FINANCIAL STATEMENT ANALYSIS AT

M/S. HATSUN AGRO PRODUCTS LIMITED

Project work SUBMITTED to the UNIVERSITY OF MADRAS In partial fulfillment of the Requirements for the award of degree of MASTER OF BUSINESS ADMINISTRATION By Rajesh Naganathan (Reg. No. MA80393)

SCHOOL OF MANAGEMENT D.G. VAISHNAV COLLEGE Chennai 600106. APRIL - 2009

BONAFIDE CERTIFICATE

This is to certify that the project report titled Financial Statement Analysis is a bonafide record of work carried out by Mr. Rajesh Naganathan at M/s. Hatsun Agro Products Limited, as a summer project from May (dd/mm/yyyy) to June (dd/mm/yyyy), in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION by UNIVERSITY OF MADRAS during the academic year 2008 2009 .

Prof. V.Ganeshan, DEAN

Faculty Name

College seal

DECLARATION

I , Rajesh Naganathan hereby declare that the project work titled Financial Statement Analysis by me for the award of degree of Master of Business Administration has not formed the basis for the award of any other Degree, Diploma, Associate ship, Fellowship or other similar titles and this dissertation has been done by me under the guidance of (Company Guide/s)

(Signature of the student) Rajesh Naganathan

Place: Chennai Date: 30th May 2009

FOURTH PAGE : (On Company Letterhead)

This is to certify that (Student Name), student of Master of Business Administration, School of Management, D.G.Vaishnav College, Arumbakkam, Chennai, has successfully completed his/her six weeks project work in our company, during the period from May (dd/mm/yyyy) to June (dd/mm/yyyy) as part of his/her post graduate studies.

During

the

period

of

project

work,

he/she

has

done

project

titled

-------------------------------. He is found to be committed to the assignments/studies assigned and has shown desire to learn and complete the tasks systematically.

We wish him/her a bright future and all success in future endeavors.

For (company name)

Company Guide Designation Department

ACKNOWLEDGEMENTS

Chapter No.

Contents

Page Nos.

1 INTRODUCTION 1.1 INDUSTRY PROFILE 1.2 COMPANY PROFILE 1.3 PRODUCT PROFILE / ORGANISATION STRUCTURE 1.4 ABOUT THE TOPIC 1.5 SURVEY OF LITERATURE 1.6 NEED FOR THE STUDY 1.7 SCOPE OF STUDY 2. RESEARCH OBJECTIVES 2.1 PRIMARY OBJECTIVES 2.2 SECONDARY OBJECTIVES 3 RESEARCH METHODOLOGY 3.1 TYPE OF RESEARCH 3.2 RESEARCH APPROACH 3.3 SOURCES OF DATA 3.4 SAMPLING PLAN 3.4(1) POPULATION AND SAMPLING UNIT

3.4(2) SAMPLE SIZE 3.4(3) SAMPLING PROCEDURE 3.5 MODE OF DATA COLLECTION 3.6 DATA COLLECTION INSTRUMENT 3.7 DESIGN & PRETESTING OF QUESTIONNAIRE 3.8 TOOLS AND TECHNIQUES USED FOR ANALYSIS 4 LIMITATIONS OF THE STUDY 5 DATA ANALYSIS AND INTERPRETATION 6 FINDINGS 7 RECOMMENDATIONS 8 CONCLUSION 9 BIBLIOGRAPHY ANEXURES I. QUESTIONNAIRE II. MARKET FIGURES III.OTHERS, IF ANY

List of Tables / Illustrations / Graphs

Table No.

Title

Page No.

CHAPTER 1 INTRODUCTION 1.1 COMPANY PROFILE

Hatsun Agro products Ltd is India's largest private dairy. From a modest icecream manufacturer to one of the leading names in India's dairy sector in just a span of three decades, Hatsun now stands majestically as a hallmark of successful entrepreneurship. Be it in the dedication to quality, in employing the world's latest technology, innovative marketing strategies, or bringing prosperity to hundreds of thousands of farmers in the south. It started as a creamy dream in 1970: Arun Icecreams, the rich, delicious brand that has captured the hearts of millions of icecream lovers. With over 70 delightful varieties it has enjoyed continuous patronage from customers all over south India. Arun Icecreams is manufactured at the most modern plant of its kind in Chennai. From the ingredients, to the packaging and distribution, stringent quality control is maintained at every stage which has made Arun Icecreams the first icecream brand in India to win the 9001 certification for quality and world-class manufacturing facilities. Arun Icecreams reaches the consumers through the largest network of exclusive parlors in India. These and the many Arun miniparlors in the rural areas provide employment to thousands of people. Hatsun came up with Arokya - the standardized, homogenised and bacteria clarified milk. Arokya milk is still unsurpassed in purity, thickness and quality and has made it one of the most preferred milk brands consumed by several hundred thousand households every day and then came Hatsun Komatha. This product is Hatsun's proud contribution of a superior quality, lower fat milk which Hatsun calls 'Cow's milk'. Komatha is the perfect symbolization of the values and attributes of the provider of fresh milk - the cow. Hatsun handles a total 1.8 million litre a day. Hatsun's quest for quality starts at procurement, two times a day, 365 days of the year at over a thousand collection centers, from more than a hundred thousand farmers. Hatsun sources its milk with an ever watchful eye, always keen on quality. It is an enthusiastic and bustling activity when milk takes its first step in its journey to the consumers' homes.

