Professional Documents
Culture Documents
OF DKSSKN, CHIKODI”
Contents
Executive summary 1
Chapter II
Industrial profile 3
Company profile 7
Organization structure 16
17
Product profile
Chapter III
Chapter IV
Financial analysis
Financial statement 46
46
Balance sheet
50
Income statement 51
Analysis of financial statement 52
Significance of financial statement analysis 53
Statement of changes in the financial statement
Chapter V
Chapter VI
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Bibliography
Chapter IX
88
Annexure
89
90
91
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LIST OF TABLES
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LIST OF CHARTS
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4 Solvency Ratio 71
5 Fixed Assets Turnover Ratio 73
6 Working Capital Turnover Ratio 74
7 Gross Profit Turnover Ratio 76
8 Operating Cost Turnover Ratio 78
9 Return On Investment 79
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CHAPTER- I
EXECUTIVE SUMMARY
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Financial statements summarizes that the financial position and operation
of the company. Many companies are used comparative, ratio analysis, fund flow
and cash flow analysis to know about the financial position of the firm. The
comparative, ratio analysis, fund flow analysis and cash flow analysis are widely
used for analyzing the financial statements. It is systematic use of ratio to interpret
the financial statements so that the strength and weaknesses of a firm is
determined.
During my project the firm is not in good health and the company funds are
used only for short term assets not for long term assets.
My Objectives are
1. To determine the operational efficiency of the company using ratio analysis.
2. To know the changes in financial statements for the past 3 years
using trend analysis.
3. To conduct cash and fund flow statement for 2007- 2008
4. To identify the financial strength and weakness that the firm
might have.
Suggestions
CONCLUSION
INDUSTRIAL PROFILE
THE BRITISH
AT FIRST
After the blockade and the landing of British troops superior in number than
the French force of the General Decaen, the French capitulated in December 1810.
From the Treaty of Paris of 1814, Mauritius and its dependencies became British,
whereas Reunion even that it was captured was given back to France. Mauritius
became British and got back the name the Dutch gave her, but stayed quite close to
France as she kept the language, culture and French laws. Left on their own, under
the same legal system, the ancient French colonist and their descendants was then
able to live a French style as in the past, changing from a colony base on maritime
trade to that of an agricultural one.
Even that the sugar industry started under the French period, it was only
during the British period that it developed in such a way that it became almost a
mono-crop industry until some other crops were cultivated such as tea, tobacco and
more recently small industries for food, textile and household products.
ABOLITION OF SLAVERY. The most important event under the British.
Mauritius was in 1829. But it was only when the slaves were emancipated that it
took importance.
TOWODRS INDEPENDENCE
It is as from 1937 with the requests of the workers and the establishment of
the Labour Party that regrouped the colored people and certain intellectuals from
Indian origin as well as the recognition of the workers unions that progress started
to be done. There was also a new constitution after the elections of 1943 during
which two forth of the population could vote. The elections of 1953 made
democracy move ahead when the Labour party obtained more seats. It was in 1957,
the year when the ministerial system started in Mauritius that Dr Ramgoolam took
the leadership of the Labour party.
When sugar industry was granted tariff protection the history of sugar
industry started again before 1932 which gave limpet us (driving force) to growth
of industry. Again the government in 1951 provided incentives by fixing
minimum prices of cane and maximum prices of sugar.
POLICY
Government announces the Statutory Minimum Price (SMP) for sugarcane every
year based on recommendations of the Commission for Agricultural Costs and
Prices (CACP).
COMPANY PROFILE
Name Designation
1. Sri Mahantesh M Kavatagimath Chairman
2. Sri Ajit S Desai Vice Chairman
3. Sri Annasaheb S Jolle Director
4. Sri Ashok A Patil Director
5. Sri Prakash J Patil Director
6. Sri Tatyasaheb D Kate Director
7. Sri Mallikarjun G Kore Director
8. Sri Kallappa K Maishale Director
9. Sri Shantappa Y Miraji Director
10. Sri Amit P Kore Director
11. Sri Satappa N Saptasagar Director
12. Sri Parasagouda I Patil Director
13. Sri Bharatesh S Banawane Director
14. Sri Subhash N Katrale Director
15. Sri Mallikarjunayya V Hiremath Director
16. Sri Nandakumar M Nashipudi Director
17. Sri S B Umarane The Managing Director
BACKGROUND
Nature of Business
OWNERSHIP PATTERN
The authorized share capital of the Society shall be RS.15.20 crores divided
in to total 38,000 shares of RS.4,000/-each as under.
i) Rs.14,51,000/-dividend in to 36,275 shares of the face value of
Rs.4,000/-each reserved for the grower members called as “A”Class.
ii) Rs.9,00,000/-dividend in to 225 shares of the face value of Rs.4000/-
each reserved for Co-operative Institutions. Called as “B”Class.
iii) Rs.20,00,000/-dividend in to 500 shares of Redeemable preference
share of Rs.4,000/-each to be issued to Government of
Karnataka/Maharastra called as “C”Class.
iv) Rs.40,00,000/- dividend in to 1,000 shares of face value of Rs.4,000/-
each reserved for non grower members called as “D” Class.
