similar institutions in Bengal, Bihar,
Orissa, Punjab etc. came up. Other than consumer cooperatives and weavers cooperatives, other
non-agricultural credit cooperatives generally performed well and grew in strength and
operations during this period.
Government of India Act, 1919
In 1919, with the passing of the Reforms Act, Cooperation as a subject was
transferred to the provinces. The Bombay Cooperative Societies Act of 1925, the first provincial
Act to be passed, among others, introduced the principle of one-man one-vote. The agricultural
credit scenario was a matter of concern and various committees looked into the problems of
cooperative banks in various provinces. The Royal Commission on Agriculture in 1928 also
reviewed the cooperative sector and among others recommended the setting up of land mortgage
banks.
In both agricultural and non-agricultural non-credit sectors, societies were
organized, but most faced difficulties in operation as a result of opposition by private marketing
agencies and also the inexperience of their office bearers. This focused attention on
strengthening of cooperative institutes and unions for education and training. A prominent
development of this time was the setting up of the All India Association of Cooperative Institutes
in 1929.The setting up of the Reserve Bank of India (RBI) in 1934 was a major development in
the thrust for agricultural credit. The Reserve Bank of India Act, 1934 itself required the RBI to
set up an Agricultural Credit Department. As cooperatives were to be channels for rural
development, with the establishment of popularly elected governments in 1935, programs were
drawn up in which rural indebtedness received priority. The Mehta Committee appointed in 1937
specifically recommended reorganization of Cooperative Credit Societies as multi-purpose
cooperatives.

The Second World War boosted the prices of agricultural commodities leading to increased
returns to farmers and consequently reduction in over-dues to the cooperatives. To counter shortages of essential commodities for domestic consumption as well as raw materials, the
Government resorted to procurement of commodities from producers and rationing, for which it
decided to utilize the cooperatives. This provided a momentum to the growth of multi-purpose
cooperatives. The period between1939-1945 provided a further stimulus to the growth of the
Urban Cooperative Credit structure. Many societies had started banking functions and had grown
in size and operations over a period of time, with substantial diversification of activities.
Multi-Unit Cooperative Societies Act, 1942
With the emergence of cooperatives having a membership from more than one state such
as the Central Government sponsored salary earners credit societies, a need was felt for an enabling cooperative law for such multi-unit or multi-state cooperatives. Accordingly, the MultiUnit Cooperative Societies Act was passed in 1942, which delegated the power of the Central
Registrar of Cooperatives to the State Registrars for all practical purposes. In 1944, the Gadgil
Committee recommended compulsory adjustment of debts and setting up of Agricultural Credit
Corporations, wherever cooperative agencies were not strong enough.
Cooperative Planning Committee (1945)
The Cooperative Planning Committee under the chairmanship of Shri R.G. Saraiya was
set up in 1945. The Committee found cooperative societies to be the most suitable medium for
democratization of economic planning and examined each area of economic development. 9
Pre-Independence Development
In 1946, inspired by SardarVallabhBhai Patel and led by ShriMorarji Desai and
ShriTribhuvan Das Patel, the milk producers of Khera District of Gujarat went on a fifteen day
strike. Their refusal to supply milk forced the Bombay Government to withdraw its order
granting monopoly procurement rights to Polson, a private dairy. History was made when two
Primary Village Milk Producer Societies were registered in October 1946. Soon after on 14th
December 1946, the Khera District Cooperative Milk Producers Milk Union known as Amul was

registered. The Registrars Conference in 1947 recommended that the Provincial Cooperative
Banks be re-organized to give greater assistance to primary societies through Central Banks. For
the first time an effective linking of credit with marketing, and providing assistance by way of
liberal loans and subsidies for establishment of a large number of go downs and processing
plants was considered.

It would be appropriate to mention here some developments in Bombay vis--vis

cooperatives, which had an impact on the cooperative sector. ShriVaikunthBhai Mehta took over
as Minister, In-charge of Cooperation in the Bombay Government after which the cooperative
movement in the province received a boost. A Committee on Cooperative Education and
Training under the chairmanship of Sir JanardanMadan, made recommendations for cooperative
education programs and the setting up of an Education Fund. The Agricultural Credit
Organization Committee, with Sir ManilalNanavati as Chairman recommended State assistance
in agricultural finance and conversion of all credit cooperatives into multi-purpose cooperatives.
It also recommended a three-tier cooperative credit banking system, and various subsidies etc..

NEW REGULATORY POWERS OF THE RBI IN RESPECT OFCO-OPERATIVE

BANKS.
Provisions contained in Section 18 of the BR Act, relating to maintaining cash reserve
by non-scheduled state co-operative banks, are made applicable to co-operative banks. The
ceiling of 3 per cent on cash reserve is removed and RBI is empowered to specify the percentage
of cash reserve required If there are defaults in maintaining the cash reserve, RBI is
empowered to levy a penal interest on the shortfall for that day at a rate of 3 per cent above the
bank rate. If the default continues, the penal interest shall be increased to 5 per cent from the next
day.

