KARNATAKA MILK FEDERATION, DHARWAD
This project is carried out in Dharwad Milk Union, which is a part of Karnataka Milk Federation (KMF). KMF is a co-operative apex body in the state of Karnataka representing dairy farmer‟s organization and also implementing dairy development activities to achieve the dairy objectives. KMF has 13 Milk unions and D.M.U. is one among the 13 unions. The project helps to study the practice in working capital by D.M.U. in the past years and to calculate management‟s performance in the past five years.
A working capital plays an important role in the successful operation of business activities. The need for working capital is very necessary for any business house. Working capital is a matter of top priority, as it has a light on liquidity, solvency and profitability.
This study is undertaken to analyse the firm‟s liquidity and to test firm‟s efficiency in utilization of its current assets and resources.
Title of the Project:
“A Study to analyse the firm’s liquidity and to test firm’s efficiency in utilization of its current assets and resources at Dharwad Milk Union”
KARNATAKA MILK FEDERATION, DHARWAD
Objectives of the study:
To examine the establishment, organization and operational dimensions of the D.M.U. To know the liquidity position of the firm. To examine the management performance in components of ratio analysis. To know how actually finance department works. To test firm‟s efficiency in utilization of its assets and resources.
Need of the study:
The study is undertaken to know the present liquidity position and working of the Dharwad Milk Union, Dharwad. This project will throw light on firm‟s competitiveness with other firms and on the financial position. It also helps to know whether D.M.U. has properly utilized its resources and assets. The scope of the study is limited to financial aspects of the “Dharwad Milk Union”.
Limitations of the Study:
1. As this an academic efforts, it is limited by time, cost and coverage. 2. This study covers only a part of Dharwad Milk Union. 3. The present study covers only 3 years financial data. 4. It covers only annual reports of the firm.
KARNATAKA MILK FEDERATION, DHARWAD
Research methodology is nothing but systematic investigation and study of sources & materials. It establishes facts and helps in making conclusions.
Measurement Techniques / Statistical Tools
Accounting Ratios. Financial Statements of the Company.
Sources of Data:
The data has been collected from both primary sources as well as secondary sources.
Primary data are the data gathered at first hand. It is collected by direct interviews and discussing the subject matter with the management, staff employees and academicians.
Secondary data are the data that have been compiled or derived from other sources meant for some other purpose. It is collected from book records maintained by administration department, published books and also collected from the trading and profit and loss accounts and balance sheets of last 3 years of D.M.U.
KARNATAKA MILK FEDERATION, DHARWAD
Dairy Industry In India
The dairy industry plays an important role in the socio-economic development of India. The dairy industry in India is instrumental in providing cheap nutritional food to the vast population of India and also generates huge employment opportunities for people in rural places. The Department of Animal Husbandry, Dairying, and Fisheries, which falls under the central Ministry of Agriculture, is responsible for all the matters relating to dairy development in the country. This department provides advice to the state governments and Union Territories in formulating programmes and policies for dairy development. It also looks after all the matters relating to production and preservation of livestock farms (cattle and sheep). To keep focus on the dairy industry, a premier institution known as the National Dairy Development Board was established. This institution is a statutory body that was established in 1987. The main aim to set up the board was to accelerate the pace of dairy development in the country and attract new investments. India is a wonderland for investors looking for investment opportunities in the dairy industry. The dairy industry of India holds great potential for investment and promises high returns to the investors. The reasons why the industry has huge potential for attracting new foreign investment are: There is a basic raw material needed for the dairy industry; that is, milk is available in abundance. India has a plentiful supply of technically skilled labourers. There is an easy availability of technological infrastructure. India has all the key elements required for a free market system.
top-quality food processing machinery. aciophilin. bulgarican. and Nisin contained in dairy powder. The Indian cattle breeders are on the lookout for ways to improve their milk yield through crossbreeding. Producing biopreservative ingredients based on dairy fermentation.
Food Packaging Instruments: There is a tremendous investment opportunity for foreign investors in the manufacturing of both machinery and packaging materials that aid the development of brand loyalty and gives a clear edge in the marketing of dairy products. also promise great investment opportunity. and other coloring materials for food processing. DHARWAD
There are different sectors within the dairy industry that promise great business investment opportunities: Biotechnology: The Indian cattle yield less milk as compared to their foreign counterparts. including dairy biologics.
Dairy/Food Processing Equipment: Great potential lies for foreign investment for manufacturing and marketing of costeffective. there is a huge potential available for foreign investors to invest in dairy cattle breeding of high-quality buffaloes with hybrid cows. probiotics. Thus. enzymes. such as pediococcin. There is also great scope for investment in different dairy cultures.KARNATAKA MILK FEDERATION.
The investors can build world-class manufacturing units and let them for hire. such as cheese slicing.
. Building manufacturing units supports specialized dairy-related activities. The investors are all set to gain profitable returns on their investment. butter printing. which hold greater potential over other activities.KARNATAKA MILK FEDERATION. the dairy industry in India has huge investment opportunities in a variety of sectors. and cheese.
Manufacture of Ingredients: Several ingredients are involved in the making of different dairy products like ghee. Manufacturing of ingredients for these products offers a great potential for foreign investment.
Finished Products: There is a great scope for investment in the manufacturing of finished dairy products such as cheese sauce and cheese powders.
Technically Advanced Manufacturing Units: There is a great opportunity for foreign investors to invest in establishing manufacturing units for dairy products. DHARWAD
Retailing: Retailing of dairy products also promises great investment opportunities for standardization and upgrading dairy products in the main metropolitan cities. Thus. and dicing lines. cheese packaging. condensed milk.
Development Of Dairy Industry In India
During the pre-independence era.
. This board was registered under the Societies Registration Act and The Public Trust Act. There were lot of progressive steps taken by the government through five-year plans.
The diary and animal husbandry received attention after the independence. there was no serious thought given to dairy industry. Hence. There was discrimination done to the Indians. In 1886. in 1920 a series of steps were taken by Mr. Indian councils for the agriculture research mostly drew up these plans. This led to the formation of “National Dairy Development Board” in 1965. an expert in dairy forming to improve the milk production. our late Prime Minister Lal Bahaddur Shastri felt the need for setting up cooperative society throughout the country for the sake of rural development.KARNATAKA MILK FEDERATION. William Smith. having its office at Anand. the department of defence of the British Government established the dairy farms for the supply of milk to the British troops in Allahabad. this led to the rise of the first milk union in India in Lucknow. called “The Lucknow Milk Producer‟s Co-operative Union Ltd”.
Further. Later. in 1937. Gujarat.
with modernity.KARNATAKA MILK FEDERATION.
The NDDB was established in 1965.
. The mission has achieved to make India become the world‟s largest milk producing country. Dr Vergese Kurien was the founder chairman. the late Lal Bahaddur Shastri to extend the number of the Kaira Co-operative milk producers union (AMUL) to other parts of India. with growth transforming dairy making an instrument for the development of India‟s people. the board registered under the Societies Registration Act and the public trust Act fulfilling the desire of the Prime Minister of India. The success combined the wisdom and energy of farmers with professional management to successful capture of liquid milk and milk product markets while supporting farmer‟s investment with inputs & services. DHARWAD
National Dairy Development Board NDDB:
The NDDB was founded to replace exploitation with empowerment transition.
NDDB began its operations with the mission of making dairying a vehicle to a better future for millions of gross tools milk producers.
. Setting up dairy and cattle feed plants. Applied research and development. promote. construct or control any plant or work which promotes projects of general public utility relation to dairying. acquire. Implementation of milk production enhancement programme. Manpower planning and training. To provide assistance for exchange of information to other international agencies. Organization of farmer co-operative societies. DHARWAD
Objectives of NDDB:
Services rendered by NDDB:
Planning dairy and rural development projects. To prepare initial feasibility studies of dairying and other dairy related projects and undertake subsequent designing planning and start up those projects. To make information available on request to technical services to increase production of milk. To undertake research and development programmes related to production and marketing of milk and milk products.KARNATAKA MILK FEDERATION. manage.
The federation also manages to market milk and milk products outside the state. frozen semen straws and liquid nitrogen reproduced.In 1975. Training and development of senior managerial personnel.
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The KMF implements all the project activities. DHARWAD
Introduction to Karnataka Milk Federation
The first diary in Karnataka was started in Kudige in Kodagu district in 1955. Provides balanced cattle feed. The Karnataka Milk Federation is an apex body in the state of Karnataka representing dairy organization and also implementing dairy development activities to achieve the dairy objectives. the World Bank aided dairy development was initiated. The present Karnataka Milk Federation (KMF) came into existence in 1984 as a result of merging of Karnataka Dairy Development Co-operation. prescribing quality guidelines and norms. mineral mixture. the Federation aims at formulating Marketing strategies in marketing the milk and milk products. small co-operatives and Karnataka Milk Producers Development and loose vendors.KARNATAKA MILK FEDERATION.
The KMF performs the following functions:
The foremost function of KMF is to co-ordinate the activities between the Unions and also in making market available so that the production increases. It manages surpluses and deficiencies of liquid milk among the milk unions and helps in dispatching the milk and milk products at reasonable price. After all project activities are accomplished. acquiring and applying all recent technologies.