INFRASTRUCTURAL FACILITIES
Nearer to raw materials.
Good transportation facilities.
Nearer to rivers place. (Krishna River)
Good networking.
Proper accommodation for its employees
ACHIVEMENTS AND AWARDS
ACHIEVEMENTS
STAI, SISSTA & DSTA in their recent 8th annual convention at Hyderabad
held on 13-08-2005 have honored with the most prestigious award as the
“THE BEST EFFICIENCY & PERFORMANCE SUGAR FACTORY” in
the country for the year 2004-05. The award was given by Hon’ble Union
Minister for agricultural, food & Civil Supplies, in presence of Hon’ble
Chief Minister of Andhra Pradesh.
The Karnataka State Co-op Federation Ltd. had adjudged as “The Best Co-
operative Sugar Factory in the State” and AWARD had been given to us
through Hon’ble Chief Minister of Karnataka, on 14/11/2004.
Awards
The Karnataka State Cooperative Sugar Factories Federation Ltd., Bangalore had
honored the company with the following awards for the:-
BOARD OF MANAGEMENT
MANAGING DIRECT
SECRETARY
GENERAL CIVIL STORE MEDICAL HEAD TIME CHIEF CHIEF A\C OFFICE L.W.O. WATCH &
MANAGER ENG. KEEPER OFFICER KEEPER C.D.O. OFFICER SPDT WARD
TOOLROOM&DIESEL
PUMP
GODOWN SECTION
GENERAL CANE SALES CASH
A\C. A\C.
COMPUTER
GAD EST MEETING INWARD & SHARE TYPING GUEST LEGAL PURC.
SECTION SECTION SECTION OUTWARD SECTION SECTION HOUSE SECTION SECTION
PRODUCT PROFILE
The chief by products of sugar manufacturing are -
1) Bagasse
Bagasse is the by product of sugar left behind after crushing of sugar cane. It
is used as a fuel in the sugar factory boiler. Excess Bagasse finds use as raw
materials in paper manufacturing industry.
2) Molasses
Molasses is a by product of Sugar refining chiefly used for alcohol
production. The entire molasses output is routed to the distillers unit which is
maintained by the organization.
3) Pressmud
Pressmud is the by product generated by cane juice filtration during sugar
manufacture, currently Pressmud is used as a fertilizer in sugarcane cultivation.
AREA OF OPERATION
The area of operation of the society shall be confined to the following
villages of chikodi, Athani, Raibag Talukas of Belgaum District and Jamakhandi
Taluka of Bagalkot District of Karnataka State and villages of shirol, kagal Talukas
of Kolhapur District Maharastra State only.
FLOW CHART OF SUGAR MANAFACTURING
Juice treated with line and surplus dry chaff fed into boilers
& Heated as fuel
Subsider
Concentrated syrup
Centrifugal
Sugar molasses
Bagging
MC KINSEY 7 S MODEL
The first three element are strategy, structure and system are
considered as hardware of success, the meet four elements are style, staff, skills
and shared values / super ordinate goals are the software of any company.
1. Structure
The general admission of the company is carried out by the following departments
and these are downwards communication in the company. The information flows
from the top level of management to the lower levels.
2. System
a. Production System
b. Distribution System
Direct sales are made with in the state and outside the state.
Indirect sales are made outside the country and the depot sales are
also made.
The producers are also sold directly to the consumers or sold to the
wholesales.
c. Information System
CHAIRMAN
MANAGING DIRECTOR
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d. Security System
In the maintenance of accounts after the record have been closed, the
records are kept in the room and closed the room is opened only with
permission of higher authority.
If the visitors went to inter they have to take prior permission with the
authority and after entering they are not suppose to go any dept other then the
department from whom they took the permission.
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3. Strategy
The way in which a business aims to improve its position in relation to its
competition is embodies in its strategy or the way of doing something in an
organization.
4. Skills
Skills here refer to how the training will be given to the employees and
employees. The training will be given in 2 months they are
a) On the job
This is one of the oldest method, under this method, the individual place is on
the regular job and taught the skill necessary to perform that job on the job
training has the advantage of giving first hand knowledge and experience under
the actual working conditions. This training is given to employees.
In this methods trainee is separated from the job situations and his attention is
focused upon learning the material related to his future job performance. There
is an opportunity for freedom of expression for the trainees.
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5. Style
The style which is portrayed to outside world is derived from the style and
behaviors exhibits inside organization. The internal style of the organization effects
new staff feels thinks and does their jobs. Therefore an organization is reflection of
its structure.
a) Top down / Bottom up
At the time of policy framing, the style flows from top to bottom. If the
policy has to be framed then the policy has to be taken by upper level & it flows
towards lower level.
But when the opinion of the policy is to known, at that time the style flows
from bottom to up. This is to know the attitudes of the employees about the policy
which is framed by the upper level.
b) Authoritarian / Participative
Only the upper level is having the authority to make the decisions in the
factory.
