PROJECT REPORT ON “A STUDY ON FINANCIAL STATEMENT ANALYSIS” AT KARNATAKA CO-OPERATIVE MILK PRODUCERS FEDRATION LTD. Dissertation Submitted In Partial Fulfillment of the Requirements For The Award of the Degree of MASTER OF COMMERCE IN BANGALORE UNIVERSITY SUBMITTED BY KULKARNI.MAITRILWAMANRAO (REG NO: 16CQCOMO14) UNDER THE GUIDANCE OF EXTERNAL GUIDE DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE KUMARSWAMY LAYOUT, BANGALORE-560078DAYANANDA SAGAR COLLEGE OF ARTS SCIENCE & COMMERCE sity, Recognised by AICTE, Accredidated by N C, 'A’ Grade New Delhi) Affiliated to Banga CERTIFICATE FROM THE INSTITUTION This is to certify that the project report on “A study on financial statement analysis at Karnataka Co-operative milk federation, Bangalore” is submitted in partial fulfillment of the requirement for the degree of master of commerce of Bangalore University by KULKARNI MAITRAI WAMANRAO (Reg. No : 16CQCOMO14) and this has not formed basis for the award of any degree, diploma or fellowship by any other institute or university. Signature Signature Q Hob llastt'< Place: Bangalore Date: a/os/ooie Shavige Malleshwara Hills, Kumaraswamy Layout, Bangalore - 560 078. Phone : +91 80 42161762 / 26660789 / 26661104 Website : www.dayanandasagar.edugmrud rmo we waynes chaechone Achas (Ret) KMF Karnataka Co-Operative Milk Producer's Federation Limited No.2040/Adm-1/2018 Date: 28.04.2018 CERTIFICATE This is to certify that Ms.Kulkarni Maitri Waman rao Reg.No:16CQCOM014 studying in M.Com at Dayananda Sagar College of Arts Science & commerce Kumarswamy Layout, Bengaluru, has successfully completed her project work on “A Study on Financial Statement Analysis at Karnataka Co-operative Milk Federation LTD” for a period from 10.03.2018 to 10.05.2018. This certificate is issued for the purpose of academics only. Her conduct during this period is found to be satisfactory. Your’s faithfully, for Karnataka Co-Operative Milk Federation Ltd., Sr. Deputy Director (Admin) $ac.oeF Kotte, wold Ueo sos : 2915, cmt Oostur, shou Cg, Horisiadh ~ 560 029, ‘Complex, PIB. No. 2815, Dr. MH, Marigowde Road, Bengaluri- 560 029, Phone : 080-26096800, 25536625, Fax: 25536108. “ps:md@kmi.coop / admin@kmt.coop I finance@kmt.coop / marketing@kmf.coop / purchase@krrf.coop / mis@kmt coop ‘ah@akmt.coop /step@kmt.coop | cti@kmt coop / ao@kmf.coop / Website: wwww.kmnandini.coopCERTIFICATE OF GUIDE is to certify that the project titled “A STUDY ON FINANCIAL "ATEMENT ANALYSIS AT KME” is based on the original study conducted by ILMAITRILWAMANRAO bearing Reg. no 16CQCOM014 under sy supervision and guidance. is an authentic report prepared in partial fulfillment of the requirement for the of Master of commerce as prescribed by Bangalore University. is has not formed a basis for the award of any other degree/ diploma by galore University or any other University. : BANGALORE 2 02/05/o01¢ INTERNAL GUIDE @- Mrs. Shobha.B.GIDA SAGAR COLEGE OF ARTS, SCIENCE AND COMMERCE SHAVIGEMALLESHWARA HILLSS KUMARSWAMY LAYOUT BANGALORE-560078 STUDENT DECLARATION | KULKARNI MAITRI WAMANRAO (16CQCOM014) hereby declare that the project report titled “A STUDY ON FINANCIAL STATEMENT ANALYSIS AT KARNATAKA MILK FEDERATION LTD” is an original work carried by me during the year 2017-18, under the supervision of Mrs Shobha B.G, Asst, Professor, Department of Commerce, DSI. ‘also declare that no part of this representation has been previously published or submitted as a project report for any degree or diploma of any university. a DATE: 02/o Ss i 2018 KULKARNI MAITRI WAMANRAO PLACE: BANGALORE (16CQCOM014)ACKNOWLEDGEMENT thank lord Almighty who gave the strength and wisdom to complete the project in a very cessful manner. jwould like to express my deep and sincere thanks to my institution Dayananda Sagar College of tS, Science and Commerce, Bangalore and gratitude to those who have been instrumental in completion of my project. I have received a lot of help directly and indirectly from a number people. take this opportunity to express my powerful and whole hearted thanks to our Principal Prof. express my sincere thanks to our HOD Dr. SAVITHA TRIVEDI, a guiding force behind the mpletion of this project. thank my faculty guide Ms. SHOBHA.1.G, Asst. Professor, Department of Commerce for her timely support, motivation and guidance. ‘Tam extremely thankful to THE KARNATAKA MILK FEDERATION LTD, for providing with the details needed for the project. I express my gratitude to all the officers and staff members or their wholehearted co-operation and guidance. “Twould like to thank my parents and friends who supported me for successfully completing my KULKAI MAITRI WAMANRAO (Reg No. 16CQCOMO14)(CHAPTER SCHEMES CHAPTERS INTRODUCTION REVIEW OF LITERATURE RESEARCH DESIGN INDUSTRY PROFILE AND COMPANY PROFILE DATA ANALYSIS AND INTERPRETATION SUMMARY OF FINDINGS SUGGESTIONS AND CONCLUSIONS BIBLIOGRAPHY ANNEXURES,LIST OF TABLES TABLE NO. TABLE SHOWING SHARE CAPITAL TABLE SHOWING RESERVES AND SURPLUS TABLE SHOWING EARMARKED FUNDS, TABLE SHOWING LOAN FROM N.D.D.B OF KMF TABLE SHOWING FIXED ASSETS OF KMF TABLE SHOWING INVESTMENTS OF KMF TABLE SHOWING CASH AND BANK BALANCE OF KMF ‘TABLE SHOWING SUNDRY DEBTORS OF KMF TABLE SHOWING INVENTORY OF KMF TABLE SHOWING LOANS AND ADVANCES OF KMF TABLE SHOWING CURREBT LIABILITIES OF KMF TABLE SHOWING CURRENT ASSETS OF KMFLIST OF GRAPHS PAGE NO. GRAPH SHOWING SHARE CAPITAL FROM 2015-17 GRAPH SHOWING RESERVES AND SURPLUS FROM 15-17 GRAPH SHOWING EARMARKED FUNDS FROM 2015-17 GRAPH SHOWING LOAN FROM N.D.DB FROM 2015-17 GRAPH SHOWING FIXED ASSETS FROM 2015-14 GRAPH SHOWING INVESTMENTS FROM 2015-17 GRAPH SHOWING CASH AND BANK BALANCE FROM 2015-17 GRAPH SHOWING SUNDRY DEB1ORS FROM 2015-17 GRAPH SHOWING INVENTORY FROM 2015-17 GRAPH SHOWING LOANS AND ADVANCES FROM 2015-17 GRAPH SHOWING CURRENT LIABILITIES FROM 2015-17 GRAPH SHOWUNG CURRENT ASSETS FROM 2015-17CHAPTER 1 Introductions A Study on Financial Statement Analysis 1.1 INTRODUCTIO! FINANCE The word finance was primitively a French word. In the 18" century, it was adopted by the English speaking communities to “mean management of money”. Finance is nothing but exchange of attainable resources. Finance is not restricted only to the exchange and/or management of money. A barter trading is also type of Finance, Thus, we can say, Finance is an art of managing different types of attainable resources like money, assets, investments, securities, etc. ‘What is Finance? Finance is the area that deals with the study of investments. Finance is a wide term that explains two related activities, that is, how to acquire the funds and how to manage those funds. Finance comprises the oversight, creation and investigation of money, banking, credit, investments, assets and liabilities that make up the financial systems. In other words, Finance is management of large amount of funds. Finance includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Finance is regarded as the lifeblood of a business enterprise. It is the basic foundation of all kinds of economic activities. Finance is the master key that provides access to all the sources of growth in the economic system. The success of an organization hugely depends on efficient management of its finances. Finance is one of the functional areas in an organization. It is one of the most important of all business functions. Finance department plays a important role in an organization. It may be described as heart in the human body. The basic function of the heart in human body is to pump the necessary blood to all parts of the body. Similarly, the finance department in the organization has to supply the necessary finances to all other departments and functions to carry out their activities. It is the responsibility of the finance department to identify the financial requirements and supply the needed funds at the right time. DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 2‘Study on Financial Statement Analysis is the central too all business activities for survival and growth. All business mance, targets and goals through set in absolute terms have a common measurement in jal terms. Similarly all comparisons either with the past or the competitors are measured or with financial data. Finance is nothing but an exchange of available resources. In other words, finance is the of the economic activities. To perform any economic activity, we need certain resources, are pooled in terms of money ic., in any form of currency notes, or other valuables, ete is a prerequisite for obtaining physical resources, which are needed to execute ive activities and carrying business operations such as sales, pay compensation, reserve ingencies, unexpected situations and so on. Finance is an organic function and inseparable part of our everyday life. Today, Finance ‘become a word often encounter on our day to day basis. IN OF FINANCE can be referred to as science of money management. Finance is defined in numerous “by different set of people. Following are some statements that derive its wider meaning In General sense, Finance is the management of money and other valuables, which can be easily converted into cash.” According to Experts, “Finance is a simple task of providing the necessary funds required by the business of ‘entities like companies, firms, individuals and others on the terms that are most favorable to achieve their economic activities.” According to Entrepreneurs, “Finance is concerned with cash. It is so, since, every business transaction involves cash directly or indirectly.” A SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 3s “Finance is the procurement of funds and effective and properly planned utilization of ‘on Financial Statement Analysis According to Academicians, funds. It also deals with profits that adequately compensate for the cost and risks borne by the business.” |ONS ACCORDING DIFFERENT AUTHORS: Simon Andrade, defines the term Finance as the following: of economic activity in which money is the basis of the various embodiments, whether market investments, real estate, industrial construction, agricultural development, so on.” And of the economy I which we study the performance of capital markets and supply and price of financial assets.” 2. According to Bodie and Merton, Finance is "study how to scarce resources are allocated over time.” 3. According to O. Barrel C. and Geoffrey Hirt, the term Finance refers to “all activities related to obtaining money and effective use.” FEATURES OF FINANCE Investment opportunities Profitable opportunities Optimal mix of funds System of Internal controls, Future Decision making yee :YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCEs A Study on Financial Statement Analysis “See 1, Investment Opportunities In Finance, Investment can be explained as a utilization of money for profit or returns. Investment can be done by:- ‘* Creating physical assets with money, such as, development of land, acquiring commercial assets, ete. © Carrying business activities, like manufacturing, trading, ete , and * Acquiring financial securities, such as, shares, bonds, units of mutual funds, etc. Investment opportunities are commitments of monetary resources at different times with an expectation of economic retums in the future. 2. Profitable Opportunities In Finance, Profitable opportunities are considered as an important objective. Profitable opportunities signify that the firm must utilize its available resources most efficiently under the conditions of cut throat competitive markets. Profitable opportunities shall be a vision. It shall not result in short term profits at the expense of long term gains. For example, business carried on with non-compliance of law, unethical way of acquiring the | business, etc., usually may result in huge short-term profits but may also hinder the smooth | possibility of long-term gains and survival of business in future | 3. Optimal Mix of Funds | Finance is concerned with the best optimal mix of funds in order to obtain the desired and | determined results respectively. Primarily, funds are of two types, namely, © Owned funds —Promoter contribution, Equity shares, ete. * Borrowed funds — Bank loan, Bank overdraft, Debentures, etc. —_—_—_—_—_—_—_—_—_——— DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 5A Study on Financial Statement Anal} ‘© The composition of funds should be such that it shall not result in loss of profits to the Entrepreneurs and must recover the cost of business units effectively and efficiently. 4, System of Internal Controls. Finance is concemed with intemal controls maintained in the organization or workplace. Intemmal controls are set of rules and regulations framed at the inception stage of the organization, and they are altered as per the requirement of its business. However, these rules and regulations are monitored at various intervals to accomplish the same which have been consistently followed. 