The Growth Process:
The growth over the years and activities undertaken by Karnataka Milk Federation (KMF) is summarized briefly here :
Particulars Dairy Co-operatives
1976 .000 50.10 11520
Membership Milk Procurement
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.03.KARNATAKA MILK FEDERATION.460(DMU) day per
Milk Sales Cattle feed consumed Daily Payments to Farmers Turnover
Liters/Day Kgs/DCS Rs in (Lakhs) Rs in (Crs)
95.90 Not Available
23.19.026 3160 354 2.77 416
2009 .050 220 0.265 31.551/ 72.23.000
II. Bangalore. Pouch Film Plant at Munnekolalu. VII. DHARWAD
Units of KMF:
I. Yelahanka. Mother Dairy. Bangalore. KMF Complex. Bangalore
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. Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen Bank) at Hessaraghatta V. IV. Quality Control Lab at KMF Complex. Bangalore. Nandini Milk Products. Marathhalli Central Training Institute at KMF Complex.KARNATAKA MILK FEDERATION. VI. III.
Haveri. located in Lakkammanahalli Industrial Area. It is located in the specious 25 acres of land. adjacent to the National Highway-4.
The Dharwad Milk Union is a co-operative society among the 13 establishments under KMF. DHARWAD
Company Profile-DHARWAD MILK UNION
Dharwad Milk Union:
Dharwad Milk Union (DMU) came into existence on 3-3-1986 under co-operative Act. Gadag. Districts Dharwad. The DMU is one of the most modern plants in the country. and Uttar Karnataka come under its operation.
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.KARNATAKA MILK FEDERATION.
000 LPD. Rs.
Company Name Nature of Business Type of Ownership Tel-No Raw Material Milk
Dharwad Co-operative Milk Producers Union Ltd. Butter. 7 crore 551 Societies
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Lakkammanahalli Industrial Area. Lassi. Khova. 12 tons milk powder. 2461876. 6 tons ghee
Finished Products Total Investment Total Societies at Village Level
Milk. Gurtz. appointed by the Karnataka Milk Federation surveyed the whole of Dharwad district (includes two newly formed districts Gadag and Haveri) and Uttar Karnataka.20. Curd. 10 tons butter. DHARWAD
A group of experienced officers. Pedha. Dharwad-580004 Mfg / Service / Semi-agro based Co-operative Unit Co-operative Unit 0836-2467643. untapped resources and the huge market. Milk creams. Further they found out the need for a Milk Dairy there.B. Seeing the response.000 liters/day. Coal 4 to 5 tone
Capacity of Plant
1. 2468380. the Federation decided to setup the Milk Union in 1984. educated the villagers about Milk and Milk products and the benefits they would get from the Milk Dairy. They travelled the surrounding villages.KARNATAKA MILK FEDERATION.Road. Water 5 to 6 lack liters/day. 80. Ghee.
Haveri. 5crore. and Uttar Kannada districts. 2crore of share capital and authorized capital of DMU is Rs. To provide milk at reasonable rates to the consumers. To educate the villagers about milk and its quality. To ensure maximum returns to the milk producers. Gadag. To build village level institutions in co-operative sector to manage the dairy activities. DMU is collecting 80 thousand liters of milk per day from its societies and sells 70 thousand liters of milk per day and the remaining milk is used for producing milk products. To eliminate middlemen in the business so that milk products receive their appropriate share of bread.KARNATAKA MILK FEDERATION.
Objectives of DMU:
Providing hygienic and good quality milk to the consumers. To build bridge between masses of rural producers and millions of consumers.
Functions Of DMU:
The main function of DMU is to procure milk from villagers and pay them the right price. To make „Nandini‟ as a part of daily life. 7crore project of which Government has Rs.
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. To build the economic strength of the milk products in villages. DHARWAD
DMU was Rs. DMU formed 551 milk producer‟s co-operative societies in Dharwad. To facilitate rural development by providing opportunities for self-development at village level.
KARNATAKA MILK FEDERATION.
Rs. 100% pure pasteurized 500 ml Rs. it gives you more cups of tea or coffee and is easily digestible.0% fat and 8.
Buffalo's milk.50 containing 3. Rich. This milk has 5% fat and 9% SNF. DHARWAD
Nandini Toned Fresh and Pure milk 500 ml Rs. Containing 6% Fat and 9 % SNF.100
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Nandini Homogenized Milk is pure milk 500 ml which is homogenized and pasteurized. Available in 500ml and 1litre packs. Consistent right through. Ideal for preparing home-made sweets & savories.5% SNF. 5 liter Rs.8. creamier and tastier milk.10 processed and packed hygienically. Standard (500 ml) Milk 9.8
Full Cream milk.
Available in 200ml. Giving you all the goodness of homemade curds.KARNATAKA MILK FEDERATION. Available in 200gms and 500gms sachet. Shelf life of 6 months. Available in 100gms 500 gm Rs. 500ml.10 delicious.5 pack to retain the goodness of pure ghee. Maida. DHARWAD
1 kg Rs. 200gms and 500gms cartons both salted and unsalted. Nandini Ghee made from pure butter.
Rich. Hygienically manufactured and packed in a special 500 gm Rs.
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Nandini Curd made from pure milk.5
Great way to those soft and juicy jamoon treats at 200 gm Rs.0 200 gm Rs. Soji and Nandini Special Grade Ghee. smooth and delicious. Shelf life of 6 months at ambient temperatures. 200 ml Rs.32 home! Nandini Gulab Jamoon Mix is made from Nandini skimmed milk powder. It is fresh and pure with a delicious flavor.18 out of fresh pasteurized cream.85 (salted). Available in 100gms and 200gms standy pouch with a five layer foil lamination. smooth texture and the rich purity of cow's milk makes any preparation a delicious treat. It's thick and 500 ml Rs.41 kg tins. Rich taste.195
A taste of purity.99. 1000ml sachets. Nandini Butter is made 100 gm Rs. 5lts tins and 15.
Rs. 6 Rs. rose. 250 Nandini Peda is a delicious treat for the family. Chocó bar and Ball varieties Vanilla.
Nutritious. green coriander leaves. 20 above &
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. Strawberry. asafoetida and fresh ginger.35 temperature approximately 7 days Available in 250gms pack containing 10 pieces each. It is made from quality curds and is blended with fresh green chilies. badam. pista. delicious creamy ice cream is manufactured at ISO 9002/HACCP certified Mother Dairy modern plant.pineapple. Strawberry. Kesar Pista. Pineapple. Orange & Mango Candies.KARNATAKA MILK FEDERATION. so that it is affordable to all sections of people. The range includes Vanilla. Mango & Raspberry Dollies. 10 Rs.
Sterilized flavored milk. a nutritious and healthy drink and an 200 all-season wholesome drink available in five different flavors Rs. Mango. It is available in 200 ml packs and is priced at most competitive rates.12 . Butter scotch. DHARWAD
No matter what you are celebrating! Made from pure milk.
Nandini spiced Butter Milk is a refreshing health drink. Store at room Rs. 15 Rs. Chocolate. Nandini spiced butter promotes health and easy digestion.
A delicious beverage with hot or cold milk.
200 gm Rs. edible starch. Nandini paneer is ideal for vegetarian dishes such as mutter paneer. nutritive product made by coagulating pure milk. it is an excellent source of milk protein. skimmed milk powder and cane sugar to give you the ideal Badam delight. saffron. Nandini Ghee and Sugar. It's the goodness of Badam mixed with almond.55
Pure and tasty dishes with Nandini Paneer! A fresh.
Fresh and tasty. kesaribath.
200 gm Rs.KARNATAKA MILK FEDERATION. UHT processed bacteria free in a tamper-proof tetra-fino pack which keeps this milk fresh for 60 days without refrigeration until opened.
250 gm Rs. Nandini Mysore Pak is made from quality Bengal Gram. It can be used for kheer.42
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. desserts or ice cream. sag paneer and various other dishes. DHARWAD
Cow's pure milk. Available in 500ml Fino and in 200ml Bricks. It's a delicious way to relish a sweet moment.
KARNATAKA MILK FEDERATION. DHARWAD
Work flow Model
Production process has the following workflow model.
Fresh Liquid Milk
Fat and SNF
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.KARNATAKA MILK FEDERATION.
KARNATAKA MILK FEDERATION. DHARWAD
Organization Structure of KMF
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KARNATAKA MILK FEDERATION. DHARWAD
Products of DMU
Toned milk Double toned milk Standard milk Shubham milk
Ghee Butter Ice-cream Mysore pak Nandini bite Paneer Lassi Jamoon mix Pedha Badam powder Curd Butter milk And few more
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2. Procurement and Input Department.
Departments Of DMU:
1. Production Department. Quality Control Department.
6.KARNATAKA MILK FEDERATION. Marketing Department. Purchase Department. Finance Department.
5. Administration Department. Human Resource Department
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Providing required facilities etc. electricity. arrangement of meetings. formation of policies etc.
The general functions of this department are as follows: Up-to-date maintenance of files. producers and policies in a co-ordinate manner. records etc. water supply bills etc.KARNATAKA MILK FEDERATION. payment of telephone bills. Collecting and presenting data in the form of useful information from records.