Regarding policy matter
Board of management will take the decision in case of policy making.
Financial matter
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6. Staff
Good hard working citizen play essential role in the development of nation. The
employees are responsible for the success or failure of company.
The company has totally 778 workers are working in the company. They are
divided as follows
No. of Workers
756
Company is paying salary of Rs. 55, 00, 000 per month to its workers.
7. Shared values
Shared values are refers to company policies. In Mysore Sugar
Company limited the following policies are maintained.
Quality policies
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Environment policies
T.P.M. policies (Total productivity management)
QUALITY POLICY
ENVIRONMENT POLICY
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SUGAR
Domestic Sale of Sugar
The free sale released by Government of India is sold in the domestic
market through tender system. Sugar tenders will be called periodically from the
various sugar traders. The traders will be called advance about the grade and
quantity being offered in tender over telephone. The sugar tender are some time
will be conducted at Karnataka Sugar Institute, Belgaum and also at this factory
site.
The offers of K.S.I will be present at the time of tenders. The rates will be
collected over telephone from the various parties along with grade and quantity of
sugar required by them. The committee will take decision on allotment of sugar to
the parties who have offered higher price. Karkhana has maintained Sugar Sale
Tender register for recording the offers received and allotment made to the parties.
The parties who have purchased sugar in the tender will be sold against 100%
payment. The rate of domestic price of sugar in the state and the rate of
neighboring sugar factories will be compared while selling the sugar in tenders.
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Export of sugar
When the international price of sugar is remunerative compared to domestic
price of sugar, we do export some of the stock of sugar. The sugar export is mainly
undertaken through the mercantile export or through EXIM Corporation New
Delhi. The price for export sugar is negotiated taking into account, the prevailing
international sugar price and the price being offered by various sugar factories for
export of sugar. Once the rates are finalized, they will enter into agreement with
the party. Then the party will obtain a release orders from the Chief Director of
sugar, New Delhi and necessary excise bond from the concerned authority. After
completing all the necessary formalities Sugar will be delivered to the party for
export against full payment of the consignment.
After the export shipmen are completed, necessary documents in proof of export
of consignment will be collected from the parties. The same will be submitted to
the excise department.
Molasses Bagasses
For sale of Molasses and Bagasses we use to make a vide publicity in
the various news papers in Karnataka and Maharashtra and also floating the
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enquiries to the prospective purchasers in order to get competitive offers and better
price realization.
PRODUCTION PROCESS
The main raw material in the production of sugar is.
Sugar cane.
The harvested and transported sugar can received is weighed on the weigh
Bridge. It is unloaded and kept on the feeder tables. It is fed to the cane carrier as
per the requirement.
This cane is passed through leveler and furzier by making the fine making
the fine chips. It is crushed through series of mills. Imbibitions hot water is added
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prior to the last mill to extract more possible sugar. The bagasse from the last will
is carried through bagasse conveyor and required quantity of bagasse is fed to the
boilers and excess quality is sent for storage.
The juice from all the mills is pumped to juice weighting scale. It is heated
to about 70-77’o c in the juice heaters. It is taken to continuous juice sulphitor in
which milk of lime and sulphur dioxide gas are adjusted to maintain ph 7.0. It is
again heated in juice heaters to about 100 to 105’oc and sent to continuous
clarifier. Clear juice is taken to multiple effect evaporators to concentrate up to
60oc Brix.
The settled mud from the bottom of the clarifier is taken to mud mixer to
mix with beguile and taken to continuous vaccum filer. The filtrate is transferred
to raw juice receiving tank for treatment. The adhered mud on the screens is
scraped and sent out as filter cake, which will be used for composting the manure.
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Finance plays a vital role in the functioning of all industrial units. Finance is
the life blood of the organization. In sugar Industry Finance and accounts
Department has very vital roles. The financial plan basically deals with raising and
proper utilization of funds. The funds can be raised by issue of shares as well as
by raising loans various sources.
FUNCTIONS:
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4. Cash Section
Accounts offices are the head of this department. Accountant sales manager,
and head cashier assist him.
3. SALES SECTION:
It is looking after sales of sugar and by products molasses, Rectified spirit
and other scrap materials. It is keeping records of the concerned to all sales
section.
4. CASH SECTION:
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It is looking after the payments of all general bills and salary bills apart from
cane payment and it is also looking after receipt of cash and check payment.
PURCHASE DEPARTMENT
Purchase Department is headed by purchase officer is responsible for
purchasing the spare parts required for the industry. The storekeeper is responsible
for stacking quality maintaining and issuing to the concerned section.
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PROCEDURE OF PURCHASING
PURCHASE MANAGER
GODOWN SUPERVISORS
STORE KEEPERS
ASSISTANTS
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In the beginning of the year the purchase manager, with the help of
production planning department, prepare a purchase budget. This budget quads
him in knowing what when he has to buy and also quality, Size and quantity of
purchase.
2. DETERMINATION OF QUANTITY:
The stock availability in each location is determined and compared with the
actual requirements. After receiving the sales order raw materials needed are
scheduled according to these order level. The stock availability in each location is
determined and compared with actual requirements these quantities to be
purchased are determined.