RBI is empowered to direct the cooperative banks to maintain assets not exceeding 40
per cent of demand and time liabilities. In other words, cooperative banks shall be required to
maintain a statutory liquidity ratio RBI is also empowered to order special audit of cooperative banks In addition to the above regulatory powers, the major change introduced by the
Banking Laws (Amendment) Act, 2012, is that freedom given to the primary co-operative credit
societies to function as banks, without a license from RBI, is withdrawn. As far as the existing
primary co-operative credit societies functioning as banks are concerned, they are given time up
to a year, extendable and not exceeding to three years, to close the banking business or obtain a
license from RBI.
Document of the society
a.original copies of the Basic and Operational Regulations of the Society
b. the business plan of the Society
c.

Individuals appointed to temporarily manage the society until the Management Committee

can be elected in accordance with 28 (a) of the Cooperative Society Act.

d.

Application form for registration of Cooperative Societies.

e.

Photocopies of the ID Cards of the founder members.

A plan on how to acquire adequate finances to carry out the mandate of the Society and a plan of
how the accounts and documents of the society will be maintained should be included in the
business plan.
Conditions for members of Cooperative Societies
a)

Members of Cooperative Societies should be Maldivian Citizens. Clubs, Committees,

Companies and Partnerships, except the Government, cannot participate in Cooperative
Societies. All members should be above 18 years of age and should be actively involved in the
society or a segment of the society. The community in which the Cooperative Society will be
active should be specified in the regulation of the society.

b)

Each person should purchase or acquire at least one share of the society in order to become a
member. The individual should not have been previously expelled from any society due to abuse
of funds.

c)

The individual should not have previously been charged, or currently be serving a criminal or
legal sentence. (If a member of the society is charged with a criminal or legal offence, the
member shall be removed from the society.

d)

Proposed members of Cooperative Societies should be of sane mind.

THE ACCOUNT AND BUDGET OF THE SOCIETY

The accounts of the co-operative society should be auditing and maintained by an auditor
approved by the registar.

The annual accounts of each year should be documented, and the accounts and audit reports
should be presented in the annual general meeting of the society.

The annual accounts should be published each year after approval from the audit officer. It
should also the posted at the headquarter of the co-operative society so that the members can see
it without administering any see.

1.3 ABOUT THE SOCIRTY

ORGANISATION PROFILE

GANAPATHYPALAYAM PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETY was

established in the year 1975 with 25 members. Now it holds 2229 members. It was controlled by
the state government. In this society 5people are worked and it provides loan facilities to the
public.
It provides bike loans at 7% interest rate from the society. They need not to pay
interest within one year payment. After one year only they must pay the interest. It gives jewelry
loan to the people at 14.5% interest rate. Still now 400 members are got benefited and it the
range from minimum RS.13000 to maximum RS.800000. Its also favors farmers by providing
agricultural loan to them. To the maximum of RS.100000 with 2 year payment. It also offers
fertilizers to the turmeric, cotton, sugarcane, platoon tree, etc
The main task of society is to provide different loan for people. Hence of a person who
amount repay the loan throughout ones entire life, is liable for the loan repayment.
MULTI-PURPOSE OF SOCIETIES.
These societies are also credit societies, but they link credit with marketing. In addition to
providing short term and intermediate term credit they undertake to supply such agricultural
requisites as seed, manure, and feeding stuffs for cattle, and also make arrangements for the joint

sale of their members' produce. This enables them to advance loans against the security of
members' agricultural produce. The need for such societies is felt all the more by the
agriculturists whose debts have been adjusted. To satisfy this growing need, it is now desired to
convert gradually agricultural co-operative credit societies into multi-purpose societies and to
extend the field of operation to each society to groups of villages within a radius of five miles. To
enable the multi-purpose societies to carry on their function of selling the produce to their
members. Government have authorised the Registrar to sanction long term loans to the
construction of go downs to store agricultural produce.
There were no multi-purpose societies in the district before 1939-40 at the end of 1948-49
their number was 34 with a membership to 3,915 and a working capital of Rs.2,53,748. These
and other details tor the three years ended 1948-49.
The working of these societies showed a net loss of Rs.4,368 in 1946-47, a net profit of Rs.2,137
in 1947-48 and again a net loss of Rs.144 in 1948-49.
Agricultural credit societies, including multi-purpose societies, are now playing an
increasingly important part in the field of agricultural finance where till recent years there were
no alternatives to money-lenders as sources of credit. Various committees appointed by the State
and Central Governments to study the question of extending rural credit emphasized the need for
enlarging the sphere of co-operative societies with suitable re-organisation. The Co-operative
Planning Committee advocated the extension of the movement so as to bring 50 percent of the
villages and 30 percent of the rural population within the ambit of the reorganised primary
societies. In the State of Bombay the period within which the objective was to be achieved was
proposed as seven years from the year 1946-47. As a result of the steps taken by Government to
implement these recommendations, the primary societies registered in this district up to the year
1948-49 covered 44.5 percent of the villages and 14.8 percent of the rural population.
MAJOR FUNCTION MODULES
1.
2.
3.
4.
5.

Saving bank
Current account
Cash credit account
Daily deposit account
Term deposit

6.
7.
8.
9.

Recurring deposit
Term loans
Trading account
Membership accounting.

