Professional Documents
Culture Documents
1. INTRODUCTION
and capital as on a certain date and the income statement showing the results of
operations during a certain period".
These statements are used to convey to management and other interested outsiders
the profitability and financial position of a firm.
BALANCE SHEET
The balance sheet is one of the important statements depicting the financial
strength of the concern. One hand it shows the properties that it utilizes and on the
other hand the sources of these properties. The balance sheet shows all the assets
owned by the concern, and all the liabilities and claims, it owes to owner and
outsiders. The balance sheet is prepared on a particular data. The right hand side
shows properties and assets. Normally there is no particular sequence for showing
various assets and liabilities. The companies Act, 1956 has prescribed a particular
form for showing assets and liabilities in the balance sheet for companies
registered under this act.
Trend analysis
The funds flow statement is designed to analyze the changes in the financial
condition of a business enterprise between two periods. This statement enables the
management to have an idea about the sources of fund and their uses for various
purposes. This statement helps the management in policy formulation and
performance appraisal.
As a report of stewardship.
FINANCIAL ANALYSIS
The term analysis can take to mean the splitting or breaking down the facts or
data found in the financial statement into simple component parts of elements (i.e.,
the methodical classification of the facts or data given in the financial statement
into simple elements).
Various users of financial statements study them from different angles for
different purposes. However, we can classify various types of financial analysis
into different categories depending upon, (1) the material used, and (2) the method
of operation followed in the analysis or the modus operandi of analysis.
External analysis: It is made by those who do not have access to the detailed
records of the company. This group which has to depend almost entirely on
published financial statement includes investors, credit agencies and government
agencies regulating a business in normal way.
Horizontal analysis: When the financial statements for a number of years are
reviewed and analyzed, the analysis is called horizontal analysis. This is useful for
long-term trend analysis and planning.
Vertical analysis: It is frequently used for referring to ratios developed for one
date or one accounting period. This is not very conducive to proper analysis of the
firm’s financial position and its interpretation as it does not enable to study in
perspective.
Long-term analysis: This analysis is made in order to study the long-term financial
stability, solvency and liquidity as well as profitability and earning capacity of a
business. The objective of making this analysis is to know in the long-term that
the concern will be able to earn a minimum amount, which will be sufficient to
maintain a reasonable price if return in the investment.
Comparative statements;
Common-size Statement;
Trend Analysis;
Cost-volume-profit Analysis;
Ratio Analysis.
Comparative statements
Comparison of past over a period of time with base year is known as trend
analysis. So, trend percentage or trend ratio analysis is a method of analysis under
which the percentage relationship that each financial statement item of each year
bears to same item in the base year is calculated. After the trend percentage of
different items for various years are calculated, the trend percentages or trend ratio
are shown in comparative financial statements.
The fund flow statement is the statement which shows the movement of funds
and is a report of the financial operation of the business undertaking. It indicates
various means by which funds were obtained during a particular period and the
way in which these funds were employed. In simple words, it is a statement of
source and application of funds.
A cash flow statement is a statement which depicts the changes in the cash
position (i.e., cash and bank balance) of the concern between one balance sheet
date and another. In other words, it is as statement, which indicates the cash flows
during a financial period. It show as the various sources from which cash was
received and the various applications or uses of cash, i.e., the various purpose for
which cash was utilized during an accounting period, and also resulting cash
balance at the end of the accounting period.
Cost-Volume-Profit Analysis
Ratio Analysis
2. INDUSTRY PROFILE
A dairy is a business enterprise established for the harvesting of animal milk –
mostly from cows or goats, but also from buffalo, sheep, horses or camels – for
human consumption. A dairy is typically located on a dedicated dairy farm or
section of a multi-purpose farm that is concerned with the harvesting of milk.
Terminology differs between countries. For example, in the United States, a farm
building where milk is harvested is often called a "milking parlor". In New
Zealand such a building is historically known as a "milking shed" or "milking
parlour". Sometimes milking sheds are referred to by their type, such as "herring
bone shed" or "pit parlour".
In some countries, especially those with small numbers of animals being milked, as
well as harvesting the milk from an animal, the dairy may also process the milk
into butter, cheese and yogurt, for example. This is a traditional method of
producing specialist milk products, especially in Europe. In the United States
a dairy can also be a place that processes, distributes and sells dairy products, or a
room, building or establishment where milk is stored and processed into milk
products, such as butter or cheese. In New Zealand English the singular use of the
word dairy almost exclusively refers to the corner convenience store, or superette.
This usage is historical as such stores were a common place for the public to buy
milk products.
India is the highest milk producer in the entire globe. India is well known as the
'Oyster' of the global dairy industry, with opportunities galore for the entrepreneurs
globally. It might be dream for any nation in the world to capitalize on the largest
and fastest growing milk and milk products' market. The dairy industry in India has
been witnessing rapid growth with liberalization. As the economy provides good
opportunities for MNCs and foreign investors to release the full potential of this
industry. The main objective of the Indian Dairy Industry is to manage the national
resources in a manner to enhance milk production and upgrade milk processing
using innovative technologies.
