SUMMER TRAINING REPORT

ON RATIO ANALYSIS IN

Submitted in partial fulfillment of requirements for

the award of the degree of

BACHELOR OF BUSINESS ADMINSTRATION

Session : 2016-2017

Under Supervision of: Submitted by:

Ms. Vinita Meenakshi
TPO & Astt. Prof. BBA Final Yr.
HIMT Rohtak R.No. 3001

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

 DECLARATION

I, Meenakshi, Roll No. 3001 of BBA final year of MDU, Rohtak, hereby declare that the project
entitled Training & development is an original work and the same has not been submitted to
any other institute for award of any other degree. The interim report was presented to the
supervisor on .and the pre-submission presentation was made on.. The
feasible suggestions have been duly incorporated in consultation with the supervisor.

Signature of the Candidate

Meenakshi
 ACKNOWLEDGEMENT

GRATITUDE IS NOT A THING OF EXPRESSION; IT IS MORE A

MATTER OF FEELING.
There is always a sense of gratitude which one express for others for their help and supervision in
achieving the goals. We too express my deep gratitude to each and everyone who has been helpful to
us in completing the project report successfully.

We would like to thank almighty God for blessing showered on us during the completion of Dissertation
Report.

We give our regards and sincere thanks to Ms. Vinita who has devoted her precious time in guiding us &
helping us complete it within time.

We feel self-short of words to thanks our parents and friends who had directly or indirectly
instrumental in the completion of the project. We are indebted to all respondents for their time
passion during the long conversations.

Meenakshi
 PREFACE
Practical training provides a golden opportunity to implement studied rules and regulation. In the
absence of Practical knowledge, theoretical knowledge is incomplete. This indented for the
experience gained by me during Summer Training in Vita Milk Plant Rohtak

As per the curriculum requirement, I did 7 weeks training in Vita Milk Plant Rohtakjind
Working in such a big concern, no matter for a very small period was really a matter of pride.
My area of work in that concern was confined to Account section and moreover it was not
possible for me to cover all the areas of Account section in such a short period of time so I
concentrated my working on the project assigned to me i.e. RATIO ANALYSIS. So the learning
during the training in Vita Milk Plant Rohtakjind. a report of that is being presented in the
following pages.

I have also gained confidence to interact with different persons working at reputed posts in the
organization. I have also learned how to work efficiently in a stressful environment. During the
summer training, in preparing the project report, I have tried my level best effort to make it
reliable, compact and accurate.

Meenakshi
 INDEX

CONTENTS

CHAPTER 1- INTRODUCTION
Company Profile
Introduction to Topic
Ratio Analysis
CHAPTER 2- RESEARCH METHODOLOGY
Problem Statement
Objectives of the Study
Database
Limitation of the Study
CHAPTER 3- INTERPRETATION & ANALYSIS
Data Analysis
Liquidity Ratio
Leverage Ratio
Activity Ratio
Profitability Ratio
CHAPTER 4- RESULTS & CONCLUSION
Findings
Suggestions
Conclusion
CHAPTER 5- ANNEXURES
Balance Sheet
Profit & loss A/c
Bibliography
 CHAPTER -1
INTRODUCTION
 COMPANY PROFILE

DESAN MEIN DES HARYANA JIT DUDH DAHI KA KHANA

Haryana is the region where milk is an important constituent of the daily fare. The Haryana state
came into existence on the 1st day of November 1966 as a separate state of union of India. Earlier
to this day, the state was a part of combined Punjab state. For the development of dairy activities,
the state govt. formed a corporation in the public sector under the name and style of HARYANA
DAIRY DEVLOPMENT CORPORATION LTD (HDDC) with its registered office at
Chandigarh. HDDC provided the marketing facilities to the milk producers for their surplus
quantity of milk products, the HDDC set up its first milk plant in the heart of the state in the city
of JIND with an installed capacity of 50000 liters per day. The JIND plant came into existence in
the year 1969 and the infrastructure enabled the milk plant to process the milk and manufacture
GHEE, BUTTER and POWDER under the brand name of VITA.

It was the time when the success of ANAND PATTERN co-operative milk producers societies
was on everyones mind. NATIONAL DAIRY DEVELOPMENT BOARD (NDDB), ANAND
AND INDIAN DAIRY CORPOTATION (a govt. of India venture) decided to replicate the
ANAND PATTERN for the purpose. It is primarily a three-tier system i.e. state level CO-
OPERATIVE FEDERTION, district level MILK UNIONS and village level MILK
SOCIETIES. All these work on the co-operative system.

Organization of village level milk societies on ANAND PATTERN.

Purchase of milk testing equipment, stationery and balanced cattle feed etc. from the
manufacturers in bulk and supply the same to the societies.

Supervise the working of the societies through its staff.

The union was paid a fixed amount of commission on the quantity of milk so collected by the co-
operative societies by the corporation to meet its expenses.

To replicate further the ANAND PATTERN in the state of Haryana, a state federation was
formed under the name and style of Haryana Dairy Development Co-operative Federation Ltd.
w.e.f. 1.4.1977 and all the milk plants, setup by the corporation, along with the staff were
transferred to the federation on lease basis. Even after the formation of state level federation,
responsibilities and activities of the milk unions remained the same as before at the district level.

In the year 1982, the federation decided to transfer its P and I activities along with the staff to
the ten district milk unions existing at the time, in view of the demand for implementation of
ANAND PATTERN in the state in true spirit. But the powers of deciding the policies in regards
to milk procurement i.e. milk procurement rates to be given to the societies, rate of commission
to the union to meet its expenses and milk processing facilities remained with the federation.

Initially the federation was declaring milk procurement rates based on the realization of the value
of milk products minus the federation expenses. Milk producers did not consider the rates
declared by the federation very remunerative and thus milk procurement remained much below
the installed capacity of the plants all the time. Due to lower milk procurement and less rate of
commission to the unions, the unions went into heavy losses. Since the procurement was very
less as compared to the capacity utilization, the federation also went into the red. There had been
heavy losses in the organization at all the levels and in-discipline amongst the staff also grew.

To overcome this situation and to bring the organization out of red, the then management of the
federation took some hard steps. These included taking disciplinary action against the erring
employees, amalgamation of nearby unions into a single union (to reduce overheads by pooling
of available sources) and combining of efforts so that the organization could be taken out of red.
The main change in the federation policy was to change the milk procurement policy. This was
now linked to the market rates of procurement of milk rather than the previous policy of
realization value of milk products.

Under this decision, following five milk unions were formed in the year 1991:

The Ambala district co-operative milk producers union ltd.

The karnal & Kurukshetra co-operative milk producers union ltd.

The Hissar and Jind co-operative milk producers union ltd.

The Gurgaon and Rohtak co-operative milk producers union ltd.

The Sirsa district co-operative milk producers union ltd.

The average milk procurement for 1998-99 was at 45109 LPD at jind. However, the daily hand
and jind 110450 LPD respectively. The union has reached a turnover of Rs. 180 crores.

Besides custom packing of fluid milk in poly packs for Mother Dairy, Delhi, the union is also
manufacturing milk and products like butter, ghee and paneer under the HDDCF brand name of
VITA for which the union has a well trained, experienced and committed work force.

Close interaction with Mother Dairy, Delhi has opened the gateway to modern management ideas
for the workforce, which wants to implement international quality and food safety systems in the
milk plants. Milk plant hisar-jind had gone in for modernization and certification under ISO-
9002 Quality Management System and IS-15000 Food Safety System (HACCP) in August 1999.

A turn around had been achieved and the future is promising with an investment of Rs. 1.46
crores, generated internally by the milk plant, during 1998-99 for up gradation and automation of
the plant. During the year 1999-2000 too modernization projects costing Rs. 56 lakhs were
implemented.