The administration department also handles following sub divisions:
Canteen Time keeping machine Security
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. Ensuring of smooth running of the office by interfacing with the external agencies as required. The department looks after administration functions such as payment of salaries. DHARWAD
The administration department controls the overall functioning of the organization. Implementing the organization systems. For example.
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Structure of administrative department:
ASSISTANT MANAGER (PERSONNEL)
ADMN.KARNATAKA MILK FEDERATION.
calls for tenders. After ascertaining the stock position by stores department.
It also maintains records of all supplies.50. quotations etc. then the approval of the board member is must.
Structure of Purchase Department:
Assistant Purchase Officer
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. Purchase department can make purchases upto Rs. Quotations for lowest rate are sanctioned.000/.50. an indent is sent by different departments duly approved by the managing director.If the purchase amount exceeds Rs. This department then comes into picture to purchase those materials. DHARWAD
The main work of the purchase department is to make purchase of various materials required by different departments.000/.KARNATAKA MILK FEDERATION..
Gopal. Haveri and Uttar Kannada in the brand name Nandini. Reconciliation of sales with all agents. To be responsive to consumers and channel members. Kazi. Krishna. milk products and advertisements.KARNATAKA MILK FEDERATION.
Operating areas: DMU‟s Nandini milk is marketed in Hubli-Dharwad. Marketing department has the following objectives: To increase the market share of Nandini. To set up more marketing strategies. To promote more of Nandini milk and milk products through intense advertising. To take up suppliers. Market development and sales promotion. Uttar Karnataka. Gadag. The prime competitors are private brands like Bharat. Dutta. Gadag. Arokya and loose vendors. Consumers‟ grievances. Competitors: The Nandini milk is facing lot of competition in the market. It sells the goods in four districts namely Dharwad. Haveri. Need based marketing (pedha. Marketing department performs the following functions: Marketing of milk and milk products through own network. Karwar. North Goa and 26 Taluks in Maharashtra.). ghee etc. outlets and milk parlours. The milk is marketed through retailers.
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This department manages the sale of milk. Mysore.
jails. Sponsoring events viz. However. Advertisements in all available medias. Attain daily complaints of consumers and retailers. different promotional activities are followed with the help of KMF and IMDDB for building the brand image of Nandini and enhancement of sale of milk and milk products.Consumer Market: DMU is selling directly to the consumers through its special vendors. it follows two types of direct channels: 1. There is demand of 85. It also distributes to a total of 800 retailers and milk parlours which sell only KMF products. Participation in trade fairs. Strategies adopted by the department to enhance the sale of its products are: Conducting awareness programme of milk and homogenized processed milk. exhibitions etc.000 ltrs of milk per hour from various sources like institutions.000-90. 2.
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. schools.000 ltrs of milk per day.
DMU has its own marketing channels. Need for healthy promotional activities against competitors. hotels etc.Instituitional Market: There is demand for about 4. DHARWAD
To overcome the neck-to-neck competition. Adopting differentiated marketing strategies in place of undifferentiated marketing strategies. hospitals. cricket match.KARNATAKA MILK FEDERATION.
Finished goods stores department
1. The inventories are of different kinds ranging from mechanical. It has to send stock report to finance department.
Structure of marketing department:
Manager Deputy Manager (Account/Audit) Asst. This is later recorded in separate ledger book. spares. Manager (Tech. It has to send indent from stores to purchase section when there is storage of stock. date of issue. It has to supply the necessary materials to the entire departments. It has to maintain the proper records of the stores.000 different inventories. packing items to animal drugs and satisfactory and veterinary drugs. Officer) Supervisor Market Assistant
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. It has to control the storage costs and reduce it as much as possible. Stores department 2.KARNATAKA MILK FEDERATION. There are at least 4. The card attached to each article consists of amount balance. The stores department in DMU follows the Cordex System (Coded Control System). A card is maintained for each item and a number is allotted. DHARWAD
Marketing department has two sub-departments: 1. purchase etc.Stores Department:This department stores materials required for day-to-day consumption required in the production process and for other purposes.
Structure of Finished Goods Stores Department:
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. The goods stored are mainly non-pre indent sent by marketing department.Finished Goods Stores Department This department works as interface between production department and marketing department. approval of the goods by the quality department is mandatory. A consolidated daily and monthly report is submitted to production and finance department. DHARWAD
2.KARNATAKA MILK FEDERATION. It is mainly concerned with the maintenance of finished goods and its records. This department uses the First In First Out (FIFO) method of inventory to manage the stock. A separate ledger account is maintained for each item and it shows the receipt and dispatch of goods.
the P & I department starts functioning and makes other provisions. The extension officers at various chilling centres take care of this. DHARWAD
Procurement and Input Department
Procurement and input department is concerned with procurement of milk and input i. During flash season i.18.Milk procurement process done all the 365 days and two times a day and DMU procuring milk routes will appear for the purpose of convenience of transportation.14.
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. SNF: 9 %) for buffalo milk. But in case of far away. it is rechecked for the quality and freshness and then down loaded and directed to the production department. it will come down. the milk productivity will be high.
DMU fixes minimum of Rs. Here the quality i. SNF: 8.60 (Fat: 3.60 (Fat: 6 %. Sometimes prices vary with quality.KARNATAKA MILK FEDERATION. the driver and the contractor will be held responsible for the loss. Once a milk society is established.
If the milk is spoiled.
Milk collected from the societies will be taken to the nearest chilling centre.Then milk is loaded into tankers to be taken to the union.Procurement of milk varies season wise.e.e. During summer. from September to December. There are nearly 6 chilling centres under the Dharwad Milk Union and about 600 milk societies.e. technical facilities.5 %) for cow milk and Rs. fat and SNE content of milk will be checked and confirmed with that of the checklist sent by the society. it is brought to the notice of the society immediately. if milk by tankers spoil due to the delay. As per the law of the society recommended by the union states members should supply milk only to the union and other agency.5 %. Once milk is brought to the union.
Supplying power seeds for animal development. Conducting animal health camp every 2 weeks. Animal husbandry and veterinary health care programmed for the member animals.KARNATAKA MILK FEDERATION. DHARWAD
To upgrade the functioning and expand the productive capacity of each society the union provides many facilities:
Remunerative price for the milk produced. Subsidized cattle feed to the members of the society. Imparting training to all the members of co-operatives for smooth functioning of cooperatives. First aid centers in every co-operative society. Procurement and input department structure. DMU has 13 doctors to provide door-to-door service. Cross breeding programmers.
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KARNATAKA MILK FEDERATION. DHARWAD
Procurement and Input Department Structure:
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This is called skimmed milk. cooled to 4-5 degree C. The entire production has procedure and at every stage of production. From these tanks the milk is sent though steel pipes to undergo pasteurization. Most of the production equipments are imported from Sweden and Denmark. it is tested for quality. curd. It is then directed towards standardization process to procure for variety of milk by mixing with appropriate proportion of cream. milk powder.
When the milk is received from the cans and tankers. proper care is taken to maintain the quality and freshness of milk and milk production. Other milk production such as butter. After pasteurization.KARNATAKA MILK FEDERATION. ghee. lassi. DHARWAD
The main object of this department is to follow up production schedule as per plan and maintain close and co-operative relationship with other departments and ensures to upgrade the technical efficiency of production. These varieties of milk are then packed in different packets and stored in cold storage for dispatch. pedha are also produced and stored in cold storage.
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. the milk is taken to the cream separator machine (to get other milk products) where the cream is separated according to the standard norms.
Structure of Production Department:
Asst.( Stores) ) Typist
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.KARNATAKA MILK FEDERATION. Manager
KARNATAKA MILK FEDERATION, DHARWAD
Quality Control Department
The main task of the quality control department is checking the quality of milk and milk products in the plant. There are various tests conducted by the officers to meet this requirement. If any product does not pass the quality standards then that would be rejected. Even before dispatching the products, they undergo testing and they must get approved by the quality department.
Tests conducted at quality department:
Alcohol test Clot on boiling test( COB) Taste Flavour Acidity Corrected lactometer reading (CLR) Gender method for the test Milk tester method Moisture test Solid no test Solid not fat test (SNF)
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KARNATAKA MILK FEDERATION, DHARWAD
Human Resource Department
This department looks after the recruitment, selection and welfare of the employees. It also conducts training and orientation programmes and facilitates the following for employees:
Transportation Medical Uniform Canteen Provident fund Gratuity Women‟s pregnancy allowance
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KARNATAKA MILK FEDERATION, DHARWAD
This department controls the financial activities such as preparation of annual report, maintenance of accounts etc. This department is responsible for keeping all the inward and outward flow of money of unions. It prepares budget every year and financial rules for receipts and payments.
To prepare monthly accounts (Receipts & Payment A/c, Profit & Loss A/c, Balance Sheet). To prepare quarterly financial statements. To prepare integrated business plans. To prepare year ending financial statement. To get accounts audited from statutory books of accounts.
DMU follows 2 types of auditing:
1. Pre-audit system: done by Finance and Account Department every year. 2. Statutory System: done by private Charted Accountants every year.