The crossbred technology in the Indian Dairy Industry has further augmented with
the viability of the dairy units by increasing the milk production per animal. Then
subsequently milk production has also increased at an exponential rate while the
benefits of an increase in milk production also reached the consumers from a
relatively lower increase in the price of milk. The favorable price environment for
milk producers for the Dairy Industry in India however appeared to have weakened
during the 90's, a decline in the real price of milk being noticed after the year 1992.
And then slowly regained it is glory after 1992 to till now.
In India dairying from very much earlier is regarded as an instrument for social and
economic development. The country's milk supply comes from millions of small
producers, who are dispersed throughout the rural areas. All these farmers maintain
an average herd of one or two milk animals, comprising cows and/or buffaloes.
Mostly ample labour and a small land base encourage farmers to practice dairying
as an occupation subsidiary to agriculture. As income from crop production is
seasonal instead dairying provides a stable which is a year-round income and also
an important economic incentive for the small farmer.
India had tremendous milk production in 40 years and has become the world's
largest milk-producing nation with a gross output of 84.6 million tons in 2001. The
In India dairy business has been practiced as rural cottage industry over the years.
Semi-commercial dairy started with the establishment of military dairy farms and
co-operative milk unions throughout the country towards the end of the 19th
century. Since Independence this Industry has made rapid progress. A large
number of modern milk and milk product factories have since been established.
The organized dairies in India have been successfully engaged in the routine
commercial production of pasteurized bottled milk for Indian dairy products.
The growth of Indian Dairy Industry during the last three decades has been
impressive, at more than 5% per annum; and in the 90's the country has emerged as
the largest producer of milk. This is not a small achievement when we consider the
fact that dairying in India is largely stringent that farmers in general keep dairy
animals in proportion to their free crop and also are available for family labor with
little or no purchased inputs and a minimum of marketed outputs. The existence of
restrictive trade policy milk in the Diary Industry and the emergence of Amul type
cooperatives have changed the dairy farming practices in the country. Farmers
have gained the favorable price for their milk and for their production which was
essentially a self-reliant one is which are now being transformed into a commercial
proposition.
India in the early 1950's was commercially importing around 55000 tonnes of milk
powder annually to meet the urban milk demand. Most of the significant
developments in dairying have taken place in India in this century only.
The Indian Dairy Industry engages in the production and processing of milk &
cream. This industry is involved in the manufacture of various dairy products like
cheese, curd, yoghurt etc. The Indian Dairy Industry specializes in the
procurement, production, processing, storage and distribution of dairy products.
India as nation stands first in its share of dairy production in the international
scenario. The industry contributes about Rs 1,15,970 to the national economy.
Employment opportunities
The Indian Diary industry which is in the developing stage provides gainful
employment to a vast majority of the rural households. It employs about 8.47
million people on yearly basis out of which 71% are women.
Jobs in Indian dairy industry are mainly in the fields of production and processing
of dairy products. An individual with minimum of 60% marks who has bachelor's
degree course in the dairy technology can easily be availing an opportunity to work
in this industry. For the graduation course in Dairy technology one has to qualify
the All India Entrance Test that is affiliated to the Indian Council of Agricultural
Research. After that the person can continue with his masters in dairy technology.
Jobs would be for the following positions.
Dairy Scientists: The main job of the dairy scientists is to deal with
collection of milk and taking care of the high yielding variety of animals.
Dairy Technologists: the work of Dairy technology requires procurement
officers who take the responsibility of collecting milk from farmers, milk
booths and cattle-rearers. This particular procurement officer should well
understand the latest technology that is applicable in maintaining the quality
of milk of the process of transporting it to the desired location.
Dairy Engineers: dairy engineers are usually appointed is to set up and
maintain dairy plants.
Marketing Personnel: These individuals deal with the sale and marketing
of milk together with milk products.
Latest developments
Indian Dairy Industry is the largest milk producer all over the world, around
100 million MT Indian Dairy Industries value of output amounted to Rs.
1179 billion in 2004-05 which approximately equals combined output of
paddy and wheat. With 1/5th of the world’s bovine population
In India the Milk animals constitutes45% indigenous cattle, 55 % buffaloes,
and 10% cross bred cows
Dairy Venture Capital Fund- this is introduced in the Tenth Fiver Year Plan to
bring about structural changes in unorganized sector, which would measure like
milk processing at village level, marketing of pasteurized milk in a cost effective
manner, quality or the up gradation of traditional technology to handle commercial
scale using modern equipments and management skills.
2. RESEARCH DESIGN
TOPIC
The main reason for selecting the, " Profitability and Financial status" as a field
of my project work is to know the financial activities as well as economic role
played by BAMUL and to get the knowledge about the difference in theory and
practice.
Purpose of study
BAMUL is one which is financially sound not only the present but also would
be in the future. To know the financial position of the bank, systematic financial
analysis has to be done to assess its profitability and solvency position, this project
deals with the financial performance of BAMUL.
