PROJECT REPORT

ON

“FINANCIAL ANALYSIS OF VERKA MILK PLANT

THROUGH RATIO ANALYSIS”

SUBMITTED TO: SUBMITTED BY:

Ms. Pinky Sharma Sanju Priya

Mcom 4TH Sem
17001389

SANT BABA BHAG SINGH UNIVERSITY JALANDHAR

 STUDENT DECLARATION

I hereby declare that the project report submitted to the university, Sant Baba Bhag Singh
University in partial fulfillment of the requirement for the degree M.com on “Financial
Analysis of VERKA Milk Plant through Ratio Analysis” is a result of my own work under
continuous guidance and kind co-operation of our university faculty member, Ms. Pinky
Sharma. I have not submitted this report to any other university for the award of the degree.

SANJU PRIYA

MCOM 4TH SEM

17001389
 ACKNOWLEDGEMENT

At the level of learning, it is often difficult to understand the wide spectrum of knowledge
without proper guidance. Guidance and encouragement are the two ways that leads to the
path of success.

Gratitude cannot be seen or expressed. It can only be felt in heart and is beyond description.
It is of immense pleasure and profound privilege to express my gratitude and indebtedness
along with sincere thanks to my mentor at Sant Baba Bhag Singh University, Ms. Pinky
Sharma for providing me the guidance.

I express my heartfelt thanks to all the teachers of Sant Baba Bhag Singh University for their
guidance and support.

I was to formally acknowledge my sincere gratitude to all those who assisted and guided me
in completing my project report.
 PREFACE

For management careers, it is very important to develop managerial skills. In order to achieve
positive and concrete results, along with theoretical concepts, the exposure of real life
situation existing in a corporate world is very much needed. To fulfill this need, this type of
practical training is required.

It was my fortune to get project report of very healthy company.

It has been very educative and fruitful experience for me. It has given me an insight into
some practical experience.

I wish this great organization success so it may flourish and serve the nation and have to
achieve many goals.
 EXECUTIVE SUMMARY

For management careers, it is very important to develop managerial skills .In order to achieve
positive and concrete results, along with theoretical concepts, the exposure of real life
situation existing in a corporate world is very much needed.

The project is concern with “financial analysis of verka milk plant through ratio analysis”.
Financial statements are prepared by an organisation not only for record keeping but also
analysing and interpreting to enhance its performance in coming future.

Thus, the project deals with the analysing the results through a very important tool i.e. Ratios.
Ratios interpret quantitative relationship between two variables and shows the correct path
for improving profitability, the main objective of the firm after survival.

The project also interprets the possible reasons for fluctuations in any such ratios and dealing
with any problem arising.
 TABLE OF CONTENTS

SNO. PARTICULARS PAGE

1. COMPANY PROFILE

1.1 MILKFED 1
1.2 VERKA 2
1.3 MISSION, VISION AND OBJECTIVES 3
1.4 VERKA NETWORKS 4
1.7 PRODUCTS 5-6
JALANDHAR MILK PLANT

1.8 THE DOABA COOPERATIVE MILK PRODUCERS 7

UNION LTD.
1.9 MILK HANDLING AND PRODUCT CAPACITIES 8
1.10 TURNOVER 8
1.11OBJECTIVES AND SCOPE OF THE STUDY 9
2. RATIO ANALYSIS
2.1INTRODUCTION 10
2.2OBJECTIVES 11
2.3ADVANTAGES AND DISADVANTAGES 12
2.4CLASSIFICATION 13-15
2.5 REVIEW OF LITERATURE 16-17
2.6RESEARCH METHODOLOGY 18-19
2.7LIMITATIONS OF RESEARCH 20
3. DATA ANALYSIS AND INTERPRETATION
3.1 RATIOS COMPUTATION 21-29
3.2 SURVEY RESULT FOR THE CONSUMERS 30-37
3.3 SURVEY RESULT FOR THE RETAILERS 38-44
4 4.1 FINDINGS OF THE STUDY 45
5. 5.1 SUGGESTIONS AND RECOMMENDATIONS 46
6. 6.1 CONCLUSION 47
7. 7.1 REFERENCES 48
 CHAPTER-1
COMPANY PROFILE
 MILK-FED PUNJAB

The Punjab State Cooperative Milk producers Federation Limited popularly known as
Milkfed Punjab, came into existence in 1973 with a twin objective of providing remunerative
milk market to the milk producers in the state by value addition and marketing of produce on
one hand and to provide technical inputs to the milk producers for enhancement of milk
production on the other hand.

