A STUDY ON “RATIO ANALYSIS”

With reference to
MODEL DAIRY PRIVATE LIMITED, NIDAMANURU VIJAYAWADA

A Project report submitted to Jawaharlal Nehru Technological University,

Kakinada, In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by
C.SUJITHA
Regd. No.19NP1E0004

Under the guidance of

Dr.G.MADHU SRI
Associate Professor

DEPARTMENT OF BUSINESS ADMINISTRATION

VIJAYA INSTITUTE OF TECHNOLOGY FOR WOMEN
(An ISO 9001-2008 certified institute, Approved by AICTE, Affiliated to JNTU-K)
Enikepadu, Vijayawada - 521108.BATCH: (2019-2021)
 VIJAYA INSTITUTE OF TECHNOLOGY
FOR WOMEN
(An ISO 9001-2008 Certified Institution, Approved by AICTE, Affiliated to JNTU-K)
Enikepadu, Vijayawada-521108
DEPARTMENT OF BUSINESS ADMINISTRATION

CERTIFICATE
This is to certify that the project entitled “A study on RATIO ANALYSIS in
MODEL DAIRY PRIVATE LIMITED”, NIDAMANURU VIJAYAWADA. is
a bonafide work
done by C.SUJITHA Reg.No:19NP1E0004 under my guidance and supervision in
partial fulfillment of the requirement for the award of degree of MASTER OF
BUSINESS ADMINISTRATION in VIJAYA INSTITUTE OF TECHNOLOGY
FOR WOMEN, Enikepadu, Vijayawada, Affiliated to

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY, Kakinada. During

the Academic year 2019-2021.

Dr.G.MADHU SRI Dr. G.CHENCHAMMA

Project Guide Principal

 DECLARATION

I hereby declare that this project report entitled “A Study on RATIO ANALYSIS with
reference to MODEL DAIRY PRIVATE LIMITED”, NIDAMANURU VIJAYAWADA
is a bonafide work done by me for the award of degree of “Master of Business
Administration” from JNTU Kakinada University, done under the Esteemed guidance of
Dr.G.MADHU SRI ,Associate Professor, Department of Business Administration, during
the academic year 2019- 2021

I also declare that this project is a result of my own effort and that it has not been submitted
to any other University for the Award of any Degree.

Place: Enikepadu (C.SUJITHA)

Date: Regd.No.19NP1E0004
 ACKNOWLEDGEMENT
It is of great pleasure to take the opportunity to acknowledge and express my gratitude to all
those who helped me throughout my project work.

I would like to thank DR.G.CHENCHAMMA Principal, VIJAYA

INSTITUTE OF TECHNOLOGY FOR WOMEN, for this encouragement and support
rendered in taking up the successful completion of my project work.

My special thanks to Dr. G.MADHU SRI ,Associate Professor, Department of

Business Administration, for his valuable guidance and support for the completion of my project
work.

Finally I would also like to thank all the staff members in the Departments of
MASTER OF BUSINESS ADMINISTRATION, VIJAYA INSTITUTE OF
TECHNOLOGY FOR WOMEN for their enduring support throughout my MBA
programme.
 INDEX

CHAPTERS CONTENT PAGE NO

INTRODUCTION

 Need for the study

 Objectives of the study
 Scope of the study
UNIT-I  Methodology of the study 1-7
 Limitations of the study