The study was taken up to know the financial activities in BAMUL relating to
their business activities and performance of the corporation.
1. The study is being done to know the financial activities of the co-operative
limited.
2. The study is being done to ascertain the financial status of the co-operative
limited.
4. The study was made to analyze the financial status with reference to
financial statement like profit and loss account and balance sheet with the
help of tables, ratios and graphs.
METHODOLOGY OF STUDY
Place of study: The Bangalore Urban & Rural District Milk Producers Co-
Operative Societies Union Limited (Bamul)
Title of the study: A study on Profitability and Financial status of, BAMUL for
the period of 2010, 2011 and 2012.
Method of study:
1. Primary data
2. Secondary data
Primary data
Primary data may be described as those data that have been observed by the
researches for the first time. Primary data re-collected from the field for the
specific purpose of the research.
Secondary data
Secondary data are collected those data that have been complied already before
conducting the research. Secondary data may be internal as well as external.
Internal data are collected from the Bank’s records. External data are collected
from outside the Bank like print materials, internet and newspapers.
SAMPLING SIZE
Sampling size used in this project study relates to financial figures, covering
the period from 2010-2012. Each data was already checked and verified by CA;
hence data is straightaway taken for analysis.
RESEARCH INSTRUMENTS
Financial ratio
To find the financial areas of BAMUL, where the ratio analysis helps to
maintain balance between liquidity, solvency and profitability.
To get an idea how a financial statements can be used to predict the future
trends.
To find out the solution to the unfavorable financial conditions and financial
performance.
The confidential of the some facts and figures has acted as a limit to
BAMUL.
The study is based on the data given by the officials and reports of the co-
operative limited.
Time was limited and the subject is vast and limited information resources.
The comparison and analysis are limited only for past 3 years.
3. COMPANY PROFILE
INTRODUCTION
The Bangalore Milk Union Ltd., (Bamul) was established during 1975 under
Operation Flood II by keeping “Amul” as its Roll Model. At present Bamul has
Bangalore Urban, Bangalore Rural & Ramanagaram Districts of Karnataka State as
its area of operation for Milk Procurement and selling Milk in part of Bruhath
Bangalore Mahanagara Palika (BBMP) area. Since its inception the Union is
constantly striving further for dairy development and marketing activities in its
milk shed area.
OBJECTIVES
To organize Dairy Co-operative Societies at Village level and
dissemination of information like good dairy animal husbandry and
breeding practices & Clean Milk Production through Extension Services.
To provide assured market & remunerative price for the milk produced
by the farmer members of the co-operative societies.
To provide technical input services like veterinary services, artificial
insemination, supply of balanced cattle feed & Fodder seed materials
etc., to milk producers.
To facilitate rural development by providing opportunities for self-
employment at village level, thereby preventing migration to urban areas,
introducing cash economy & opportunity for steady income.
To provide quality Milk and milk products to urban consumers at
competitive prices.
BACKGROUND
On January 1st 1958 a pilot scheme to cater the Bangalore Milk Market,
Department of Animal Husbandry, Government of Karnataka was started Milk
processing facilities & Veterinary Hospitals at National Dairy Research Institute
(NDRI). Later in 1962, The Bangalore Milk Supply Scheme came into existence
as an independent body. With the great efforts by the then Hon’ble Minister for
Revenue & Dairying, Government of Mysore Sri M V Krishnappa, A joint venture
of UNICEF, Government of India & Government of Mysore was dedicated
Bangalore Dairy to the people of Karnataka State on 23rd January 1965 by the
then Hon’ble Prime Minister Late Sri Lal Bahadhur Shastriji. The Bangalore
Dairy scattering over an area of 52 Acres of land, the Dairy had an initial capacity
to process 50,000 liters of milk per day. Bangalore Dairy underwent a structural
change in December 1975, handed over to Karnataka Dairy Development
Corporation (KDDC). Rural Milk Scheme of Mysore, Hassan & Kudige Districts
was started under Operation Flood-II and then transferred to Karnataka Milk
Federation (KMF) in May 1984 as a successor of KDDC. To cater to the growing
demand for milk by the consumers of Bangalore City, the capacity was increased
to 1.5 lakh liters per day under the Operation Flood-II during 1981 and later
increased to 3.5 lakh liters per day under Operation Flood-III during 1994.
As per the policies of the National Dairy Development Board (NDDB), Bangalore
Dairy was handed over to Bangalore Milk Union Ltd., (Bamul) on 1 st September
1988. The Union is capable of processing the entire milk procured, by timely
implementation of several infrastructure projects like commissioning of New Mega
Dairy state-of-the-art technology with a processing Capacity of 6.0 Lakh liters per
day, new chilling centers, renovation of product block etc.,
The milk shed area of Bamul comprises of 2611 revenue villages. As of now the
Union has organized 1884 Dairy Co-operative Societies (DCS) in 2,257 villages,
thereby covering 86 % of the total villages in these three districts. In these DCSs,
there are 3,35,458 milk producer members. Among them 109843 members are
women and 60,024 members belong to Schedule Caste and Schedule Tribes.