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KARNATAKA MILK FEDERATION, DHARWAD
Structure of Finance Department:
Assistant Account Officers
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A financial statement generally refers to the following. It may show a position at a moment in time as in the case of b/s or may reveal a series of activities over a given period of time as in case of income statement. Its purpose is to convey understanding of some financial aspects of business firm. Income Statement: The income statement also termed as (profit or loss account) is
generally considered to be the most useful of all financial statements. It tells the story of progress or decline over given period and why and how an indicated result was achieved. It discloses the revenue realized from the sale of goods and the costs incurred in the process of producing the scheme. The balance shown in income statement is transferred to the balance through this statement after making necessary appropriations. b. It is thus a connecting link between the balance sheet and the income statement. Status of investments. Financial statement are prepared for the management to deal with a. Statement of Retained Earnings: The term retained earnings means the accumulated
excess of earnings over losses and dividends. It explains what has happened to a business as a result of operations between two balance sheet dates.
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1. Balance Sheet: It is statement of financial position of a business at particular moment of
time and the claims of the owners and outside against those assets at that time. DHARWAD
A financial statement is an organized collection of data according to logical and consistent accounting procedures. This statement is also termed as profit and loss appropriation account in case of companies.KARNATAKA MILK FEDERATION.
3. Results achieved during a given period under review.
Thus a risk returns trade off is involved in holding current assets. Level of fixed as well as current assets depends upon expected sales but it is only
current assets which can be adjusted with sales fluctuations in the short run. working capital is the difference between resources in cash and readily convertible into cash (current assets) and organizational commitments for which cash will soon be required (current liabilities). short-term assets. negotiating favourable credit terms.KARNATAKA MILK FEDERATION. cash and bank balances. especially cash strengthens the firm‟s liquidity
position (reduces riskiness) but also reduces the overall profitability. debtors. In managing fixed assets time is a very important factor. 2.
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. That is. Consequently. Thus the firm has a greater degree of flexibility in managing current assets. Thus working capital involves activities such as arranging the short-term finance. DHARWAD
Working Capital Management
Management of the working capital is nothing but the management of current assets. The management of the current assets includes inventory. Working capital refers to the amount of capital which is readily available to an organization. 1. administrating accounts receivables and monitoring the investments also a great deal of time. discounting
and compounding techniques play significant roles in capital budgeting and latter one in the management of current assets. 3. received. however differs in three important ways. book debts. controlling the movement of cash. The large holding of current assets. The management of fixed and current assets.
inadequate amount of working capital can threaten solvency of the firm because of its inability to meet its current obligations. A negative net working capital occurs when current liabilities are in excess of current assets. bills receivables and stock (inventory). A positive net working capital will arise when current assets exceed current liabilities. DHARWAD
Types of working capital: A) On the basis of concepts: There are two concepts of working capital – 1. Net working capital can be positive or negative. not less. Investment in current assets should be just adequate. Current assets are the assets which can be converted into cash within an accounting year and include cash.
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. The gross working capital concept focuses attention on two aspects of current assets management: (a) How to optimise investment in current assets? (b) How should current assets be financed? The level of investment in current assets should avoid two danger points. bills payable and outstanding expenses. Excessive investment in current assets should be avoided because it impairs firm‟s profitability as idle investment earns nothing. not more. short-term securities. to the needs of the business firm.excessive and inadequate investment in current assets. Gross Working Capital:
It refers to the firm‟s investment in current assets.KARNATAKA MILK FEDERATION. Net Working Capital: It refers to the difference between current assets and current liabilities. 2. debtors. The working capital needs of the firm may be fluctuating with changing business activity. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors. On the other hand.
2. It covers the minimum amount required for maintaining the circulation of current assets.KARNATAKA MILK FEDERATION. (a) Seasonal Working Capital: There are many lines of business where the volumes of operations are different in different seasons and hence the amount of working capital varies with seasons.
(b) Special Working Capital: The capital required to meet any special operations such as experiments with new products or new techniques of production and making interior advertising campaign etc is also known as Special Working Capital. DHARWAD
B) On the basis of time:
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. It consists of adequate cash balance on hand and at bank. it may be divided into two classes. adequate stock of raw materials and finished goods and amount of receivables. (a) Initial Working Capital: At its inception and during the formative period of its operations. The capital required to meet the seasonal needs of the enterprise knows as Seasonal Working Capital. Permanent Working Capital: Permanent Working Capital is permanently locked up in the circulation of current assets. (b) Regular Working Capital: It refers to the minimum amount of liquid capital required to keep up the circulation of the capital from the cash inventories to account receivable and from account receivables to back again cash. Variable Working Capital: It refers to the working capital that changes with the volume of business. The need for initial working capital is for every company to consolidate its position. a company must have enough cash fund to meet its obligations.
We will hardly find a business firm which does not require any amount of working capital. operating supplies. Indeed firms differ in their requirements of the working capital.g. DHARWAD
Needs of Working Capital:
The need for working capital to run the day-to-day business activities cannot be overemphasized. salesmanship. The firm‟s aim is maximizing the wealth of shareholders. clerical staff. To pay wages.KARNATAKA MILK FEDERATION. fuel.
Therefore working capital is required for: To meet the cost of inventories including total of raw materials. There is always an operating cycle involved in the conversion of sales into cash. sales servicing. To meet overhead costs including those of maintenance service activities. managerial and supervision staff. Current assets are needed because sales do not convert into cash instantaneously. work in progress. etc. To bear the expansion (with regard to promotion of sales) e. taxes and general expense administration. advertisement. purchased parts. The firm has to invest enough funds in current assets for generating sales activity. credit facilities. delivery services. power charges.
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. salaries for indirect labor. finished goods. Earning a steady amount of profit requires successful sales activity. expenses on packing.
It ensures solvency and stability of the enterprises. It enables the company to procure loans from banks on easy and competitive terms.
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. security and confidence in the minds of the persons in the management as well as in the minds of creditors and workers.KARNATAKA MILK FEDERATION.
Objectives of WC management:
Deciding optimum level of investment in various WC assets. A Company with adequate working capital is always able to meet current liabilities. It enhances the prestige of the company and moral of its workers because a company with adequate working capital is always able to pay wages and salaries promptly and regularly. It also ensures continuity in production and sales. Decide appropriate means of short term financing. It enables the company to take advantage of cash discount offered by the suppliers of raw materials or merchandise. DHARWAD
Importance of Working Capital Management:
Adequate working capital creates certainty. It creates a good credit standing for the firm because credit standing depends upon the ability to pay promptly. Decide optimal mix of short-term and long-term capital.
KARNATAKA MILK FEDERATION. Income tax deducted at sources from contractors. Advanced recoverable in cash or kind for value to be received. 5. Advanced payment of income takes credit certificates. Current Assets.
A) Current Assets: Components of current assets are as follows: 1. Stock of raw materials at cost. Cash and bank balance 2. Current Liabilities. 2. B. 6. 7. 4. 6. Outstanding debts for a period exceeding six months. 4. Expenses Payable. Unclaimed Dividend. Bank overdraft acceptance. 3.
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. Liabilities for bills discounted. Deposits under the company scheme. 3. 5. Sundry Creditors for the goods and expenses. Security Deposits.
B) Current Liabilities: Components of Current Liabilities are as follows: 1.work in process and finished goods. DHARWAD
Components of Working Capital:
There are two components of Working Capital A. 7. Balance with central excise authorities.
Longer the operating cycle greater will be the amount of working capital required and vice versa. DHARWAD
Operating cycle or working capital cycle indicates the length of time between a firm‟s paying for raw materials entering into finished stock and receiving cash on the sales of such finished stock.KARNATAKA MILK FEDERATION. Thus it plays an important role in determining the working capital needs of a firm.
Milk & Milk Products
Work In Process
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. This operating cycle differs from firm to firm.
after the conversion of resources into inventories. fits into stocks of finished goods through the work-in-progress with the progressive increment of labour and service costs. 3. It involves the purchase of raw materials and stores.KARNATAKA MILK FEDERATION. It is also called as cash conversion cycle. 2. conversion of finished goods (Milk & Milk Products) into sales. Manufacture of the product which includes conversion of raw material into workin.
In the Dharwad Milk Union (manufacturing concern). The operating cycle of a DMU involves three phases. Thus shorter duration of operating cycle indicates an efficient working capital management.progress into finished goods.
Length of operating cycle:
When raw materials remain in store pending for production for a less duration. the working capital operating cycle starts with the purchase of raw materials and ends with the realization of cash from the sale of finished products. when finished goods remain in warehouse pending for sales for a short duration only and when cash realizations out of sales are made quickly and finally when payment to creditors is made slowly. the operating cycle would be smaller and consequently the working capital will also be reasonable. labor.
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. Acquisition of resources such as raw material. 1. Sales of the product either for cash or on credit. power and fuel etc. when raw materials gets converted into WIP in a short duration. debtors and receivables and ultimately realization of cash and this cycle continues again from cash to purchases of raw material and so on. into cash. DHARWAD
Operating Cycle is the time duration required to convert sales.
it is logical to expect that a large amount of working capital is required. Therefore it requires more working capital.