Company

/ Infrastructure

The Company has an excellent milk collection system with chilling centers in more than 50 locations and a fleet of more than 1348 vehicles on contract for procurement. Its milk shed area is spread over 10 districts in Tamilnadu and 3 in Karnataka and covers over 70,000 milk producers and 2000 medium and bulk milk vendors. The Company is also involved in dairy extension services to farmers for the development of livestock quality and yields. Besides this the company also has tie up with banks for arranging agricultural loans to milk producers. More than 110 veterinary doctors under direct employment rendering full-scale animal care to the milk producers. Hatsun's state of the art processing and packaging plants are located in Salem, Kancheepuram, Madurai, Palacodu in TamilNadu and Honnali, Belgaum in Karnataka. After procurement, milk vans then take the procured milk to these plants where the milk has to undergo a quality test again to enter the plant. Then the weight is checked. After that, using superior technologies milk is subjected to pasteurisation, homogenisation, and bacteria clarification. Hatsun is a pioneer in India of the world-acclaimed homogenisation processes where the fat globules are broken and evenly distributed in the milk making it rich and wholesome. An unyielding commitment to quality has formed the backbone of Hatsun's business ethics right from its start. At every stage, intensive procedures to preserve quality are undertaken to ensure the purity of the milk. The entire Hatsun staff work in harmony as one family in enforcing the tough standards that Hatsun set for itself as basic guidelines. Each milk packet packaged-using German technology-reaches the consumer with this assurance: The Hatsun Quality Everyday Hatsun's fleet of puff-insulated trucks travel 3.9 times the distance around the world, i.e. 1, 82,730 km taking milk for consumption by homes across the states of Tamilnadu, Karnataka, Goa and Kerala. Hatsun takes pride in having its large cold-chain network in India ensuring that each and every one of its consumers gets fresh milk day after day. Hatsun's dairies are ISO 9001:2000 and HACCP (Hazard Analysis Critical Control Point) certified. The Salem plant has received ISO 14001 and been certified eco-friendly. The quality assurance of Hatsun ensures that stringent quality standards and norms of American

Dairy Products Institute (ADPI) are fully met. The success of Arun Icecreams has been taken as a case study by the Indian Institute of Management, Ahmedabad, India's leading business school.

Company / Network
The company has achieved excellence in establishing an extremely efficient supply chain management, better logistics and widespread distribution network spearheaded by exclusive franchisee outlets. All the brands of the company enjoy very strong brand equity and despite being in a price sensitive market, its brands command a premium. ARUN Icecream is sold through exclusive franchisee outlets and is occupying the top slot in Tamilnadu and figures within the top three in the south India. With the commissioning of plant in Belgaum, the company has entered into the Goa, Pune and southern districts of Maharashtra markets. The company has also entered into International markets during the financial year (2004-05). The company has implemented an arrangement, whereby Arun icecream is now available in Seychelles. Arun Icecream is also being exported to Brunei.

Company / Quality & Certification

Food Safety Standard of ISO 22000:2005 Quality Management System Standard of ISO 9001:2000 Environmental Management System Standard of ISO 14001:2004 Export Inspection Council of India (Ministry of Commerce & Industry Govt. Of India) Certificate of Approval of Quality for Export of Milk Product. o The Milk and Milk Product Order -1992 Registration (Ministry of Agriculture, Govt. Of India) o o o o

Quality & Food Safety Policy

We, Hatsun Agro Product Ltd., Processors of Branded Milk and Milk Products are committed to satisfy our esteemed customers by: Adopting Quality and Food Safety Management System Adhering Statutory & Legal Requirements

Ensuring best Quality Products and value for Customer's money Maintaining Timely Delivery Developing Good working atmosphere and culture Taking every effort to up-grade the milk producers by providing required services and facilities

Also aiming at continual improvement in all spheres of our activities through periodical review of our above policy and resetting the quality and Food Safety objectives.