The setup of the organization is a three tier system:

 Milk Producers Cooperative Societies at the village level

 Milk unions at district level
 Milk Federation as an Apex Body at State level

First Milkfed plant of the state was setup near the Amritsar. The brand name of milk and milk
products was adopted as Verka. Commissioning of the plant was done by Dairy development
Corporation in 1974.

The organization has continuously advanced towards its covered objectives well defined in its
bylaws.
VERKA:

Verka is a flagship brand of MILKFED and came into being in 1973 when MILKFED was
mandated for milk procurement, quality processing of milk & its products and marketing of
these products. “VERKA” was christened after the name of the place where the first plant
was setup in Amritsar.

A trusted brand, Verka has become a household name and is loved by its customers for
nutrition, quality and sheer indulgence.

It has consolidated its brand strength by not only retaining the high quality of existing
products but also by innovating and bringing new products to the tables of its diverse
customers.

Verka stands apart, with its promise of purity in the milk testing done by NABL(National
Accreditation Board for Testing and Calibration Laboratories) accredited laboratory, Verka
Gold has topped the full cream milk category with a score of 88 out of 100.

The brand registered the highest milk fat at 6.69%, a lower saturated fat of 3.52%. verka milk
is also loaded with calcium and Vitamin A.

Currently, Verka sources milk from over 4, 00,000 members of around 7,000 village milk
producers cooperative societies.

These village level cooperatives work under 11 district milk producers unions with 9 milk
plants having a consolidated milk handling capacity of around 19,75,000 litres per day.

Each verka product is the manifestation of natural goodness unlocked by adopting state of art
technology.
MISSION, VISION AND OBJECTIVES OF VERKA:

MISSION:
Ensuring prosperity to the milk producers by ensuring milk procurement at remunerative
prices around the year coupled with providing quality extension services for enhancing milk
production as well as reducing cost.

VISION:
To become the most admired brand in the dairy sector and vibrant cooperative institution in
the country, facilitating inclusive growth.

OBJECTIVES:
a. To ensure quality milk procurement at remunerative price coupled with improved
animal productivity for reducing cost of milk production for sustainable growth of the
milk producers.
b. To provide quality extension services at the door steps of milk producers.
c. To improve fiscal management by optimizing the returns on capital.
d. To enhance brand equity.
e. To ensure continual expansion of distribution.
f. To embrace innovation in the entire value chain for consumer delight.
g. To ensure acquisition, development and retention of competent manpower.
 VERKA NETWORKS:

With an aim to maximum reach out to its consumers, Verka has developed a widespread
network of milk unions in different towns of Punjab.

FEROZP
SANGR UR FARIDK
UR OT

CHANDIGARH
BATHIN
DA

VERKA
AMRITS
MOHALI NETWOR AR
KS

GURDASP
PATIALA UR

LUDHIAN HOSHIARP
A UR
JALANDHA
R

Milkfed has strong base with 11 District Cooperative milk unions having 9 milk plants of the
unions (except Ferozpur & Faridkot).
Milkfed has 2 Cattle Feed Plants at Khanna and Ghania Ke Banger, 1 Fodder Seed
Processing Unit at Bassi Pathana, 1 Frozen Semen Station at Khanna and UHT cum Ice
Cream Manufacturing Plant at Chandigarh. The handling capacity of milk plants is 19.75 lac
litres per day.
With advanced technology and customer satisfaction in mind, Verka strives to provide best
quality products to its esteemed customers in almost all of Punjab.
PRODUCTS- VERKA

Verka is a prominent player in organized pouch milk segment in Punjab and adjoining areas,
yet the organization is not short of innovative spirits. Verka has full-fledged jumped into
other segments as well, whether its beverages, sweets or exotic ice-creams. Adding to the
consumer range, Verka also provides bulk packs for milk, paneer, dahi etc. which makes it a
prominent supplier.

POUCH MILK DAHI PANEER

LASSI FLAVOURED MILK CHEESE SINGLES

SWEETS MILK POWDER KHEER

NIMBU PANI KULFIS AND CONES JEERA RAITA

AAM PANNA GINGER & HONEY TABLE BUTTER

COLD COFFEE CHEESE SPREAD MANGO RASEELA

 JALANDHAR MILK PLANT

THE DOABA COOPERATIVE MILK PRODUCERS UNION LTD,

JALANDHAR:
The Doaba Cooperative Milk Producers Union Ltd., Jalandhar was set up in the year 1972
under Cooperative Sector with the financial assistance provided by State Government and
N.D.C. The Doaba Milk Plant was established in the year 1976 with a capital of Rs.110
lakhs.

