You are on page 1of 110

Financial Analysis & Leverages

CHAPTER-1

INTRODUCTION

PART-A: ABOUT INDUSTRY

Introduction The dairy sector in the India has shown remarkable development in the past decade and India has now become one of the largest producers of milk and valueadded milk products in the world. The dairy sector has developed through cooperatives in many parts of the State. During 1997-98, the State had 60 milk processing plants with an aggregate processing capacity of 5.8 million litres per day. In addition to these processing plants, 123 Government and 33 co-operatives milk chilling centres operate in the State. With the increase in milk production. Maharashtra now regularly exports milk to neighbouring states. It has also intiated a free school feeding scheme, benefiting more than three million school children from over 19,000 schools all over the

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

1

Financial Analysis & Leverages State.

Indian dairy industry Dairy is a place where handling of milk and milk products is done and technology refers to the application of scientific knowledge for practical purposes. Dairy Industry in India More than 2,445 million people economically active in agriculture in the world, probably 2/3 or even more ¾ of them are wholly or partly dependent on livestock farming. India is endowed with rich flora & Fauna & continues to be vital avenue for employment and income generation, especially in rural areas. India, which has 66% of economically active population, engaged in agriculture, derives 31% of Gross Domestic Product GDP from agriculture. The share of livestock product is estimated at 21% of total agricultural sector. Contribution of live stock sector to gross domestic product (Percentage contribution) 1950-51 1990-91 63.5 67.0 12.0 16.0
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 2

Financial Analysis & Leverages 4.1 1.3 16.5 3.1 0.3 10.0

Live stock populations: Number of animals (in thousand) (Source: production yearbook 1995 /FAO statistics division) Sheeps Goats Pigs Chickens Cattle 45000 119242 11780 435 194655 Buffaloes Horses Mules Camels 79500 990 1742 1520 (Source Indian Dairy man, 50:1998) Cattle Buffalo Total (1996) (millions) 196

80

276

0.68% / year 0.75% / year

World (1996) 1320 151 1471 0.64% / year 0.87% / year

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

3

Financial Analysis & Leverages In India In World 28 breeds of cattle 1997 520.6 mt 5.5-0.75% 7 breeds of buffalo .2020.620 to 650 mt.

Milk Production 1950 – 17 million tonnes 1996 – 70.8 million tonnes 1997 – 74.3 mT (Projected) 2020 – 240 mT Expected to reach- 220 to 250 mT – 2020 India contributes to world milk production rise from 12-15 % & it will increase upto 30-35% (year 2020) Average milk production / year America 6874 Kg/ year Denmark 6223 Kg/year Holland 5751 Kg/year India 552 Kg/year

Average Productivity
4

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages

2.4 kg/day or 732 kg/lactation/cow

China: 1600 kg/lactation America 7200 kg/lactation Percapita availability: Recommanded – 210 gm India

1950 132 gm 1997 214 gm 2020 290 gm India contributes 35% of total Asian milk Dairy Industry profile 1997

Human Population Milk production Average annual growth rate (1996-2000) Per capita milk availability Milch animals

953 million (70 million dairy farmers) 74.3 million tonnes (203.5 million 1 pd) 5.6% 214 gm/day or 78 kg/year 57 million cows;

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

5

Financial Analysis & Leverages

39 million buffaloes

Milk yield per breedable bovine in milk Cattle feed production (organized sector)

1,250kg 1.5 million tonnes

Turnover of veterinary pharmaceuticals Dairy plants throughout Throughout as percentage of total milk output Value of output of milk group (1994-95) (Based on producers price) Value of output of dairy industry (Based on retail price)

Rs 550 crores 20 mlpd 10 Rs 50,051 crores

Rs 105,000 crores

Projected milk production at different rates of annual growth 1995 to 2000 year @5% @5.5% @6% 1995 66.3 66.3 66.3 1996 69.3 70.0 70.2 1997 73.1 74.0 74.4 1998 76.7 78.0 78.8 1999 80.6 82.3 83.5 2000 84.6 86.8 88.5
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 6

50 0.00 130.00 170.80 4.20 3.20 Indian Buffaloes: (Dairy business Directory 1996) Buffaloes are classified into two categories. Constituents Buffalo Cow Goat Liquid skimmed milk no 1 Moisture (gm) 2 Protein (gm) 3 Fat (gm) 4 Minerals (gm) 5 Carbohydrates (gm) 6 Energy calories (kcal) 7 Calcium (mg) 8 Phosphorus (mg) 9 Iron (mg) 81.00 0.20 87.10 0.00 90.00 120.50 0.40 4.10 4. 1) reverine (depending upon variation in their habitat & genome) 2) swamp Swamp buffaloes: .30 6.80 3.80 5.00 0.60 29.00 120.60 67.10 2.00 4.50 86.00 210.50 chromosomes ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 7 .70 4.48 chromosomes South east asian countries Stocky animals.00 72.50 0.00 90.80 0.Financial Analysis & Leverages Milk Composition Sr.30 92.00 0.00 120.30 4.00 117. marshy land habitat River Buffaloes: .20 0.

1992) From 1950 to 1992 milk production in the world increased by 4.1 to 17.6% per annum ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 8 .4% is produced in India (FAO.Prefer to enter clear water World’s Buffalo population: 147 million about 142 millions in Asia & Pacific India: leading most buffalo populated country 78 millions most of reverine Milk production: About 95% of world buffalo milk (45. while 64.3 million tonnes) is produced in Asia &Pacific. Total bovine slaughtered (%) World 17.26% The % of total bovines slaughtered.1.Financial Analysis & Leverages .4% or .massive in size and curled horns .

Kanara. Tarai & Toda Breeds of Buffaloes of Indian Origin and Breeding Tracts: Group Murrah type Breed Murrah Nili Ravi Breeding tract Rohtak. 1.g. Manda.Financial Analysis & Leverages India 15% per annum Asia 6. Kalahandi. Pandharpuri. Nagpuri. Jind. Ravi. Cockril (1982) = Buffalo river type. Sonepat (Hariyam) Ferozepur (Punjab) Kaira and Baroda 9 Gujarat Surti ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE . Bhiwari.eg.6% Increasing trend of buffalo population in most of the Asian countries in Brazil and Italy BREEDS Classified on phenotypic & geographic locations. Mehasana. Horns are sickle shaped and unswept: e. two sub groups.Hisar. Bhadawari. Jaffarabadi. Murrah. Horns are closed and set close to head & are down swept . Surti. Sambalpur 2.

Uttar pradesh Tarai Central Nagpuri India Pandharpuri Kalahandi Sambalpur Toda South India Nilgiri Hills South Kanara West coast in Kerela Buffaloes found in the north –eastern states and the eastern coastal region of India & in China South east Asian countries e.P. have been classified as swamp buffaloes on the basis of their genetic constitution (2n=48) & natural habitat.Financial Analysis & Leverages Jaffarabadi Mehsana Bhadawari Kutch.(Indian buffaloes) low 21 kg High 41 kg Higher Average in daily male gain 404 of calves 548 gm gm between than between birth to in 3-6 36 females months months 10 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE . Kampuchea. north Karnataka Hilly region of Andra Pradesh and Orissa Bilaspur dist.. Beh Tehsil in Agra. Bhadawari estate. Malaysia. Vietnam. Bangladesh etc. Burma. Srilanka. Akola. west A. Philippines. Laos. Jungarh & Jamnagar dist Mehsana. Gwalior & Etawah dist. South maharashtra. Nagpur. Amravati dist. Banaskantha Dist. sabarkantha. Production performance Growth: The average birth wt.The breeds includes in these groups are Manda & Palakhemundi. Thailand. Tarai region of U.P.g.