ORGANISATION STATUS
The member producers and their Dairy Co-operative Societies (DCS) are the vital
constituents of the Union and their progress is the judging yardstick on the
efficiency of the Union’s operation. Hence the maximum importance has been
given to their development. The Union is making intensive efforts over the years
to organize DCSs in more and more villages of the three districts in the milk-shed
area.
Importance has been given to enroll more and more milk producers in the villages
as members of these DCS’s. While enrolling these members, more emphasis is
being accorded to enroll more number of women members and to organize more
women managed DCSs under STEP (Support to Training and Employment
Program for Women). It is heartening to note that there is an active participation
of women/ weaker sections of the society in all the dairy development activities of
the Union. They have become mainstay of all the developmental programs of the
Union. This has resulted in the buildup of economical benefits to the most
vulnerable sections of the rural mass.
MILK PROCUREMENT
The Milk produced by 102995 farmers at village level will be collected every
day morning and Evening at DCS. Under Clean Milk Production programme,
to maintain the freshness & quality of the milk 121 Bulk Milk Coolers
covering 344 DCS of Total Capacity 215000 Lts were installed at DCS
level. During the year the Unions daily average milk procurement is 10.13
Lakh Kgs, which works out to be 563 kgs per day per DCS. The milk
procurement has increased by 7.65 % when compared to the last year.
Packing
4%
Process
4% Milk Purchase
71%
Transport
5%
Milk collected at DCS will be transported to Chilling Centers, through 107 Milk
Procurement Can Routes, by traveling 17,929 KM’s every day. 23 Bulk Milk
Cooler (BMC) Routes are also in operation, which collects milk from 121 BMC
centers of 344 DCS directly transported to Bangalore Dairy through insulated
tankers.
nandini Toned Milk Karnataka's most favorite milk, Nandini Toned Milk. Fresh
and Pure milk containing 3.0% fat and 8.5% SNF. Available
in 500ml and 1ltr & 6 Ltr packs. Better to use within a day
from the date of pack.
Nandini Homogenised Cow Milk is pure milk containing 3.5% Fat & 8.5% SNF. Which is
homogenised and pasteurised. Consistent right through, it gives you more cups of tea or coffee
and is easily digestible. Available in 500 ml packets.
nandini Subham
Nandini Subham Milk. Containing 4.5% Fat and 8.5 % SNF. A rich,
creamier and tastier milk, Ideal for preparing home-made sweets &
savouries. Available in 500ml and 1ltr packs. Apart from the Milk, the
different Milk Products are Curds, Butter, Ghee, Peda, Paneer, Set Curds
& Spiced Butter Milk are also sold.
nandini Curd
Nandini Curd made from pure milk. It's thick and delicious. Giving you all the goodness of homemade
curds. Available in 200 gms and 500 grms & 1 Kg packs. Nandini Butter Rich, smooth and delicious.
Nandini Butter is made out of fresh pasturised cream. Rich taste, smooth texture and the rich purity of
cow's milk, makes any preparation a delicious treat. Available in 100 gms, 200 gms and 500gms cartons
both salted and unsalted.
61696
49265
38312
32825
14490 16054
11139
8208
1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
nandini Ghee
A taste of purity. Nandini Ghee, made from pure
butter. It is fresh and pure with a delicious
flavour. Hygienically manufactured and packed
in a special pack to retain the goodness of pure
ghee. Shelf life of 6 months at ambient
temperatures. Available in 200ml, 500ml,
1000ml sachets & 15.0 kg tins.
nandini Butter
Rich, smooth and delicious. Nandini Butter is made out of fresh pasturised cream. Rich
taste, smooth texture and the rich purity of cow's milk, makes any preparation a delicious
treat. Available in 100 gms (salted), 200 gms and 500gms cartons both salted and unsalted.
nandini Peda
INFRASTRUCTURE DEVELOPMENT:
The strategy of Bangalore Milk Union is “Procure More, Sell More & Serve More”
and reaping the benefits of economies of scale. In order to realize this strategy, the
Union has implemented the following projects so that more and more milk can be
procured and processed. This will help us to serve our producer members by
passing on the maximum benefits, we are consciously adopting the growth-
oriented strategy of helping our producers to grow by ourselves growing
constantly.
Although Bamul sets standards for its products for better serve to customers, it was
not possible to keep the standards stability due to manual operations. In designing
mega dairy, Bamul looked towards an automated system that would allow it to
achieve consistent quality parameters for each product. Energy and manpower
would also be more effectively optimised and controlled and all plant equipment
would be integrated.
NEW Projects:
Bamul has planned to convert Hosakote Chilling Center into a 2.0.LLPD Capacity
Dairy with an investment of Rs.2427.00 Lakh and a New Product Block at
Bangalore Dairy Premises with an investment of Rs. 2033.00 Lakhs .