The primary objectives of the union were to provide ready market to the Milk Producers for
sale of milk in the villages through Cooperatives on the one hand and to provide wholesome
hygienic good quality processed milk and milk products to the urban consumers at
remunerative price on the other hand.

The milk shed area of Milk Union comprises districts of Jalandhar, kapurthala, and
Nawanshahar. It consists of 7 tehsils namely Jalandhar, Nakodar, Phillaur, Kapurthala,
Sultanpur lodhi, Phagwara and Nawanshahr covering 1834 villages in 18 blocks.
MILK HANDLING AND PRODUCT CAPACITIES:

Sr. MILK HANDLING AND PRODUCT CAPACITIES - MILK UNION

No. JALANDHAR
1 City Supply 165000 Litres per day
2 Dahi 10 MT/day
3 Lassi 25 MT/day
4 Paneer 1500 KGs per day
5 Kheer 800 KGs per day
6 Ghee 10 MT/day
9 Panjiri (CDPO) 8.2 MT/day
10 White Butter 12 MT/day
TOTAL MILK HANDLING 150000 Litres per day
CAPACITY

TURNOVER: VERKA JALANDHAR

 OBJECTIVES & SCOPE OF THE STUDY

OBJECTIVES
The primary objective of the project is to analyse the financial strength of the VERKA.
Study is conducted to check that which product is consumed more by the customers. Aim of
the project is to find the loopholes in its existing marketing and distribution system.

1) To study and analyze the financial position of the company through ratio analysis.
2) To analyze the profitability position of VERKA
3) To determine the long term solvency position of VERKA
4) To suggest the feasible solution to improve the overall efficiency of the VERKA.

SCOPE OF THE STUDY

The scope of the study is:-

1. Estimating the total market size of loose and pouch milk.

2. Analyzing the market share of VERKA and its competitors.
3. Analyzing the behavior of customers and retailers towards the products of
VERKA.
 CHAPTER-2
RATIO ANALYSIS
 RATIO ANALYSIS

INTRODUCTION:

Meaning of Ratio: - It is an arithmetical expression of relationship between two inter-

related or related terms.

Meaning of Ratio Analysis: - Ratio analysis is a study of relationship among various

financial factors in a business. It is a process of determining and interpreting relationships
between the items of financial statements to provide a meaningful understanding of the
performance and financial position of an enterprise.

Expression of Ratio: - The Ratio can be expressed in any of the following forms:

Pure Percentage Times Fraction

2:1 25% 4 times ¾

Types of Ratio:-

LIQUIDITY SOLVENCY ACTIVITY/ PROFITABILITY

RATIOS RATIOS TURNOVER RATIOS
RATIOS
These ratios show These ratios are These ratios show These ratios help to
the ability of the calculated to assess how efficiently the assess a business ability
enterprise to meet the long term company is using its to generate earnings
the short term financial position of resources. compared to its expenses
financial the enterprise. and other relevant costs
obligations. Solvency means incurred.
ability to meet its
long term liabilities.
OBJECTIVES OF RATIO ANALYSIS:-

Financial ratios are the true test of profitability, efficiency and financial soundness of the
firm. These ratios have following objectives:

1. Measuring the Profitability: Profitability is the profit earning capacity of the

business. This can be measured by Gross Profit, Net Profit, Expenses and other Ratios. If
these ratios fall we can take corrective actions.

2. Measuring financial position: Short-term and long term financial position of the
business can be measured by calculating liquidity and solvency ratios. In case of unhealthy
short or long term position, corrective measures can be taken.

3. Facilitating Comparative Analysis: Present performance can be compared

with past performance to discover the plus and minus points. Comparison with the
performance of other competitive firms can also be made.

4. Indicating Overall efficiency: Profit and Loss Account shows the amount of net
profit and Balance Sheet shows the amount of various assets, liabilities and capital. But the
profitability can be known by calculating the financial ratios.