5. Future Decision Making Finance is concemed with the future decision of the organization. A “Good Finance" is an indicator of growth and good retums. This is possible only with the good analytical decision of the organization. However, the decision shall be framed by giving more emphasis on the present and future perspective, economic conditions respectively. DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 6“A Study on Financial Statement Anal, ‘3 FUNCTIONS OF FINANCE. “Finance function is the most important function of a business. Finance is, closely, connected with ‘production, marketing and other activities. Inthe absence of Finance, all these activities come to can be commenced, continued and expanded. ‘halt. In fact, only with finance, a business acti Finance exists everywhere, be it production, marketing, human resource development or undertaking research activity. Financial system is useful to all informed citizens, it is particularly useful to organization's finance department. Finance department negotiates loans from financial intermediaries, raises ‘resources in the financial markets, and invests surplus funds in financial instruments. In a very ‘significant way it manages the interface between the organization and its financial environment. ‘The Finance function can simply be taken as the task of providing funds needed by an enterprise ‘on favorable terms, keeping in view the objective of the firm. This means that the finance function is completely concerned with the acquisition of short term and long term funds. The s of Finance, that promotethe various activitiesof the following are some of the fun ‘organization that are connected to each other such as manufacturing, trading and so on. functions of Finance are 4 Payment systemDepositoryfinancial intermediaries such as banks are the pivot of the payment system. Credit card companies play a supplementary role. To realize the importance of this function, simply look at the hardship and inconvenience caused when the payment system breaks down, 4 Pooling of Funds Moder business enterprises require large investments which are often beyond the means of an individual o even of hundreds of individuals. Mechanisms e financial markets and financial intermediaries, which Are an integral part of the financial system, facilitate the pooling of household savings for financing business. If you look at it from the other side, the financial system enables households to participate in large indivisible enterprises SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page7s A Study on Financial Statement Analys ‘> Transfer of Resources The financial system facilities the transfer of economic resources across time and space. As Robert Merton says: “A well-developed, smooth functioning financial system facilitates the efficient life-cycle allocations of household consumption and the efficient allocation of physical capital to its most productive use in the business sector” ~A well-developed, smooth functioning capital market also makes possible the efficient separation of ownership from managementofthe firm. This in tum makes feasible efficient specialization in production according to the principle of comparative advantage.” 4 Risk Management A well-developed financial system offers a variety of instruments that enable economic agents to pool, price, and exchange risk. It provides opportunities for risk pooling and risk sharing for both household and business firms ‘The three basic methods for managing risk are: hedging, diversification and insurance, Hedging entails moving from a risky asset to diskless asset. A forward contract, for example, is hedging device, Diversification involves pooling and sub-dividing risks. While it does not the total risk, it redistributes it to diminish the risk faced by each individual, Insurance enables insured to retain the economic benefits of ownership while laying off the possible losses. Of course, to do this a fee or insurance premium has to be paid. 4 Price Information for Decentralized Decision Making Apart from the manifest function of facilitating individuals and businesses to trade in financial assets, financial markets serve an important latent function as well. They provide information that helps in coordinating decentralized decision making, Robert Merton puts it thus: “Interest rates and security prices are used by households or their agents in making their consumption saving decisions in choosing the portfolio allocations of their wealth. These same prices provide important signals to managers of firms in their selection of investment projects and financings.” —_——————_$_—$—$_ ———— rrr" DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @® Page 8A Study on Financial Statement Analysis ¢ Dealing with Incentive Problem When one party to a transaction has information that the other does not have, informational asymmetry exists. This leads to the problems of moral hazard and adverse selection, which Are broadly referred to as agency problems. The nature of these problems may be illustrated with reference to insurance. A person who has taken a fire insurance policy is likely to become somewhat negligent. This is the moral hazard faced by the insurance company. A person who is more likely to experience fire losses will be inclined to take fire insurance. This is the adverse selection problem faced by the insurance company. Financial intermediaries like banks and venture capital organizations can mitigate the problem of informational asymmetry by handling sensitive information discreetly and developing a reputation for profitable activity. ‘L4 CONCLUSION ON FINANCE: Finance to be more precise is concerned with the management of, ‘Owned funds i.e., promoter contribution, Raised funds ic., Equity shares, preference shares etc. and Borrowed funds i.e., loans, Debentures, overdrafts etc. |At the same time, Finance also encompasses wider perspective of managing the business ‘generated assets and other valuables more efficiently. —_——$S$——————————————— DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 9‘Study on Financial Statement Analysis cial Statements, also called as Financial Report is a methodical record of the financial jings and status of a business, person, or other entity. ‘al Statements are important sources of financial information that can be used to make 1d business decisions. This means that every component of financial statements is important, ponents of Financial Statements can be described as the building blocks used for structing the financial statements and these items represent, in words and numbers, various urces, claims to those resources, and any transactions that create changes in those resources claims. “Below is the list of components of the most important financial statements- balance sheet, profit ‘and loss statement and cash flow statement — and their importance. 1.6 COMPONENTS OF FINANCIAL STATEMENTS ARE: 1. BALANCE SHEET Balance Sheet is a statement of the assets, liabilities, and capital of an organization at one particular point in time, This statement gives an idea as to what the company owns and owes and ‘also the amount of shareholding. The critical components of this statement are as below, « ASSETS ‘An asset can be Tangible or Intangible and is often owned or controlled with the belief that it would provide some future benefit and can be tangible or intangible. While the former includes current assets, the latter refers to rights and other non physical resources that provide value to the business, Current assets consist of inventory, accounts receivables and other short term investments. Fixed Assets could be buildings, equipment and other physical resources. Intangible Assets usually include goodwill, copyright, trademarks and patents. DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMME! @ Page 10© LIABILITIES Liabilities are a company’s legal debts or obligations that might arise during the course of business operations. These are usually settled over time through the transfer of economic benefits like cash, goods or services. Liabilities include account payable, salaries or wages payable, interest due, customer deposits and other such obligations to third parties. Liabilities might be of two types ~ Current or long term, While the former could be liquidated within a year, the latter can be repaid only in the long term (more than a year). Long-term liabilities include long- term bonds issued by the firm notes payables, leases, pension obligations, and long term product warranties. * EQUITY OR OWNER’S EQUITY It is the residual assets of an entity that remain after deducting liabilities. Theoretically, this is the capital available for distribution to shareholders. Hence, from a company’s liquidation perspective , equity would be considered the residual claim on the assets of a business, available to shareholders, after liabilities have been paid. 2. PROFIT AND LOSS STATEMENT. ‘This statement is a summary of the financial performance of a business over time. This is usually prepared after every quarter or year. The components in this statement include: * REVENUES The amount of cash that the company actually receives during a specific period, through the sale of goods or services, is referred to as the company’s revenue. This would include discounts and deductions for returned merchandise. Revenues would also include the amount received as a result of using the capita; or assets of using the capital or assets of the business as part of the operations of the business. Revenue is the “top line” or “gross income” of the business. a pe DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 11‘on Financial Statement Analysis * EXPENSES: The outflow of money or incurring of liabilities (or a combination of both) through production of goods, rendering of services, or carrying out6 any activity that would form a part of the business’ operations, are the expense of the company. Typical business expenses include wages or salaries, utilities such as rent, depreciation of capital assets, and interest paid on loans. The purchase of an asset such as building or equipment is not an expense. Expenses also include the Cost Of Goods Sold (COGS), which Is the cost incurred for selling goods during the period, and includes import duties, freight, handling and other costs for converting inventory into finished goods. * GAINS A company’s gain is an increase in equity through peripheral or incidental transactions by a firm, other than those from revenue or investments by owners. It refers to any economic benefit that is outside the normal operation of the business. Typically, gains refer to unusual and non recurring transactions, such as gain on sale of land, change in a stock’s market price or a gift. It is often shown in the P&L statemdent as non operating income. « LOSSES A company’s losses are decreases in equity through peripheral or incidental transactions carried out by the firm, other than those form expenses or distributions to owners. This could be loss on sale of an asset, written down of assets or loss from law suits. Ot could also include costs that give no benefit. It is often shown in the P&L statement as non operating expense. DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 12& on Financial Statement Analysis HH FLOW STATEMENTS. ss Statement is a summary of the actual or anticipated inflows and outflows of cash in a firm an accounting period. This could be prepared at the end of a month, quarter or year. The flow statement could reflect the liquidity position of the business. This is used as the basis budgeting and business planning. The components in this statements include + CASH FLOW FROM OPERATING ACTIVITIES: Operating activities of a business refer to the production, sales and delivery of the finished product and collection of payment from customers. Cash outflows here could include purchasing raw materials, advertising and cost of shipping the product. They might not include payment to suppliers, employees and interest payments. Depreciation and amortization are also included in the cash flow statement. Cash inflows here consist of receipt from sale of goods and services and interest received. * CASH FLOW FROM INVESTING ACTIVITIES: These are cash flows related to investments and include purchase of assets, gains or losses through investments in the financial market or in subsidiaries, and other related items. + CASH FLOWS FROM FINANCING ACTIVITIES: This would account for activities that aid a firm in raising capital and raising capital nad repaying investors the cash flow might include cash dividends, adding or changing loans or issue of stock. Cash flow from Financing activities reveals the company’s financial strength. Financing activities that produce positive cash flow include cash from issued stocks and bonds. Financing activities that produce negative cash flow include cash for repurchasing stock, paying off debt or interest or payment of dividend to shareholders. ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 13on Financial Statement Analysis jtem in financial statements is important and provide insights to the workings and the ce of the firm .these components are useful to all stakeholders including the rent, employees, suppliers and shareholders, for putting in place sound business plans lowing a financial viable strategy. TIONSHIP AMONG THE FINANCIAL STATEMENTS The financial statements contam inter related information. This is the reason the financial statements are prepared in the sequence presented above. In fact, some of the figures in one financial statement component are actually taken from another component © The net income from the Income Statement is used in the Statement of changes in Equity. Remember that income and expenses affect capital. © The ending balance of capital in the Statement of owner's/ Partners/ SH's equity is forwarded to the balance sheet © The cash balance presented in the Balance Sheet is supported by the Statement of cash Flows. The ending balance of cash in the cash Statement of Cash Flows is the same amount presented in the Balance Sheet. The notes to financial statement show supporting computations of the amounts and additional information about the items presented in the above reports. .7 OBJECTIVES OF FINANCIAL STATEMENTS 1, Accounting Assumptions 2. Qualitative characteristics Leen eee TAySGyH UTE Tsu PETE DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 14‘on Financial Statement Analysis Accounting Assumptions Jt is recommended that financial statements are prepared in accordance with the established assumptions. Basic Accounting Assumptions are © Going Concern In this case, the financial statements are b usually prepared on the assumptions that the entity will continue fimetioning in the foreseeable future, and neither there is an intention, nor a need to material curtail the scale of operations © Consistency This assumption specifies the use of identical accounting policies for similar accounting transactions in all accounting periods. Such a practice makes way for easier comparison of financial statements. Accounting policies, if need of a change, can be modified by a statue or accounting standard, given the need for more appropriate financial statements. © Accrual basis of Accounting Termed the most logical approach in determining profit, accrual basis of accounting is an assumption where transactions are recognized immediately after their occurrence. Accrual basis warrants better matching between revenue and cost. Very importantly, profit/loss onthis basis reflects activities of the enterprise during an accounting period, in contrast to the cash flow basis where nothing but cash flows are generated 2. Qualitative Characteristics Qualitative Characteristics enhance the usefulness of information provided in a financial statement, The following are the qualitative characteristics that a financial statement adhere to’ © Understandabi presentation of financial statements must be livid and concise, to the extent that a person reasonable business knowledge can decipher. Too much of information, especially the (YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 15,on Financial Statement Analysis it ones make a statement clumsy. However, non-disclosure of vital information must be © Relevance The Financial Statements must only reveal the information which influences the economic decisions of the users. Information of that kind may assist the user in the evaluating part, present and future events, or on the other hand help in confirming or correcting past evaluations « Reliability ‘The information provided must be reliable, and for an information to be reliable, it must be accurate and free from errors, bias etc. The following are the traits of reliability: © Transactions and events reported are faithfully represented, * Transactions and events are reported based on their substance and economic reality, and not the basis of legal form. «= Time reporting of transactions and events are neutral ie. without and prejudice and bias. © Prudence exercised in reporting uncertain outcome of transactions or events. © Comparability Comparison of statements in one of the most frequently used and most parent tools of financial analysis. The financial statements must permit both inter-firm and intra-firm comparison. «True and Fair View Financial Statements must always depict a true and fair view of the performance, financial position and cash flows of an enterprise. Application of other qualitative characteristics combined with usage of proper accounting standards will help in providing a true and fair view, DAYANANDA SAGAR COLLEGE OF ART! ;, SCIENCE AND COMMERCE @ Page 16‘on Financial Statement Anal; Gm occurrence with common thought that the results of today are based on yesterday's RS OF FINANCIAL STATEMENTS Statements are prepared to provide information that suits the common needs of all ‘Users of financial statements could be any of the following: Investors © Employees Lenders © Suppliers and other Trade creditors © Customers * Government and other agencies © Public IMPORTANCE OF FINANCIAL STATEMENTS: importance of financial statements lies in their utility to satisfy their varied interest of ferent categories of parties such as management, creditors, publi, etc. 1. Importance to Management Increase in size b and complexities of factors affecting the business operations necessitate a scientific and analytic approach in the management of modern business enterprises, ‘The management team requires up to date, accurate and systematic financial information for the purposes. Financial Statements help the management understand the position, progress and prospects of business vis-a-vis the industry. By providing the management with the causes of business results, they enable them to formulate appropriate policies and courses of action for the future, The management communicates only through these financial statements, their performance to various parties and justify their activities and SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE, @ Page 17Study on Financial Statement Anal there by their existence. A comparative analysis of financial statements reveals the trend in the progress and position of enterprise and enables the management to make suitable changes in the policies 2. Importance to Shareholders Management is separated from ownership in the case of companies. Shareholders cannot, directly, take part in the day-to-day activities of business. However, the results of the activities should be reported to Shareholders at the annual general body meeting in all form of financial . These Statements enable the Shareholders to know about the efficiency and effectiveness of the management and also earning capacity and financial strength of the company. By analyzing the financial statements, the prospective Shareholders could ascertain the profit earning capacity, present position and future prospects of the company and decide about making their investments in this company. 3. Importance to Lenders/Creditors ‘The Financial Statements serve as a useful guide for the present and future suppliers and probable Lenders of a company. Itis through a critical examination of the financial statements that these groups can come to know about liquidity, profitability and long term solvency position of a company. This would help them to decide about their future course of action, 4. Importance to Labour: Workers are entitled to bonus depending upon the size of profit as discussed by audited profit and loss account. Thus, profit and loss account becomes greatly important to workers. In wages negotiations also, the size of profits and profitability achieved are greatly relevant, DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE >) Page 18s Business is a social entity. Various groups of society, though directly not connected with Study on Financial Statement Analysis 5. Importance to the Public: business, are interested in knowing the position, progress and prospects of a business enterprise. They are financial analysts, lawyers, trade associations, trade unions, financial press, f research scholars and teachers, etc. It is only through these published financial statements people can analyze, judge and comment upon business enterprise. 6. Importance to National Economy: The rise and growth of corporate sector, to a great extent, influence the economic progress of a country. Unscrupulous and fraudulent corporate managements shatter the confidence of the general Public in joint stock companies, which is essential for economic progress and regard the economic growth of the country. Financial Statements come to the rescue of general public by providing information. by which they can examine and assess the worth of the company and avoid being cheated by unscrupulous persons. The law endeavors to raise the level of business morality by compelling the companies to prepare financial statements a clear and systematic form and disclosure material information. This has increased the confidence of the public in companies. Financial statements are also essential for the various regulatory bodies such as tax authorities, of companies, ete... they can judge whether the regulations are being strictly followed and also whether the regulations are producing the desired effect or not, by evaluating the financial statements. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE. @ Page 19fost of the limitations are mostly cumulative effect of recorded facts, accounting conventions personal judgmenton financial statements. Unless they are prepared specially they fall to eflect the current economic picture of business. As such, financial statements have numerous mitations, lin tions of financial statements are as follows: 1. Information is incomplete and inexact: The financial statements are interim reports prepared for an accounting period, Hence, the financial information as revealed by them is neither complete nor exact The true financial position or ultimate gain or loss, can be known only the business is closed down. 2. Qualitative information is Ignored: Financial statements depict only those items of quantitative information that are expressed in monetary terms. But, a number of qualitative factors, such as the reputation and prestige of the management with public, cordial industrial relations and efficiency of workers, customer satisfaction, competitive strength, etc., Which cannot be expressed in monetary terms, are not depicted by financial statements, However, these factors are essential for understanding the real financial condition and operating results of the business. 3. Financial Statements mostly show Historical Information: As the financial statements are compiled on the basis of Historical costs, they fail to take into account such factors as decrease in money value or increase in the price level changes. Since these statements deal with past data only, they are of little value in decision making. "ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @™4, Financial Statements are based on Accounting Concepts and Conventions: ‘Accounting Concepts and Conventions used in the preparation of financial statements make them unrealistic. For example the Income statement prepared on the basis of convention of conservatism fails to disclose the true income, for it includes probable losses and ignores probable incomes, Similarly the value of fixed asset is shown in the balance sheet on the 'going concern concept’. This means that the value of the asset rarely represents the amount of cash, which would be realized on liquidation. 