Financial Jersey

Organizational study
1. INTRODUCTION
1.1 Meaning of Organization:
Organization is the foundation upon which the whole structure of management is
built. Organization is related with developing a frame work where the total work is
divided into manageable components in order to facilitate the achievement of
objectives or goals. Thus, organization is the structure or mechanism (machinery) that
enables living things to work together. n a static sense, an organization is a structure
or machinery manned by group of individuals who are working together towards a
common goal. !like "management", the term "organization" has also been used in a
number of ways. #roadly speaking, the term "organization" is used in four different
senses$ as a process, as a structure of relationship, as a group of persons and as a
system.
Importance of organization:
%ignificance of the organization in any institution may be discussed as below
t e n s u r e s optimum use of human resources
t establishes persons with different interest&s skills, knowledge and
viewpoints.
t stimulates creativity
! sound and well conceived organization structure is the source of creative
thinking and initiation of new ideas.
'se of improved technology
! good organization provides for optimum use of technological
improvements.
(o)ordination in the enterprise
n a good organization, the different departments perform their functions in a
closely related manner.
*+ecutive development:
The pattern of an organization structure has strong influence on the
development of e+ecutives.
t ensures cooperation among workers:
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! good organization promotes mutual goodwill and cooperation among
workers also
1.2 Importance of Organisational Stu!
Organizational /unctioning is an important factor for any Organization to achieve the
desired goals and Objectives. This re6uires (o)ordination at all levels to smooth
functioning mportance of organization in order to understand the organization
structure and their functions.
The main purpose of doing the organization study was to study the various
departments of the organization and understand their basic functions, their purpose,
achievements, competitors and the mission and vision of the company and their
progress towards that. !ll general information we get in course is all book knowledge,
on which westerly cannot depend. t is very important to observe the actual working
of an organization and the overall structure of an organization. The
actual professionalism can be studied only through e+perience.
!n organisation is re6uired to fulfil certain goals and some of which include the
following
The manager knows the communication to be sent to other level and what he
reciprocally can e+pect from other .
!n organisation embodies the objectives of the enterprise.
The manager is aware of his right and responsibilities of coordination with
other level.
To know how various departments in an organisation and coordinate the other
departments and to the e+ternal environment.
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1." Scope of t#e stu!
The study focus on the overall structure of the organization. n this study, the
researcher analyzed the overall functioning of the firm and also the financial
performance of the enterprise .The researcher made a moderate attempt to have the
%8OT analysis of the study.
1.$ O%&ecti'es of t#e stu!
a)To understand the organizational structure of the company.
b) To identify the various departments of the company.
c) To find the problems of each department of the company.
d) To undertake the %8OT analysis of the company.
e) To interpret the financial position of the company through the financial statement
analysis .
1.( Data Collection Met#o
)RIM*R+ D*T*
The primary data was collected by observing the various departments of the 'ltra
tech cement ltd and by interacting with various employees in the 'ltratech
cement ltd.
.S,COND*R+ D*T*
The secondary data related to the company pooled from the various sources such as
9 (ompany manuals
9 nternet
9 1anagement books
9 8ebsite
1.- .imitations of t#e stu!
0ifficulty in meeting with all the Top level Officials.
(ertain areas are restricted, so a detailed study is not possible.
Time allotted for the study is insufficient.
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2. INDUSTR+ )RO/I.,
2.1 Origin of t#e Inustr!
0airy is a place where handling of milk and milk products is done and
technology refers to the application of scientific knowledge for practical purposes.
0airy technology has been defined as that branch of dairy science, which deals with
the processing of milk and the manufacture of milk products on an industrial scale.
n developed dairying countries such as the '.%.!., the year 5;<= is seen as the
dividing line between farm and factory)scale production. -arious factors contributed
to this change in these countries, viz. concentration of population in cities where jobs
were plentiful, rapid industrialization, improvement of transportation facilities,
development of machines, etc. whereas the rural areas were identified for milk
production, the urban centre&s were selected for the location of milk processing plants
and product manufacturing factories. These plants and factories were rapidly
e+panded and modernized with improved machinery and e6uipment to secure the
various advantages of large)scale production. .early all the milk in the '.%.!. before
5>== was delivered as raw (natural) milk. Once pasteurization was introduced, it
developed rapidly. 1echanical refrigeration helped in the rapid development of the
factory system of market milk distribution.
n ndia, dairying has been practiced as a rural cottage industry since the remote
past. %emi)commercial dairying started with the establishment of military dairy farms
and co)operative milk unions throughout the country towards the end of the
nineteenth century.
0uring the earlier years, each household in those countries maintained its
?family cow& or secured milk from its neighbor who supplied those living close by. !s
the urban population increased, fewer households could keep a cow for private use.
The high cost of milk production, problems of sanitation etc., restricted the practice@
and gradually the family cow in the city was eliminated and city cattle were all sent
back to the rural areas.
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2radually farmers within easy driving distance began delivering milk
over regular routes in the cities. This was the beginning of the fluid milk)sheds which
surround the large cities of today. 3rior to the 5;<=s most milk was necessarily
produced within a short distance of the place of consumption because of lack of
suitable means of transportation and refrigeration.
The ndian 0airy ndustry has made rapid progress since ndependence.
! large number of modern milk plants and product factories have since been
established. These organized dairies have been successfully engaged in the routine
commercial production of pasteurized bottled milk and various 8estern and ndian
dairy products. 8ith modern knowledge of the protection of milk during
transportation, it became possible to locate dairies where land was less e+pensive and
crops could be grown more economically.
n ndia, the market milk technology may be considered to have
commenced in 5><=, with the functioning of the (entral 0airy of !are 1ilk (olony,
and milk product technology in 5><B with the establishment of !1'C 0airy, !nand.
The industry is still in its infancy and barely 5=D of our total milk production under
goes organized handling.
#eginning in organized milk handling was made in ndia with the establishment
of 1ilitary 0airy /arms.
Eandling of milk in (o)operative 1ilk 'nions established all over the country
on a small scale in the early stages.
Cong distance refrigerated rail)transport of milk from !nand to #ombay since
5>A<
3asteurization and bottling of milk on a large scale for organized distribution
was started at !arey (5><=), (alcutta (Earinghata, 5><>), 0elhi (5><>), 8orli
(5>B5), 1adras (5>B:) etc.
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*stablishment of 1ilk 3lants under the /ive)Fear 3lans for 0airy
0evelopment all over ndia. These were taken up with the dual object of
increasing the national level of milk consumption and ensuing better returns to
the primary milk producer. Their main aim was to produce more, better and
cheaper milk.
ndia&s milk production will continue to grow at about : per cent per annum in
spite of difficulties due to stagnant livestock herd size and shortage of fodder. 0ue to
increasing population, per capita availability of milk will increase by only about 5.<
per cent per annum. /or an economy growing at about B per cent per annum, this
increase in availability will be grossly inade6uate. 3roduction growing at only : per
cent and consumption growing at more than double the rate is obviously going to lead
to a mismatch between demand and supply. This will create opportunities for
international dairy companies.
On one hand, ndia is e+pected to enter the international market with demand
for commodities like skimmed milk powder and butter oil. On the other hand,
growing prosperity and fast growth of organized modern retail and western style fast
food outlets will lead to increased consumption of products like cheese and table
butter.
2.2 0ro1t# of t#e inustr!
0ro1ing 2olumes
The effective milk market is largely confined to urban areas, inhabited by
over 7< per cent of the country"s population. !n estimated <= per cent of the total milk
produced is consumed here. #y the end of the twentieth century, the urban population
is e+pected to increase by more than 5== million to touch :BA million in 7=== a
growth of about A= per cent. The e+pected rise in urban population would be a boon
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to ndian dairying. 3resently, the organized sector both cooperative and private and
the traditional sector cater to this market.
The consumer access has become easier with the information revolution.
The number of households with T- has increased from 7: million in 5>;> to A<
million in 5>><. !bout :A per cent of these households in urban ndia have access to
satellite television channel.
)otential for furt#er gro1t#
Of the three !"s of marketing ) availability, acceptability and affordability,
ndian dairying is already endowed with the first two. 3eople in ndia love to drink
milk. Eence no efforts are needed to make it acceptable.
ts availability is not a limitation either, because of the ample scope for
increasing milk production, given the prevailing low yields from dairy cattle. t leaves
the third vital marketing factor affordability. Eow to make milk affordable for the
large majority with limited purchasing powerG That is essence of the challenge. One
practical way is to pack milk in small 6uantities of 7<= ml or less in polythene
sachets. !lready, the glass bottle for retailing milk has given way to single)use sachets
which are more economical. !nother viable alternative is to sell small 6uantities of
milk powder in mini)sachets, ade6uate for two cups of tea or coffee.
2." Ma&or pla!ers of t#e Inustr!
1r. H. #hasker ,eddy graduated in 0airy Technology from Osmania
'niversity in 5>;: and completed his *+ecutive 1#! programme from
ndian %chool of #usiness ( %# ) I Eyderabad in the year, 7=5:. #eing a
first generation entrepreneur and with hardly any funds at his disposal, he
toiled a lot initially in establishing first private dairy in the state of
!ndhra 3radesh in 5>;B along with his peers.
n the later years, he successfully lead the team in establishing 1ilk
(hilling (enters J 3rocessing (enters across %outhern ndia and steered
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the organization in achieving ,s. K=== millions annual sales as on 1arch,
7=5:. L,ound the (lock 1ilk 3arlorsM and L1obile 1ilk Testing
(entersM, the first of their kind in the modern dairy industry in !.3., are
his brainchild.
1r. 1. 2angadhar, a /ellow 1ember of nstitute of (hartered
!ccountants of ndia ((!), is having more than :: years of e+perience,
post 6ualification, in the fields of /inance, !ccounting, (osting and
1anagement, more especially in the 0airy ndustry. Ee worked for <
years in %angam 0airy as 021 (/inance) and served reputed private
sector companies for < years before joining (03C.
1r.0. (handra %hekher ,eddy is a graduate in 0airy Technology from
Osmania 'niversity. Ee worked as Technical Officer in N%abarkantha
0istrict 1ilk 3roducers 'nion CimitedN, popularly known as %!#!,
0!,F, part of !1'C organization for 5J5O7 years. Eis vast e+perience
in processing of various milk products and e+pertise in technical, plant
maintenance and operations are put to effective use to strengthen the
technical aspects of the company. Ee attended !nuga /oodtec at (ologne,
2ermany ) 8orlds most important trade fair for food and drink
technology.
1r. (. #alraj 2oud hails from Hamareddy 1andal, .izamabad 0istrict,
!.3. and is a first generation entrepreneur. 2raduated from Osmania
'niversity with ,ural ndustrialization as his main elective. Ee
completed C.C# from 1aratwada 'niveristy, .anded. Ee pursued
successfully his 3ost 2raduation with 2eography as specialization from
Osmania 'niversity. Ee was very active in sports, .%% and .(( in
%chool J (ollege. Ee was awarded "(" (ertificate with "!" 2rade in .((.
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Ee had successfully completed the 3arachuting .ational (amp, !gra in
5>;=.
1r.#alram %ingh Fadav is the 3resident J *+ecutive 0irector of 2odrej
!grovet Cimited (2!-C) and is a nominee 0irector on the #oard of
(reamline 0airy 3roducts Cimited. 2!-C entered into a strategic alliance
with (03C in 7==5 with an e6uity stake hold of 7BD.
1r.%.-aradaraj is the (hief /inancial Officer at 2odrej !grovet
Cimited (2!-C) and is a nominee 0irector on the #oard of (reamline
0airy 3roducts Cimited. 2!-C entered into a strategic alliance with
(03C in 7==5 with an e6uity stake hold of 7BD.
1r.%uresh Humar %hetkar has graduated in !griculture. Ee has more than
5< years e+perience in agro based activities and businesses. (ongress 13
from Paheerabad Cok %abha (onstituency. Ee managed Hhandsari %ugar
'nit for : years and coordinated collection of sugarcane from farmers in
B= villages of 1edak 0istrict. Ee commenced -illage 1ilk !ssociations
in 1edak 0istrict and has been instrumental in establishing milk
procurement channel for (03C in the district. Ee is also one of the
founder directors of (03C.
0r. 1ohana ,. -elagapudi is 10 of 1edicine. Ee is a non resident
ndian engaged as physician.
3O*RD O/ DIR,CTORS
%hri H. #hasker ,eddy ) 1anaging 0irector
%hri 1. 2angadhar ) 0irector (/inance)
%hri 0. (handra %hekher ,eddy ) 0irector (Technical)
%hri (. #alraj 2oud ) *+ecutive 0irector
%hri #al ram %ingh Fadav ) *+ecutive 0irector
%hri %. -aradaraj ) .ominee 0irector
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%hri %rinath %hekar ) .ominee 0irector
0r. 1ohana , -elagapudi ) .ominee 0irector
2.$ C#allenges of t#e inustr!
,etention of talented J skilled manpower
1ainating the harmonious relation with the internal Je+ternal stakeholders
ncrease in manufacturing cost due to fuel, power and incoming raw
materials .
!chieving targeted production and dispatch on sustainable basis.
". compan! profile
".1 4istor! of t#e compan!
nineteenth century.
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5>A<
(5>B5), 1adras (5>B:) etc.
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cheaper milk.
butter.
This will throw up opportunities for branded dairy products to enter this
huge market of more than a billion people. Eelping international as well as ndian
companies understand the dairy scenario of ndia from a macro)level perspective is
the prime objective of this study. /acts and statistics, instead of opinions and
impressions, are the key building blocks of this report
3ac5groun
ndia with 5:Amn cows and 57<mn buffaloes has the largest population of
cattle in the world. Total cattle population in the country as on October"== stood at
:5:mn. 1ore than fifty percent of the buffaloes and twenty percent of the cattle in the
world are found in ndia and most of these are milch cows and milch buffaloes.
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ndian dairy sector contributes the large share in agricultural gross domestic
products. 3resently there are around K=,=== village dairy cooperatives across the
country. The co)operative societies are federated into 5K= district milk producers
unions, which is turn has 77)state cooperative dairy
/ederation. 1ilk production gives employment to more than K7mn dairy
farmers. n terms of total production, ndia is the leading producer of milk in the
world followed by '%!. The milk production in 5>>>)== is estimated at K;mn 1T as
compared to KA.<mn 1T in the previous year. This production is e+pected to increase
to ;5mn 1T by 7===)=5. Of this total produce of K;mn cows" milk constitute :Bmn
1T while rest is from other cattle.
8hile world milk production declined by 7 per cent in the last three years,
according to /!O estimates, ndian production has increased by A per cent. The milk
production in ndia accounts for more than 5:D of the total world output and <KD of
total !sia"s production. The top five milk producing nations in the world are ndia
,'%!, ,ussia, 2ermany and /rance.
!lthough milk production has grown at a fast pace during the last three
decades (courtesy$ Operation /lood), milk yield per animal is very low. The main
reasons for the low yield are
)rouction of mil5 in Inia
+ear )rouction in million MT
5>;;);> A;.A
5>;>)>= <5.A
5>>=)>5 <:.K
5>>5)>7 <B.:
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5>>:)>A B5.7
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5>><)>B B<
5>>B)>K B;.<
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7===)=5(T) ;5.=
".2 2alue6 2ision 7 Mission.
2ision
LTo emerge as a Ceader in 0airy /oods with 2lobal 3resence through
#usiness *+cellence and ensuring (ustomer 0elightM
Mission
LTo grow continuously, offering value added 0airy 3roducts and gain
customers& confidence through nnovative 3racticesM
2alues
L8e act with a sense of pride adopting ethical practices and compassionate
approachM.
Integrit!: !cting and taking decisions in a manner that is fair and honest.
/ollowing the highest standards of professionalism and being recognised for doing so.
ntegrity for us means not only financial and intellectual integrity, but encompasses all
other forms as are generally understood.
Commitment: On the foundation of ntegrity, doing all that is needed to
deliver value to all stakeholders. n the process, being accountable for our own actions
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and decisions, those of our team and those in the part of the organisation for which we
are responsible.
)assion : !n energetic, intuitive zeal that arises from emotional engagement
with the organisation that makes work joyful and inspires each one to give his or
her best. ! voluntary, spontaneous and relentless pursuit of goals and objectives with
the highest level of energy and enthusiasm.
"." Nature of t#e 3usiness
The promoters of Creamline Dairy Products, a leading manufacturer of milk
and milk products in South India, aims to raise up to Rs 250 crore y selling a
part of their stake to a foreign strategic partner, people familiar !ith the
de"elopment said#
The money !ill e used to e$pand the company%s manufacturing capacity and
augment its product suite# &Creamline is looking for a strategic partner that
!ill help it in gro!ing its "alue'added product asket# The promoters are open
to induct a foreign partner in the company and are !illing to di"est stake
any!here et!een 2( and 5)*,& said a person re+uesting anonymity#

,our families currently hold -.* stake in Creamline# The remaining 2(* is
/odre0 1gro"et, the largest animal feed manufacturing company in the
country# 1ccording to sources, /odre0 1gro"et is also open to sell a part of its
stake in the company to gi"e the foreign partner a greater control o"er the
functioning of Creamline#

&/odre0 1gro"et has een a partner in Creamline since 2005# 2hether they
!ill pare stake is a matter of discussion and !ill depend on the contours of the
agreement# 3ut all possile options are currently eing e$plored,& said
another person a!are of the de"elopment#
Sources said 4D,C 3ank has een gi"en the mandate to manage the
transaction# This !ill e the pri"ate lender%s second 561 7merger and
ac+uisition8 transaction#&There is a high degree of interest among
multinational corporations to in"est in the Indian dairy sector, !hich has a
reported C1/R 7compound annual gro!th rate8 of )5* in "alue terms for the
last four years# Some of the leading gloal players ha"e sho!n interest in
in"esting in Creamline and the deal is likely to e closed y the end of this
9nancial year,& one of the persons +uoted ao"e said#
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Industry players said total milk production in the country has topped ):0
million metric tonne in 20)2'): making India the !orld%s largest milk
producer# They estimate the country%s milk production to reach )-5 million
metric tonne y 2020#
2hile ;ttar Pradesh !as India%s iggest market for milk production accounting
for )-* of the total milk production in 20)2'):, the three southern states <
1ndhra Pradesh, =arnataka and Tamil >adu < together had 20* share in the
country%s total milk production during the year# Creamline, ased in 1ndhra
Pradesh, has signi9cant presence in these three states#
The total si?e of the dairy market is estimated to e around Rs :#5 lakh crore
in 20)2#
".$ )rouct profile
MI.8
1ilk is regarded as the most nearly perfect single food stuff. Today, milk is
the most important single item of human diet, as it is beneficial at all stages of human
growth literally from cradle to grave due to its high nutritive value. mportance of
milk in diet is mainly due to its contribution of high 6uality protein, its e+ceptional
richness in (alcium and its general supply of pre)formed -itamin ! and of riboflavin
and other members of #7 comple+.

TON,D MI.8 94O., MI.8
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DOU3., TON,D MI.8 S.IM MI.8
One 7== ml glass of milk provides a power)pack of nutrients and contains
the minerals and vitamins as below$
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DOOD4),D*
0oodh peda is a desiccated sweetened product made from fresh milk and
contains A<D milk solids and :<D sugar. t is slightly brownish white in colour and has
coarse grainy structure. The product is hygienically packed. 0oodh peda is a nutritious
product with delicious taste and having a shelf life of K day
There are certain things in life that are sheer delight to the soul and add
meaning to our e+istence. These go beyond the limits of age and are cherished and
adored by everybody. ce creams certainly are among those finer things in life.
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IC, CR,*MS
ce cream is a power pack of nutrients. t is the most palatable source of milk
proteins and a rich source of calcium, phosphorous and other minerals vital in
building strong bones and teeth. ce cream is also an e+cellent source of food energy.
Eaving twice or three times the fat content of milk, and more than half its total solids
being sugar (sucrose and lactose) the energy value of ice cream is very high. That
makes ice cream a very desirable food for growing children and persons who need to
put on weight.
Qersey brand of e+otic ice creams are made of fresh milk based fats and are
brought to you by (ream line 0airy. ! preferred choice of every connoisseur of fine
taste, what really makes the difference is the processes that are adopted at (ream line
to make our products endearing to everybody. 'tmost care is taken to ensure the
highest level of hygiene and superlative efforts are made to create the flavors which
make you to coming back to Qersey again and again.