5. Budgeting and Forecasting: Ratio analysis is of much help in financial

forecasting and planning. Ratios calculated for a number of years work as a guide for the
future. Meaningful conclusions can be drawn for future from these ratios.
 ADVANTAGES AND DISADVANTAGES
ADVANTAGES
Helpful in analysing the financial
statement: Accounting ratios are
extremely useful device for
analysing the financial
statements. Bankers, investors,
creditors, etc. analyse the Balance
Sheet and Profit and Loss A/c of
the firm/company by means of
ratios.
Helpful in comparison: Accounting
ratios help in making inter-firm
and intra-firm comparisons. A
firm can compare its performance
with the general trend in the
industry and take corrective
measures wherever needed.
Helpful in locating weak spots of
the business: Ratios help in
measuring the efficiency and
performance of each unit and
department of a firm. During this
process, weak spots may come to
light. Owners can pay more
attention to these weak spots
and make the business more
profitable.
Helpful in simplifying accounting
figures: Accounting ratio
simplifies, summarises and
systematises a long array of
accounting figures to make them
understandable. Absolute figures
do not carry much meaning.
DISADVANTAGES
Lack of proper standard: There is
no single standard ratio which is
universally accepted and against
which a comparison can be
made. Circumstances differ from
firm to firm and industry to
industry. It renders interpretation
of ratios difficult and to some
extent arbitrary.
Qualitative factors are ignored:
Ratio analysis is only a
quantitative analysis. It ignores
the qualitative aspects of the
firm, how so ever important it
may be. For example, ability of
the manager, customer
satisfaction, etc. are more
important than quantitative
factors
Ratios alone are not adequate for
proper conclusions: Ratios
calculated from financial
statements are not sure indicator
of good or bad financial position.
The analyst has to carry out
further investigations and
exercise his judgement in arriving
at some concrete conclusion
Window dressing: Many firms, in
order to show the rosy picture of
their business, conceal the
material facts and exhibit false
position. It makes the financial
statements and the ratios based
upon them as defective.
CLASSIFICATION OF RATIOS:

LIQUIDITY RATIOS 1. Current ratio

2. Quick ratio Or liquid ratio Or acid test ratio

SOLVENCY RATIOS 1. Debt to equity ratio

2. Total assets to debt ratio

3. Proprietary ratio

4. Interest coverage ratio

ACTIVITY/ TURNOVER RATIOS 1. Inventory(stock) turnover ratio

2. Total assets turnover ratio

3. Fixed assets turnover ratio

4. Working capital turnover ratio

PROFITABILITY RATIOS 1. Gross profit ratio

2. Net profit ratio

3. Return on investment
 TYPES OF FINANCIAL RATIOS
On the basis of function or test, the ratios are classified as liquidity ratios, profitability ratios,
activity ratios and solvency ratios.

1.Liquidity Ratios:

Liquidity ratios measure the adequacy of current and liquid assets and help evaluate the
ability of the business to pay its short-term debts. The ability of a business to pay its short-
term debts is frequently referred to as short-term solvency position or liquidity position of the
business.

Generally a business with sufficient current and liquid assets to pay its current liabilities as
and when they become due is considered to have a strong liquidity position and a businesses
with insufficient current and liquid assets is considered to have weak liquidity position.

Short-term creditors like suppliers of goods and commercial banks use liquidity ratios to
know whether the business has adequate current and liquid assets to meet its current
obligations. Financial institutions hesitate to offer short-term loans to businesses with weak
short-term solvency position.

Four commonly used liquidity ratios are given below:

1. Current ratio or working capital ratio

2. Quick ratio or acid test ratio
3. Current cash debt coverage ratio

Unfortunately, liquidity ratios are not true measure of liquidity because they tell about the
quantity but nothing about the quality of the current assets and, therefore, should be used
carefully. For a useful analysis of liquidity, these ratios are used in conjunction with activity
ratios (also known as current assets movement ratios). Examples of activity ratios are
receivables turnover ratio, accounts payable turnover ratio and inventory turnover ratio etc.

2.Profitability ratios:

Profit is the primary objective of all businesses. All businesses need a consistent
improvement in profit to survive and prosper. A business that continually suffers losses
cannot survive for a long period.

Profitability ratios measure the efficiency of management in the employment of business

resources to earn profits. These ratios indicate the success or failure of a business enterprise
for a particular period of time.

Profitability ratios are used by almost all the parties connected with the business.

A strong profitability position ensures common stockholders a higher dividend income and
appreciation in the value of the common stock in future.
Creditors, financial institutions and preferred stockholders expect a prompt payment of
interest and fixed dividend income if the business has good profitability position.

Management needs higher profits to pay dividends and reinvest a portion in the business to
increase the production capacity and strengthen the overall financial position of the company.

