EXECUTIVE SUMMARY

Financial statements provide summarized view of the financial position and

Operation of the company. Therefore, now a day it is necessary to all companies to
know as well as to show the financial soundness i.e. position and operation of
Company to their stakeholders. It is also necessary to company to know their
financial position and operation of the company.
In this report I made an effort to analyse the financial position of
VijayaMilk Producers Union Limited, by using the Annual Reports & Financial
Statements of the firm.
The Financial analysis of this report will show the Strength and weakness of
the VijayaMilk Union Limited. Financial analysis will help the firm to take decision.
Thus, we can say that, Financial Analysis is a starting point for making plans before
using any sophisticated forecasting and planning.
NEED FOR STUDY

T o examine the operational dimensions of the VDM.

To examine the management performance in components of ratio analysis.
To know the activities of the organization.
To learn the practical aspects of the industry.

OBJECTIVES OF STUDY
To know the liquidity position of the firm.
To test the firms efficiency in utilization of its resources
To know how actually finance dept functions

LIMITATION OF THE STUDY

 The accuracy of ratio subject to the

validity of information provided through

Balance sheet, Profit and Loss A/c and interactions with Management.
As this an academic efforts, it is limited by time, cost & coverage.
This study covers only a part of V.D.M.
The presents report covers only the 5 consecutive recent years data.

INDUSTRY PROFILE

INTRODUCTION

India has the highest livestock population in the world with 50% of the
buffaloes and 20% of the worlds cattle population, most of which are milk of cows
and buffaloes. Dairy development in India has been acknowledged the world over as
one of modern Indias most successful developmental programme. Today, India is the
largest milk producing country in the world.
Late DR.VergheseKurien, the man who brought milk revolution in the country,
was a renowned Indian social entrepreneur and also known as "Father of the White
Revolution", for his 'Billion-Litre Idea' the world's biggest agricultural development
programme.
Late DR. VergheseKurien was instrumental in laying the foundation of
democratic enterprises at the remote villages and far flung hamlets which ensured
economic justice. The operation took India from being a milk-deficient nation, to the
largest milk producer in the world. One of the greatest proponents of the cooperative
movement in the world, his work has alleviated millions out of poverty not only in
India but also outside. Hailed as the "Milkman of India"
Dairy Cooperatives account for the major share of processed liquid milk
marketed in the India. Milk is processed and marketed by 170 Milk Producers
Cooperative Unions, which federate into 15 State Cooperative Milk Marketing
Federations. Over the years, several brands have been created by cooperatives like
Amul

,Vijaya

(Trichy),

Verka

(Perambalur),

Saras

(Madurai).

Nandini

(Kanchipuram), Milma (Karur) and Gokul (Chennai). The market for dairy whiteners
and creamers is around Rs 3,000 mn. Apart from MNCs like Nestle and companies
like Britannia, the Indian enterprises have also made perceptible progress. Names
like Amul, Sapan, Vijaya, Mohan, Parag and several others have been seen in the
marketplace with their whiteners. These are available mostly in pouches, tetra packs,
and in the near future, may be in mini portion cups.

Amul
Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat,
India.The word Amulis derived from the Sanskrit word Amulya, meaning invaluable.
Vijaya dairy milk was formed in 1946, which is a brand managed by a cooperative
body, the Gujarat Co-operative Milk Marketing Federation Ltd. Today Amul is the
Largest MILK PRODUCER in the World.
DrVergheseKurien, founder-chairman of the Gujarat Co-operative Milk
Marketing Federation Ltd. credited with the success of Amul. The idea behind the
White Revolution which led to the birth of AMUL [vijaya dairy milk] wasthe power
in the idea of co-operating all milk producers and pooling their resources to build a
better life and achieving what they could never achieve alone.
Amul is located in the town Vijaya which is in tirchy and it has setup itself a
model for development in the rural areas. Amul has around 2.9 million producer
members covering 15,322 village societies and the total capacity of handling milk is
around 13.07 million liters every day. The brand capacity of milk drying is around
647 Mts each day and its capacity for cattle field manufacturing is about 3740 Mts
each day.

The main functions of the Amul are:

Collection of surplus milk from the milk producers of the village, and payment
based on quality and quantity,

Providing support services to the members like veterinary first aid, artificial
insemination services, cattle-feed sales, mineral mixture sales, fodder and fodder
seed sales, conducting training on animal husbandry and dairying.