8a&u 5iss miss 3utterscotc# Cone Casatta
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,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 7=
Ot#er )roucts
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SNO9I,S
%nowies is the retail chain started by the organization to serve pure and
natural milk ice creams and shakes. 1ilk based sweets, snacks and beverages are also
made available in %nowies. %ome of the varieties of ice)creams served at snowies are
given below$
SUND*,
! portion of ice cream over which one or more dressings of syrups,
fruits, nuts or other toppings are poured.
DOU3.,
SUND*,
The same flavor of ice cream and same flavor of topping, like
chocolate ice cream with chocolate topping.
R*IN3O9
ce cream made by mi+ing different flavors with attractive marbled
appearance.
3ON 3ON
This is similar to %undae usually made in a stem glass with fruit at the
bottom and a combination of ice creams on top.
/R*)),
/rozen or partly frozen fruit juices applied to whipped combinations
of ice cream, syrup, fruits and nuts.
)UNC4 ce cream in which fruit juices are reinforced with an alcoholic
beverage.
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".$ Competitors
These are the following dairy products are the major competitors in !ndhra
3radesh.
Southern India
!ndhra 3radesh
A B C D Agri Enterprises (P) Ltd
Amrut Industries Ltd
Andhra Pradesh Dairy Development Cooperative Federation Ltd: Anantapur, Chittoor,
Cuddapah, untur, !ydera"ad, #a$inada, #arimnagar, #hammam, #urnool, %andyal,
%i&ama"ad, 'ngole, (a)ahmundry, *i)aya+ada, *isha$hapatnam, ,arangal
Bangarupalyam Dairy
Bastion Dairy Produ-ts Ltd
Creamline Dairy Produ-ts Ltd
Dodla Dairy Ltd
Durga Dairy Ltd
Esteem Foods Ltd
!eritage Foods (India) Ltd
.yothi Dairy Pvt Ltd
#amdhenu Cheese /pe-ialities Ltd
#avini Dairy Produ-ts Ltd
#oratla Dairy Produ-ts Ltd
La$shmi Dairy
Lotus Cho-olate Company Ltd
0odel Dairy Pvt Ltd
0other Dairy !ydera"ad (APDDCF Ltd)
%ivee Agro Farms Pvt Ltd
%utrine Con1e-tionery Co Ltd
/mith#line Bee-ham Consumer !ealth-are Ltd
/ri odavari Food Produ-ts Pvt Ltd
/ri *yshnavi Foods Pvt Ltd
/teel City Foods Pvt Ltd
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".- Organizational structure
OR0*NI:*TION*. C4*RT

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#oard of 0irectors
1anaging 0irector
0irector
customer
%upport
*+ecutive
0irector
Ruality assurance
1anagement
,epresentative

%*,
0irector
commercia
l
0irector
Operation
.3*#
(apacitors
*ngineering
0epartment
3roduction
1anagement
%ervices
3roduction %ales
1aterial management
%ervices
%ystem %ales and
*+ports
!ccounts 8ork
0epartment
!ccounts
Officer
%ystem
*ngineering)7
ncoming
1aterial stores
/inished 2oods
%tores
$. /unctional epartments
5. /inance department
7. 1arketing department
:. E, department
A. 3roduction department
<. 0istribution department
$.1 /inance epartment
The finance department of a business takes responsibility for organising the financial
and accounting affairs including the preparation and presentation of appropriate
accounts, and the provision of financial information for managers. The main areas
covered by the financial department include$
1.3oo5 5eeping proceures.
Heeping records of the purchases and sales made by a business as well as capital
spending. These records today are typically kept on computer files. #ut we still use
the term ledger entries to refer to the days when all financial transactions were
carefully recorded in thick books (ledgers).
2.Creating a %alance s#eet an profit an loss account.
/inancial statements need to be produced at given time intervals, for e+ample at the
end of each financial year. Trial balances are e+tracted from the ledger entries to
create a #alance %heet showing the assets and liabilities of a business at the year end.
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%ystem
*ngineering)5
n addition, records of purchases and sales are totalled up to create a 3rofit and Coss
(3JC) account.
".)ro'iing management information.
1anagers re6uire ongoing financial information to enable them to make better
decisions. /or e+ample, they will want information about how much it costs to
produce a particular product or service, in order to assess how much to produce and
whether it might be more worthwhile to switch to making an alternative product.
$.Management of 1ages.
The wages section of the finance department will be responsible for calculating the
wages and salaries of employees and organising the collection of income ta+ and
national insurance for the nland ,evenue.
(.Raising of finance.
The finance department will also be responsible for the technical details of how a
business raises finance e.g. through loans, and the repayment of interest on that
finance. n addition it will supervise the payment of dividends to shareholders.
Management accounts
There is an important distinction between management accounts which involves the
provision of information to managers for ongoing decision making, and financial
accounting which is concerned with the preparation of financial statements outlining
the financial health and performance of a company in previous time periods.
Ientification )ro%lem
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n econometrics, the difficulty in regressing an e6uation when too many variables
change. /or e+ample, if a good"s supply changes but demand does not, one can devise
an estimation of the demand at a particular price. Eowever, this is difficult if both
supply and demand change.
$.2 mar5eting epartment
The marketing department has overall responsibility for growing revenue, increasing
market share and contributing to company growth and profitability. n a small
business, the marketing department may just be one person, or it may include a
marketing director or manager plus marketing e+ecutives responsible for functions
such as advertising, publications or events.
%trategy
The senior member of the marketing department takes responsibility for setting
marketing strategy in line with overall company strategy and objectives. The strategy
may be to increase share in a specific market sector, for e+ample, to enter a new
sector, or to open a new channel of distribution, such as the nternet, to reach a wider
geographical market. The marketing department reaches agreement on strategy with
the board or senior management team before planning campaigns in detail.
1arket ,esearch
1arket research is a key responsibility for the marketing department. ,esearch helps
the company identify market opportunities and gain a better understanding of
customer needs. t also helps them understand competitors& strengths and weaknesses
so they can take action to protect business with e+isting customers or win business
from weaker competitors. The department can carry out its own research by studying
industry reports, market data on websites, or by contacting customers and prospects to
survey their needs and attitudes. !lternatively, they can brief a market research firm to
carry out the research.
3roduct 0evelopment
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The marketing department works with nternal or e+ternal product development teams
to develop new products or improve e+isting ones. The department analyzes sales of
e+isting products and identifies gaps in the product range where there may be
opportunities for the company. 1arketing employees provide development teams with
information on customer needs and preferences to help them identify the features or
improvements to incorporate in new products. Cater in the product development
process, the marketing department sets prices and prepares plans to launch the
product.
(ommunications
1arketing departments plan campaigns and develop communications material to
promote products and services to customers and prospects. 0epending on their
available budgets, they may plan advertising campaigns, develop e)mail marketing
programs, create promotional content for the company website, write press releases or
product publications, such as product leaflets, company brochures, product data sheets
or customer newsletters. They may write and design the promotional material if they
have skills within the department or they may appoint advertising agencies or design
firms to produce the work.
%ales %upport
(ooperation between the sales and marketing departments can improve sales
performance and speed up business growth. The marketing department can provide
sales teams with high)6uality leads by running advertisements that include a reply
mechanism, such as a coupon or telephone number, or by encouraging visitors to the
company website to register their details in return for a free newsletter or special
report. 1arketing also prepares presentations for the sales team and supplies them
with stocks of promotional material to give to customers and prospects.
*vents
n some companies, marketing departments are responsible for organizing events,
such as e+hibitions, seminars, sales conferences or customer hospitality events. They
plan the logistics of the event, booking e+hibition booths or meeting facilities, for
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e+ample, and provide event material, such as displays, presentations or handouts.
They also promote e+ternal events to customers and prospects to ensure successful
attendance
$." 4R epartment
! typical Euman ,esource 0epartment is carries out the following functions$

1anpower 3lanning
t involves the planning for the future and finding out how many employees will be
needed in the future by the business and what types of skills manpower
planningshould they possess.
t depends on the following factors
The number of people leaving the job
The projected growth in sales of the business
Technological changes
3roductivity level of the workers

Qob analysis and Qob description
E, 0epartment is also involved in designing the Qob analysis and Qob description for
the prospective vacancies.
! job analysis is the process used to collect information about the duties,
responsibilities, necessary skills, outcomes, and work environment of a particular job.
Qob descriptions are written statements that describe the$
duties,
responsibilities,
most important contributions and outcomes needed from a position,
re6uired 6ualifications of candidates, and
reporting relationship and co)workers of a particular job.

0etermining wages and salaries
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E, 0epartment is also involved in conducting market surveys and determining the
wages and salaries for different position in an organization. These decision may be
taken in consultation with top management and the /inance department.

,ecruitment and %election
One of the most important jobs E, department is to recruit the best people for the
organization. This is of crucial importance as the success of any organization depend
on the 6uality of its workforce. 0etails regarding the recruitment and selection
procedure can be found here.

3erformance !pprasial
Once the employees are recruited , the E, 0epartment has to review their
performance on a regular basis through proper performance appraisals.
3erformance appraisal is the process of obtaining, analyzing and recording
information about the relative worth of an employee. The focus of the performance
appraisal is measuring and improving the actual performance of the employee and
also the future potential of the employee. ts aim is to measure what an employee
does.
On the basis of performance appraisal the E, 0epartment will set up an action plan
for each employee. f the employees needs any training then he provided that.

Training and 0evelopment
E, department is constantly keeping a watch over the employees of the organisation.
n order to improve the efficiency level of the employees they traininghave go
undergo regular trainings and development programmes. !ll trainings and
development needs are carried out by this department. Training might include on the
job or off the job training. /ind more information on training here.

*mployee welfare and motivation
Eappy employees mean a healthy organization. E, 0epartment conducts various
employee welfare activities which might include employees get together, annual staff
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parties etc. E, department also reviews organizational policies and its impact on the
motivation of the employees.

!ddressing employees grievances
E, department is the link between the workers and the management. *mployees
grievances related work environment are usually entertained and resolved by the E,
0epartment.

Cabour management relations
/or the smooth operation of any organization, it is crucial to have good labour
management relations. E, department has to ensure that these labourSunrestrelations
are cordial. n case of any labour)management conflict the E, 0epartment will play a
vital role in bringing both management parties to the negotiation table and resolving
the issue.

mplementing organizational policies
E, 0epartment has to coordinate with line manager and see that the organizational
policies are being implemented in a proper manner. 0isciplinary action can be
initiated against employees who are not following organizational rules and
regulations. !ll these actions are conceived and implemented by the E, department.