Some important profitability ratios are given below:

1. Net profit (NP) ratio

2. Gross profit (GP) ratio
3. Price earnings ratio (P/E ratio)
4. Operating ratioExpense ratio

3.Activity ratios:
Activity ratios (also known as turnover ratios) measure the efficiency of a firm or company
in generating revenues by converting its production into cash or sales. Generally a fast
conversion increases revenues and profits.

Activity ratios show how frequently the assets are converted into cash or sales and, therefore,
are frequently used in conjunction with liquidity ratios for a deep analysis of liquidity.

Some important activity ratios are:

1. Inventory turnover ratio

2. Asset turnover ratio
3. Working capital turnover ratio
4. Fixed assets turnover ratio

4.Solvency ratios:
Solvency ratios (also known as long-term solvency ratios) measure the ability of a business
to survive for a long period of time. These ratios are very important for stockholders and
creditors.

Solvency ratios are normally used to:

 Analyze the capital structure of the company

 Evaluate the ability of the company to pay interest on long term borrowings
 Evaluate the ability of the the company to repay principal amount of the long term
loans (debentures, bonds, medium and long term loans etc.).
 Evaluate whether the internal equities (stockholders’ funds) and external equities
(creditors’ funds) are in right proportion.

Some frequently used long-term solvency ratios are given below:

1. Debt to equity ratio

2. Proprietary ratio
3. Fixed assets to equity ratio
 REVIEW OF LITERATURE

1. Steen amp(1991):- Studied the consumers variety seeking tendency is recognized as

an important characteristic that influences consumer’s electronic choice behavior. Empirical
studies in economics and marketing have not specifically focused on this consumer
characteristic, but instead have approached the issue from the overt behavior side. Given the
great many factors that may underlay variation in behavior, intrinsic desire for variety cannot
be validly derived from observed behavior.

2. Dieter and David(1991):- Conducted research on Privatized Transport

Infrastructure and Incentives to invest. This paper examines incentives to invest in transport
infrastructure under public and privatized ownership. It argues that the methods used to
request the United kingdoms nationalized industries plans but that changes in regulation
introduced after 1978 have given more incentives. The authors concluded by suggesting
further investigation of solution to the dilemma posed by the possibility of under investments
and the associated social costs.

3. Hay(1993):- Conducted research on Equity and welfare in the geography of public

transport provisions that focuses on equity and welfare implications of four differing
principles of public transport provisions and demonstrates by means of graphs and a case
study.

4. Journal of IPM Meerut(2008):- The research on the topic CONSUMER

PERCEPTION IN SBI the objective of the study is to made analysis with regard to the
assessment of services provided by SBI to the customers. The research methodology used by
the researcher includes collection of primary and secondary data. Primary data has been
collected from existing customers of SBI. Data collected has been analyzed by researcher
through tables, graphs, and pie charts.
5. Indian Journal of Marketing:- The researcher research on the topic
CONSUMER BEHAVIOUR/PERCEPTION AND BRAND PERFORMANCE TOWARDS
THE ONIDA T.V. The objective of the research was to study consumer satisfaction and
brand loyalty of the respondents towards the Onida TV. For this researcher collected primary
and secondary data from the sources. The research methodology adopted by the researcher
includes chi-square test. Percentage, arithmetic mean, and variance.

6.Kaur(2008):- Conducted research on “To study the welfare measures provided to the
workers in Verka Milk plant at Jalandhar”. He found in his research that labour welfare is a
comprehensive term including various services, benefits and facilities offered to employees
by the employer. Through such generous fringe benefits and facilities offered to employees
the employer makes life worth living for employees. The welfare amenities are extended in
addition to normal wages and other economic rewards available to employees as per the legal
provisions. Sample size is 50 for this research. Research is conducted in verka milk plant at
Jalandhar. Majority of the workers feel that they work in a safe condition whereas some
loopholes are there in sanitation measures.

She concludes that in Milk Plant Jalandhar, welfare measures are provided to the workers in
an organized manner. On the basis of the analysis on the welfare measures provided to the
workers, some loopholes are there in various kinds of amenities, like hygiene and sanitation
require major form of improvement.
 RESEARCH METHODOLOGY

INSIGHT MARKETING RESEARCH PROCESS AN OVERVIEW

The essence of research conducted by me is to analyze the present market position of verka
products among its competitors and the problems which are being faced by customers,
wholesalers and retailers. The eventual objective is to suggest some recommendations to the
company so as to enable them to increase their market share. One in analyzing my samples
follows no conventional method. The total analysis based on the internees from the question
put on before my sample size. A research of this can’t be done all once throughout large area
in a limited time so Jalandhar has been selected for research.