Selling liquid milk for local consumers of the village,

Supplying milk to the District Milk Union.

The Amul brand

The largest distribution network for any FMCG company. It has nearly 50 sales
offices spread all over the country, more than 5000 wholesale dealers and more than
700000 retailers.
Amul became the world's largest vegetarian cheese and the largest pouched-milk
brand.
AMUL is also the largest exporter of dairy products in the country. VDM is
available today in over 40 countries of the world. Vijaya dairy milk is exporting a
wide variety of products which include whole and skimmed milk powder, cottage
cheese (Paneer), UHT milk, clarified butter (Ghee) and indigenous sweets.

Regulatory Environment in the Dairy ProcessingSector in India

The Indian processed dairy industry has grown anddiversified enormously in
the last few years. To ensure theproper development and growth of this industrial
sector,the Government of India has instituted various laws andregulations. The
various regulations that govern the dairyprocessing industry can broadly be classified
into:
Compulsory LegislationPrevention of Food Adulteration Act, 1954
This Act is the basic statute that is intended to protect thecommon consumer
against the supply of adulterated food.This specifies different standards for various
food articles.The standards are in terms of minimum quality levelsintended for
ensuring safety in the consumption of thesefood items and for safeguarding against
harmful impuritiesand adulteration. The Central Committee for FoodStandards, under
the Directorate General of Health Services,Ministry of Health and Family Welfare, is
responsible forthe operation of this Act. The provisions of the Act aremandatory and
contravention of the rules can lead to bothfines and imprisonment.
Milk and Milk Product Order (MMPO) 1992
The Milk and Milk Product Order (MMPO), 1992, issued onJune 9, 1992 seeks
to ensure the supply of liquid milk, anessential commodity, to consumers by
regulating itsprocessing and distribution. Within eight years of itsoperation, the
Central/State Registering Authorities havetill December 2000 registered 666 units
with a totalprocessing capacity of 65.8 million litres per day (mlpd).

Salient Features of the MMPO Order include the following:

 The Certificate also specifies the milk shed area, which,under the order is
defined as a geographical areademarcated by the Registering Authority for
thecollection of milk by the registered unit.
Maintenance of specified hygienic conditions in thepremises where milk and
milk products are handledprocessed, manufactured or stored.The collection,
transportation and processing of milknormally centres around the operations of
a processing plant.
The region from which the marketable surplus of milkproduction finds its way
to a processing plant is called amilkshed. The concept of milkshed areas is
pivotal to theMMPO. For an orderly development of the dairy industry,
aproper assignment/allocation of milkshed is critical.
Standards on Weights and Measures(Packaged Commodities) Rules, 1977
These Rules lay down certain obligatory conditions for allcommodities that are
packed form, with respect todeclarations on quantities contained. These Rules
areoperated by the Directorate of Weights and Measures, underthe Ministry of Food
and Civil Supplies.
a) Voluntary Standards
There are two organizations that deal with voluntarystandardization and certification
systems in the foodsector. The Bureau of Indian Standards looks afterstandardization
of processed foods andstandardization of raw agricultural produce is underthe
purview of the Directorate of Marketing andInspection.

b) Bureau of Indian Standards (BIS)

The activities of BIS are twofold, the formulation ofIndian standards in the processed
foods sector andthe implementation of standards through promotionand through

voluntary and third party certificationsystems. BIS has on record, standards for most
ofprocessed foods. In general, these standards cover rawmaterials permitted and their
quality parameters,hygienic conditions under which products aremanufactured and
packaging and labeling requirements. Manufacturers complying withstandards laid
down by the BIS can obtain and ISImark that can be exhibited on product
packages. BIShas identified certain items like food colors/additives,vanaspati,
containers for packing, milk powder andcondensed milk, for compulsory
certification.
c) Directorate of Marketing and Inspection (DMI)
The DMI enforces the Agricultural Products (Gradingand Marketing) Act, 1937.
Under