KEY FEATURES

1. Graphical user interface

2. Modular approach
3. Parameterized set up
4. Online help
5. GL maintenance
6. Gold loan
7. Sundry creditors
8. Stock statement
9. Trial balance
10. Trade account
11. Profit and loss account
12. Balance sheet
13. Statement of account
14. Statutory reporting
15. Dividend calculation and register
16. Investment register
17. Membership accounting
18. Inventory control
19. Purchase register
20. Loan against deposit

FUNCTIONS
It provides credit to the farmers, distribute inputs like fertilizers and also run outlets under
Public Distribution System. These banks provide short term and medium term credit for agriculture
and allied activities. The short term loans are repayable within a period of 12 to 15 months and the
medium term loans are repayable within 3 to 5 years. The loan amount exceeding this limit is secured
with mortgage of property or pledge of jewels.
Primary Agricultural Cooperative Credit Societies also issue loans for other agricultural purposes
like purchase of farm machineries and for non-agricultural purposes including loans for the purchase
of consumer durables, housing loans, education loans and professional loans. To provide marketing
facilities for the sale of agricultural produce.To associate itself with economic and social welfare
programs of the village.
Considering the importance of increasing credit flow into the agriculture sector, Government
has reduced the interest rate for the crop loans from 9% to 7% per annum from 2006-07, the interest
differential being compensated by the Government.

ORGANISATIONAL HIERARCHY

BOARD OF DIRECTORS
(21 member elected as per the provisions
of the act,rules and law)

PRESIDENT
(Elected from among the board of
directors)

MANANGING DIRECTORS

CHIEF GENERAL MANAGER (3)

GENERAL MANAGER(7)

DEPUTY GENERAL MANAGER

(Functions as department heads)

BRANCH
MANAGERS (14)

OTHER SUPPORTING
OFFICERS AND STAFFS

OBJECTIVES OF SOCIETY

1. To cater to the credit requirement of farmer-members of the primary agriculture co-operative

societies.

2. To provide improved customer service through up gradation of technology and adoption of best
practice.
3. To direct effort towards achieving the state government given targets under various crop
production programs and implementation of policies on the co-operative sectors.
4. Term loans for acquisition /creditor development of assets in agriculture and non-agriculture
sector.

5. Employment generation through bank finance in rural and urban areas.

6. Provider of banking service in rural and urban areas.
7. They motivate self-help group also to starting new business.
8. To motivate the entrepreneur by giving loan.
9. The peoples are easily getting loan from society.

Chapter-II

Main theme of the project

CHAPTER II

OBJECTIVES OF THE STUDY

1.
2.
3.
4.
5.

To estimate the amount of working capital of the society for a period from 2010 to 2013.
To evaluate the short-term solvency of the society.
To calculate common size balance sheet to assess the financial position of the firm.
To understands the overall financial position of the society.
To assess the factor influencing the financial performance of the society.

SCOPE OF THE STUDY

1.

This study deals with management of financial performance at primary agricultural

Co-operative credit society.
2. The annual reports and the books of the society for four years from 2010 to 2013 were
analyzed.
3. The basis for financial planning and analysis is financial information, financial need to
predict compare and evaluate the forms earning ability. It is also required to aid in
economic decision making. Investment and financial statement or accounting reports.

LIMITATION

a. Analysis is the based on the annual reports of the society.

b. External factors that affect the financial performance of the society have not been
given much importance
c. Ratios of the past are not true indicators of future.
d. Any change in the methods or procedures of accounting systems limits the utility of
financial statement.
e. Financialstatements are prepared on the basis of certain accounting concepts and
conventions.
f. Financial analysis is based in monetary information and non-monetary information
ignored.

NEEDS OF THE STUDY

Financial statement analysis is an important tool for measuring the financial performance of the
society. The main aspect of financial management is working capital management and it should
be done on day-to-day basis. Hence the society permits me to do in the areas of finance. This
study helps to review the financial performanceof the society.
Financial analysis is the process of identifying the financial strength and weakness of
the firm by properly established relationship between the item of the balance sheet and the profit
and loss accounts.
RESEARCH METHODOLOGY
RESEARCH
Research is process in which the researcher wishes to find out the end result for a
given problem and thus the solution helps in future course of action. The Research has been
defined as A careful investigation or enquiry especially through search for new facts in branch
of knowledge.

RESEARCH DESIGN
The collected data were presented in tables and these table were analyzed systematically. Ratio
analysis is the vital tools used to study the financial performance of primary agricultural cooperative credit society. A chart and various diagrams are used to explain the analysis clearly.

DATA COLLECTION METHOD

Data collection method is an important task in every research process. There are two types of
data is being used
Primary data: The data are collected directly from the respondents as the information is not
already been provided.
Secondary data: The data are collected from the company records, newspaper, journals,
magazines, library, etc..

The study is based on secondary source of data. Secondary data have been mainly obtained
from annual reports, records and books of primary agricultural co-operative credit society. The
Secondary data were also collected from audited financial statement such as income statement
and balance sheet.
PERIOD OF STUDY
Data of 4 financial years are used for the purpose of study. The 4 years of study ranges from
2010-2013.