The number of villages of jind district supply milk too the hisar-jind milk plant.such as
UCHANA,KHATKAR,JULANA,SHAPAR,KANDELA,NAGURA,NARNAUND,KALTA.IGR
A,KAIR KHERI,and many others.

COMPANY LOGO
NATIONAL DAIRY DEVELOPMENT BOARD (NDDB)
The National Dairy Development Board (NDDB) was founded to replace exploitation with
empowerment, tradition with modernity, stagnation with growth and transforming dairying into
an instrument for the development of India farmers.

The National Dairy Development Board was created in 1965 in response to the Prime Minister
Lal Bahadur Shastris call to transplant the spirit of ANAND in many other places. He
wanted the ANAND MODEL of dairy development with institutions owned by rural producers,
which were sensitive to their needs and responsive to their demands replicated in other parts of
the country.

The Boards creation was routed in the conviction that our nations socio-economic progress lies
largely on the development of rural India.

Thus NDDBs mandate is to promote, finance and support producer-owned and controlled
organizations. NDDBs programmers and activities seek to strengthen farmer co-operatives and
support national policies that are favorable to the growth of such institutions.

With a mission to make dairying a vehicle for a better future for millions of grassroots milk
producers in rural India, the NDDB launched Operation Flood, the worlds largest dairy
development programmer, in 1970. It made India the worlds largest milk producing nation and
within three decades, Operation Flood led to the creation of more than 100000 village level
diary co-operatives nationwide. These co-operatives procured an average of 25.09 million kg of
milk per day and marketed an average of 20.04 million liters of milk per day in the year 2008-09.

NDDB has embarked upon a national campaign to create an umbrella brand identity for
associated co-operative milk brand. This is based on quality guidelines, standardized presentation
and packaging. The Operation Flood Logo Milk Drop has been adopted as the symbol for
fresh and pure milk. To enhance visibility, milk pouch designs have been standardized through an
established colour code to distinguish different types of milk.

The Milk Drop is used on milk sachets, retail signs and distribution vehicles to promote a better
recall for all co-operative brands in the marketplace. As a prelude to the campaign, NDDB
worked out strict quality guidelines that a participating brand must conform before it qualifies for
the campaign. These guidelines relate to improving quality at various levels.
At present 16 brands across 15 states and one union territory are participating in the
campaign.

HARYANA DAIRY DEVELOPMENT CO-OPERATIVE FEDERATION

HARYANA is one of the most progressive states of Republic of India. In the domain of dairy
development it is well known for its productive milk cattle particularly the Murrah Buffaloes
and Haryana Cows. The economy of the state is predominantly based on agriculture. People rear
and breed cattle subsidiary occupation. Milk production in the state was estimated around 147
lakhs liters per day during 2006-07.

The essence of various programmes launched in the State has been to adopt the ANAND
PATTERN of Milk Co-operatives. Under this system, all the functions of dairying like milk
procurement, processing and marketing are controlled by the Milk producers themselves. It has
three tier system comprising milk Producers Societies at the village level, Milk Producers Co-
operative Union at the district level and the state Milk Federation as an apex body at the state
level.

The Haryana Dairy Development Co-operative Federation Ltd. registered under Haryana
Co-operative Societies Act came into existence on April 1, 1977. Its authorized share capital is
Rs.4000 lakhs. It was established with the primary aim to promote economic interests of the milk
producers of Haryana particularly those belonging to weaker sections of the village community
by procuring and processing milk into milk products and marketing thereof by itself or through
its unions. In furtherance of the above objects, the Federation undertakes a number of activities
such as establishment of milk plants, marketing of VITA BRAND milk products of the Milk
Unions. Its turnover during is Rs.768.00 crores. It also extends technical guidance to the Unions
in all spheres of personnel, technical, marketing and financial management as well as makes
them quality conscious, through use of modern methods of laboratory testing of various
products.
Quality VITA the Hallmark of Quality
As part of stringent quality measures, milk required for processing VITA products is procured
from Dairy Co-operative Societies only. It is ensured that the milk is transported to chilling
canters and plants in clean and sterilized milk cans as quickly as possible. All quality measures
as per Standard of Bureau of Indian Standards/ Agmark are being applied before the products are
marketed. Well-equipped laboratories are functioning in the chilling centers and milk plants to
maintain ideal quality standards. VITA is the endorsement of quality, a commendation we are
Proud of. Milk Plant Rohtak, Ballabgarh, Ambala and Jind have obtained ISO-9002 and
IS-15000 certificates. Remaining Plants would also obtain ISO-9002 shortly. Each Plant has
taken steps for implementing Hazard Analysis and Critical Control Points (HACCP).

DISTRICT MILK PRODUCERS CO-OPERATIVE UNIONS

The Primary Milk Societies (PMS) functioning at the village level join to form a Milk Union for
carrying out such activities which are conducive and essential for the socio-economic
development of milk producers, by procuring and processing of milk and marketing of milk
products. The Board of Directors comprising 8 members elected out of the Chairmen of affiliated
Primary Milk Societies run the day-to-day administration through Chief Executive officer.

These Unions either process milk at their own level or pass the same to the milk plants of other
milk unions for processing. They also organize new Primary Milk Societies at the village level. A
brief matrix of the Milk Unions is as follows:
 MILK UNIONS IN HARYANA

Sr. No. Name of the Union Date of Regis.

1 The Ambala District Co-operative Milk Producers Union Ltd., Ambala 10.03.1973

2 The Rohtak District Co-operative Milk Producers Union Ltd., Rohtak 01.04.2003

3 The Hisar-Jind Co-operative Milk Producers Union Ltd., Jind 10.07.1991

4 The Kurukshetra-Karnal Co-operative Milk Producers Union Ltd., Kurukshetra 05.07.1991

5 The Sirsa District Co-operative Milk Producers Union Ltd., Sirsa 10.01.1978

6 The Ballabgarh Co-operative Milk Producers Union Ltd., Ballabgarh 01.04.2003

There are five milk plants operating in the Co-operative Sector in Haryana. These are located at
Ambala, Jind, Rohtak, Sirsa and Ballabgarh having a handling capacity of 470000 liters per day.

PRIMARY MILK SOCIETY

The Primary Milk Society is the foundation of the Co-operative structure. The efficiency of the
movement solely lies in the strength of these Societies. Primary Milk Societies are organized at
the rate of one society per village. The purpose of such a society is to promote the economic
interests of its members by improving quality, and increasing quantity of milk production per
buffalo or cow and to provide necessary guidance and assistance to its members and supply milk
to Milk Unions. These societies also supply cattle feed etc. to their members with a view to
enhancing milk production. The Managing Committee of the Society comprises members elected
by those members who are eligible to participate and vote in the General Body Meeting.

GROWTH AT A GLANCE
Functional 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007-
Year 2008-09
Societies 01 02 03 04 05 06 07 08
(Avg)
Nos. 2710 2885 3166 3350 3906 4127 5028 5980 6167
 Status of Milk Booths under Union

As On 31.10.2010

Sr. No. Name of the Union No. of Booths

1 The Ambala District Co-operative Milk Producers Union Ltd., Ambala 85

2 The Rohtak District Co-operative Milk Producers Union Ltd., Rohtak 61

3 The Hisar-Jind Co-operative Milk Producers Union Ltd., Jind 80

4 The Kurukshetra-Karnal Co-operative Milk Producers Union Ltd., Kurukshetra 26

5 The Sirsa District Co-operative Milk Producers Union Ltd., Sirsa 17

6 The Ballabgarh Co-operative Milk Producers Union Ltd., Ballabgarh 99

SWEETENED FLAVOURED
DOUBLE TONED MILK
MANGO DRINK
NAMKEEN LASSI
MITHI LASSI

TABLE BUTTER GHEE (AGMARK)

JAL JEERA
DAHI
 MILK
PANEER

KHEER
COW MILK GHEE
 MILK CAKE KAJU PINNI

VITA PRODUCTS PRICE

HARYANA DAIRY DEVELOPMENT COOPERATIVE FEDRATION LTD.