this

Act,

GradeStandards

are

prescribed

for

agricultural

and

alliedcommodities. These are known as AgmarkStandards. Grading under the

provisions of this Act isvoluntary. Manufacturers who comply with standardthe laid
down by DMI are allowed to use Agmarklabels on their products.
Other Government Regulations:
1) Industrial License:
No license is required for setting up a Dairy Project inIndia. Only a
Memorandum has to be submitted tothe Secretariat for Industrial Approvals (SIA)and
anacknowledgment is to be obtained. HoweverCertificate of Registration is required
under the Milkand Milk Products Control Order (MMPO) 1992.
2) Foreign Investment:
Foreign Investment in dairying requires priorapproval from the Secretariat of
Industrial Approvals,Ministry of Industry, as dairying has not been includedin the list
of High Priority Industries. Automaticapproval will be given upto 51% Foreign
Investmentin High Priority Industries. In case of other Industries,proposals will be

cleared on case to case basis.Government may allow 51% without enforcing theold
limit of 40% applicable under Foreign ExchangeRegulations Act at its discretion.
Gujarat Cooperative Milk Marketing Federation
In 1973, Dr. Vijaya set up to market the products produced by the dairies which
was jointly owned by 3.03 million milk producers in Gujarat. After the key invention
of milk powder from buffalo milk there was no stopping to the growth in dairy sector
because in India most of the milk came from buffalo unlike other countries which
primarily depended on milk. It focused on low pricing strategy with superior quality
in order to attract consumers by guaranteeing the value for their money.
National Dairy Development Board
The National Dairy Development Board is an institution of national
importance set up by an Act of Parliament of India. The National Dairy Development
Board (NDDB) was created in 1965 by LATE Dr. VergheseKurien to fulfill the
desire of the then Prime Minister of India - the late LalBahadurShastri - to extend the
success of the Kaira Cooperative Milk Producers' Union (Amul) to other parts of
India.
That success combined the wisdom and energy of farmers with professional
management to successfully capture liquid milk and milk product markets while
supporting farmer investment with inputs and services.NDDB has now integrated
96,000 dairy co-operatives in what it calls the Anand Pattern, linking the village
society to the state federations in a three-tier structure.NDDB launched its
Perspective Plan 2010 with four thrust areas: Quality Assurance, Productivity
Enhancement, Institution Building and National Information Network.
AMUL PATTERN IN DIFFERENT STATES OF INDIA

Vijaya (Trichy)
Trichy Dairy Development Cooperative Federation Ltdis a Coop. Dairy second
only to Gujarat Coop. Dairy for its presence and range of products available. It
manufactures milk and milk products under the popular brand name Vijaya and sells
the same not only in Trichy but across the country in various metros. Vijaya has
retained the trust and faith of the common consumer for the last 4 decades.
It all started in the year 1960 as integrated milk project under the auspices of the
Dairy Development Department for collection of surplus milk in rural areas at the
door steps of the farmers and to provide quality milk to the urban and semi urban
consumers. Accordingly rural surplus milk was procured in villages and transported
to a network of chilling centers and further transported to Hyderabad by road and rail
tankers to meet the consumers demand of the twin cities.
Milma(Karur)
The Kerala

Co-operative

Milk

Marketing

Federation (KCMMF)

or Milma started its operation in 1980 with its head office at Thiruvananthapuram. It
is managed by the Kerala Livestock Development and Milk Marketing Board. It main
motive was to implement the Operation Flood programme started by the National
Dairy Development Board (NDDB) in Kerala.The name MILMA has been derived
from the cumbersome predecessor, Kerala Livestock Development Board and Milk
Marketing Board (KLD&MMB).
Milk distribution in Kerala was available at only a few locations in Kerala. The
consumers had to purchase coupon booklets in advance and exchange the coupons in
exchange for milk. Mr. Nagarajan bought about a change in this system by making
the consumer pay for milk at the time of purchase instead of the coupon booklet

system. Moreover at that time milk was being sold in bottles and for the first time in
India he introduced milk in liter sachets. He had a prototype machine for
packaging milk in sachets installed in Thiruvananthapuram. From 1981 onwards
under

the advice

of Dr. V. Kurien, by forming cooperative societies

PrayarGopalakrishnan and others were able to introduce MILMA to the whole of

Kerala.
Verka (Perambalur)
The Punjab State Cooperative Milk Producers Federation Limited popularly
known as MILKFED Punjab with brand name Verka 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.Punjab is the second largest milk producing state in India, producing
around 10% of the countrys Milk Production i.e. 8 million tons annually.