2. The growth in volume of the business effects the requirements of working capital. DHARWAD
Determinants of Working Capital:
The following is the description of factors which generally influence the working capital requirements of Dharwad Milk Union : 1. Manufacturing Cycle: It comprises of the purchase and use of raw materials and the production of finished goods. large will be the firm‟s working capital requirements. If the firm goes on diversifying its activities. The credit policy influences the requirement of working capital in two ways: 1) 2) Credit terms generated by the firm to its customers.KARNATAKA MILK FEDERATION. Nature of Business: This is one of the primary factors influencing the working capital requirements of a firm.
4. Growth & Expansion: As a firm grows. Longer the manufacturing cycle. The DMU is a manufacturing firm having a longer operating cycle for manufacturing the products and investing more funds in its current assets. Credit terms available to the firm from its creditors.
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. Credit Policy: The credit policy relating to sales and purchases also affects the working capital. the working capital also increases.
it leads to an increase in the requirement of working capital and vice versa. The need for working capital varies with the tax rates and advance tax provisions. Same level of current assets will need increased investment when price are increasing. Operating Efficiency & Performance: The operating efficiency of the firm relates to the optimum utilization of resources at minimum costs. This will in turn increase investment in current assets to support enlarged scale of operations.
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.Sales Growth: The working capital needs of the firm increase as its sales grow. The firm will be effectively contributing to its working capital if it is efficient in controlling operating costs. The use of working capital is improved and pace of cash cycle is accelerated with operating efficiency. Price Level Changes: Changes in the price level also affect the requirements of working capital. The rising price levels will require a firm to maintain higher amount of working capital. The amount of taxes to be paid in advance creates the need for working capital.
6.KARNATAKA MILK FEDERATION.
7. Level of Taxes: Tax liability is the short-term liability. The growing firm may need to invest funds in fixed assets in order to sustain its growing production and sales. If the tax liability increases. DHARWAD
A firm needs the cash for the following three purposes:(a) The Transaction Motive (b) The Precautionary Motive (c) The Speculative Motive 2. Moreover.KARNATAKA MILK FEDERATION. Cash Management: Cash is the important current asset for the operation of the business. The firm should keep sufficient cash.
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. Inventory management: Every enterprise needs inventory for smooth running of its activities. to increase sales. The unforeseen fluctuations in demand and supply of goods necessitate the need for inventory. The greater the time lag. Receivables Management: Receivable represents amounts owed to the firm as a result of sale of goods or services on the ordinary course of business. It is the ready money available in the firm or with the business essential for its operations. The period of credit and extent of receivables depends upon the credit policy followed by the firm. Cash is the basic input needed to keep the business running on a continuous basis. the higher the requirements for inventory. These are claims of the firm against its customers and form part of its current assets. it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. it provides a cushion for future price fluctuations. DHARWAD
Working Capital Management concerned with the following aspects:
1. It serves as a link between production and distribution process. There is generally a time lag between the recognition of a need and its fulfilment. These receivables are carried for the customers. and to maintain a cordial relationship with the clients. 3. neither more nor less. Cash is the liquid form of an asset. The main purpose of maintaining or investing in receivables is to meet competitors.
Permanent/Long term sources 2. Permanent/Long term sources: Shares capital Debentures Public deposits Ploughing back of profits Loan from financial instituitions
2. Temporary/ Short term sources
1. 1.Temporary/ Short term sources: Indigenous bankers are the short term source for financing the working capital Trade credits Instalment credits Income received in advance Customers‟ advance Bank loans which include cash credit and overdraft Commercial papers Purchasing and discounting of bills
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.KARNATAKA MILK FEDERATION. DHARWAD
Sources of Working Capital:
There are two type of sources for financing the working capital requirement .
The study is conducted in Dharwad Milk Union (DMU) to measure the working capital management of the company. because ratio analysis is the important tool to measure the working capital management. aims at providing health and toned milk to its consumer at a better and reasonable price. Debtors Collection Period 7.KARNATAKA MILK FEDERATION. Note: For calculating operating cycle and also to understand the liquidity position the following ratios are used: 1. so this study is undertaken to observe the management of Working Capital through Ratio Analysis Technique. So I have taken the three years annual reports to measure the working capital management. Current Assets Turnover Ratio
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. Inventory Conversion Period 5. Dharwad Milk Union (DMU). Quick Ratio/ Liquidity Ratio/ Acid-Test Ratio 3. Creditor‟s Payment Period 9. Creditors Turnover Ratio/Payable Turnover Ratio 8. Dharwad Milk Union (DMU) is facing competition from various manufactures of milk&milk products. The working capital management is the most important tool to measure the liquidity position of the company. Inventory Turnover Ratio/Stock Turnover Ratio 4. Current Ratio 2. Every company has to maintain good management of working capital. Debtors Turnover Ratio/Accounts Receivables Turnover Ratio 6. DHARWAD
Analysis and Interpretation
Dharwad Milk Union (DMU) is one of the most reputed companies in the Karnataka. leading milk & milk products co-operative society. Working Capital Turnover Ratio 10.
The current ratio measures the ability of the firm to meet its current liabilities.53. Deposits (asset).860 9.322 7. Current Liabilities include: GRANTS.56. Current Ratio:
The current ratio of a unit measures firm‟s short-term solvency.30 1.S.KARNATAKA MILK FEDERATION. Sundry Creditors.39. Duties & Taxes.056 5.85. Loans & Advances. Salary Recovers.
Table-1 The Table Showing Current Ratio Year 2007-08 2008-09 2009-10 Current assets 8. Current assets get converted into cash in the operating cycle of the firm and provide the funds needed to pay current liabilities.62. DHARWAD
1). It is the ratio of total current assets to total current liabilities. Security Deposit A/C. Cash-in-hand. It is calculated by dividing total current assets by total current liabilities:
CURRENT RATIO = CURRENT ASSETS CURRENT LIBILITIES
Current Assets include: Closing Stock.30
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.36. Unpaid Salary/ Wages A/C.79. That is its ability to meet short-term obligations.37. O.55.80. Other Liabilities.623 Current Ratio 1.092 Current Liabilities 5. and Bank Accounts. Sundry Debtors.60 1.464 7.69.L.29.
an arbitrary standard of 2 to 1 should not be blindly followed. However. The firm has a current ratio1.1.
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. As a conventional rule.1 for the year 2007-2008.KARNATAKA MILK FEDERATION. we can understand that the company had held Rs. through which it may be interpreted to be insufficiently liquid. a current ratio of 2 to 1 is considered satisfactory.1 The Chart Showing Current Ratio
Chart: . Similarly 1. current ratio is the crude and quick measure of the firm‟s liquidity.4 1.8 0.2 1 0. Firms with less than 2 to 1 current ratio may be doing well and while firms with 2 to 1 or even higher current ratios may be struggling to meet their obligations.2 0 2007-08 2008-09 2009-10 Current Ratio
From this. However.60 of current assets to meet its current liabilities of Rs.30:1 for the years 2008-2009 and 2009-2010.6 1.6 0.30:1.4 0.8 1.
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.84. A Quick ratio is concerned with standard of 1:1 and the relationship between quick assets and current liabilities.55.322 7.37.623 Quick Ratio 1.341 Current Liabilities 5.80.83 1.056 5.737 7.341 4.56. Quick Ratio / Liquidity Ratio: This ratio is also termed as Acid-test ratio.80. It is calculated by dividing the Quick Current Assets by the Current Liabilities.KARNATAKA MILK FEDERATION.
QUICK RATIO = QUICK CURRENT ASSETS CURRENT LIBILITIES
Quick Current Assets = Current Assets – Inventory(Stock-in-hand)
The Table Showing Quick Ratio Year 2007-08 2008-09 2009-10 Quick Assets 5. The Quick Ratio is the ratio between quick current assets and current liabilities. DHARWAD
2). It is a measure of liquidity calculated dividing current assets minus inventory and prepaid expenses by current liabilities.04 0.
we can understand that the company had held Rs. yet it should be used cautiously. Although quick ratio is more penetrating test of liquidity.1.1 current liability. 1. DHARWAD
Chart: . 0. It should be noted that all the debtors may not be liquid and cash may be immediately needed to pay operating expenses. doubtful and long-duration outstanding debtors.83:1. the quick ratio remains an important index of firm‟s liquidity. 2008-2009 and 2009-2010 respectively. It should be noted that inventories are not absolutely non-liquid.2 0 2007-08 2008-09 2009-10 Quick Ratio
Interpretation: From this. The company is having 1.02:1 for the years 2007-2008. a company with low value of quick ratio may really be prospering and paying its current obligation in time if it has been turning over its inventories efficiently.04 of quick assets to meet Rs. Here we can notice that 1.
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.6 0. On the other hand.2: The Chart Showing Quick Ratio
1.04 and 1. Nevertheless. Generally.02 are more than the satisfactory level.4 0. A quick ratio of 1 to 1 or more does not necessarily imply sound liquidity position.8 0.04:1.KARNATAKA MILK FEDERATION. Thus company with a high value of quick ratio can suffer from the shortage of funds if it has slow paying.2 1 0. a quick ratio of 1 to 1 is considered to represent a satisfactory current financial condition.