0ismissal and redundancy
E, 0epartment has to take firm actions against employees who are not following the
organizational code of conduct, rules and regulations. This can result in the dismissal
of the employee.
%ometimes, an organization may no more re6uire the services of an employee. The
employee may be made redundant. E, 0epartment has to see that organizational and
government regulations are being followed in this process.
$.$ prouction epartment
3roduction is the functional area responsible for turning inputs into finished outputs
through a series of production processes. The 3roduction 1anager is responsible for
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making sure that raw materials are provided and made into finished goods effectively.
Ee or she must make sure that work is carried out smoothly, and must supervise
procedures for making work more efficient and more enjoyable.
/ive production sub)fuctions
n a manufacturing company the production function may be split into five sub)
functions$
5. Theproduction and planning department will set standards and targets for each
section of the production process. The 6uantity and 6uality of products coming off a
production line will be closely monitored. n businesses focusing on lean production,
6uality will be monitored by all employees at every stage of production, rather than at
the end as is the case for businesses using a 6uality control approach.
7. Thepurchasing department will be responsible for providing the materials,
components and e6uipment re6uired to keep the production process running smoothly.
! vital aspect of this role is ensuring stocks arrive on time and to the right 6uality.
:. Thestores department will be responsible for stocking all the necessary tools,
spares, raw materials and e6uipment re6uired to service the manufacturing process.
8here sourcing is unreliable, buffer stocks will need to be kept and the use of
computerised stock control systems helps keep stcoks at a minimal but necessary level
for production to continue unhindered.
A. Thedesign and technical support department will be responsible for researching
new products or modifications to e+isting ones, estimating costs for producing in
different 6uantities and by using different methods. t will also be responsible for the
design and testing of new product processes and product types, together with the
development of prototypes through to the final product. The technical support
department may also be responsible for work study and suggestions as to how
working practices can be improved.
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<. Theworks department will be concerned with the manufacture of products. This
will include the maintenance of the production line and other necessary repairs. The
works department may also have responsibility for 6uality control and inspection.
! key aspect of modern production is ensuring 6uality. The term 6uality means fitness
for purpose i.e. a product, process or service should do e+actly what is e+pected of it.
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! financial statement is a collection of data organized according logical and
consistent accounting procedures. ts purpose is to convey an understanding of some
financial aspects of a business firm. t may show a position at a moment in time, as in
the case of an income statement, thus the term financial statements generally refers to
the two statements, these are$
ncome statement (or) 3rofit and loss account.
3osition statement (or) #alance sheet.
These statements are used to convey to management and other interested
outsiders the profitability and financial position of the firm.
/inancial statements are the outcome of summarizing process of accounting.
n the words of john N.Her, the financial statements provide a summary of the
accounts of a business enterprise, the balance sheet reflecting the asset, liabilities and
capital as on a certain date and the income statement showing the results of operations
during a certain period.
/inancial statements are also called financial reports. n the words of Anthony,
financial statements, essentially, are interim reports, presented annually and reflect a
division of the life of an enterprise onto more or less arbitrary accounting period)
more fre6uently a year.
M,*NIN0 O/ /IN*NCI*. *N*.+SIS:
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The term financial analysis also known as analysis and interpretation of
financial statements, refers to the process of determine financial strength and
weakness of the firm by establishing strategic relationship between the items of the
balance sheet, profit and loss account and oilier operative data.
n the words of ?1yers&,M financial statements analysis is largely study of
relationship among the various financial factors in a business as disclosed by a single)
set of statements and study of the trend of these factors as shown in a series of
statementsM.
The analysis and interpretation of financial statements is essential to bring out
the mystery behind the figures in financial statements.
R*TION*., O/ T4, STUD+:
/IN*NCI*. *N*.ISIS:
The focus of financial analysis is on key figures in the financial
statements and the significant relationship that e+ists between them. The analysis of
financial statements is a process of evaluating the relationship between component
parts of financial statements to obtain a better understanding of the firm&s position and
performance. 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 statement. The second step is to arrange the information in a way to
highlight significant relationships. The final step interpretation and drawing of
inferences and conclusions in brief, financial analysis is the process of selection,
relation and evaluation.
TOO.S O/ /IN*NCI*. *N*.+SIS:
/unds flow statement
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(ash flow statement.
Trend analysis
,atio analysis
(omparative statement analysis
(ommon size statement analysis
O3;,CTI2,S O/ T4, STUD+
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The following are the objectives of study.
The primary objective of financial analysis is to assist in decision)making.
To provide reliable financial information about economic resources and
obligations.
The present and future earning capacity or profitability of the concern.
The possibility of developments in the future by making forecasts and
preparing budgets.
The comparative study in regard to one firm with another firm or one
department with another department.
The long)term li6uidity of its funds.
The financial stability of a business concern.
To study and analysis the financial performance of the company.
To offer findings, suggestions J conclusions of the study
N,,D /OR T4, STUD+
/inancial statement analysis is used to identify the trends and relationships
between financial statement items. #oth internal management and e+ternal users (such
as analysts, creditors, and investors) of the financial statements need to evaluate a
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company"s profitability, li6uidity, and solvency. The most common methods used for
financial statement analysis are trend analysis, common)size statements, and ratio
analysis. These methods include calculations and comparisons of the results to
historical company data, competitors, or industry averages to determine the relative
strength and performance of the company being analyzed.
SI0NI/IC*NC, O/ T4, STUD+:
%tudies of this type are useful to the management, owners, investors,
government, employees, suppliers and society.
%tudies of this type are useful to the research scholars who conduct in depth
research.
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%tudies of this type are useful to the similar organization in assessing their
financial performance
M,T4ODO.O0+ O/ T4, STUD+:
The study carried with the co)operation of the management who
permitted to carry on the study and provided the re6uisite data. The data is collected
from the following sources.
SOURC,S O/ D*T*
3rimary 0ata
%econdary 0ata
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0ata !nalysis
)RIM*R+ D*T*$
nterviewing a few financial department heads. Officers and management
bodies and staff members of the company form part of primary data.
S,COND*R+ D*T*$
The information collected from
5. !nnual report.
7. *+ecutive and staff of financial accounting department.
:. *+ecutives of other departments.
D*T* *N*.+SIS$
The information collected from different sources is tabulation and analyzed
with help of all financial statements.
.IMIT*TIONS O/ T4, STUD+:
/inancial statements do not depict the e+act position and are essentially
interim reports.
The /inancial statements contain historical information. This information is
useful@ but an investor should be concerned more about the present and future.
The financial statements are prepared on the basis of certain accounting
concepts and conventions. !n investor should know them.
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The statements contain only information that can be measured in monitory
units.
The financial statements are sometimes prepared according to the needs of the
situation or the whims of the management.
INDUSTR+ )RO/I.,
D*IR+ INDUSTR+ 4ISTOR+ O/ INDI*N M*R8,T
0airy is a place where handling of milk and milk products is done and
technology refers to the application of scientific knowledge for practical purposes.
0airy technology has been defined as that branch of dairy science, which deals with
the processing of milk and the manufacture of milk products on an industrial scale.
n developed dairying countries such as the '.%.!., the year 5;<= is seen as the
dividing line between farm and factory)scale production. -arious factors contributed
to this change in these countries, viz. concentration of population in cities where jobs
were plentiful, rapid industrialization, improvement of transportation facilities,
development of machines, etc. whereas the rural areas were identified for milk
production, the urban centre&s were selected for the location of milk processing plants
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and product manufacturing factories. These plants and factories were rapidly
e+panded and modernized with improved machinery and e6uipment to secure the
various advantages of large)scale production. .early all the milk in the '.%.!. before
5>== was delivered as raw (natural) milk. Once pasteurization was introduced, it
developed rapidly. 1echanical refrigeration helped in the rapid development of the
factory system of market milk distribution.
nineteenth century.
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5>A<
(5>B5), 1adras (5>B:) etc.
cheaper milk.
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butter.
This will throw up opportunities for branded dairy products to enter this
huge market of more than a billion people. Eelping international as well as ndian
companies understand the dairy scenario of ndia from a macro)level perspective is
the prime objective of this study. /acts and statistics, instead of opinions and
impressions, are the key building blocks of this report
3ac5groun
ndia with 5:Amn cows and 57<mn buffaloes has the largest population of
cattle in the world. Total cattle population in the country as on October"== stood at
:5:mn. 1ore than fifty percent of the buffaloes and twenty percent of the cattle in the
world are found in ndia and most of these are milch cows and milch buffaloes.
ndian dairy sector contributes the large share in agricultural gross domestic
products. 3resently there are around K=,=== village dairy cooperatives across the
country. The co)operative societies are federated into 5K= district milk producers
unions, which is turn has 77)state cooperative dairy
/ederation. 1ilk production gives employment to more than K7mn dairy
farmers. n terms of total production, ndia is the leading producer of milk in the
world followed by '%!. The milk production in 5>>>)== is estimated at K;mn 1T as
compared to KA.<mn 1T in the previous year. This production is e+pected to increase
to ;5mn 1T by 7===)=5. Of this total produce of K;mn cows" milk constitute :Bmn
1T while rest is from other cattle.
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8hile world milk production declined by 7 per cent in the last three years,
according to /!O estimates, ndian production has increased by A per cent. The milk
production in ndia accounts for more than 5:D of the total world output and <KD of
total !sia"s production. The top five milk producing nations in the world are ndia
,'%!, ,ussia, 2ermany and /rance.
!lthough milk production has grown at a fast pace during the last three
decades (courtesy$ Operation /lood), milk yield per animal is very low. The main
reasons for the low yield are
Cack of use of scientific practices in milching.
nade6uate availability of fodder in all seasons.
'navailability of veterinary health services.
)rouction of mil5 in Inia
+ear )rouction in million MT
5>;;);> A;.A
5>;>)>= <5.A
5>>=)>5 <:.K
5>>5)>7 <B.:
5>>7)>: <;.B
5>>:)>A B5.7
5>>A)>< B:.<
5>><)>B B<
5>>B)>K B;.<
5>>K)>; K=.;
5>>;)>> KA.K
5>>>)==(*) K;.5
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7===)=5(T) ;5.=
E= estimated
T= target / expected
Source: DFPI, Annual Report!"""#$$$
Operation /loo
The transition of the ndian milk industry from a situation of net import
to that of surplus has been led by the efforts of .ational 0airy 0evelopment #oard"s
Operation /lood. 3rogramme under the aegis of the former (hairman of the board 0r.
Hurien.
Caunched in 5>K=, Operation /lood has led to the modernization of ndia"s
dairy sector and created a strong network for procurement processing and distribution
of milk by the co)operative sector. 3er capita availability of milk has increased from
5:7 gm per day in 5><= to over 77= gm per day in 5>>;. The main thrust of Operation
/lood was to organize dairy cooperatives in the milkshed areas of the village, and to
link them to the four 1etro cities, which are the main markets for milk. The efforts
undertaken by .00# have not only led to enhanced production, improvement in
methods of processing and development of a strong marketing network, but have also
led to the emergence of dairying as an important source of employment and income
generation in the rural areas.
t has also led to an improvement in yields, longer lactation periods,
shorter calving intervals, etc through the use of modern breeding techni6ues.
*stablishment of milk collection centers and chilling centers has enhanced life of raw
milk and enabled minimization of wastage due to spoilage of milk. Operation /lood
has been one of the world"s largest dairy development programmes and looking at the
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success achieved in ndia by adopting the co)operative route, a few other countries
have also replicated the model of ndia"s 8hite ,evolution.
/res# Mil5
Over <=D of the milk produced in ndia is buffalo milk, and A<D is cow
milk. The buffalo milk contribution to total milk produce is e+pected to be <AD in
7===. #uffalo milk has :.BD protein, K.AD fat, <.<D milk sugar, =.;D ash and ;7.KD
water whereas cow milk has :.<D protein, :.KD fat, A.>D milk sugar, =.KD ash and
;KD water. 8hile presently (for the year 7===) the price of #uffalo milk is ruling at
T7B5):5: per 1T that of cow is ruling at T5K=)7BK per 1T. /resh pasteurized milk is
available in packaged form. Eowever, a large part of milk consumed in ndia is not
pasteurized, and is sold in loose form by vendors. %terilized milk is scarcely available
in ndia.
3ackaged milk can be divided according to fat content as follows,
8hole (full cream) milk ) BD fat
%tandardized (toned) milk ) A.<D fat
0oubled toned (low fat) milk ) :D fat
another category of milk, which has a small market is flavoured milk
T#e Inian Mar5et < * )!rami
Consumer 4a%its an )ractices
1ilk has been an integral part of ndian food for centuries. The per
capita availability of milk in ndia has grown from 5K7 gm per person per day in 5>K7
to 5;7gm in 5>>7 and 7=: gm in 5>>;)>>.This is e+pected to increase to 757gms for
5>>>)==. Eowever a large part of the population cannot afford milk. !t this per capita
consumption it is below the world average of 7;< gm and even less than 77= gm
recommended by the .utritional
*'isor! Committee of t#e Inian Council of Meical Researc#.
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There are regional disparities in production and consumption also. The
per capita availability in the north is 7K; gm, west 5KA gm, south 5A; gm and in the
east only >: gm per person per day. This disparity is due to concentration of milk
production in some pockets and high cost of transportation. !lso the output of milk in
cereal growing areas is much higher than elsewhere which can be attributed to
abundant availability of fodder, crop residues, etc which have a high food value for
milch animals.
n ndia about AB per cent of the total milk produced is consumed in
li6uid form and AK per cent is converted into traditional products like cottage butter,
ghee, paneer, khoya, curd, malai, etc. Only K per cent of the milk goes into the
production of western products like milk powders, processed butter and processed
cheese. The remaining <AD is utilized for conversion to milk products. !mong the
milk products manufactured by the organized sector some of the prominent ones are
ghee, butter, cheese, ice creams, milk powders, malted milk food, condensed milk
infant&s foods etc. Of these ghee alone accounts for ;<D.
t is estimated that around 7=D of the total milk produced in the country
is consumed at producer)household level and remaining is marketed through various
cooperatives, private dairies and vendors. !lso of the total produce more than <=D is
procured by cooperatives and other private dairies.
8hile for cooperatives of the total milk procured B=D is consumed in fluid
form and rest is used for manufacturing processed value added dairy products@ for
private dairies only A<D is marketed in fluid form and rest is processed into value
added dairy products like ghee, makhan etc.
%till, several consumers in urban areas prefer to buy loose milk from vendors due to
the strong perception that loose milk is fresh. !lso, the current level of processing and
packaging capacity limits the availability of packaged milk.
The preferred dairy animal in ndia is buffalo unlike the majority of the world market,
which is dominated by cow milk. !s high as >;D of milk is produced in rural ndia,
which caters to K7D of the total population, whereas the urban sector with 7;D
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population consumes <BD of total milk produced. *ven in urban ndia, as high as
;:D of the consumed milk comes from the unorganized traditional sector.
3resently only 57D of the milk market is represented by packaged and
branded pasteurized milk, valued at about ,s. ;,=== crores. Ruality of milk sold by
unorganized sector however is inconsistent and so is the price across the season in
local areas. !lso these vendors add water and caustic soda, which makes the milk
unhygienic.
ndia"s dairy market is multi)layered. t"s shaped like a pyramid with the
base made up of a vast market for low)cost milk. The bulk of the demand for milk is
among the poor in urban areas whose individual re6uirement is small, maybe a
glassful for use as whitener for their tea and coffee.
.evertheless, it adds up to a sizable volume ) millions of litres per day. n
the major cities lies an immense growth potential for the modern sector. 3resently,
barely KK; out of :,K== cities and towns are served by its milk distribution network,
dispensing hygienically packed wholesome, 6uality pasteurized milk. !ccording to
one estimate, the packed milk segment would double in the ne+t five years, giving
both strength and volume to the modern sector. The narrow tip at the top is a small but
affluent market for western type milk products.
Mar5eting Strateg! for 2=== *D
Two key elements of marketing strategy for 7=== !0 are$ /ocus on
strong brands and, prouct mi> e>pansion to include 'ET milk, cheese, ice creams
and spreads. The changing marketing trends will see the shift from generic products to
the packaged 6uasi, regular and premium brands. The national brands will gradually
edge out the regional brands or reduce their presence. The brand image can do
wonders to a product"s marketing as is evident from the words of 3erfume 3rincess
(oco (hannel$ n the factory, we pack perfume@ in the market, we sell hopeU
,merging Dair! Mar5ets
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 A>
/oo ser'ice institutional mar5et: t is growing at double the rate of
consumer market
Defense mar5et: !n important growing market for 6uality products at
reasonable prices
Ingreients mar5et: ! boom is forecast in the market of dairy products used
as raw material in pharmaceutical and allied industries
)arlour mar5et: The increasing away)from)home consumption trend opens
new vistas for ready)to)serve dairy products which would ride piggyback on
the fast food revolution sweeping the urban ndia.
ndia, with her sizable dairy industry growing rapidly and on the path of
modernization, would have a place in the sun of prosperity for many decades to come.
The one inde+ to the statement is the fact that the projected total milk output over the
ne+t 5< years (5>><)7=5=) would e+ceed 5A<K.B million tonnes which is twice the
total production of the past 5< yearsU
)enetration of mil5 proucts
8estern table spreads such as butter, margarine and jams are not very
popular in ndia. !ll ndia penetration of butterO margarine is only AD. This is also
largely represented by urban areas, where penetration is higher at >D. n rural areas,
butterO margarine have penetrated in 7.5D of households only. The use of these
products in the large metros is higher, with penetration at 5<D.
3enetration of cheese is almost nil in rural areas and negligible in the urban
areas. 3er capita consumption even among the cheese)consuming households is a poor
7.Akg pa as compared to over 7=kg in '%!. The lower penetration is due to peculiar
food habits, relatively e+pensive products and also non)availability in many parts of
the country. #utter, margarine and cheese products are mainly manufactured by
organized sector.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <=
%imilarly, penetration of ghee is highest in medium sized towns at :K.7D
compared to :5.KD in all urban areas and 75.:D in all rural areas. The all ndia
penetration of ghee is 7A.5D. n relative terms, penetration of ghee is significantly
higher in .orth and 8est, which are milk surplus regions. .orth accounts for <KD of
ghee consumption and 8est for 7:D, %outh J *ast together account for the balance
7=D. ! large part of ghee is made at home and by smallO cottage industry from milk.
The relative share of branded products in this category is very low at around 5)7D.
1ilk powder and condensed milk have not been able to garner any
significant consumer acceptance in ndia as indicated by a very low A.KD penetration.
The penetration is higher at ;.5D in urban areas and lower at :.<D in rural areas.
8ithin urban areas, it is relatively higher in medium sized towns at ;.<D compared to
K.KD in a large metros.
Mar5et Size an 0ro1t#
1arket size for milk (sold in looseO packaged form) is estimated to be
:Bmn 1T valued at ,sAK=bn. The market is currently growing at round AD pa in
volume terms. The milk surplus states in ndia are 'ttar 3radesh, 3unjab, Earyana,
,ajasthan, 2ujarat, 1aharashtra, !ndhra 3radesh, Harnataka and Tamil .adu. The
manufacturing of milk products is concentrated in these milk surplus %tates. The top B
states viz. 'ttar 3radesh, 3unjab, 1adhya 3radesh, ,ajasthan, Tamil .adu and
2ujarat together account for <;D of national production.
1ilk production grew by a mere 5D pa between 5>AK and 5>K=. %ince the
early K="s, under Operation /lood, production growth increased significantly
averaging over <D pa.
!bout K<D of milk is consumed at the household level which is not a
part of commercial dairy industry. Coose milk has a larger market in ndia as it is
perceived to be fresh by most consumers. n reality however, it poses a higher risk of
adulteration and contamination.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <5
The production of milk products, i.e. milk products including infant milk
food, malted food, condensed milk J cheese stood at :.=K lakh 1T in 5>>>.
3roduction of milk powder including infant milk)food has risen to 7.7< lakh 1T in
5>>>, whereas that of malted food is at B<=== 1T. (heese and condensed milk
production stands at <=== and 55=== 1T respectively in the same year.
The packaged milk segment is dominated by the dairy cooperatives.
2ujarat (o)operative 1ilk 1arketing /ederation (2(11/) is the largest player. !ll
other local dairy cooperatives have their local brands (/or e.g. 2okul, 8arana in
1aharashtra, %aras in ,ajasthan, -erka in 3unjab, -ijaya in !ndhra 3radesh, !avin in
Tamil .adu, etc). Other private players include Q H 0airy, Eeritage /oods, ndiana
0airy, 0airy %pecialties, etc. !mrut ndustries, once a leading player in the sector has
turned bankrupt and is facing li6uidation.
)ac5aging Tec#nolog!
1ilk was initially sold door)to)door by the local milkman. 8hen the dairy
co)operatives initially started marketing branded milk, it was sold in glass bottles
sealed with foil. Over the years, several developments in packaging media have taken
place. n the early ;="s, plastic pouches replaced the bottles. 3lastic pouches made
transportation and storage very convenient, besides reducing costs. 1ilk packed in
plastic pouchesObottles have a shelf life of just 5)7 days, that too only if refrigerated.
n 5>>B, Tetra 3acks were introduced in ndia. Tetra 3acks are aseptic
laminate packs made of aluminum, paper, board and plastic. 1ilk stored in tetra packs
and treated under 'ltra Eigh Temperature ('ET) techni6ue can be stored for four
months without refrigeration. 1ost of the dairy co)operatives in !ndhra 3radesh,
Tamil .adu, 3unjab and ,ajasthan sell milk in tetra packs. Eowever tetra packed milk
is costlier by ,s<)K compared to plastic pouches. n 5>>>)== .estle launched its 'ET
milk. !mul too re)launched its !mul Taaza brand of 'ET milk. The 'ET milk
market is e+pected to grow at a rate of more than 5=)57D in coming years.
,>port )otential
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <7
ndia has the potential to become one of the leading players in milk and
milk product e+ports. Cocational advantage$ ndia is located amidst major milk deficit
countries in !sia and !frica. 1ajor importers of milk and milk products are
#angladesh, (hina, Eong Hong, %ingapore, Thailand, 1alaysia, 3hilippines, Qapan,
'!*, Oman and other gulf countries, all located close to ndia.
Concerns in e>port competiti'eness are
Cost of )rouction: 1ilk production is scale insensitive and labour intensive. 0ue to
low labour cost, cost of production of milk is significantly lower in ndia.
?ualit!: %ignificant investment has to be made in milk procurement, e6uipments,
chilling and refrigeration facilities. !lso, training has to be imparted to improve the
6uality to bring it up to international standards
)roucti'it!: To have an e+portable surplus in the long)term and also to maintain
cost competitiveness, it is imperative to improve productivity of ndian cattle.
There is a vast market for the e+port of traditional milk products such as ghee, paneer,
shrikhand, rasgolas and other ethnic sweets to the large number of ndians scattered
all over the world.
9#at oes t#e Inian Dair! Inustr! #as to Offer to /oreign In'estors@
ndia is a land of opportunity for investors looking for new and e+panding
markets. 0airy food processing holds immense potential for high returns. 2rowth
prospects in the dairy food sector are termed healthy, according to various studies on
the subject.
The basic infrastructural elements for a successful enterprise are in place.
Hey elements of free market system
raw material (milk) availability
an established infrastructure of technology
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <:
Supporting manpo1er
!n entrepreneur"s participation is likely to provide attractive returns on the
investment in a fast growing market such as ndia, along with an e+port potential in
the 1iddle *ast, %ingapore, 1alaysia, ndonesia, Horea, Thailand, Eong Hong and
other countries in the region.
!mong several areas of potential participation by .,s and foreign
investors, the following list outlines a few promising opportunities
3iotec#nolog!:
0airy cattle breeding of the finest buffaloes and hybrid cows
1ilk yield increase with recombinant somatotropin
,ecombinant chymosin, acceptable to vegetarian consumers
0airy cultures, probiotics, dairy biologics, enzymes and coloring materials for
food processing
/ermentation derived foods and industrial products alcohol, citric acid, lysine,
flavor preparations, etc.
#io preservative ingredients based on dairy fermentation, viz., .isin,
pediococcin, acidophilin, and bulgarican contained in dairy powders.
Dair!Afoo processing eBuipment:
3otential e+ists for manufacturing and marketing of cost competitive food
processing machinery of world)class 6uality.
/oo pac5aging eBuipment:
Opportunities lie in the manufacturing of both machinery and packaging
materials that help develop brand loyalty and a clear edge in the marketing of dairy
foods.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <A
Distri%ution c#annels:
/or refrigerated and frozen food distribution, a world class cold chain
would help in providing 6uality assurance to the consumers around the region.
Retailing:
There is scope for standardizing and upgrading food retailing in major
metropolitan cities to meet the shopping needs of a vast middle class. This area
includes grocery stores of *uropean and .orth !merican 6uality, warehousing and
distribution.
)rouct e'elopment:
0airy foods can be manufactured and packaged for e+port to countries
where ndian food enjoys basic acceptance. The manufacturing may be carried out in
contract plants in ndia. !n option to market the products in collaboration with local
establishments or entrepreneurs can also be e+plored. 3roducts e+hibiting potential
include typical indigenous dairy foods either not available in foreign countries or
products whose authenticity may be 6uestionable. 2ulabjamuns, #urfi, 3eda,
,asagollas, and a host of other ndian sweets have good business prospects.
3roducts typically foreign to ndia but indigenous to other countries could
also be developed for e+port. %uch products can be manufactured in retail package
sizes and could be produced from milk of sheep, goats and camel. (ertain products
are characteristically produced from milk of a particular species. /or e+ample, /eta
cheese is used in significant tonnage, in ran. %heep milk is traditionally used for
authentic /eta cheese. !ccordingly, ndia"s goat and sheep herds can be utilized for
the manufacture of such authentic products.
Ingreient manufacture:
*+port markets for commodities like dry milk, condensed milk, ghee and
certain cheese varieties are well established. These items are utilized as ingredients in
foreign countries. These markets can be e+panded to include value)added ingredients
like aseptically packaged cheese sauce and dehydrated cheese powders.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <<
C#eese sauce:
(anned cheese sauce is made from real cheese to which milk, whey, modified food
starch, vegetable oil, colorings and spices may be added. (heese sauce is useful in
kitchens for the preparation of omelet, sandwiches, entrees, and soups. n addition,
cheese sauce is used as a topping on potatoes and vegetables and may be incorporated
in pasta dishes.
C#eese po1ers:
(heese powders are formulated for dusting or smearing of popular snacks like potato
chips, crackers, etc. They impart flavor and may be blended with spices.
8ith the globalization of food items, an opportunity should open up for food service
and institutional markets.
Tec#nolog!<ri'en manufacturing units:
These plants would fulfill an essential need by providing a centralized and
specialized facility for hire by the units which cannot justify capital investment but do
need such services. 3otential areas for state)of)the)art contract)pack units may
conceivably specialize in cheese slicing, or dicing line, cheese packaging, butter
printing, and aseptic packaged fluid products.
1ost ndians prefer to use homemade white butter (makkhan) for reasons of
taste and affordability. 1ost of the branded butter is sold in the towns and cities. The
major brands are !mul, -ijaya, %agar, .andini and !arey. !mul is the leading
national brand while the other players have greater shares in their local markets. The
latest entrant in the butter market has been #ritannia. #ritannia has the advantages of
a wide distribution reach and a strong brand recall. 3riced at par with the !mul brand,
it is e+pected to give stiff competition to the e+isting players. n 5>>>)== the butter
production is estimated at A lakh 1T of this only A<H 1T is in the white form used
for table purposes rest all is in the yellow form.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <B
Mil5 )o1er
Mil5 po1er are mainl! of 2 t!pes
8hole milk powder
%kimmed milk powder
8hole milk powder contains fat, as distinguished from skimmed milk
powder, which is produced by removing fat from milk solids. %kimmed milk powder
is preferred by diet conscious consumers. 0airy whiteners contain more fat than
skimmed milk powder but less compared to whole milk powder. 0airy whiteners are
popular milk substitute for making tea, coffee etc. The penetration of these products in
milk abundant regions is driven by convenience and non perishable nature (longer
shelf life) of the product.
0airy sector of advanced nations e+port milk products with a subsidy of T
5=== per tonne with a level of subsidy more than B= D of the price of milk powder
produced in ndia, this has led to large scale imports of milk powder both in whole
and skimmed form. To protect the domestic sector from these subsidized imports the
central government has recently increased the basic import duty on all imports of milk
powder more than 5==== 1T to B=D from 5<D. /or imports less than 5==== 1T the
basic customs duty has been left unchanged at 5<D.
n 5>>>)== ndia is estimated to have imported about 5;,=== tonnes of
milk powder against a total estimated production of 7.A= Cakh 1Ts. n 7===)=5 ndia
is e+pected to e+port 5==== 1T of skimmed milk powder due to rise in international
prices to T7:== per 1T from last year"s levels of T5A== per 1T. These e+pectations
are based on the strong demand from ,ussia, *ast !sia and Catin !merica, and also
on tightening of supply in *', which accounts for K<D of the annual global %kimmed
1ilk 3owder e+ports
Regulator! /rame1or5
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <K
The dairy industry was de)licensed in 5>>5 with a view to encourage
private investment and flow of capital and new technology in the segment. !lthough
de)licensing attracted a large number of players, concerns on issues like e+cess
capacity, sale of contaminatedO substandard 6uality of milk etc induced the
2overnment to promulgate the 113O (1ilk and 1ilk 3roducts Order) in 5>>7. 1ilk
and 1ilk 3roducts Order (113O) regulates milk and milk products production in the
country. The order re6uires no permission for units handling less than 5=,=== liters of
li6uid milk per day or milk solids up to <== tpa. 113O prescribes %tate registration
to plants producing between 5=,=== to K<,=== liters of milk per day or manufacturing
milk products containing between <== to :,K<= tonnes of milk solids per year. 3lants
producing over K<,=== litres per day or more than :,K<= tonnes per year of milk solids
have to be registered with the (entral 2overnment. The stringent regulations,
government controls and licensing re6uirements for new capacities have restricted
large ndian and 1.( players from making significant investments in this product
category. 1ost of the private sector players have restricted themselves to manufacture
of value added milk products like baby food, dairy whiteners, condensed milk etc.
!ll the milk products e+cept malted foods are covered in the category
of industries for which foreign e6uity participation up to <5D is automatically
allowed. ce cream, which was earlier reserved for manufacturing in the small)scale
sector, has now been de)reserved. !s such, no license is re6uired for setting up of
large)scale production facilities for manufacture of ice cream.
%ubse6uent to de)canalization, e+ports of some milk based products are
freely allowed provided these units comply with the compulsory inspection
re6uirements of concerned agencies like$ .ational 0airy 0evelopment #oard, *+port
nspection (ouncil etc. #ureau of ndian standards has prescribed the necessary
standards for almost all milk)based products, which are to be adhered to by the
industry.
/uture )rospects
ndia is the world"s highest milk producer and all set to become the
world"s largest food factory. n celebration, ndian 0airy sector is now ready to invite
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <;
.,s and /oreign investors to find this country a place for the mammoth investment
projects. #e it investors, researchers, entrepreneurs, or the merely curious I ndian
0airy sector has something for everyone.
1ilk production is relatively efficient way of converting vegetable
material into animal food. 0airy cow&s buffalo&s goats and sheep can eat fodder and
crop by products which are not eaten by humans. Fet the loss of nutrients energy and
e6uipment re6uired in milk handling inevitably make milk comparatively e+pensive
food. !lso if dairying is to play its part in rural development policies, the price to milk
producers has to be remunerative. n a situation of increased international prices, low
availabilities of food aid and foreign e+change constraints, large scale subsidization of
milk conception will be difficult in the majority of developing countries.
Eence in the foreseeable future, in most of developing countries milk and
milk products will not play the same roll in nutrition as in the affluent societies of
developed countries. *ffective demand will come mainly from middle and high
income consumers in urban areas.
There are ways to mitigate the effects of une6ual distribution of
incomes. n (uba where the 2overnment attaches high priority to milk in its food and
nutrition policy, all pre)school children receive a daily ration of almost a litre of milk
fat the reduced price. (heap milk and milk products are made available to certain
other vulnerable groups, by milk products outside the rationing system are sold price
which is well above the cost level. 'ntil recently, most fresh milk in the big cities of
(hina was a reserved for infants and hospitals, but with the increase in supply,
rationing has been rela+ed.
n other countries dairy industries have attempted to reach lower income
consumers by variation of compositional 6uality or packaging and distribution
methods or blending milk in vegetable ingredients in formula foods for vulnerable
groups. /or instance, pricing of products rich in butter fat or in more lu+ury packaging
above cost level so as to enable sales of high protein milk products at a some what a
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 <>
reduced price has been widely practiced in developing countries. This policies need to
be brought in ndian 0airy scenario.
COM)*N+ )RO/I.,
.ame $ (,*!1 C.* 0!,F 3,O0'(T% CT0.
0escription $ 1akes 3roducts like 1ilk, (heese, 3aneer, /lavored
1ilk, 2hee, #utter *tc.,
!ddress $ 5)55)7<7O55O5, 1otilal .agar, #egum 3et, Eyderabad.
3in (ode $ <===5B
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B=
(ity $ Eyderabad
%tate $ !ndhra 3radesh
/a+ $ KKB<5B;, KKB=BA:
*mail $ infoVcreamlinedairy.com
8eb site $ http$OOwww.creamlinedairy.com
Cream line Dair! )roucts is a 3rivate %ector Organization that offers services
in /ood 3rocessingO #everages with !nnual Total Turnover of 5=)5== (rores and with
*mployee %trength of 7<5)<==.
Cream line Dair! )roucts .imite CCD).D is customer centric private dairy
employing modern machinery and applying advanced technologies. t constantly
endeavors to give its customers the best products by way of continuous research and
innovation.
(ream line, an %O 77=== accredited dairy, is a leading manufacturer and
supplier of milk and milk products in %outhern ndia spanning across !ndhra 3radesh,
Tamil .adu, Harnataka and with a foothold at .agpur in (entral ndia. t operates its
milk procurement, milk and milk products processing and distribution through
%trategic #usiness 'nits (%#'s). ts milk and dairy products are sold under the
popular brand name Q*,%*F. %ince inception, the organization has been growing
consistently under the visionary leadership of promoter directors, business acumen of
operational heads and unrelenting efforts of committed workforce. The organization is
possible of achieving a turnover of ,s. A<== millions for the /F 7==>)7=5= and is set
to achieve an ambitious target of ,s.5=<== millions by end 7=5:.
The Organization entered into strategic partnership with 1Os. 2odrej !grovet
Cimited, the largest animal feed manufacturing organization in the country, in the Fear
7==< by offering e6uity stake of to strengthen its backward integration with farmers,
the primary producers of milk, for compound feed supply. The Organization is open to
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B5
strategic business tie)ups at national and international level and is looking at e+port
opportunities to its products.
The workforce of the organization is composed of a balanced mi+ture of
technocrats, dairy engineers, and production and 6uality specialists besides the
dedicated top)notch management team overseeing the entire corporate functioning.
The Organization has e+cellent infrastructure with := own and > associate milk
chilling centers, 7: #1('s, K packing stations, B sales offices and 5 state of the art
powder plantO%#' at Ongole. t has a combined milk processing capacity of B.B lakh
liters per day. The organization markets its products through a well laid distribution
network comprising of organization owned parlors, e+clusive franchise outlets, and
product push carts. #esides, the organization also sells its products through <===
agents panning across %outhern ndia and 1aharashtra. The organization has entered
the market of cultured products like Foghurt, (urd, Cassi and #uttermilk in 7==< and
within a short span made its mark in the dairy market.
%ince its incorporation in the year 5>;B, the organization has successfully
applied many innovative practices like 7A hour parlors with unemployed youth in
5>>:, mobile milk testing labs in 5>>; etc. The organization is now planning to
e+pand its operations to (entral ndia by setting up new 3rocessing J 3ackaging
'nits.
Qersey has become a household name for dairy products and continues to create
consumers& delight to perfection. (ontinued support and encouragement of customers
including households, prestigious defense establishments, railways, educational
institutions, T (ompanies, star hotels, and hospitals in ever increasing numbers stand
testimony to our superior 6uality products.
2ision
LTo emerge as a Ceader in 0airy /oods with 2lobal 3resence through
#usiness *+cellence and ensuring (ustomer 0elightM
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B7
Mission
LTo grow continuously, offering value added 0airy 3roducts and gain
customers& confidence through nnovative 3racticesM
2alues
L8e act with a sense of pride adopting ethical practices and compassionate approachM
MI.,S STON,S 7 CR,D,NTI*.S
8on #est -endor in Eospitality %ector !ward by Taj 2roup in 7==A
!ccredited with %O >==5 (ertification in 7==7
8on *ntrepreneur of the Fear 7==5 !ward from Eyderabad 1anagement !ssociation
*ntered into %trategic 3artnership with 2odrej !grovet Cimited
ntroduced ?,ound the (lock 1ilk 3arlors& and ?1obile 1ilk Testing (enters&.
3O*RD O/ DIR,CTORS
%hri H. #hasker ,eddy ) 1anaging 0irector
%hri 1. 2angadhar ) 0irector (/inance)
%hri 0. (handra %hekher ,eddy ) 0irector (Technical)
%hri (. #alraj 2oud ) *+ecutive 0irector
%hri #al ram %ingh Fadav ) *+ecutive 0irector
%hri %. -aradaraj ) .ominee 0irector
%hri %rinath %hekar ) .ominee 0irector
0r. 1ohana , -elagapudi ) .ominee 0irector
/OOD S*/,T+ )O.IC+
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B:
8e at (03C are committed to provide safe and nutritious 1ilk J 1ilk
products to our customers that comply with all the legal and regulatory re6uirements,
by adopting good manufacturing practices and good hygiene practices.
8e are committed for continual improvement of our food safety
management system, aiming at customer satisfaction J delight and endeavor to
become a global player.
To this effect we communicate, implement and maintain the re6uirements of
the food safety throughout the food chain.
)RODUCTS O/ CD).
MI.8
1ilk is regarded as the most nearly perfect single food stuff. Today, milk is
the most important single item of human diet, as it is beneficial at all stages of human
growth literally from cradle to grave due to its high nutritive value. mportance of
milk in diet is mainly due to its contribution of high 6uality protein, its e+ceptional
richness in (alcium and its general supply of pre)formed -itamin ! and of riboflavin
and other members of #7 comple+.