COMPANY PROFILE
VIJAYA MILK UNION
VijayaCo-operative milk producers Union Ltd. (VIJAYA) has been registered
under Karnataka Co-operative Act in 1986. It commenced on 3-March-1986 which is
the co-operative society among the 13 establishments, under KMF. VijayaMilk Union
(VMU) is one of the most modern plants in Karnataka. It is located in the precious 25
acres of land, located in Lakkammanhalli Industrial Area.
It coversVijaya, Haveri, Gadag and Uttara Kannada Districts. VIJAYA has 741
number of Functional Dairy Co-operative covering 28 taluks.Societies (DCS) which
include 191 Nos. of exclusive women Dairy Co-operative societies. Currently
VIJAYA is procuring andmarketing 1 lakh kgs of milk per day. Emphasis has been
given to procure good quality milk through Clean Milk productionprogramme. Apart
from having a main dairy at Vijayaand 553 Electronic Milk Testers and 438 nos, of
Electronic weighing scales have further strengthened Clean Milk Production
programme.
The main purpose of establishing this unit is to encourage milk producers inhabited
in rural areas. It has 6 chilling plants spread over the 4 districts and production plant
in Vijaya, the turnover is on an average of 4 Crores per year.

MISSION STATEMENT OF DMUL

To Enhance Milk Production And Procurment And Maximizereturns To Milk

Producers ByFinding Lucrative Market For Milk And Thereby Towards Viability Of
Milk Union.

Visio
To march forward with a missionary zeal which will make VMF a trailblazer of
exemplary performance and achievements beckoning other Milk Federations in
the country in pursuit of total emulation of its good deeds?
To ensure prosperity of the rural Milk producers who are ultimate owners of the
Federation.
To promote producer oriented viable cooperative society to impart an impetus to
the rural income, dairy productivity and rural employment.
To bridge the gap between price of milk procurement and sale price.
To develop business acumen in marketing and trading disciplines so as to serve
consumers with quality milk, give a fillip to the income of milk producers.
OBJECTIVES
To provide remunerative market for the milk produced by the farmers.
To provide good & best quality to its customers.
To bridge the gap between masses of rural producers & millions of consumers.
To achieve socio-economic of the revolution hinterland of the state.
To ensure maximum returns to the milk producers.
To provide milk at reasonable rates to the consumers.

HISTORY
A group of experience officers, appointed by the Karnataka Milk Federation
surveyed the whole of VijayaDistricts. Further they found out there is need for a milk
dairy. They surveyed the surrounding villages educated. The villages about milk and
milk products and the benefits they would get from the milk dairy.
The overwhelming response received and untapped resources and the huge
market. The federation decided to set up the milk union in 1984, known as the
Vijayadistrict.
Further in 1988, the Raipur diary and chilling center setup in 1968, also came
under the union. In 1989 the training center which was controlled by Karnataka Milk
Federation came underVijayaMilk Union. VijayaMilk Union was Rs. 7 crores of the
projects of which Government has Rs. 2 croreso f share capital and authorized capital
of DMU is Rs. 5 crores.
VijayaMilk Union formed 551 Milk Producers Co-operative societies in
Vijaya, production capacity of VijayaMilk Union is 2 lakhs liters Milk per day and
also has the capacity to produce 12 tons of Milk Powder, 10 tones of butter, 6 tones of
Ghee per day. FMU collecting 80-85 thousand liters of milk per day from its societies
and sells above 65 thousand liters per day and the remaining milk is used for produce milk
products.
VMU builds and runs under the co-operative institutions such as:
District co-operative society (DCS)
National Dairy Development Board (NDDB)
Karnataka Milk Federation (KMF)

MILK CHILLING CENTER AND CAPACITY

Gadag 20000 LPD.

Haveri 20000 LPD.
Hirekerur 20000 LPD.
Naragunda 8000LPD.
Ron 10000 LPD.
Sirsi 20000 LPD.