3. PURCHASE ORDER:
After satisfy with the quantity of materials and reputation of the supplier,
purchase order is send to the supplier. Purchase order contain includes the date of
order, description of materials to be supplied made of supply. The companies of
this send to the Head office, another to accounts departments and one copy send to
the storekeeper.
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MECHANICAL DEPARTMENT
MANUFACTURE DEPARTMENT
This department is headed by Chief Chemist. To manufacture the maximum
quality the sugar from the cane juice of superior ISI. grade minimize the sugar
losses in bye-products to maintain the register and calculations of sugar entering in
the house and production submit day to day report of production and recoverable
sugar and excise matters in the season. In the off season maintenance of the
boiling house plant.
WATCH AND WARD
This department is headed by security officer. Security of factory and
control on gates and supervision day and night all over the factory area from
security point of view.,
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STORES DEPARTMENT
This department is headed by store keeper. To keep the sores and required
materials for the factory section wise in a proper way and to maintain their
registers and big cards of indents (order goods)
FUNCTIONS:
1> Receiving the materials
2> Unfolding the packing.
3> Takes entry in store receipt Book (SRB)
4> Preparing bills after receiving quality memo back.
5> Stacking the materials.
6> Issue of materials to concerned sections as per their indents.
ADMINISTRATIVE OFFICE
The office time is from 10.30 to 5.30pm
The lunch break is from 1.30 to 2.00 pm
FACTORY PREMISES
Inside: from 8:30am to 5:30pm
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AGRICULTURAL DEPARTMENT
This department is headed by Cane development officer. Cane procurement,
harvesting (to reap) and development of cane. To make the provision of proper
seed of cane to the cultivators, soil testing and proper guideline for measuring etc.
CIVIL DEPARTMENT
This department is headed by civil engineer. Construction of the roads for
proper transport of cane in the area, civil works of the factory, maintenance of the
factory building etc.
LABOUR WELFARE
This department is headed by labour welfare officer. To look into the
welfare activities of the worker and solve the labour problems. The factory
provides all the necessary facilities. The purpose of providing welfare amenities is
to facilitate the development of total personality of working class for physical,
mental, psychological, cultural, social, moral and intellectual development the
factory provides well planned residential accommodation, medical facilities,
educational facilities, drinking and washing water, canteen, cycle stand, library etc.
In addition, the factory has following non-statutory schemes for workers welfare.
Consumers society, uniforms to watchman production and engineering workers
etc.
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OBJECTIVES
1) To secure for the worker fair wage.
FUNCTION:
1) To promote harmonious relation between the factory management and
workers.
3) To study and understand the point of view of labour in order to help the
management to shape and formulate labour welfare policies.
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7) To suggest the measure which will serve to raise the standard of living of
workers and in general to promote their well being.
SWOT- ANALYSIS-
STRENGHTS -
The major strength is crushing capacity and highest chimney and
packing of bags per day.
It is producing own electricity it reduces the cost of electric bills.
It also sells electricity to the KPTCL.
This factory has its own trucks and some other vehicles, which
reduces transportation charges.
They have foreign customers too.
Good Administration
Healthy management labour relations
Superior product quality
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WEAKNESS-
It does not have separate HR department, so the selection of employees is
not satisfactory and it creates lot of burden on labour welfare officer.
Too much stock of sugar in godown.
They purchased two wheeler vehicles and trucks on loan. During off-season
they remain idle, but the interest of the loan is always shooting up.
They don’t have particular employee for particular work. Anybody can do
any work assigned by their respective superiors.
High cost of production.
No control on minimizing the losses in process.
Company can’t sell as much as sugar in the market at any specific time, as
sugar release mechanism is controlled by government of India.
OPPORTUNITIES-
It is located in the best area. Here all the resources are available in less cost.
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CHAPTER- III
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Methodology
This project is an analytical research where in the researcher has to
use the available facts as information and analyze these to make a critical
evaluation of materials. This is also an applied research with an aim to find a
solution for immediate problems facing industry or the firm.
The methodologies followed in the analysis of the financial
statement are comparative statement, Common size statement, Trend analysis, ratio
analysis, fund flow analysis and cash flow analysis.
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Plan of analysis
This study is conducted with the help of statistics figures &
techniques like Graphs & charts for better comparison and interpretation.
Limitations
1. The study is done only on the Balance sheet and Profit and loss account.
1. Study is based on information provided by the company.
CHAPTER- IV
FINANCIAL ANALYSIS
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FINANCIAL STATEMENTS
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The Financial statements are the end product of the financial accounting
process. The financial statements are nothing but the financial information
presented in concise and capsule form, and the financial information is the
information relating to the financial position of any firm. Therefore the financial
statements are the depiction of the financial position of firm.
The basic source which provides the financial information is the annual
report of the company, which is presented by the company to its shareholders at the
annual general meeting. This annual report contains the chairman’s report, the
balance sheet, the income statement , the auditors report together with number of
schedules, annexure etc. Though the presentation of annual report is a statutory
requirement under the companies Act of 1956. Every firm prepares the following
financial statement.