DEVELOPING THE RESEARCH PLAN

The second step of marketing research process calls for developing the most efficient plan for
gathering the needed information. While designing a research plan we have to take decisions
regarding data sources, search approached, search instruments, sampling etc..

(A) DATA SOURCES

There are two types of data sources:-

1. Primary Data : It includes information collected from internal guide and Finance
manager.

2.Secondary Data:- Secondary data is obtained from different Milkfed magazines, annual
reports, financial documents referred.

(B) RESEARCH APPROCH:

Secondary Data
The data in respect to this report is collected from the balance sheets and statement
of profit & loss accounts. Thus, Secondary data has been majorly used while
preparation of this project along with the internet sources. Secondary data was very
much helpful as it provided minor details and ensured accuracy throughout the
project whereas primary data provided practicality and ensured reliability
CHAPTER-3
DATA ANALYSIS AND
INTERPRETATION
1. CURRENT RATIO:
Meaning: Current ratio is a relationship of current assets to current liabilities and is
computed to assess the short term financial position of the enterprise. It means current ratio is
an indicator of the enterprise`s ability to meet its short term financial obligations.

Current Ratio= Current assets

Current liabilities

COMPUTATION:
Year Current Assets(cr) Current Liabilities(cr) Current Ratio(%)

March 2013 342 150 2.28%

March 2014 350 152 2.30%
March 2015 360 155 2.32%
March 2016 380 160 2.37%
March 2017 405 163 2.48%

Current Ratio
2.5

2.45

2.4

2.35

2.3 Current Ratio

2.25

2.2

2.15
2013 2014 2015 2016 2017

INTERPRETATION:

Rule of thumb for Current Ratio is 2:1. The current ratio was low in 2013 that is
only 2.28. But has increased in 2017 from 2.28 to 2.48 significantly. In the last five years the
rate of growth of the company has increased. The objective of calculating current ratio is to
assess the ability of firm to pay its short term liabilities.
2. QUICK RATIO/ ACID TEST RATIO
MEANING: Liquid ratio is a relationship of liquid assets with current liabilities and is
computed to assess the short term liquidity of the enterprise. Liquid assets are the assets
which are either in the form of cash and cash equivalents or can be converted into cash within
a very short period. Thus, it does not include inventories and prepaid expenses.

Quick ratio = Quick Assets

Current liabilities

COMPUTATION:
Year Quick Assets(cr) Current Ratio(%)
Liabilities(cr)
2013 250 150 1.66%
2014 260 152 1.71%
2015 285 155 1.83%
2016 295 160 1.84%
2017 305 163 1.87%

Quick Ratio
1.9
1.85
1.8
1.75
1.7 Quick Ratio

1.65
1.6
1.55
2013 2014 2015 2016 2017

INTERPRETATION:

Rule of thumb for quick Ratio is 1:1. Quick ratio of 1:1 is an accepted standard. The
firms has a good capacity to pay of current liabilities.The ratio of the firm in 2013 was 1.66%
and afterwards it rises in the year 2017 from 1.66 to 1.87%.
3.TOTAL ASSETS TO DEBT RATIO
MEANING: Total assets to debt ratio establishes relationship between total assets and total
long term debts.it measures the margin available to the lenders of long term debts i.e. the
extent to which debt is covered by the assets.

Total assets to debt ratio = Total assets

Debt

COMPUTATION:
Year Total Assets(cr) Debt(cr) Ratio(%)

2013 870 450 1.93%

2014 883 350 2.52%
2015 900 400 2.25%
2016 950 380 2.5%
2017 995 383 2.51%

Total Assets to Debt Ratio

3

2.5

1.5
Total Assets to Debt Ratio
1

0.5

0
2013 2014 2015 2016 2017

INTERPRETATION:

The total assets to debt ratio is repetitively higher in all the years (1.93 in 2013, and 2.51 in
2017) .Though it has fluctuated a bit but has remained high. This higher ratio means higher
safety for lenders to the business. Thus, VERKA ensures complete safety to its lenders as it
measures the margin available to the lenders of long term debts.
4. PROPRIETARY RATIO
MEANING: Proprietary ratio establishes the relationship between proprietors` funds and total
assets. The objective of this ratio is to measure the proportion of total assets financed by the
Proprietors` funds. The ratio is important as it shows financial strength of the company.