0 44.3-54.0 Bhadawari 46.0 26.Financial Analysis & Leverages Body weight at first 367 531 calvingkg kg ranges (Dharwati) (Nili from to Ravi) Higher growth rate in reverine breeds than swamp MILK Production performance of different breeds of Buffaloes: Age at 1st calving Lactation.4-47.2 Nagpuri 48. Range Murrah 43.0 39.5-45. Range Avg (Range) 1850 1476-2515 315(267-365) 1765 1596-2808 2808 (09) 1364 1304-1693 313(300-373) 1181 276 (-) 1103 926-1175 270 (-) - Performance: Most of the buffaloes are considered to be seasonal breeds with maximum calving taking place from July to November in almost all breeds Buffaloes come in oestrus in cold month and are sub-fertile during hot month Sub-fertility-> due to poor thermoregulaion in buffaloes and Poor nutrition -> poor heat symptom-low heat detection (only ligno-cellulosic material straw /dry roughages) ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 11 . (months) Buffalo Avg.3-55.6 Reproduction Lactation Length (days) PRODUCTION Yield (kg) Avg.3 Surti 39.9-54.5 Nili Ravi 42.0 44.0 41.

This department provides advice to the state governments and Union Territories in formulating programmes and policies for dairy development. and Fisheries.Financial Analysis & Leverages Calving interval Dry period Service period (days) Murrah 454 Nili Ravi 530 Surti 410 Bhadawari 460 Nagpuri (days) 148 198 165 156 (days) 133 211 103 98 Ag. Technologies (Dairy) The dairy industry plays an important role in the socio-economic development of India. Dairying. which falls under the central Ministry of Agriculture. 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. To keep focus on the dairy ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 12 . It also looks after all the matters relating to production and preservation of livestock farms (cattle and sheep). is responsible for all the matters relating to dairy development in the country.

India is a wonderland for investors looking for investment opportunities in the dairy industry. There are different sectors within the dairy industry that promise great business investment opportunities: • Biotechnology: 1. The ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 13 . This institution is a statutory body that was established in 1987. The Indian cattle yield less milk as compared to their foreign counterparts. India has all the key elements required for a free market system. 2. There is a basic raw material need for the dairy industry. India has a plentiful supply of technically skilled laborers. 4. milk is available in abundance. There is an easy availability of technological infrastructure. that is. The main aim to set up the board was to accelerate the pace of dairy development in the country and attract new investments.Financial Analysis & Leverages industry a premier institution known as the National Dairy Development Board was established. 3. The dairy industry holds great potential for investment in India and promises high returns to the investors. The reasons why the industry has huge potential for attracting new foreign investment are: 1.

top-quality food processing machinery.Financial Analysis & Leverages Indian cattle breeders are on the lookout for ways to improve their milk yield through cross-breeding. Thus. Producing biopreservative ingredients based on dairy fermentation. aciophilin. enzymes. and Nisin contained in dairy powder. including dairy biologics. such as pediococcin. There is also great scope for investment in different dairy cultures. 2. • Dairy/Food Processing Equipment: Great potential lies for foreign investment for manufacturing and marketing of cost-effective. 3. there is a huge potential available for foreign investors to invest in dairy cattle breeding of high-quality buffaloes with hybrid cows. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 14 . • 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. bulgarican. and other coloring materials for food processing. also promise great investment opportunity. probiotics.

Thus. such as cheese slicing. butter printing. the dairy industry in India has huge investment opportunities in a variety of sectors. and dicing lines. condensed milk. • Finished Products: There is a great scope for investment in the manufacturing of finished dairy products such as cheese sauce and cheese powders. cheese packaging.Financial Analysis & Leverages • Retailing: Retailing of dairy products also promises great investment opportunities for standardization and upgrading dairy products in the main metropolitan cities. • Manufacture of Ingredients: Several ingredients are involved in the making of different dairy products like ghee. which hold greater potential over other activities. The investors are all set to gain profitable returns on their investment. • Technically Advanced Manufacturing Units: There is a great opportunity for foreign investors to invest in establishing manufacturing units for dairy products. The investors can build world-class manufacturing units and let them for hire. Building manufacturing units supports specialized dairy-related activities. and cheese. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 15 . Manufacturing of ingredients for these products offers a great potential for foreign investment in India.

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 16 . graphs. The field of financial analysis is comprised of leverages. which serves as a support service for the manufacturing of the Milk & products and also the contribution of the financial activities within the company. The study is made to analyze the financial performance with reference to financial statements like profit and loss account and balance sheet with the help of tables. providing suggestions for improving the methods and procedure followed in the firm. The scope of the study is to know the financial activities of the company. comparative statement and common size statement analysis.Financial Analysis & Leverages PART-B: ABOUT SUBJECT INTRODUCTION The study “Financial Analysis & Leverages” was conducted in Kolar Milk Union Limited in order to know the financial status of the company.

“Financial Statement Analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statement and a study of the trend of the trend of these factors as shown in a series of statements”. The most important objective of the analysis and interpretation of financial statements are to understand the significance and meaning of financial statement data to known the strength and weakness of a business undertaking so that a forecast may be made of the prospects of that undertaking.Financial Analysis & Leverages The main aim is to study the activities of finance department by utilizing the theoretical knowledge relating to practical situation and to highlight differences in practice. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 17 . In the words of Myres. MEANING OF FINANCIAL ANALYSIS: One of the important steps of accounting is the analysis and interpretation of the financial statements which results in the presentation of data that helps various categories of persons in forming opinion about the profitability and financial position of the business concern.

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 18 . the term financial statement generally refers to two basic statements. or may reveal a series of activities over a given period of time. such as Income Statement and Balance Sheet. The following are the main objectives of analysis of financial statements: 1. To judge the present and future earning capacity or profitability of the concern. 2. To judge the operational efficiency as a whole and of its various parts or departments. a company may also prepare a statement of Retained Earnings and Statement of changes in financial position OBJECTIVES OR USES OF FINANCIAL ANALYSIS: Financial analysis is helpful in assessing the financial position and profitability of a concern. as in the case of and Income Statement. It way show a position at a moment of time as in the case of balance sheet.Financial Analysis & Leverages FINANCIAL STATEMENTS: A Financial Statement is an organized collection of data according to logical and consistent accounting procedures. Apart from these two statements. Its purpose is to convey an understanding of some financial aspects of business firm. Therefore.

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 19 . relation and evaluation. The functional analysis is the process of selections. 4. 1. To have comparative study in regard to one department with another department. 5. The first task of the financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. The second step is to arrange the information in a highlight significant relationship. PROCESS OF FINANCIAL ANAYSIS: The analysis of financial statements is a process of evaluating the relationship between component of financial statements to obtain a better understanding of the firm’s position and performance. 2. To judge the short-term and long-term solvency of the concern for the benefit of the debenture holders and trade creditors. To help in assessing developments in the future by making forecasts and preparing budgets.Financial Analysis & Leverages 3.

TYPES OF FINANCIAL ANALYSIS: A Financial analysis can be external or internal. governmental agencies and research Scholars make such type of analysis. External Analysis: Those persons who are not connected with the enterprise make it. They do not have access to the detailed record of the company and have to depend mostly on published statements.Financial Analysis & Leverages 3. They do not have access to the enterprise. The final step is interpretation and drawing of inferences and conclusions. Internal Analysis: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 20 . Investors credit agencies.

Financial Analysis & Leverages Those persons who have access to the books of accounts make the internal analysis. A number of techniques are used to study the relationship between different statements. They are members of the organization.  COMPARATIVE FINANCIAL STATEMENTS: The comparative financial statements are statements of the financial position at different periods of time. TECHNIQUES OF FINANCIAL ANALYSIS: The analysis and interpretation of financial statement is used to determine the financial position and operations as well. The following methods of analysis are used. Analysis of financial statements or other financial data for managerial purpose is the internal type of analysis. The internal analyst can give more reliable result than the external analyst can because every type of information is at his disposal. The elements of financial position are shown ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 21 .

Thus. Since the figures two or more periods are shown side by side. Both the income Statement and Balance Sheet can be prepared in the form of comparative financial statements.Financial Analysis & Leverages in a comparative form so as to give an idea of financial position at two or more periods. only a glance of data incorporated in this statement will be helpful in making useful conclusions. A comparative income statement will show the absolute figures for two or more periods. the absolute change from one period to another and if desired the change in terms of percentages.  COMPARATIVE INCOME STATEMENTS: The income statement discloses net profit or net loss or account of operations. whether cost of sales have increased or decreased etc…therefore.  COMPARATIVE BALANCE SHEET: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 22 . figures for two or more periods are placed side by side by side to facilities easy comparison. with the help of this we can quickly ascertain whether sales have increased or decreased. in these statements.