5. Personal Judgment Influence Financial Statements: Many items in the financial statements are left to the judgmentof the accountant. For example, the method of inventory valuation, the method of depreciation, the treatment of, deferred revenue expenditure, etc., depend on the personal judgment of the accountant. If it goes wrong, the real picture Mary be distorted. However, such indiscreet personaljudgments are controlled to a certain extent by the convention of conservatism. DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE. @ Page 21= A Study on Financial Statement Analysis INANCIAL STATEM! |ALYSIS ‘What is inancial Statement Analysis? cial Statement Analysis is a process of reviewing and evaluating a company’s financial ment such as the balance sheet or profit and loss statement, thereby gaining an standing of the financial health of the company and enabling more effective decision ing. Financial Statements record financial data, however, this information must he evaluated igh financial statement analysis to become more useful to investors, Shareholders, managers other interested parties. ial Statement Analysis an evaluative method of determining the past, current and d performance of the company. Several techniques are commonly used as part of al analysis including horizontal analysis, which compares two or more years of financial in both rupees and percentage form, vertical analysis, where each category accounts on the sheet is shown as a percentage of the total account, and ratio analysis, which calculates ical relationships between data. financial statement provides multiple years of data. Used together analysts can track 1ce Measures across financial statements using several various methods for financial ent analysis, including vertical and horizontal analysis. An example of vertical analysis is ‘each line item: the financial statement is listed as percentage of another. tal analysis compares line items in each financial statement against previous time In ratio analysis, line items from one financial statements are compared with line items another. For example, many analysts like to know howmany times a company can pay off ‘with current earnings. Analysts can do this by dividing debt, which comes from the balance by net income, which comes from the Income Statement. Likewise, retum on assets )) and the return on equity (ROE) compare company net income statement with assets and Jholder’s equity as found on the balance sheet. IDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 22s Study on Financial Statement Analysis or 2 OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS, main objectives of financial statement analysis is to provide information about the financial ition, performance and changes in financial position of a company that is useful to a wide of users in making examine decisions. By examining the past and current financial data, tors can evaluate a company's performance and financial position as well as assessing risks. cial analysis yelling valuable information about trend and relationships, the quality of a pany’s earnings, and the strengths and weaknesses of it’s financial position, ial Statements also show the results of the stewardship of management, ot the wuntability of management for the resources entrusted to them by the Shareholders. As tors, you must always use financial statements to assess the risk and retum of your stments and take investment decisions based on sound analysis. Objectives of Financial Statement Analysis include : * Assessment of Past Performance Past performance is a good indicator of future performance. As Investors you should be interested in the trend of past sales, operating expenses, net income, cash flows and return ‘on investment, among others. These tends offer a means for judging Management’s past performance are possible indicators of future performance + Assessment of current position Analysis of the current position indicates where the business stands today. Such analysis will show the types of assets owned by a business enterprise and the different liabilities due against the enterprise, the company's cash position as well as debt the company has in relation to equity, among others. ‘+ Assessment of Operational Efficiency ial Statement Analysis helps to assess the operational efficiency of the management of a yy. Actual performance of the form which are revealed in the financial statements can be iANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 23A Study on Financial Statement Analysis s compared with some standards set earlier and the deviation ofany between standards and actual performance can be used as the indicator of management efficiency. 1.12 ADVANTAGES AND DISADVANTAGES OF FL IAL STATEMENT ANALYSIS ‘There are various advantages and disadvantage of financial statement analysis. They are : Advantages: 1) It simplifies the financial statements 2) Ithelps in comparing companies if different size with each other 3) It helps in trend analysis which involves comparing a single company over a period 4) It highlights important information in simple form quickly. A user can judge a company by just looking at few numbers instead of reading the whole financial statements, 5) Financial Statement analysis determines the company’s health and stability. The data gives you an intuitive understanding of how the company comics the business. 6) Stockholders can find out how management employs resourees and whether they use them properly. 7) The financial statement analysis provides liquidity rations that show how much monetary worth the company has on a given day, which helps determine the firm's financial reliability. 8) Full disclosure is one of the main advantages of, and one of the main purposes for, financial statement analysis. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE, @ Page 24s A Study on Financial Statement Analysis Disadvantages: Despite usefulness, financial statement analysis has some disadvantages. Some key demerits of Financial Statement Analysis are : 1) Different companies operate in different industries each having different environmental conditions such as regulation, market structure, ete. Such factors are so significant that a comparison of two companies from different industries might be misleading. 2) Financial accounting information is affected by estimates and assumptions. Accounting standards allow different accounting policies, which impaired comparability and hence analysis is less useful in such situations TOOLS AND TECHNIQUES OF FINANCIAL STATE! |ALYSIS: tant tools and techniques of Financial Statement Analysis are as follows: Common Size Statement Analysis Trend Analysis Average Analysis Statement of Changes in Working Capital Fund Flow analysis Cash Flow Analysis Ratio Analysis Cost and Volume Profit Analysis Comparative Statements i Comparative Income Statement 10. Comparative Balance Sheet. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE rc) Page 25‘Study on Financial Statement Analysis A ¢ financial condition of the business concern can be found out by preparing mparative Balance Sheet. The various items of Balance Sheet for different iods are used. These assets are classified as current assets and fixed assets for ison. Likewise, the liabilities are classified as current liabilities, long term ilities and shareholders’ net worth includes Equity Share Capital, Reserves and lus and the like. FANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @® Page 26CHAPTER 2 REVIEW OF LITERATUREStudy on Financial Statement Analysis jew of literature is a search and evaluation of available literaturein your given subject or 1 topic area, It documents the state of the art with respect to subject or topic you are writing A literature review shows your readers that you have an in depth grasp of your subject; that you understand where your ownresearch for into and adds to an existing body of agreed edge. fiterature review has four main objectives ‘© Itsurveys the literature of your chosen area. © Itsynthesizes the information in that literature into a summary. ‘© Itcritically analyzes the information gathered by identifying gaps in count knowledge by showing limitations of theories and points of view and by formulating areas for further research and reviewing areas of controversy. © Itpresents the literature in an organized way. 1 REVIEW OF LITERATURE number of National and Intemational research studies have been carried out in different s of financial performance by the researchers, economists and academicians in India. ferent authors have analyzed performance in different authors have analyzed performance in mnt aspects. Therefore, the present chapter the empirical studies related with different 4s of performance. Literature reviews has been divided into two categories, National jew and International Review. NATIONAL REVIEW 1979)have been doing research on financial performance M.N and Bala Subramay Indian cement industry andanalyzed during the period of 1972 to 1977 shows that the cial performance of the selected cement companies evidenced by Profitability, Liquidity 'YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 28‘Study on Financial Statement Anal; capital structure ratios has declined. The non availability of financial has affected the mization of plants and periodic rehabilitation of the kilns. Besides, the bottlenecks in ly of raw materials and power and non remunerative prices have reduced the capacity tion, profits and cash flow. The profitability and liquidity position in many cement anies have been affected adversely because of the problem in supply of raw materials, sport and power. mar B. Das (1987)has made analysis of the financial performance of the cement industry. It be analyzed that the next fixed assets as the percentage of total assets decreased for period of 10-71 to 1977-78 that was 553.5% to 44.04% respectively. Current liabilities have increased the current assessing. Liquidity performance of the cement industry is not healthy during iod of the study. The debt asset ratio is downward during the period of the study and debt ity ratio has slightly increased while net worth ratio has decreased kidder the years. 991)has focused the productivity aspect of Indian Cement Industry. This study sized that cement, being a construction material, occupied a strategic place in Indian my. This study has revealed that, in 1990-91, the industry has installed capacity of 60 fion tonnes with a production of 48 million tonnes. In this study, the cement industry was ted to have a capacity growth of about 100 million tonnes by the year 2000. This study also analyzed the productivity and financial performance ratios of the cement industry with a to identifying the major problem areas and the prospects of solving them wn and RajendraVaidha (1993)have analyzed to evaluate the performance of the it industry after decontrol was characterized by presumes that were generally competitive welfare enhancing. This study has revealed that the structure of the industry changed ificantly with large magnitude of relative technologically and superior capacity being created many new entrants into the industry. It was also noticed in this study that there were SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 29ficant real price increase and an associated increase in profitability. The performance of firm the strategic group was different with d firm's operating relatively new and large plans peared to have an advantage. Further, the study has dealt with the nature and effect of inter- sm heterogeneities in the cement industry. and IndrasenaReddy.P (1995)in their study, analyzed the financial strength of industry had been improving from year to year. The company’s performance in relation to ating internal funds in the form of reserves and surplus was excellent and also the company doing well in mobilizing outsider’s find. The liquidity position of the company was sound as ealed by current ratio and quick ratio which were above the standard. The solvency ratio et that company had been following the policy of low capital treating from 1990-91 as these s had been decreasing from this year. The performance of the company in relation to fitability was not up to the expected level. The company's ability to utilize assets for eration of sales had not been improved much during the pissed of study as revealed by is tum erratios. Kishore Sharma (2002),in his study on n financial appraisal of cement industry in India, found that the liquidity position was decreasing, current ratio and quick ratio showed a easing trend and also these ratios varied from time to time. On comparing the current ratio ‘quick ratio of cement industry, six companies were found higher than the industry average ur companies lower than the industry average. The solvency position in term of debt equity hhas showed a decreasing trend in the 4 years put the study, after that it registered an sing trend. The ratio of fixed assets to total debt always showed more than 100 percent indicates that the claims of outsiders were covered by the fixed assets of cement anies. enduBhunia (200 studied on liquidity management, analyzed the short term financial through the analysis of the working capital management of selected iron and steel anies in India. The study revealed that actual values of working capital have been found toon Financial Statement Analysis fer than the estimated values of working capital for the companies, such as Steel authority Limited (SAIL) and Indian Iron and Steel Corporation (IISCO). There was poor Sdity performance existed in case of both SAIL and IISCO, inefficient inventory management ‘case of SAIL and inefficient receivable management in case of both the enterprises. It ‘ed that increase in additional investment in raw materials, reduction in not the burden of liabilities were necessary in order to improve the inventory management and liquidity of these steel companies. '8),has analyzed the liquidity performance of Tata Iron and Steel Company ). During the selected period of the study, it was found that the liquidity position of the yy, on the basis of current ratio as well as quick ratio, was not satisfactory. It indicated share of current assets in total assets of the company, on an average, was. 29.1 percent the period of study. It wassuggested to maintain overall control of liquidity position, the xy shouldgive special attention to the management of current assets. He found that the of influence of liquidity on its profitability was low and insignificant. 