RATES LIST OF VITA MILK AND MILK PRODUCTS AS ON 1.4.10
Sr. No. Product Packing Rate w.e.f. Price
GHEE (Haryana / CHD / Delhi / HP)
1 Ghee rates 1 Ltr. MP 12-2-11 282.00
2 Ghee rates 1 Ltr. PP 12-2-11 280.00
3 Ghee rates 1 Ltr. Tin 12-2-11 286.00
4 Ghee rates 2 Ltr. Tin 12-2-11 572.00
5 Ghee rates 5 Ltr. Tin 12-2-11 1390.00
6 Ghee rates 15 Ltr. Tin 21-4-11 4195.00
7 Cow Milk Ghee rates (Sirsa) 1 Ltr. MP 12-2-11 292.00
8 Cow Milk Ghee rates (Sirsa) 15 Ltr. Tin 21-4-11 4346.00
TABLE BUTTER (Haryana / CHD / Delhi)
9 Table Butter 100 gm 21-4-11 24.00
10 Table Butter 500 gm 21-4-11 117.00
 11 Table Butter (Un Cartuoned) 15 Kg 21-4-11 3405.00
LIQUID MILK
12 Liquid Milk (500 ml) Full Cream 1-8-11 19.00
13 Liquid Milk (500 ml) Standard 11-4-11 16.00
14 Liquid Milk (500 ml) Tonned 11-4-11 13.50
15 Liquid Milk (500 ml) Double Tonned 11-4-11 12.00
SWEETS
16 Milk Cake (Milk Plant Ambala) 200 gm 14-8-11 39.00
17 Milk Cake (Milk Plant Ambala) 450 gm 14-8-11 89.00
18 Milk Cake (Milk Plant Ambala) 900 gm 14-8-11 174.00
19 Kheer (Milk Plant Ambala) 200 gm 1-6-11 15.00
20 Kaju Pinni (Milk Plant Sirsa) 900 gm 14-8-11 175.00
21 Kaju Pinni (Milk Plant Sirsa) 450 gm 14-8-11 90.00
22 Pinni (Milk Plant Jind) 900 gm 14-8-11 170.00
DAHI
23 Dahi 200 gm 1-4-11 14.00
24 Dahi 400 gm 1-4-11 24.00
DRINKING DELIGHTS
Sweetened Flavored Milk
26 200 ml Bottle 1-4-11 18.00
Butter Scotch Flavor
Sweetened Flavored llaichi
27 200 ml Bottle 1-4-11 18.00
Flavor
28 Plain Lassi 1 Litre pouch 7-5-11 20.00
29 Salted Lassi 250 ml pouch 21-6-11 9.00
30 Mithi Lassi 200 ml cup 1-4-11 15.00
31 Jal Jeera (Jind) 200 ml pouch 1-4-11 6.00
32 Plain Chhachh (BLB) 500 ml pouch 1-4-11 7.00
33 Mango Drink 500 ml 1-5-11 22.00
34 Mango Drink 1000 ml 1-5-11 38.00
ICE CREAM
35 Kulfi (Pista) 60 ml 15-6-11 15.00
 36 Choco Bar 60 ml 2-7-11 13.00
37 Vanila Cup 100 ml 23-4-11 12.00
38 Butter Scotch Cup 100 ml 23-4-10 15.00
39 Kaju Kishmish Brick 800 ml 23-4-10 54.00
40 Tutti Fruity Brick 800 ml 23-4-10 54.00
41 Butter Scotch Brick 800 ml 23-4-10 52.00
42 Vanila Brick 1000 ml 23-4-10 52.00
43 Strawberry Brick 1000 ml 23-4-10 53.00
Paneer
44 Paneer 200 gm 1-4-11 36.00
45 Paneer 1 kg 1-4-11 165.00
 INTRODUCTION TO TOPIC
RATIO ANALYSIS
The term Ratio refers to the numerical and quantitative relationship between two items or
variables. This relationship can be exposed as

Percentages

Fractions

Proportion of numbers

Ratio analysis is defined as the systematic use of the 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 by ratio analysis, Ratio reflects a quantitative relationship
helps to form a quantitative judgment.

STEPS IN RATIO ANALYSIS

The first task of the financial analysis is to select the information relevant to the decision
under consideration from the statements and calculates appropriate ratios.

To compare the calculated ratios with the ratios of the same firm relating to the pas6t or
with the industry ratios. It facilitates in assessing success or failure of the firm.

Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.

BASIS OR STANDARDS OF COMPARISON

Ratios are relative figures reflecting the relation between variables. They enable analyst to draw
conclusions regarding financial operations. They use of ratios as a tool of financial analysis
involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio
analysis is of four types.

Past ratios, calculated from past financial statements of the firm.

Competitors ratio, of the some most progressive and successful competitor firm at the
same point of time.
 Industry ratio, the industry ratios to which the firm belongs to

Projected ratios, ratios of the future developed from the projected or pro forma financial
statements.

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the
process of establishing and interpreting various ratios for helping in making certain decisions. It
is only a means of understanding of financial strengths and weaknesses of a firm. There are a
number of ratios which can be calculated from the information given in the financial statements,
but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The
following are the four steps involved in the ratio analysis.

Selection of relevant data from the financial statements depending upon the objective of
the analysis.

Calculation of appropriate ratios from the above data.

Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from projected financial statements or the ratios of some other firms or
the comparison with ratios of the industry to which the firm belongs.

INTERPRETATION OF THE RATIOS

The interpretation of ratios is an important factor. The inherent limitations of ratio analysis
should be kept in mind while interpreting them. The impact of factors such as price level
changes, change in accounting policies, window dressing etc., should also be kept in mind when
attempting to interpret ratios. The interpretation of ratios can be made in the following ways.

Single absolute ratio

Group of ratios

Historical comparison

Projected ratios

Inter-firm comparison
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS
The calculation of ratios may not be a difficult task but their use is not easy. Following
guidelines or factors may be kept in mind while interpreting various ratios.

Accuracy of financial statements

Objective or purpose of analysis

Selection of ratios

Use of standards

Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS

Aid to measure general efficiency

Aid to measure financial solvency

Aid in forecasting and planning

Facilitate decision making

Aid in corrective action

Aid in intra-firm comparison

Act as a good communication

Evaluation of efficiency

Effective tool

LIMITATIONS OF RATIO ANALYSIS

Differences in definitions

Limitations of accounting records

Lack of proper standards

No allowances for price level changes

Changes in accounting procedures

 Quantitative factors are ignored

Limited use of single ratio

Background is over looked

Limited use

Personal bias

CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are different parties
interested in the ratio analysis for knowing the financial position of a firm for different purposes.
Various accounting ratios can be classified as follows:

Traditional Classification

Functional Classification

Significance ratios

1. Traditional Classification
Balance sheet (or) position statement ratio: They deal with the relationship between
two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the
items must, however, pertain to the same balance sheet.

Profit & loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit & loss account items, e.g. the ratio of gross profit to sales
etc.,

Composite (or) inter statement ratios: These ratios exhibit the relation between a profit
& loss account or income statement item and a balance sheet items, e.g. stock turnover
ratio, or the ratio of total assets to sales.