37. The higher the ratio.40.3 The Table Showing Inventory Turnover Ratio Year 2007-08 2008-09 2009-10 Cost of Goods Sold 126.96.36.199
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.621 2. It can be ascertained by following formula:
INVENTORY TURNOVER RATIO = COST OF GOODS SOLD AVERAGE INVENTORY
Cost of Goods Sold = Sales – Gross Profit Average Inventory = Opening Stock + Closing Stock / 2 Table: .437 Inventory Turnover Ratio 16.24 188.8.131.52 17. the more efficient the management of inventories & vice versa. Inventory Turnover Ratio/Stock Turnover Ratio: Every firm has to maintain a certain level of inventory of finished goods so as to meet the requirements of the business. DHARWAD
3).KARNATAKA MILK FEDERATION.184.108.40.2065 Average Inventory 2.51.623 2.71.14. This ratio establishes relationship between cost of goods sold during a given period of time and average amount of inventory held during that period.675 49.504 59. The inventory turnover reflects the efficiency of inventory management.
The inventory turnover ratio is also an index of profitability. Sometimes. dull business. However the study of the comparative or trend analysis of inventory turnover is still useful for financial analysis. accumulation of obsolete and slow moving goods and low profits as compared to total investment. A low inventory turnover ratio indicates an inefficient management of inventory. DHARWAD
Chart 3:The Chart Showing Inventory Turnover Ratio
Inventory Turnover Ratio
30 25 20 15 10 5 0 2007-08 2008-09 2009-10 Inventory Turnover Ratio
Interpretation: From this. Similarly a high turnover ratio may be due to under-investment in inventories.
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. a high inventory turnover ratio may not be accompanied by relatively high profits. we can understand that the inventory turnover of Dharwad Milk Union is increasing. Usually a high inventory turnover/stock velocity indicates efficient management of inventory because more frequently the stocks are sold. stock accumulation. It may also be mentioned here that there are no rule of thumb or standard for interpreting the inventory turnover ratio. a low ratio signifies low profit.KARNATAKA MILK FEDERATION. where a high ratio signifies more profit. the lesser amount of money is required to finance the inventory. poor quality of goods. This shows that the firm‟s performance is better in selling its products. The norms may be different for different firms depending upon the nature of industry and business conditions. Inventory turnover ratio measures the velocity of conversion of stock into sales. A low inventory turnover implies over-investment in inventories.
4 The Table Showing Inventory Conversion Period Year 2007-08 2008-09 2009-10 No.57 Inventory Conversion Period 23 21 15
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. It includes: Raw Materials Conversion Period W-I-P Conversion Period Finished Goods Conversion Period
The Inventory Conversion Period can be ascertained by following formula:
INVENTORY CONVERSION PERIOD = NO. DHARWAD
4). Inventory Conversion Period: Inventory period is the time lag between the purchase of raw materials & sale of finished goods.24 24. OF DAYS IN A YEAR INVENTORY TURNOVER RATIO
No.KARNATAKA MILK FEDERATION.T.20 17. of Days in a Year – 365 days Table: .R 16. of Days in a Year 365 365 365 I.
In last 3 years.4 The Chart Showing Inventory Conversion Period
Inventory Conversion Period
25 20 15 10 5 0 2007-08 2008-09 2009-10 Inventory Conversion Period
Interpretation: From this we get to know the number of days Dharwad Milk Union is taking to convert raw materials into finished products.U has been maintaining better inventory conversion period.
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. D..KARNATAKA MILK FEDERATION. DHARWAD
Chart: . the company has improved its conversion period yearly.M. It indicates the faster conversion of inventory & the faster sale of its goods.
54 30.820 Debtors 1. Sale of Milk.5 The Table Showing Debtors Turnover Ratio Year 2007-08 2008-09 2009-10 Total Sales 51. It can be ascertained by the following formula:
DEBTORS TURNOVER RATIO = TOTAL SALES DEBTORS
Total Sales includes: Sale of cattle feed.532 2.KARNATAKA MILK FEDERATION. Debtors:Sundry Debtors Table: .76.79.465 Debtors Turnover Ratio 29.418 2.41.68 220.127.116.113 73.606 60. The ratio measures how rapidly receivables are collected.17. Other Sales.51
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. Sale of P & I.18.104.22.168. The analysis of the debtor‟s turnover ratio supplements the information regarding the liquidity of an item of current assets of the firm. Debtors Turnover Ratio/Accounts Receivable Turnover Ratio: Debtors Turnover Ratio is an important part of current assets.18. DHARWAD
5). it is determined by dividing the net credit sales by average debtors outstanding during the year.99. Sale of Milk Products.
In the year 2009-10.5 30 29. It is the reliable measure of the time of cash flow from credit sales. Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year. DHARWAD
Chart: . 30. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly.5 28 27.5 29 28. the debts are collected rapidly i.5 27 26.
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.50 compared to other 2 years.5 The Chart Showing Debtors Turnover Ratio
Debtors Turnover Ratio
31 30.KARNATAKA MILK FEDERATION.e.5 26 2007-08 2008-09 2009-10
Debtors Turnover Ratio
Interpretation: From this we get to know the last 3 years debtors turnover ratio of Dharwad Milk Union. low debtors turnover ratio implies inefficient management of debtors or less liquid debtors.
It can be ascertained by following formula:
DEBTORS COLLECTION PERIOD =
6). OF DAYS IN AYEAR DEBTORS TURNOVER RATIO
Table: . The average collection period ratio represents the average number of days for which a firm has to wait before its debtors are converted into cash.51 13 14 12
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.KARNATAKA MILK FEDERATION. of Days in a Year 365 365 365 Debtors Turnover Ratio Debtors Collection Period 29.6 The Table Showing Debtors Collection Period Year 2007-08 2008-09 2009-10 No. Debtors Collection Period: The Debtors/Receivable Turnover ratio when calculated in terms of days is known as Average Collection Period or Debtors Collection Period Ratio.68 27.
a longer collection period implies too liberal and inefficient credit collection performance. A short collection period implies prompt payment by debtors. From 2007-08 to 2008-09 the debts collection period shows an increasing trend which shows customers have not made payment promptly. But in the year 2009-10 the debts collection period seems to have decreased by 2 days and shows prompt payment made by the customers compared to the previous years. It is difficult to provide a standard collection period of debtors.5 11 2007-08 2008-09 2009-10 Debtors Collection Period
Interpretation: From this. Similarly.5 14 13. we get to know the debts collection period of Dharwad Milk Union.6 The Chart Showing Debtors Collection Period
Debtors Collection Period
14. This ratio measures the quality of debtors. It reduces the chances of bad debts.
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.5 13 12.KARNATAKA MILK FEDERATION. DHARWAD
Chart: .5 12 11.
It is calculated by following formula:
CREDIT TURNOVER RATIO = NET PURCHASE AVERAGE CREDITORS
Table: .045 42.12. Accounts payable include both sundry creditors and bills payable. It signifies the credit period enjoyed by the firm in paying creditors. It expresses the relationship between creditors and purchase. It compares creditors with the total credit purchases.08.931 83.07
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. Same as debtors turnover ratio.91.56.451 1.08.26.44.KARNATAKA MILK FEDERATION.30.484 Average Creditors 79. creditors turnover ratio can be calculated in two forms.21 39.55.7 The Table Showing Creditors Turnover Ratio Year 2007-08 2008-09 2009-10 Net Purchase 38. This ratio is similar to the debtors turnover ratio.913 51.177 Creditors Turnover Ratio 48.36 62. It is ratio between net credit purchase & the average amount of creditors outstanding during the year. creditors turnover ratio and average payment period. DHARWAD
7). Creditor’s Turnover Ratio: This ratio shows the rapidity of debt payment by the firm.87.
the credit payment of D. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly.7 The Chart Showing Creditors Turnover Ratio
Creditors Turnover Ratio
70 60 50 40 30 20 10 0 2007-08 2008-09 2009-10 Creditors Turnover Ratio
Interpretation: From this.U has increased to 62.07. The average payment period ratio represents the number of days by the firm to pay its creditors. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors.M. DHARWAD
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. we understand that there are ups & downs in the ratio of credit turnover.KARNATAKA MILK FEDERATION.U has been paying credit properly. It indicates that D. But in 2009-10.
Creditor’s Payment Period: The Creditors Payment Period Ratio represents the average number of days taken by the firm to pay the creditors.KARNATAKA MILK FEDERATION.8 The Table Showing Creditors Payment Period Year 2007-08 2008-09 2009-10 No. OF DAYS IN AYEAR
CREDITORS TURNOVER RATIO
Table: .07 Creditor's Payment Period 8 10 6
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.36 62. DHARWAD
8).21 39. of Days in a Year 365 365 365 Creditors Turnover Ratio 48. It is calculated by following formula:
CREDITOR’S PAYMENT PERIOD =
U has made its payment regularly.e. 6 days.8 The Chart Showing Creditors Payment Period
Creditor's Payment Period
12 10 8 6 4 2 0 2007-08 2008-09 2009-10 Creditor's Payment Period
Interpretation: It may be found that there are ups & downs in credit payment period of Dharwad Milk Union. It indicates that the D. But in the year 2009-10 the credit payment period is high i.