TOOLS
The following are the various tools used to analyze the data

Ratio analysis
Working capital
Common size balance sheet
RATIO ANALYSIS
Ratio analysis is a widely-used tool of financial analysis. It is defined as the systematic use of
ratio to interpret the financial statement so that the strengths and weakness of a firm as well as its
historical performance and current financial condition can be determined.
CURRENT RATIO

Current ratio may be defined as the relationship between current assets and current liabilities.
This ratio, also known as working capital ratio,is a measure of general liquidity and is most
widely of the firm, it is calculated by dividing the total of current assets by total of the current
liabilities.
Current ratio= Current assets/ Current liability

LIQUID RATIO
The ratio between quick asset and current liabilities is called liquid assets.
Liquid ratio= Liquid assets/ Current liabilities
It refers to the assets which can be converted into cash very quickly. They are also called liquid
assets. Here liquidity means the ability of the assets to be quickly converted into cash. Therefore,
it is assumed that if stock-in-trade is excluded from current assets, we may have a measure of
quick or liquid assets.

ABSOLUTE LIQUID RATIO

Although receivable, debtors and bill receivable are general more than inventories, yet there
may be doubts regarding their realization into cash immediately or in time. Hence some
authorities are of the opinion that the absolute liquid ratio should also be calculated together with
current ratio and acid test ratio so as to exclude even receivable from the current assets and find
out the obsolete liquid assets.
Absolute liquid ratio= Absolute liquid assets/ Current liabilities

WORKING CAPITAL RATIO

Working capital of a concern is directly related to sales. The current assets like debtors, bill
receivable, cash, and stock ,etc.. Change with the increase or decrease in sale. The working
capital is taken as:

Working capital = current assets current liabilities

FIXED ASSET RATIO

The ratio establishes the relationship between fixed assets and long term funds. The objective of
calculating this ratio is to ascertain the proportion of long term funds invested in fixed assets.
Fixed asset ratio =Fixed assets/Long term funds
COMMON SIZE BALANCE SHEET
A statement where balance sheet items are expressed in the ratio of each asset to total assets
and the ratio of each liability is expressed in the ratio of total liabilities is called common size
balance sheet. The common size statements (Balance Sheet and Income Statement) are shown in
analytical percentages. The figures of these statements are shown as percentages of total assets,
total liabilities and total sales respectively. Take the example of Balance Sheet. The total assets
are taken as 100 and different assets are expressed as a percentage of the total. Similarly, various
liabilities are taken as a part of total liabilities.

REVIEW OF LITERATURE
Financial performance analysis is the process of determining the operating and financial
characteristics of the firm from accounting and financial statements. The goal of such analysis is
to determine the efficiency and performance of firms management, as reflected in the financial
records and reports. The analyst attempts to measure the firms liquidity, profitability and other
indicators that the business is conducted in a rational and normal way; ensuring enough to the
shareholders to maintain at least its market value.
According to Myer
Financial statements analysis is largely a study of relationship among various financial
factors in a business as disclosed by a single set of statements and study of these factors shown in
series of statement.

Thus financial analysis is the use of financial statements to analyst companys financial
position and performance, and to assess future financial performance. In short financial analysis
is the process of examining the composition of financial statements for getting valuable
information about the business. It is a technique of x-raying the financial position as well as
progress of a firm.
Financial analysis includes analysis and interpretation of financial statements. The word analysis
literally means to break into parts. In the context of financial statements, analysis is the process
of breaking down a complex set of figure into simple statements in order to have a better
understanding. It is a critical examination of financial transactions effected during a definite
period.
According to Altman and Eberhart
Financial performance analysis is vital for the triumph of an enterprise. financial
performance analysis is an appraisal of the feasibility, solidity and fertility of a business, subbusiness or mission. Altman and Eberhart (1994) reported the use of neural network in
identification of distressed business by the Italian central bank. Using over 1000 sampled firm
with 10 financial ratios as independent variables, they found that the classification of neural
networks was very close to that achieved by discriminate analysis. They concluded that the
neural network is not a clearly dominant mathematical technique compared to traditional
statistical technique.
According to gepp and kumar
Gepp and kumar (2008) incorporated the time bias factor into the classic business
failure prediction model. Using Altman (1968) and Ohlsons (1980) model to a matched sample
of failed and non-failed firms from 1980s, they found that the predictive accuracy of Altmans
model declined when applied against the 1980s data. The findings explained the importance of
incorporating the time factors in the traditional failure prediction models.
According to Campbell
Campbell (2008) constructed a multivariate perdition model that estimates the probability
of bankruptcy reorganization for closely held firms. Six variables were used in developed the
hypotheses and five were significant in distinguishing closely held firms that reorganize from
those that liquidate. The five factors were firm size, assets profitability, the number of secured

creditors, the presence of free assets, and the number of under-secured secured creditors. The
prediction model corrently classified 78.5% of the sampled firms. This model is used as a
decision aid when forming an export opinion regarding a debtors likelihood of rehabilitation. No
study has incorporated the financial performance analysis of the central public sector enterprises
in Indian drug &pharmaceutical industry. Nor has any previous research examined the solvency
position, liquidity position, operating efficiency and the prediction of financial health and
viability of public sector drug & pharmaceutical enterprises in India.