Statements prepared in this way are referred to as Common Size statements. it is on change in the comparative balance sheet. This type of balance sheet is very helpful in studying the trends in a business concern. the income statement exhibits each expense item or group of expense items as a percentage of net sales. each individual asset and liability classification is shown as a percentage of total assets and liabilities respectively. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 23 . Therefore. in a single Balance Sheet the emphasis is on present position. When this method is pursued. 1. Similarly.Financial Analysis & Leverages Balance Sheet of two or more different dates can be used for comparing assets and liabilities and finding out any increase or decrease in those items. and net sales are taken at 100 percent. Common Size Financial Statements: Common size financial statements are those in which figures reported are converted into percentage to some common base.

analytical device for the management since by substitution of percentages for large amounts. This method is a very much useful. brevity and readability are achieved. 3. given the fact that absolute figures of two firms of the same industry are not comparable. Each item of base year is taken as 100 and on that basis the percentages for each of the items of each of the years are calculated. Trend percentages: Trend percentages are very much helpful in making a comparative study of the financial statements for several years.Financial Analysis & Leverages Common-Size statements prepared for one firm over the years would highlight the relative changes in each group of expenses. assets and liabilities. These statements can be equally useful for inter-firm comparisons. The way calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. These percentages can be taken as index Number showing the relative changes in the financial data resulting with the passage of time. Funds flow statements: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 24 . 2.

Where Got and Statement and statement of Resources Provided and Applied. 4. weekly or for any other duration. It may be prepared annually. which shows the movement of funds between two balance sheet dates. Statement of sources and Applications of Funds. The funds flow statement is called by different names. According to Anthony. In short. “The funds flow statements describes the sources from which additional funds were derived and the uses to Which these funds were put”. which indicates the various means by which the funds have been obtained during the certain period and the ways to which these funds have used during that period.Financial Analysis & Leverages Funds flow statement is a financial statement. it is the statement. monthly. such as. half – yearly. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 25 . Cash flow statement: Cash flow statement shows the movement of cash and their causes during the period under consideration. Statement of changes in Working Capital.

It may be favorable. Operating leverage and ii. i. Financial leverage. Return on investment leverage i. 6. A cash flow statement concentrates on transactions that have direct impact on cash. Combined leverage iv. a statement of changes in a financial position of a firm on cash basis is called a Cash flow statement. Operating leverage: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 26 . An unfavorable leverage exists if the rate of return remains to be lower. It deals with the inflow and outflow of cash between two Balance Sheet dates. In financial management. Leverage may be. it refers to employment of funds to accelerate rate of return to owners.Financial Analysis & Leverages Cash flow statement is prepared to show the impact of financial policies and procedures on the cash position of the firm and takes into consideration all transactions that have a direct impact upon cash. In other words. Leverage Ratios Leverage refers to an increased means of accomplishing some purpose. iii. It can be used as a tool of financial planning by the finance manager.

It shows the extent of the change in earnings before interest and tax (EBIT) as a result of change in sales volume. As far as possible a firm should avoid operating under conditions of a high degree of operating leverage. a firm with high degree of Operating leverage will experience much large effect on EBIT because of small change in sales. If the fixed costs of the firm are relatively large. Once the breakeven point is reached. as it is a high-risk situation. On the other hand.e. Two important points i. substantial portion of its contribution margin is appropriated to cover these fixed costs. relating to fixed costs and break-even point should be noted about operating leverage. If there is small percentage of increase in earnings. all contribution margins become profit of the concern. It will be desirable to operate at sufficiently above the break –even point to avoid the danger of sharp fluctuations in profits because of variation in sales.Financial Analysis & Leverages It occurs when with fixed costs the percentage change in profits due to change in sales volume. a small drop in sales eliminates the entire earnings near the break-even point. Thus. It may be noted carefully that the degree of operating leverage ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 27 . The magnitude of the operating leverage is related to the fixed costs of the firm. The significance of operating leverage lies in the fact that it tells the finance manager about the impact of change in sales revenue and operating income.

It tells the extent of the change in earning before tax (EBT) due to change in operating income (EBIT). It is calculated with the help of the following formula: Financial leverage = Earnings before interest and Tax / Earnings before Tax. Favorable financial leverage is also referred to as trading on equity. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 28 . it is said to have favorable financial leverage.Financial Analysis & Leverages goes on decreasing with every increase in sales volume above the break-even point. iii. the firm is said to have unfavorable financial leverage. Return on investment leverage : It may be favorable or unfavorable. If the rate of return on investment (ROI) of a firm is higher than the cost of debt capital. if the rate of return on investment (ROI) is lower than the cost of debt capital. It is calculated by the following formulas: Operating leverage = Marginal contribution / Earnings before interest and Tax ii. Financial leverage: When a firm procures debut capital to finance its needs. it is said to have financial leverage. On the other hand.

Financial Analysis & Leverages iv. Combined leverage: This leverage exhibits the relationship between a change in sales & in corresponding variation in taxable income. Combined leverage = Contribution Taxable income OR Combined leverage = Operating leverage X Financial leverage ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 29 .

Now a day’s KOMUL is facing lot of competition in the market due to existence of more competitors like HERITAGE. to take corrective steps to overcome the competitors by doing the financial analysis. the KOMUL should be in a position to analyses its financial and leverage factors.Financial Analysis & Leverages CHAPTER 2 RESEARCH DESIGN TITLE OF THE STUDY A STUDY ON “FINANCIAL ANALYSIS & LEVERAGES OF KOLAR MILK UNION LIMITED”. DODLA. In this situation. many milk union limited’s came into existence. TIRUMALA. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 30 . GOOD MORNING MILK etc. STATEMENT OF PROBLEM: After the white revaluation. it helps to know the financial position of the KOMUL which involves in analyzing of various financial statement such as Profit And Loss Account. AROGYA. As a result lot of competition according in the field of purchase and sale of milk in satisfying the customers. Balance Sheet etc.

Comparative Common Size Analysis.Financial Analysis & Leverages and by during the leverages analysis it helps in knowing the risk involved carrying on the operations of KOMUL so. Analysis. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 31 . this project is done to show how the financial and leverages analysis to be done to overcome the competition by understanding it’s own financial position and extent the risk taken along with its importance. OBJECTIVE OF THE STUDY  To study and analyze the financial performance of KOMUL  To get the practical knowledge of the financial evaluation techniques and analysis of annual reports in KOMUL  To forecast the financial performance through Leverage analysis  To make the analysis and interpretation more effective by using various techniques such as Trend analysis Comparative analysis.

REVIEW OF LITERATURE Reviewing the text books of finance. reports provided by the finance department in KOMUL.Financial Analysis & Leverages SCOPE OF THE STUDY  The current study is undertaken for the purpose of knowing the financial Performance KOLAR MILK UNION LIMITED”  The study focuses attention mainly on the level of financial Performance of KOLAR MILK UNION LIMITED. OPTIONAL DEFINITIONS OF CONCEPTS: LEVERAGE Definition Leverage is “the employment of an asset or funds for which the firms pays a fixed cost or fixed return” James Horne ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 32 .

4. Operating leverage: Operating leverage shows the relationship between the changes in sales & the changes in then fixed operating income.Financial Analysis & Leverages TYPES OF LEVERAGES 1. Operating leverage has impact mainly on fixed cost & variable cost & also on contribution. 3. Financial leverage. Contribution Operating leverage = Operating Profit (EBIT) ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 33 . Operating leverage 2. The following equation is developed by RW Johnson to compute operating leverage. Return on investment leverage. Combined leverage.

Contribution Combined leverage = Taxable income OR Combined leverage = Operating leverage X Financial leverage ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 34 .Financial Analysis & Leverages Financial leverage: The process of variation in capital structure is called financial leverage or trade on equity. Operating income Financial leverage = Taxable income Combined leverage: This leverage exhibits the relationship between a change in sales & in corresponding variation in taxable income. By adopting this leverage. The variation in capital composition will have an impact on operating & taxable income of the company. the rate of return on equity capital is modified. It signifies the relationship between the earning power on equity capital & rate of interest on borrowed fund or debt.

that is. No samples are required for this study as it is concerned with the true financial analysis. SOURCES OF DATA COLLECTION: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 35 . as the case may be. data are collected for each and every item of expenses. The advantage of this type of survey will be that no item is left out and hence greater accuracy may be ensured.Financial Analysis & Leverages SAMPLING:There are two ways in which the required information may be obtained. METHODOLOGY:  It has also been assumed that the information obtained from the respondents were true and authentic. money and time required for carrying out the enumeration will generally be more. They are  Complete enumeration survey  Sampling technique Here the study is based on complete enumeration method. However the effort.