Bamul has SEVEN Chilling Centers geographically located around Bangalore and
85 Bulk Milk Coolers at DCS Level. Milk Product Block within the campus to
manufacture Butter, Ghee, Peda, Flavoured Milk, Spiced Butter Milk, Paneer, Set
Curds etc.,
FINANCE:
The Union had an approximate turnover of Rs. 882.16 crores in the year 2011-12
as against Rs. 692.82 Crores for the year 2010-11.
1800 1728.02
1600 1487.17
1400 1278.94
1157.11 1158.39 1158.17 1175.00
1200
1000
800
600
400
200
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
69828.49
56633.00
50935.00
45206.00
40374.00 39589.00
574.83
486.25
357.3
327.48 343.79
279.32
216.89
185.27
Bangalore Milk Union is providing various Technical Input & Extension Services
to the milk producer members & their Dairy animals through ELEVEN Camp
Offices situated in each Taluk i.e., Anekal, Bangalore Head Office (Bangalore
South), Yelahanka (Bangalore North), Channapattana, Devanahalli,
Doddaballapura, Hosakote, Kanakapura, Solur (Magadi), Nelamangala &
Ramanagara. From these camps the Technical Input services like Weekly Mobile
Veterinary Service, Emergency Veterinary Service, Artificial Insemination
Service, Periodical Vaccinations, Balanced Cattle Feed Sales, Mineral Mixture
Sales, Fodder development and Fodder Seed Production, Clean Milk Production
practices, Extension Services for Cattle Feeding, breeding, insurance and milk
production etc., will be carried over.
The Union is taking special care to promote the health of the cattle of member milk
producers. Veterinary facilities have been extended to all the DCS. Mobile
veterinary routes, emergency veterinary routes, Health camps, vaccination against
foot & mouth disease and thaileriosis diseases, etc., are being regularly done.
Regularly Deworming is also done for the cattle. There is also a backup of First
Aid Services to needy DCS’s.
ARTIFICIAL INSEMINATION
Artificial Insemination (AI) has been the main functional tool in dictating this
upsurge of development of Dairying in Bamul. Farmers have taken up cross-
breeding from way back in 1962. The Union has surveyed and appropriately
located AI centers based on cattle population. It is also popularized the idea of
cluster AI centers and replace the Single AI centers in a phased manner. The use
of progeny tested semen from “Nandini Sperm Station” is also giving a further
boost to the breeding activities.
During 1999-2000, a Vertical Silo of 10,000 liter capacity for storing Liquid
Nitrogen has been installed under TMDD program in collaboration with National
Dairy Development Board and Karnataka Milk Federation. In addition this facility
is being used for supplying liquid nitrogen to neighboring Unions and also to
Department of Animal Husbandry. This has helped in protecting the quality of
semen straws, thereby considerably increasing the probability of conception during
artificial insemination of cattle.
The Union is implementing several programs to increase milk production and also
to reduce the cost of milk production in the milk shed area. Balanced cattle feed is
being procured from the Cattle Feed Plants of KMF for distribution among
member producers.
CF Sales (in
33359 37691 40529 45233 45870 24809
MT’s)
CATTLE INSURANCE:
IN THIS MILLENNIUM:
We want to become not only the largest Union, but also become one amongst the
best-run milk unions in the country. The Union is aware of the challenges of the
new private entrants, who are mainly thriving on unfair trade practices. They
procure milk at least cost, without bothering about 1the welfare of the producers
and without extending any technical inputs for improving milk production. They
market milk by resorting to unhealthy and unethical practices deceiving the
unsuspecting consumers. The Union wants to counter this in a positive manner by
trying to improve its efficiency of operation and market promotion. It wants to
become well trenched in the market as market leader. It wants to follow the
strategy of cost-competitiveness, which is hard to match by the competitors.
After the bifurcation of the above Union, into two separate union for
Bangalore Districts (Urban and Rural) and Kolar District, Bangalore Urban
and Rural District Co-operative Milk Producers’ Societies Union Ltd.
(BAMUL) on 23rd March 1987.
a. Main Dairy
i. Milk Processing capacity was 60,000 Liters per day (LPD) at the time of
establishment of the dairy on 23rd January 1965.
ii. Milk Processing capacity was expanded to 1.5 lakh LPD on 1 st February
1981.
iii. Milk Processing capacity was expanded to 3.5 lakh LPD during 1994.
i. Anekal Chilling Center was started on 12th September 1964 with a milk
chilling capacity of 20,000 LPD.
ii. Later the milk chilling capacity was expanded to 60,000 LPD on 28th
February 1999.
i. Byrapatna Chilling Center was started on 19th May 1962 with a milk chilling
capacity of 20,000 LPD.
ii. Later the milk chilling capacity was expanded to 60,000 LPD
i. Doddaballapur Chilling Center was started on 5th January 1967 with a milk
chilling capacity of 20,000 LPD.
ii. Later the milk chilling capacity was expanded to 60,000 LPD
i. Solur Chilling Center was established on 31st January 1999 with a milk
chilling capacity of 60,000 LPD.
i. Hoskote Chilling Center was commissioned on 29th March 2000 with a milk
chilling capacity of 1.5 lakh LPD.