2008),have stayed on production performance of ‘ement Limited. It can be analyzed the comparative production performance of Madras and all other cement companies in India. Statistical method Mann- Whitney U-set was The results of analysis indicated that the production performance of v selected unit was ‘to production performance of all other cement units in India. i (2013),made an attempt to study financial performance of to selected steel companies SAIL and JSW. The study covered a period of five years from 2008 to 2012. Various tools and techniques were used to analyze profitability, liquidity and management of both the units and t-test was used to test the hypothesis. It was concerned that SAIL better than JSW in terms of profitability, liquidity and management efficiency during IDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 31Ss Period under study. Researcher recommended that JSW should control it's cost of goods sold operating expenses. It was also suggested that JSW should try to utilize itsfull production Study on Financial Statement Analysis ity and should properly utilize its fixed assets in order to improve its performance. (2013),inflation is rise in general level of prices of goods and ice in an economy over a period of time. This study investigates the impact of inflation on ies" financial performance and financial position by evaluating and comparing reported inflated financial ratios. Financial ratios of 42 manufacturing companies covering 7 ial sectors have been restated in current purchasing power for a period of S years (2004-05 2008-09). The reason were calculated on both historical and financial statements to form b two of ratios. The Current Purchasing Power method and Financial Ratio analysis have been wed to the study the impact of inflation on different financial ratios. This study offered le information and results showed that with the impact of inflation there is significant ¢ in not liquidity, profitability and activity ratios except quick ratio, and Kumar (2014) attempted to review the financial performance of Steel Authority of Limited (SAIL) .The study was purely based on secondary data considered for va period of years from 2005-06 to 2009-10. The data were tabulated, analyzed and interpreted with the of various financial ratios and multivariate Discriminate Analysis (MDA) developed by Edward I Altman (1986). It was observed from the analysis of various reasons that v the earning capacity, liquidity position and long-term solvency position of SAIL was quite during the study period and the level of bankruptcy position was also very low. Financial structure is simply a mean of describing the total of assets and types of financing that are employed as part of the overall financial procedure business or other entity. Assessing the financial structure of a business or any bank is a key in determining if the company/bank is financially stable. Since this approach encompasses ‘ANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 32‘on Financial Statement Analysis range of financial assets, the job of determining the companyis increasing or decreasing cerall worth is easier to handle, Taking the time to evaluate the structure on a regular basis, ‘as monthly or quarterly, offers the benefit of identifying emerging movements that could be ‘erin or the detriment of the operation, and adjusting the asset management strategy in order to fe desirable results. This research paper makes a modest attempt to b analysis ¢ the Jal structure which help to identify the shortcomings and inadequacy of the find to raise t during the study period and study v the causes and consequences of the components of the Jal statements in relation to the profitability of the bank. In this research paper we have analyzed the financial stability and overall performance of SBI and study the profitability of Bank of India. Idhayajothi, Dr. O.1.V. Latasi A. MeharajBanu, R. Malini (2014)Financial regarded as the life blood of a business enterprise. In the modem oriented company, finance is asic foundations of all kinds of economics activities. Finance statements are prepared for decision- making. They play a dominant role in setting the frame work and .gerial conclusion and can be drawn from these statements if of immense use in decision- ing through analysis and interpretation of financial statements. As said earlier finance is said be there life blood of any business, Every business under taking needs financial for it's smooth ing it has raise funds from the cheapest and risky source to utilize this in most effective nner. So every company will be interested in knowing it's financial performance. The project itled “Financial Performance Analysis of Ashok Leyland Company Ltd” throw light on 1 financial performance of the company. k_Kumar Rath (2016)India is one of the developing Nations of v the World. alization provides about of opportunity of companies to expand overseas and enrich India ith high Quality and World Class products by implementing state-of-art technology. The Steel Giants of India are namely, Arcellor Mittal, Tata Steel Ltd. And Steel Authority of India mating India on the Global front. Tata Steel is expanding is production capacity on n India 'YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 33,s&s ‘and has some ¢ Greenfield Steel Projects under implementation, including one at the Kalinga ‘A Study on Financial Statement Analysis Nagar Industrial Complex at Dub Uri in Jaipur district. This project report is an effort to suggest the best financing option for the project expenditure of RS.21200 Cr and to identify it's financial strength and weaknesses with the help of various financial statement analysis tools and ‘techniques. wwsatMuslumov (2005)analyzed that the privatization was associated with a declining value and Shareholders’ profitability in Turkish cement industry. A decline in the value added Shareholders’ profitability were mainly caused by the decrease in return on assets. The Jine in the retum on assets was traced to declining asset productivity. These results are not ‘stent with previous cross-sectional privatization studies and number of country studies. ¥_(2008)has a conducted a study on liquidity performance relationship of fgerian manufacturing companies. The results of the study have revealed a significant tionship between liquidity, profitability, efficiency and leverage measures. The study has also an attempt to suggest that in order to target money supply, monetary policy could be used facilitate monetary transmission mechanism by integrating a minimum liquidity jirementfor the manufacturing industry. Rationale for the present study, 2011)analyzed the relationship between Working ital Management and Profitability.A case study of Cement industry in Pakistan. In this study analyzed the relationship between Working capital management and profitability. Researcher ted 14 companies in cement industry in the Khyber PakhtonKhuwa Province (KPK) of istan, The study is totally depend on secondary data collected from the audited financial rents of these companies which are listed in Karachi Stock Exchange for the period SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE, @ Page 34s&s A Study on Financial Statement Analysis spanning 2004-2009. There data was analyzed using statistical techniques of correlation coefficient and multiple regression analysis. Hajihassani (2012) A comparison of Financial Performance in Cement Sector in Iran. This ‘study exhibited comparison of financial performance for the period study 2006 to 2009. Tt can be ‘analyzed comparison of financial performance of selected cement companies by using various cial ratios and measures of cement companies working in Iran. Financial ratios are divided three categories. This concludes that the performance of cement companies on the basis of fitability ratios different than on n the basis of liquidity ratio and leverage ratio. Abdul_GhafoorAwan,PervaizShahid, Jahanzeb Hassan, Wagas Ahmed_(2014)have lyzed the impact of working capital management on performance of cement sector of istan. The period of study spanning from 2009 to 2013. The study is totally dependent on dary data collected from the audited financial statements of these companies which are in Karachi Stock Exchange. Return was x used as the dependent variable in order to test impact of working capital management on firm's profitability and independent variables Inventory Tumover in days, Cash Conversion Cycle, Current Ratio, Quick ratio, Gross ig Capital, Average payment, Size of the firm and Funds allocated by Governmentin ic sector development program. Panel data method is used to study the impact of Working ital Management on profitability of Cement sector of Pakistan. can conclude that cash conversion cycle, Inventory Turnover in days and average payment have negative relation with firm's performance and their profitability is significant. lly insignificant and has needing impact on Return on Equity Literature Review were related to various industries such cement, steel ete in India and | Of these review, there are three major research conducted on the liquidity and lity management through the accounting tool "ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @CHAPTER 3 RESEARCH DESIGNA Study on Financial Statement Analysis = 3.1 TITLE OF THE STUDY A Study on Financial Statement Analysis with reference to Karnataka Milk Federation, Bangalore” INTRODUCTION damental to the success of any formal research is a sound research design. The function of rch is to ensure the required data is collected accurately and economically. A research ign is purely able simply the framework or plan for study that guides the collectionand ysis of data. nature of the study is descriptive as it deals with the fact finding. This has been categorized descriptive study because it has a rigid design, which gives the good protection against basis also has a structured instrument for collection. part of academic requirement, the project was undertaken at Kamataka Milk Federation, Colony, Adugodi, Bangalore. This assignment is intended to help in analyzing the cial Statement of the company. STATEMENT OF THE PROBLEM: cial Statements have existed for decades as way banks determine the stability and condition companies. The objective of financial statements is to provide information about the ance and changes in the financial position of the company that is useful to a wide range users in making economic activities about accounting and who are willing to study the tion diligently. of Financial Statement Analysis will teach employees the importance of Financial ents Analysis and to clarify the true financial condition of companies by making realistic SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 37‘Study on Financial Statement Anal: ions that can be determined for purposes of investment, lending or merger and isitions. company or firm’s financial statement analysis is very important. The major benefit is that jors get enough idea about investments of their funds in the specific company. Financial rents analysis can help the government agencies to analyze the taxation due to the any. Moreover, company can analyze it's own performance over the period of time through {ial statement analysis. OBJECTIVE OF THE STUDY: objectives of financial statement analysis is the assessment of information contained in the s as a basis to make sound management decisions in the development of the company, .ce competitiveness, attract investment and loan funds, evaluation of partners, as well as jining the effectiveness of the use of material, labour and production resources. 