2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios and
profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and secondary
ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios
that support the primary ratio are called secondary ratios.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE

Liquidity ratio

Leverage ratio

Activity ratio

Profitability ratio

1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when there
becomes due. The short term obligations of a firm can be met only when there are sufficient
liquid assets. The short term obligations are met by realizing amounts from current, floating (or)
circulating assets The current assets should either be calculated liquid (or) near liquidity. They
should be convertible into cash for paying obligations of short term nature. The sufficiency (or)
insufficiency of current assets should be assessed by comparing them with short-term current
liabilities. If current assets can pay off current liabilities, then liquidity position will be
satisfactory.

To measure the liquidity of a firm the following ratios can be calculated

Current ratio

Quick (or) Acid-test (or) Liquid ratio

Absolute liquid ratio (or) Cash position ratio

(a) 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 used to make the analysis of a short-term financial position (or) liquidity of a firm.

Current Assets
Current Ratio =
Current Liabilities

Components of Current Ratio

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

(b) QUICK RATIO

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a
firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as
the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid
if it is converted into cash within a short period without loss of value.

Quick or Liquid Assets

Quick Ratio =
Current Liabilities

Components of Quick or Liquid Ratio

QUICK ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
 Cash at bank Bank over draft
Bills receivable Bills payable
Sundry debtors Short-term advances
Marketable securities Sundry creditors
Temporary investments Dividend payable
Income tax payable

(c) ABSOLUTE LIQUID RATIO

Although receivable, debtors and bills receivable are generally more liquid than inventories, yet
there may be doubts regarding their realization into cash immediately or in time. Hence, absolute
liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude
even receivables from the current assets and find out the absolute liquid assets.

Absolute Liquid Assets

Absolute Liquid Ratio =
Current Liabilities

Components of Absolute Liquid Ratio

ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Interest on Fixed Deposit Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income tax payable

2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations.
Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs
and repayment schedules associated with its long term borrowings.

The following ratio serves the purpose of determining the solvency of the concern.
 Debt Equity Ratio

Debt to total Funds Ratio

Proprietary Ratio

Fixed Assets to Proprietors Fund Ratio

Capital Gearing Ratio

Interest Coverage Ratio

(a) DEBT EQUITY RATIO

Debt-Equity ratio, also known as External Internal Equity ratio is calculated to measure the
relative claims of outsiders and the owners (i.e., shareholders) against the firms assets. This ratio
indicates the relationship between the external equities or the outsider funds and the internal
equities or the shareholders funds.

Outsiders Funds
Debt-Equity Ratio =
Shareholder Funds

Components of Debt-Equity Ratio

OUTSIDERS FUND SHAREHOLDERS FUND

Debentures Share capital
Mortgage loan Reserves & Surplus
Bank loan
Loan from financial institutions
Public deposits

(b) DEBT TO TOTAL FUNDS RATIO

The ratio establishes a link between the long term funds raised from outsiders and total long term
funds available in the business.

Debt
Debt to Total Funds Ratio =
 Components of Debt to Total Funds Ratio

SHAREHOLDERS FUND TOTAL CAPITALISATION

Share capital Debentures
Reserves & Surplus Mortgage loan
Bank loan
Loan from financial institutions
Public deposits
Share capital
Reserves & Surplus

(c) PROPRIETARY RATIO

A variant to the debt-equity ratio is the proprietary ratio which is also known as equity ratio. This
ratio establishes relationship between shareholders funds to total assets of the firm.

Shareholder Funds
Proprietary Ratio =
Total Assets

Components of Proprietary Ratio

SHAREHOLDERS FUND TOTAL ASSETS

Share capital Fixed assets
Reserves & Surplus Current Assets
Cash in hand & at bank
Bills receivable
Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid expenses
(d) FIXED ASSETS TO PROPRIETORS FUND RATIO
The ratio establishes the relationship between fixed assets and shareholders funds, i.e., share
capital plus reserves, surpluses and retained earnings.

Fixed Assets
Fixed Assets to Proprietors Ratio =
Proprietors Funds

Components of Proprietary Ratio

FIXED ASSETS PROPRIETORS FUNDS

Machinery Share capital
Buildings Reserves & Surplus
Plant
Vehicles

(e) CAPITAL GEARING RATIO

The term capital gearing is used to describe the relationship between equity share capital
including reserves and surpluses to preference share capital and other fixed interest-bearing
loans. If preference share capital and other fixed interest bearing loans exceed the equity share
capital including reserves, the firm is said to be highly geared.

Equity Share Capital + Res. & Sur.

Capital Gearing Ratio =
Fixed Cost Bearing Capital

Components of Capital Gearing Ratio

EQUITY SHAREHLDER FUND FIXED COST BEARING CAPITAL

Equity share capital Preference capital
Reserves & Surplus Debentures
Long term loans
(f) INTEREST COVERAGE RATIO

Net income to debt service ratio or interest coverage ratio is used to test the debt-servicing
capacity of a firm. The ratio is also known as Fixed Charges Cover or Times Interest Earned.
This ratio is calculated by dividing the net profit before interest and taxes by fixed interest
charges.

Net Profit (before Interest and taxes)

Interest Coverage Ratio =
Fixed Interest Charges

3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The efficiency
with which assets are managed directly affects the volume of sales. Activity ratios measure the
efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are
also called Turn over ratios because they indicate the speed with which assets are converted or
turned over into sales.

Stock Turnover Ratio

Debtors Turnover Ratio
Creditors Turnover Ratio
Working capital turnover ratio
Fixed assets turnover ratio

(A) STOCK TURNOVER RATIO

Stock turnover ratio is also known as inventory stock ratio is normally calculated as sales/
average inventory or cost of goods sold/ average inventory. It would indicate whether inventory
has been efficiently used or not. The purpose is to see whether only the required minimum funds
have been locked up in inventory. Inventory Turnover Ratio (I.T.R.) indicates the number of
times the stock has been turned over during the period and evaluates the efficiency with which a
firm is able to manage its inventory.

Cost of Goods Sold

Stock Turnover Ratio =
Average Stock
Cost of Goods Sold = Net Sales Gross Profit

Opening Stock + Closing Stock

Average Stock =
2

(b) DEBTORS TURNOVER RATIO

Debtors turnover ratio indicates the velocity of debt collection of firm. In simple words, it
indicates the number of times average debtors are turned over during a year.

Net Credit Sales

Debtors Turnover Ratio =
Average Trade Deb.

Trade Deb. = Sundry Deb. + Bill Receivables

Opening Trade Deb. + Closing Trade Deb.

Avg. Trade Debtors =
2

(c) CREDITORS TURNOVER RATIO

A supplier of goods, i.e., creditor, is naturally interested in finding out how much time the firm is
likely to take in repaying its trade creditors. The analysis for creditors turnover is basically the
same as of debtors turnover ratio except that in place of trade debtors, the trade creditors are
taken as one of the components of the ratio and in place of average daily sales, average daily
purchases are taken as the other component of the ratio.

Net Credit Purchases

Creditors Turnover Ratio =
Average Trade Cr.

Trade Creditors = Sundry Cr. + Bill Payable

Opening Trade Cr. + Closing Trade Cr. Avg. Trade

Creditors =
2

(d) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales. It indicates the velocity of the utilization
of net working capital. This indicates the no. of times the working capital is turned over in the
course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio
indicates inefficient utilization.

Cost of Sales
Working Capital Turnover Ratio =
Working Capital

Working Capital = Current Assets - Current Liabilities

Components of Working Capital

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
Cash at bank Bank overdraft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

(e) FIXED ASSETS TURNOVER RATIO

It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit
earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets.
Lower ratio means under-utilization of fixed assets.

Cost of Sales
Fixed Assets Turnover Ratio =
Net Fixed Assets

Cost of Goods Sold = Net Sales Gross Profit

Net Fixed Assets = Fixed Assets - Depreciation

4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is the engine,
that drives the business enterprise. Generally, profitability ratios are calculated either in relation
to sales or in relation to investment. The various profitability ratios are discussed below.