TON,D MI.8 94O., MI.8
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 BA

DOU3., TON,D MI.8 S.IM MI.8
One 7== ml glass of milk provides a power)pack of nutrients and contains
the minerals and vitamins as below$
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B<

DOOD4),D*
0oodh peda is a desiccated sweetened product made from fresh milk and
contains A<D milk solids and :<D sugar. t is slightly brownish white in colour and has
coarse grainy structure. The product is hygienically packed. 0oodh peda is a nutritious
product with delicious taste and having a shelf life of K day
There are certain things in life that are sheer delight to the soul and add
meaning to our e+istence. These go beyond the limits of age and are cherished and
adored by everybody. ce creams certainly are among those finer things in life.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 BB
IC, CR,*MS
ce cream is a power pack of nutrients. t is the most palatable source of milk
proteins and a rich source of calcium, phosphorous and other minerals vital in
building strong bones and teeth. ce cream is also an e+cellent source of food energy.
Eaving twice or three times the fat content of milk, and more than half its total solids
being sugar (sucrose and lactose) the energy value of ice cream is very high. That
makes ice cream a very desirable food for growing children and persons who need to
put on weight.
Qersey brand of e+otic ice creams are made of fresh milk based fats and are
brought to you by (ream line 0airy. ! preferred choice of every connoisseur of fine
taste, what really makes the difference is the processes that are adopted at (ream line
to make our products endearing to everybody. 'tmost care is taken to ensure the
highest level of hygiene and superlative efforts are made to create the flavors which
make you to coming back to Qersey again and again.

8a&u 5iss miss 3utterscotc# Cone Casatta
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 BK
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B;
Ot#er )roucts
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 B>
SNO9I,S
%nowies is the retail chain started by the organization to serve pure and
natural milk ice creams and shakes. 1ilk based sweets, snacks and beverages are also
made available in %nowies. %ome of the varieties of ice)creams served at snowies are
given below$
SUND*,
! portion of ice cream over which one or more dressings of syrups,
fruits, nuts or other toppings are poured.
DOU3.,
SUND*,
The same flavor of ice cream and same flavor of topping, like
chocolate ice cream with chocolate topping.
R*IN3O9
ce cream made by mi+ing different flavors with attractive marbled
appearance.
3ON 3ON
This is similar to %undae usually made in a stem glass with fruit at the
bottom and a combination of ice creams on top.
/R*)),
/rozen or partly frozen fruit juices applied to whipped combinations
of ice cream, syrup, fruits and nuts.
)UNC4
ce cream in which fruit juices are reinforced with an alcoholic
beverage.
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T4,OR,TIC*. /R*M,9OR8
1eaning of /inancial %tatements
Objectives of /inancial %tatements
Types of /inancial %tatements
(haracteristics of /inancial %tatements
Cimitations /inancial %tatements
/inancial %tatements !nalysis
1ethods of /inancial !nalysi
Meaning of /inancial Statements:<
! financial statement is a collection of data organized according logical and
consistent accounting procedures. ts purpose is to convey an understanding of some
financial aspects of a business firm. t may show a position at a moment in time, as in
the case of an income statement, thus the term financial statements generally refers to
the two statements$ () the position statement or the balance sheet, and (ii) the income
statement or the profit and loss account. These statements are used to convey to
management and other interested outsiders the profitability and financial position to a
firm.
/inancial statements are the outcome of summarizing process of accounting.
n the words of Qohn .. Eer, the financial statements provide a summary of the
accounts of a business enterprise, the balance sheet reflecting the asset, liabilities and
capital as on a certain date and the income statement showing the results of operations
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during a certain period. /inancial statements are prepared as an end result of financial
accounting and are the major sources of financial information of an enterprise %mith
and !sburne define financial statements as. The product of financial accounting in
asset of financial statements prepared by the accountant of a business enterprise that
purport to reveal the financial position of the enterprise, the result of its recent
activities, and an analysis of what has been done with earningsM.
/inancial statements are also called financial reports. n the words of !nthony,
financial statements, essentially, are interim reports, presented annually and reflect a
division of the life of an enterprise onto more or less arbitrary accounting period)
more fre6uently a year.
O%&ecti'es of /inancial Statements$)
/inancial statements are the sources of information on the basis of which conclusions
are drawn about the profitability and financial position of a concern. they are the
major means employed by firms to present their financial situation of owners,
creditors and the general public, the primary objective of financial statements is to
assist in decision making,. The accounting principles board of !merica (!3#) sates
the following objectives of financial statements.
5. To provide reliable financial information about economic resources and
obligations of a business firm.
7. To provide other needed information about changes in such economic resources
and obligations.
:. To provide reliable information about changes in net resources (resources less
obligations) arising out of business activities.
A. To provide financial information that assists in estimating the earning potentials
of business.
<. To disclose, to the e+tent possible, other information related to the financial
statements that is relevant to the needs of the users of these statements.
T!pes of /inancial Statements:<
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/inancial statements primarily comprise two basic statements$ (5) the position
statement or the balance sheet and (7) the income statement or the profit and loss
account. Eowever, (2enerally !ccepted !ccounting 3rinciples (2!!3) specifies that
a complete set of financial statements must include$
(5). ! #alance %heet.
(7). an ncome %tatement (3rofit and Coss !ccount).
(:). ! %tatement of (hanges in /inancial 3osition.
1. 3alance S#eet:<
The !merica institute of certified public accountants defines balance sheet
as. ! tabular statement of summary of balances (debits and credits) carried forward
after an actual and constructive closing of books of account and kept according to
principles of accountingM. The purpose of the balance sheet is to show the resources
that the company has, i.e. its assets, and from where those resources come from i.e.,
its liabilities and investments by owners and outsiders.
The balance sheet is one of the important statements depicting the financial
strength of the concern. t shows on the one hand the properties that it utilizes and on
other hand the sources of those properties. The balance sheet shows all the assets
owned by the concern and all the liabilities and claims it owes to owners and
outsiders.
7. Income Statement CorD )rofit an .oss *ccount:<
ncome statement is prepared to determine the operational position of the
concern. t is a statement of revenues earned and the e+penses incurred for earning
that revenue, if there is e+cess of revenues over e+penditures it will show a profit and
if the e+penditures are more than the income then there will be a loss. The income
statement is prepared for a particular period, generally a year. 8hen income statement
is prepared for the year ending, then all revenues and e+penditures falling due in that
year will be taken into account irrespective of their receipt or payment.
The income statement may be prepared in the form of a manufacturing
account to find out the cost of production, in the form of trading account to determine
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gross profit or gross loss. n the form of a profit and loss account determine net profit
or net loss, a statement of retained earnings may also be prepared to show the
distribution of profits.
". Statement of C#anges in O1ners ,Buit! CRetaine ,Buit!D:<
The term ?owner&s e6uity& refers to the claims of the owners of the business
shareholders against the assets or the firm. t consists of two elements (5) paid)up
share capital, .e. the initial amount of funds invested by the shareholder&s and (7)
retained earningsOreserves and surplus representing undistributed profits. The
statement of changes in owners& e6uity simply shows the beginning balance of each
owner&s e6uity account the reasons for increases and decreases in each, and its ending
balance. Eowever in most cases, the only owner&s e6uity account that changes
significantly is retained earnings and hence the statement of changes in owners& e6uity
becomes merely a statement of retained earnings.

! statement of retained earnings is also known as profit and loss
!ppropriation !ccount or income 0isposal %tatement. !s the name suggests it shows
appropriations of earnings. The previous years balance is first brought toward. The net
profit during the current year is added to this balance. On the debt side, appropriations
like interim dividends paid. 3roposed dividend in preference and e6uity share capital,
amounts transferred to debenture redemption fund, capital redemption funds. 2eneral
reserves etc are shown. The balance in tills account will show this amount of profit
retained in hand and carried forward. The appropriations cannot lie more than the
profits so this account will not have a debit balance. There cannot be appropriations
without profits.