According to Apria Healthcare Group, Inc..andLincareHoldings,Inc

Two healthcare companies, Apria Healthcare Group, Inc. and Lincare Holdings, Inc. both
provide home medical equipment and service throughout the United States and are listed in the
standard and poor Mid Cap400. In order to gage the financial performance of each of these
companies, team B will evaluate each companys financial performance over the past two years
using various ratios. This will assist in analyzing trends and determining any significant
differences in the two companys financial performance. The team will identify cash used and
generated, determine reasons for changes year over year, and evaluates if cash is generated in a
sustainable manner. Based on this research, we will make appropriate recommendations on how
the companies may better manage cash flow in the future.

LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is a very important device but it has certain limitations
which are to be kept in mind. Following are the limitations of financial statement analysis.
Based on past data:
The nature of financial statements is historical. Past cannot be the index of future
estimation, forecasting, budgeting and planning.
Financial statement analysis cannot be a substitute for judgment :
Analysis is a tool which can be utilized usefully by an expert may lead to erroneous
conclusion by unskilled analysis. Thus the result analysis cannot be considered as judgment or
conclusion.

Reliability of figures:
The accuracy and reliability of analysis depends on reliability of figures derived from
financial statement.
Different interpretation:
Result of the analysis may be interpreted differently by different user
Change in accounting methods:
Analysis will be effective if the figures taken from financial statements comparable. If
there are frequent change in accounting policies and method, figures of different periods will be
different and comparable.
Price level change:
The ever rising inflation erodes the value of money in the present day economic situation,
which reduces the validity of analysis.
Limitations of the tools of analysis:
Different techniques of analysis are used by an analyst. These tools are suitable for
different type of analysis. Application of a particular tool or technique depends on the skill and
expertise of the analyst. If an unsuitable technique is used, it give misleading result. It may lead
to wrong conclusions and prove harmful to the business concern.

METHODS OF ANALYSIS AND INTERPRETATION

The analysis and interpretation of financial statement is used to determine the financial
position and result of operation as well. The following are the tools that are used for analyzing
the financial position of the company:
1) Ratio Analysis
2) Working capital
3) Common size balance sheet
RATIO ANALYSIS
Ratio analysis is an important and age-old technique. It is a powerful tool of financial
Analysis. It is defined as The indicated quotient of two mathematical expressions and as the
relationship between two or more things .Systematic use of ratio is to interpret the financial

statement so that the strength and weakness of a firm as well as its historical performance and
current financial condition can be determined.
A ratio is only comparison of the numerator with the denominator .The term ratio refers
to the numerical or quantitative relationship between two figures. Thus, ratio is the relationship
between two figures and obtained by dividing a former by the latter. Ratios are designed show
how one number is related to another.
The data given in the financial statements are in absolute form and are dumb and are
unable to communicate anything. Ratios are relative form of financial data and are very useful
technique to check upon the efficiency of a firm. Some ratios indicate the trend or progress or
downfall of the firm.
In the view of the requirements of the various users of ratio, it is divided in to the following
important categories.
1. Liquidity ratios
2. Activity ratios
3. Profitability ratios
4. Earning ratios

LIQUIDITY RATIOS:
Liquidity ratios measure the ability of the firm to meet its a current obligation. In fact,
analysis of liquidity needs the preparation of cash budgets and cash and fund flow statements;
but liquidity ratios, by establishing a relationship between cash and other current asset to current
obligations provide a quick measure of liquidity.
A firm should ensure that it does not suffer From lack or liquidity, and it does not have
excess liquidity .the failure of the company to meet its obligations due to its lack of liquidity, will
result in a poor creditworthiness, loss of creditors confidence, or even in legal tangles resulting
in the closure of the company a very high degree of liquidity is also bad idle assets earn nothing.
The firms fund will be unnecessarily tied up in current assets. Therefore it is necessary to strike a
proper balance between high liquidity and lack of liquidity.

ACTIVITY RATIO OR TURNOVER RATIO:

Activity Ratio highlights the activity and the operational efficiency of the business
concern . The better managements of asserts the larger the amount of sales. Activity ratio
measures the relationship between the sales and the assets. Turnover ratios are employed to
evaluate the efficiency with which the firm manages and utilize s its assets. Their ratio indicates
the speed with which assets are brought converted as turn over into sales.
PROFITABILITY RATIOS:
Profitability reflects the final result of the business operations. Profit earning is
considered essential for the survival of the business. There are two types of profitability ratios
profit margin ratio and the rate of return ratios. Profit margin ratio shows the relationship
between profit and sales.
Popular profit margin ratios are gross profit margin and net profit margin ratio. Rate of return
ratio reflects between profit and investment. The important rates of return measures are rate of
return on total assets and rate in equity.
EARNINGS RATIOS:
Earnings are income to the shareholders of the share invested by them. Hence the earning ratio
will be useful to the investors to the value of the shares that is been holding by them.

hapter III

Data analysis and

interpretation

CHAPTER III

ANALYSIS AND INTERPRETAYIONS

RATIO ANALYSIS

3.1 CURRENT RATIO

Current ratio may be defind as the relationship between current asset and current liabilities.
The acceptable norms (or) rules or thump is 2:1. This ratio is also known as working capital ratio and it is
calculated by divided the total of the current assets by total of the current liabilities.

CURRENT RATIO= CURRENT ASSET

CURRENT LIABILITIES

TABLE SHOWING THE CURRENT RATIO FOR THE FOLLOWING YEARS

CURRENT ASSET
YEARS

(IN Rs.)