Company/ Sales and distribution network

The company has strong logistics and distribution network Around 1,000 exclusive ice cream parlors spreading over entire Tamil Nadu and Parts of Andhra Pradesh and Karnataka cater to the needs of the consumers.

The company has 12 cold room distribution points, strategically located for quick

and easy distribution of its products.

In the milk segment, the companys distribution network comprises of 150 wholesale distributors and over 8,500 dealers for milk.

More than 500 milk van handling distribution and covering a distance of 250 to 300 kms each.

Leader in liquid milk among the private sector dairies and market leader for southern ice cream market.

 Export of milk powder and butter oil to more than 30 countries namely Dubai,

Saudi, Arabia, Iran, Ceylon, Singapore, Yemen, Thailand, Malaysia, Algeria, Canada, Japan, etc and targeting 20%of the total revenues form export by 2009.

The company has started manufacturing value added milk powder, butter oil, butter and ghee and started exporting powder and butter oil to Gulf, Canada, South Asian nations and African countries. The exports potentials look very promising with the cut back and abolition of subsidies for dairy products in America and European countries.

In addition, ARUN ice creams are available in Brunei and Seychelles and steps are being taken to market ARUN ice creams in Singapore.

The company derives its strength form its strong rural linkage with farmers by sheer organization of geographically penetrated milk collection network.

The company enjoys excellent relation with bankers multiple banking and the track record of loan is standard.

1.2 Our Products

1. MILK / AROKYA Arokya is Indias first bacteria clarified milk. Arokya uses German technology to remove the dead pathogenic bacteria completely from milk. This helps to retain the natural taste & flavor of milk. Using American technology, the butterfat globules are broken into smaller particles making Arokya wholesome to the last drop.

HIGHLIGHT:

Top selling private milk brand in Tamil Nadu, Karnataka and Kerala.

Only brand after state-owned AAWIN (Tamil Nadu), NANDHINI (Karnataka) and MILMA (Kerala) to have a state-wide reach and even better than co-operatives in reach.

No private dairy sells this volume in India.

Hatsun Komatha Toned Milk Another fresh milk in the stable of Hatsun, Hatsun Komatha Toned Milk was launched in the year 2000. A lighter milk than Arokya, Hatsun Komatha Toned Milk comes with all the good processing technologies deployed by Hatsun, i.e., homogenization, pasteurisation and bacteria clarification. This ensures that the high quality and hygiene standards set by Hatsun for its products are met. Distribution Stockists / Agents. We reach our customers through our wide network of 30 Distribution Stockists and over 1500 Agents in Tamil Nadu / Bangalore. Pack sizes: 5000ml, 500ml, 250ml, 200ml & 1 Hatsun Santosa FULL CREAM Milk A relatively new product in Hatsun's basket of offerings, Hatsun Santosa Full Cream Milk, is full cream milk that caters to niche commercial markets. Hatsun Santosa Full Cream Milk is well suited for Hotels and Catering needs as it is ideal for preparation of curd, lassi, milk shakes, sweets, payasam, tea and coffee. Pack sizes: 2000ml, 1000ml, 500ml & 150ml

Special packs for the food service industry We have introduced a new Food Service Pack of 5 liter. at an attractive price, keeping in mind the needs of hotels and institutions. The following benefits will accrue through its use:

Convenience in handling during transportation Convenience in cold storage Reduction in spillages / losses from packs / cans Assurance of quality delivery that is packed in the dairy plant Tamper Proof Correct quantity delivery

A choice of global standards Hatsun produces the following variants of milk powder in accordance with ADPI (Extra Grade) standards. They are: Skimmed Milk Powder-Low heat, Medium heat and High heat Full Cream Milk Powder (Whole Milk Powder)-Normal and Instant 2. MILK Products / Hatsun Cooking Butter Hatsun's all-natural high-quality Cooking Butter has something that makes it stand out from the crowd - it has dollops of 'zeal' in it. Hatsun Pasteurised Cooking Butter is made from the choicest of creams, churned from pure farm fresh milk. It is then processed in a high-tech dairy plant where hygiene and quality are given utmost importance. This ensures that sweets, savouries and cakes have a great taste and aroma. Pack sizes: 200g and 500g

MILK Products / Hatsun Cow ghee

At Hatsun, we decided that Hatsun would be different from other branded ghees that jostle for your attention. So, what makes Hatsun Ghee different? The nutty taste of Hatsun Ghee a special grade ghee, is perfect for Indian cuisine in general and sweet making in particular. Being made only from cow milk, all the freshness and uniqueness associated with cow

milk can be found in Hatsun Ghee. It has the distinct property of carrying and enhancing the flavour of practically any dish that one briefly fries in Hatsun Ghee. Hatsun Ghee comes with the 'Agmark' seal of quality. MILK Products / Hatsun Butter Milk Rich & tasty buttermilk made from farm-fresh milk Available in easy-to-carry 200 ml pouch