$. Statement of C#anges in /inancial )osition:<
The basic financial statements, .e., the balance sheet and the profit and loss
account or income statement of a business reveal the net effect of the various
transactions on the operational and financial position of the company. The balance
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sheet gives a static view of the resources of a business and the uses to which these
resources have been put at a certain point of time. The profit and loss account in a
general way. ndicates the resources provided by operations. #ut there are many
transactions that do not operate through profit and loss account. Thus, for a better
understanding another statement called statement of changes in financial position has
to be prepared show the changes in assets and liabilities from the end of one period to
the end of another point of time. The objective of this statement is to showing the
movement of funds (working capital or cash) during a particular period. The
statement to changes in financial position may take any of the following two forms.
CaD /uns /lo1 Statement:<The funds flow statements is designed to analyze the
changes in the financial conditions of a business enterprise between two periods. The
word fund is used to denote working capital.
This statement will show the sources from which the funds are received and the uses
which these have been put. his statement enable the management to have an idea
about the sources of funds and their uses for various purposes. ills statement helps
the management in policy formulation and performance appraisal.
C%D Cas# /lo1 Statements:<a statement of changes in the financial position of a firm
on cash basis is called cash flow statement. t summarizes the causes of changes in
sash position of a lousiness enterprise between states of two balances sheets. This
statement is very much similar to the statement of changes in working capital .e.,
funds flow statement. ! cash flow statement focuses attention on cash changes only.
C#aracteristics of Ieal /inancial Statements:<
The financial statements are prepared with a view to depict financial position
of the concern. ! proper analysis and interpretation of these statements enables a
person to judge the profitability and financial strength of the business. The financial
statements should be prepared in such away that they are able to give a clear and
orderly picture of the concern. The ideal financial statements have the following
characteristics.
1. Depict True /inancial )osition:<
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The information contained in the financial statements should be such that a true and
correct idea is taken about the financial position of the concern. .o material
information should be with held while preparing position of the concern. .o material
information should be with held while preparing these statements.
2. ,ffecti'e )resentation:<
The financial statements should be presented in a simple and lucid way so as to make
them easily understandable. ! person who is not well versed with accounting
terminology should also be able to understand the statements without much difficulty.
This characteristic will enhance the utility of these statements.
". Rele'ance: <
/inancial statements should be relevant to the objectives of the enterprises. This will
be possible when the person preparing these statements is able to properly utilize the
accounting information. The information which is not relevant to the statements
should be avoided@ otherwise it will be difficult to make a distinction between
relevant and irrelevant data.
$. *ttracti'e:<
The financial statements should be prepared in such a way that important information
is underlined so that it attracts the eye of the reader.
(. ,asiness:<
/inancial statements should be easily prepared. The balances of different ledger
accounts should be easily taken to these statements. The calculation work should be
minimum possible while preparing these statements. The size of the statements should
not be very large. The columns to be used for gibing the information should also be
less. This will enable the saving of time in preparing the statements.
-. Compara%ilit!:<
The results of financial analysis should be in a way that can be compared to the
previous year&s statements. The statement can also be in compared with the figures of
other concerns of the same nature. %ometimes budgeted figures are given along with
the present figures. The comparable figures will make the statements more useful. The
ndian companies !ct. 5><B has made it obligatory to give previous year&s figures in
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the balance sheet. The comparison of figures will enable a proper assessment for the
working of the concern.
E. *nal!tical representation:<
The information should be analyzed in such a way that similar date is presented at the
same place. ! relationship can be established in similar type of information. This will
be helpful in analysis and interpretation.
F. 3rief:<
f possible, the financial statements should be presented in brief. The reader will be
able to form an idea about the figures. On the other hand, it figures are given in details
then it will become difficult to judge the working of the business.
G. )romptness:<
The financial statements should be prepared and presented at the earliest possible.
mmediately at the close of the financial year, statements should be ready.
.imitations of /inancial Statements:<
Though financial statements are relevant and useful for the concern, still
they do not present a final picture of the concern. The utility of these statements is
dependent upon a number of factors. The analysis and interpretation of these
statements should be done very carefully otherwise misleading conclusions may be
drawn@ the financial statements suffer from the following limitations$
1. Onl! interim reports:<
These statements don not give a final picture of the concern. LThe data given
in these statements is only appro+imate.M The actual position can only be determined
when the business is sold or li6uidated. Eowever, the statements have to be prepared
for different accounting periods, generally one year, during the life time of the
concern. The costs and incomes are apportioned to different periods with a view to
determine profits etc. the allocation of e+penses and incomes will depend upon the
personal judgment of the accountant. The e+istence of cotangent assets and liabilities
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also makes the statements imprecise. %o financial statements do not give the final
picture and they are the most interim reports.
2. Do not gi'e e>act position$)
The financial statements are e+pressed in momentary values so they appear
to give final and accurate position. The value of fi+ed assets in the balance sheet
neither represents the value for which fi+ed assets can be sold nor did the amount,
which will lie, re6uire replacing these assets. The balance sheet is prepared on the
presumption of a going concern. The concern is e+pected to continue in the figure. %o
fi+ed assets are shown all cost less accumulated depreciation. There are certain assets
in the balance sheet such as preliminary e+penses, goodwill, discount on issue of
shares which will realize nothing at the time of li6uidation through they are shown in
the balance sheet.
". 4istorical Costs:<
The financial statements are prepared on the basis of historical costs or
original costs. The value of assets decreases with the passage of time current price
changes are not taken into account. The statements are not prepared keeping in view
the present economic conditions. The balance sheet losses the significance of being an
inde+ of current economic realities. %imilarly, the profitability shown by the income
statement may not represent the earning capacity of the concern. The increase profits
may be due to an increase in prices or due to sonic abnormal causes and not due to
increase in efficiency. The conclusions drawn from financial statements may not give
a lair picture of the concern.
$. Impact of Non<Monetar! /actors Ignore:<
There are certain f actors which have a bearing on the financial position and
operating results of the business but they do not become a pan of these statement s
because they cannot be measured monetary terms. %uch factors may include the
reputations of the management, credit worthiness of the concern, sources and
commitments for purchases and sales, co)operation of the employees, etc. The
financial statements only show the position of the financial accounting for business
and not the financial position.
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(. No )recision:<
The precision of financial statement data is not possible because the
statement deal with matters which cannot be precisely stated. The data are recorded
by convention procedure is followed over the years. -arious conventions, postulates
personal judgments etc, are used for developing the data.
/inancial Statements *nal!sis:<
/inancial statements are prepared primarily for decision making. They play a
dominant role in setting the frame work of managerial decision. #ut the information
provided in the financial statements is not an end in itself as no meaningful
conclusions can be drawn from these statements alone. Eowever, the information
provided in the financial statements is of immense use in making decisions through
analysis and interpretation of financial statements.
/inancial analysis is ?the process of identifying the financial strengths and
weakness of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss amount. There are various methods or techni6ues
used in analyzing financial statements, such as comparative statements, trend analysis,
common)size statements, schedule of changes in working capital, funds flow and
analysis, cost volume profit analysis and ratio analysis.
Meaning an Concept of /inancial *nal!sis:<
The term ?financial analysis& also known as analysis and interpretation of
financial statements&, refers to the process of determine financial strengths and
balance sheet, profit and loss account and oilier operative data. L!nalyzing financial
statementsM,
!ccording to 1etcalf and TitardM. s a process of evaluating the relationship
between component parts of financial statement to obtain a better understanding of a
firm&s position and performanceG Ln the words of ?1yers&, L/inancial statement
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!nalysis is largely a study of relationship among the various financial factors in a
business as disclosed by a single set I of statements, and study of the trend of
these(actors as shown in a series of statementsM.)
The purpose of financial analysis is to diagnose the information contained in
financial statements so as to judge the profitability and financial soundness of the
firm, just like a doctor e+amines ills patient by recording his body temperature, blood
treatment, a financial analyst analysis the financial statements with various tools of
analysis before commenting upon the financial health or weakness of an enterprise.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. /inancial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so
that forecast may be made of the future earnings, ability to pay interest and debt
maturities (both current and long)term) and profitability of a sound dividend policy.
Met#os or De'ices of /inancial *nal!sis:<
The analysis and interpretation of financial statement is used to determine
the financial position and results of operations as well. ! number of methods or
devices are used to study the relationship between different statements. !n effort is
made to use those devices, which clearly analyze the position of the enterprise. The
following methods of analysis are generally used$
5. (omparative %tatements
7. Trend !nalysis
:. (ommon sized statements
A. /unds flow statements
<. (ash flow statement
B. (ost)-olume)3rofit !nalysis
K. ,atio !nalysis.
1. Comparati'e Statements:<
The comparative financial statements are statements of the financial position
at different periods of time. The elements of financial position are shown in a
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comparative form so as to give an idea of financial position at two or more periods.
!ny statements prepared in a comparative term will be covered in comparative
statements. /rom practical point of view, generally two financial statements (balance
sheet and income statement) are prepared in comparative form for financial analysis
purposes.
.ot only the comparison of the figures of two periods but also be
relationship between balance sheet and income statement enables an in)depth study of
financial position a cooperative results. The comparative statement may show$
. !bsolute /igures (rupee amounts)
. (hanges in absolute figures i.e., increase or decrease in absolute figures.
. !bsolute data in terms of percentages.
The analyst is able to draw useful conclusions when figures are given in a
comparative position. The figures of sales for a 6uarter, half)year or one year may tell
only the present position of sales efforts. 8hen sales figures of previous periods, are
given along with the figures of current periods then the analyst will be able to study
the trends of sales over different periods of time. %imilarly, comparative figures will
indicate the trend and direction of financial and operating results.
The financial data will be comparative only when same accounting
principles are used in preparing these statements. n case of a deviation in the use of
accounting principles this fact must be mentioned at the foot of financial statements
and the analyst should be careful in using these statements. The two comparative
statements are () balance sheet and (ii) income statement.
I. Comparati'e income statement:<
The income statement gives the results of the operation of a business. The
comparative income statement gives an idea of the progress of a business over a
period of time. The changes in absolute data in money values and percentages can be
determined to analyze the profitability of the business. Cike comparative balance
sheet, income statement also has four columns. /irst two columns give figures of
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various items for two years. Third and fourth columns are used to show increase is
decrease in figures in absolute amounts and percentages respectively.
ii. Comparati'e %alance s#eet:<
The comparative balance sheet analysis is the study of the trend of the same items,
group of items and computed items in two or more balance sheet of the same business
enterprise on different dates. The changes in periodic balance sheet items reflect the
conduct of a business. The changes can be observed by comparison of the balance
sheet at the beginning and at the end of a period and these changes can help in
forming an opinion about the progress of an enterprise. The comparative balance sheet
has two columns for the data of original valance sheets. ! third column is used ti
show increases in figures. The fourth column may be added for giving percentages of
increases or decreases.
2. Tren anal!sis:<
The financial statements may be analyzed by computing trends of series of
information@ this method determines the direction upwards of downwards and
involves the computation of the percentage relationship that each statement item bears
to the same item in base year. The information for a number of years is taken rp and
one year, generally the first year, is taken as a bade year. The figures of the base year
are taken as 5== and trend ratios for other years are calculated on the bases of base
year. The analyst is able to see the trend of figures, whether upward or downward.
". Common< size statement:<
The common size statements, balance sheet and income statement are shown
in analytical percentages. The figures are shown as percentages of total assets, total
liabilities and total sales. The total assets ate taken as 5== and different assets are
e+pressed as a percentage of the total. %imilarly various liabilities are taken as a part
of total liabilities. These statements are also known as component percentage or 5==
percent statement because every individual item is stand as a percentage of the total
5==. The short)comings in comparative statements and tend percentages where
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changes in items could not be compared with the totals have been covered up. The
analyst is able to assess the figures in relation lo total values.
A. /uns flo1 statement:<
The funds flow statement is a statement is a statement which shows the
movement of funds and is a report of the financial operations of the business under
king. t indicates various means by which funds were obtained during a particular
period and the ways, in which these funds were employed, in simple words, it is a
statement of sources and applications of funds.
Meaning an concept funs:<
The term ?funds& has been defined in a number of ways$
*. in a narro1 sense: it means cash only and a funds flow statement prepared on this
basis is called a cash flow statement. %uch a statement enumerated net effects of the
various business transactions on cash and takes into account receipts and
disbursements of cash.
3. in a %roaer sense: the term Lfunds& refers to money values in whatever forms it
may e+ist. Eere funds mean all financial resources, used in business whether in the
form of men, material, money, machinery and others.
C. in a popular sense: the term ?funds& means working capital i.e., the e+cess of
current over current liabilities. The working capital concept of funds has emerged due
the tact that total resources of a business are invested partly in fi+ed assets in the form
of fi+ed capital and partly kept in form of li6uid or near li6uid form as working
capital.
The narrower concept of funds i.e., cash or working capital concept fails to
reveal the changes in the total financial resources of a business. %ome significant
items, such as purchase of building in e+change of shares or payment of bonus in the
form of shares which do not directly affect cash or working capital are not revealed
from the analysis based on these concepts, however, the concept of funds as working
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capital is the most popular one and in this chapter we shall refer to ?funds& as working
capital and a funds flow statement as a statement of sources and application of funds.
Meaning an Concept of H/lo1 of /unsI :<
The term ?flow& means movement and includes both ?inflow& and ?outflow&. The term
/low of funds& means transfer of economic valued from one asset of e6uity to another.
/low of funds is said to have taken placed when any transaction makes changes in the
amount of funds available before happening of the transaction. f the effect of
transaction results in the increase of funds, it is called sources of funds and if it results
in the decrease of funds, it if known as application of funds, further, in case the
transaction does not change funds it is said to have not resulted in the flow of funds.
!ccording to the working capital concept of funds, the term ?flow of funds& refers to
the movement of funds in the working capital. f any transaction results in the
increase in working capital, it is said lo be a source or inflow of funds and if it results
in the decrease if working capital, it is said to be an application or out)flow of funds.
Rule:<
The flow of funds occurs when a transaction changes on the one hand a non
current account and on the other current account and vice)versa.
8hen a change in a non current account e.g., fi+ed assets, long term liabilities
reserves and surplus fictitious assets etc, is followed by a change in another non)
current account, it does not amount to flow of funds.
This is because of the fact that in such cases neither the working capital
increases nor decreases. %imilarly, when a change in one current account results in a
change in anther current account it does not affect funds. /unds move from non
current to current transactions or vice)versa only.
n simple language funds move when a transaction affects (i) a current assets
and a fi+ed assets or (ii) a fi+ed and a current liability or (iii) a current asset and a
fi+ed liability of (iv) a fi+ed liability and current liability, and funds so not move when
the transaction affects fi+ed assets and fi+ed liability or current assets and current
liability.
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Uses6 significance an importance of funs flo1 statement:<
! funds flow statement is an essential tool for the financial analysis and is of
primary importance to the financial management. .ow)a)days it is being widely used
by the financial annalists, credit granting institutions and financial managers. The
basic purpose of a funds flow statement is to reveal the changes in the working capital
in the two balance sheet dates. t also describes the sources from which additional
working capital has been financed and the uses to which working capital has been
applied. %uch a statement is particularly useful in assessing the growth of the firm, its
resulting financial needs and in determining the best way of financing these needs. #y
making use of projected funds flow statements, the management can come to know
the ade6uacy or inade6uacy of working capital even in advance. One can plan the
intermediate and long)term financing of the firm, repayment long)term debts,
e+pansion of the business, allocation of resources, etc. the significance or importance
of funds flow statement can be followed from its various uses given below.
5. It #elps in t#e anal!sis of financial operations:
The financial statements reveal the net effect of various transactions on the
operational and financial position of a concern. The balance sheet gives a static view
of the resources or a business and the uses to which these resources have been put at a
certain point of time. #ut it does not disclose the causes for changes in the assets and
liabilities between two different points of time.
The funds flow statement e+plains causes for such changes and also the
effect of these changes on the li6uidity position of the company. %ometimes a concern
may operate profitably and yet its cost position may become more and worse. The
funds flow statement gives a clear answer to such a situation e+plains what has
happened to the profit of the firm.
2. t shows light on many perple+ing 6uestion of general interest which otherwise
may be difficult to be answered, such as$
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8hy were the net current assets lesser in spite of higher profits and vice)
versaG
8hy more dividends could not be declared in spite of available profitsG
Eow was it possible to distribute more dividends than the present
earningsG
8hat happened to the net profitG 8here did they goG
8hat happened to the proceeds of sale of fi+ed assets or issue of sharesG
0ebentures etc.G
8hat are the sources of the repayment of debtG
Eow was the increase in working capital financial and how will it be
financed in futureG
". t helps the formation of a realistic dividend policy, sometimes a firm has sufficient
profits available for distribution as dividend but yet it may not be advisable to
distribute divided for lack of li6uid of cash resources. n such cases, a funds flow
statement helps in the formation of a realistic dividend policy.
$. It #elps in t#e proper allocation of resources: the resources of a concern are
always limited and it wants to make the best use of these resources. 1anagerial
decisions. The firm can plan the deployment of its resources and allocate them among
various applications.
(. It acts as a future guie@ a projected funds flow statement also acts as a guide for
future to the management. The management can come to know the various problems
it is going to lace in near future for want of funds. The firm&s future needs of funds
can be projected well in advance and also the timing of these needs. The firm can
arrange to finance these needs more effectively and avoid future problems.
-. It #elps in appraising t#e use of 1or5ing capital: a funds flow statement helps in
e+plaining how efficiently the management has used is working capital and also
suggests ways to improve working capital position of the firm.
E. it #elps 5no1ing t#e o'erall creit 1ort#iness of a firm: the financial institutions
and banks such as state financial institutions, industrial 0evelopment corporation,
industrial financial corporation of ndia, industrial development bank of ndia etc., all
ask for funds flow statement constructed for a number of years before granting loans
to know the credit worthiness and paying capacity of the firm. Eence a firm seeking
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financial assistance from these institutions has no alternative but to prepare funds flow
statements.
.imitations of funs flo1 statement:<
The funds flow statement has a number of uses@ however it has certain limitations
also, which are listed below$
5. t should be remembered that a funds how statement is not a substitute of an
income statement or a balance sheet. t provides only some additional information as
regards changes in working capital.
7. t cannot reveal continuous changes.
:. t is not an original statement but simply is arrangement of data given in the
financial statements.
A. t is essentially historic in nature and projected funs flow statement cannot be
prepared with much accuracy.
<. (hanges in cash are more important and relevant for financial management than the
working capital.
B. (ash flow statement$ a statement of changes in the financial position of firm on
cash basis is called a cash flow statement.
%uch a statement enumerates net effects of the various business transactions on
cash and takes into account receipts and disbursements of cash. ! cash flow statement
summarizes the causes of changes in cash position of a business enterprise between
dates of two balance sheets. This statement is very much similar to the statement of
changes in financial position prepared on working capital basis i.e., a funds (low
statement, e+cept that a cash called a cash flow statement because it describes the
inflow (sources) and outflow (uses) of cash.
Comparison %et1een /uns /lo1 an Cas# /lo1 Statement:<
The term ?funds& has a variety of meanings. n a narrow sense it means cash
and the statement of changes in the financial position prepared on cash basis is called
a cash flow statement. n the most popular sense, the term ?funds& refers to working
capital and a statement of changes in the financial position prepared on tills basis is
called a funds flow statement. ! cash flow statement is much similar to a funds flow
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 ;K
statement as both are prepared to summaries the causes of changes in the financial
position of a business. Eowever, following are the main differences between funds
and a cash flow statement.
5. /unds flow statement is based on a wider concept of funds .e., working capital
while cash flow statement is based in the narrower concept of funds, i.e., cash only,
which is only one element of working capital, the other being debtors stock,
temporary investment, bills receivable etc.
7. /unds flow statement is based on accrual basis of accounting while cash flow
statements are based on cash basis of accounting. n cash flow statement while
calculating operating profits, adjustments for prepaid and outstanding e+penses and
income are made to convert the data from accrual basis to cash basis, but no such
adjustments are re6uired to be made while preparing a funds flow statements.
:. /unds flow statement does not reveal changes in current assets and current
liabilities, rather these appear separately in a schedule of changes in working capital.
.o such schedule of change in working capital is prepared for a cash flow statement
and changes in all assets and liabilities fi+ed as well as current, are summarized in the
cash flow statement.
A. (ash flow statement is prepared by taking the opening balance of cash, adding to
this all the inflow of cash and deducting the outflows of cash from the total. The
balance, i.e., opening balance of cash and inflows of cash minus outflows of cash, is
reconciled with closing balance of cash. .o such opening or closing balance appears
in a funds flow statement. The net difference between sources and applications of
funds does not represent cash rather it reveals the net increase or decrease in working
capital.
<. /unds flow statement is useful in planning intermediate and long)term financing
while as cash flow statement is more useful for short)term analysis and cash planning
of the business.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 ;;
Uses an Significance of Cas# flo1 Statement:<
(ash flow is of vital importance to the financial management. t is an essential
tool of financial analysis for short)term planning. The chief advantages of cash flow
statement are as follows$
5. %ince cash flow statement is based on the cash basis of accounting, it is very useful
in the evaluation of cash position of a firm.
7. ! projected cash flow statement can be prepared in order to know the future cash
position of a concern so as to enable a firm to plan and coordinate its financial
operations properly. #y preparing this statement, a firm can come to know as to how
much cash will be generated into the firm and how much cash will be needed to make
various payments and hence the firm can well plan to arrange for the future
re6uirements of cash.
:. ! comparison of the historical and projected cash flow statements can be made so
as to find the variations and deficiency or otherwise in the performance so as to
enable the firm to take immediate and effective action.
A. ! series of intra)firm and inter)firm cash statement reveals whether the firm&s
li6uidity (short)term paying capacity) is improving or deteriorating over a period of
time and in comparison to other firms over a given period of time.
<. (ash flow statement helps in planning the repayment of loans, replacement of
fi+ed assets and other similar long)term planning of cash. t is also significant of
capital budgeting decisions.
B. t better e+plains the causes for poor cash position in spite of substantial profits in a
firm by throwing light on various applications of cash made by the firm. t further
helps in answering some intricate 6uestions like what happened to the net profits.
8here did the profits goG 8hy more dividends could not be paid in spite of sufficient
available profitG
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K. (ash flow analysis is more useful and appropriate than funds flow analysis for
short)term financial analysis as in a very short period it is cash which is more relevant
then the working capital for forecasting the ability of the firm to meet its immediate
obligations.
Ratio *nal!sis:<
One of the techni6ues of analysis of financial statements is to calculate
ratios. ,atio is the numerical or an arithmetical relationship between two figures. t is
e+pressed when one figure is divided by another. f A=== is divided by 5=,=== the
ration can be e+pressed as A or 7$< or A=D.
!bsolute figures are valuable but they standing alone convey no meaning
unless compared with another. !ccounting ration inter)relationships, which e+ist
among various accounting dataG 8hen relationships among various accounting data
supplied by financial statements are worked out, they are known as accounting ratios.
*ccounting ratios can %e e>presse in 'arious 1a!s suc# as:
i. ! pure ratio say ratio of current assets to current liabilities is 7$ or
ii. ! rate say current assets are two times of current liabilities or
iii. ! percentage say current assets are 7==D of current liabilities.
*ach method of e+pression has distinct advantage over the other. The analyst will
select that mode which wills best)suit his convenience and purpose.
Classification of Ratios:<
,atios may be classified in a number of ways keeping in view the particular
purpose. ,atios indicating profitability are calculated on the basis of the profit and
loss account, those indicating financial position are computed on the basis of the
balance sheet and those which operating efficiency or productivity or effective use of
resources are calculate on the basis of figures in the profit and loss account and the
balance sheet.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 >=
This classification is rather crude and unsuitable to determine the
profitability and financial position of the business. To achiever this purpose
effectively ratios may be classified as$
1. )rofita%ilit! Ratios
2. Turno'er Ratios
". /inancial Ratios
$. .e'erage Ratios
1. )rofita%ilit! Ratios:<
3rofitability ,atios are of outmost importance for a concern@ these ratios are
calculated to enlighten the end results of business activities, which is the sole criterion
of the overall efficiency of a business concern
2. Turno'er C)erformance or *cti'it!D Ratios:<
These ratios are very important for a concern to judge how well facilities at
the disposal of the concern are being used or to ratios are usually calculated on the
basis of sales or cost of sales and are e+pressed in integers rather than as percentage.
%uch ratios should be calculated separately for each type of asset. Eigher the turnover
ratio, the profitability and use of capital or resources will be. The following are the
important turnover ratios usually calculated by a concern.
". /inancial Ratios:<
These ratios are calculated to judge the financial position of the concern
from long)term as well as short)term solvency point of view. The following are the
ratios, which are calculated in the respect.
$. .e'erage Ratios:<
Ceverage ,atios to an increased means of accomplishing some purpose. n
financial management it refers to employment of funds to accelerate rate of return to
owners. t may be favorable or unfavorable. !n unfavorable leverage e+ists if the rate
of return remains to however. t can be used as a tool of financial planning by the
finance manager.
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 >5
)lan of t#e Stu!:<
/rom the above description it can be said that the financial statement
analysis, particularly ratio analysis plays an important role in analyzing the financial
position of any organization. . the light of this back ground the study has been taken
up to analyze the ratios to analyze the financial position of -Q!F !2,O
3,O0'(T% CT0 taking ratios analysis as techni6ue study is organized in the manner
described below.
/inancial Statements *nal!sis of ;,RS,+ D*IR+
Introuction
Meaning an concept of /inancial *nal!sis
/inancial Statements of ;,RS,+ D*IR+
Met#os or De'ices of /inancial *nal!sis
Users of /inancial *nal!sis
Introuction:
The basis for financial planning, analysis and decision)making is the financial