DEPARTMENTS IN DMU:

Administrative Department
Finance & Accounts Department
Procurement & Input Department
Quality Control Department
Production Department
Engineering & Civil Department
Marketing Department
Finished Goods Department
Purchase Department
Store Department
Security Department
Canteen Department
Time Office Department

COMPETITORS
The Nandini milk is facing lot of competition in the milk market. The
primeCompetitors are private players like,
1.Bharat

2.Siddhi Vinayak
3.Mayour
4.Gopal
5.Aditya
6.Datta
WELFARE FACILITIES
I. Statutory Facilities

Canteen facility
Payment to provident fund contribution.
Restroom sittings
Leave facilities.
I. Casual Leave 15days
II. Sick Leaves 10days.
III. Earned Leaves 30days
Uniforms are provided.
Provision of wash basins.
Medical benefits

II.Non Statutory Facilities.

Factory arranges cultural programs at the time of Ganesh Chaturthi, workers day and
Deepavali.
Factory often conducts demonstration through social workers in respect of family

planning, AIDSawareness, etc.

Staff members children will be provided with gift for scoring in SSLC, PUC.
Milk subsidy for i. 10 months ltr free (Jan-Oct)ii. 2 months ltr free (Nov-Dec)
15%discuount on purchase of 1kh Ghee (Only staff)
Yearly 1kg Ghee free for festivals i.e. Deepavali and Ganesh Chaturthi.

III. Financial Scheme

Employee gratuity scheme.

Employees group savings linked insurance scheme.
Employees death cum gratuity scheme.
Employees provided fund and pension scheme

SWOT ANALYSIS
STRENGTH

Many products are marked.

Major market share 70%&Market leader in milk products.
Competitive price.
The best quality products.
Excellent brand image& distribution channels.
Consistency in demand for product thought out the year.
Wide distribution network leads regular and timely supply.
Reduce the transportation cost.

WEAKNESS

More manpower.
All the products are perishable products.
Poor retail serving and consumer grievance handling.
Recurring quality problem
Lowest paying brand i.e. commission given by the company is less compare to other

brands
Inadequate sales promotional activity. Due to bad smell that persists low sale
OPPORTUNITIES:
Availability of buffalo milk improves market milk quality
Predominant of loose milk segment divide appropriate strategies
Phenomenal scope for innovation in product development packaging and presentation.
Step should be taken to introduce value added products like srikhands, ice-cream

THREATS

No entry barriers for private players.

Low level of consumer awareness.
Persuade benefits of competing brand.
Increase in tax and service rate.
Increase of competitors.

PRODUCTS

CONCEPTUAL FRAME WORK

Despite of tough competition from various manufacturers of milk and milk
products, VijayaMilk Union still stand to be one of the most reputed companies in
Karnataka. The VijayaMilk Union aims at providing health and toned milk to its
customers at a better and reasonable price. Every company has to maintain good
management for smooth running of its activities. This study is undertaken to observe
the VMUperformance through ratio analysis technique because ratio analysis is the
important tool used to obtain a quick indication of a firm's financial performance in
several key areas.
RATIO ANALYSIS
It refers to the systematic use of ratios to interpret the financial statements in
terms of the operating performance and financial position of a firm. It involves
comparison for a meaningful interpretation of the financial statements.

In view of the needs of various uses of ratios the ratios, which can be
calculated from the accounting data are classified into the following broad categories

Yet another factor which influences the usefulness of ratios is that there is
difference of opinion regarding the various concepts used to compute the ratios.
There is always room for diversity of opinion as to what constitutes shareholders
equity, debt, assets, and profit and so on. Different firms may use these terms in
different senses or the same firm may use them to mean different things at different
times.
Reliance on a single ratio, for a particular purpose may not be a conclusive
indicator. For instance, the current ratio alone is not asaadequate measure of short
term financial strength; it should be supplemented by the acid test ratio, debtors
turnover ratio and inventory turnover ratio to have real insight into the liquidity
aspect.

Finally, ratios are only a post mortem analysis of what has happened between
two balance sheet dates. For one thing, the position in the interim period us bit reveal
ed by ratioanalysis. Moreover, they give no clue about the future.
In brief, ratio analysis suffers from some serious limitations. The analyst
should not be carried away by its oversimplified nature, easy computation with a high
degree of precision. The reliability and significance attached to ratios will largely
depend upon the quality of data on which they are based. They are as good as the data
itself. Nevertheless, they are an important tool of financial analysis.

DATA ANALYSIS AND INTERPRETATION

LIQUIDITY RATIOS
1. Current Ratio
The current ratio measures the short-term solvency of the firm i.e. ability to meet
short term obligations.It establishes the relationship between current assets and
current liabilities.