CURRENT
LIABILITIES

RATIO

(IN Rs.)
2010

20203896.82

3935235

5.2

2011

20953554.4

2928987.14

7.2

2012

32927949

4698150.3

2013

34432991.9

4165344.17

7.0
8.2

INTERPRETATION:
From the above table it was analyzed that current ratio was increased from 5.2 to
8.2. The current ratio is lessthan the rule of thumb 2:1 except the year 2013.

CHART SHOWING THE CURRENT RATIOFOR THE FOLLOWING YEARS

20
18
16
14
12
10
8
6
4
2
0
YEARS

3.2QUICK RATIO

2010

2011

2012

2013

The ratio between quick asset and quick liabilities is called liquid ratio. Quick ratio is also
known as acid ratio it isa more rigorous test of that the current ratio quick ratio may also be
defined as relation between quick liquidity assets and current liquid liabilities.

Quick ratio refers to the assets which can be converted into cash very quickly. They are
also called liquid assets.

LIQUID RATIO =

LIQUID ASSETS
CURRENT LIABILITIES

TABLE SHOWING THE QUICK RATIO FOR THE FOLLOWING YEARS

QUICK ASSET
YEARS

(IN Rs.)

CURRENT
LIABILITIES

RATIO

(IN Rs.)
2010

20079131.56

2011

19408245.89

3935235
2784663

5.1
6.9

2012

27552737.7

4585665

6.0

2013

522227.81

3443446

1.8

INTERPRETATION:
Usually a high acid test ratio is an indication that the firm is liquid and has the ability to meet its
current or liquid liabilities in time and on the other hand a low quick ratio represents that the
firms liquidity position is not good.

From the above table it was analyzed that quick ratio was increased from 5.1 to 6.9 and
decreased to 1.8. it was due to improper maintenance of quick assets. The quick ratio was below
the rule thumb of 1:1 i.e quick asset were less than current liabilities.

CHART SHOWING THE QUICK RATIOFOR THE FOLLOWING YEARS

12
10
8
6
4
2
0
YEARS

2010

2011

2012

2013

3.2 ABSOLUTE LIQUIDITY RATIO

Liquid ratio is the modified version of current ratio and absolute liquid ratio is the modified
version of liquid ratio. Here current assets are bereft of stock-in-trade, accounts receivable, and
current liabilities are bereft of bank overdraft. The ratio can be written in following way:

CASH + BANK + MARKETABLE SECURITIES

ABSOLUTE LIQUIDITY RATIO =
CURRENT LIABILITIES BANK OVERDRAFT

TABLE SHOWING THE ABSOLUTE LIQUIDITY RATIOFOR THE FOLLOWING

YEARS

CASH AND BANK

YEARS

(IN Rs.)

CURRENT
LIABILITIES
(IN Rs.)

RATIO

2010

143898.67

3935235

0.04
0.01

2011

280491.34

2784663

2012

1228408.71

4585665

2.72

2013

969800.16

3443446

0.29

INTERPRETATION:

It shows the cash or absolute ratio. It is calculated for comparing cash and current
liabilities. The higher proportion denotes idleness of cash, which affects the profitability
position of the firm, and a low proportion of cash means shortage of cash poor liquidity.
It satisfies the proportion of 0.75:1.

CHART SHOWING THE ABSOLUTE LIQUIDITY RATIOFOR THE FOLLOWING

YEARS

12
10
8
6
4
2
0
YEARS

2010

2011

2012

2013

3.4 WORKING CAPITAL RATIO

Working capital of a concern is directly related to sales. The current assets like debtors, bill
receivable, cash, and stock,etc.. Change with the increase or decrease in sale. The working
capital is taken as:
Working capital = current assets current liabilities

TABLE SHOWING THE WORKING CAPITAL RATIOFOR THE FOLLOWING

YEARS

CURRENT ASSET
YEARS

(IN Rs.)

CURRENT
LIABILITIES

RATIO

(IN Rs.)
2010
2011

20571772.39

3935235

20955355

2928987.14

2012

32927949

4698150.3

2013

34432991.9

4165344.17

16636537.39
18026367.86

28229798.7
30267647.73

INTERPRETATION:

From the above table it was analyzed that net working capital ratio had increase from 2010
to 2013. It was due to changes in working capital.

TABLE SHOWING THE WORKING CAPITAL RATIOFOR THE FOLLOWING

YEARS

35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
YEARS

2010

2011

2012

2013

3.5 FIXED ASSET RATIO

The ratio establishes the relationship between fixed assets and long term funds. The objective of
calculating this ratio is to ascertain the proportion of long term funds invested in fixed assets.
Fixed asset
Fixed asset ratio =
Long term funds

TABLE SHOWING THE FIXED ASSET RATIOFOR THE FOLLOWING

YEARS

FIXED ASSET
YEARS
2010
2011
2012
2013

(IN Rs.)
1433190.53
1594354.53
3026339.53
2888955.13

LONG TERM
FUND (IN Rs.)
18031410.41
1478839.82

RATIO
0.08
1.08

1745585.32

1.73

1993585.32

1.44

INTERPRETATION:
Fixed assets are generally taken at written down values at the end of the year. It given
increases when investment on fixed assets is in good position, For the year 2012
gradually increase and it shows the good utilization of fixed assets. For the year 2010 it
decreased by 0.08%.