1Month LIMITATIONS OF THE STUDY ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 36 . books. is also studied to made presentation fair & adequate techniques of financial analysis were made use off.e. PLAN OF ANALYSIS The data edited from the company financial statements in respect of over all products statements or analysis of respective year’s . etc.Financial Analysis & Leverages The study is based on both primary data & secondary data..For better analysis profit is computed by using leverages & financial analysis methods Further impact of variable cost. REFERENCE PERIOD: The reference period of this study was 30 Days i. fixed cost on profit. Primary data It was collected from over all products financial statements as per the respective years. personal discussion with executives in the company. Secondary data It was collected from company annual reports.

all the ratios could not be calculated. • Discussion about the project could be conducted only with a few officials due to time constraints face by them. • Time allotted by the company for the study was very short with in which collection of all the information was not possible. only few of them were taken in to account. • The study was done only for the past four years only. • As this study is related to the financial aspects the union could not revel all the information. some data were confidential. • Constraints of time due to busy schedule of organizational Personnel. but it does not give complete and total accuracy of findings. • Analysis and interpretation of the report is purely based on the manual provided by the finance department.Financial Analysis & Leverages • The study no doubt with relation to objective. CHAPTER SCHEME The study report will be presented in 5 chapters as indicated below: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 37 . • It is based on monetary information only. • Due to time constraints. • It is only the study of interim reports.

Limitations of the study & chapter scheme Chapter-3 Profile of the Company: It deals with the Company Background & details. operational definitions of the concept. Source of Data collection & the Methodology. Chapter-2 Research Design: It deals with design of the study. Title of the project. Chapter-4 Analysis & Interpretation of Data: It deals with the analysis & interpretation of the financial data collected from the Company. Statement of the problem. Objectives & Scope of the study. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 38 .Financial Analysis & Leverages Chapter-1 Introduction: It deals with theoretical back ground of the study.

.Financial Analysis & Leverages Chapter-5 Summary of Findings & Conclusions: It presents the summary of all findings & Conclusions Chapter-6 Recommendations & Suggestions It helps to take out some unwanted information’s by giving suggestions. Chapter7 Appendices & Annexures It is a copy of Balance Sheet of a Company.. CHAPTER-3 COMPANY PROFILE  INCEPTION: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 39 . web sites and the text books etc. Chapter-8 Bibliography It is the reference made from Internets.

56.774 kg. Total geographical area of Kolar district is 8.Financial Analysis & Leverages Dairy development activity in the district was initiated during the year 1975 under IDA assistance as a part of Kolar Milk Union Limited (KOMUL). At present the average Milk procurement per society is 447 kg per day with a minimum price paid per kg of Milk is Rs. It ranks second in the state as far as Milk procurement is concerned and first as far as the functional MPCS is concerned.89 lakhs and an average daily procurement of about 6. Total cattle population in the Milk-shed area is about 4.200sq km with 2889 inhabited village.954 kg/day. 00. Operation of the Milk union consists of all the eleven Taluks of Kolar district. 36. 84.654 that includes 1. Of milk Today with a total number of 1497 functional Milk producers co-operative Societies (MPCS) a total membership of 2. Subsequently the district was bifurcated for the operational area of KOMUL to form a separate Milk union with effect from 01-04-1987.58/TYPE: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 40 . The average daily procurement of the union was 1. Average rainfall in the area is about 750mm. 60.000 crossbreed cattle. Initially the union started its function with a total number of 460 dairy co-operative societies at the time of bifurcation.8.000. and the total population averaging is 26.

50. the dairy is manufacturing Butter.Financial Analysis & Leverages The union has a Milk processing plant at Kolar with handling the capacity of 2. Recently it has entered Chintamani market also selling nearly 10. and “Nandini Smart” while all other products are sold under the brand name of “Nandini”.  Chintamani  Gowribidanur  Sadli With handling capacity of one lakh LPD at Kolar. UHT Milk is being sold under the brand name “Nandini”. Ghee. Peda. Masala Butter Milk. Curd. “Good Life”. The union started marketing of liquid Milk in polythene sachets in entire Kolar district and in a part of Bangalore city since 1994. UHT Milk in addition to pasteurized toned Milk and full cream Milk.000 liters per day (LPD) and has three chilling centers at. the member producers and their Dairy Co-operative Societies (DCS) are the vital constituents of the Union and their progress is the ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 41 . Cheese.000 LPD NATURE: DCS Organizations.

the first director of Dairy Research. Until the year 1940. Hence the maximum importance has been given to the development and the progress achieved in various activities.Financial Analysis & Leverages judging yardstick on the efficiency of the Union’s operation. the Dairy Industry had begun to grow at a rapid pace. W. Within a span of four decades considerable research had been conducted at the National Dairy Research Institute and other places on indigenous dairy products. is the fruit of these efforts. The credit for the first publication on the subject goes to Dr. Davis. there was very little published information available about the method of preparation and use of these products. There have been tremendous efforts put in by the various organizations to assure good quality milk to the people and the saying “All that is white is pure milk” came in to existence. BOARD OF DIRECTORS ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 42 . B. Since then.

V. Krishnappa Sir.manjunatha Reddy DESIGNATION President Director Director Director Director Director Director Director Director Director Director PLACE Mulbagal chikkabalapur Gowribidanur Chintamani Shidlagatta Bangarpet Srinivaspur Gudibande kolar Malur Bageplli ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 43 .C.N. Nagaraj Sir.k.K.Ramesh Sir.K.Munivenkatappa Sir.Jayasihmha Krishna Sir. 1 2 3 4 5 6 7 8 9 10 11 NAM E Sir.N.T.k.R.K Ramaya Sir.Ashwathareddy Sir. Rajgopal Sir.Gudiappa Sir. Nagaraj Sir.Financial Analysis & Leverages NO.S.

Financial Analysis & Leverages ORGANIZATION CHART ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 44 .

Financial Analysis & Leverages ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 45 .

Financial Analysis & Leverages BUSINESS OPERATIONS OF KOMAL Milk shed area of KOMUL ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 46 .

5crores. This is available in 500ml. At present Cheddar Cheese is produced from Cow Milk and ripened to various lengths of Time will be blended and processed to obtain Processed Cheese. It is Available in 500 ml and 1-liter packs.3. It is Available in 500 ml and 1-liter packs. Full Cream Milk: This pure milk Containing 6% fat and 9% SNF. It is Rich in Fat. 1 liter and 5 liter packets. On an average 25 Kg Peda is Produced and sold in units of 250gms box. Each box contains10 pedas weighting 25 gm each. HOMOGENIZED MILK: This Milk is good in quality which gives you more cups of tea or coffee and is easily digestible. Cheese: Cheese plant was started in the Union in 1997 at a cost of Rs. Peda: Peda is sweetened heat desiccated Product obtained from milk. 4. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 47 . is Nandini Toned milk.Financial Analysis & Leverages PRODUCT PROFILE: 1. Toned Milk: Karnataka’s most favorite Milk. 3. ideal for preparing homemade sweets and savories. A rich Creamer and tastier milk. Pure milk containing of 3.5% SNF. Proteins. 2.0% fat and 8. Lactose and minerals especially Iron content.