Current Ratio =

Current Asset
Current Liabilities

Table No.1: The Table Showing Current Ratios.

Year
2009-2010
2011-2012
2012-2013
2013-2014
2013-2014
2014-2015

Graph No: - 1.

Current assets

Current

Current asset ratio

75,369,860
98,539,092
172,644,224
150,230,786
192,353,670
221,345,898

liabilities
58,079,322
75,655,623
153,307,468
142,683,538
191,809,827
191,389,987

1.29
1.30
1.13
1.05
1.00
1.16

Current asset ratio

1.4

1.29

1.2

1.3
1.13

1.05

1.16
1

1
0.8
0.6
0.4
0.2
0

Interpretation

Current asset ratio

As per industry norm a Current Ratio of 2:1 is considered satisfactory. In the

2009-11firm has fair ratio of 1.29:1 & 1.3:1. But in further years ratios are diluted
slightly i.e. 1.13, 1.05, 1. It indicates firm delays in payments of operating expenses.

2. Quick Ratio
It has been an important indicator of the firms liquidity position and is used as
acomplementary ratio to the current ratio. It establishes the relationship between
quick assets

and current liabilities.

Acid Test Ratio =

Quick Assets
Current liabilities

Quick Assets = Current Assets Stock.

Table No.2: The Table Showing Quick Ratio.

Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

Quick Assets
48,084,737
77,345,340
93,373,691
87,461,682
88,025,072
91,020,212

Current liabilities
58,079,322
75,655,623
153,307,468
142,683,538
191,809,827
187,789,356

Quick Ratios
0.83
1.02
0.61
0.61
0.46
0.48

Graph No:-2

Quick Ratios
1.02

1.2
1
0.8
0.6
0.4
0.2
0

0.83
0.61

0.61
0.46

0.48

Quick Ratios

Interpretation
Generally, a Quick Ratio of 1:1 is considered to represent a satisfactory current
financial condition. From the above company has low ratio in year 2007-08
compared to 2009-10 i.e. 0.83:1 & 1.02:1. Firm has satisfactory financial
conditiononly in the year 2009-10.But in the year 2010-11,2011-12firm has constant
ratio (0.61:1)& in 2012-13 firms ratio has decreased (0.46:1) compared to previous
years. Therefore, company faces difficulties to meet its obligations.

3. Net Working Capital

It is the excess of currents assets over the current liabilities.
Net Working Capital = Currents Assets - Current Liabilities.
Table No.3: The Table Showing Net Working Capital
Year

Current assets

Current liabilities

Networking capital

2009-2010

75,369,860

58,079,322

17,290,538

2010-2011

98,539,092

75,655,623

22,883,469

2011-2012

172,644,224

153,307,468

19,336,756

2012-2013

150,230,786

142,683,538

7,547,248

2013-2014

192,353,670

191,809,827

543,842

2014-2015

221,223,345

193,344,332

27,879,013

Graph No:-3

Networking capital
27,879,013

30,000,000
25,000,000

22,883,469

20,000,000 17,290,538

19,336,756

Networking capital

15,000,000
10,000,000
5,000,000

7,547,248

543,842

Interpretation
From the above analysis the Net working Capital was fluctuating from year
2009-11 to 2011-13. So here current asset is more than current liabilities. Firm had
ability to meet its obligation. In 2012-15amount of working capital has decreased
drastically comparing to previous years. It indicates that firm struggles to meets it
current obligation.

ACTIVITY / TURNOVER RATIOS

4. Inventory Turnover Ratio
This ratio indicates the number of times the inventory has been
converted into sales during the period.
Cost of goods sold (COGS)= Sales-Gross Profit.
Average Inventory = (Opening + Closing balances) / 2
Inventory Turnover Ratio =

Cost of goods sold

Average Inventory

Table No.4: The Table Showing Inventory Turnover Ratios

Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

COGS

Average

Ratios

495,039,504
595,737,895
795,319,326
1,055,552,048
1,253,085,537
1,278,045,455

Inventory
28,714,623
24,239,437
71,019,818
50,232,142
83,548,850
89,345,345

17.24
24.58
11.20
21.01
15
14.30

Graph No:-4

Inventoy turnover Ratios

24.58
25
20
15
10

21.01
17.24

15
11.2

14.3
Inventory turn over
ratios

5
0

Interpretation
As per industry norm an Inventory Turnover Ratio is 8 times which
indicates healthy performance. In the year 2009-10 ratio was17.24 times which
indicates that company performance was healthier. In the year 2010-11 ratio was 24.58
times where company was converting its inventory into sales very fast. Further in the
years of 2011-12, 2012-13, 2013-14 & 2014-2015 ratios were fluctuating (i.e. 11.20,
20.01, 15& 14.33 times) which reveals that company was efficient managing its
inventory.