CHART SHOWING THE FIXED ASSET RATIO FOR THE FOLLOWING YEARS

14
12
10
8
6
4
2
0
YEARS

2010

2011

2012

2013

SCHEDULE OF CHANGES IN WORKING CAPITAL

PARTICULAR

2010

2011

2012

2013

CURRENT ASSETS
a. CASH

27216.10

32721.4

129830.25

15600.25

b. CASH AT BANK

116782.57

247769.96

1098578.46

954199.91

c. SHORT TERM LOAN

17589463

18771864

26601651.7

29832109

d. ACCURED ITEMS

544832.62

709097.62

1063901.60

e. STOCK

4031392.18

492640.83

3631713.3

194233.94

f. SUNDRY DEBTORS

1522510.53

699460.53

1466175.3

2372947.12

20571772.39

209553555

32927949

34432991.9

2228906

876656.14

1617525.3

1054799.37

1631331

2008706

2824953.5

2699197.9

74997

43625

255671.50

411346.9

TOTAL CURRENT LIABILITIES

3935234

2928987.14

4698150.3

4165344.17

WORKING CAPITAL [A-B]

16636538.4

206624568

28229798.8

30267647.6

TOTAL CURRENT ASSETS

CURRENT LIABILITIES
a. CREDITORS
b. PROVISION AND
RESERVES
c. PAYMENTS

INTERPERTATION
This table shows the working capital position is good into the society. Because the current
assets over the access into the liabilities.

COMMON SIZE BALANCE SHEETS FOR THE YEAR 2010-2011

Particulars

31-032010

percentag 31-03e
2011

Percentag
e

Current assets
Cash on hand

27216.1

0.12

32721.4

0.14

Cash at bank

116682.57

0.53

247769.96

1.08

Loan& advances
Accrued items

17589463
544832.62

80.0
2.43

18771864
709097.62

82.0
3.17

Stock
Debtors

403192

1.83
6.93

492640.83
699460.53

2.10
3.05

Total current assets

1522510.53
20203896.
82

91.97

20953554.
4

91.6

Fixed asset
Investment

1049159.3

4.78

1049159.30

4.58

Immovable assets

380911.23

1.73

545195.23

2.39

Future
Overdue interest

24365.01
308313

0.11
1.45

344522

1.52

Total assets

21966645.
4

100

22892430.
9

100

Payment items

74997

0.34

43625

0.19

Provision items
Creditors

1631331
2228905.60

7.42
10.15

2008706
876656.14

8.77
3.82

Total current
liabilities

3935233.9

17.91

2928987.1
4

12.78

Deposits

943571.41

4.29

863853.91

3.78

Share capital
Borrowing

913964
16173875

4.16
73.62

948674

4.15
79.29

Total liabilities

21966645.
41

Current liabilities

Long term liabilities

100

18150915.85

22892430.
9

100

COMMON SIZE BALANCE SHEETS FOR THE YEAR 20112012

Particulars

31-032011

Current assets
Cash on hand
Cash at bank

32721.4
247769.96

Loan& advances
Accrued items
Stock
Debtors

18771864
709097.62
492640.83
699460.53

Total current assets

Fixed asset
Investment
Immovable assets
Future
Overdue interest
Total assets

20953554.
4

percentag
e
0.14
1.08
82.0
3.17
2.10
3.05
91.6

31-032012
129830.25
1098578.46
26601651.7
363171.32
1466175.33
32927949

Percentag
e
0.37
3.14
74.92
1.02
4.13
92.8

1049159.30
545195.23
344522
22892430.
9

4.58
2.39
1.52
100

2412498.3
162812.85
-

Current liabilities
Payment items
Provision items

43625
2008706

0.19
8.77

255671.5
2824953.5

0.72
7.96

Creditors
Total current
liabilities

876656.14
2928987.1
4

3.82
12.78

1617525.24
4698150.3

4.55
13.23

863853.91
948674

3.78
4.15
79.29

341048.97
955419

0.96
2.70
83.11

Long term liabilities

Deposits
Share capital
Borrowing
Total liabilities

18150915.85

22892430.
9

100

35503260.
2

29508641.9

35503260.
2

6.81
0.5
100

100

COMMON SIZE BALANCE SHEETS FOR THE YEAR 20122013

Particulars
Current assets
Cash on hand
Cash at bank
Loan& advances
Accrued items
Stock
Debtors

31-032012
129830.25
1098578.46

1.02
4.13

29832109
1063901.62
194233.94
2372947.12

92.8

34432991.8

94.84

6.81
0.5
-

962617.3
684077.8
222548

2.65
1.88
0.62

100

36302234.
9

100

255671.5
2824953.5

0.72
7.96

411346.91
2699197.9

1.13
7.43

1617525.24
4698150.3

4.55
13.23

1054799.34
4165344.2

2.91
11.47

341048.97

0.96

26601651.7
363171.32

Total current assets

Fixed asset
Investment
Immovable assets
Future
Overdue interest

2412498.3
162812.85
-

Current liabilities
Payment items
Provision items
Creditors
Total current
liabilities
Long term liabilities
Deposits
Share capital
Borrowing