Proprietary ratio = Proprietors` funds OR Shareholders` funds

Total assets

COMPUTATION:
Year Proprietors fund(cr) Total Assets(cr) Ratio(%)

2013 700 870 0.80%

2014 750 883 0.84%
2015 753 900 0.83%
2016 800 950 0.84%
2017 861 995 0.86%

Proprietory Ratio
0.87
0.86
0.85
0.84
0.83
0.82
Proprietory Ratio
0.81
0.8
0.79
0.78
0.77
2013 2014 2015 2016 2017

INTERPRETATION:

This ratio has remained quite low in all the years and not shown any major changes. It was
0.8 in 2013 and 0.86 in 2017 approximately and did not show any significant change. This
means lower or inadequate safety for the creditors. 50% is supposed to be satisfactory
proprietory ratio for the creditors.
5. INVENTORY OR STOCK TURNOVER RATIO
MEANING: Stock turnover ratio establishes relationship between Cost of revenue from
operations, i.e. cost of goods sold and the average inventory carried during that period. It
denotes how many times a rupee invested in inventories carried during that period.

Inventory turnover ratio = Cost of goods sold

Average inventory

COMPUTATION:

Year Cost of goods Average Inventory(cr) Ratio(%)

sold(cr)
2013 400 20 20%
2014 500 25 20%
2015 650 30 21.6%
2016 890 40 22.25%
2017 950 42 22.6%

Stock turnover ratio

23
22.5
22
21.5
21
20.5 Stock turnover ratio
20
19.5
19
18.5
2013 2014 2015 2016 2017

INTERPRETATION:

It ascertains whether the investment in stock is adequate. A high ratio shows that more sales
are being produced by a rupee of investment in inventories. In 2013 the ratio was low which
is 20%. In 2016 ratio increased and again showed an increasing trend in 2017.
6. TOTAL ASSETS TURNOVER RATIO
MEANING: This ratio establishes a relationship between revenue from operations i.e. sales
and total assets. The Asset Turnover ratio can often be used as an indicator of the efficiency
with which a company is deploying its assets in generating revenue.

Total asset turnover ratio= Sales

Total asset

COMPUTATION:
Year Sales(cr) Total assets(cr) Ratio(%)

2013 400 870 0.4%

2014 500 883 0.56%
2015 650 900 0.72%
2016 890 950 0.93%
2017 950 995 0.95%

Asset turnover ratio

1
0.9
0.8
0.7
0.6
0.5
Asset turnover ratio
0.4
0.3
0.2
0.1
0
2013 2014 2015 2016 2017

INTERPRETATION:
The higher the asset turnover ratio, the better the company is performing, since higher ratios
imply that the company is generating more revenue per Rupee of assets. Thus the ratio is
increasing slowly but in 2017 it has increased from 0.4 to 0.9.
7. FIXED ASSET TURNOVER RATIO
MEANING: Fixed-asset turnover establishes a relationship between the sales and value of
fixed assets .It indicates how well the business is using its fixed assets to generate sales.
Fixed assets are assets which are purchased for long-term use.

Fixed asset turnover ratio = Sales or revenue

Fixed assets

COMPUTATION:
Year Sales(cr) Fixed Assets(cr) Ratio(%)

2013 400 528 0.75%

2014 500 533 0.93%
2015 650 540 1.20%
2016 890 570 1.56%
2017 950 590 1.61%

Fixed asset turnover ratio

1.8
1.6
1.4
1.2
1
0.8 Fixed asset turnover ratio
0.6
0.4
0.2
0
2013 2014 2015 2016 2017

INTERPRETATION:
The higher the ratio, the better, because a high ratio indicates the business has less money tied
up in fixed assets for each unit of currency of sales revenue. Thus VERKA is continuously
improving its fixed asset turnover ratio which was low in 2013 i.e. 0.75% only but in 2017 it
showed a significant change and rise to 1.61%.
8. WORKING CAPITAL TURNOVER RATIO

MEANING: This ratio shows the relationship between working capital and net sales. It shows
the number of times a unit of rupee invested in working capital produces sales. This ratio is
considered better than stock turnover as it shows the efficiency in the use of entire working
capital, not merely a part.