GENERAL PROFITABILITY RATIO

Gross Profit Ratio

Net Profit Ratio

Operating Ratio

PROFITABILITY RATIO BASED ON INVESTMENT

Return on Capital Employed

Return on Shareholders Funds

GENERAL PROFITABILITY RATIO

(a) GROSS PROFIT RATIO

Gross profit ratio measures the relationship of gross profit to net sales and is usually represented
as a percentage. Thus, it is calculated by dividing the gross profit by sales.

Gross Profit
Gross Profit Ratio =
Net Sales

Net Sales = Sales Sales Return

(b) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the
efficiency of the management in manufacturing, selling administrative and other activities of the
firm.

Net Profit after Tax

Net Profit Ratio =
Net Sales
Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax

Net Sales = Sales Sales Return

(c) OPERATING PROFIT RATIO

Operating ratio establishes the relationship between cost of goods sold and other operating
expenses on the one hand and the sales on the other.

Operating Cost
Operating Ratio =
Net Sales

Operating Profit
Operating Profit Ratio =
Sales

Operating Profit = Net sales - Operating cost

PROFITABILITY RATIO BASED ON INVESTMENT

(d) RETURN ON CAPITAL EMPLIYED

Return on capital employed establishes the relationship between profits and the capital
employed. It is the primary ratio and is most widely used to measure the overall profitability and
efficiency of a business.

Adjusted Net Profits

Return on Capital Employed =
Capital Employed

Adjusted Profits = Profits before Interest, Tax and Dividends

Capital Employed = Fixed Assets + Working Capital

(e) RETURN ON SHAREHOLDERS FUNDS

Return on shareholder funds is the relationship between net profits (after interest & tax) and the
proprietors funds. The two basic components of this ratio are net profits and shareholders funds.
Shareholders funds include equity share capital, preference share capital and reserves. Net
profits are arrived at after deducting interest on long-term borrowing and income tax, because
those will be the only profits available for shareholders.

Net Profits after Int. & Tax

Return on Shareholders Fund=
Shareholders Funds
 CHAPTER 2
RESEARCH
METHODOLOGY
 RESEARCH METHODOLOGY

Research is a voyage of discovery, a movement from unknown to known. In common parlance, it

refers to a scientific and systematic search for pertinent information on a specific topic. It is the
pursuit of truth with the help of study, observation, comparison and experiment. Research
methods may be understood as all those method / techniques that are used by the researcher
during the course of studying his research problem.

Research methodology is a way to solve the problem scientifically and systematically. In this we
study the various steps that are generally adopted by researcher in studying his research problem
along with the logic behind them. When we talk about research methodology, we not only talk of
the research methods but also the comparison of the logic behind the method we use in the
context of our research study and explain why we are using a particular method and why not
others.
 OBJECTIVES OF THE STUDY

The major objectives of the resent study are to know about financial strengths and weakness of
The Hisar-jind Co-operative Milk Producers Union Ltd. Milk Plant JIND through
FINANCIAL RATIO ANALYSIS.

The objectives of the study are to evaluate the performance and efficiency of the company by
using ratios as a yardstick. To understand the liquidity, profitability and efficiency positions of
the company during the study period and to evaluate and analyze various financial performance
facts of the company. Make comparisons between the ratios during different periods.

OBJECTIVES

To study the present financial system at The Hisar-jindCo-operative Milk Producers

Union Ltd. Milk Plant jind.

To determine the Profitability, Liquidity Ratios.

To analyze the capital structure of the company with the help of Leverage ratio.

To offer appropriate suggestions for the better performance of the organization.

 DATA BASE

The information needed for fulfilling the objective of the study is collected both from primary as
well as secondary sources of data with regard to time, cost and sources available.

Primary Sources: -

Primary data is collected through observation and direct communication with Finance Manager
and other employees of Finance department.

Secondary Sources: -

Annual Reports & Records of the company are used for the purpose of report. Number of books
for the purpose has been studied for better understanding and preparing the report in a simple,
unambiguous and precise manner. Annexure, schedules & other pertinent details from various
sources are also used. Company Journal, Company Website and Special record that is maintained
by accountants has been studied while making this report.
 Limitations of the Study

The study is bound up with some limitations and constraints which made efficiency of the same
extend deviate it from its main line of thought. Though no stone was left unturned to make the
study more precise, accurate and relevant to the objectives, yet there are some limitations and
general problems, which are note worthy to make study meaningful.

1. Time Constraint
The time was the major constraint for conductive the study. The time for conducting the project
was comparatively inadequate.

2. Limited Scope
The study of me was limited only to a company.

3. Lack of Deep Knowledge

Lack of deep knowledge was another limitation. To analyze the financial statements in depth one
should possess the deep knowledge of the financial analysis.

4. Only the Partial Fulfillment of the Degree

The study is carried only for the partial fulfillment of the degree of Master of Business
Administration (Finance). Due to this the researcher did not provide the whole and sole
concentration of his on the study.

5. Results cannot be generalized

In our analysis we used the trend analysis and comparative financial statements. So the results
cannot be generalized.
 CHAPTER 3
INTERPRETATION &
ANALYSIS
 DATA ANALYSIS

1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when there
becomes due. The short term obligations of a firm can be met only when there are sufficient
liquid assets. The short term obligations are met by realizing amounts from current, floating (or)
circulating assets The current assets should either be calculated liquid (or) near liquidity. They
should be convertible into cash for paying obligations of short term nature. The sufficiency (or)
insufficiency of current assets should be assessed by comparing them with short-term current
liabilities. If current assets can pay off current liabilities, then liquidity position will be
satisfactory.

To measure the liquidity of a firm the following ratios can be calculated

Current ratio

Quick (or) Acid-test (or) Liquid ratio

Absolute liquid ratio (or) Cash position ratio

LIQUIDITY RATIO

A. CURRENT RATIO

(Amount in `)

Current Ratio
Year Current Assets Current Liabilities Ratio
2011-12 123296313.00 54330888.59 2.27
2012-13 132443503.49 50127148.94 2.64
2013-14 205860507.99 71297804.34 2.89
2014-15 305913637.70 52604159.71 5.82
2015 16 493669302.07 30760257.42 16.05
 GRAPHICAL REPRESENTATION

Interpretation
As a rule, the current ratio with 2:1 or more is considered as satisfactory position of the firm. As
we can see that in the year 2010-2011 current ratio is 16.05:1 which has reached very high as
compared to previous five years which shows that the company is not utilizing the liquid funds
properly and company is in a position to pay its current liabilities out of its current assets in time.

As per the rule this ratio is good. But very high ratio is not good for the company.

B. QUICK RATIO

(Amount in `)

Quick Ratio
Year Quick Assets Current Liabilities Ratio
2011-12 41284005.02 54330888.59 0.76
2012-13 65105975.12 50127148.94 1.30
2013-14 135540557.70 71297804.34 1.90
2014-15 219156085.82 52604159.71 4.17
2015 16 381937673.10 30760257.42 12.42

GRAPHICAL REPRESENTATION

Interpretation
As a rule, the quick ratio with 1:1 or more is considered as satisfactory position of the firm. As
we can see that in the year 2010-2011 quick ratio is 12.42:1 which has reached very high as
compared to previous five years which shows that company is able to pay off current obligations
immediately.

As per the rule this ratio is good. But very high ratio is not good for the company.