RATIO ANALYSIS
Comparison of the calculated ratios with the ratios of the same firm in
the past, or the ratio developed from projected financial statements or the
comparison with ratios of the industry to which the firm belong.
The ratio analysis is a widely used tool of financial analysis. It can be sued to
compare the risk and return relationship of firms of different sizes. It is devised to
analyze and interpret the financial health of the company. The use of ratio is not
confined to financial managers only but also to the different parties interested in
the ratios analysis for knowing the financial position of a firm for different
purposes. The suppliers of goods on credits, banks, financial institutions, investor,
shareholders and management all make us of the ratio analysis. And also firm to
know the financial position to provide loans, advances and make investment in
other sectors.
The ratio analysis is one the most powerful analysis. It is used as a device to
analyze and interpret financial health of enterprise. Thus, ratios have wide
applications and are of immense use today.
C. Use to creditors:
Suppliers of the goods to the firm are interested to know the financial
position of the company. With help of liquidity ratios creditor can know the
liquidity position of the company and can decide to extend the credit facility
or not.
D. Use to employees:
Employees are also interested in the financial position of the concern to
know the profitability, wages, salaries and fringe benefits are depends upon
the profitability of the company.
E. Use to government:
Government interested to know the financial strength of the industry.
Various financial statement published by the units are to calculate ratios for
determining short-term, long-term and overall financial position of the
concerns. Based on the industrial information, government can prepare the
future policies.
Vijaya college, R.V road Bangalore Page 51
A study on Profitability and Financial status on BAMUL
1. No fixed standards
There is no fixed standard which can be laid down for ideal ratios. For
example current ratio is generally considered to be ideal if current assets are
twice the current liabilities. However in case of those concerns which have
adequate arrangements with their bankers for providing funds when they
require. It may be perfectly ideal if current assets are equal to or slightly
more than current liabilities. Therefore it is difficult in rendering
interpretation of ratios.
3. Personal bias:
Ratios are the only means of financial analysis and not an end in itself.
Same ratios have to be interpreted by different way.
Classification of ratios
The use of ratio analysis is not confirmed to financial manager only. There are
different parties interested in the ratio analysis for knowing the financial position
of a firm for different purposes. In view of various users of ratios, there are many
types of ratios which can be calculated from the information given in the financial
statement. The particular purpose of the user determines the particular ratios that
might be used for financial analysis.
Liquidity ratios
These are the ratios which measure the short term solvency or financial position
of a firm. These ratios are calculated to comment upon the short term paying
capacity of a concern or the firm’s ability to meet its current obligations. The
various liquidity ratios are: current ratio, liquid ratio and absolute liquid ratio.
Further to see the efficiency with which the liquid resources have been employed
by a firm, debtor’s turnover and creditor’s turnover ratios are calculated.
Activity ratios
Activity ratios are calculated to measure the efficiency with which the resources
of a firm have been employed. These ratios are also called turnover ratios because
they indicate the speed with which assets are being turned over into sales, for
example debtor’s turnover ratio. The various activity or turnover ratios have been
named in the chart classifying the ratios.
Profitability ratios
The ratio measures the profit available to the equity share holders on per
share basis that is the amount that they can get on every share held. The ratio
between net profits after tax and number of equity shares is called as earning per
share.
Ratios
0.2
0.15
0.1 Ratios
0.05
0
2009-10 2010-11 2011-12
Analysis:
From the table in the year 2009-10 the EPS was 0.13, in the year 2010-11was
0.14 and in the year 2011-12 was 0.20. So we conclude that EPS is gradually
increases from 0.20 to 0.13.
Interpretation:
From the graph we conclude earning per share is gradually increasing from
year to year. Due to the increase in the profit, but decrease in the share capital
increase the profit ratios.
Gross Profit
Sales
Ratios
10.00%
8.00%
6.00%
Ratios
4.00%
2.00%
0.00%
2009-10 2010-11 2011-12
Analysis:
From the table in the year 2009-10 the GP Ratio was 9.63%, in the year
2010-11 was 8.59% and in the year 2011-12 was 7.23%. So we conclude that GP
Ratio is gradually decreasing from 9.63% to 7.23%.
Interpretation:
From the graph we conclude that the GP ratio is gradually decreasing year by
year. This indicates poor results. The Company needs to take necessary actions
regarding sales for better results
Net profit ratio is the ratio of net profit (after taxes) to net sales. It is
expressed as percentage.
Net Sales
Ratios
0.45%
0.40%
0.35%
0.30%
0.25%
0.20% Ratios
0.15%
0.10%
0.05%
0.00%
2009-10 2010-11 2011-12
Analysis:
In the year 2009-10 the Net Profit Ratio was 0.307%, in the year 2010-11 it was
0.31% and in the year 2011-12 Net Profit Ratio was 0.398%.