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.KARNATAKA MILK FEDERATION.M. DHARWAD
This ratio measures the efficiency with the working capital.469 Working Capital Turnover Ratio 13.KARNATAKA MILK FEDERATION.50.675 49.63 26.98. This ratio represents the number of times the working capital is turned over in course of a year i.39. it measures the efficiency with which the working capital is being used by the firm.40.9 The Table Showing Working Capital Turnover Ratio Year 2007-08 2008-09 2009-10 Cost of Goods Sold 43.538 2.72.03
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.37.895 Net Working Capital 3.53 28.90. It establishes the relationship with the net sales. Working Capital Turnover Ratio: This ratio indicates whether the working capital has been properly utilized in making sales or not.e. DHARWAD
9).22.214.171.1248 1. It is calculated by following formula:
WORKING CAPITAL TURNOVER RATIO = COST OF GOODS SOLD NET WORKING CAPITAL
Cost of Goods Sold = Sales – Gross Profit Net Working Capital = Current Assets – Current Liabilities Table: .504 59.24. It is taken as one of the primary indicators of the short-term solvency of the business.28.
The working capital turnover ratio measure the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But again in the 2009-10 there seems to be a low trend in the ratio indicating inefficiency compared to its previous year. there is a considerable increase in the ratio from 2007-08 to 2008-09. This shows an efficient utilisation of working capital. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation. DHARWAD
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.KARNATAKA MILK FEDERATION.9 The Chart Showing Working Capital Turnover Ratio
Working Capital Turnover Ratio
35 30 25 20 15 10 5 0 2007-08 2008-09 2009-10 Working Capital Turnover Ratio
Interpretation: We see that though there are ups and downs in the working capital turnover ratio over the years.
820 Current assets 8.93 8. the better is the firm in utilizing its current assets.76.69. It is calculated by following formula:
CURRENT ASSETS TURNOVER RATIO =
TOTAL SALES CURRENT ASSETS
Table: .860 126.96.36.199 The Table Showing Current Assets Turnover Ratio Year 2007-08 2008-09 2009-10 Total Sales 51.464 7.606 60.85.48
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.092 Current Assets Turnover Ratio 5.383 73. DHARWAD
10). The higher the ratio.39.07 7.17.29. Current Assets Turnover Ratio: This ratio reveals the relationship between cost of goods sold and current assets.62.79.53. The lower ratio indicates that investment in current assets has not brought commensurate gain to the firm.KARNATAKA MILK FEDERATION.18.
It reflects the good current assets management.U has utilized its current assets more efficiently in that year.KARNATAKA MILK FEDERATION. But it has got decreased for the year 2009-10 which shows inefficient usage of current assets compared to its previous year.10 The Chart Showing Current Assets Turnover Ratio
Current Assets Turnover Ratio
9 8 7 6 5 4 3 2 1 0 2007-08 2008-09 2009-10 Current Assets Turnover Ratio
Interpretation: This helps us know how Dharwad Milk Union has utilized its current assets.
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Chart: . From the year of 2007-08 to 2008-09 the ratio has increased and indicates that D.M.
Gross Operating Cycle: The time lag between the purchase of raw materials & collection of cash for sale is Gross Operating Cycle.KARNATAKA MILK FEDERATION.11 The Table Showing Gross Operating Cycle Year 2007-08 2008-09 2009-10 Inventory Conversion Period 23 21 15 Debtors Collection Period Gross Operating Cycle 13 14 12 36 35 27
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. It is calculated by following formula:
GROSS OPERATING CYCLE = Inventory Conversion Period + Debtors Collection Period
Table: . DHARWAD
11). It refers to the sum of inventory period and debtor‟s collection period.
Chart: .11 The Chart Showing Gross Operating Cycle
Gross Operating Cycle
40 35 30 25 20 15 10 5 0 2007-08 2008-09 2009-10 Gross Operating Cycle
Interpretation: From this we can understand that gross operating cycle has improved over the years and has shown better performance.KARNATAKA MILK FEDERATION.
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Creditors Payment Period
Table: . Net Operating Cycle: Net Operating Cycle is the time length between the payment for raw material purchases & the Collection of cash for sale.KARNATAKA MILK FEDERATION.12 The Table Showing Net Operating Cycle Year 2007-08 2008-09 2009-10 Gross Operating Cycle 36 35 27 Creditor's Payment Period Net Operating Cycle 8 10 6 28 25 21
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12). It is calculated by following formula:
NET OPERATING CYCLE = Gross Operating Cycle . It is difference between gross operating cycle & creditors conversion period.
KARNATAKA MILK FEDERATION. DHARWAD
Chart: .12 The Chart Showing Net Operating Cycle
Net Operating Cycle
30 25 20 15 10 5 0 2007-08 2008-09 2009-10 Net Operating Cycle
Interpretation: From this we can understand that net operating cycle has improved over the years and has shown better performance.
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07 7.KARNATAKA MILK FEDERATION. of Days in a year Inventory Turnover Ratio 5 Debtors Turnover Ratio Total Sales Debtors 6 Debtors Collection Period No.60 Y’2 1.03 8 10 6 48.36 62.07 13 14 12 29.21 39. of Days in a year Creditors Turnover Ratio 9 Working Capital Turnover Cost of goods Sold Ratio 10 Currents Ratio 11 Gross Operating Cycle Assets Net Working Capital Turnover Total Sales Current Assets Inventory Period Conversion 36 + Debtors 35 27 5. of Days in a year Debtors Turnover Ratio 7 Creditors Turnover Period Net Purchase Average Creditors 8 Creditors Payment Period No.30 Y’3 1.No 1 Particulars Current Ratio Formulas Current Assets Current Liabilities 2 Quick Ratio/ Liquidity Ratio Quick current assets Current Liabilities 3 Inventory Turnover Ratio Cost of goods sold Average inventory 4 Inventory Conversion Period No.54 30.83 1.63 26.53 28.02 Y’1 1.93 8.24 24.48 13. DHARWAD Ratio’s Table
Collection Period 12 Net operating Cycle Gross Operating Cycle – 28 Creditors payment Period
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.51 23 21 15 16.68 27.04 0.57 1.20 17.
the debts are collected rapidly i. This ratio‟s standard norm is 2:1. the liquidity position of the Dharwad Milk Union is less i. 1. So the DMU seems to have maintained good quick ratio in its financial activities.02.57 for the year 2009-10. the more efficient is the management of debtors or more liquid the debtors are.50 and it is higher compared to other 2 years.This ratio‟s standard norm is 1:1.
3) The Inventory Turnover Ratio of the Dharwad Milk Union has shown a considerable increase over the years and shows 24.e. 30. D.
4) In last 3 years.30. the company has improved its conversion period from year to year and shows 15 for the year 2009-10.
6) From 2007-08 to 2008-09 the debts collection period shows an increasing trend which shows customers have not made payment promptly. So the higher the debtors turnover ratio. So it is struggling to recover the current ratio of the firm.M. But in the year 2009-10 the debts collection period seems to have decreased by 2 days and shows prompt payment made by the customers compared to the previous years.KARNATAKA MILK FEDERATION. It indicates the fast conversion of inventory & the faster sale of its goods. 2) The Quick Ratio of the Dharwad Milk Union for the year 2009-10 is 1. This shows that the firm‟s performance is better in selling its products.
5) In the year 2009-10.e.
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.U has been maintaining better inventory conversion period. DHARWAD
1) The Current Ratio shows that for the year 2009-10.
U has increased to 62.
11) The gross operating cycle has improved over the years and has shown better performance.U has not utilised its current assets more efficiently compared to previous years.M.
10) There are ups and downs in Dharwad Milk Union in utilising its current assets and has decreased for the year 2009-10.U has not properly utilized the working capital for making the sales.U has been paying credit properly. But in 2009-10.
12) The net operating cycle has improved over the years and has shown better performance.KARNATAKA MILK FEDERATION. It indicates that D.
9) There are ups and downs in the working capital turnover ratio and has decreased for the year 2009-10. It indicates that D.M. we understand that there are ups & downs in the ratio of credit turnover.07. the credit payment of D. It indicates the company is maintaining credit payment properly.
8) Credit payment period of Dharwad Milk Union for the year of 2009-10 is in decreasing trend with 6 days. DHARWAD
7) From this.M. It shows the D.
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So it is suggested that the Dharwad Milk Union (DMU) has to maintain the same stability in managing its inventory and improve still better if possible and firm is also maintaining good inventory conversion period. debt collection period has decreased which shows prompt payment by debtors.
4. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly.U has not properly utilized the working capital for making the sales as there have been ups and downs in its utilization and has shown decreased value for the recent year.
7. 5. For the recent year the firm has shown better debtors turnover ratio. So the firm has to maintain that stability and improve over time.
3. The firm‟s performance is better in selling its products. It seems that the firm has maintained high creditors turnover ratio and lower credit period for the recent year accordingly. . the more efficient is the management of debtors or more liquid the debtors are.M. So firm has to manage the same conditions and still improve over time.