C. ABSOULTE LIQUIDITY RATIO

(Amount in `)

Absolute Liquidity Ratio

Year Absolute Liquid Assets Current Liabilities Ratio
2011-12 8687164.94 54330888.59 0.16
2012-13 5538256.14 50127148.94 0.11
2013-14 6497389.09 71297804.34 0.09
2014-15 10052927.09 52604159.71 0.19
2015 16 32755145.63 30760257.42 1.06

GRAPHICAL REPRESENTATION

Interpretation
Absolute Liquid Ratio of 0.5:1 or more is supposed to be an ideal ratio. As we can see that in the
year 2010-2011 current ratio is 1.06:1 which has reached very high as compared to previous five
years which shows that companys short-term financial position is good.

As per the rule this ratio is good and it is also good for the company.

2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations.
Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs
and repayment schedules associated with its long term borrowings.

The following ratio serves the purpose of determining the solvency of the concern.
 Debt Equity Ratio

Debt to total Funds Ratio

Proprietary Ratio

Fixed Assets to Proprietors Fund Ratio

Capital Gearing Ratio

Interest Coverage Ratio

LEVERAGE RATIOS

A. DEBT EQUITY RATIO

(Amount in `)

Debt Equity Ratio

Year Outsider Funds Shareholder Funds Ratio
2011-12 112631760.87 54450607.74 2.07
2012-13 52861168.90 63194048.10 0.84
2013-14 61744210.40 63296365.79 0.98
2014-15 71158277.79 66921073.19 1.06
2015 16 261000000.00 71813190.97 3.63

GRAPHICAL REPRESENTATION

Interpretation
Debt Equity Ratio of 2:1 or less is supposed to be an ideal ratio. As we can see that from the year
2006-2007 to 2008-2009 the ratio is less than 2:1 but in the last year 2009-2010 this ratio is
3.63:1 which is higher than ideal ratio which show that company claims of outsiders in long term
(creditors) are greater than those of owners.

As per the rule this ratio is not good and it is also not good for the company.
B. DEBT TO TOTAL FUNDS RATIO

(Amount in `)

Debt to Total Funds Ratio

Year Outsider Funds Total Capitalization Ratio
2011-12 112631760.87 167082368.61 0.67
2012-13 52861168.90 116055217.00 0.46
2013-14 61744210.40 125040576.19 0.49
2014-15 71158277.79 138079350.98 0.52
2015 16 261000000.00 332813190.97 0.78

GRAPHICAL REPRESENTATION

Interpretation
Debt to total funds Ratio of 0.67:1 or less is supposed to be an ideal ratio. As we can see that
from the year 2007-2008 to 2010-2011 ratio is continuously increasing which shows that
company has relied much on outside sources for raising long-term funds.

As per the rule this ratio is not good hence it is also not good for the company.

C. PROPRIETARY RATIO

(Amount in `)

Proprietary Ratio
Year Share Holders Funds Total Assets Ratio
2011-12 54450607.74 226207675.78 0.24
2012-13 63194048.10 257932727.77 0.25
2013-14 63296365.79 331894935.48 0.19
2014-15 66921073.19 433418563.96 0.15
2015 16 71813190.97 625356345.33 0.12
 GRAPHICAL REPRESENTATION

Interpretation
In Proprietary Ratio there are no rules of thumb higher the ratio better it is for the company. As
we can see that from the year 2006-2007 to 2010-2011 ratio is continually decreasing which
shows that companys long-term solvency position is not better.

As per the rule this ratio is not good hence it is also not good for the company.

D. FIXED ASSETS TO PROPRIETORS FUNDS

(Amount in `)

Fixed Assets to Proprietors Ratio

Year Fixed Assets Shareholders Funds Percentage
2011-12 90848300.09 54450607.74 167%
2012-13 109970071.59 63194048.10 174%
2013-14 106193589.80 63296365.79 168%
2014-15 105278921.57 66921073.19 157%
2015 16 107153312.57 71813190.97 149%

GRAPHICAL REPRESENTATION

Interpretation
Fixed Assets to proprietors Ratio of 65% or less is better for the company. As we can see that
from the year 2006-2007 to 2010-2011 ratio is continuously decreasing which show that
company is improving this ratio but it is much higher to normal ratio this shows that owners
funds are not sufficient to finance the fixed assets and company has to depend upon outsiders to
finance the fixed assets.

As per the rule this ratio is not good hence it is also not good for the company.
E. CAPITAL GEARING RATIO

(Amount in `)

Capital Gearing Ratio

Fixed Cost Bearing
Year Equity Shareholder Fund Ratio
Capital
2011-12 54450607.74 112631760.87 0.48
2012-13 63194048.10 52861168.90 1.20
2013-14 63296365.79 61744210.40 1.03
2014-15 66921073.19 71158277.79 0.94
2015 16 71813190.97 261000000.00 0.28

GRAPHICAL REPRESENTATION

Interpretation
In Capital Gearing Ratio there are no rules of thumb lesser the ratio better it is for the company.
As we can see that from the year 2006-2007 to 2009-2010 ratio is continuously decreasing which
show that company capital gearing ratio is good.

As per the rule this ratio is good hence it is also good for the company.
F. INTEREST COVERAGE RATIO

(Amount in `)

Interest Coverage Ratio

Year EBIT Fixed Interest Charges Ratio
2011-12 7965269.89 6712032.68 1.19
2012-13 14538426.10 9958071.00 1.46
2013-14 8705714.40 4580355.10 1.90
2014-15 9554336.83 8070006.02 1.18
2015 16 11216940.37 6325295.00 1.77

GRAPHICAL REPRESENTATION

Interpretation
In Interest Coverage Ratio higher the ratio better it is for the company. As we can see that from
the year 2005-2006 to 2010-2011 ratio is increasing except the year 2008-2009 which shows that
company is able to meet its commitment of fixed interest charges.

As per the rule this ratio is good hence it is also good for the company.
3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The efficiency
with which assets are managed directly affects the volume of sales. Activity ratios measure the
efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are
also called Turn over ratios because they indicate the speed with which assets are converted or
turned over into sales.

Stock Turnover Ratio

Debtors Turnover Ratio

Creditors Turnover Ratio

Working capital turnover ratio

Fixed assets turnover ratio

ACTIVITY RATIOS

A. STOCK TURNOVER RATIO

(Amount in `)

Stock Turnover Ratio

Year Cost of Goods Sold Average Stock Ratio
2011-12 989246756.66 58569423.02 16.89
2012-13 1379748713.93 55985834.36 24.65
2013-14 1740902881.50 47855588.69 36.38
2014-15 2044892769.85 54447919.21 37.56
2015 16 2273758620.65 73474740.16 30.95
 GRAPHICAL REPRESENTATION

Interpretation
In Stock Turnover Ratio there are no rules of thumb higher the ratio better it is for the company.
As we can see that in the year 2005-2006 to 2008-2009 the ratio is continuously increasing
except last year 2009-2010 ratio which show that companys previous year trends are good but in
last year the ratio is decreasing which is not good.

As per the rule this ratio is not good hence it is also not good for the company.

B. DEBTORS TURNOVER RATIO

(Amount in `)

Debtors Turnover Ratio

Year Net Credit Sales Avg. Trade Dr. Ratio Collection Period
2011-12 1031504291.53 18586934.78 55.50 7 days
2012-13 1425577500.72 28007884.85 50.90 7 days
2013-14 1781031869.07 58293047.64 30.55 12 days
2014-15 2088598137.00 137320364.22 15.21 24 days
2015 16 2323788901.21 194850640.46 11.93 31 days

GRAPHICAL REPRESENTATION

Interpretation
In Debtors Turnover Ratio there are no rules of thumb higher the ratio better it is for the
company. But as per the company policy all the sales is done on cash basis except government
organisations. As we can see that in the year 2005-2006 to 2009-2010 ratio is continuously
decreasing it is due to the credit sales given to the govt. institutions.
But it is decreasing at a higher rate which is not good for the company.