5. Assets Turnover Ratio

Asset turnover ratios, also called efficiency ratios.The relationship between
assets and sales is known as assets turnover ratio. This ratio shows the firms
ability to generate sales from all financial resources committed to total assets.
Total asset turnover = Total Sales/ Total Assets
Table No.5: The Table Showing Asset Turnover Ratios
Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

Sales
607,962,385
737,699,820
968,614,982
1,230,278,092
1,438,150,806
1,345,342,859

Assets
179,388,794
196,737,477
289,194,291
267,122,853
322,899,573
289,944,755

Ratios
3.39
3.75
3.35
0.46
4.45
4.63

Graph No:-5

Assets turnover Ratios

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

4.45 4.63
3.39

3.75

3.35

Assets turnover Ratios

0.46

Interpretation
From the above it is a clear evident than in years of 2009-12 ratioswere 3.39, 3.75,
3.35 times which indicates that firm was using its asset efficiently and effectively to
generate adequate sales. But in year 2012-13 ratio was 0.46 times which indicates
that the company has generated very low sales&in 2013-14 it was vice-versa i.e. 4.45
times and the 2014-15 sales was decrease and the ratio is 4.63 times.

6. Debtors Turnover Ratio

This indicates the number of times average debtors have been converted intocash
during a year.
Debtor Turnover Ratio = Net Credit Sales/ Average Receivable. Net
Sales = Gross Credit Sales - Sales Return.
Average Receivables = (Opening Receivables + Closing Receivables)
2

Table No.6: The Table Showing Debtors Turnover Ratios

Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

Graph No:-6

Net Credit Sales

Average

Ratios

607,962,384
737,699,820
968,614,982
1,230,278,092
1,438,150,805
1,456,849,344

Receivables
19,658,975
13,193,409
19,972,452
17,066,201
23,935,589
30,633,446

30.93
55.91
48.5
72.09
60.08
47.55

Credit

Debtors turnover Ratios

72.09

80
70

60.08

55.91

60

48.5

47.55

50
40

30.93

30

Debtors turnover
Ratios

20
10
0

Interpretation
From above it portrays that in year 2009-10firm was collecting its debts
slowly compared to2009-11 (30.93 times & 55.91 times). In year 2011-12, 2012-13,
2013-14 ratios are 48.5 times, 72.09 times 60.08 times. In the above graph shows
72.09 times in 2012-13 is very high.

7. Average Collection Period

It is a period required to collect the outstanding amount from the
customers.
Average Collection Period = (Average Receivable/Net Credit Sales)*Annual Days.
Table No.7: The Table Showing Average Collection Period
Year
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015

Average

Net Credit Sales

ACP

Receivables
19,658,975
13,193,409
19,972,452
17,066,201
23,935,589
20,223,445

607,962,384
737,699,820
968,614,982
1,230,278,092
1,438,150,805
1,543,235,345

11.64
6.44
7.43
4.99
5.99
4.78

Graph No:-7

Average collection period

11.64
12
10
8
6

6.44

7.43
4.99

5.99
4.78

Average collection
period

4
2
0

Interpretation
The above graph reveals that in year 2009-10 the collection period was 11.64 days
which was too slow. Further years 2010-11, 2011-12,2012-13,2014-15 periods were
6.44 days, 7.43 days,4.99 days & 5.99 days respectively. It indicates that company is
more efficient in the management of credit. In vise versa in the year of 2014-2015 the
average collection period was 4.78.