1. The Balance Sheet
2. The Income Statement
BALANCE SHEET
The Balance sheet is regarded as the most significant and basic financial
statement of any firm. The Balance sheet is prepared by a firm to present a
summery of financial position at a given point of time, usually at the end of a
financial year. It shows the statement of affairs of the firm and the contribution of
the owners of the firm. The BS in fact balances the assets of firm against its
financing i.e. the total value of the assets must be equal to the total claims against
the firm and this can be stated as
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Fixed assets
Fixed assets are held in business for use not for sale. These assets provide long-
term benefits to the concern. Fixed assets will be higher in manufacturing concern.
The fixed assets involves – Tangible assets – includes land, building, machinery,
equipment, furniture, fixtures etc. these assets are shown the balance sheet
deducting the depreciation there on.
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LIABILITIES
Liabilities are the obligations of the concern that is to pay the outsiders.
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c) Accounting policies
Auditors report
Auditors report to shareholders verifies whether the balance sheet and
profit and loss account provides a true and fair view of the state of a
company’s affairs. Auditors should obtain all necessary informations and
explanations and ensure that proper books of accounts as required by law
have been prepared by the company.
Accounting policies
Companies adopt different accounting policies for preparing their balance
sheet and profit and loss account. Annual reports incorporate major accounting
policies as well as changes made in current year.
INCOME STATEMENTS
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Income statement is, also known as the profit and loss account or the
statement of earnings, summarizes the revenues and expenses of the firm for an
accounting period. It gives a detail of sources of income and expenses and thus it
provides the summery of the operating results of the firm for a specific period. It
matches the revenues with the costs that are incurred in generating the revenues,
and shows the difference between the two as the net profit made or net loss
incurred during the period. The IS shows the results of the operations of the firm
during the period. The IS therefore, is a flow report against the BS which is a stock
report or a status report. The IS depicts the earning capacity of the firm during the
period under consideration.
Profit and loss account presents the summery of revenues, expenses and
net income of a firm. It serves as a measure of the firm’s profitability. Revenues
are amount. The main content of the income statement are:
Net sales
Cost of goods sold
Gross profit
Operating expenses
Operating income
Non operating expenses
Non operating income
Profit
Loss
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CHAPTER-V
DATA ANALYSIS AND INTERPRETATION
The preparation of the CFS is based on the premise that a statement covering
a period of a number of years is more meaningful and significant than for a single
year only, and that the financial statement for one period represent only 1 phase of
the long and continuous history of the firm.
The CFS can be prepared for both the BS and the IS.
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Table No. 1
SHREE DOODHAGANGA KRISHNA SAHAKARI SAKKARE
KARKHANE NIYAMIT, CHIKODI
Comparative Balance Sheet
(Amts in crores)
Particulars 2006-2007 2007-2008 INCREASE/ INCREASE /
DECREASE
DECREASE(Amt) (%tage)
LIABILITIES -
Share Capital 132.19 133.66 1.47 1.12
Reserves & Surpluses 676.80 757.90 81.10 11.99
Term loan 409.49 502.83 93.34 22.80
Working capital loan 912.46 717.85 (194.61) 21.33
Bank O. D. payable 8.40 12.83 4.43 52.74
Statutory and other deposits 683.18 666.17 (17.01) 2.49
Suspense, sundries & other 555.99 471.07 (84.92) 15.28
Total 3378.51 3262.31 (116.20) 3.44
ASSETS -
Fixed assets 1296.30 1307.44 11.14 0.86
Investments 2.62 16.73 14.11 583.55
Current assets 1242.47 1039.87 (202.6) 16.31
Loans and advances 48.55 101.44 52.89 108.94
Debtors 272.93 274.33 1.40 0.52
Cash in hand 0.32 0.30 (0.02) 6.25
Cash at bank 158.33 132.40 (25.93) 16.38
Profit and loss account 356.99 389.80 32.81 9.19
Total 3378.51 3262.31 (116.20) 3.44
INTERPRETATION
Current assets
The investments in the current assets are low and it has decreasing trend
over the period under study. The current assets have decreased by Rs. 202.60
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from the CIS, a financial analyst can quickly ascertain whether sales are increasing
or decreasing and by how much amount or by how much percentage.
Table No. 2 SHREE
DOODHAGANGA KRISHNA SAHAKARI SAKKARE
KARKHANE NIYAMIT, CHIKODI COMPARATIVE
INCOME STATEMENT
(Amounts in crores)
2006-2007 2007-2008 Increase/decrease Increase/decrease
Details AMOUNT (%tage)
Income
Sales (Revenues) 1640.81 1773.10 132.29 8.07
Other Income 10.48 3.25 7.23 68.99
Total 1651.29 1776.35 125.06 7.58
Expenditure
Cost of goods sold 1517.95 1624.81 106.86 7.04
Gross Profit 133.34 151.54 18.2 13.65
Selling and Administration
Expense(operating exp) 40.23 94.75 54.52 135.52
Operating income 42.35 1.36 40.99 96.79
Non operating exp 124.37 161.62 37.25 29.95
Non operating income 7.13 70.66 63.53 891.03
Loss 18.22 32.81 14.59 80.08
INTERPRETATION
On the basis of comparative income statement it can be said that gross profit
for the year 2006 has increased by Rs.18.20 over the profit for the year 2008. The
Net sales during the same period have increased by Rs.132.29. The cost of goods
sold increased by Rs.106.86.