4 Assessment of Past Performance Past performance is good indicator of future performance. Investors or creditors are interested in the trend of past sales, cost of goods sold, operating expenses, net income, cash flows and return on investment. These trends offer a means for judging management past performance and are possible indicators of future performance Assessment of Current Position Financial Statement Analysis shows the current position of the firm in terms of the types of assets owned by a business firm and the different liabilities due against the enterprise, 4 Prediction of Profitability and growth prospects Financial statement analysis helps in assessing and predicting the earning prospects and growth rate in caring which are used by investors while comparing investment alternatives and other users in judging earning potential of business enterprise. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 38Study on Financial Statement Anal; + Prediction of Bankruptcy and Failure Financial Statement Analysis is an important too! in assessing and predicting bankruptcy and probability of business failure. Assessment of Operational Efficiency Financial Statement Analysis helps to assess the operational efficiency of the management of the company. The actual performance of the firm which are revealed in the financial statements can be compared with b some standards set earlier and the deviation of any between standards and actual performance can be used as the indicator of the efficiency of the management. To Understand the Information Contained in Financial Statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm. SCOPE OF THE PROJECT STUDY: project study covers entire theoretical and the practical aspects of financial statement lysis. It covers the concept of finance, financial statement and principles of financial ent analysis, methods and objectives. study assist covers the detailed break up of financial statement (Balance Sheet) for three ; 2014-15, 2015-16 and 2016-17, preparation of comparative statements, working out the tions for each year with respect to various items and therefore the project study becomes a | for financial statement analysis. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 39Study on Financial Statement Anal) s LIMITATIONS OF THE STUDY: this project is carried out at corporate level minute details of financial statements of the vidual branches are not taken into account. For the purpose of analysis, only information lable in the financial statements has been used. 1) Type of Research: This is an email study and analysis of financial reports with specific reference to Kamataka Milk Federation (KMF). 2) Sample Design: Financial Statements i., balance sheet is the components of the sample design. 3) Size of the sample survey: The size of the sample survey covers there yearsfinancial statements 4) Tool for Collection of Data: As mentioned above financial statements are basie tools for selection of data. They are supported by a number of books on financial statement analysis and business finance by eminent authors. The secondary accounting data and other related information have been collected from the annual report of KMF. Method of Analysis: Each of Statement has been broken into different tables on a comparative basis and ratio analysis for each year. For example, each year’s assets and liabilities, financial resources, investments, etc. (ANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 40Study on Financial Statement Anal 6) Reference period: time period utilized to refer all the data and analyze is two month. lation method is also used, percentage frequency are also worked out, logical analysis is findings are recorded, conclusions are drawn and recommendations are made. and analytical research, already available facts and information are used to analyze the lem. TANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 41CHAPTER 4 INDUSTRY PROFILE & OMPANY PROFILEDUSTRY PROFILE AND COMPANY PROFILE. 4.1 ORIGIN OF MILK: is an ancient as mankind itself, as it is the substance created to feed the mammalian infant All species of mammals, from man to whales, produce milk for this purpose. Many centuries . pethaps as early as 6000-8000 BC ancient man leamed to domestic species of animals for provision of milk to be consumed by them. These included cows, buffaloes, sheep, goat and mels, all which are still used in various parts of the world for the world for the production of for human consumption. is largest milk production in the world. It has animal production of about 84.6 million tric tons. Certain countries enjoy the reputation of certain goods. Japan for Automobiles and imer Electrics; United States for High-Tech innovation, Soft Drinks, Cigarettes and Jeans, Development has its profound impact on economy and nutrition level of the country, feater employment opportunities are generated through Dairy Development especially for in rural area. Dr. VergheseKurien was the founder of “Operation Flood” who was the of White Revolution in India. The operation Flood is the largest Dairy Development in world. lia is the world’s largest milk producer certified by the ‘International Dairy Industry’. is the reason for the recognition of India as a dairy giant by the United Nation’s ‘Food and griculture Organization (FAO). dia has become the world’s No.1 milk producing country, with output in 1999-2000 ting year ending March 2000) forecasted at 78 million tones. The annual rate of growth nilk production in India is between 5-6 percent, against the worlds at | percent. India’s annual (OMMERCE @) Page 43on Financial Statement Anal: production has more than trebled in last 30 years, rising from 21 million tons in 1968 to an pated 80 million tons in 2001 rapid growth and modernization is largely credited to the contribution of dairy cooperatives, the Operation Flood Project, assisted by many multi-lateral agencies, including the an Union, the World Bank, FAO and WEP (World Food Program). In India context of and malnutrition, milk has a special role to play for its many nutritional advantages mentary income to some 7 million farmers in over 500000 remote villages. is the raw material of the dai dustry, which cannot be created artificially and stored for time. The term “Milk Market” refers to the field whole that is sold to the individuals ly for direct consumption. dairy industry has come up the present stage because of well-planned, effective and inated efforts of the National Dairy Development Board, cooperative of Government. ial Dai Development Board lays down rules and regulations to be followed by the cooperative milk societies. Amul (Anand Milk Union Limited) was a pioneer in starting tive milk producer's society and thereafter many cooperative societies were started Bank also had given credit of Rs.78 cores for starting another society AMUL in re SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 44Study on Financial Statement Anal; AMUL AND THE EVOLUTION OF ANAND MODEL: procurement from rural areas and its marketing in the urban areas was the major problem in dairying at the time of India gained independence. In one of the earliest urban milk supply es, Polsons- a private dairy at Anand — procured milk from milk from milk producers igh middlemen, processed it and then sent milk to Bombay, some 425km away (Korten, 1). Bombay was a good market for milk and Polsons profited immensely. In mid 1940's the milk producers in Kaira asked for a proportionate share of trade margins, they were ied even a modest increase. The milk producers went on strike, refusing to supply milk to ns. On the advice of SadarVallabai Pate, a leader in India’s independence movement, the producers registered the Kaira District Cooperative Milk Producers union, now popularly vn as AMUL, in 1946. The Kaira union produced milk from affiliated village level milk jeties. This was the genesis of organized milk marketing in India, a pioneering effort that red a new vista for dairy development in the country. IL formed the basis of the Anand Model of dairying. The basic unit in this model is the milk lucers” cooperative society at the village level. These cooperatives are organization of milk lucers who wish to market collectively. Membership is open to all who need the rative's services and who are all willing to accept the responsibilities of being a member. isions are taken on the basis of one member exercising one vote. No privilege accrues to I, and the economic returns, whether profit or loss, are divided among the members in tion to patronage. All the milk cooperatives in a district for a union that, ideally has its processing facilities nand Pattern ‘eemica pan tn Ogee povwomnet -YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE >) Page 45,‘A Study on Financial Statement Analysis BOARD 4.3 NATIONAL DAIRY DEVELOPME! National Dairy Development Board (NDDB) was established in 1965 under the Societies Registration Act, the Charitable Trust Act and the Public Trust Act, to fill the vacuum of national Jevel organization to replicate Anand Model dairy cooperatives throughout the country and to ‘make available multidisciplinary, professional dairy expertise to dairies in the public and peratives sectors. During its initial stage, NDDB was assisted financially by the government India, the Danish Government and by AMUL. It also received aid from the United Nations ildren’s Fund (UNICEF) in the form of teaching material and equipment. National Dairy Development Board 1969, when the Government of India approved the operation Flood program and its financing igh the monetization of World Food Program gifted commodities, it was found that the under which NDDB was registered did not provide for handling of Government funds fore, in 1970 a government established a public sector company, the Indian Dairy ration. The IDC was given responsibility for receiving the project's donated commodities, 1g their quality, their storage and transfer to user dairies, and receiving the dairies payments. . it served as finance cum proportion entity while the entire Operation Flood technical t was provided by NDDB. To avoid any duplication in their activities or overlap of ‘ions, the IDC and NDDB were eventually merged into a newly constituted NDDB by an of Parliament passed in October 1987. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 46THE MARKET OF MILK INDUSTRY IN INDIA: beginning in organized milk handling was made in India with the establishment of “Military Farms” (oldest in Allahabad, 1889), the salient features of the market of milk industry so have been: > Long distance refrigerator rail transport of milk from AMUL to Mumbai since 1945. > Handling of milk in co-operative Milk Union (oldest in Allahabad, 1913) established all ‘over the country on a small scale in early stages. > Pasteurization and bottling on a large scale for organized distribution was started as Aarey (1950), Worly (1961), Calcutta ( Haringhata, 1959), Chennai (1963), etc... > Establishment of milk plant under five year plan for dairy development all over the India. These were taken up with dual object of increasing the national level of milk consumption and ensuring better to the primary milk producer. Their main aim was to produce more, better and cheaper milk is almost a complete food, with very high negative value. It provides body building ins, energy giving lactose and milk fat, bone- forming minerals and health giving vitamins. these nutrients are present in easily digestible form in milk and are therefore a very important especially for children. It is also important for the elderly, the sick or the pregnant. comprises of water, fat and solid-not-fat (SNF). Milk is nutritionally balanced when fat and are in right proportions. SNF is made up of proteins, lactose and minerals. Normal cow contains about 4% fat and 8.5% SNF while buffalo milk contains 7% fat and 9% SNF of the ¢ daily human requirements, a glass of milk (about 20ml) provides: 16% protein, 30% , 11% potassium, 20% Riboflavin, 13% vitamin, B-12 and 25% vitamin D. January 1* 1958 a pilot scheme to cater the Bangalore Milk Market, Department of Animal dry, Government of Kamataka was started Milk processing facilities and Veterinary jtals at National Dairy Research Institute (NDRI). Later in 1962, the Bangalore Milk ly Scheme came into existence as an independent body. With the great efforts by the ible Minister for Revenue and dairying, Government of Mysore Sri M V Krishnappa, A joint WYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE >) Page 47‘Study on Financial Statement Analysis of UNICEF, Government of India & Government of Mysore was dedicated Bangalore to the people of Kamataka state on 23 January 1965 by the Humble Prime Minister Late § Lal Bahadhur Shastrij. Bangalore Dairy scattering over an area of 52 Acers of land, the Dairy had an initial capacity process 50,000 liters of milk per day, Bangalore Dairy underwent a structural change in ber 1975, handed over Kamataka Dairy Development