C. CREDITORS TURNOVER RATIO

(Amount in
`)

Creditors Turnover Ratio

Year Net Credit Purchase Avg. Trade Cr. Ratio Payment Period
2011-12 862304398.38 33008439.08 26.12 14 days
2012-13 1218063363.76 34102557.54 35.72 10 days
2013-14 1569377942.91 41298110.38 38.00 10 days
2014-15 1849566173.60 35204283.19 52.54 7 days
2015 16 2048746839.00 14528146.83 141.02 3 days

GRAPHICAL REPRESENTATION

Interpretation
In Creditors Turnover Ratio there are no rules of thumb lesser the ratio better it is for the
company. But as per the company policy all the purchases of raw milk will be done on 10 days
payment basis. As we can see that from the year 2005-2006 to 2009-2010 ratio is continuously
increasing which shows that company pays the credit amount very fast.

As per the rule this ratio is not good hence it is also not good for the company.

D. WORKING CAPITAL TURNOVER RATIO

(Amount in `)

Working Capital Turnover Ratio

Year Cost of Sales Working Capital Ratio
2011-12 989246756.66 68965424.41 14.34
2012-13 1379748713.93 82316354.55 16.76
2013-14 1740902881.50 134562703.65 12.94
2014-15 2044892769.85 253309477.99 8.07
 2015 16 2273758620.65 462909044.65 4.91

GRAPHICAL REPRESENTATION

Interpretation
In Working Capital Ratio there are no rules of thumb higher the ratio better it is for the
company but a high working capital turnover ratio is not a good situation for company. This ratio
should be compared with ratios of other firms doing similar business and making a better
interpretation of the ratio. As we can see that in the year 2006-2007 to 2009-2010 ratio is
continuously decreasing which shows that companys working capital ratio is not good.

E. FIXED ASSETS TURNOVER RATIO

(Amount in `)

Fixed Assets Turnover Ratio

Year Cost of Sales Net Fixed Assets Ratio
2011-12 989246756.66 51349925.28 19.26
2012-13 1379748713.93 63995092.77 21.56
2013-14 1740902881.50 62018721.87 28.07
2014-15 2044892769.85 58639581.77 34.87
2015 16 2273758620.65 57137107.77 39.79

GRAPHICAL REPRESENTATION

Interpretation
In Fixed Assets Turnover Ratio there are no rules of thumb higher the ratio better it is for the
company. As we can see that from the year 2006-2007 to 2009-2010 ratio is continuously
increasing which show that company fixed assets turnover ratio is good.

As per the rule this ratio is good hence it is also good for the company.
4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is the engine,
that drives the business enterprise. Generally, profitability ratios are calculated either in relation
to sales or in relation to investment. The various profitability ratios are discussed below.

GENERAL PROFITABILITY RATIO

Gross Profit Ratio

Net Profit Ratio

Operating Ratio

PROFITABILITY RATIO BASED ON INVESTMENT

Return on Capital Employed

Return on Shareholders Funds

A. GROSS PROFIT RATIO

(Amount
in `)
Gross Profit Ratio
Year Gross Profit Net Sales Percentage
2011-12 42257534.87 1031504291.53 4.10%
2012-13 45828786.79 1425577500.72 3.22%
2013-14 40128987.57 1781031869.07 2.25%
2014-15 43705367.15 2088598137.00 2.09%
2015 16 50030280.56 2323788901.21 2.15%

GRAPHICAL REPRESENTATION
Interpretation
In Gross Profit Ratio there are no rules of thumb higher the ratio better it is for the company. As
we can see that from the year 2005-2006 to 2009-2010 ratio is continuously decreasing which
shows that companys gross profit ratio is not good.

As per the rule this ratio is not good hence it is also not good for the company.

B. NET PROFIT RATIO

(Amount
in `)
Net Profit Ratio
Year Net Profit After Tax Net Sales Percentage
2011-12 1142222.89 1031504291.53 0.11%
2012-13 2029708.61 1425577500.72 0.14%
2013-14 2723149.30 1781031869.07 0.15%
2014-15 2676137.83 2088598137.00 0.13%
2015 16 3112890.69 2323788901.21 0.13%

GRAPHICAL REPRESENTATION

Interpretation
In Net Profit Ratio there are no rules of thumb higher the ratio better it is for the company. As
we can see that from the year 2005-2006 to 2007-2008 ratio is continuously increasing but in
2008-2009 and 2009-2010 the ratio has decreased which shows that companys net profit ratio is
not good.

As per the rule this ratio is not good hence it is also not good for the company.
C. OPERATING PROFIT RATIO

(Amount in `)

Operating Profit Ratio

Year Operating Profit Net Sales Percentage
2011-12 18066022.69 1031504291.53 1.75%
2012-13 19822396.49 1425577500.72 1.39%
2013-14 21065818.48 1781031869.07 1.18%
2014-15 14107379.66 2088598137.00 0.68%
2015 16 15700499.56 2323788901.21 0.68%

GRAPHICAL REPRESENTATION

Interpretation
In Operating Profit Ratio there are no rules of thumb higher the ratio better it is for the
company. As we can see that from the year 2005-2006 to 2009-2010 ratio is continuously
decreasing which shows that companys operating profit ratio is not good.

As per the rule this ratio is not good hence it is also not good for the company.

D. RETURN ON CAPITAL EMPLOYED

(Amount in `)
Return on Capital Employed
Year Adjusted Profit Capital Employed Percentage
2011-12 7965269.89 159813724.50 4.98%
2012-13 13014861.61 192286426.14 6.77%
2013-14 8705714.40 240756293.45 3.62%
2014-15 9554336.83 358588399.56 2.66%
 2015 16 11216940.37 570062357.22 1.97%

GRAPHICAL REPRESENTATION

Interpretation
In Return on Capital Employed Ratio there are no rules of thumb higher the ratio better it is for
the company. As we can see that from the year 2006-2007 to 2009-2010 ratio is continuously
decreasing which shows that companys return on capital employed ratio is not good.

As per the rule this ratio is not good hence it is also not good for the company.

E. RETURN ON SHAREHOLERS FUND

(Amount in `)
Return on Shareholders Fund
Year Adjusted Profit Shareholders Funds Percentage
2011-12 7965269.89 54450607.74 14.63%
2012-13 13014861.61 63194048.10 20.60%
2013-14 8705714.40 63296365.79 13.75%
2014-15 9554336.83 66921073.19 14.28%
2015 16 11216940.37 71813190.97 15.62%

GRAPHICAL REPRESENTATION

Interpretation
In Return on Shareholders Fund Ratio there are no rules of thumb higher the ratio better it is
for the company. This ratio should be compared with ratio of other firms doing similar business
and making a better interpretation of the ratio. As we can see that from the year 2006-2007 and
2007-2008 ratio is decreasing but after that in 2008-2009 and 2009-2010 it is again increasing
which show that resources of company are well used.

As per the rule this ratio is good hence it is also good for the company.

CHAPTER 4
RESULTS & CONCLUSION
 FINDINGS

Like a traveler, who after completing his long and arduous journey reaches his destination and
looks back upon the area covered by him for recalling the important landmarks and experiences
he came across; similarly, it would be desirable to review the various aspects of the present
study. So prior to winding up this study, an attempt is made to summarize its major findings on
the basis of forgoing chapters which deals with the analysis and interpretation of the financial
statements.

To conclude, Vita Milk Plant Rohtakjind short term, long term and solvency financial position
can be regarded as not good which is shown through under mentioned facts and figures:-

Liquidity position of Milk Plant Hisar-jind is not good because Quick ratio and Current
ratio is very high in previous year as compared to the last years which is due to the idle
funds.

Gross Profit Ratio also shows the declining trend from year to year.

Net profit of Milk Plant Hisar-jind is very low because Milk Plant jind is a co-operative
society.