GHEE: ‘Nandini’ ghee is made from pure butter. FLUID MILK: Currently two types of HTST pasteurized fluid Milk is processed and packed. Both are packed in the units of ½ Later and 1 Later Fluid Milk is sold in bulk to other dairies both inside and outside the state. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 48 . Shelf life of 6 months at ambient temperature. Any preparations made from this will be a delicious treat.5% SNF (Solids Non Fat) and full cream Milk with 6% fat and 9% SNF. They are toned Milk with 3% fat and 8. 500ml. 1-liter sachets. 200gms and 500gms cartons both salted and unsalted. It is fresh and pure and have delicious flavor.Financial Analysis & Leverages CURDS: ‘Nandini’ curds are made out of pure Milk. BUTTER: Rich smooth and delicious. It is thick and delicious. ‘Nandini’ butter is made out of fresh pasteurized Milk cream. It is available in 200gms and 500gms packets. giving all the goodness of homemade curds. This is available in 200ml. 5-liter tins and 15kg tins. Hygienically manufactured and packed in a special pack to retain the goodness of pure ghee. It is available in 100gms (salted).

“less than one defect out of ten lakhs products”. The concept of UHT milk is absolute i. The packing material used for UHT Milk packing consists of 6 layers consisting of polythene.6% fat and 8. The composition of the milks is more nutritious and is as below. water. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 49 . on an average 25. bacteria free besides retaining the nutritional quality of milk. Nandini Smart being low fat products good for health conscious people.e.e.000 of both variety of Milk is being sold per day. During the process.Financial Analysis & Leverages UHT MILK: It refers to ultra high temperature heat-treated Milk. Raw milk is used for UHT processing to get good quality end products. light and bacteria there by keeping the Milk well 60 level quality i. has been achieved in UHT Milk due to good quality of initial raw Milk. foil and paper which prevents the center of air. Both the milk can be stored for at least 45 days at room temperature. milk is exposed to a temperature of 137ºc for 4 sec and immediately cooled a room temperature packing it aseptically.5% SNF and another one is “NANDINI smart” with 1. It needs no boiling before drinking. aluminum.5% fat and 9% SNF. At present two types of UHT Milk are being produced one “Nandini Good Life” with 3.

Per day in 250ml sachets.M.F) ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 50 .5 % MASALA BUTTERMILK: Masala buttermilk is manufactured and sold in the summer season.6 Life % Nandini Smart 1. The Milk used for “Mastidhai” preparation consists of 4.1% 10.75% Lactose 4.5% Total Solids 12.95% Proteins 10. MASTI DHAI: Recently Kolar dairy was taken up the production of “Masti-dhai” in polythene cups of units of 200gms and 400gms. On an average the selling mounts to about 1000lts.5% Nandini Good 3. the only period during which it gets demand. especially from month of March to July. 7% of fat and 11% of SNF added with lactic stator culture.5% 89.Financial Analysis & Leverages Constituters Fat Minerals 3.3% 4. This product is being marketed by Gujarat Co-operative Milk Marketing Federation (G.M.3% Water 87.7% 0.C.5% 3.

Dharwad and Dempo dairies belonging to K. Bihar Milk federation. Mega Dairy has a capacity it process 7 lakh liters of Milk per day.Financial Analysis & Leverages SLIM MILK POWDER: Excess Milk obtained during flush season is converted into SLIM Milk powder at other product dairies as Mandya. The Mega Dairy has the latest “State-of-the-Art” ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 51 . its prior reliance on manual operations made it difficult to keep up with surging demand. Although KOMUL had set high standards for its products and customer services.70crores obtained as a term loan from National Dairy Development Board. Annually about 1000 tons of SMP is produced and sold to other dairies in Karnataka. Additionally.F and packed in bulk sachets of 25kgs. Energy and power was more effectively optimized and controlled and all plant equipment was integrated. Delhi Mother Dairy and others the remaining is used for reconstitution during lean. Komul looked towards an automated system that would allow it to achieve consistent quality parameters for each product. This Dairy has been built by investing Rs. In designing the “Mega Dairy”.35.M. employees were given training to use the new automated systems and valuable management information were collected at the main server and used for marketing and evaluations.

Financial Analysis & Leverages technological facilities in dairy processing and the Union has the ability to manufacture Milk and milk products to world-class standards. CHEESE  GOOD LIFE and other products ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 52 . at a higher quality and with a Longer shelf life. KOMUL product range: The products produced by KOMUL are  MILK  CURD  BUTTER Milk  PEDA  GHEE. Milk and Milk products now reaches the market faster. This is sharp contrast to its previous reliance on manual systems that led to time lags in each production stage. ultimately consumers are at the beneficial end.

56 Lakhs 9.000 Kg’s PD 1.000 Kg’s PD 32 292 7 15.97 ores COMPETITORS: There are 125 competitors form private factories.Financial Analysis & Leverages MARKET SHARE: BRIEF OVERVIEW OF “KOMUL PROCUREMENT & INPUTS Inhabited Villages Milk producer Members Dairy Co-operative Societies Milk Procurement Routes Artificial Insemination Centers PROCESSING PLANTS Kolar Dairy Gowribhidanur Chilling center Sadil Chintamani MARKETING & SALES Number of distribution routes Agents Milk Parlors Every day Sachet milk sales FINANCE Total Share Capital Annual Turnover 2930 288751 1497 105 1475 2.000 Kg’s PD 1. The main are: • • • • • HERITAGE GOMATA SHRUTHI SWASTIC GOLD FIELF 53 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE .00.000 Kg’s PD 1.12 Cores 271.00.00.00.

Financial Analysis & Leverages • • • • DIARY PLUS NILGIRIS AROKYA DODLA etc. FUNCTIONAL CHART: FUNCTIONAL CHART BOARD DEPARTMENTS ENGINEERIN G FINAN CE R& DD D MARKETIN G ADMINISTRATI ON HR D ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE PURCHAS SALE 54 ..

W.Financial Analysis & Leverages GROWTH & DEVELOPMENT OF THE INDUSTRY: Until the year 1940. The credit for the first publication on the subject goes to Dr. the first director of Dairy ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 55 . there was very little published information available about the method of preparation and use of these products. Davis. B.

Since then. the Dairy Industry had begun to grow at a rapid pace.Financial Analysis & Leverages Research. Within a span of four decades considerable research had been conducted at the National Dairy Research Institute and other places on indigenous dairy products. There have been tremendous efforts put in by the various organizations to assure good quality milk to the people and the saying “All that is white is pure milk” came in to existence CHAPTER 4 DATA ANALYSIS & INTERPRETATION TABLE 1: SHOWING OPERATING LEVERAGES ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 56 .

050 1.Financial Analysis & Leverages Years 2006-07 2007-08 2008-09 2009-10 Operating leverages 1. So we can say that there is a gradually increased in leverages when compared to base year 2006-07.045 1.050 in the year 2008 & 1.072.056 in the year 2009 & in 2010 it is 1.056 1.072 ANALYSIS: From the above table we can observe that operating leverage is 1. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 57 .045 in the year 2007 & it has been increased to 1.

045 1.08 Interpretation: So we can say that there is a gradually increased in leverages when compared to base year 2005-06.06 1.05 2006-07 1.04 1. TABLE 2: TABLE SHOWING FINANCIAL LEVERAGE ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 58 .03 1.072 2008-09 1.05 1.056 Series1 2007-08 1.Financial Analysis & Leverages Graph.07 1.1: SHOWING OPERATING LEVERAGES 2009-10 1.

& it has been decreased to 1.007 in the year 2008 & to 1.Financial Analysis & Leverages Year 2006-07 2007-08 2008-09 2009-10 Financial leverage 1.006 in the year 2009 & in 2010 it is again decreased to 1.002 Analysis: From the above table we can observe that the financial leverage is 1. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 59 .013 In the year 2007.007 1.002.006 1. So we can say that there is gradual decreased in leverages when compared to the base year 2007.013 1.

008 1.004 1.014 1.996 1.Financial Analysis & Leverages Graph -2: SHOWING FINANCIAL LEVERAGE 1.002 1 0.007 1.998 0. we can say that there is gradual decreased in leverages when compared to the base year 2007.012 1.01 1.002 2008-09 2009-10 2006-07 2007-08 2008-09 2009-10 Interpretation: Thus.006 2006-07 2007-08 1.013 1. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 60 .006 1.

24 times in the year 2008 & decreased to 3.Financial Analysis & Leverages TABLE 3: TABLE SHOWING RETURN ON INVESTMENT LEVERAGE Year Return on investment 2006-07 3.537 2007-08 4.26.537 in the year 2007 & it has been increased to 4.26 Analysis: From the above table we can observe that the return on investment leverage is 3.24 2008-09 3.23 2009-10 6. So ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 61 .23 in the year 2009 & in the year 2010 again increased to 6.