Interpretation:
From the graph we conclude that net profit of the company is increasing year by
year. This indicates that the profitability of the company is good
OPERATING RATIO:
A ratio that shows the efficiency of a company's management by comparing
operating expense to net sales. It is expressed as percentage
Operating Cost
Net Sales
Ratios
10.00%
8.00%
6.00%
Ratios
4.00%
2.00%
0.00%
2009-10 2010-11 2011-12
Analysis:
In the year 2009-10 the Operating Ratio was 0.305%, in the year 2010-11
it was 0.304% and in the year 2011-12 Operating Ratio was 0.38%.
Interpretation:
From the graph we can conclude that Operating ratio is decreasing, lower the
Operating ratio higher the Net profit and Operating profit. This ratio shows that the
company’s profit is satisfactory.
Operating Profit
Net Sales
Ratios
1.80%
1.60%
1.40%
1.20%
1.00% Ratios
0.80%
0.60%
0.40%
0.20%
0.00%
2009-10 2010-11 2011-12
Analysis:
In the year 2009-10 the Operating Profit Ratio was 1.64%, in the year
2010-11 it was 1.44% and in the year 2011-12 Operating Profit Ratio was
1.04%. Decreasing in Operating profit ratio effect the company
Interpretation:
From the graph we conclude that the Gross Profit ratio is gradually decreasing
year by year. Decrease in the Ratio affects the company. The company has to take
necessary steps and need to overcome the problem.
CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and
current liabilities. Current assets refers to all those assets can be easily converted
into cash within a period of 12 months. Current liabilities are those obligations
which are payable within a short period generally one year. This ratio indicates the
ability of a concern to meet its current liabilities. A current asset includes cash in
hand, cash at bank, sundry debtors, short term loans and advance and inventories.
A current liability includes sundry creditors, bills payable, provision for tax, etc.
Current Assets
Current Ratio =
Current Liabilities
Ratio
1.25
1.2
1.15
Ratio
1.1
1.05
1
2009-10 2010-11 2011-12
Analysis:
From the table we can see that the current ratio in the year 2009-10 was
1.16 times, in the year 2010-11 was 1.1 times and in the year 2011-12 was
1.24 times.
Interpretation:
From the graph we conclude the current ratio has been increasing from
2010-11 to 2011-12. This is because of the increase in the current assets.
Therefore it is very good working capital for the company.
LIQUIDITY RATIO:
Liquid Assets
Liquidity Ratio =
Liquid Liabilities
Ratio
1.4
1.2
1
0.8 Ratio
0.6
0.4
0.2
0
2009-10 2010-11 2011-12
Analysis:
From the table we can see that the Liquidity ratio in the year 2009-10 was
1.25 times, in the year 2010-11 was 0.77 times and in the year 2011-12 was
0.8 times.
Interpretation:
A Liquidity ratio higher than 1:1 indicates that the business can meet its current
financial obligations with the available quick funds on hand. A Liquidity ratio
lower than 1:1 may indicate that the company relies too much on inventory or
other assets to pay its short-term liabilities.
Net assets
Ratio
0.2
0.15
0.1
Ratio
0.05
0
2009-10 Ratio
2010-11
2011-12
Analysis:
From the table we can see that the Net working capital ratio in the year
2009-10 was 0.13 times, in the year 2010-11 was 0.09 times and in the year
2011-12 was 0.19 times.
Interpretation:
From the graph we can conclude that the net working capital ratio is
fluctuating every year. It is because, due to the changes in the overall current
assets of the company. But the ratio has been increased in current previous
year this shows increase in working capital.
Current assets
Net worth
Ratio
1.25
1.2
1.15 2009-10
1.1 2010-11
2011-12
1.05
0.95
2009-10 2010-11 2011-12
Analysis:
From the table we can analyze that the company’s current assets to net
worth ratio was 1.22 in the year 2009-10, 1.07 in the year 2010-11 and 1.1 in
the year 2011-12.
Interpretation:
From the graph it shows that the company’s current asset to net worth ratio
is increased from 2010-11 to 2011-12. So we conclude that the company’s
return on current assets is getting better as the ratio is increasing. The increase
in ratio shows they are working on it.
Fixed assets cannot be easily converted into cash. A firm purchases fixed
assets for long-term purpose. This ratio establishes the relationship between
fixed assets and shareholders fund. The ratio indicates the extent to which
shareholder’s funds are sunk in the fixed assets. Net worth includes owner’s
equity or paid up capital and reserves and surplus. Generally, the purchase of
fixed assets should be financed by the shareholder’s equity which includes
reserves, surplus and retained earnings.
Fixed assets
Net worth
Ratio
1.4
1.2
1
2009-10
0.8
2010-11
0.6
2011-12
0.4
0.2
0
2009-10 2010-11 2011-12
Analysis:
It is analyzed that the fixed assets to net worth are 1.29, 1.11 and 0.88 in
the year 2009-10, 2010-11 and 2011-12 respectively.