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Table No. 3
SHREE DOODHAGANGA KRISHNA SAHAKARI SAKKARE
KARKHANE NIYAMIT, CHIKODI
COMMON SIZE INCOME STATEMENT
(Amts in crores)
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(Amounts in crores)
Trend percentage (%)
Particulars 2006 2007 2008
Sales 100 120.17 129.86
Less- cost of sales 100 114.87 122.96
Gross profit 100 279.49 337.33
Less- admin & selling exp. 100 26.14 61.56
Add- operating income 100 238.73 7.67
Less- Non operating exp 100 135.53 59.54
Add- Non operating income 100 0.33 57.13
Profit 100 66.64
Loss 100 660.38
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INTERPRETATION:
RATIO ANALYSIS
MEANING
Ratio analysis is a widely-used tool of financial analysis. It is defined as the
systematic use of ratio to interpret the financial statements to that the strength and
weaknesses of a firm as well as its historical performance and current financial
condition can be determined. A ratio is relationship expressed in mathematical
terms between two individual and groups of figures connected with each other in
some logical manner. The relationship between two or more accounting
figures/groups is called financial ratio. A financial ratio helps to summarize a large
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mass of financial data into a concise form and to make meaningful interpretation
and conclusion about the performance and positions of a firm.
TYPES OF RATIO
Ratio can be classified into four broad groups:
LIQUIDITY RATIOS
LEVERAGE RATIOS
ACTIVITY RATIOS
PROFITABILITY RATIOS
LIQUIDITY RATIO
Liquidity ratio measures the ability of the firm to meet its current obligation.
In fact, analysis of liquidity needs the preparation of cash budgets and cash and
fund flow statements; but liquidity ratio, by establishing a relationship between
cash and other current assets to current obligation, provide a quick measure of
liquidity.
The most common ratios which indicate the extent of liquidity are:
Current ratio
Quick ratio
Current ratio
The current ratio is calculated by dividing current assets by current liabilities:
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Current liabilities
Current assets include cash and those assets which can be converted into cash
within a year, such as marketable securities, debtors and inventories. The standard
ratio is 2:1.
Table No. 7
CHART SHOWING CURRENT ASSETS
TO CURENT LIABILITIES
2004- 2005- 2006- 2007-
Details 05 06 07 08
1. CURRENT
RATIO 1.51 1.25 1.41 1.21
1402.8 1521.0 1673.7
Current Assets 8 7 4 1446.92
1216.5 1472.9
Current Liabilities 932.47 0 5 1200.52
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Chart No. 1
CURRENT RATIO
3500
3000
2500
2000
1500
Current Liabilities
1000
Current Assets
500
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
INTERPRETATION
As a matter of policy or as referred to as banker’s rule of thumb, the
current ratio of 2:1 is considered to be satisfactory. The analysis is proved that the
current ratio position of the DKSSK is not fully satisfactory. That is 1.51 times in
2005, 1.25 times in 2006, 1.14 times in 2007, 1.21 times in 2008.
Quick ratio
Quick ratio establishes a relationship between quick, or liquid, assets and
current liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Inventories are considered to be less
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liquid. The quick ratio is found out by dividing quick asset by current liabilities.
The standard ratio is 1:1.
liquid liabilities
Table No. 8
CHART SHOWING LIQUID ASSETS
TO LIQUID LIABILITIES
2004- 2005- 2006- 2007-
Details 05 06 07 08
2. QUICK RATIO 0.50 0.38 0.41 0.46
Liquid assets 450.60 454.32 595.45 535.79
1210.4 1464.5
Liquid Liabilities 905.20 5 5 1187.68
Chart No. 2
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QUICK RATIO
2500
2000
1500
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
INTERPRETATION
The quick ratio of 1:1 is considered satisfactory. The company is not
having a good liquidity. That is in the years 2005, 2006, 2007 and 2008 the quick
conversion ratio is 0.50, 0.38, 0.41, and 0.46 times respectively of the current
liabilities.
SOLVANCY RATIO
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Table No.9
CHART SHOWING SHARE HOLDERS
TO TANGIBLE ASSETS
2004- 2005- 2006- 2007-
Details 05 06 07 08
3. PROPRIETARY
RATIO 0.40 0.44 0.47 0.61
Share holders funds 533.89 631.98 754.11 836.68
1349.9 1466.1 1618.8
Total tangible assets 0 8 5 1392.03
Chart No. 3
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PROPRIETARY RATIO
2500
2000
1500
Total tangible
1000 assets
500 Share holders
funds
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
INTERPRETATION
This ratio shows the risk means, high ratio shows the lesser risk to the
creditors. In 2005 it is 0.40, 2006 it is 0.44, 2007 it is 0.47 and 2008 it is 0.61. The
proprietary ratio will be satisfactory.