UNIT-II INDYSTRY PROFILE 8-36

UNIT-III COMPANY PROFILE 37-48

UNIT-IV THEORETICALFRAMEWORK 49-84

UNIT-V DATA ANALYSIS AND 84-97

INTERPRETATION

UNIT-VI FINDINGS,SUGGESTIONS,CONCLUSION 98-100

BIBLIOGRAPHY 101
 LIST OF TABLES
S.NO TABLE NAME OF THE TABLE PAGE NO
NO

1 2.0 STRUCTURE OF INDIAN DAIRY 08

INDUSTRY

2 2.1 OPERATION FLOODS OF INDUSTRY 12

3 2.2 DISTRICTS SELECTED UNDER 19

OPERATION FLOOD PROGRAM

4 2.3 MILK PRODUCTION IN INDIA 20

5 2.4 DAIRYPLANTS OPERATING 1IN INDIA 23

6 3.1 PRICES OF MODEL DAIRY PRODUCTS 42

7 3.2 MODELDAIRY FOEMATION 48

8 5.1 CURRENT RATIO OF MODEL DAIRY 84

PRIVATE LIMITED DURING THE PERIOD
2015-19

9 5.2 QUICK RATIO OF THE MODEL DAIRY 85

PTIVATE LIMITED DURING THE PERIOD
2015-19

10 5.3 DEBT EQUITY RATIO OF THE MODEL 86

DAIRY PTIVATE LIMITED DURING THE
PERIOD 2015-19

11 5.4 DEBT TO TOTAL FUND RATIO OF THE 87

MODEL DAIRY PTIVATE LIMITED
DURING THE PERIOD 2015-19
13 5.5 PROPRIETARY RATIO OF THE MODEL DAIRY 88
PTIVATE LIMITED DURING THE PERIOD 2015-19
14 5.6 INTEREST COVERAGE RATIO OF THE 89
MODELDAIRY PTIVATE LIMITED DURING THE
PERIOD2015-19
15 5.7 STOCKTURNOVER RATIO OF THE MODEL 90
DAIRY PTIVATE LIMITED DURING THE PERIOD
2015-19
16 5.8 FIXED ASSET TURNOVER RATIO OF THE 91
MODEL DAIRY PTIVATE LIMITED DURING THE
PERIOD 2015-19
17 5.9 WORKING CAPITALTURNOVER RATIO OF THE 92
MODEL DAIRY PTIVATE LIMITED DURING THE
PERIOD 2015-19
18 5.10 GROSSPROFIT RATIO OF THE MODEL DAIRY 93
PTIVATE LIMITED DURING THE PERIOD 2015-19
19 5.11 NETPROFIT RATIO OF THE MODEL DAIRY 94
PTIVATE LIMITED DURING THE PERIOD 2015-19
20 5.12 OPERATING RATIO OF THE MODEL DAIRY 95
PTIVATE LIMITED DURING THE PERIOD 2015-19
21 5.13 EXPENSES RATIO OF THE MODEL DAIRY 96
PTIVATE LIMITED DURING THE PERIOD 2015-19
22 5.14 RETURN ON CAPITAL EMPLOYED OF THE 97
MODEL DAIRY PTIVATE LIMITED DURING THE
PERIOD 2015-19
 LIST OF CHARTS
S.NO CHART NAME OF CHART PAGE
NO NO

1 2.1 KEY FACTS ON INDIAN DAIRY 22

INDUSTRY

2 5.1 CURRENT RATIO OF MODEL DAIRY 84

PRIVATE LIMITED DURING THE PERIOD
2015-19

3 5.2 QUICK RATIO OF THE MODEL DAIRY 85

PTIVATE LIMITED DURING THE PERIOD
2015-19

4 5.3 DEBT EQUITY RATIO OF THE MODEL 86

DAIRY PTIVATE LIMITED DURING THE
PERIOD 2015-16

5 5.4 DEBT TO TOTAL FUND RATIO OF THE 87

MODEL DAIRY PTIVATE LIMITED
DURING THE PERIOD 2015-19

6 5.5 PROPRIETARY RATIO OF THE MODEL 88

DAIRY PTIVATE LIMITED DURING THE
PERIOD 2015-19

7 5.6 INTEREST COVERAGE RATIO OF THE 89

MODEL DAIRY PTIVATE LIMITED
DURING THE PERIOD 2015-19

8 5.7 STOCKTURNOVER RATIO OF 90

THE MODEL DAIRY PTIVATE
LIMITED DURING THE PERIOD
2015-19
9 5.8 FIXED ASSET TURNOVER RATIO OF 91
THE MODEL DAIRY PTIVATE LIMITED
DURING THE PERIOD 2015-19