8. Creditors Turnover Ratio.

A creditor's turnover ratio is a reflection of how quickly a company pays
its creditors. This is also known as a payable turnover ratio. It is calculated to judge
the requirements of cash for paying sundry creditors.
Creditor Turnover Ratio = Net Credit Purchases
Average Payable
Net Credit Purchases = Gross Credit Purchases - Purchase Return
Average Payables= (Opening Payables+ Closing Payables)
2

Table No.8: The Table Showing Creditors Turnover Ratios

Year
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15

Net CreditPurchases
425,591,914
515,687,484
754,737,841
926,422,460
1,160,793,675
1,232,342,353

Average Payables
9,378,691
9,560,554
17,951,209
24,684,942
30,702,829
34,545,543

Ratios
45.38
53.94
42.04
37.53
37.81
35.67

Graph No:- 8

Creditors turnover Ratios

60
50

53.94
45.38

42.04

40

37.53 37.81 35.67

Creditors turnover
Ratios

30
20
10
0

Interpretation
Thegraph shows ups & downs in the ratio of Creditors Turnover.The
ratios for 6 years were 45.38 times, 53.94 times, 42.04 times, 37.53 times, 37.81
times, and 35.67 times. By observing these ratios, it may be interpreted that company
is taking longer time to repay its creditors.

9. Working Capital Turnover Ratio

A higher ratio is an indicator of better utilization of current assets and
working capital and vice-versa (a lower ratio is an indicator of poor utilization of
current assets& working capital).

Net working capital turnover ratio =

Net Sales
Net Working Capital

Net Working Capital = Current Assets - Current Liabilities.

Table No.9: The Table Showing Working Capital Turnover Ratio
Year
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15

Net Sales

Net

Working Ratios

607,962,384
737,699,820
968,614,982
1,230,278,092
1,438,150,805
1,543,633,848

Capital
17,290,538
22,883,469
19,336,756
7,547,248
543,842
234,456

35.16
32.23
50.09
163
2644.42
659.54

Graph No:-9

Working capital turnover Ratios

2644.42

3000
2500
2000

Working capital
turnover Ratios

1500
659.54

1000
500

35.16 32.23 50.09

163

Interpretation
This ratio shows how many times firms working capital turned over to produce
the sales volume for the given period. The ratios for the 6 years were 35.16 times,
32.23times, 50.09times, 163times, 2644.42times. In the years 2010-12the working
capital turnover ratio was higher, whichwas more efficient in using working capital to
generate sales compared to 2009-10.
But in year 2013-14 there is drastic increase in working capital turnover ratio
which show that a company does not have enough capital to support its sales growth.

FINDINGSANDSUGGESTIONS
FINDINGS
The current ratio is below the industry norm 2:1 which discloses that
companys position is not good to meet its short term obligations.
The firm does not maintain the ideal quick ratio 1:1. Its 0.46:1 in the year
2013-14
Amount of working capital has decreased drastically which indicates that firm
struggles to meets it current obligation.
The inventory turnover ratio is 15 times which is above the industry norm 8
times which shows that firm is efficient in managing its inventory.
The debtors turnover ratios are increasing drastically from year to year which
shows how efficiently a company is collecting its credit sales.
Average collection period is increased in 2013-14 which shows that company
is improving in collecting debt.
The company is taking longer time to repay its creditors which is the result of
poor liquidity.
The study reveals that there is drastic increase in working capital turnover ratio
which shows that a company does not have enough capital to support its sales
growth.
Firm should use its asset efficiently and effectively to generate adequate sales.

SUGGESTIONS

 It is examine that company should improve its current ratio in order to meet its
obligation & increase the Margin of Safety for creditors.
The firm should generate cash in order to repay its creditors as possible as
possible.
It is suggest that the firm has to maintain ideal quick ratio 1:1.
The study reveals that Working Capital is Over-Leveraged. So it advised to
VMU to adopt Scientific Inventory Management to improve Working
Capital.
VMU should appoint skilled labours in order to increase the efficiency of firm.
VMU should adopt innovative technology in order to increase the productivity.
VMU should take precautionary measures to increase its sales.

CONCLUSION

The study on Short-term Finance in the DMU is satisfactory. The study of 5

years reveals that liquidityposition of the DMU is fair.
Firm is facing financial crisis & less quantity of milk supply in the previous
years. It shows that firm is facing difficulties to meet its current obligation. Company
should generate cash to meet its current obligations.
VMU should improve its financial conditions by increasing its working capital
to earn more profits.
The activity position of the VMU is good as the company is efficient in
managing its inventory 15 times which is more than industry norm 8 times. Firm is
also collecting its debt quickly in 6 days.