Solvency ratio
It refers to the ability of the firm to pay both short term and long term
liabilities. A co is solvent, if it can meet its outside liability out of its total assets.
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Table No. 10
CHART SHOWING OUT SIDE LIABILITY
TO TOTAL ASSETS
2004- 2005- 2006- 2007-
Details 05 06 07 08
4. SOLVENCY
RATIO 0.62 0.64 0.60 0.71
Out side liabilities 828.09 935.63 969.12 984.61
1349.9 1466.1 1618.8
Total assets 0 8 5 1392.03
Chart No. 4
SOLVENCY RATIO
3000
2500
2000
1500
1000 Total assets
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
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INTERPRETATION
The company cannot meet solvency because there is high solvency
ratio. High solvency ratio shows insolvent. The company cannot pay both short
term and long term liabilities. i.e. 2005, 2006, 2007 and 2008 are 0.62, 0.64, 0.62
and 0.71 respectively.
EFFICIENCY RATIO
Efficiency ratios measures efficiency with which the assets are managed
in the business. High ratio indicates efficient management of assets and low ratio
depicts inefficient management of assets.
Fixed assets turn over ratio
Working capital turnover ratio
Fixed assets
Table No. 11
CHART SHOWING NET SALES
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TO FIXED ASSETS
2004- 2005- 2006- 2007-
Details 05 06 07 08
5. FIXED
ASSETS
TURNOVER
ROTIO 1.00 1.10 1.27 1.36
1143.1 1365.4 1640.8
Net sales 5 7 1 1773.10
1142.1 1251.1 1296.3
Fixed assets 1 5 0 1307.44
Chart No.5
3500
3000
2500
2000
1500
Fixed assets
1000
Net sales
500
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
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INTERPRETATION
There is a more investment in fixed assets. All fixed assets are
contributed towards sales. In 2005 it is 1.00, 2006 it is 1.10, 2007 it is 1.27 and
2008 it is 1.36 there is increase in fixed assets.
Working capital turnover ratio
This ratio shows whether working capital has been efficiency used in
making sales. High ratio indicates higher operating efficiency of a firm.
Working capital
Table No. 12
CHART SHOWING NET SALES
TO WORKING CAPITAL
2004- 2005- 2006- 2007-
Details 05 06 07 08
6.WORKING
CAPITAL
TURNOVER
RATIO 4.64 6.80 5.39 3.77
Net sales 1143.1 1365.4 1640.8 1773.10
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5 7 1
Working capital 246.40 200.78 304.56 470.40
Chart No. 6
2500
2000
1500
1000
Working capital
500
Net sales
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
INTERPRETATION
Decrease in working capital turnover ratio.i.e. 4.46, 6.80, 5.39 and
in 2005, 2006, 2007 and 2008 respectively. It shows the working capital
does ‘not efficiently used in making sales.
PROFITABILITY RATIO
Profitability is an indicator of efficiency with which the operations of the
business are performed. Profitability ratios are used to know how efficiently
operations are carried out.
Gross profit ratio
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Table No. 13
CHART SHOWING GROSS PROFIT
TO NET SALES
2004- 2005- 2006- 2007-
Details 05 06 07 08
7. GROSS
PROFIT 0.21 0.04 0.08 0.09
Gross profit 238.75 43.96 122.86 148.29
1143.1 1365.4 1640.8
Net sales 5 7 1 1773.10
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Chart No. 7
2000
1500
1000
Net sales
500 Gross profit
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
INTERPRETATION
The gross profit ratio will be slightly increased from 2006 to 2008.
i.e. 0.04, 0.08 and 0.09 respectively. It helps to ascertain the average gross margin
to be maintained on sales.
Operating cost ratio
This is the ratio of net profit to net sales. It indicates whether the cost
component in the sales is higher or low.
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Net sales
Table No. 14
CHART SHOWING OPERATING COST
TO NET SALES
2004- 2005- 2006- 2007-
Details 05 06 07 08
8.OPERATING COST
RATIO 103.37 14.50 9.94 13.71
1181.5
Operating cost 9 197.88 163.09 243.04
1143.1 1365.4 1640.8
Net sales 5 7 1 1773.10
Chart no. 8
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2500
2000
1500
0
2004- 2005- 2006- 2007-
05 06 07 08
YEAR
INTERPRETATION
The operating cost ratio shows the operating efficiency of a firm.
There is a standard up to 75% to 85%.i.e 103.37, 14.50, 9.94 and 13.71 in 2005,
20006, 2007 and 2008 respectively.
Return on investment ratio
This is the ratio which indicates percentage of return on capital invested
in the business. It shows the efficiency of the business as a whole.