10 5.9 WORKING CAPITALTURNOVER RATIO 92

OF THE MODEL DAIRY PTIVATE
LIMITED DURING THE PERIOD 2015-19

11 5.10 GROSSPROFIT RATIO OF THE MODEL 93

DAIRY PTIVATE LIMITED DURING
THE PERIOD 2015-19

12 5.11 NETPROFIT RATIO OF THE MODEL 94

DAIRY PTIVATE LIMITED DURING
THE PERIOD 2015-19

13 5.12 OPERATING RATIO OF THE MODEL 95

DAIRY PTIVATE LIMITED DURING
THE PERIOD 2015-19

14 5.13 EXPENSES RATIO OF THE MODEL 96

DAIRY PTIVATE LIMITED DURING
THE PERIOD 2015-19

15 5.14 RETURN ON CAPITAL EMPLOYED OF 97

THE MODEL DAIRY PTIVATE LIMITED
DURING THE PERIOD 2015-19
 UNIT-I
INTRODUCTION
INTRODUCTION

Financial analysis depends to very large extents of the use of ratios through there are
other equality important tools of such analysis. Thus, a direct examination of the magnitude
of two released items is somewhat enlightening but the comparison is greatly facilitated by
expressing the relationship as a ratio.

Ratio analysis of business enterprises enters on efforts to derive quantitative measures or

guides concerning the expected capacity of the firm to meet its future financial obligation an
expectations present and past data are used for the purpose and whatever extrapolations
appear necessary. They are made to provide no indication of future performance.

Alexander Walt, who criticized the bankers for its lap sided development awing to their
decisions regarding the grant of credit on current ratios a lone, made the presentation of an
elaborate system of ratio analysis in 1919.

A ratio is a simple arithmetical expression of the relationship of one number to another. It

may be defined as the indicated quotient of two mathematical expressions.

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the

process of establishing and interpreting various ratios for helping in making certain decisions.

NATURE OF RATIO ANALYSIS

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the

indicated quotient of two mathematical expressions” and as “the relationship between two or
more things”. In financial analysis, a ratio is used as a bench mark for evaluating the financial
position and performance of a firm.

The absolute accounting figures reported in the financial statements do not provide a
meaningful understanding of the performance and financial position of a firm. A accounting
figures conveys meaning when it is related to some other relevant information.

The relation between two accounting figures, expressed mathematically, is known as a

financial ratio. Ratios help to summarize large quantities of financial data and to make
qualitative judgement about the firm‟s financial performance.

1
EVALUATING THE FIRM PERFORMANCE

Ratios point out the operating efficiency of the firm i.e. the investor wealth. It ensures a fair
return to its owners and secures optimum utilization of firm assets.

SIMPLIFIES FINANCIAL STATEMENTS

It provides the relevant data for the comparison of the performance of different departments.
If comparison shows a variance the possible reasons of variations may be identified and if
results are negative, the action may be initiated immediately to bring them in line.

IT HELPFUL IN BUDGETING AND FORECASTING

Accounting ratios provide a reliable data, which can be compared, studied and analysed.
These ratios provide sound footing for future prospects.

IT HELPS IN DETERMINING LIQUIDITY POSITION

With help of ratio analysis conclusion can be drawn regarding the liquidity position of a firm.
The liquidity position of a firm would be satisfactory if it is able to meet its current obligation
when they become due.

IT HELPS IN DETERMINING LONG TERM SOLVENCY

Ratio analysis is equally assessing the long term financial ability of the firm. The long term
solvency is measured by the leverage or capital structure and profitability ratio which shows
the earning power and operating efficiency, solvency ratio shows relationship between total
liability and total asset.

IT HELPS IN DETERMING OPERATING EFFICIENCY

Yet another dimension of usefulness or ratio analysis, relevant from the view point of
management is that it throws on the degree efficiency in the various activity ratios measures
this kind of operations

2
NEED FOR THE STUDY

 Financial performance analysis is very important to every company because every

company want to know the financial position of the company like weather it is getting
profit or losses. These are more assets or liabilities in company these will be known
through financial performance analysis.
 The ratio analysis gives in details information about financial status of the company
by using some of the ratios like LIQUIDITY RATIO, SOLVENCY RATIO, and
ACTIVITY RATIO.