MILK Products / Hatsun Curd Hatsun Curd is a semi-solid fermented milk product, with excellent consistency. It has a very low bacteria count making it extremely healthy in nature and delightfully tasty in character. MILK Products / Hatsun Paneer Made from farm-fresh milk. A higher milk solid make it tastier and helps in retaining texture & shape. Ideal to cook mouth-watering dishes. 3. Beverages / Aaros Milk / Badam Milk

Made from pure creamy milk from a high quality dairy Tasty, thick and full of strength Badam Milk also available

Beverages / Aaros Tea / Masala Tea

Made from select and high quality tea gardens Strong, has Fine Taste and Good Colour Masala tea also available

Beverages / Aaros Coffee

Made from exquisite quality coffee beans Very fine filter coffee taste

Beverages / Aaros Ragi

Made from high quality roasted ragi grains Tasty and very Refreshin

4. Arun Icecreams

The company has been in the Ice creams business for more than 35 years and its the premium product of the company. The company was the first to introduce the Sit & eat concept in ice cream industry. It has been successful in giving verities in ice creams satisfying the tastes and preference of various analogous groups. The brand Arun is a house hold name in south India and the brand value itself worth several crores. Arun Ice cream is the No.1 ice cream brand in South India. There are over 70 unforgettable varieties, each distinct in taste with regular additions to the range. Arun has over 1000 exclusive parlours. Among these, many of them are Indias first & trendsetters in their category. Like amazing Colour Magic an ice cream that changes colours.

HIGHLIGHTS OF HATSUN
Well

known company with strong brands ARUN and

AROKYA Largest Private Dairy in the Country. Market leader in Ice cream and Standardized milk in south India. Excellent linkage with farmers in South India. Sound and growing export business. State of the art facilities with grass root developments. Expansion of the existing dairy ingredient capacity in Krishnagiri District in Tamil Nadu. IIM (A) case study on Arun Brand in 1999. Strong distribution network with city, town and rural reach. Listed company Companys white Gold scheme for enhancement of milk production and village prosperity is fast gaining popularity.

 Powder plant in Dharmapuri district to go on stream by February09

1.3. Product Profile

1. Arun Icecreams Arun surprised the ice cream industry itself by overtaking the industry growth rate of 12% by growing at a rate of 30%. And commanding an astounding market share of 34% in the entire Southern market. The network reaches out to all the urban regions and even small towns with populations of 30,000. Thereby, giving lakhs and lakhs of families a delightful and affordable ice cream outing. During the year 2007-2008, the ice cream division achieved a turn over of around Rs.438 millions and it expected to achieve a target of around Rs.500/- millions during the current financial year. The company also earns export revenue by exporting ice cream to MALDIVES. It has been dispatching ice cream by air to ANDAMAN Island. Arun is a familiar in BRUNEI and SEYCHELLES.

HIGHLIGHTS Four decade old, No. 1 selling brand in Tamil Nadu. Within Top-3 leading brands in other southern states. Estimated market share of close to 35% in south India.

In Hatsun Dairy milk pouch are packed are in three different brand names such as 1) Arokya 2) Komatha 3) Santhosa

1) Arokya Milk pouch S.No 1 2 3 4 Quantity (ml) 5000ml 1000ml 500ml 200ml Fat 4.5% 4.5% 4.5% 4.5% S.N.F 8.5% 8.5% 8.5% 8.5% Price 80Rs 19Rs 9.50Rs 4Rs

2) Komatha Milk pouch Quantity (ml) S.No 1 2 3 1000ml 500ml 250ml Fat 3.0% 3.0% 3.0% S.N.F 8.5% 8.5% 8.5% Price 15Rs 7.5Rs 4Rs

3) Santhosa Milk pouch S.No 1 2 3 4 Quantity (ml) 2000ml 1000ml 500ml 200ml Fat 6.0% 6.0% 6.0% 6.0% S.N.F 9.0% 9.0% 9.0% 9.0% Price 40Rs 20Rs 10Rs 4Rs

1.4 ABOUT THE TOPIC

FINANCIAL STATEMENTS refer to formal and original statements prepared by a business concern to disclose its financial information. In the words of Hampton J.J The statements disclosing status of investments is known as balance sheet and the statement showing the result is known as profit and loss account. Thus, the term financial statements prepared by accountants at the end of a specific period.