26 2006-07 2007-08 2008-09 2009-10 2009-10 Interpretation Hence. Graph-3: SHOWING RETURN ON INVESTMENT LEVERAGE 7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 3.24 3.Financial Analysis & Leverages we can say that there is gradual increase & decrease when compared to the base year 2006-2007. we can say that there is gradual increased & decreased when compared to the base year 2005-2006 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 62 .537 4.23 6.

0575 in the year 2007 & it has been decreased to 1.Financial Analysis & Leverages TABLE 4: TABLE SHOWING COMBINED LEVERAGE Years 2006-2007 2007-2008 2008-2009 2009-10 Combined leverage 1.0698 Analysis: From the above table we can observe that the combined leverage is 1.0563 1.0613 1.0575 1.0563 times in the year 2008 & increased to ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 63 .

0698 1. So we can say that there are gradual fluctuations in the combined leverages.0563 2007-2008 2008-2009 2009-10 2006-2007 2007-2008 2008-2009 2009-10 Interpretation ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 64 .045 2006-2007 1.0613 1.0613 in the year 2009 and in 2010 it is almost constant.05 1.07 1.06 1.065 1. Graph-4: SHOWING COMBINED LEVERAGE 1.Financial Analysis & Leverages 1.055 1.0575 1.

0613 in the year 2009 and in the year 2010 it was 1.98 324.Financial Analysis & Leverages From the above graph we can observe that the combined leverage is 1. 2006-07 2007-08 2008-09 2009-10 91327700 117448400 219176400 281193700 Percentage 100 128.0575 in the year 2007 & it has been decreased to 1.0698.6 239.0563 times in the year 2008 & to 1. TABLE 5: SHOWING CHANGES IN THE SHARE CAPITAL Years Amt.78 Analysis: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 65 . So we can say that there is more fluctuations when compared to the base year 2006-2007.

6 2007-08 2008-09 2009-10 239.6% in the year 2008 & 239.78 350 300 250 200 150 100 50 0 2006-07 2007-08 2008-09 2009-10 100 2006-07 128.98 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 66 .98% in the year 2009 and in the year 2010 324. TABLE 5: SHOWING CHANGES IN THE SHARE CAPITAL 324.Financial Analysis & Leverages From the above table we can observe that the percentage of share capital is 100 % in the year 2007 & it has been increased to 128. So we can say that there is a gradually increased in the share capital when compared to base year 2006-07.78%.

Financial Analysis & Leverages Interpretation: Thus. TABLE 6: CHANGES IN THE RESERVES & SURPLUS Years 2006-07 Amt. we can say that there is a gradually increased in the share capital when compared to base year 2006-07. 101111251 Percentage 100 2007-08 101556505 101 2008-09 117137541 116 2009-10 114696482 113 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 67 .

Graph.Financial Analysis & Leverages Analysis: From the above table we can observe that the percentage of Reserves & surplus is 100 % in the year 2007 & it has been increased to 101% in the year 2008 & increased to 116% in the year 2009 & to 113% in the year 2010.6: CHANGES IN THE RESERVES & SURPLUS ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 68 . So we can say that there are a more fluctuations in the Reserves & surplus when compared to base year 2006-07.

Financial Analysis & Leverages 120 115 110 105 100 95 90 100 101 116 113 Series1 2006-07 2007-08 2008-09 2009-10 Interpretation: From the above chart we can say that there is a more fluctuations in the Reserves & surplus when compared to base year 2006-07. TABLE -7: SHOWING CHANGES IN THE LOAN ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 69 .

Financial Analysis & Leverages Years 2006-07 Amt. 217181741 Percentage 100 2007-08 189293306 87 2008-09 260394944 120 2009-10 299710803 138 Analysis: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 70 .

Financial Analysis & Leverages From the above table we can observe that the percentage of loans is 100 % in the year 2007 & it has been decreased to 87% in the year 2008 & increased to 120% in the year 2009 and to 138% in the year 2010.7: SHOWING CHANGES IN THE LOANS 160 140 120 100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 120 100 87 2006-07 2007-08 2008-09 2009-10 138 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 71 . So we can say that there are a more fluctuations in the loans compared to base year 2006-07. Graph.

Financial Analysis & Leverages Interpretation: So we can say that there are a more fluctuations in the loans compared to base year 2006-07 TABLE. 17417221 15515275 18113910 14531709 Percentage 100 89 104 84 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 72 .8: SHOWING CHANGES IN THE FIXED ASSETS Years 2006-07 2007-08 2008-09 2009-10 Amt.

Financial Analysis & Leverages Analysis: From the above table we can observe that the percentage of fixed assets is 100 % in the year 2007 & it has been decreased to 89% in the year 2008 & increased to 104% in the year 2009 & again decreased to 84% in the year 2010. Graph-8: SHOWING CHANGES IN THE FIXED ASSETS 84 100 2006-07 2007-08 2008-09 2009-10 104 89 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 73 . So we can say that there is a more fluctuations in the Fixed assets when compared to base year 2006-07.

Financial Analysis & Leverages Interpretation: We can say that there is a more fluctuations in the Fixed assets when compared to base year 2006-07. TABLE 9: SHOWING CHANGES IN THE CURRENT ASSETS ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 74 .

Graph.9: SHOWING CHANGES IN THE CURRENT ASSETS ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 75 .Financial Analysis & Leverages Years Amt. So we can say that there is a gradually reduced current assets in the year 2009-10. 2006-07 2007-08 2008-09 2009-10 345166990 346147409 497244244 429398826 Percentage 100 101 144 124 Analysis: From the above table we can observe that the percentage of Current assets is 100 % in the year 2007 & it has been increased to 101% in the year 2008 & 144% in the year 2009 & decreased in 2010 to 124%.

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 76 .Financial Analysis & Leverages 160 140 120 100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 100 101 144 124 Interpretation: So we can say that there are gradually reduced current assets in the year 2009-10.

Financial Analysis & Leverages TABLE 10: SHOWING CHANGES IN THE CURRENT LIABILITIES Years 2006-07 2007-08 2008-09 2009-10 Amt. So we can say that there is a more fluctuations when compared to base year 2006-07. 144444239 127370442 253148677 192963579 Percentage 100 88 175 134 Analysis: From the above table we can observe that the percentage of current liabilities is 100 % in the year 2007 & it has been decreased to 88% in the year 2008 & 175% in the year 2009 & 134% in 2010. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 77 .

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 78 .Financial Analysis & Leverages Graph-10: SHOWING CHANGES IN THE CURRENT LIABILITIES 200 180 160 140 120 100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 100 88 175 134 2006-07 2007-08 2008-09 2009-10 Interpretation: We can say from the above diagram that there is a more fluctuations when compared to base year 2006-07.

So we can say that there is a gradually increased in the working capital when compared to base year 2006-07.Financial Analysis & Leverages TABLE -11: SHOWING CHANGES IN THE WORKING CAPITAL Years 2006-07 2007-08 2008-09 2009-10 Amt. 200722751 218776966 244095567 236435247 Percentage 100 108 122 118 Analysis: From the above table we can observe that the percentage of Working capital is 100 % in the year 2007 & it has been increased to 108% in the year 2008 & 122% in the year 2009 & 118% in the year 2010. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 79 .

Financial Analysis & Leverages Graph-11: SHOWING CHANGES IN THE WORKING CAPITAL 2009-10 118 2008-09 108 122 2009-10 2008-09 2007-08 2006-07 2007-08 2006-07 0 50 100 100 150 Interpretation: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 80 .

Financial Analysis & Leverages Thus there is a gradually increased in the working capital when compared to base year 2006-07. 3058526160 2987049900 3578197425 3961593839 Percentage 100 98 117 130 Analysis: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 81 . TABLE 12: SHOWING CHANGES IN THE SALES Years 2006-07 2007-08 2008-09 2009-10 Amt.