Corporation (KDDC). Rural milk of Mysore, Hassan &Kudige Districts was started under Operation Flood- II and then ferred to Karnataka Milk Federation (KMF) in May 1984 as a successor of KDDC. To cater the growing demand for milk by the consumers of Bangalore city, the capacity was increased 1.5 lakh liters per day under the operation Flood-II during 1981 and later increased to 3.5 lakh per day under operation Flood-III during 1994, ppet the policies of the National Dairy Development Board (NDDB), Bangalore Dairy was over to Bangalore Milk Union Ltd., (BAMUL) on 1* September 1988, The union is wble of processing the entire milk procured, by timely implementation of several structure projects like commissioning of New Mega Dairy state of the art technology with a cessing Capability of 6.0 lakh liters per day, new chilling centers, renovation of product blocks milk shed Bamul comprises of 2611 revenue villages. As of now the union has organized ‘Study on Financial Statement Analysis Dairy Cooperative Societies (DCS) in 2,225 villages, thereby covering 85% of total s in these two districts. In these DCS’s there are 3,31,554 milk producer members. Among 105804 members are women and 59235 members belong to schedule Caste and Schedule philosophy of this cooperative milk producer's organization is to eliminate middlemen and ze institutions owned and managed by milk producers, by employing professionals. -ve economies of scale of rural milk producers by ensuring maximum returns and at the time providing wholesome time milk at reasonable price to urban consumers. Ultimately, ‘complex network of cooperative organization should build a strong bridge between masses of producers and millions of urban consumers and achieve a socio-economic revolution in the community 1 has been registered under MMPO by Central Registration Authority. Today, the Union become the biggest Milk Co-operative Union in Southem India. Bamul has been certified for 2000:2005 & ISO 9001:2000 for quality management and food safety systems. recognition to these efforts and achievements, the National Productivity Council (NPC) of yment of India has conferred “Best Productivity Award” FIVE TIMES and “Energy srvation Award” by Bureau of Energy Efficiency (BEE) to the Union. "ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE rc) Page 49‘Study on Financial Statement Analysis HISTORY OF KARNATAKA MILK FEDERATION ataka Milk Federation (KME) sells products such as pedha, paneer, curds and mill in the It is a federation of milk producers association working on cooperative k is ofNandini. Almost every district in Kamataka has milk producing co-operatives The mill inciples. processed and sold in the market by the brand of lected from Farmers who are its members, \dini, It is second largest milk co-operative in India after AMUL. vataka Milk Federation's headquarters is in Bangalore Karnataka Milk Federation first of the dairy co-operatives that make up Karnataka Milk Federation started in 1955 in fige, KodaguDistrict. KMF was founded in 1974 as Kamataka Dairy Development tion (KDDC) to implement a dairy development project run by World Bank. In 1984 the ization was renamed Karnataka Milk Federation (KMF). Karnataka Milk Federation has 14 Unions throughout the Kamataka State which produce milk to the consumers in various and rural markets in Kamataka State. ‘ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE, @ Page 50umataka Milk Federation which is most popular as KMF, evolved itself as a premier and most ofitable dairy Farmers’ organization in the State of Karnataka. an agency in 1975 to implement the World Bank Aided Dairy Development Project, taka Dairy Development Corporation (KDDC) was formed. The company grew itself fast ad as it spreads the wings of new found rural economic activity — Dairying all over the State, genesis of apex cooperative body took the ¢ share of KMF win 1984 encompassing entire tate with 14 District Co-operative Milk Unions executing the various parameters of Dairy etivity ~ organization of Dairy Co-operatives, Milk Routes, Veterinary Services, Procurement milk in two shifts of the day, Chilling, Processing of milk, distribution of milk and also establishment of Cattle Feed Plans, Nandini Sperm Station, Liquid Nitrogen Supply, Training enters — as its main stay. entire system was reconstructed on the model of well known 'ANAND' pattem dairy co- ative societies. Eight southem districts of Karnataka was considered initially with the target organizing 1800 Dairy Co-operative Societies, four Milk Unions and processing facilities set up to the tune of 6.5 lakhs per day by 1984. Operation Flood ~ II & Ill, project which started in 1984 &1987 covered the remaining ts of Kamataka, Thirteen milk Unions were organized in 175 talukas of all 20: districts then d the field work was extended by organizing more dairy co-operative societies, The process cilities i.e. chilling centers, milk diaries and powder plants were transferred in pass to the ministrative control of respective co-operative milk Unions and the activities continued to be mented by these District Organizations. Additional processing facilities were created and Sting facilities were created & existing facilities augmented every decades with the help of emment/ ZillaPanchayatand NDDB (Under Perspective Plan) to handle ever increasing milk ement without declaring milk holidays. The processing facility as exists 57.40 lakh liters/ is further strengthen. EYANANDA SAGAR COLLEGE OF ARTS, SCIEN=z A Study on Financial Statement Analysis = 4.7 ABOUT KARNATAKA MILK FEDERATIO KamatakaCo-operative Milk Producer’s Federation Limited (KMF) is the Apex Body for the dairy co-operative movement in Karnataka. It is the second largest dairy co-operative amongst the dairy co-operatives amongst the dairy co-operatives in the country. In South India it stands first in terms of procurement as well as sales. One of the core functions of the Federation is marketing of Milk and MilkProducts. The Brand “Nandini” it's the household name for Pure and Fresh milk land milk products. KMF has 14 Milk Unions covering all the districts of the State which procure milk from Primary Dairy Cooperative Societies (DCS) and distribute milk to eonsumers in various Towns/Cities/Rural markets in Karnataka. jataka Dairy Development Corporation (KDDC), the first ever World Bank/ International lopment Agency funded Dairy Development program in the country started in Karnataka on ative lines with the organization of Village Level Dairy Co-operatives imn1974, The L pattern of dairy co-operatives started functioning in Kamataka from 1974-75 with the ial assistance from World Bank/ IDA, Operation Flood II & Ill. The Anand Pattern three organization structure —Dairy Co-operative Societies at the village level, District Milk SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE e Page 52& Unions at theDistrict level to take care of the procurement, processing and marketing of Milk and A Study on Financial Statement Analysi provide technical input services for enhancing milk production at producers level and Federation at the state level to co-ordinate the growth of sector in the State, are resolutely and harmoniously ‘working hand-in-hand in creating self sustainingrural economy based on cooperative dairying, KMF is one of the few Federation's in the country, who have converted dairying from a subsidiary of into an industry. Coordination of activities along the and developing market for Milk and Milk Products is the responsibility of KMF. Marketing Milk in the respective jurisdiction is organized by respective Milk Unions. Surplus/deficit of liquid milk among the member Milk Unions it's monitored by the Federation. While the marketing of all milk products is organized by KMF, both within and ‘outside the State, all the Milk and Milk Products are sold under a common brand name SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 53on Financial Statement Anal: Federation is striving to create a self-reliant and vibrant rural economy in Karnataka by iding a supportive and conducive environment for the growth of Dairy Co-operatives as }ous economic and social institutions. The Federation is largely successful in realizing ‘ones of dairying during the last four decades of Dairy Development in Karnataka State. It is -large successful in providing a viable subsidiary occupation to employed real poor so as. ‘aise their income eaming capacities and to supply adequate quantity of quality milk at able prices to Urban consumers. results of effective dairy development by KMF have made far reaching and extensive impact ‘rural landscape in Karnataka, The best remunerative milk purchase price to Farmers, efficient timely input services, delivered at the door steps to Farmers, such as,unfailing veterinary service to any remote village, quality artificial inseminationfor breedimprovements , ly of balance cattle feed at less than the market price, ete., have made the Farmers to ingly patronize their Co-operative. The extent of patronization by farmers is so complete, dominant share of marketable surplus milk of Farmers is so complete, that dominant share of ible surplus milk of Farmers in Karnataka is produced by KMF dairies and hardly there is ‘organized dairy milk procurement, which is weirdly prevalent in other parts of the country. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 54Technical input wing Deputy manager Assistant manager SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE ic) Page 55A Study on Financial Statement Analy: 4.9 UNITS OF KMF: > Mother Dairy, Yelahanka, Bangalore. x cial ori = Shim ees SANANDA SAGAR COLLEGE OF ARTS, ENCE AND COMMERCE Page 56 8A Study on Financial Statement Analysis = > Nandini Milk Products, KMF Complex, Bangalore. > Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan/Shikaripura. YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE oS) Page 57A Study on Financial Statement Analysis __““ow > Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen Bank) at Hessaraghatta, > Nandini Packaging Film Plant at Munnekolalu, Marathalli. Page 58‘A Study on Financial Statement An‘ > Central Training Institute, Bangalore &Training Institutes at Mysore/Dharwad. > Ice Cream Plant, Bellary. DAYANANDA SAGAR COLLEGE OF ARTS, SCIE] Page 59TANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCEsS ‘Study on Financial Statement Analysis KMF is a Co-operative Apex Body in the State of Kamataka representing organizations of milk producers’ and implementing all round dairy development activities to achieve the following objectives > To ensure assured and remunerative market round the year for the milk produced by Farmer members. > Tomake available the quality milk and other premier dairy products to Urban consumers. v To build and develop village level institution as cooperative model units to manage the dairy activities. > To ensure the provision of inputs for milk production, processing facilities and dissemination of know how. > To facilitate rural development by providing opportunities for self employment at village level, preventing migration to Urban areas, introducing cash economy and opportunity for a sustained income. philosophy of dairy development is to eliminate middlemen and organize institutions to be and management by the milk producers themselves, employing professionals. To sum it every activity of KMF revolves around meeting one basic objective: ' Achieve economies of to ensure maxim returns to the milk producers, at the same time facilitate wholesome milk reasonable price to the Urban consumers.’ Ultimately, the complex network of cooperative ization should build a bridge between masses of rural producers and millions of Urban ers and in the process achieve a socio-economic revolution in every Homeland of State. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE, @ Page 61s ‘Study on Financial Statement Analysis 2 VISION AND MISSION OF KMF : ION > To march forward with a missionary zeal which will make KMF a trailblazer of exemplary performance and achievements beckoning other Milk Federation in the country in pursuit of total emulation of its good deeds > To ensure prosperity of the rural Milk producers who are ultimate owners of the Federation. > To promote producer oriented viable cooperative society to import an impress to the rural income, dairy productivity and rural employment. > To abridge the gap between price of milk procurement and sale price. > To develop business acumen in marketing and treating disciplines so as to serve consumers with quality milk, give a full to the income of milk producers. > To compete with MNCs and Private Dairies with better quality of milk and milk products and in the process sustain invincibility of co-operatives. SION lding economic, social and cultural prosperity in the lives of our milk producer members by joting vibrant, self-sustaining and holistic cooperative dairy development in Karnataka State. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 62‘Study on Financial Statement Anal 13 QUALITY AND FOOD SAFETY ing the last ten years, the Federation is giving greater emphasis on procuring quality milk DCSs under the concept of “Quality Excellence from Cow to Consumer.” Many Clean Production (CMP) initiatives have been implemented at all the stages of procurement, sing and marketing. Among these CMP initiatives, noteworthy initiative is the setting up ‘Community Milk Parlours in villages. KMF is forerunner to introduce this innovative technological initiative for bringing about Jutionary improvement in quality of milk in DCSs. This system has several advantages such elimination of mastitis in milch animals and improvement of productivity. The milk from g machines, collected through Automatic Computerized Milk Collection Units is chilled ily in Bulk Milk Coolers. This chilled raw milk, untouched and unadulterated by human has very high microbiological quality, comparable to International standards, high quality milk is being utilized for manufacturing high quality value added milk ts, for both domestic as well as International markets. Clean Milk Production (CMP) Initiatives include : Training of milk producers on modem dairy husbandry practices and Clean Milk Production (CMP), Providing Stainless Steel utensils, antiseptic solutions for udder cleaning on pre and post milking, ete., to producers. ‘Training to DCS staff and officers of the Unions on Clean Milk Production (CMP). Replacing Aluminium milk cans and collection vessels with Stainless Steel -304, Posters, documentary films and booklets on Clean Milk Production (CMP). ‘YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 63'A Study on Financial Statement Analysis 14 THE GROWTH PROCESS: @ EMENT | | 2017-2018 | UNIT 1976-1977 | 2015-2016 | 2016-2017 | ("P ae Feb,18) ‘Nos 416 14826 15074 15772 Nos 13270 13517 14170 | Nos 3049 3919 4053 Nos 3550 3549 3675 | | Nos | | 2104 2274 2374 Nos 1943 2088 2201 Nos 37000 23.54 Lakhs | 24.50 Lakhs | | 1 AL AVG. MILK LKPD 0.50 64.88 65.51 | 70.81 (YANANDA SAGAR COLLFGF OF ARTS, SCIENCE AND COMMERCE @ Page 64on Financial Statement Anal; 72.84 | 77.62 UREMENT | LKPD | (JUNE'16) | (JUNE"17) K SALES LLPD | 95050 34.38 | 33.32 34.72 = - +- - + 4 SALES | LLPD 3.97 4.09 442 1 LLPD 3.56 4.03 5.00 m ilisc. ——— = PAYMENT TO RS. 0.09 14.62 16.00 18.40 CRORES TURNOVER | RS. | | 8.82 11779 13133 UNIONS) | CRORES ” = ts \YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 65Study on Financial Statement Analysis > CONFERENCE HALL:The institute has 2 spacious conference halls. Each can accommodate 50 candidates. The hall is equipped with facilities of audio- vision aids and over head projectors. > ACCOMMODATION: The institute has good hostel facility. > CANTEEN: A fully equipped canteen functions exclusively for the purpose of the trainees residing at the hostel > TRANSPORT FACILITY:The institute has a bus for transportation of trainees for visits to institutions for exposure and training. > SCOPE FOR EXTENDING FACILITIES TO OTHER ORGANIZATION AND GOVERNMENT DEPARTMENTS: The experience and the experience developed over the years has give us the impetus to go a step further to extend the facilities available at the institute and hostel to other organizations, Government Departments and Banks who may want to undertake In- house training programmes for their employees! officers and to conduct official meeting "ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 66@) ‘Study on Financial Statement Analysis > Nandini Pasteurized Toned Milk. > Shubham Milk > Nandhini Double toned Milk > Samrudhi > Homogenised Cow's Pure Milk > Special Toned Milk S & OTHER FERMENTED PRODUCTS _ Yoghurt Mango lassi Real thick Curd Curd Butter milk vvVvVV Vv Sweet lassi > Dairy whitener > Skimmed milk powder > Badam milk milk LYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE i) Page 67A Study on Financial Statement Analysi GHEE & BUTTER > Ghee in standy pouches > Butter salted & unsalted > Bad in Box Ghee in Pet Jar ¥ > Ghee in Sachet E CREAM & FROZEN DESSERTS v Crazy cone ice cream Butter v Nandini Magic Strawberry PistaKulfi Chocobar Ice cream Delightfully Tasty Anjir Ice cream Delightfully Tasty Chocolate Ice cream Delightfully Tasty Vanilla and Strawberry Ice cream Delightfully Tasty KajuDraksh Ice cream Delightfully tasty Mango Ice cream DelightfullyTastyKesarPista Ice cream Delightfully Tasty Black Currant Casatta Ice cream ‘Nandhini Sugar Free Pro Biotic Frozen Food MatkaKulfi Ice cream Delightfully Tasty Butter Scotch Ice cream Delightfully Tasty Pineapple Dolly stick Ice cream Raspberry & Orange SYANANDA SAGAR COLLEGE OF ARTS. SCIENCE AND COMMERCE i) Page 68 VVVVVVVVYV VV VV Y¥ VvA Study on Financial Statement Analysis Ice cream Mango > Sundae Ice cream Strawberry > Sundae Ice cream Butter Scotch Ball Ice cream Vanilla Strawberry Mysore Pak Khovajamoon Dru Fruits Burfi Rasgulla Assorted sweet gift box Coconut Burfi vvvyv Vermicelli paysa mix (kheer) Chocolate Barfi Nandini Bite vv Vv Premium BadamBurfi Premium Besamladoo Premium Cashew Burfi Pure Milk Elachi and KesrPeda > Pure Milk Peda vvvyv > Creamy Bite > Eclairs > Chit Chat :YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE i)Study on Financial Statement Analysis > Nandini trupti milk > Nandini healthy life milk IER PRODUCTS & Process cheese bread > Cheddar cheese > Diced Paneer A > DharwadPeda > Flavoured Milk Pista, Mango, Strawberry — > Flavoured Milk Cool choco Milk shake racee > Khova > Flavoured Milk, Spiced Butter Milk, Staawberry kg: Ea > GulabJamoon Mix — —— FANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 70Study on Financial Statement Analysis 4 2013- Government of Kamataka raised the incentive from Rs.2 to Rs.4 for every litre of milk supplied by producers to cooperatives. 4 2013-“KSHEERA BHAGYA”, the prestigious program of distribution milk to school and Anganwadi children by GOK through KMF, was inaugurated by honorable chief Minister. 2013- Inauguration of flexi pack unit at DK Milk union. 4 2014- Declaration of incentive of Rs.0.20 paise per litre milk procured to DCS staff by Kamataka govt. 2014- Launch of Nandini special milk. 4 2014- Inauguration of new cattle feed plant with 300MT capacity at Shikaripur. 4 2014-Kalaburagi Dairy which was under KMF control handed over to Kalaburagi milk union, 2014- Nandini milk sales started in Chennai. 4 2014- Nandini milk powder worth of Rs. One Crore was sent to Jammu Kashmir as flood relief material. 2014- Bangalore union launched Nandini Ghee Laddoo. “> 2014- KMF Launched Nandini Gold cattle feed. 2015- Commissioning of Hoskote dairy of 2LLPD in Hoskote CC premises. SYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE, @ Page 71s % 2015- Nandini buffaloe milk introduction at mother dairy. Study on Financial Statement Analysis 2015- KMF has launched Nandini milk and milk products at Hyderabad and Secunderabad. + 2018- Corporate citizen award (2014-2015) to KMF. 2015- Vijayapura and Bagalkot union released new product “Nandini kolhar”, thick and creamy curd, % 2015- Dakshinakannada milk union (DKMUL) of KMF launched conventional buttermilk. *% 2016- Dakshinakannada milk union launched milk in fexi pack. # 2016- Inauguration of Hosakote dairy and product block by Bangalore milk union. * 2016- Launching of milk & milk products in Mumbai. ° 2016- Foundation stone paying for 100MT/day capacity powder plant by KMF along with other milk product at an estimated cost of Rs.300 crores at Ramanagar district and mega dairy plant by BAMUL at Kanakapura with an estimated cost of Rs.450 crores. % 2016- Government of Kamataka raised the incentive from Rs.4 to Rs.5 for every litre of milk supplied by producer to cooperatives. # 2017- Inauguration of 80000 Itr/day capacity flexi nandini milk packing unit at Belagavi. ANANDA SAGAR COLLEGE OF ARTS, SCIFNCF AND COMMERCE i) Page 72PLACE OF WORKING NAME DESIGNATION | RAKESH SINGH, IAS MANAGING DIRECTOR/CEO KMF CO | ‘M.T. KULKARNI DIRECTOR (MKTG) KMF CO DE.G.T.GOPAL DIRECTOR (PURCHASE/CTD) KMF CO | H.V. THIPPAREDDY DIRECTOR (ADMIN) KMF CO DR.D.N.HEGDE DIRECTOR (AH & SCHEMES) KMF CO | 1 SH B KONNUR DIRECTOR (FIN) KMF CO B.NATARAJ DIRECTOR (QC) | KMF CO | | "SURESH KUMAR DIRECTOR (ENGG) | KMF CO | | DR.K,SWAMY DIRECTOR (STEP) | KMF CO | M.S.SUHAEL ADDL DIRECTOR (SYSTEMS) KMF CO } C.P.REDDY PUBLIC RELATION OFFICER KMF CO |A Study on Financial Statement Analysis 4.19UNION CHIEFS NAME DESIGNATION PLACE OF WORKING D.C.NAGARAJAIAH MD BENGALURU MILK UNION ~~ KOLAR- N HANUMESH M.D CHIKKABALLAPURAMILK UNION M.SHIVALINGEGOWDA M.D MYSURU MILK UNION NAGAR MILK DR.M.S VISAYKUMAR MD ae UNION GOPALAIAH, MD HASSAN MILK UNION DR.SURESH BABU MD MANDYA MILK UNION B.MUNEGOWDA M.D TUMAKURU MILK UNION DRAR mate aes MD SHIVAMOGGA MILK UNION DR.B.V a ae a Jee MD DAKSHINA KANNADA BUKKA Md --BALLARI-KOPPAL MALLIKARJUNA a) HAICHUR 2 SURESH NAIK K.N M.D DHARWAD MILK UNION UBEDULLA KHAN MD BELAGAVI MILK UNION D.ASHOK M.D VISAYAPURA-BAGALKOT DR.C.H.KAMKERI KALABURAGI MILK UNION YYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 74Study on Financial Statement Analysis UNIT CHIEFS | NAME DESIGNATION PLACE OF WORKING | CENTRAL TRAINING DR.G.T.GOPAL DIRECTOR INSTITUTE/PURCHASE C.NARASIMHA DIRECTOR MOTHER DAIRY | K-RAMACHANDRA DIRECTOR (FARM) NANDINI SPERM STATION BHAT T.S.SHASHIDAR DIRECTOR NANDINI MILK PRODUCT DR.K.RAVI CATTLE FEED PLANT,GUBBI NANDINI HITECH PRODUCT GOVINDE GOWDA DIRECTOR PLANT, CHANNARAYAPATNA CATTLE FEED PLANT, .PRASANNA KUMAR GM RAJANUKUNTE MADHUSUDAN GM CATTLE FEED PLANT, DHARWAD D.VIVEK GM CATTLE FEED PLANT, HASSAN CATTLE FEED PLANT, HEMASHEKARAPPA cM SHIKARIPUR NANDINI PACKAGING FILM M.KRISHAPPA. GM PLANT DR.G.V.HEGDE uc TRAINING CENTRE, DHARWAD ADDL DIRECTOR | K.P.SHIVASHANKAR anny TRAINING CENTRE, MYSURU B.N.VILAYKUMAR M.D DDIL,ASANGI-BAGALKOT .KSHMINARASAPPA 10 COMPETITORS vc BALLARI CREAM PLANT DAYANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE. @ Page 75,Study on Financial Statement Anal; 1 is an Indian dairy cooperative, founded by Dr. Cargoes Jurgen in 1946 and initially AMUL 4 as Anand milk federation union limited, managed the Gujarat co-operative | milk ‘eting federation limited (GCMMF), Amul supported Indian’s white revolution, it made the wul is the world’s largest milk produ cts. In this procedure Amul became the cer and milk products, In this Procedure and milk largest food brand in India and has daring into cots overseas. TAGE MILK 5 as a public limited company under the ‘Companies act, 0" July, 1992. The global of d various milk company was introduced by June and obtained the certificate of commencement of business on 1 company is to manufacture process and deal in milk and deal in milk ant fucts. It was patronizing by Chandra Babu Naidu and his relatives. In 1995 heritage milk any strengthened its position in the existing markets at Chennai and Hyderabad in 1996 the tage milk company stimulate new entrepreneur to setup franchise milk company products iF oete ANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE @ Page 76A Study on Financial Statement Anal A Kwality milk product several good quality milk products and it is exports them to over 20 countries across the world. Kwality limited company manufactures the Products are milk, ghee, curd, lassie, Paneer and ice cream. And also it is an ISO certified dairy company, and it is established in the year 1992. It has 6 milk processing plants in the country, and kwality sells is ‘milk products beneath the brand name of “Dairy Best” & el tia ae Pa ig) Pon Ota LMA MA had ranked at sixth place in the last of top dairy companies in India, Established in 1980 the implementing agency for Operation Flood II in the State of Kerala, it has as its goal - “The io-economic progress of the dairy farmer through procuring, processing and marketing of ilk”. MILMA has controlled and managed by Kerala cooperative milk marketing federation, also it is popularly recognized as MILMA produces products like milk, curd, paneer, late, Ice cream and ghee. The board was later renamed to Kerala Livestock Development rd. VIN 'YANANDA SAGAR COLLEGE OF ARTS, SCIENCE AND COMMERCE ro) Page 77cers, It was established in the year 1958, On February 1, 1981, the commercial activities of cooperative were handed over to Tamil Nadu Co-operative Milk Producers’ Federation trademark "AAVIN". The Tamil Nadu Co- ‘ited which sold milk and milk products under the ive Milk Producers’ Federation Limited is an apex body of 17 District Cooperative Milk ers’ Unions. It is headquartered located at Aavinillam, Madhavaram, Chennai and has four plants in Clicnnai. SYANANDA SAGAR COLT FGF OF ARTS, SCIENCE AND COMMERCE @® Page 78