They are: 1. Profit and loss account 2. Balance sheet or statement of financial position. Now-a-days another statement is also prepared known as surplus statement or retained earnings statement. Numbers of schedules are also prepared to supplement the data and information contained in the balance sheet and profit and loss account Schedules of assets, debtors, creditors, investment etc are some examples of some of the schedules which are attached to the financial statements. These statements put together, are called package of financial statements. Financial statements are based on the following facts: 1. Based on recorded facts 2. Accounting conventions 3. Postulates 4. Personal judgments

Importance of financial statements:

Financial statements are prepared in order to show the financial position of the organization/company. These statements are prepared periodically in order to inform about the future prospects of the business concern. The financial statement is useful to the following :

1. Management 2. Financiers 3. Creditors 4. Investors

Types of Analysis
Financial statement analysis is of different types. The process of analysis is classified on the basis of information used and modus operandi of analysis. The classification is as under: 1. On the basis of information used: (a) External analysis (b) Internal analysis 2. On the basis of modus operandiof analysis: (a) Horizontal analysis (b) Vertical analysis

1.5 Need / Objectives of the study

To study the financial position at M/s. HATSUN AGRO PRODUCT LIMITED. To measure the managerial efficiency of the company

To measure the short- term and long- term solvency of the company.

To suggest ways and means to improve the present position of the company

To analyze the financial statements by using various techniques

1.6 Scope of study

o The study will help the company to identify their liquidity, profitability, creditworthiness of customers and repayment capacity. o It will help the company to forecast about future expansion and diversification.
o

The company can study the various opportunities and threats it faces from other competitors.

It will also help to analyze the efficiency utilization of working capital.

CHAPTER 2 RESEARCH OBJECTIVES

Primary objectives:
The primary objective is to analyze the financial statements of M/s.Hatsun Agro Product Ltd, Chennai.

Secondary objectives:

To

analyze

the

working

capital,

profitability,

liquidity,

creditworthiness of customers and repayment capacity by making use of various ratios.

To analyze the various financial factors disclosed by a single set of statements and a study of the trend of these factors as shown in the series of statements.

CHAPTER 3 RESEARCH METHODOLOGY 3.1 RESEARCH DESIGN

Research methodology is a way to systematically solve the research problem. It may be understood as a science how research is done scientifically. It has many dimensions and research methods constitute a part of the research methodology. The research design for this study is descriptive. In this design, the researcher can discover causes and can report what is happening.

3.2 AREA OF OPERATION

Under this head of Financial Statement Analysis, the area to be covered by the study is confined to M/s. HATSUN AGRO PRODUCTS LTD as whole.

3.3 PERIOD OF STUDY

The period of study is confined to five years i.e. 2003-04 to 2007-08.

3.4 SOURCES OF DATA

The data that is used for the research purposes is secondary data. The main sources of data are the companys budgeted annual report and actual reports.

3.5 TOOLS AND TECHNIQUES USED

The tools and techniques used for the study are: 1.Ratio analysis 2.Trend analysis

RATIO ANALYSIS A ratio is simply the relationship between two or more things. Ratios help to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance. For example, a measurement of income may be compared to a measurement of size. Data for the financial ratios are taken from the balance sheet, the cash flow statement and the income statement. Uses of ratio analysis Financial ratios can be put to many uses. 1. To be used by an operator or a business manager in managerial analysis. 2. To be used by a lending agency in credit analysis. 3. Measuring efficiency 4. Facilitating investment decisions 5. Inter firm comparisons

CLASSIFICATION OF RATIOS
The ratios can be classified as:

Classification by statements

Balance sheet ratios

Profit and loss a/c ratios

B/s and P&L a/c ratios

Liquidity ratio Current ratio Proprietary ratio Debt equity ratio Fixed assets ratio Capital gearing ratio

Gross profit ratio Operating ratio Operating profit ratio Expenses ratio Net profit ratio

Return on investment Stock turnover Debtors turnover Creditors turn over Fixed assets turnover Return on shareholders funds

TREND ANALYSIS Through trend analysis one can predict the future with the help of the past data. The trend analysis can be done using the following techniques: Simple average method Moving average method 3 years moving average 4 years moving average 5 years moving average

CHAPTER 4 LIMITATIONS OF THE STUDY

The time period have been taken for the study is only 5 financial years (200304to 2007-08) which cannot be taken as mean for conclusion. It should done by keeping in mind the overall picture and the prevailing economic and political situation. Ignores price level changes. Financial statements are essentially interim reports. Accounting concepts and conventions. Influence of personal judgment Disclose only monetary facts.