So we can say that there is a variation in the sales when compared to base year 2006-07.Financial Analysis & Leverages From the above table we can observe that the percentage of sales is 100 % in the year 2007 & it has been decreased to 98% in the year 2008 & 117% in the year 2009 & 130% in 2010. Graph-12: SHOWING CHANGES IN THE SALE 22% 30% 2006-07 2007-08 2008-09 2009-10 22% 26% ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 82 .

TABLE 13: SHOWING CHANGES IN FIXED COST Years 2006-07 2007-08 2008-09 Amt. 135966984 139735298 167089030 Percentage 100 103 123 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 83 .Financial Analysis & Leverages Interpretation: So we can say that there is a variation in the sales when compared to base year 2006-07.

So we can say that there is a gradually increased in the fixed cost when compared to base year 2006-07. Graph-13: SHOWING CHANGES IN FIXED COST ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 84 .Financial Analysis & Leverages 2009-10 184213082 135 Analysis: From the above table we can observe that the percentage of fixed cost is 100 % in the year 2007 & it has been increased to 103% in the year 2008 & 123% in the year 2009 & 135% in 2010.

Financial Analysis & Leverages 2009-10 135 2008-09 103 123 2009-10 2008-09 2007-08 2006-07 2007-08 2006-07 0 50 100 100 150 Interpretation: So we can say that there is a gradually increased in the fixed cost when compared to base year 2006-07 TABLE 14: SHOWING CHANGES IN THE PRIME COST ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 85 .

Financial Analysis & Leverages Years 2006-07 2007-08 2008-09 2009-10 Amt. Graph-14: SHOWING CHANGES IN THE PRIME COST ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 86 . 1783510325 2074798683 2224474539 2354233629 Percentage 100 116 125 132 Analysis: From the above table we can observe that the percentage of Prime cost is 100 % in the year 2007 & it has been increased to 116% in the year 2008 & 125% in the year 2009 & 132% in 2010. So we can say that there is a gradually increased in the prime cost when compared to base year 2006-07.

TABLE 15: SHOWING CHANGES IN THE VARIABLE COST ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 87 .Financial Analysis & Leverages 125 116 100 132 140 120 100 80 60 40 20 0 2006-07 Series1 2007-08 2008-09 2009-10 Interpretation: So we can say that there is a gradually increased in the prime cost when compared to base year 2006-07.

Financial Analysis & Leverages Years 2006-07 2007-08 2008-09 2009-10 Percentage 100 122 162 212 Difference Nil 22 40 50 Analysis: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 88 .

So we can say that there is a gradually increase in the variable cost when compared to base year 2006-07.Financial Analysis & Leverages From the above table we can observe that the percentage of variable cost is 100 % in the year 2007 & it has been increased to 122% in the year 2008 & 162% in the year 2009 & 212% in 2010. Graph-15: SHOWING CHANGES IN THE VARIABLE COST 250 200 150 100 50 0 2006-07 2007-08 S1 2008-09 2009-10 100 122 162 212 2006-07 2007-08 2008-09 2009-10 Interpretation: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 89 .

TABLE 16: SHOWING CHANGES IN THE CONTRIBUTION Years 2006-07 2007.08 2008-09 2009-10 Percentage 100 115 127 148 Difference Nil 15 12 21 Analysis: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 90 .Financial Analysis & Leverages Hence there is a gradually increased in the variable cost when compared to base year 2006-07.

So we can say that there is a more increase when compared to base year 2006-07. Graph-16: SHOWING CHANGES IN THE CONTRIBUTION 20% 31% 2006-07 2007.08 2008-09 23% 26% 2009-10 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 91 .Financial Analysis & Leverages From the above table we can observe that the percentage of contribution is 100 % in the year 2007 & it has been increased to 115% in the year 2008 & 127% in the year 2009 & 148% in 2010.

Financial Analysis & Leverages Interpretation: So we can say that there is a more increase when compared to base year 2006-07. CHAPTER -5 SUMMARY OF FINDINGS & CONCLUSIONS Findings  From this table we can observe that operating leverages of KOMUL is in increasing trend in the year 2006-07 when compare to the other three years ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 92 .

 From this table we can observe that the combined leverage of KOMUL are having more fluctuations are due to gradual increasing trend in operating leverage & gradual decrease in trend in financial leverage. In this table we can observe that there is increased in the share capital in the all 4 years so we can say that the amt. in the year 2006-07.  From the above table we can observe that reserves & surplus of KOMUL is having slight fluctuations due to decreasing in profit ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 93 .  From this table we can observe that there was more fluctuations in the return on investment leverage .i.  From this table we can observe that the changes in the share capital at KOMUL.e.Financial Analysis & Leverages  From this table we can observe that the financial leverage of KOMUL are in gradual decreasing trend when compared to the other three years so we can say that the financial risk taken by KOMUL are decreasing year by year. collected from the public through shares as been increased.

CONCLUSION From the study conducted by me a study on financial &leverage analysis.Financial Analysis & Leverages  The Current assets of KOMUL is also having more fluctuations that is it has been increased extensively by in the year 2009 -10 this because of various credit policies of KOMUL in the year  There are fluctuations in the liabilities over the four years.  Usually the fixed cost should remain constant. their &liabilities in the balance sheet. But here it has not happened like that so it is a bad sign to the company.  The sales volume is increasing year by year. way of classification of assets classification of cost particulars their method of costing even I came to know the risks taken by Komul both financially &technically by calculating various types of leverages.  The working capital in the has been increased slightly due to increase in the risks taken by the company. I came to know the performance of Komul. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 94 .  There is a gradual increase in the prime cost.

Financial Analysis & Leverages So thus project is concluded with the composition of performance of Komul by taking the classification in the items of balance sheet.I have identified several differences in the performance of Komul and also given some suggestions to overcome those differences and problems. CHAPTER-6 RECOMMENDATIONS AND SUGGESTIONS. progress reports for 3 accounting years along with this . SUGGESTIONS: ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 95 . profit and loss account trading account cost statements.

The Komul as to continue to maintained the same rate of financial leverage. To maintain good rate of leverages.  The ROI of KOMUL in the year 2009-10 is better than other two years so Komul as to maintain the same leverages or further it should try to get more returns on investment in the fore coming years. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 96 .  Since the financial leverage are in decreasing trend so we can say that then financial risk taken by KOMUL are decreasing which is a Good sign to the company.  Fluctuations are good sign to the company because the risk is taking after knowing the competition in the market so KOMUL has to maintain the same method of combined leverage.Financial Analysis & Leverages  Since the operating leverages are increasing trend when compare to the other three years it is a good sign to the company & should maintain operating leverages.

 The fluctuations in the fixed assets are not a good signed but here KOMUL has reduced investments of fixed assets in the year 2006-07.Financial Analysis & Leverages  Since the share capital is increasing trend . It should try to avoid fluctuations in the maintaining the reserves &surplus by earring more profits.It is a good sign to the company &it should maintain the same. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 97 . Even it should try to further attract more investment from the public  The KOMUL has to maintain more reserves &surplus in order to meet UN -certain contingencies. Mainly because reduction on fixed assets in the year 2006-07 mainly because the reduction in financial risk taken by KOMUL due to heavy competition this method of reducing the financial after analyzing comp0etation is a good for a competition to survive in this competitive world. Mainly because reduction on fixed assets in the year 2006-07 mainly because the reduction in financial risk taken by KOMUL due to heavy competition this method of reducing the financial after analyzing comp0etation is a good for a competition to survive in this competitive world.  The fluctuations in the fixed assets are not a good signed but here KOMUL has reduced investments of fixed assets in the year 2006-07.

 The increase in working capital is good signed by the company as. it indicates the risk taken by the company therefore KOMUL has to maintain same. So after analyzing the advantages and disadvantages of both credit policies to it has balance in the year 2007 between these two methods.Financial Analysis & Leverages  Since the KOMUL has maintain liberal credit policy in the year 2007 with attract more customer and increases it sales but cash inflows cannot been collected immediately this may also arises due to increase in bad debts also in the year 2007 it has maintained rigid policies it can be collected CIF immediately but it results in decrease in sales and also decrease in the year 2007 bad debts. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 98 .  Decrease in sales is not a good signed to the company so the company has to adopt aggressive sales policy through sales promotion activity to increase sales as well as earning capacity.

