DEBT SERVICE COVERAGE RATIO

(DSCR= Net Profit+ Depreciation+ Interest on Loan / Installment)

Year

Net profit

1 2 3 4 5 6 7 8 9 10

1772370 1093235 2068145 2232990 1404210 2449200 2570745 1721490 2808140 2924430

Depreciation Interest on Loan 251500 180800 218025 170530 189500 158850 165000 145560 144000 130435 125900 113220 110325 93630 96850 71340 85150 45970 75000 17100

EMI + Interest free loans yearly repayment 611150 611150 611150 611150 611150 255150 255150 255150 255150 255150

DSCR (A/B) 3.61 2.43 3.96 4.16 2.75 10.54 10.88 7.41 11.52 11.82

2204670 1481790 2416495 2543550 1678645 2688320 2774700 1889680 2939260 3016530

611150 611150 611150 611150 611150 255150 255150 255150 255150 255150

GRAPH

DSCR
14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 DSCR

The above graph shows DSCR ratio of the farm for the next ten years of business. Thus as denoted above, the ratio is increasing. The DSCR for the first year was 3.63 and that for the last year the ratio has increased till 11.87 Thus, we can conclude that the project is financially viable as the ratio is positive and increasing. Also, the business is in sound position and is in profit. So, it can repay the loan in specified period.

CONCLUSION:-

This project was carried out to prepare the financial statements required for the loan proposal & to know the procedure of raising a loan from commercial banks. The need & importance of various documents in the process of loan is understood. Considering the rapidly increasing scope of dairy farm business & demand of milk, the project turns out to be a feasible one as the owner of the business can expand his business and earn more and better profits. Thus, from this project I got the knowledge about the preparation of various documents & financial statements required for raising a loa from bank in order to start a new business.