CHAPTER 5 DATA ANALYSIS INTERPRETATION TREND ANAYLSIS STATEMENT SHOWING SALES TREND
Year Sales 2004 3,661,115 2005 4,538,276 2006 5,448,186 2007 5,852,828 (Rs in 000s) 2008 8,631,936

CALCULATION OF TREND VALUES

YEAR SALES(Y) X X^2 XY TREND VALUES 2004 2005 2006 2007 2008 N=5 3661115 4538276 5448186 5852828 8631936 -2 -1 0 1 2 4 1 0 1 4 X^2=10 -7322230 -4538276 5852828 17263872 XY=11256194 3375229.4 4500848.8 5626468.2 6752087.6 7877707

Y=28132341 X=0

FORMULA FOR TREND VALUE IS Y c =a+bx a = Y/N = 28132341/5 =5626468.2

X Y/X^2 =

11256194/10

=1125619.4

SALES TREND

18000000 16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 20 04 2005 2006 2007 2008 6752087.6 5 626468.8 4500848 .8 3375229 8631936 F orcas ted Actual 7877707

5 4481865852828 4538276 3661115

FORCASTED TREND VALUE

YEAR 2009 2010 2011 2012 2013

SALES (Rs. In 000s) 9003326.4 10128945.8 11254565.2 12380184.6 13505804

STATEMENT SHOWING WORKING CAPITAL TREND

YEAR WORKING CAPITAL Year 2004 2005 2006 2007 2008 2004 17414 2005 -30804 2006 -3541 2007 -89633 2008 116013

WORKING CAPITAL(Y) 17414 -30804 -3541 -89633 116013

X -2 -1 0 1 2

X^2 4 1 0 1 4

XY -34828 30804 -89633 232026

Trend Values -25784 -11947.1 1889.8 15726.7 29563.9

N=5

Y=9449

Y=0

X^2=10

XY=138369

FORMULA FOR TREND VALUE IS Y c =a+bx

a = Y/N

= 9449/5 =1889.8

b = X Y/X^2 =138369/10 =13836.9

WORKING CAPITAL TREND

150000 100000 50000 0 2004 -50000 -100000 2005 2006 2007 2008

Actual Forcasted

FORECASTED TREND VALUE

Year 2009 2010 2011 2012 2013

Working capital trend value (Rs.000s) 43400.8 447845.8 461682.7 475519..6 489356.5

RATIO ANALYSIS: ANALYSIS OF CURRENT RATIO: Current ratio = Current Assets Current liabilities

Year 03-04 04-05 05-06 06-07 07-08

Current Assets 317620 252949 317994 380592 892978

Current Liabilities 300206 283753 321535 470225 776965

Ratio 1.06 0.89 0.99 0.81 1.15

ANALYSIS OF CURRENT RATIO:

ANALYSIS OF CURRENT RATIO

1.2 1 0.8 RATIOS 0.6 0.4 0.2 0 20032004 2004- 20052005 2006 YEARS 2006- 20072007 2008

Interpretation:
From the table it shows that the current ratio of the company has been decreased during 04-05 from 1.06 to 0.89 and it has increased as well as decreased each financial year. Finally it has been increased to 1.15. Higher ratio indicates high liquidity position. Ideal ratio is 2:1.

GROSS PROFIT RATIO GROSS PROFIT RATIO=GROSS PROFIT NET SALES

GROSS PROFIT=NET SALES COST OF GOODS SOLD COST OF GOODS SOLD=RAW MATERIALS CONSUMED+ MANAFACTURING EXPENSES+ DIRECT WAGES+OPENING FINISHEDGOODS-CLOSING FINISHED GOODS ANALYSIS OF GROSS PROFIT RATIO:
YEAR 03-04 04-05 05-06 06-07 07-08 NET SALES 3619097 4491875 5403442 5852828 8631936 GROSS PROFIT 801672 836202 1034171 1167148 1660334 RATIO 22.15% 18.62% 19.14% 19.94% 19.23%

ANALYSIS OF GROSS PROFIT RATIO

ANALYSIS OF GROSS PROFIT RATIO

23.00% 22.00% 21.00% RATIO 20.00% 19.00% 18.00% 17.00% 16.00% 20032004 20042005 20052006 YEARS 20062007 20072008

INTERPRETATION:
We can see that the gross profit ratio of the company is fluctuating year by year i.e. alternate years there is an increase in the gross profit ratio. If there is an increase in

the percentage of gross profit as compared to the previous years then one of the factors can be taken into account: 1. The selling price of the goods has gone up without corresponding increase in the cost of goods sold. 2. The cost of goods sold has gone down without corresponding decrease in the selling price of the goods. 3. Omission of purchases or sales figures might have inflated. If there is a decrease the following factors can be taken into account: 1. Decrease in the selling price of the goods without corresponding decrease in he cost of goods sold and vie-versa 2. Omission of sales 3. Stock at the end may be undervalued or the opening stock may have been overvalued. This ratio indicates the degree to which the selling price of goods per unit may decline without resulting in any losses from operations to the firm.