35503260.
2

955419
29508641.9

0.37
3.14
74.92

2.70
83.11

15600.25
954199.9

Percentag
e
0.04
2.63
82.18
2.93
0.53
6.53

1466175.33
32927949

Total assets

percentag 31-03e
2013

4155751.7
1028419
26952720

11.45
2.83
74.24

Total liabilities

35503260.
2

100

INTERPRETATION:
Common size balance sheet for the year 2010-2011
Fixed asset increase from 8.03% to 8.49%
Loan and advances increase from 80% to 82%

Common size balance sheet for the year 2011-2012

Fixed asset decrease from 8.49% to 7.2%
Loan and advances decrease from 82% to 74.92%
Common size balance sheet for the year 2012-2013
Fixed asset decrease from 7.2% to 5.16%
Loan and advances increase from 74.92% to 82.18%.

36302234.
9

100

Chapter IV

Findings, recommendation and

conclusion

CHAPTER IV
FINDINGS AND CONCLUSION
4.1. FINDINGS
1. The current ratio was increased from 5.2% to 8.2%. the current ratio is more than the
rule of thumb 2:1.
2. The quick ratio was increased from 5.1% to 6.9% and decreased to 1.8 in the year 2013.
3. The working capital position is good into the society.
4. The fixed assets decreased from 8.3% to 5.16% and long term liabilities are increased in
82.18%.
5. The schedule of changes in working capital was good. It was properly maintain in
current assets and current liabilities.
6. As per common size balance sheet are gradually increasing total assets and liabilities
ever through decreasing in the year 2012-2013 compared to previous years.
7. Over the period of four years from 2010-2013 the financial analysis of the society
showing on increasing trend. In 2010 the financial analysis was 1433190.53 it was
increasing to 2888955.13 in 2013.

SUGGESTIONS

Society should reduce to provide credit facility to same members and administrative
expenses, it will increases overall efficiency of the firm.
The society has to maintain the saving of cash account is not satisfactory.
The quick ratio was decreased from 5.1% to 1.8%. itwas due to improper maintences of
ratio.
Fixed asset ratio is decreases from 2011-2013. So concentrate the fixed assets and
payable accounts.
As far as accounting is concerned, although the entire system is computerized, but there
still involved lot of paper work. The society should be reducing the paperwork. It
consumes the time saving and to increases the efficient work due to advanced accounting
software.
It is observed that the society does not follow any method of financing of working
capital. So in order to maintain a trade-off between profitability and liquidity, the society
should follow a well-planned financing performance of working capital.
The current ratio and liquid ratio was at a satisfactory level for all Financial year. It show
that the society was able to meet its current obligations.
A test applied to check the solvency of the society in terms of cash (absolute liquid ratio)
seems to be unsatisfactory to meet the emergencies. So it recommended to take quick and
effective measures to rectity the absolute liquid ratio as early as possible.

CONCLUSION

On studying the financial performance through ratio analysis, working capital,common

sizebalance sheet of primary agricultural cooperative credit society ltd for a period of 4 years
from2010 to 2013. The study reveals that the financial performance of the company is in good
level. It could be concluded that the company has been performing well.

The study is expected to help understanding the overall financial performance of society.
Finally the study helped me to acquire practical knowledge that was only over by books and
paper alone.

Appendix
PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY

BALANCE SHEET
Particulars

2010

2011

2012

2013

943571.41

863853.91

341048.97

4155751.7

913964

948674

955419

1028419

16173875

18150915.85

29508641.9

26952720

74997

43625

255671.5

411346.91

2228905.60

876656.14

1617525.24

1054799.34

Provision for gratuity

363573

403477

424788

Provision for NPA

133268

428841

222548

308313

344522

166375.05

82446.15

1167343

1167343

18262260.4

1969517.56

21966645.4

22892430.90

35503260.2

36302234.9

Cash on hand

27216.1

32721.4

129830.25

15600.25

Cash at bank

116682.57

247769.96

1098578.46

954199.9

Loan & advances

17589463

18771864

26601651.7

29832109

Accrued items

544832.62

709097.62

1063901.62

403192

492640.83

363171.32

194233.94

Debtors

1522510.53

699460.53

1466175.33

2372947.12

Investment

1049159.3

1049159.30

2412498.3

962617.3

Immovable assets

380911.23

545195.23

162812.85

684077.8

Future

24365.01

308313

344522

222548

21966645.4

22892430.9

35503260.2

36302234.9

LIABILITIES
Deposits
Share capital
Borrowing
Payment items
Creditors

Provision for O.D interest

Provision for interest on MICR
Total liabilities
ASSETS

Stock

Overdue interest
Total assets

Bibliography
BIBLIOGRAPHY
Book
1. Financial

management

I.M.Pandey

Ninth

Edition

Vikash

publishing house pvt.Itd.

2. Financial management theory and practice prasanna Chandra

sixth Edition Tata mc graw hill publishing company
3. Management

accounting

priciples

and

practice

R.K.Sharmasahash.kGupthaEigth edition kalyanspublishiers.

4. Dr.S.N .maheshwari Financial management G.G.S Indraprasatha

university, newdelhi..
5. Annual reports in primary agricultural cooperative credit society.

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