3
OBJECTIVES OF THE STUDY

 To know the financial strengths and weakness of Model Dairy Private Limited.
 To study the current financial position of the Model Dairy Private Limited.
 To examine the liquidity position of the Model Dairy Private Limited by using
Liquidity ratio.
 To analyse the solvency position of the Model Dairy Private Limited through ratios.
 To find the activity position of the Model Dairy Private Limited.

4
SCOPE OF THE STUDY

 The present study is confined to only Model Dairy Private Limited, Vijayawada.
 The scope of the study is limited to calculating the Liquidity Ratio, Leverage Ratio,
Profitability Ratio, and Activity Ratio.
 The study covers the financial reports for only 5years from 2011 to 1015.
 The scope is limited to secondary data only in Model Dairy Private Limited.
 The data and information was gathered during the time period only.

5
RESEARCH METHODOLOGY
Methodology is an intensive and purposeful search for knowledge and for the
understanding social and physical phenomenon. It is the method for the discovery of true
values in scientific way. The information for the study has been obtained from two sources
namely.

 PRIMARY DATA
 SECONDARY DATA

PRIMARY DATA

This is the data collected for the first from the respondent through the interview or
questionnaire.

There is no primary data for this study.

SECONDARY DATA

Secondary data is the data collected from already existing sources.

For this study data has been collected from financial reports of the company through web
sites.

7
LIMITATIONS OF THE STUDY

 Time factor was one of the major constraints of the timing only for 45days.
 The research was limited to Model Dairy Private Limited only so the result cannot
the generalized.
 For this study the data has taken only for 5 years of Model Dairy Private Limited.
 All the data that is available and used for analysis were taken from the financial
statements of the company only.
 The company has provided decorative figures, because of time constraint.

8
 UNIT-II
INDUSTRY PROFILE
INTRODUCTION

Dairy farming once a subsidiary occupation and a means of base substance in rural areas is
now an important industry. India is a country of village where our farmers have small land
holdings, incentives cropping therefore have been the way of planning as a result production
enhancement inputs went on increasing. Thus the input output ratio started getting
unbalanced. The need of cash was felt to by inputs so to meet these needs framers had to
borrow to buy inputs. So to meet these farmers had to borrow money at a very high rate of
interest. A large number of framers of puny and armed nagger in Maharashtra are in open
hostility against money lenders in 1879 subsequently land improvement act 1883 and
agriculture act in 1884 were passed to advance loans at reasonable rate of interest of formers.
The government realized that co-operative credit society act was noted. The act had following
short comings.

GRAPH 2.0 STRUCTURE OF INDIAN DAIRY INDUSTRY

9
1. Credit only societies are resisted.

2. Classification of the societies into urban and rural was in scientific

3.It was selected about distribution of profit, thus another act named.

“The co-operative society‟s act 1912 was enacted. The act took are following instructions like
central bank superior of union and non-credit societies”

The co-operative remained central subject in the year 1919 co-operative becomes a
static subject within the scope of the provisional legislative. Each province started
formulating of their own co-operating societies act to suit these requirements. After
independence the co-operative movement made rapid stride government adopted the policy
of developing the co-operative movement for establishing the important order in the country.
The co-operative sector was gave an important place in the economy of the country and acted
as balancing between private sector and public sector with the expansion of the movement
after independence. It becomes necessary that co-operative legislation must keep pace with
the progress of movement after independence. I become necessary that co-operative
legislation must keep pace with the progress of movement after independence.

It becomes necessary that co-operative legislation must keep pace with the progress
of movement and there should be uniformity of co-operative acts of different states. The
Bombay co-operative society‟s act 1992 was amended nineteen times to suit the changing
circumstances. Hence the government appointed a committed in 19567 to review co-
operative acts in different states and prepare a model bill on the basis of this model bill acts
passed are as follows.

1. The A.P. co-operative societies act of 1964

2. The Gujarat co-operative societies act of 1961
3. The Madras co-operative societies act of 1961
4. The Mysore co-operative societies act of 1959

10
 5. The Rajasthan co-operative societies act of 1965

STEPS OF DAIRY DEVELOPMENT

In India there was no progress in the dairy industry before independence. Government of
India realized the necessity of increasing milk production and products there by producing
substantial job opportunities to the urban and rural community. The government has also
recognized the need for getting of additional income and employment opportunities to the
rural and urban people.