NET PROFIT RATIO NET PROFIT RATIO=NET PROFIT AFTER TAX NET SALES

YEAR 03-04 04-05 05-06 06-07 07-08

NET PROFIT AFTER TAX 53853 7351 42453 81460 173256

NET SALES 3619097 4491875 5403442 5852828 8631936

RATIO 1.48 0.16 0.78 1.39 2

Analysis of Net Profit Ratio

ANALYSIS OF NET PROFIT RATIO

2 1.8 1.6 1.4 1.2 RATIO 1 0.8 0.6 0.4 0.2 0

2003- 2004- 2005- 20062004 2005 2006 2007 YEARS

20072008

INTERPRETATION:
The above table shows relationship between net profit after tax and net sales of the company for five years. We can see that the ratio keeps on fluctuating from year to year. In the first year it is 1.48%, but it has decreased to 0.16% in the second year thereby showing

that operational efficiency is not up to the mark. Gradually, it starts to increase thereby showing better operational efficiency of the company.

WORKING CAPITAL TURNOVER RATIO:

Analysis of Working capital turnover ratio This ratio is a measure of the efficiency of the employment of the working capital. It indicates over trading and under trading and is harmful for the smooth conduct of business. This ratio finds out the relation between cost of sales and working capital. It helps in determining the liquidity of a firm in as much as it gives the rate at which inventories are converted to sales and then to cash. Working capital turnover ratio = net sales / net working capital (Rs in 000s)
Year 03-04 04-05 05-06 06-07 07-08 Net sales 3619097 4491875 5403442 5852828 8631936 -89633 116013 Net working capital 17414 -30804 -3541 Ratio 207.83 -145.82 1525.96 -65.3 74.4

ANALYSIS OF WORKING CAPITAL RATIO

ANALYSIS OF WORKING CAPITAL RATIO

500 0 RATIO -500 -1000 -1500 -2000 YEARS 20032004 20042005 20052006 20062007 20072008

Interpretation:
This ratio indicates whether or not working capital has been effectively utilised in making sales. In case a company can achieve higher volume of sale with relatively small amount of working capital, it is an indication of the operating efficiency of the company. The ratio shows a constant trend over the period. So it indicates that the company has suffered lack of working capital for meeting its day to day activities.

INVENTORY TURNOVER RATIO: INVENTORY TURNOVER RATIO = COST OF SALES AVERAGE STOCK

YEAR 03-04 04-05 05-06 06-07 07-08

COST OF SALES 3619097 4491875 5403442 5852828 8631936

AVG INVENTORY 36168 65139 96556 137160 295512

RATIO 100.06 68.95 55.96 42.67 29.21

Analysis of Inventory turnover Ratio

ANALYSIS OF INVENTORY TURNOVER
120 100 80 RATIO 60 40 20 0 2003- 2004- 2005- 2006- 20072004 2005 2006 2007 2008 YEARS

INTERPRETATION:
As already stated, the inventory turnover ratio indicates the liquidity of the inventory .A high inventory ratio indicates brisk sales. But the ratio of the company gradually decreases. A low inventory ratio results in blocking of funds in inventory which ultimately would result in heavy losses for the company as the stock may become obsolete or deteriorate in quality.

CURRENT ASSETS TO WORKING CAPITAL RATIO:

The ratio shows the relationship between current assets and working capital purpose of this ratio is to calculate the percentage of working capital influenced in current assets. It is calculated as current assets / working capital.

YEAR 03-04 04-05 05-06 06-07 07-08

CURRENT ASSETS 317620 252949 317994 380592 892978

WORKING CAPITAL 17414 -30804 -3541 -89633 116013

RATIO 18.24 -8.21 -89.8 -4.25 7.7

ANALYSIS OF CURRENT ASSETS TO WORKING CAPITAL RATIO

CURRENT ASSETS TO WORKING CAPITAL RATIO

20 0 -20 RATIO -40 -60 -80 -100 2003- 2004- 2005- 2006- 20072004 2005 2006 2007 2008 YEARS

INTERPRETATION:
The above table shows that the current assets working capital ratio. The ratio is gradually fluctuating year by year because the company has got lower value of current assets in working capital. So it indicates that the companys current assets position in working capital is not at a satisfactory level.