information. /inancial information is needed to predict, compare and evaluate the
firm&s earning ability. t is also re6uired to aid in economic decision)making ))
investment and financing decision)making. The financial information of an enterprise
is contained in the financial statements or accounting reports.
Meaning an Concept of /inancial *nal!sis:<
The term ?financial analysis& also known as analysis and interpretation of
financial statements&, refers to the process of determine financial strengths and
balance sheet, profit and loss account and oilier operative data. L!nalyzing financial
statementsM, according to 1etcalf and TitardM. s a process of evaluating the
relationship between component parts of financial statement to obtain a better
understanding of a firm&s position and performanceG Ln the words of ?1yers&,
L/inancial statement !nalysis is largely a study of relationship among the various
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 >7
financial factors in a business as disclosed by a single set I of statements, and study of
the trend of these(actors as shown in a series of statementsM.)
The purpose of financial analysis is to diagnose the information contained in
financial statements so as to judge the profitability and financial soundness of the
firm, just like a doctor e+amines ills patient by recording his body temperature, blood
treatment, a financial analyst analysis the financial statements with various tools of
analysis before commenting upon the financial health or weakness of an enterprise.
The analysis and interpretation of financial statements is essential to bring out the
mystery behind the figures in financial statements. /inancial statements analysis is an
attempt to determine the significance and meaning of the financial statement data so
that forecast may be made of the future earnings, ability to pay interest and debt
maturities (both current and long)term) and profitability of a sound dividend policy.
The term ?financial statement analysis& includes both ?analysis& and
?interpretation&. ! distinction should, therefore be made between the two terms. 8hile
the term ?analysis& is used to mean the simplification of financial data by methodical
classification of the data given in the financial statements. LnterpretationM means,
e+plaining the meaning and significance of the data so simplified. ?Eowever, both&
analysis and interpretation& are interlined and complimentary to each oilier analysis is
useless without interpretation and interpretation without analysis is difficult or even
impossible. 1ost of the authors have used to term ?analysis& only to cover meanings
of both analysis and interpretation, as the objective of analysis is to study the
relationship between various items of financial statements by interpretation.
/inancial Statements:<
1. 3alance S#eet:<
#alance sheet is the most significant financial statement. t indicates the
financial condition or the state of affairs of a business at a particular moment of time.
1ore specifically, ?balance sheet contains information about resources and obligations
of a business entity and about its owners& interests& in the business at a particular pint
of time. Thus, the balance sheet of a firm prepared on 1arch :5, 7==K reveals the
firm&s financial position on this specific date. n the language of accounting, balance
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 >:
sheet communicates information about assets, liabilities and owner&s e6uity for a
business firm as on a specific date. t provides a snapshot of the financial position of
the firm at the close of the firm&s accounting period.
*ssets are valuable economic resources owned by the firm. They embody
future benefits and are measured in monetary terms. !ssets represent$ (a) stored
purchasing power (e.g., cash) (b) money claims (e.g., receivables, stock) and (c)
tangible and intangible items that can be sold or used in business to generate earnings.
Tangible items include land, building, plant, e6uipment or stocks of materials and
finished goods and all such other items which have physical substance. ntangible
items do not have any physical e+istence, but they have value to firm. They include
patents, copyrights, trade name or goodwill.
/irmIs o%ligations are called Ciabilities. Ciabilities represent debts payable
in the future by the firm to its lenders and creditors. They represent economic
obligations to pay cash or to provide goods or services in some future period.
2enerally, borrowing money or purchasing goods or services on credit creates
liabilities. *+amples of liabilities are creditors, bills payable, wages and salaries
payable, interest payable, ta+es payable, bonds, debentures, borrowing from banks
and financial institutions, public deposits etc.
)rofit an .oss *ccount:<
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 >A
#alance sheet is considered as a very significant statement by bankers and
other lenders because it indicates the firm&s financial solvency and li6uidity, as
measured by its resources and obligations. Eowever, creditors, particularly bankers
and financial analysts in ndia have recently started paying more attention to the
firm&s earning capacity as a measure of its financial strength. The earning capacity
and potential of a firm are reflected by its profit and loss account. The profit and loss
account is a ?score)board& of the firm&s performance during a period of time.
3rofit and loss account presents the summary of revenues, e+penses and net
income (or net loss) of a firm. t serves as a measure of the firm&s profitability.
,evenues are amount that the customers pay to the firm for providing them goods and
services. The firm uses economic resources in providing goods and services to
customers. The cost of the economic resources used to earn revenues during a period
of time is called e+penses. Thus determine, net profit, the accounting system matches
e+penses incurred during the accounting period against revenues earned during that
period. This matching of e+penses with revenue is called matching concept.
,evenues and e+penses are sometimes categorized as operating and non)
operating. ,evenues (e+penses) arising from the main operations or business of the
firm are called operating revenues (operating e+penses).
,*-! .%TT'T* O/ %(*.(* !.0 1!.!2*1*.T 3age 4 ><
1. Comparati'e 3alance S#eet of ;erse! Dair! as on
2==(<=- to 2==-<=E
2==(<=- 2==-<=E *%solute
IncreaseA
CDecreaseD
J IncreaseA
CDecreaseD
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A,AA,5=,<== < <
,eserves J %urplus <5,>7,:B,7:: <K,K<,<>,AA: <,;:,7:,75= 5=.=> D
.oan /uns
%ecured Coans ;,=B,7K,AB; ;,=A,;:,;<A (5,AA,B5A) (=.5K> D)
'n %ecured Coans 5,:B,<>,;B; 5,:A,:A,:AB (7,7<,<77) (5.B< D)
Current .ia%ilities
(urrent Ciabilities :,:B,=5,B;K <,=<,;>,K<: 5,B>,;;,=BB <=.<< D
3rovisions K,>B,AA,<77 5:,A7,::,KA7 <,A<,;>,77= B;.<A D
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B:,==,=== B,5:,B=,=== (A>,A=,===) (K.A< D)
Total /uns F"6E$6F=62EF G-62=6E16-"F 126$(6G16"-=
*pplication of /uns
.et /i+ed !ssets :B,=B,5=,:;: :B,K;,BB,AAK K7,<B,=BA 7.=5 D
Investments 75,7:,;== 75,7:,B== (7==) (=.==> D)
Current *ssets6 .oans
7 *'ances
nventories 5=,=K,B7,B>: 5<,B5,K>,7=< <,<A,5B,<57 <A.>> D
%undry 0ebtors ;,<A,A5,:A: 5=,>>,75,<>: 7,AA,;=,7<= 7;.B< D
(ash J#ank #alances 7,=A,AK,B;> 5,<5,=>,KB< (<:,:K,>7A) (7B.5= D)
Other current assets 5,><,577 5,5=,7;7 (;A,;A=) (A:.A; D)
CoansJ !dvances 7B,K;,>>,7A; :5,:K,B=,KAB A,;7,B5,A>; 5<.>> D
Total *ssets F"6E$6F=62EF G-62=6E16-"F 126$(6G16"-=
2.Comparati'e 3alance S#eet of ;erse! Dair! as on
2==-<=E to 2==E<=F
2==-<=- 2==E<=F *%solute
IncreaseA
CDecreaseD
J IncreaseA
CDecreaseD
Sources of /uns
>B
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A,AA,5=,<== < <
,eserves J %urplus <K,K<,<>,AA: B:,K7,:>,55< <,>B,K>,BK7
.oan /uns
%ecured Coans ;,=A,;:,;<A B,<K,B>,7AA (5,AK,5A,BA=) (5;.7; D)
'n %ecured Coans 5,:A,:A,:AB 5,::,7:,>AK (5,5=,:>>) (=.;7 D)
Current .ia%ilities
(urrent Ciabilities <,=<,;>,K<: :,BA,7K,=A< (5,A5,B7,K=;) (7K.>> D)
3rovisions 5:,A7,::,KA7 5K,AA,55,<AB A,=5,KK,;=A 7>.>: D
Ot#er .ia%ilities
0iffered Ta+ Ciability B,5:,B=,=== B,5:,B=,=== ) )
Total /uns G-62=6E16-"F 1="62G6$16"GE E6=F6-G6E2G
*pplication of /uns
.et /i+ed !ssets :B,K;,BB,AAK :>,<K,AK,;>K 7,K;,;5,A<= K.<K D
Investments 75,7:,B== 75,::,<== (5==) (=.==A D)
7 *'ances
nventories 5<,B5,K>,7=< 5;,;;,;B,>:K :,7K,=K,K:7 7=.>A D
%undry 0ebtors 5=,>>,75,<>: 55,:K,:=,;:: :;,=>,7A= :.AB D
(ash J#ank #alances 5,<5,=>,KB< KA,==,57= (KK,=>,BA<) (<5.=7 D)
Other current assets 5,5=,7;7 5,5K,:7= K,=:; B.:; D
CoansJ !dvances :5,:K,B=,KAB :7,A>,7A,K>= 5,A5,BA,=AA A.<< D
Total *ssets G-62=6E16-"F 1="62G6$16"GE E6=F6-G6E2G
". Comparati'e 3alance S#eet of ;erse! Dair! as on
2==E<=F to 2==F<=G
2==E<=F 2==F<=G *%solute
IncreaseA
CDecreaseD
J IncreaseA
CDecreaseD
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A,A,5=,<== < <
,eserves J %urplus B:,K7,:>,55< K5,K;,B:,::> ;,=B,7A,77A 57.B< D
.oan /uns
%ecured Coans B,<K,B>,7AA 7=,K7,><K (B,:B,>B,7BK) (>B.;A D)
'n %ecured Coans 5,::,7:,>AK 5,A;,5B,:BA 5A,>7,A5K 55.7= D
Current .ia%ilities
(urrent Ciabilities :,BA,7K,=A< <,7>,>=,K<= 5,B<,B:,K=< A<.:K D
3rovisions 5K,AA,55,<AB 55,KK,=<,7;= (<,BK,=B,7BB) (:7.<5 D)
>K
Ot#er .ia%ilities
0iffered Ta+ Ciability B,5:,B=,=== <,A5,K=,>A7 (K5,;>,=<;) (55.K5 D)
Total /uns 1="62G6$16"GE 1==6$=6"=61"2 26FG61162$(
*pplication of /uns
.et /i+ed !ssets :>,<K,AK,;>K :K,KA,:<,:AK (5,;:,57,<<=) (A.B7 D)
Investments 75,::,<== 75,::,<== ) )
7 *'ances
nventories 5;,;;,;B,>:K 5:,5A,=<,=:= (<,KA,;5,>=K) (:=.A: D)
%undry 0ebtors 55,:K,:=,;:: 5:,B5,;;,K<5 7,7A,<K,>5; 5>.KA D
(ash J#ank #alances KA,==,57= A,:K,;=,7K< :,B:,;=,5<< A>5.B5 D
Other current assets 5,5K,:7= :,=K,KB5 5,>=,AA5 5B7.:7 D
CoansJ !dvances :7,A>,7A,K>= :5,7K,K>,AB; (5,75,A<,:77) (:.K: D)
Total *ssets 1="62G6$16"GE 1==6$=6"=61"2 26FG61162$(
$. Comparati'e 3alance S#eet of ;erse! Dair! as on
2==F<=G to 2==G<1=
2==F<=G 2==G<1= *%solute
IncreaseA
CDecreesD
J IncreaseA
CDecreaseD
Sources of /uns
S#are#olersI /uns:
%hare (apital A,A,5=,<== A,AA,5=,<== < <
,eserves J %urplus K5,K;,B:,::> K7,5>,<:,777 A=,;>,;;: =.<K 5,>7,>7,;>A 5,K7,5>,>:K ;:=.B> D
'n %ecured Coans 5,A;,5B,:BA 5,B:,A=,A>= 5<,<A,57B 5=.7; D
Current .ia%ilities
(urrent Ciabilities <,7>,>=,K<= <,5<,BK,B<< (5A,7:,=><) (7.B; D)
3rovisions 55,KK,=<,7;= 55,K7,>A,B<K (A,5=,B7:) (=.:A D)
Ot#er .ia%ilities
0iffered Ta+ Ciability <,A5,K=,>A7 B,B7,5K,K:; 5,7=,AB,K>B 77.K: D
Total /uns 1==6$=6"=61"2 1="6E=6EE61(- "6"=6$E6=1E
*pplication of /uns
.et /i+ed !ssets :K,KA,:<,:AK <7,>B,7A,>>; 5<,75,;>,B<5 A=.:7 D
Investments 75,::,<== 7:,:B,5;= 7,=7,B;= >.A> D
7 *'ances
>;
nventories 5:,5A,=<,=:= 5=,<7,>5,A:A (7,B5,5:,<>B) (5>.;K D)
%undry 0ebtors 5:,B5,;;,K<5 5<,5=,>B,:5K 5,A>,=K,<B= 5=.> D
(ash J#ank #alances A,:K,;=,7K< 7,<<,>A,:A; (5,;5,;<,>7K) (A5.<: D)
Other current assets :,=K,KB5 <K,>;B (7,A>,KK<) (;5.5< D)
CoansJ !dvances :5,7K,K>,AB; 77,:=,K<,;>7 (;,>K,=:,<KB) (;7.BK D)
Total *ssets 1==6$=6"=61"2 1="6E=6EE61(- "6"=6$E6=1E
(. Comparati'e 3alance S#eet of ;erse! Dair! as on
2=1=<12 to 2=12<1"
2=1=<12 2=12<1" *%solute
IncreaseA
CDecreesD
J IncreaseA
CDecreaseD
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A,AA,5=,<== $6$$61=6(==
,eserves J %urplus K7,5>,<:,777 KA,B>,A=,;BK 7,A>,;K,BA< :.ABD
.oan /uns
%ecured Coans 5,>7,>7,;>A 5,<7,;K,:== (A=,=<,<>A) (7=.KBD)
'n %ecured Coans 5,B:,A=,A>= 5,;=,K:,7:B 5K,:7,KAB 5=.B=D
Current .ia%ilities
(urrent Ciabilities <,5<,BK,B<< ;,>;,A5,=K> :,;7,K:,A7A KA.75D
3rovisions 55,K7,>A,B<K 55,7>,;;,<5> (A:,=B,5:;) (:.BKD)
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B7,5K,K:; >,<<,=5,<;K 7,>7,;:,;A> AA.77D
Total /uns 1="6E=6EE61(- 1126"=6$"6=FF F6(G6-(6G"2
*pplication of /uns
.et /i+ed !ssets <7,>B,7A,>>; AK,<;,<;,5AK (<,:K,BB,;<5) (5=.5<D)
Investments 7:,:B,5;= 7:,:B,5;=
7 *'ances
nventories 5=,<7,>5,A:A 5:,:>,A<,=7: 7,;B,<:,<;> 7K.75D
%undry 0ebtors 5<,5=,>B,:5K 5<,77,><,K=; 55,><,:>5 =.K>D
(ash J#ank #alances 7,<<,>A,:A; 57,5=,:A,;>B >,<A,A=,<A; :K7.;>D
Other current assets <K,>;B 5:,;>,;A; 5:,:5,;B7 77>B.;BD
CoansJ !dvances 77,:=,K<,;>7 7:,B5,;K,7;B 5,:5,55,:>A <.;KD
Total *ssets 1="6E=6EE61(- 1126"=6$"6=FF F6(G6-(6G"2
>>
1. Comparati'e Statements:<
The comparative financial statements are statements of the financial position
at different periods of time. The elements of financial position are shown in a
comparative form so as to give an idea of financial position at two or more periods.
!ny statements prepared in a comparative term will be covered in comparative
statements. /rom practical point of view, generally two financial statements (balance
sheet and income statement) are prepared in comparative form for financial analysis
purposes. .ot only the comparison of the figures of two periods but also be
relationship between balance sheet and income statement enables an in)depth study of
financial position a cooperative results.. The two comparative statements are ()
balance sheet and (ii) income statement.
Ci.D Comparati'e income statement:<
The income statement gives the results of the operation of a business. The
comparative income statement gives an idea of the progress of a business over a
period of time. The changes in absolute data in money values and percentages can be
determined to analyze the profitability of the business. Cike comparative balance
sheet, income statement also has four columns. /irst two columns give figures of
various items for two years. Third and fourth columns are used to show increase is
decrease in figures in absolute amounts and percentages respectively.
Cii.D Comparati'e %alance s#eet:<
The comparative balance sheet analysis is the study of the trend of the same
items, group of items and computed items in two or more balance sheet of the same
business enterprise on different dates. The changes in periodic balance sheet items
reflect the conduct of a business. The changes can be observed by comparison of the
balance sheet at the beginning and at the end of a period and these changes can help in
forming an opinion about the progress of an enterprise.
1. Common Size 3alance S#eet of ;erse! Dair! as on
"1<="<2==G
2==G )ercentage in
5==
.ia%ilitiesA*ssets
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A.B5 D
,eserves J %urplus <K,K<,<>,AA: B=.=: D
.oan /uns
%ecured Coans ;,=A,;:,;<A ;.:B D
'n %ecured Coans 5,:A,:A,:AB 5.:> D
Current .ia%ilities
(urrent Ciabilities <,=<,;>,K<: <.7> D
3rovisions 5:,A7,::,KA7 5:.>< D
Ot#er .ia%ilities
0iffered Ta+ Ciability B,5:,B=,=== B.:K D
Total /uns G-62=6E16-"F 1==.== J
*pplication of /uns
.et /i+ed !ssets :B,K;,BB,AAK :;.7: D
Investments 75,7:,B== =.77 D
Current *ssets6 .oans 7 *'ances
nventories 5<,B5,K>,7=< 5B.7: D
%undry 0ebtors 5=,>>,75,<>: 55.AA D
(ash J#ank #alances 5,<5,=>,KB< 5.<K D
Other current assets 5,5=,7;7 =.=5 D
CoansJ !dvances :5,:K,B=,KAB :7.:= D
Total *ssets G-62=6E16-"F 1==.== J
2. Common Size 3alance S#eet of ;erse! Dair! as on
"1<="<2=1=
2=1= )ercentage in
.ia%ilitiesA*ssets
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A.7> D
,eserves J %urplus B:,K7,:>,55< B5.B> D
.oan /uns
%ecured Coans B,<K,B>,7AA B.:B D
'n %ecured Coans 5,::,7:,>AK 5.7; D
Current .ia%ilities
(urrent Ciabilities :,BA,7K,=A< :.A D
Total /uns 1="62G6$16"GE 1==.== J
*pplication of /uns
5=5
.et /i+ed !ssets :>,<K,AK,;>K :;.:5 D
Investments 75,::,<== =.7= D
Current *ssets6 .oans 7
*'ances
nventories 5;,;;,;B,>:K 5;.7; D
%undry 0ebtors 55,:K,:=,;:: 55.=5 D
(ash J#ank #alances KA,==,57= =.K5 D
Other current assets 5,5K,:7= =.=5 D
CoansJ !dvances :7,A>,7A,K>= :5.A; D
Total *ssets 1="62G6$16"GE 1==.== J
". Common Size 3alance S#eet of ;erse! Dair! as on
"1<="<2=11
2=11 )ercentage in
.ia%ilitiesA*ssets
Sources of /uns
S#are#olersI /uns:
%hare (apital A,A,5=,<== A.A7 D
,eserves J %urplus K5,K;,B:,::> K5.A> D
.oan /uns
%ecured Coans 7=,K7,><K =.7= D
'n %ecured Coans 5,A;,5B,:BA 5.AK D
Current .ia%ilities
(urrent Ciabilities <,7>,>=,K<= <.7K D
3rovisions 55,KK,=<,7;= 55.K7 D
Ot#er .ia%ilities
0iffered Ta+ Ciability <,A5,K=,>A7 <.:> D
Total /uns 1==6$=6"=61"2 1==.== J
*pplication of /uns
.et /i+ed !ssets :K,KA,:<,:AK :K.<> D
Investments 75,::,<== =.75 D
*'ances
nventories 5:,5A,=<,=:= 5:.=; D
%undry 0ebtors 5:,B5,;;,K<5 5:.,AB; :5.5K D
Total *ssets 1==6$=6"=61"2 1==.== J
5=7
$. Common Size 3alance S#eet of ;erse! Dair! as
"1<="<2=12
2=12 )ercentage in
.ia%ilitiesA*ssets
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== A.7; D
,eserves J %urplus K7,5>,<:,777 B>.B5 D
.oan /uns
%ecured Coans 5,>7,>7,;>A 5.;B D
'n %ecured Coans 5,B:,A=,A>= 5.<K D
Current .ia%ilities
(urrent Ciabilities <,5<,BK,B<< A.>K D
3rovisions 55,K7,>A,B<K 55.:5 D
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B7,5K,K:; B.:; D
Total /uns 1="6E=6EE61(- 1==.== J
*pplication of /uns
.et /i+ed !ssets <7,>B,7A,>>; <5.=B D
Investments 7:,:B,5;= =.77 D
*'ances
nventories 5=,<7,>5,A:A 5=.5< D
%undry 0ebtors 5<,5=,>B,:5K 5A.A,:A; 7.AB D
Other current assets <K,>;B =.==< D
CoansJ !dvances 77,:=,K<,;>7 75.<5 D
Total *ssets 1="6E=6EE61(- 1==.== J
(. Common Size 3alance S#eet of ;erse! Dair! as
"1<="<2=1"
2=1" )ercentage in
.ia%ilitiesA*ssets
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== :.><D
,eserves J %urplus KA,B>,A=,;BK BB.<7D
.oan /uns
%ecured Coans 5,<7,;K,:== 5.:KD
'n %ecured Coans ;=,K:,7:B 5.B=D
Current .ia%ilities
5=:
(urrent Ciabilities ;,>;,A5,=K> ;.==D
3rovisions 55,7>,;;,<5> 5=.=BD
Ot#er .ia%ilities
0iffered Ta+ Ciability >,<<,=5,<;K ;.<5D
Total /uns 1126"=6$"6=FF 1==J
*pplication of /uns
.et /i+ed !ssets AK,A<,>5,7=: A7.:KD
Investments 7:,:B,5;= =.7=D
*'ances
nventories 5:,:>,A<,=7: 55.>:D
%undry 0ebtors 5<,77,><,K=; 5:.<BD
(ash J#ank #alances 57,5=,:A,;>B 5=.K;D
Other current assets 5:,;>,;A; =.57D
CoansJ !dvances 7:,B5,;K,7;B 75.=:D
Total *ssets 1126"=6$"6=FF 1==J
Common size statements:<
The common size statements, balance sheet and income statement are shown
in analytical percentages. The figures are shown as percentages of total assets, total
liabilities and total sales. The total assets ate taken as 5== and different assets are
e+pressed as a percentage of the total. %imilarly various liabilities are taken as a part
of total liabilities. These statements are also known as component percentage or 5==
percent statement because every individual item is stand as a percentage of the total
5==. The short)comings in comparative statements and tend percentages where
changes in items could not be compared with the totals have been covered up. The
analyst is able to assess the figures in relation lo total values.
5=A
1. Tren *nal!sis of ;erse! Dair! from 2==F<=G to 2==G<1=
)articulars 2==F<=G J 2==G<1= D
Sources of /uns
S#are#olersI /uns:
%hare (apital A,AA,5=,<== 5== A,AA,5=,<== 5==
,eserves J %urplus <5,>7,:B,7:: 5== B:,K7,:>,55< 577.K7
.oan /uns
%ecured Coans ;,=B,7K,AB; 5== B,<K,B>,7AA ;5.<K
'n %ecured Coans 5,:B,<>,;B; 5== 5,::,7:,>AK >K.<A
Current .ia%ilities
(urrent Ciabilities :,:B,=5,B;K 5== :,BA,7K,=A< 5=;.A=
3rovisions K,>B,AA,<77 5== 5K,AA,55,<AB 75;.>;
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B:,==,=== 5== B,5:,B=,=== >7.<A
Total /uns F"6E$6F=62EF 5== 1="62G6$16"GE 12".""
*pplication of /uns
.et /i+ed !ssets :B,=B,5=,:;: 5== :>,<K,AK,;>K 5=>.KA
Investments 75,7:,;== 5== 75,::,<== 5==.A<
7*'ances
nventories 5=,=K,B7,B>: 5== 5;,;;,;B,>:K 5;K.A<
%undry 0ebtors ;,<A,A5,:A: 5== 55,:K,:=,;:: 5::.5=
(ash J#ank #alances 7,=A,AK,B;> 5== KA,==,57= :B.5>
Other current assets 5,><,577 5== 5,5K,:7= B=.57
CoansJ !dvances 7B,K;,>>,7A; 5== :7,A>,7A,K>= 575.7;
Total *ssets F"6E$6F=62EF 5== 1="62G6$16"GE 12".""
2. Tren *nal!sis of ;erse! Dair! from 2==F<=G to 2=1=<11
)articulars 2==F<=G J 2=1=<11 D
Sources of /uns
S#are#olersI
/uns:
%hare (apital A,AA,5=,<== 5== A,A,5=,<== 5==
,eserves J %urplus <5,>7,:B,7:: 5== K5,K;,B:,::> 5:;.7<
.oan /uns
%ecured Coans ;,=B,7K,AB; 5== 7=,K7,><K 7.<K
'n %ecured Coans 5,:B,<>,;B; 5== 5,A;,5B,:BA 5=;.AB
Current .ia%ilities
(urrent Ciabilities :,:B,=5,B;K 5== <,7>,>=,K<= 5<K.K=
5=<
3rovisions K,>B,AA,<77 5== 55,KK,=<,7;= 5AK.K;
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B:,==,=== 5== <,A5,K=,>A7 ;5.K=
Total /uns F"6E$6F=62EF 5== 1==6$=6"=61"2 11G.FF
*pplication of /uns
.et /i+ed !ssets :B,=B,5=,:;: 5== :K,KA,:<,:AK 5=A.BB
Investments 75,7:,;== 5== 75,::,<== 5==.A<
Current *ssets6
.oans 7*'ances
nventories 5=,=K,B7,B>: 5== 5:,5A,=<,=:= 5:=.A5
%undry 0ebtors ;,<A,A5,:A: 5== 5:,B5,;;,K<5 5<>.:>
(ash J#ank #alances 7,=A,AK,B;> 5== A,:K,;=,7K< 75A.5=
Other current assets 5,><,577 5== :,=K,KB5 5<K.K7
CoansJ !dvances 7B,K;,>>,7A; 5== :5,7K,K>,AB; 55B.K<
Total *ssets F"6E$6F=62EF 5== 1==6$=6"=61"2 11G.FF
". Tren *nal!sis of ;erse! Dair! from 2==F<=G to 2=11<12
)articulars 2==F<=G J 2=11<12 J
Sources of /uns
S#are#olersI
/uns:
,eserves J %urplus <5,>7,:B,7:: 5== K7,5>,<:,777 5:>.=A
.oan /uns
%ecured Coans ;,=B,7K,AB; 5== 5,>7,>7,;>A 7:.>7
'n %ecured Coans 5,:B,<>,;B; 5== 5,B:,A=,A>= 55>.B7
Current .ia%ilities
(urrent Ciabilities :,:B,=5,B;K 5== <,5<,BK,B<< 5<:.AA
3rovisions K,>B,AA,<77 5== 55,K7,>A,B<K 5AK.7K
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B:,==,=== 5== B,B7,5K,K:; >>.;K
Total /uns F"6E$6F=62EF 5== 1="6E=6EE61(- 12".F"
*pplication of /uns
.et /i+ed !ssets :B,=B,5=,:;: 5== <7,>B,7A,>>; 5AB.;B
Investments 75,7:,;== 5== 7:,:B,5;= 55=.==
Current *ssets6
.oans 7*'ances
nventories 5=,=K,B7,B>: 5== 5=,<7,>5,A:A 5=A.A>
%undry 0ebtors ;,<A,A5,:A: 5== 5<,5=,>B,:5K 5KB.;A
(ash J#ank #alances 7,=A,AK,B;> 5== 7,<<,>A,:A; 57<.5B
Other current assets 5,><,577 5== <K,>;B 7>.K5
5=B
CoansJ !dvances 7B,K;,>>,7A; 5== 77,:=,K<,;>7 ;:.7B
Total *ssets F"6E$6F=62EF 5== 1="6E=6EE61(- 12".F"
$. Tren *nal!sis of ;erse! Dair! from 2==F<=G to 2=12<1"
)articulars 2==F<=G J 2=12<1" J
Sources of /uns
S#are#olersI
/uns:
,eserves J %urplus <5,>7,:B,7:: 5== KA,B>,A=,;BK 5=:.AB
.oan /uns
%ecured Coans ;,=B,7K,AB; 5== 5,<7,;K,:== 5;.>B
'n %ecured Coans 5,:B,<>,;B; 5== 5,;=,K:,7:B 5:7.:5
Current .ia%ilities
(urrent Ciabilities :,:B,=5,B;K 5== ;,>;,A5,=K> 7BK.:K
3rovisions K,>B,AA,<77 5== 55,7>,;;,<5> 5A5.;K
Ot#er .ia%ilities
0iffered Ta+ Ciability B,B:,==,=== 5== >,<<,=5,<;K 5AA.=A
Total /uns F"6E$6F=62EF 5== 1126"=6$"6=FF 1"$.=G
*pplication of /uns
.et /i+ed !ssets :B,=B,5=,:;: 5== AK,A<,>5,7=: 5:5.>B
Investments 75,7:,;== 5== 7:,:B,5;= 55=.==
Current *ssets6
.oans 7*'ances
nventories 5=,=K,B7,B>: 5== 5:,:>,A<,=7: 5:7.>A
%undry 0ebtors ;,<A,A5,:A: 5== 5<,77,><,K=; 5K;.7A
(ash J#ank #alances 7,=A,AK,B;> 5== 57,5=,:A,;>B <>5.>:
Other current assets 5,><,577 5== 5:,;>,;A; K57.7>
CoansJ !dvances 7B,K;,>>,7A; 5== 7:,B5,;K,7;B ;;.5B
Total *ssets F"6E$6F=62EF 5== 1126"=6$"6=FF 1"$.=G
". Ratio *nal!sis:<
,atio !nalysis is a powerful tool of financial analysis. ! ratio is defined as
Lthe indicated 6uotient of two mathematical e+pressionsM and as Lthe relationship
5=K
between two or more things.M n financial analysis, a ratio is used to as a benchmark
for evaluating the financial position and performance of a firm. The absolute
accounting figures reported in the financial statements do not provide a meaningful
understanding of the performance and financial position of a firm. ,atios help to
summarize large 6uantities of financial data and to make Qualitative Judgment about
the firm&s financial performance.
Stanars of Comparison $)
The ratio analysis involves comparison for a useful interpretation of the
financial statements. ! single ratio in itself does not indicate favorable or unfavorable
condition. t should be compared with some standard. %tandards of comparison may
consist of$
Past ratios, i.e., ratios calculated from the past financial statements of
the same firm@
%ompetitors& ratios, i.e., ratios of some selected firms, especially the
most progressive and successful competitor, at the same point of time@
Industr' ratios, i.e., ratios of the industry to which the firm belongs@
and
Pro(ected ratios, i.e., ratios developed using the projected or
Performa, financial statements of the same firm.
T!pes of Ratios:<
%everal ratios (alculated from the accounting data can be grouped into various
classes according to financial activity or function to be evaluated. !s stated earlier, the
parties interested in financial analysis are short) and long)term creditors, owners and
5=;
managements. %hort)term creditors& main interest is in the li6uidity position or the
short)term solvency of the firm.
1anagement is interested in evaluating every aspect of the firm&s
performance. They have to protect the interests of all parties and see that the firm
grows profitably. n view of the re6uirements of the various users of ratios, we may
classify them into the following important categories
.iBuiit! ratios
.e'erage ratios
*cti'it! ratios
)rofita%ilit! ratios
)i*uidit' ratios measure the firm&s ability to meet current obligations@
)e+erage ratios show the proportions of debt and e6uity in financing the firm&s assets@
Acti+it' ratios reflect the firm&s efficiency in utilizing its assets, and
Pro,ita-ilit' ratios measure overall performance and effectiveness of the firm.
I. .I?UIDIT+ R*TIOS:<
t is e+tremely essential for a firm to be able to meet its obligations as they
become due. Ci6uidity ratios measure the ability of the firm to meet its current
obligations (liabilities). n fact, analysis of li6uidity needs the preparation of cash
budgets and cash and fund flow statements.
The most common ratios, which indicate the e+tent of li6uidity or lack of it,
are: CiD current ratio an CiiD Buic5 ratio. Other ratios include cash ratio, interval
measure and net working capital ratio.
CiD Current Ratio:<
The current ratio is a measure of the firm&s s#ort<term sol'enc!. t indicates
the availability of current assets in rupees for every one rupee of current liability.
Current ratio is calculated by dividing current assets by current liabilities$
Current ratio K Current asset
Current .ia%ilities
5=>
Current *ssets include cash and those assets that can be converted into cash with in
one year, such as marketable securities, debtors, inventories and prepaid e+penses are
also included in current assets.
Current .ia%ilities include creditors, bills payable, accrued e+penses, short)term
bank Coan, income,)ta+, liability and long term debt maturing in the current year.
T!#C* 5$
+ear Current *ssets
C*D
Current .ia%ilities
C3D
Ratio
CCDK*A3
7==;)=> W5<,B5,K>,7=<X5=,>>75,<>:X5,<5,=>,
KBX5,5=,7;7X:5,=K,B=,KABYZ<>,7=,;5
,<>5
W<,=<,;>,K<:X5:,A7,::,KA7X7,:
K,;7,;<AY Z 7=,;B,=B,:A>
7.;A
7==>)5= W5;,;;,;B,>:KX55,:K,:=,;::XKA,==,57
=X5,5K,:7=X:7,A>,7A,K>=YZ
B:,<=,B=,===
W:,BA,7K,=A<X5K,AA,55,<ABX7,:K
,:B,7AAY Z7:,A<,KA,;:<
7.K5
7=5=)55 W5:,5A,=<,=:=X5:,B5,;;,K<5XA,:K,;=,
7K<X:,=K,KB5X:5,7K,K>,B;YZ
B7,AA,B5,7;<
W5:,5A,=<,=:=X5:,B5,;;,K<5XA,
:K,;=,7K<X:,=K,KB5X:5,7K,K>,B
;YZ B7,AA,B5,7;<
:.B5
7=55)57 W5=,<7,>5,A:AX5<,5=,>B,:5KX7,<<,>A,
:A;X<K,>;BX77,:=,K<,;>7YZ
<=,<5,5<,>KK
W<,5<,BK,B<<X55,K7,>A,B<KX5,>7
,>7,;>AY Z5;,;5,<<,7=B
7.B;
7=57)5: W5:,:>,A<,=7:X5<,77,>5,K=;X57,5=,:
A,;>BX5:,;>,;A;X
7:,B5,;K,7;BYZBA,A;,A;,KB5
W;,>;,A5,=K>X55,7>,;;,<5>X5,<7
,;K,:==YZ75,5;,5B,;>;
7.><
0R*)4IC*. R,)R,S,NT*TION 1:
55=
Interpretation:<
!s a conventional rule, a current ratio of 7 to 5 or more is considered
satisfactory. t is a good sign on the part of the company that it has a good current
ratio. The li6uidity position of the Qersey 0airy is very good. #ut it is suggested that
the company need not maintain that many number of li6uid assets. #ut these recourses
can be used for investment proposal so that the profitability level of the company inc
2.?uic5 Ratio:<
555
?uic5 ratio6 s also called aci<test ratio6 establishes a relationship between Quick, or
Liquid, assets and (urrent liabilities. !n asset is li6uid if it in can be converted into
cash immediately or reasonably soon without a loss of value.
Ruick ratio Z (urrent assets I nventories(Ruick !ssets)
(urrent Ciabilities
(ash is the most li6uid asset. Other assets are debtors and bills receivables and
marketable securities (temporary 6uoted investments). nventories are considered to
be less li6uid. Eence for the purpose of 6uick ratio inventories are not considered as a
6uick asset.
T*3., 2:
+ear CCurrent *ssets < In'entoriesD
K ?uic5 *ssets
C*D
Current .ia%ilities
C3D
R*TIO
CCDK*A3
7==;)=> W<>,7=,;5,<>5 I 5<,B5,K>,7=<Y
Z A:,<>,=7,:;B
W<,=<,;>,K<:X5:,A7,::,KA7X7
,:K,;7,;<AY
Z 7=,;B,=B,:A>
7.=;
7==>)5= WB:,<=,B=,=== I 5;,;;,;B,>:KY
Z AA,B5,K:,=B:
W:,BA,7K,=A<X5K,AA,55,<ABX7
,:K,:B,7AAY Z 7:,A<,KA,;:<
5.>=
7=5=)55 WB7,AA,B5,7;<)5:,5A,=<,=:=Y
ZA>,:=,<B,7<<
W<,7>,>=,K<=X55,KK,=<,7;=X7
=,K7,><KYZ5K,7K,B;,>;K
7.;<
7=55)57 W<=,<5,5<,>K> I 5=,<7,>5,A:AY
Z :>,>;,7,<A<
W<,5<,BK,B<<X55,K7,>A,B<KX5
,>7,>7,;>AYZ 5;,;5,<<,7=B
7.5:
7=57)5: WBA,A;,A;,KB5)5:,:>,A<,=7:Y
Z<5,=>,=:,K:;
W;,>;,A5,=K>X55,7>,;;,<5>X5
,<7,;K,:==YZ75,5;,5B,;>;
7.:A
2,!3E(!C ,*3*,%*.T!T!O. 7$
557
Interpretation:<
The normal of this ratio is 5$ 5 is considered to represent a satisfactory
current financial position. The 6uick ratio of Qersey 0airy very good. The company
maintain li6uid in very high level. This indicates the position of the company
performance.
II. .,2,R*0, R*TIOS:<
The short)term creditors, like bankers and suppliers of raw material, are more
concerned with the firm&s current debt)paying ability. On the other hand, long)term
55:
creditors, like debenture holders, financial institutions etc. To judge the long)term
financial position of the firm, financial le'erage, or capital structure ratios are
calculated.
These ratios indicate mi+ of funds provided by owners and lenders. !s a general rule,
there should be an appropriate mi+ of debt and owner&s e6uity in financing the firm&s
assets.
1.De%t Ratio:<
The firm may be interested in knowing the proportion of the interest)bearing
debt (also called funded debt) in the capital structure. t may, therefore, compute e%t
ratio.
De%t Ratio Z Total 0ebt (T0)
.et !ssets(.!)
T*3., ":
+ear Total De%t
CSecure L Unsecure .oansD
C*D
Net *ssets
CNet /i>e *ssets L
Net Current *ssetsD
C3D
R*TIO
CCDK*A3
7==;)=> W;,=A,;:,;<A X 5,:A,:A,:ABY
Z >,:>,5;,7==
W:B,K;,BB,AAKX A=,K7,<;,=>BY
Z KK,<5,7A,<A:
=.57
7==>)5= WB,<K,B>,7AA X 5,::,7:,>AKY
Z K,>=,>:,5K5
W:>,<K,AK,;>KX A7,A7,75,A=>Y
Z ;5,>>,B>,:=B
=.=>
7=5=)55 W7=,K7,><K X 5,A;,5B,:BAY
Z 5,B;,;>,:75
W:K,KA,:<,:AKX A<,:K,B<,7<<Y
Z ;:,57,==,B=7
=.=7
7=55)57 W5,>7,>7,;>AX5,B:,A=,A>=Y
Z:,<B,::,:;A
W<7,>B,7A,>>;X::,B7,<:,BBKY
Z;B,<;,K;,BB<
=.=A
7=57)5: W5,<7,;K,:==X5,;=,K:,7:BY
Z:,::,B=,<:B
WAK,A<,>5,7=:XAA,7=,5>,5B:Y
Z>5,BB,5=,:BB
=.=:B
0R*)4IC*. R,)R,S,NT*TION ":
55A
Interpretation:<
This ratio e+presses the relationship between total debt and net assets. The firm i.e., it
measures the share of the net assets financed by outside funds. #ut as we know that
the cost of debt is par less the cost of e6uity it is advisable that debt capital of the
company could be raised to a greater e+tent. %o in this regard it is suggested to raise
the total debt.
2.D,3T<,?UIT+ R*TIO:<
The relationship describing the lenders& contribution for each rupee of the owners&
contribution is called De%t<,Buit! ratio. 0ebt)e6uity (0*) ratio is directly computed
by dividing total debt by net worth$
55<
0ebt)*6uity ratio Z Total 0ebt (T0)
.et 8orth (.8)
T*3., $:
+ear Total De%t
CSecure Unsecure .oansD
C*D
Net 9ort#
CS#are Capital L Reser'es
an SurplusD
C3D
Ratio
CCD K *A3
7==;)=> W;,=A,;:,;<A X 5,:A,:A,:ABY
Z >,:>,5;,7==
WA,AA,5=,<== X <K,K<,<>,AA:Y
Z B7,5>,B>,>A:
=.5<5
7==>)5= WB,<K,B>,7AA X 5,::,7:,>AKY
Z K,>=,>:,5K5
WA,AA,5=,<== X B:,K7,:>,55<Y
Z B;,5B,A>,B5<
=.55B
7=5=)55 W7=,K7,><K X 5,A;,5B,:BAY
Z 5,B;,;>,:75
WA,AA,5=,<== X K5,K;,B:,::>Y
Z KB,77,K:,;:>
=.=77
7=55)57 W5,>7,>7,;>A X 5,B:,A=,A>=Y
Z :,<B,::,:;A
WA,AA,5=,<== X K7,5>,<:,777Y
Z KB,B:,B:,K77
=.=AB
7=57)5: W5,<7,;K,:==X5,;=,K:,7:BY
Z:,::,B=,<:B
WA,AA,5=,<==XKA,B>,A=,;BKY
ZK>,5:,<5,:BK
=.=A7
0R*)4IC*. R,)R,S,NT*TION $:
55B
Interpretation:<
This ratio e+presses the relationship between borrowed capital and owner&s
capital. The above data of Qersey 0airy shows that the debt e6uity ratio will be
decreased slowly by the year to year from 7==>)5= to 7=5=)55 but, in the current year
7=55)57 was begins to increase the debt)e6uity ratio.
III. *cti'it! Ratios:<
55K
*cti'it! ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called turno'er ratios because
they indicate the speed with which assets are being converted or turned over into
sales.
!ctivity ratios, thus, involve a relationship between sales and assets. ! proper
balance between sales and assets generally reflects that assets are managed well.
%everal activity ratios can be calculated to judge the effectiveness of asset utilization.
1. In'entor! Turno'er Ratio:<
In'entor! turno'er indicates the efficiency of the firm in producing and selling
its product. t is calculated by dividing the cost of goods sold by the average
inventory$
nventory turnover Z (ost of 2oods %old
!verage nventory
Cost of 0oos sol consists of raw material consumed, manufacturing e+penses and
all direct e+penses which relate to manufacturing process plus !dding opening 8ork)
in)process, 0educt closing 8ork)in)process. !nd adding Opening stock of /inished
2oods, 0educt closing %tock of /inished 2oods can obtained (ost of 2oods sold.
*'erage In'entor! consists of opening and closing balances of inventory.
Calculation of cost of 0oos Sol
)articulars 7==;)=> 7==>)5= 7=5=)55 7=55)57 7=57)5:
,aw 1aterial A7,==,>;,=7; AA,B<,=7,7<: :;,<:,<>,B>A :;,AK,>B,75A A<,;<,7=,5B>
55;
(onsumed
1fg *+penses 55,:;,A=,:;< 5:,5:,B:,BB; 55,<7,5<,=;5 5B,;:,5B,>;: 5B,:K,5K,::>
8ages J
%alaries
A,<<,B;,A:K <,=<,;;,KB< <,A<,5:,A;: B,=5,>:,>AB B,<>,;B,A55
Total (E6G(6=-6F(= -26F$6($6-F- ((6=(6FF62(F -16""6=E61$" -F6F262"6G1G
Opening
8ork)in)
3rocess
X5,77,A=,5<: X7,>=,57,KBK X7,K:,5>,<K> X7,77,>A,K;> X5,:A,B7,;=A
(losing
8ork)in)
3rocess
)7,>=,57,KBK )7,K:,5>,<K> )7,77,>A,K;> )5,:A,B7,;=A )7,7<,:A,7BA
Opening
%tock of
/.2oods
X7,5:,=B,A=; XA,BK,:A,5K< XA,>>,=B,>B: X:,:A,BA,>K7 XA,<:,A<,===
(losing %tock
of /.2oods
)A,BK,:A,5K< )A,>>,=B,>B: ):,:A,BA,>K7 )A,<:,A<,=== )<,<A,7<,5A5
Cost of goos
Sol
("6E"6=-6$-G -26-G6E(6=F- (E6-(6((6="G -16=26(G61== --6G=6E26"1F
T*3., (:
In'entor! Turno'er Ratio:<
+ear Cost of 0oos Sol
C*D
*'erage In'entor!
C3D
Ratio
CCDK*A3
7==;)=> <:,K:,=B,ABK W5=,=K,B7,B>:X
5<,B5,K>,7=<O7Y
Z 57,;A,K=,KA>
A.5;
7==>)5= B7,B>,K<,=;B W5<,B5,K>,7=<X
5;,;;,;B,>:KO7Y
Z 5K,7<,::,=K5
:.B:
55>
7=5=)55 <K,B<,B<,=:> W5;,;;,;B,>:KX
5:,5A,=<,=:=O7Y
Z 5B,=5,A<,>;A
:.B=
7=55)57 B5,=7,<>,5== W5:,5A,=<,=:=X
5=,<7,>5,A:AO7Y
Z 55,;:,A;,7:7
<.5<
7=57)5: BB,>=,K7,:5; W5=,<7,>5,A:<X5:,:>,A<,=
7:O7YZ55,>B,5;,77>
<.<>
0R*)4IC*. R,)R,S,NT*ION (:
57=
Interpretation:<
This ratio indicates the numbers of times inventory is replaced during the
year. The normal of this ratio may be taken as < to B times. This ratio is deemed
reflect efficiency of inventory management. The higher ratio, the more efficient the
management of inventory and vice versa. The above data indicates Qersey 0airy
maintains on an average A times. Therefore the inventory management of the
company is satisfactory.
575
In'entor! 4oling )erio:<
nventory holding period is the period taken conversion of nventories into %ales.