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. D. DHARWAD
6.KARNATAKA MILK FEDERATION.It is suggested that the Dharwad Milk Union (DMU) has to increase its current ratio. The higher the debtors turnover ratio. This situation enhances the credit worthiness of the company. So firm has to manage the same conditions and still improve over time. It is also suggested that DMU has to maintain stability in its quick ratio. So it is advised to make efficient use of working capital. For the recent year.
10. Dharwad Milk Union (DMU) should have to appoint skilled and qualified employees and also new technology in machineries.
11. DMU should have to computerize all the departments in order to increase efficiency and productivity of employees. It is suggested that Dharwad Milk Union (DMU) should continue to show better performance in its gross and net operating cycles as it has been showing over the financial years.
13.KARNATAKA MILK FEDERATION.
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8. It is advised to adopt scientific inventory management to improve “working capital”.
9.DMU should have to take sales promotion measures like free home delivery to urban consumers. This helps to increase the market share through increased sales. It increases efficiency and quality of the firm.
If D.M.KARNATAKA MILK FEDERATION.M. it can earn more profits. I got more information on working capital management of the D.
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.U is improving its financial conditions & also utilizing its assets & resources properly. DHARWAD
The study of “Working Capital Management” in DMU is satisfactory. The study of the last three years liquidity position of the company is better. D.M.U.U has suffered losses due to financial problems & less quantity of milk supply in the previous years but in the recent year. it is in better position.U continues the same performance as in the current financial year. In the last three years company is facing several problems in finance & marketing & promotional activities. It shows that D.M.
KARNATAKA MILK FEDERATION. Vikas Publishing House Pvt.Y.co
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. Jain – Financial Management. M. Ltd. DHARWAD
Text Books: I.
Web Site: http://www.M.kmfnandini. K. Pandey – Financial Management. Khan and P.
But it has got decreased for the year 2009-10 which shows inefficient usage of current assets compared to its previous year.KARNATAKA
Chart: .10 The Chart Showing Current Assets Turnover Ratio
Interpretation: This helps us know how Dharwad Milk Union has utilized its current assets.
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.U has utilized its current assets more efficiently in that year. It reflects the good current assets management.M. From the year of 2007-08 to 2008-09 the ratio has increased and indicates that D.
It refers to the sum of inventory period and debtor’s collection period. Gross Operating Cycle: The time lag between the purchase of raw materials & collection of cash for sale is Gross Operating Cycle.11).11 The Table Showing Gross Operating Cycle Year 2007-08 2008-09 2009-10 Inventory Conversion Period 23 21 15 Debtors Collection Period Gross Operating Cycle 13 14 12 36 35 27
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. It is calculated by following formula:
GROSS OPERATING CYCLE = Inventory Conversion Period + Debtors Collection Period
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.11 The Chart Showing Gross Operating Cycle
Interpretation: From this we can understand that gross operating cycle has improved over the years and has shown better performance.KARNATAKA
It is difference between gross operating cycle & creditors conversion period. Net Operating Cycle: Net Operating Cycle is the time length between the payment for raw material purchases & the Collection of cash for sale.12). It is calculated by following formula:
NET OPERATING CYCLE = Gross Operating Cycle .12 The Table Showing Net Operating Cycle Year 2007-08 2008-09 2009-10 Gross Operating Cycle 36 35 27 Creditor's Payment Period Net Operating Cycle 8 10 6 28 25 21
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.Creditors Payment Period
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.12 The Chart Showing Net Operating Cycle
Interpretation: From this we can understand that net operating cycle has improved over the years and has shown better performance.
57 15 30.30 0.24 21 27.07 6 26.07 35
Y’3 1.No 1 2 3 4 5 6 7 8 9 10 11
Particulars Current Ratio Quick Ratio/ Liquidity Ratio Inventory Turnover Ratio Inventory Conversion Period Debtors Turnover Ratio Debtors Collection Period Creditors Turnover Period Creditors Payment Period
Formulas Current Assets Current Liabilities Quick current assets Current Liabilities Cost of goods sold Average inventory No.Sl.36 10 28.
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.03 7.54 14 39.48 27
Working Capital Turnover Cost of goods Sold Ratio Currents Net Working Capital Assets Turnover Total Sales
Ratio Gross Operating Cycle
Current Assets Inventory Conversion 36 Period + Debtors Collection Period Gross Operating Cycle – 28 Creditors payment Period
Net operating Cycle
FEDERATION.60 1. of Days in a year Debtors Turnover Ratio Net Purchase Average Creditors No.68 13 48.20 23 29.53 5.63 8.30 1. of Days in a year Inventory Turnover Ratio Total Sales Debtors No.93
Y’2 1.02 24. of Days in a year Creditors Turnover Ratio
Y’1 1.83 17.21 8 13.51 12 62.04 16.
This ratio’s standard norm is 2:1. This shows that the firm’s performance is better in selling its products. the more efficient is the management of debtors or more liquid the debtors are.M.
6) From 2007-08 to 2008-09 the debts collection period shows an increasing trend which
shows customers have not made payment promptly.
3) The Inventory Turnover Ratio of the Dharwad Milk Union has shown a considerable
increase over the years and shows 24.
2) The Quick Ratio of the Dharwad Milk Union for the year 2009-10 is 1.
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. So the higher the debtors turnover ratio. So the DMU seems to have maintained good quick ratio in its financial activities.50 and it is higher compared to
other 2 years.02.This ratio’s
standard norm is 1:1. D. the debts are collected rapidly i.U has been maintaining better inventory conversion period.
4) In last 3 years.e. the company has improved its conversion period from year to year and
shows 15 for the year 2009-10. 1.Findings
1) The Current Ratio shows that for the year 2009-10. But in the year 2009-10 the debts collection period seems to have decreased by 2 days and shows prompt payment made by the customers compared to the previous years. 30.30. the liquidity position of the Dharwad
Milk Union is less i.57 for the year 2009-10. So it is struggling to recover the current ratio of the firm.e.
5) In the year 2009-10. It indicates the fast conversion of inventory & the faster sale of its goods.
10)There are ups and downs in Dharwad Milk Union in utilising its current assets and has
decreased for the year 2009-10.
11)The gross operating cycle has improved over the years and has shown better performance.M. But in 2009-10.
12)The net operating cycle has improved over the years and has shown better performance.M. It indicates that D. It indicates that D.M.
9) There are ups and downs in the working capital turnover ratio and has decreased for the
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. It indicates the company is maintaining credit payment properly. the credit payment of D.07.U has not utilised its current assets more efficiently compared to previous years. It shows the D.U has been paying credit properly.KARNATAKA
FEDERATION. we understand that there are ups & downs in the ratio of credit turnover.U has not properly utilized the working capital for making the sales.M.
8) Credit payment period of Dharwad Milk Union for the year of 2009-10 is in decreasing
trend with 6 days.U has increased to 62.
7) From this.
6. 4. It is also suggested that DMU has to maintain stability in its quick ratio. So firm has to manage the same conditions and still improve over time. For the recent year. So it is suggested that the Dharwad Milk Union (DMU) has to maintain the same stability in managing its inventory and improve still better if possible and firm is also maintaining good inventory conversion period. debt collection period has decreased which shows prompt payment by debtors. . This situation enhances the credit worthiness of the company.It is suggested that the Dharwad Milk Union (DMU) has to increase its current ratio. The higher the debtors turnover ratio. For the recent year the firm has shown better debtors turnover ratio. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly.KARNATAKA
FEDERATION. the more efficient is the management of debtors or more liquid the debtors are. So firm has to manage the same conditions and still improve over time. 3. The firm’s performance is better in selling its products.
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. It seems that the firm has maintained high creditors turnover ratio and lower credit period for the recent year accordingly. 5. So the firm has to maintain that stability and improve over time.
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. D. So it is advised to make efficient use of working capital. 13. Dharwad Milk Union (DMU) should have to appoint skilled and qualified employees and also new technology in machineries.
8. 10. DMU should have to computerize all the departments in order to increase efficiency and productivity of employees. 9. This helps to increase the market share through increased sales. 11.7.U has not properly utilized the working capital for making the sales as there have been ups and downs in its utilization and has shown decreased value for the recent year. It is advised to adopt scientific inventory management to improve “working capital”.M.DMU should have to take sales promotion measures like free home delivery to urban consumers. It is suggested that Dharwad Milk Union (DMU) should continue to show better performance in its gross and net operating cycles as it has been showing over the financial years.
FEDERATION. It increases efficiency and quality of the firm.
it is in better position.
The study of “Working Capital Management” in DMU is satisfactory. The study of the last three years liquidity position of the company is better.KARNATAKA
FEDERATION.M.M. In the last three years company is facing several problems in finance & marketing & promotional activities. If D.U is improving its financial conditions & also utilizing its assets & resources properly.M. It shows that D. it can earn more profits. D.
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. I got more information on working capital management of the D.U continues the same performance as in the current financial year.U.U has suffered losses due to financial problems & less quantity of milk supply in the previous years but in the recent year.M.
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FEDERATION. Jain – Financial Management. Ltd. M.Y. Vikas Publishing House Pvt. Pandey – Financial Management.
Web Site: http://www.M. Khan and P. K.