Interpretation:
The ratio is obtained by dividing net profit by net worth. This measures
the productivity of the shareholder’s funds. A higher ratio indicates the better
utilization of owner’s funds and higher productivity. It is useful for inter-firm
and inter-industry comparisons. This ratio is expressed as a percentage.
Net profit
Net worth
Ratio
6.00%
5.00%
4.00% 2009-10
3.00% 2010-11
2011-12
2.00%
1.00%
0.00%
2009-10 2010-11 2011-12
Analysis:
From the table in the year 2009-10 the net profit to net worth ratio was 4.09%,
in the year 2010-11 was 4.5% and in the year 2011-12 was 5.96%.
Interpretation:
The increase in ratio shows the profitability of the company. The net profit of
the company is increasing. The net profit to net worth ratio is doing well to the
company.
Earnings per share are increasing year by year. Due to the increase in the
profit, but decrease in the share capital increase the profit ratios.
Current assets to net worth ratio fluctuating every year. But from latest year
performance we can conclude that the company is taking better steps to
overcome this problem.
Fixed assets to net worth ratio is decreasing year by year, the shareholder’s
funds are also decreasing to finance it for fixed assets.
Profits had increased gradually; the net profit to net worth ratio is doing
well to the company.
The Net profit of the company is increasing year by year. This shows
the profitability of the company.
Operating ratio is decreasing, lower the Operating ratio higher the Net profit
and Operating profit. This ratio shows that the company’s profit is
satisfactory. The interest received from year to year is increasing trend.
But when compared to the year 2008-09 the rate of increase is
satisfactory.
Vijaya college, R.V road Bangalore Page 77
A study on Profitability and Financial status on BAMUL
The Gross Profit ratio is gradually decreasing year by year. Decrease in the
Ratio effect the company. The company has to take necessary steps and need
to overcome the problem.
The company has to encounter the problems which are faced and has to
find solution.
Even though the profit is increasing but the profit ratio id gradually
decreasing/fluctuating year after year. This may leads to loss in the
company.
As earning per share is decreasing, the equity shares which are issued by
the company should be increased. This may leads to increase in EPS.
The company has to conduct more public related programme, this gains
more goodwill to the company.
The company should utilize the funds properly so that cash cannot be
used unnecessarily.
More number of branches can be opened all over the Karnataka for the
benefit of customer across the state.
6. CONCLUSION
The study had undertaken on the topic “Profitability and financial status”
to know the financial status and interpret the company’s performance. The
analysis of the co-operative limited was undertaken with the help of ratios,
which are important tools of financial analysis.
The co-operative limited has achieved tremendous progress over the recent
year. The co-operative limited has a healthy financial performance; the co-
operative limited has been able to achieve growth across the multiple
parameters, including customer’s acquisition, geographical spread, business
volumes and revenues.
It is found that the current assets are more than the current liability and we
can conclude that the co-operative limited will be able to meet all its
immediate, all its financial commitments, without succumbing to pressure.
Therefore the short-term solvency position of the BAMUL remains healthy.
After having solved the ratio and analyzing the financial data, we can
conclude that the co-operative limited has gradually excelled over the years.
Thus ratio analysis has been a very useful technique which has highlighted the
performance of BAMUL in key-areas and also has in the avocation of certain
strategies to be followed by BAMUL which is indispensable to its future
growth.
7. ANNEXURES
Balance sheets (as on 31-03-2010, 31-03-2011, 31-03-2012)
3 LOAN LIABILITY
LOANS 158742333 146705048 231655460
4 CURRENT LIABILITIES
A DUES PAYABLE 220807272 161408350 233469968
B AUDIT OBJECTIONS 1169746 1169745 1169744
C INTER DAIRY CREDITORS 32972604 16934964 46584528
D OTHER CREDITORS 217987213 192465898 148204326
E SCHEMES 13383860 77496997 19280483
F DUTIES AND TAXES 38109554 9563820 44208
G SALARY RECOVERIES 12168 14141 0
TOTAL(A+B+C+D+E+F+G) 524442417 459053915 448753260
2 CURRENT ASSETS-LOANS-
ADVANCES
A INVENTORY 260131301 177463614 63377705
B SUNDRY DEBTORS 64768886 80679442 105826408
C CASH AND BANK BALANCES 261305225 186892996 301776956
D LOANS AND ADVANCES 16016622 28170751 13374223
E SERVICE DEPOSITS 19126831 19010726 18901028
F OTHERS 31631161 15192086 17383982
8. BIBLIOGRAPHY
COST AND FINANCIAL ANALYSIS:
S.P.JAIN
K.L.NARANG
JAWAHAR LAL
MANAGEMENT ACCOUNTING:
M.N.ARORA
I.M.PANDEY
SHASHI K.GUPTA
R.K.SHARMA
ANNUAL REPORT:
The Bangalore Urban & Rural District Milk Producers Co-Operative Societies
Union Limited (Bamul)
WEBSITE:
www.accountingformanagement.org
www.investopedia.com
www.wikipedia.org
www.indianmirror.com