Operating Profit Ratio is also showing a declining trend from year to year.

Return on Capital employed shows decreasing trend which is not good for the company.
It shows the weaker position of the company.

Return on shareholders fund shows increasing trend which is good for the company.

Proprietary Ratio of the Milk Plant jind shows decreasing trend, which is again not good
for the company.

Receivable ratio show decreasing trend which has negative effect on liquidity position of
the company.

Payable ratio shows that Milk Plant Hisasr-jind gets less days in previous year for
payment to its creditors.
 SUGGESTIONS

A companys performance is reflected through its turnover, profitability and long term & short
term financial position. From the above analysis it is clear that the financial position of the plant
is not sound. There is a need to apply long term as well as immediate stern steps. To improve the
financial position of the company, following measures are suggested:

Efforts should be made to improve internal equity over external equity.

Proper utilization of fixed assets is required.

Current assets management should be checked & its level should be decreased to
overcome the problem of idle funds.

To control the cost of goods sold, the purchase policy should be revised and purchases
should be made on favorable basis.

To reduce administration expenses. Proper utilization of employees and workforce should

be made. There is a need to recruit and retain more efficient employees in the plant.

To control operating cost, cost of goods sold & administration expenses should be
reduced.

There is also a need of better inventory management, effective steps should be taken to
control inventory conversion period.

To improve the sales, the plant should move along with the advanced technology by
modifying its sales policies, so that stock can be easily converted into sales.

Receivable and payable ratio is also to control by extending the payment period and
receive the payment as fast as possible.

Profitability can be increased by reduction in cost of power and fuel, higher utilization of
labour, use of higher skilled labour etc.

The company has idle funds which can be utilized by improving the management
system.
 CONCLUSION

Success is achieved by those who try where there is nothing to lose by trying and a great deal to
gain if successful, by all means try
W. Clement Ston
The overall conclusion of study is that the overall position of Milk Plant Hisar-jind is not good.
This is due to the taking of long term unsecured loan which also effect the bank balance of the
current asset that effect the overall ratios of the study.

Hence, we can say that the short term, long term and solvency positions of Milk Plant Hisar-jind
are not good as compared to the previous years.
CHAPTER 5
ANNEXURES
 BALANCE SHEET

The Hisar-jindCo-operative Milk Producers Union Ltd.

BALANCE SHEET AS AT 31ST MARCH 2016

BALANCE SHEET OF LAST FIVE YEARS

2011-12 2012-13 2013-14 2014-15 2015-16
LIABILITIES
Share Capital 1338487.21 14764221.84 15973199.73 17180431.73 18258876.65
Reserves &
39923513.64 46400117.65 44600016.76 47064503.63 50441423.63
Surplus
Grant &
10522791.53 96336511.89 138112996.40 242568345.42 258940051.26
Subsidies
Unsecured Loans 112631760.87 52861168.90 61744210.40 71158277.79 261000000.00
Current
Liabilities & 54330888.59 50127148.94 71297804.34 52604159.71 30760257.42
Provisions
TOTAL 230793825.84 260489169.22 331728227.63 430575718.28 619400608.96

ASSETS
Fixed Assets 90848300.09 109970071.59 106193589.80 105278921.57 107153312.57

Investments 12063062.69 15519152.69 19840837.69 22226004.69 24533730.69

Current Assets 123296313.00 132443503.49 205860507.99 305913637.70 493669302.07

Losses
Upto Last Year
5728372.95 4586150.06 2556441.45 -166707.85 -2842845.68
Profit/Loss A/C
During the Year
-1142222.89 -2029708.61 -2723149.30 -2676137.83 -3112890.69
Profit/Loss A/C
TOTAL 230793825.84 260489169.22 331728227.63 430575718.28 619400608.96
 PROFIT & LOSS ACCOUNT

TheHisar-jind Co-operative Milk Producers Union Ltd.

PROFIT & LOSS FOR THE YEAR ENDING 31ST MARCH 2006, 2007, 2008, 2009, 2010
& 2011

P&L ACCOUNT OF LAST FIVE YEARS

2 2015-16 2015-16 2015-16 2015-16
REVENUE INCOME (` In Thousands)
Sale of Milk & Milk
980536.32 1336611.83 1650720818.33 1933704108.79 2182890.26
Prod
Sale of Trading
49750.59 87824.78 129134919.55 153455194.24 139477.80
Goods
Sale of Scrap 1217.37 1140.88 1176131.19 1438833.97 1420.82

Closing Stock
Finished Goods 61121.15 45626.77 46996890.46 58079612.47 84402.19

Trading Goods 3461.56 1762.18 1325328.52 2494006.98 1973.66

SUB TOTAL 1096087.00 47388.95 48322218.98 60573619.45 86375.86

Misc Income 793.78 1364.40 1729965.42 1962865.04 1682.34

Income From TIP 13.53 26.62 6050.00 0.00 0.00

By Gross Profit 42257.53 45828.78 40128987.57 43705367.15 50030.28

TOTAL 43064.85 1474357.48 1831090103.47 2151134621.49 2411847.11

REVENUE EXPENSES (` In Thousands)

O-Stock Finished
51406.93 61121.15 4562.67 46996.89 58079.61
Good
O-Stock Trading
1149.20 3461.56 1762.18 1325.32 2494.00
Goods
R-Material
814172.43 1128694.51 1434723.76 1703316.02 1895842.39
Consumed
Manufacturing Exp. 99081.12 124271.56 132558.35 153400.95 175994.79

Procurement Exp. 30173.59 35714.41 38529.72 43094.31 48496.64

 Purchase of Tar.
57846.17 73874.46 136024.29 157332.87 179227.03
Good
Gross Profit 42257.53 45828.78 40128.98 43705.36 50030.28

SUB TOTAL 1096087.00 2900104.13 3618579.18 2149171.75 2410164.76

Administrative Exp. 14049.98 18250.36 17498.80 20564.63 25545.32

Selling Exp. 10092.36 7756.02 10140.27 9033.35 8784.45

Prior Period Exp. 49.15 0.00 -1564.36 0.00 0.00

NON OPERATING
EXP.
Royalty Paid 551.00 500.00 500.00 500.00 551.50

Lease Money 4438.28 1221.96 1221.96 1221.96 1221.96

Depreciation 5918.79 6476.60 5362.60 4793.94 4392.44

Int. on Loan HDDC 187.80 9958.07 4580.35 5500.19 307.78

Int. on Cash Cr.
6137.49 0.00 0.00 0.00 6404.24
Limit
Net Profit Before I.
1639.97 3056.79 4125.35 4054.14 4504.90
Tax
Income Tax on
-497.75 -1027.08 -1402.21 -1378.00 -1392.01
Profits
Add Back I. Tax of
0.00 0.00 0.00 306.60 0.00
Pre. Year
Net Profit after I. Tax 1142.22 2029.70 2723.14 2676.13 3112.89

TOTAL 43064.85 1474357.48 1831090.10 2151134.62 2411847.11

BIBLIOGRAPHY

In completing this project report many books, annual reports of Vita Milk Plant Rohtakjind
and many websites are being used. I pay my respect and thanks to them.

Annual report of Vita Milk Plant RohtakRohtak for the last 5 years.
 GUPTA, Arun gupta, and Sharma, R.K., Management Accounting, 11nt ed., New Delhi,
Kalyani Publishers, 2009

Kothari, C.R., Research Methodology Methods & Techniques, 2nd ed., New Delhi, New
Age International (P) Limited Publishers, 2008

Pandey, I.M., Financial Management, 9th ed., Vikas Publishing House Pvt. Ltd., 2007

Websites referred

www.vitaindia.com

www.google.com

www.wikipedia.com

www.nddb.org