Working capital turnover ratio = Revenue from operations (Net sales)

Working capital

COMPUTATION:
Year Sales(cr) Working Capital(cr) Ratio(%)
2013 400 192 2.08%
2014 500 198 2.52%
2015 650 205 3.17%
2016 890 220 4.04%
2017 950 230 4.13%

Working capital turnover ratio

5

3
Working capital turnover
2 ratio

0
2013 2014 2015 2016 2017

INTERPRETATION:
The objective of computing this ratio is to ascertain whether or not working capital has been
effectively used in making sales. Higher the ratio, better it is but a very high ratio indicates
overtrading. Thus in 2013 the ratio was much low (2.08), in 2017 it increased significantly
(4.13). This ratio must be normal, excessive ratio shows overtrading.
9. GROSS PROFIT RATIO
MEANING: Gross profit ratio establishes a relationship of gross profit and Net sales of an
enterprise. This ratio is calculated and presented in percentage. This ratio is a reliable guide
for fixing selling prices and efficiency of trading activities and is to be compared with ratio of
last years.

Gross profit ratio = Gross profit

Net sales

COMPUTATION:
Year Gross Profit(cr) Net Sales(cr) Ratio(%)

2013 300 400 0.75%

2014 320 500 0.64%
2015 450 650 0.69%
2016 650 890 0.73%
2017 780 950 0.82%

Gross Profit Ratio

0.9
0.8
0.7
0.6
0.5
0.4 Gross Profit Ratio
0.3
0.2
0.1
0
2013 2014 2015 2016 2017

INTERPRETATION:
The main objective of this ratio is to determine the efficiency. Higher gross profit ratio is
better as it leaves higher margin to meet operating expenses and creation of reserves. In the
case of above concern, the ratio is0.75 % in 2013, but later increased to 0.82% in 2017.
 FINDINGS OF THE STUDY

1) The liquidity position of the company is good as Current ratio is more than the
standard norm ie. 2:1, where as Quick ratio is also fulfilling the standard norm ie. 1:1.
It shows that company has sufficient funds to meet the short term obligations of
creditors.

2) Profits are increasing every year which shows that company is using its resources
efficiently.

3) The asset turnover ratio of the company is not up to the mark which shows that
company is not using its assets fully or efficiently, which shows underutilization of
the assets.

As stock turnover ratio is high which means that the concern is efficient and hence it sells its
goods quickly.

SUGGESTIONS & RECOMENDATIONS:

 The company should focus more and more on innovation and technological
developments.
 The company should make efforts towards marketing and more awareness among
people to increase sales.
 The company should try to cut their expenses in order to reduce its prices which will
help them to face competition.
 The company should try to pay off their debts as soon as possible so as to lower down
the finance costs.
 The company’s major part of current assets is blocked in inventories. It must be
avoided.
 The company needs to take necessary steps by giving discounts.
 The company needs to take steps for quick delivery to avoid stock shortage. They
need to deliver the products as quickly as possible.

RECOMMENDATIONS REGARDING PRODUCT

Verka has presently four variants of liquid milk in market but still it is not able to segment
market according to consumer’s preferences. The only differentiation in these variants is the
color of the packs. Variants name should be printed on the packs in such a way that they are
clearly visible to the consumers. Different punch lines should be designed for different
variants.
 CONCLUSION:

By studying the different ratios, we can conclude that the company is performing well and is
in good position. The profits are increasing continuously and are focusing on all the areas to
achieve its goals. It has also been concluded that Verka has never compromised on quality for
profits as customer’s health is the major area of concern for the company.

It is sincerely making efforts to increase its market share and is giving its best to spread its
roots not only in Punjab but other states too.

Verka is very much successful in facing the competition given by international brands like
Amul, Mother dairy and others.

Talking about financial performance of the company, it is brilliantly heading towards the high
scale production and profitability along with efficiency and effectiveness.

Marketing is now an important tool for Verka to give boost to its sales and through their milk
bars all over the state, they are spreading awareness about its products.

Overall, Verka is a very important brand of pouch milk in Punjab and will continue with its
goodness and services for many more decades.
 REFERENCES:

1. Verka – About us (2017)

http://www.verka.coop/page/about-us
2. Verka – Verka Network (2017)
http://www.verka.coop/page/verka-network
3. Verka: Different products (2016)
https://www.google.co.in/search?q=verka+different+product
4. Verka milk plant –Ratio analysis (2014)
http://www.slideshare.net/jyoti1992/verka-ppt-on-ratio
5. Verka milk plant - Jalandhar
http://www.verka.coop/page/jalandhar
6 .Verka- milk handling capacity
http://www.verka.coop/page/milk-handling-and-production-
capacities-jalandhar
7. Verka – milk products
http://www.verka.in/page/milk-fresh-products