The government of India has focused much more attention on dairy development program by
allocation more funds in fourth and fifth year plans the government if India during 1970 have
lunched massive program operation flood I and operation flood with the help of European
nation and world production program costing rupees 500cores. The government of India has
under taken various schemes through organization and institution. India development board,
animal husbandry, plans national dairy research institute. These programs enable for
immediate development in dairy activities, dairy development with the help of effective
marketing systems, marketing development enhancement of profitability prospects of the
enterprise.

Large member of farmer of Pune and Ahmednagar areas in Maharashtra is in

open hostility against money lenders in 1879.

Subsequently land improvement act 1884 and agricultural act in 1884 was
passed to advance loans at reasonable rate of interest of framers. The government realized
that the co-operative movement could possibly solve the economic problems of the framers,
thus in 1904 the co-operative credits societies act was enacted.

 The act however has following short comings

 Only credit societies could be registered
 Classification of the societies into urban and rural was unscientific

11
It was selected about distribution of profit, thus another act named the co-operative societies
act of 1912 enhanced. The act took the following institution like Central Bank, supervision of
unions and non 0 credit societies. The co-operative remained central subject.

It the year 1919 co-operative became state subject and fell with in scope of
provisional legislature. Each province started formulation of their co-operative act to suit
requirements after the independence the co-operative movement for establishing the
democratic economic order in the country.

The co-operative sector was given an important place in the economy of the country and
acted as balancing actor between private sector and public sector with expansion of
movement after independence.

It became necessary that co-operative legislation must keep place with the
progress of movement and there should be informing of co-operative society act 1925 was
amended 19 times to suit the changing circumstances. Hence, the government of India
appointed a committee in 1956 to review, Co-operative Act in different states and prepare a
model bill on the basis of this model bill.

OPERATION FLOOD PROGRAM IN INDIA

In order to build a variable and self sustaining nation dairy industry and co-operative lines
then N.D.D.B. launched a project christened operation flood mobilized from the sale of
products base on foreign food donation in the firm of skimmed powered and butter oil.
Operation flood the closely on the help of” GREEN REVELUATION” in the country.
Against the back drop of huge surplus at milk production in the highly developed milk
producing countries in the west and dwindling per capital milk availability at borne with its
pledge to provide milk to one and all, it spurred the India dairy industry to launch a “ White
Revolution”

12
The agreement signed by world food program and government of India. The W.F.P. will
arrange to supply 126000 metric tons of butter oil, which the co-operative will handle on
behalf on the government utilization of commodities would generate funds estimated at
rupees 954 million during the project period. These funds are to be invested in the
improvement of milk marketing in the organized sector especially in the four major cities
extended over ten states that is Punjab, Haryana, Utter Pradesh, Behar, West Bengal,
Tamilnadu, Andhra Pradesh, Maharashtra and Gujarat.

Table2.1 Operation floods of industry

Phase Operation flood-I Operation flood-II Operation flood –III

Duration July1970- April1981- April1985-
March1981 March1985 March1990
Funds (Rs) 1165 (disbursed) 2772(disbursed) 6013(disbursed)

The importance of dairy development in India was recognized internationally in

the holding of the 58thannual session of international dairy federation and 19 th
international dairy congress of a particular significance to India as its theme was Dairy as
an instruments of social and economic change.

INSTITUTION SUPPORT TO CO-OPERATIVE DAIRYING INDIA DAIRY

CORPORATION

The Indian dairy corporation was set up under companies act on 13 thFebruary
1970; it is government of India under taking. The immediate need to steps I.D.C. was to
handle the popularly known “Operation flood”

Thus is becomes mainly a financing cum promotional agency of the central

government The main objectives are of Indian corporations.

1. The promote dairy industry in the country.

2. To assist the state government and other organization including co-operative societies
interested in the promotion of dairy industry to meet the requirement of Milk products.

13
3. To provide a package of technical input for enhancement of milk production.

4.Resettlement of city based cattle in the rural areas.

5.To assist in development of allied industry requirement to meet the needs of dairy
development.