Operating profit
ROI ratio = * 100
Capital employed
Table No. 15
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Chart No. 9
1600
1400
1200
1000
800
600 Capital employed
400 Operating profit
200
0
-200
2004-05 2005-06 2006-07 2007-08
YEAR
INTERPRETATION
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MEANING
Table No. 16
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deposits
Long term loans 93.30 Purchases of fixed assets 11.00
Funds from operations 150.84 Purchases of investment 14.00
Reserve & surplus 81.00
Tax paid 22.16
Increase in w.c. 100.84
246.00 246.00
INTERPRETATION
The fund flow statement shows the increase in working capital
because there is increase in current assets and the sources of funds are hugely used
in purchasing fixed assets and investment.
MEANING
A cash flow statement is a statement, which shows the changes in cash
position of a firm from one period to another. It is a statement indicating inflow
and out flow of cash during a financial period.
In other words it is a statement which provides information about the cash
receipt and payments of a firm for a given period.
The Institute of Cost and Works Accountants of India has defined cash
flow of statement as “a statement setting out the flow of cash under distinct heads
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INTERPRETATION
In cash flow statement the application of cash is more compare to
sources of cash and it is also helpful in planning for immediate future to avoid
cash shortages.
STRENGTH
On the basis of comparative income statement it can be said that gross profit
for the year 2008 has increased by Rs.13.65% over the profit for the year
2007. The Net sales during the same period have increased by Rs.8.07%.
In comparative balance sheet the fixed assets, investments and reserve and
surplus are increases i.e. 0.86%, 583.55% and 11.99% respectively. Current
liabilities are decrease by 18.63%.
Based on common size income statement the gross profit is gradually
increases i.e. 20.89% in 2005, 3.22% in 2006, 7.49% in 2007 and 8.37% in
2008.
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In common size balance sheet the share capital, reserve and surplus, fixed
assets and investments are increases in 2008 i.e. 4.10%, 23.23%, 40.08%
and 0.52% respectively.
On the basis of trend income statement the sales are increased by 129.86%
in 2008 to 120.17 in 2007. The gross profit is also increase by 20.70%.
In trend balance sheet the share capital, reserve and surplus, fixed assets and
investments are increases i.e. 120.30, 159.31, 114.48 and 1186.53.
Based on ratio analysis the current ratio, liquidity ratio and gross profit ratio
slightly increases. It shows the company liquidity.
Based on fund flow statement it shows the sources from which funds were
derived and the uses to which these funds were put.
On the basis of cash flow statement it shows the inflow and out flow of cash.
WEAKNESSES
Based on comparative income statement the selling and Administrative
expenses increased by 135.52% Non operating income for the year 2008 is
increased by 891.03%. The non operating expense is increased by 29.95%
during the year 2008. The Net loss is increased 80.08%.
In comparative balance sheet the current assets are decrease by 16.31%. And
cash & bank balance also decrease by 22.65%.
On the basis of common size income statement the cost of goods sold is high
i.e. 79.08% in 2005, 96.78% in 2006, 92.52% in 2007 and 91.64% in 2008
on total sales.
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In common size balance sheet the current assets are decreased by 3.11%.
The current liabilities are also increased by 36.84%.
Based on trend income statement the cost of goods sold are increase in
2007- 114.87 and 2008 -122.96.
In trend balance sheet the current assets are decreased by 80.04 and the
current liabilities are increased by 314.39.
Based on ratio analysis the solvency ratio shows the insolvent of the
company and return on investment shows the capital is not fruitfully
employed in the business.
Based on fund flow statement there is a decrease in working capital and it
shows the sources of funds are hugely used in purchasing fixed assets.
On the basis of cash flow statement the application of cash is more compare
to sources of cash.
CHAPTER VI
FINDINGS AND SUGGESTIONS
FINDINGS:
a) The current ratio and quick ratio are not satisfactory because the current
ratio is not up to the standard limit for efficient utilization of current assets.
b) In quick ratio the liquid liabilities are more than liquid assets.
c) The proprietary ratio is good because the share holder’s funds are up to the
standard limit. It shows lesser risk but solvency ratio is not satisfactory due
to increases in out side liability.
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d) The fixed assets turnover ratio indicates the efficient management of assets.
In working capital turnover ratio the working capital is not efficiently used
in making sales.
e) The gross profit ratio and operating cost ratio are satisfactory because the
gross profit is high towards sales and operating cost is less compare to last
two years.
f) Return on investment and gross profit also is found to be very very low i.e.
negative in the year 2005-2006 and it is slightly positive in 2006 and 2007.
g) The major application of fund is decrease of working capital and not
purchase of long term assets.
SUGGESTIONS
1. Ratio analysis indicates the firm is not in good health none of the ratios are
reaching the ideal ratios necessary for enhancement of share holder’s wealth.
Hence the firm should concentrate on enhancing the operating efficiency of
the firm.
2. From the study it is found that the funds are used for short term assets which
should be avoided. The long term sources of fund should be used for long
term assets and not short term assets.
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CHAPTER VII
CONCLUSION
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CHAPTER IX
ANNEXURE
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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH
2005, 2006, 2007 AND 2008
(All amounts in crores of Indian rupees unless otherwise stated)
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