 In order to increase control the company has to reduce the prime cost and other variable cost not only the company should reduce the casts in the other hand.  From the analysis I came to know that most of the expenses have been decreasing when compared to the previous years or year by year. GENERAL SUGGESTIONS  In Komul they are not even able to find out steam expenses for a particular production units of products.Financial Analysis & Leverages  The increase in prime cost and decrease in sales is not a good Sign so the company has to adopt cost control technique .  The company should maintain the fixed cost at a constant rate and the it should not variable from one year to another year.to reduce the cost. Since the steam is common to all in the production units and they are approximately allocating steam expenses for finding out of the cost of the products. And it has been increased the sales. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 99 .

Financial Analysis & Leverages  It is found that Komul is not following certain cost control techniques.  Responsibility accounting system should be allowed in Komul as it personalizes control reports by accumulating and reporting cost & revenue information according to defined responsibility areas within a company.  Even they are not fallowing cost reduction techniques. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 100 .  They should use certain technical devices in order to know the steam expenses for a particular production unit from this they can arrive at correct steam cost for a particular production department.  Komul should follow certain cost control techniques which helps in formulation of standards & budgets that incorporate objectives and goals to be achieved & also helps in formulation of corrective measures to eliminate & reduce unforcerable variables.  Komul is also not fallowing responsibility accounting system.

The solvency position of the company is acceptable to certain extant. and improved standards of quality finding other means to reduce the costs of products.Financial Analysis & Leverages  Komul should also fallow cost production techniques which helps in eliminating waste improving operations. CHAPTER-7 APPENDICES AND ANNEXURES ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 101 .  From the above study we can conclude that financial position of the company in good to certain extant. search for cheaper materials. The liquidation position is good. increasing productivity.

17 2.58 280 0.88 2.21 25 2.87 15 2.06.16 669 165.11.5 01 5.3 24 5. s Lak hs Milk Kgs .22 920 308. Daily average Procurement/DCS Procurement Transportation Cost/ Kg.34 21 2. s Lak hs 91-92 551 511 0.16 344 0.93 28 2.53 305 0.72 285 0. Price Rs.39. DCS In Profit Profit Amount DCS in Loss Loss Amount ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 102 .81 14 1.44 92-93 667 624 1.21 786 182.64.14 308 0.80 2.12 8 0.60. s Lak hs No.9 39 3.19 827 282.92.19 7 3.45 256 0.65 2.8 66 3. Milk Kgs .75. s No.48 275 0.04 93-94 724 696 1.3 24 4.54 285 0.29 98-99 968 943 1.09.15 2.87 1.71 2.21 900 285.03 1.14 609 160. Rs.91 95-96 820 807 1.19 732 161.5 06 5.03 23 3.0 80 3.65 97-98 932 915 1.Financial Analysis & Leverages AN OVER VIEW OF THE STATISTICS RELATED TO PROCUREMENT ACTIVITIES Years Particulars DCS Registered DCS Functional Members Enrolled Daily average Uni t No.13 96-97 861 841 1.20 15 2.66 94-95 781 760 1. No.16 Procurement Procurement payable per Kg.13 503 132.

Financial Analysis & Leverages
Daily Average Liquid Litr es Lak hs Date of completion of Audit 16-0991 31-0793 20-0194 19-0894 11-0995 30-1295 7.64 14.74 3.64 9.55 11.43 3.80 165.82 20-0298 17,220 152.30 27-0498

milk sales Union’s Net Profit/Loss

Years Particulars DCS Registered DCS Functional Members Enrolled Daily average Uni t No. s No. s Lak hs Milk Kgs . Price Rs. Milk Kgs . 103 99-00 1039 1013 1.96 3,16,0 19 6.66 312 00-01 1150 1105 2.10 3,65,1 50 7.56 330 01-02 1220 1168 2.16 3,65,6 17 7.88 313 02-03 1264 1199 2.22 3,94,9 98 8.25 329 03-04 1270 1199 2.27 4,63,1 03 8.25 386 04-05 1322 1246 2.56 4,97,1 28 8.15 399 06-07 1389 1303 2.61 5,38,42 7 7.89 413 07-08 1418 1346 2.65 5,54,3 67 8.48 411

Procurement Procurement payable per Kg. Daily average Procurement/DCS

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages
Procurement Transportation Cost/ Kg. DCS In Profit Profit Amount DCS in Loss Loss Amount Daily Average Rs. No. s Lak hs No. s Lak hs Liquid Litr es Lak hs Date of completion of Audit 13-1299 26/08/ 00 23/09/ 00 23/09/ 00 14/05/ 01 10/09/ 01 27/11/0 2 0.19 987 394.09 26 5.51 39,636 67.41 0.20 10.76 453.43 29 6.24 54,267 117.41 0.24 11.42 493.36 26 5.16 68,710 158.13 0.25 1175 910.73 24 4.27 76,686 114.87 0.24 1171 600.90 28 7.60 80,429 21.96 0.23 1227 681.93 19 18.83 83,528 54.76 0.23 1277 750.28 26 5.91 90,867 45.22 0.22 1124 460.51 22 11.42 82,470 122.15 -

milk sales Union’s Net Profit/Loss

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

104

Financial Analysis & Leverages

AN OVER VIEW OF THE STATISTICS RELATED TO TECHNICAL INPUT ACTIVITIES

S l. N o . 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 Emergency Attended Cost/Case Cases No .s in Rs. Particulars Un it 9493-94 95 95-96 97 96-

Years

97-98

98-99

99-00

00-01

Emergency Visit Animal Health No Camps Conducted .s Cost/Case in Animal Rs. Health Camps Total single AI No

-

-

-

167

215 63,66 2 -

291 78,5 81 -

332 1,01, 491 -

335 98,7 99 -

352 1,05, 920 -

344 1,13, 662 -

341 1,18, 235 -

355 1,12,7 34 38295 4

Centers .s AI done/Single AI No Center Total Cluster .s AI No

Centers .s AI Done/Cluster AI No Centeres .s

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

105

.250 4.42 7 3.726 3.s Theileriasis (T) Do Vaccination Done ses Villages Covered No Under T.995 4.t on 3.78 9 5. Vaccn. Vaccn.068 2.726 4. Particulars Uni t 01-02 02-03 03-04 Years 04-05 05-06 06-07 07-08 02 ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 106 .s M.718 Sl .s Brucellosis (B) Do Vaccination Done ses Villages covered No Under B. . N o.Financial Analysis & Leverages 0 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 FMD done Villages Vaccination Do ses Covered No Under FMD Vaccn. .s Sample Analysed in No ADDL Cattlefeed Sold .

26. 49406 53006 60021 70260 54 Attended s Cost/Case in Emergency Rs. Brucellosis s (B) Dos - Vaccination Done es Villages covered Under No. B. Theileriasis s (T) Dos Vaccination Done es Villages Covered Under No. s ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 107 . s Dos Centeres FMD Vaccination done es Villages Covered Under No. 339 1.4 21 36505 383 12449 8 53319 1 387 14332 7 44995 4 390 15061 6 45100 0 280 307 - Health Camps Total single AI Centers AI done/Single 3 s AI No. No. Visit Animal Health Camps No.Financial Analysis & Leverages 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2 1 3 1 4 Emergency Cases No.26. s No. Vaccn.5 33 31971 0 372 1. Vaccn. FMD Vaccn. T.2 69 33073 6 369 1. Conducted Cost/Case in s Animal Rs.23. 10 Center Total Cluster AI Centers AI Done/Cluster s AI No.17.7 37 378 1.

586 9.Financial Analysis & Leverages 1 5 1 6 Sample Analysed in No.t on 4.795 5. s M.087 962 15.956 18.698 14.920 6.455 9 ADDL Cattlefeed Sold 9. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 108 .

Aswathappa Financial management Business Finance - R. ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 109 .Financial Analysis & Leverages CHAPTER-8 BIBLIOGRAPHY BOOKS: Business research methodology K.K.Jain & kulkerni. Reddy & Appaniah.

Raman.KOMUL. B S Raman KOMUL Annual report KOMUL progress report Website WWW.S.gupta.K.COM ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 110 ..Financial Analysis & Leverages Financial accounting Cost & Management accounting Cost & financial analysis - B. Shahsi.