DEBTORS TURNOVER RATIO:

Average accounts receivable Accounts receivable period = Annual sales / 365

YEAR 03-04 04-05 05-06 06-07 07-08

ACCOUNTS RECIVABLE 23623000 40134000 64030000 52549000 149654000

ANNUAL SALES/365 9915334 12306507 14803951 16035145 23649140

RATIO 2 3 4 3 6

Analysis of Debtors Turnover Ratio

ANALYSIS OF DEBTORS TURNOVER RATIO

6 5 4 RATIO 3 2 1 0 2003- 2004- 2005- 2006- 20072004 2005 2006 2007 2008 YEARS

INTERPRETATION:
The above table shows the accounts receivable period maintained by the company during the year 2003-2004 was 2 days. In the year 2005 to 2006 its increased from 2 days to 3 days. Then 2006-2007 its slowly decreased to 3 days. In the year 2007-

2008 its increased to 6 days. The accounts receivable period should be less for efficient collection of account receivable, but its very high shows inefficiency in collection

LONG TERM SOLVENCY RATIOS: 1. DEBT EQUITY RATIO= TOTAL LONG-TERM DEBT SHAREHOLDERS FUNDS

YEAR 03-04 04-05 05-06 06-07 07-08

LONG TERM DEBT (SECURED LOANS) 423671 692510 702485 523582 837156

SHAREHOLDERS FUNDS (SHARE CAPITAL +RESERVES+P&L A/C) 222752 230103 305628 360731 481576

RATIO 1.9 3 2.3 1.45 1.74

Analysis of Debt Equity Ratio

ANALYSIS OF DEBT EQUITY RATIO

3 2.5 2 RATIO 1.5 1 0.5 0 20032004 2004- 20052005 2006 YEARS 2006- 20072007 2008

2. FIXED ASSET RATIO FIXED ASSSTS RATIO = FIXED ASSETS TOTAL LONG- TERM FUNDS

YEAR 03-04 04-05 05-06 06-07 07-08

FIXED ASSETS 968356 1259319 1337467 1436041 1754211

TOTAL-LONG TERM FUNDS (SHAREHOLDERS FUNDS +SECURED LOANS) 646423 922613 1008113 883953 1318732

RATIO 1.5 1.36 1.33 1.62 1.33

Analysis of Fixed Assets Ratio

FIXED ASSETS RATIO

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2003-2004 2004-2005 2005-2006 YEARS 2006-2007 2007-2008

RATIO

INTERPRETATION:
Long-term solvency position of the company is good. Debt-equity ratio of the company is not satisfactory as in all the five years it crosses the ideal ratio which is 1.The fixed assets ratio more than 1 implies that fixed assets are purchased with short-term funds which is not a prudent policy.

CHAPTER 6 FINDINGS

Current ratio of the company is satisfactory only by the year 2008 (1.15). So the company has to concentrate on short term funds. Working capital turnover ratio indicates that the company has suffered for lack of working capital for is day-to-day liabilities that too in the year 2006. Later it gradually reduced. Later in 2008, the position reached to 74.40 Inventory turnover ratio of the company indicates that efficient operation of the company and effective utilization of raw materials. There is a decrease in the inventory ratio from 46.07 in 2006-07 to 29.21 in 2007-08. The company needs to review the stock positions periodically. In average the company has got lower value of current assets in working capital. But while observing the last 2 years performance i.e., 2007 to 2008 it increase from -4.25 to 7.7.

 The company has earned normal profit during this study period. Debtors turnover ratio is not satisfactory as it has the collection period has increased from 3 days in 2005-2006 to 6 days in 2007-2008. This shows an in efficiency on the part of the company with respect to debts.

CHAPTER 7 RECOMMENDATIONS
The Company must maintain its current ratio to the standard 2:1. The Company must procure current assets in order to maintain a healthy current ratio. Matching principles shall be adopted for financing of funds (i.e.,) long term funds can be employed for financing fixed assets and short term funds can be employed for financing current assets. As the company is financed more on non-traditional line (high debt or equity) it is appreciable to be conservative in its financing. The fixed asset ratio should also be maintained to 0.67 which is considered to be an ideal ratio.

CHAPTER 8 CONCLUSION
After an in- depth study of FINANCIAL STATEMENT ANALYSIS at M/s HATSUN AGRO PRODUCTS LTD, CHENNAI, following conclusions are drawn. In the last five years there has been a steady increase in gross profit value and percentage. The annual turnover of the company has also been on an increasing trend, this is mainly due to the Companys effective cost control measures and excellent supply chain management. On the other hand, the Company has to focus on managing effective working capital as in three successive financial years the Company had negative working capital which could hamper the progress of the Company. The debt equity ratio and the fixed asset ratio also needs to improve. Overall, the Companys financial position is satisfactory and progressive even though some aspects need more focus. The Company which has completed a decade recently in dairy industry has the opportunity to grow in the near future.