nventory Eolding 3eriod Z SSSSSSSS:B=SSSSSSS
nventory Turnover ratio
T!#C* B$
+ear "-= A In'entor! Ratio In'entor! 4oling
)erio
7==;)=> :B=OA.5; ;B days
7==>)5= :B=O:.B: >> days
7=5=)55 :B=O:.B= 5== days
7=55)57 :B=O<.5 days
7=57)5: :B=O<.<> BAdays
2.De%tors C*ccounts Recei'a%leD Turno'er Ratio:<
! /irm sells goods for cash and credit. (redit is used as a marketing tool by a number
of companies. 8hen the firm e+tends credits to its customers, debtors are created in
the firm&s accounts.
577
0ebtors turnover indicates the number of times debtors turnover each year.
2enerally, the higher the value of debtor&s turnover, the more efficient is the
management of credit.
0ebtors Turnover ,atio Z %ales
0ebtors
Sales mean .et sales that can be obtained 2ross %ales minus *+cise 0uty.
0ebtors mean (losing #alance of 0ebtors.
T*3., E:
+ear Net Sales
C0ross Sales M ,>cise Dut!D
C*D
Closing 3alance of
De%tors
C3D
Ratio
Cno. of timesD
CCD K *A3
7==;)=> W;5,<5,:5,75; I K,A7,A7,77AY
Z K:,K;,;;,>>A
5=,>>,75,<>: B.K5
7==>)5= W>5,><,:>,577 I ;,K<,<A,75<Y
Z ;:,5>,;A,>=K
55,:K,:=,;:: K.:5
7=5=)55 W;<,7:,=K,A7: I ;,==,AB,=AKY
Z KK,77,B5,:K<
5:,B5,;;,K<5 <.BK
7=55)57 W;7,=K,:A,A:,=A,K<,;BAY
ZK:,=7,<;,<K5
5<,5=,>B,:5K A.;:
7=57)5: W>A,B=,==,7A=)5=,=A,5A,KABY
Z;A,<<,;<,A>A
5<,77,>5,K=; <.<<
0R*)4IC*. R,)R,S,NT*TION E:
57:
Interpretation:<
t indicates the number of times debtors turnover each year. 2enerally a high
ratio is considered for the business as it implies better cash flow. This ratio shows how
6uickly receivables of debtors are into cash. n the above data indicates Qersey 0airy
maintains debtor&s turnover on an average A times a year. Therefore the company
debtors management is satisfactory level.
57A
De%tors Collection )erio:<
The average collection period measures the 6uality of debtors since it indicates
the speed of their collection. The shorter average collection period, the better the
6uality of debtors, since a short collection period implies the prompt by debtors. The
average collection period should be compared against the firm&s credit terms and
policy to judge its credit and collection efficiency.
!verage (ollection 3eriod Z SSSSS:B=SSSSSS
0ebtors Turnover
T!#C* ;$
+ear "-= ADe%tors Turno'er De%tors Collection
)erio
7==;)=> :B=OB.K5 <: days
7==>)5= :B=OK.:5 A> days
7=5=)55 :B=O<.BK B: days
7=55)57 :B=OA.;: KA days
7=57)5: :B=O<.<< BAdays
".*ssets Turno'er Ratio:)
57<
!ssets are used to generate sales. Therefore, a firm should manage its assets
efficiently to ma+imize sales. The relationship between sales and assets is called
assets turno'er.
CiD Net *sset Turno'er Ratio:<
.et !sset Turnover ,atio Z %ales
.et !ssets
T!#C* >$
+ear Net Sales
C*D
Net *ssets
CN/* L NC*D
C3D
Ratio
Cno. of timesD
CCD K *A3
7==;)=> W;5,<5,:5,75;I K,A7,A7,77AY
Z K:,K;,;;,>>A
W:B,K;,BB,AAKX
A=,K7,<;,=>BY
Z KK,<5,7A,<A:
=.><
7==>)5= W>5,><,:>,577I ;,K<,<A,75<Y
Z ;:,5>,;A,>=K
W:>,<K,AK,;>KX
A7,A7,75,A=>Y
Z ;5,>>,B>,:=B
5.=5
7=5=)55 W;<,7:,=K,A7:I ;,==,AB,=AKY
Z KK,77,B5,:K<
W:K,KA,:<,:AKX
A<,:K,B<,7<<Y
Z ;:,57,==,B=7
=.>7
7=55)57 W;7,=K,:A,A:,=A,K<,;BAY Z
K:,=7,<;,<K5
W<7,>B,7A,>>;X
::,B7,<:,BBKY
Z ;B,<;,K;,BB<
=.;A
7=57)5: W>A,B=,==,7A=)=,=A,5A,KABY
Z;A,<<,;<,A>A
WAK,A<,>5,7=:XAA,7
=,5>,5B:Y
Z>5,BB,5=,:BB
=.>7
0R*)4IC*. R,)R,S,NT*TION G:
57B
Interpretation:<
This ratio indicates whether there was ade6uate investment in net assets or over
investment or under investment in net asset /or e+ample the current year 7=57)5:
net asset turnover =.>7 implies that Qersey 0airy is producing ,s.=.>7 of %ales for
one rupee of capital employed in net assets.
iiD Total *ssets Turno'er Ratio:<
57K
This ratio shows the firm&s ability in generating sales from all financial
resources committed to total assets. Thus$
Total !ssets Turnover Z %alesSSSS
Total !ssets
Eere, %ales means .et %ales that can be obtained 2ross %ales minus *+cise 0uty.
Total !ssets (onsists of .et fi+ed !ssets and .et (urrent !ssets ((urrent !ssets I
(urrent Ciabilities.)
T*3., 1=:
+ear Net Sales
C*D
Total *ssets
CNet /i>e *ssets L C*D
C3D
Ratio
CNo. of
TimesD
CCD K *A3
7==;)=> W;5,<5,:5,75; I K,A7,A7,77AY
Z K:,K;,;;,>>A
W:B,K;,BB,AAKX<>,7=,;5,<>5Y
Z ><,>>,A;,=:;
=.KB
7==>)5= W>5,><,:>,577 I ;,K<,<A,75<Y
Z ;:,5>,;A,>=K
W:>,<K,AK,;>KXB:,<=,B=,===Y
Z 5=:.=;.=K.;>K
=.;=
7=5=)55 W;<,7:,=K,A7: I ;,==,AB,=AKY
Z KK,77,B5,:K<
W:K,KA,:<,:AKXB7,AA,B5,7;<Y
Z 5==,5;,>B,B:7
=.KK
7=55)57 W;7,=K,:A,A:,=A,K<,;BAY
Z K:,=7,<;,<K5
W<7,>B,7A,>>;X<=,<5,5<,>K>Y
Z 5=:,AK,A=,>KK
=.K=
7=57)5: W>A,B=,==,7A=)5=,=A,5A,KABY
Z;A,<<,;<,A>A
WAK,A<,>5,7=:XBA,A;,A;,KB5Y
Z555,>A,:>,>BA
=.K<
0R*)4IC*. R,)R,S,NT*TION 1=:
57;
Interpretation:<
This ratio indicates how much sales generated when one rupee investment in total
assets i.e., fi+ed and current assets. /or e+ample The (urrent Fear 7=57)5: Total
assets turnover ratio =.K< implies that Qersey 0airy a %ale of ,s.=.K< for one
rupee nvestment in fi+ed and current assets together.
/i>e *ssets Turno'er Ratio:<
57>
The firm may wish to know its efficiency of utilizing fi+ed assets and current
assets separately.
/i+ed !ssets Turnover ,atio Z %alesSSSSSS
.et /i+ed !ssets
T*3., 11:
+ear Net Sales
C*D
Total Net /i>e *ssets
C3D
Ratio
CNo. of TimesD
CCD K *A3
7==;)=> W;5,<5,:5,75;IK,A7,A7,77AY
Z K:,K;,;;,>>A
:B,K;,BB,AAK 7.==
7==>)5= W>5,><,:>,577I;,K<,<A,75<Y
Z ;:,5>,;A,>=K
:>,<K,AK,;>K 7.5
7=5=)55 W;<,7:,=K,A7:I;,==,AB,=AKY
Z KK,77,B5,:K<
:K,KA,:<,:AK 7.=A
7=55)57 W;7,=K,:A,A:,=A,K<,;BAY
Z K:,=7,<;,<K5
<7,>B,7A,>>; 5.:K
7=57)5: W>A,B=,==,7A=)=,=A,5A,KABY
Z;A,<<,;<,A>A
AK,A<,>5,7=: 5.K;
0R*)4UC*. R,)R,S,NT*TION 11:
5:=
Interpretation: <
This ratio indicates how much sales generated when one rupee investment in fi+ed
assets. /or e+ample The (urrent Fear 7=57)5: fi+ed assets turnover ratio 5.K;
implies that Qersey 0airy a %ale of ,s.5.K; for one rupee nvestment in fi+ed
assets.
5:5
Current *ssets Turno'er Ratio:<
The firm may wish to know its efficiency of utilizing (urrent !ssets in the
organization.
(urrent !ssets Turnover Z %alesSSSSS
(urrent !ssets
T*3., 12:
+ear Net Sales
C*D
CTotal Current *ssetsD
C3D
Ratio
CNo. of
TimesD
CCD K *A3
7==;)=> W;5,<5,:5,75; I K,A7,A7,77AY
Z K:,K;,;;,>>A
<>,7=,;5,<>5 5.7A
7==>)5= W>5,><,:>,577 I ;,K<,<A,75<Y
Z ;:,5>,;A,>=K
B:,<=,B=,=== 5.:5
7=5=)55 W;<,7:,=K,A7: I ;,==,AB,=AKY
Z KK,77,B5,:K<
B7,AA,B5,7;< 5.7:
7=55)57 W;7,=K,:A,A:,=A,K<,;BAY
Z K:,=7,<;,<K5
<=,<5,5<,>K> 5.AA
7=57)5: W>A,B=,==,7A=)5=,=A,5A,KABY
Z;A,<<,;<,A>A
BA,A;,A;,KB5 5.:5
5:7
0R*)4IC*. R,)R,S,NT*TION 12:
Interpretation$)
This ratio indicates how much sales generated when one rupee investment in total
current assets. /or e+ample The (urrent Fear 7=57)5: current assets turnover ratio
5.:5implies that Qersey 0airy a %ale of ,s.5.:5 for one rupee nvestment in
current assets.
5::
)rofita%ilit! Ratios:<
3rofit is the difference between revenues and e+penses over a period of time
(usually one year). 3rofit is the ultimate ?output& of a company, and it will have no
future if it fails to make sufficient profits. Therefore, the financial manager should
continuously evaluate the efficiency of the company in term of profits. The
profita%ilit! ratios are calculated to measure the operating efficiency of the company.
#esides management of the company creditors and owners are also interested in the
profitability of the firm.
2enerally, two major types of profitability ratios are calculated$
CiD 3rofitability in relation to sales
CiiD 3rofitability in relation to investment.
0ross )rofit Margin Ratio:<
The gross profit margin reflects the efficiency with which management
produces each unit of product. This ratio indicates the average speed between the cost
of goods sold and the sales revenue.
2ross 3rofit 1argin Z 2ross 3rofit
%ales
T*3., 1":
+ear 0ross )rofit
CSales M Cost of 0oos SolD C*D
Sales
C3D
Ratio
CpercentageD
CCD K *A3N1==
7==;)=> WK:,K;,;;,>>A I <:,K:,=B,B>Y
Z 7=,=<,;7,<7<
K:,K;,;;,>>A 7K.5; D
7==>)5= W;:,5>,;A,>=KI B7,B>,K<,=;BY
Z 7=,<=,=>,;75
;:,5>,;A,>=K 7A.BA D
7=5=)55 WKK,77,B5,:KY
Z 5>,<K,=B,::K
KK,77,B5,:K< 7<.:A D
7=55)57 WK:,=7,<;,<K5I B5,=7,<>,5==Y
Z 55,>>,>>,AK5
K:,=7,<;,<K5 5B.A: D
7=57)5: W;A,<<,;<,A>A)BB,>=,K7,:5;Y
Z5K,B<,5:,5KB
;A,<<,;<,A>A 7=.;KD
0R*)4IC*. R,)R,S,NT*TION 1":
5:A
Interpretation:<
The ratio reveals the amount of gross profit of for each rupee of sales. The
higher ratio, the greater will be profit margin 7=D to :=D. 2ross profit ratio may be
considered normal. %o it is clear that gross profit margin of -ijay !gro 3roducts Ctd
3vt maintains average 2.3 margin 7=D. #ut in the previous year 7=55)57 company
performance is not good. #ut in the current year company performance is good.
Net )rofit Margin Ratio:<
5:<
.et profit is obtained e+penses, interest and ta+es are subtracted from the
2ross profit. .et profit margin ratio establishes a relationship between net profit
and sales and indicates management&s efficiency in manufacturing, administrating
and selling the products.
This ratio also indicates the firm&s capacity to withstand adverse economic
conditions. ! firm with a high net margin ratio would be in an advantageous
position to survive in the face of falling selling prices rising costs of production or
declining demand for the product.
.et 3rofit 1argin ,atio Z 3rofit !fter Ta+
%ales
T*3., 1$:
+ear )rofit *fter Ta>
C*D
Sales
C3D
Ratio
CpercentageD
CCD K *A3N1==
7==;)=> ;.::.K=.;7; K:,K;,;;,>>A 55.7> D
7==>)5= >.K7.<5.5== ;:,5>,;A,>=K 55.B; D
7=5=)55 55.5=.=A.A5; KK,77,B5,:K< 5A.:K D
7=55)57 7.>A.=B.K5= K:,=7,<;,<K5 A.=7 D
7=57)5: <,<B,:5,B=> ;A,<<,;<,A>A B.<KD
0R*)4IC*. R,)R,S,NT*ION 1$:

5:B
Interpretation:<
This ratio indicate the amount of sales left for shareholders after all costs and
e+penses have been met. The higher the ratio, the greater will be the profitability
and the higher the return to the shareholders <D to 5=D may be considered as
normal. The Qersey 0airy maintains on an average net profit ratio 5=D. #ut in the
current year 7=57)5: net profit margin is B.<KD. The company performance in the
current year not satisfactory.
,arning )er S#are C,)SD:<
The profitability of the shareholder&s investment can also be
5:K
1easured in many other ways. One such measure is to calculate the *arnings per
%hare.
*3% calculations made over years indicate whether or not the firm&s earnings
power on per)share basis has changed over that period. The *3% of the company
should be compared with the industry average and the earnings per share of other
firms.
*3% Z 3rofit !fter Ta+SSSS
.umber of shares Outstanding
T*3., 1(:
+ear )rofit *fter Ta>
C*D
No. of ,Buit!
S#ares
C3D
,)S CRsD
CCD K *A3
7==;)=> ;,::,K=,;7; AA,A=,<K< 5;.KK
7==>)5= >,K7,<5,5== AA,A=,<K< 75.>=
7=5=)55 55,=5,=A,A5; AA,A=,<K< 7<.==
7=55)57 7,>A,=B,K5= AA,A=,<K< B.77
7=57)5: <,<B,:5,B=> AA,A=,<K< 57.<7
0R*)4IC*. R,)R,S,NT*ION 1(:
5:;
Interpretation:<
This ratio indicates the profitableness if common share holders investigation
a per share basis. ! high ratio is always preferable since higher the earnings, higher
will be the prosperity of the company. n the above case Qersey 0airy maintains on an
average *3% is ,s.5<. #ut, in the current year 7=57)5: the *arnings per %hare is
57.<7 therefore the company performance in the current year not satisfactory.
CiiiD Di'iens )er S#are:<
The net profits after ta+es belong to shareholders. #ut the income, which
they really, are the amount of earnings distributed as cash dividends. Therefore, a
5:>
large number of present and potential investors may be interested in 03%, rather
than *3%.
03% is the earnings distributed to ordinary shareholders divided by the number of
ordinary shares outstanding
03% Z *arnings paid to %hareholders (dividends).
.umber of ordinary %hares
T*3., 1-:
+ear Di'ien )ai
C*D
No. of Orinar!
S#ares
C3D
D)S
CRsD
CCD K *A3
7==;)=> 7,77,=7,;K< AA,A=,<K< <.==
7==>)5= :,::,=A,:5: AA,A=,<K< K.<=
7=5=)55 7,B:,A:,A<= AA,A=,<K< <.>:
7=55)57 7,77,=7,;K< AA,A=,<K< <.==
7=57)5: 7,BB,==,=== AA,A=,<K< <.>>
0R*)4IC*. R,)R,S,NT*TION 1-:
5A=
Interpretation:
The ratio indicates the profitableness of the share holders. This ratio is very
good because the ratio indicates position of the firm level and share holders interest.
$.Tren *nal!sis$)
n financial analysis the direction of changes over a period of years is of
crucial importance. Time series or Tren *nal!sis of ratios indicates the direction of
5A5
change. This kind of analysis is particularly applicable to the items of profit and loss
account.
/or trend analysis, the use of inde+ numbers is generally advocated. 3rocedure
followed is to assign the number 5== to items of the base year and to calculate
percentage changes in each item of other years is relation to the base year. This
procedure may be called as OTren<)ercentage Met#o.P
5A7
/INDIN0S
The following thongs are found out after careful analysis of the financial statements
of the company during the last < years.
There was a considerable fall in the sales figures in the year 7==K)=;.
The company in spite of its e+pansion programmes gas not been concentrating
on the sales figures, which have been reflected in each and every aspect of the
management.
The overall pay out ratio of the company has been very less.
The company has been maintaining e+cess amount of profits in the form of
reserves.
The capital structure of the company seems to be unlevered.
There was a considerable decrease in earnings in the yeas 7==>)5=.
The performance of the company regarding its e+pansion programmes has
been to a desirable e+tent.
n spite of its e+pansion programmes, the company has not increased its sales
figures to the level of increase in its product range.
The company has been maintaining huge amounts in the form of li6uid assets.
There was a considerable increase in the e+cise duty in the year 7==K)=;.
The average collection period has been very high and it is increasing year by
year.
SU00,STIONS
5A:
The performance of the company is up to the mark in each aspect. #ut, it has
a few more suggestions for its best performance.
/irstly, the company is suggested to the concentrate on sales, as the sales
figures seem to decline over the last three years, the increase in sales lead to
increase in 2ross profit as well .et 3rofit figures.
The company is as well suggested to involve debt in its capital structure as
debt not only reduces the ta+able portion of the income but also the cost of
using the debt is low when compared with the cost of e6uity.
t is realized that the company has been maintaining large amounts of profit as
reserves. t is not advisable to keep that much of reserves in idle form. t is
suggested to invest these reserves for productive purpose so that the return
would be enhanced.
t has also been realized that there is much deviation between 2ross 3rofit and
.et profit of the company. This shows that the operating e+penditure is high.
%o, it is suggested that the company should concentrate on reducing the
operating e+penditure.
The average collection period has been high and is still increasing. t is not at
all a desirable average collection period. t shows the inefficiency on reducing
the average collection period.
t is suggested t maintain the same pay out ratio as the company is
concentrating on the e+pansion programme.
CONC.USION
5AA
The economic life of any organization depends on some important financial
aspects like profits, e+penses, turnover etc. ! careful analysis of these areas is
very much essential for the success and survival of these organizations. /or this
purpose financial statement analysis with the help of the techni6ue like ratios,
funds flow etc. is to be carried out. ! study of this type is very much useful for
nay organization to keep into the different financial aspects and to take some
measures to improve in the above areas. The company under study Qersey 0airy ,
being a unit of the soap industry as to carefully watch the trends in the soap
industry as should come forward with innovative marketing strategies.
3I3.IO0R*)4+
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5A<
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1!.!2*1*.T !((O'.T.2) 0r.%.3. 2'3T!
/.!.(!C 1!.!2*1*.T ) %!,1! J 2'3T!
!0-!.(*0 !((O'.T!.(F ) %.3.Q!., .!,!.2
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9,3SIT,S
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1. 3alance S#eet of ;erse! Dair! as on "1<="<2==G
*s on
"1<="<2==G ,s.
Sources of /uns
S#are#olerIs funs:
(apital A,AA,5=,<==
,eserves J %urplus <K,K<,<>,AA:
.oan /uns:
%ecured Coans ;,=A,;:,;<A
5AB
'nsecured Coans 5,:A,:A,:AB
Current .ia%ilities an )ro'isions:
(urrent Ciabilities <,=<,;>,K<:
3rovisions 5:,A7,::,KA7
Ot#er .ia%ilities:
0eferred Ta+ Ciability B,5:,B=,===
Total /uns G-62=6E16-"F
*pplication of /uns
/i>e *ssets:
2ross #lock B:,<=,A7,55A
Cess)0epreciation :5,=<,;>,K<K
.et #lock "26$$6(26"(E
(apital 8ork)in)3rogress A,:A,5A,=>=
nvestments 75,7:,B==
Current *ssets6 .oans 7 *'ances:
nventories 5<,B5,K>,7=<
%undry 0ebtors 5=,>>,75,<>:
(ash J #ank #alances 5,<5,=>,KB<
Other (urrent !ssets 5,5=,7;7
Coans J !dvances :5,=K,B=,KAB
Total /uns G-62=6E16-"F
2. 3alance S#eet of ;erse! Dair! as on "1<="<2=1=
*s on
"1<="<2=1= ,s.
Sources of /uns
S#are#olerIs funs:
(apital A,AA,5=,<==
,eserves J %urplus B:,K7,:>,55<
.oan /uns:
%ecured Coans B,<K,B>,7AB
'nsecured Coans 5,::,7:,>AK
(urrent Ciabilities :,BA,7K,=A<
3rovisions 5K,AA,55,<AB
Ot#er .ia%ilities:
0eferred Ta+ Ciability B,5:,B=,===
Total /uns 1="62G6$16"GG
*pplication of /uns
/i>e *ssets:
2ross #lock KA,A7,K;,:>:
Cess)0epreciation :B,<A,=5,K5B
.et #lock "E6FF6E-6-EE
(apital 8ork)in)3rogress 5,B;,K5,77=
nvestments 75,7:,<==
5AK
nventories 5;,;;,;B,>:K
%undry 0ebtors 55,:K,:=,;::
(ash J #ank #alances KA,==,57=
Other (urrent !ssets 5,5K,:7=
Coans J !dvances :7,A>,7A,K>=
Total /uns 1="62G6$16"GG
". 3alance S#eet of ;erse! Dair! as on "1<="<2=11
*s on
"1<="<2=11 ,s.
Sources of /uns
S#are#olerIs funs:
(apital A,AA,5=,<==
,eserves J %urplus K5,K;,B:,::>
.oan /uns:
%ecured Coans 7=,K7,><K
'nsecured Coans 5,A;,5B,:BA
(urrent Ciabilities <,7>,>=,K<=
3rovisions 55,KK,=<,7;=
Ot#er .ia%ilities:
0eferred Ta+ Ciability <,A5,K=,>A7
Total /uns 1==6$=6"=61"2
*pplication of /uns
/i>e *ssets:
2ross #lock KB,BK,<=,A;<
Cess)0epreciation :>,KA,5<,A5;
.et #lock "-6G"6"(6=-E
(apital 8ork)in)3rogress ;5,==,7;=
nvestments 75,::,<==
nventories 5:,5A,=<,=:=
%undry 0ebtors 5:,B5,;;,K<5
(ash J #ank #alances A,:K,;=,7K<
Other (urrent !ssets :,=K,KB5
Coans J !dvances :5,7K,K>,AB;
Total /uns 1==6$=6"=61"2
$. 3alance S#eet of ;erse! Dair! as on "1<="<2=12
*s on
"1<="<2=12 ,s.
Sources of /uns
S#are#olerIs funs:
(apital A,AA,5=,<==
,eserves J %urplus K7,5>,<:,777
.oan /uns:
5A;
%ecured Coans 5,>7,>7,;>A
'nsecured Coans 5,B:,A=,A>=
(urrent Ciabilities <,5<,BK,B<<
3rovisions 55,K7,>A,B<K
Ot#er .ia%ilities:
0eferred Ta+ Ciability B,B7,5K,K:;
Total /uns 1="6E=6EE61(-
*pplication of /uns
/i>e *ssets:
2ross #lock >;,=:,=>,<:K
Cess)0epreciation A<,=B,;A,<:>
.et #lock (26G-62$6GGF
(apital 8ork)in)3rogress )
nvestments 7:,:B,5;=
nventories 5=,<7,>5,A:A
%undry 0ebtors 5<,5=,>B,:5K
(ash J #ank #alances 7,<<,>A,:A;
Other (urrent !ssets <K,>;B
Coans J !dvances 77,:=,K<,;>7
Total /uns 1="6E=6EE61(-
(. 3alance S#eet of ;erse! Dair! as on "1<="<2=1"
*s on
"1<="<2=1" ,s.
Sources of /uns
S#are#olerIs funs:
(apital A,AA,5=,<==
,eserves J %urplus KA,B>,A=,;BK
.oan /uns:
%ecured Coans 5,<7,;K,:==
'nsecured Coans 5,;=,K:,7:B
(urrent Ciabilities ;,>;,A5,=K>
3rovisions 55,7>,;;,<5>
Ot#er .ia%ilities:
0eferred Ta+ Ciability >,<<,=5,<;K
Total /uns 1126"=6$"6=FF
*pplication of /uns
/i>e *ssets:
2ross #lock >;,::,=:,K<>
Cess)0epreciation <=,;K,57,<AA
nvestments 7:,:B,5;=
5A>
nventories 5:,:>,A<,=7:
%undry 0ebtors 5<,77,>5,K=;
(ash J #ank #alances 57,5=,:A,;>B
Other (urrent !ssets 5:,;>,;A;
Coans J !dvances 7:,B5,;K,7;B
Total /uns 1126"=6$"6=FF
1. )rofit an .oss *ccount of ;erse! Dair! for t#e !ear ene "1<="<2==G
)articulars +ear ene "1<="<2==G
,s.
Income
%ales ;5,<5,:5,75;
Other ncome :,:>,5>,BK>
* F$6G=6(=6FGE
,>peniture
,aw materials consumed A7,==,>;,=7;
3ayments J #enefits to *mployees A,<<,B;,A:K
1anufacturing, %elling, !dministrative J Other
*+penses
5A,;K,<5,>BA
*+cise duty and Ta+es ;,:=,:K,:AB
nterest ;7,AK,577
0epreciation <,B:,57,5K=
0ecrease O (ncrease) in stocks (A,77,==,:;5)
3 E16GF61$6-F$
)rofit %efore ta> C*<3D 126G26"-621"
*+cess provision for depreciation made in earlier years
credited back.
<,:A,B5<
3rovision for diminution in value of investments )
3rovision for I (urrent ta+ (<,5:,A=,===)
*+cess 3rovision for I 0iffered ta+ made in earlier
years with drawn
A>,A=,===
0iffered Ta+ )
)rofit after ta> F6""6E=6F2F
*+cess provision of income ta+ made in earlier years )
F6""6E=6F2F
3rofit brought forward from previous year A,A:,><,=;:
)rofit a'aila%le for appropriations 126EE6-(6G11
Transfer to 2eneral ,eserve B,==,==,===
3rovision for 3roposal 0ividend 7,77,=7,;K<
3rovision for ta+ on distributed profits 7;,AA,KA:
#alance of profit carried forward to ne+t year A,7K,5;,7>:
Total 126EE6-(6G11
5<=
2. )rofit an .oss *ccount of ;erse! Dair! for t#e !ear ene "1<="<2=1=
)articulars +ear ene "1<="<2=1=
,s.
Income
%ales >5,><,:>,577
Other ncome :,=5,B7,=>A
* G$6GE6=1621-
,>peniture
,aw materials consumed AA,B<,=7,7<:
3ayments J #enefits to *mployees <,=<,;;,KB<
*+penses
5K,=5,55,B,>5B
nterest <A,;A,5;5
0epreciation <,KA,<A,;BB
0ecrease O (ncrease) in stocks (5A,K>,B==)
3 F16E=6(26="E
)rofit %efore ta> C*<3D 1"62-6$G61EG
credited back.
<,A=,<<7
3rovision for I (urrent ta+ (A,==,==,===)
*+cess 3rovision for I 0iffered ta+ made in earlier
years with drawn
)
0iffered Ta+ )
)rofit after ta> G6"16FG6E"1
*+cess provision of income ta+ made in earlier years A=,B5,:B>
G6E26(161==
3rofit brought forward from previous year A,7K,5;,7>:
)rofit a'aila%le for appropriations 1"6GG6-G6"G"
Transfer to 2eneral ,eserve B,==,==,===
nterim 0ividend paid 5,55,=5,A:;
3rovision for ta+ on distributed profits A7,BK,55<
#alance of profit carried forward to ne+t year A,7:,>K,>B<
Total 1"6GG6-G6"G"
". )rofit an .oss *ccount of ;erse! Dair! for t#e !ear ene "1<="<2=11
5<5
)articulars +ear ene "1<="<2=11
,s.
Income
%ales ;<,7:,=K,A7:
Other ncome A,<;,K>,<<<
* FG6F16F-6GEF
,>peniture
,aw materials consumed :;,<:,<>,B>A
3ayments J #enefits to *mployees <,A<,5:,A;:
*+penses
5<,5<,>A,;75
*+cise duty and Ta+es K,;K,B5,<57
nterest 5;,AB,=A<
0epreciation <,K<,KK,K;>
0ecrease O (ncrease) in stocks 7,5A,BB,K;5
3 E(61162=612(
)rofit %efore ta> C*<3D 1$6E=6--6F("
*+cess provision for depreciation made in earlier
years credited back.
)
3rovision for I (urrent ta+ (A,:=,==,===)
*+cess 3rovision for I 0iffered ta+ made in
earlier years with drawn
K5,;>,=<;
0iffered Ta+ )
)rofit after ta> 116126((6G11
%hort provision of income ta+ made in earlier
years
(7,<5,A>:)
1161=6=$6$1F
3rofit brought forward from previous year A,7:,>K,>B<
)rofit a'aila%le for appropriations 1(6"$6=26"F"
Transfer to 2eneral ,eserve K,==,==,===
nterim 0ividend paid )
3rovision for 3roposal 0ividend 7,BB,A:,A<=
3rovision for ta+ on distributed profits :K,:B,KAA
#alance of profit carried forward to ne+t year <,:=,77,5;>
Total 1(6"$6=26"F"
$. )rofit an .oss *ccount of ;erse! Dair! for t#e !ear ene "1<="<2=12
5<7
)articulars +ear ene "1<="<2=12
,s.
Income
%ales K:,=7,<;,<K5
Other ncome 7,A:,;<,B>A
* E(6$-6$$62-(
,>peniture
,aw materials consumed :;,AK,>B,75A
3ayments J #enefits to *mployees B,=5,>:,>AB
*+penses
7=,B7,=<,==>
*+cise duty and Ta+es ;,;;,7:K
nterest A,:7,7BB
0epreciation <,B5,A>,<55
0ecrease O (ncrease) in stocks (5<,A7,;>K)
3 E=6E162262FF
)rofit %efore ta> C*<3D $6E(6216GE-
credited back.
)
3rovision for /ringe #enefit Ta+ (;,7<,===)
3rovision for I (urrent ta+ (A=,==,===)
*+cess 3rovision for I 0iffered ta+ made in earlier years
with drawn
)
0iffered Ta+ (5,7=,AB,K>B)
)rofit after ta> "6=-6(=61F=
%hort provision of income ta+ made in earlier years (57,A:,AK=)
26G$6=-6E1=
3rofit brought forward from previous year <,:=,77,5>=
)rofit a'aila%le for appropriations F62$62F6G==
Transfer to 2eneral ,eserve 7>,A=,BK5
nterim 0ividend paid )
3rovision for ta+ on distributed profits :5,5:,><:
#alance of profit carried forward to ne+t year <,A5,K5,A=5
Total F62$62F6G==
(. )rofit an .oss *ccount of ;erse! Dair! for t#e !ear ene "1<="<2=1"
)articulars +ear ene "1<="<2=1"
,s.
Income
%ales ;A,<<,;<,A>A
5<:
Other ncome 5,<B,5B,;7>
*
,>peniture
,aw materials consumed A<,;<,7=,5B>
3ayments J #enefits to *mployees B,<>,;B,A55
*+penses
7=,B5,><,K55
*+cise duty and Ta+es >,;<,7><
nterest A,>;,5;=
0epreciation <,;>,5:,7B5
0ecrease O (ncrease) in stocks 5,BB,:<,A=5
3 EE6$$6-"6-2-
)rofit %efore ta> C*<3D F6-E6"F6-GE
*+cess provision for depreciation made in earlier
years credited back.
)
3rovision for /ringe #enefit Ta+ (7,==,===)
3rovision for I (urrent ta+ (>;,==,===)
*+cess 3rovision for I 0iffered ta+ made in
earlier years with drawn
<B,;<,<>;
0iffered Ta+ (7,>7,;:,;A>)
)rofit after ta> (6"16$=6$$-
%hort provision of income ta+ made in earlier
years
3rofit brought forward from previous year <,A5,K5,A=5
)rofit a'aila%le for appropriations 1=6E"6116F$E
Transfer to 2eneral ,eserve 7,A<,<>,:7>
nterim 0ividend paid 5,KK,B7,:==
3rovision for 3roposal 0ividend ;;,;5,5<=
3rovision for ta+ on distributed profits 5<,=>,:<5
#alance of profit carried forward to ne+t year <,A<,>>,K5K
Total 1=6E"6116F$E
5<A

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