DAIRY INDUSTRY IN ANDHRA PRADESH

The main occupation in A.P cultivation. The village reflect the social economical moral and
cultural of human race. Dairy stands as the back of agricultural and at same time it place
important rely for stability of rural economic renditions and helps to maintains nation‟s
health by supplying sweet milk. It provides not only health but also income to milk
producers. Now the productions of the milk become a subsidiary occupation among marginal
fanners, small fanner and agriculture labour.

The program of dairy industry was matted with commendable help of the united
national children‟s Emergency fund, food and agriculture organization and freedom from
hunger co campaign organization of the U.K. this organization insisted a lit of the
establishment of dairy units at Hyderabad and Vijayawada in 1967 and 1969 respectively
which led to pioneer dairy development program in Andhra Pradesh. Later to set cooling and
chilling centres have been set up to feed these two these gigantic units.

The milk producers have been facing either a lot of problems in the process of
production & marketing and milk improper facility poor technology and absence of price part
facility, poor technology and absence of price part facility, poor technology and absence of
price particularly during flush period etc. It was at this context the Government of AP has
viewed to constitute a dairy development corporation. More than 3.5 Lakh milk producers get
20cr Rs per annual for supplying of milk of which 69% of total benefits belongs to small and
marginal farmers, agriculture lab our and other weaker section of the rural community.

14
 The government of Andhra Pradesh has started dairy development corporation to
safe guard the interest of milk procedures and ensuring adequate supply of fresh milk at
reasonable price to the urban consumers as an our come A.R.D.D.C. provide employment to
nearly 20employees and organized as many as 87 dairy units including 7 milk factory‟s 13
district dairies, 22 chilling centres, 24 mini chilling centres, 18 cooling centres, 15 mini
cooling centres. In addition to the private units have been contributing there little, mite in the
development of the dairy industry. m/s Hindustan milk food that has started a malted milk
products factory in Rajahmundry. Further to enhance working efficiency and to increase in
turnover the government an autonomous dairy development corporation on the
recommendation of the India dairy corporation. As results of these measures the dairy
industry improving towards massive and milk collection.

Dairy development:

In 1960 a pilot milk supply scheme was started in the state for the dairy
development. It initial milk collection capacity was 100 litters a day at the time of starting
now its dairy collection increased 11 lacks per day.

AP dairy development co-operative federation.

A.P.D.D.C.F. was formed in October 1981 to implement Operation Flood-II

Program through active involvement of producers in organizing milk production,

procurement, processing and marketing on “Three-Tier” co-operative structure as per
national government of India .The three tier system consists of primary dairy co-operative
societies 13 at village level, co-operative union at district level and federation at state level.

Planning investments:

 33.43 cores
 247.523 cores
 187.00 cores
 349.17 cores
 1166.00 cores
 600.00 cores
15
Operation flood

In our state operation flood was divided in three types.

1.Village level

2. District level

3.State level

Marketing division

The marketing division of the federation is doing marketing of milk produced by the below
units. Public relation advertisement, training and controlled by the joint director ( training and
marketing). The marketing wing consist of 38 members of employees presently.

The Andhra Pradesh dairy development federation has got six products manufacturing units
in A.P

 Milk products factory, Hyderabad.

 Milk products factory, Chittoor.
 Milk products factory, Nandayala.
 Milk products factory, Proddutoor.
 Sangam Dairy, Vadlamudi.
 Milk products factory, Vijayawada.
 Milk products factory, Nalgonda Rangareddy.
 Milk products factory, Karim nagar Dairy.

The products manufactured by these units in the federation are being sold
under the brand name of “VIJAYA”. The products generally produced for the national
market are

 Skim milk powder

 White milk powder
 Vijay a spray
 Table butter
16
  Cheese
 Ghee and white butter

Organization of dairy farm:

There are many activities involved in successful running of a dairy farm. Each one of these
activities is as important as any other for profitable dairy farming. Coordination of all these
activities in a dairy farm is known as organization of the dairy farm.

Premium Milk

We are offering our esteemed clients excellent quality Premium milk, which is used for
making paneer, curd, ghee and other delicious milk products. The milk is hygienically
processed under the supervision of the expert professionals using advanced technologies.
Before packing the milk using quality approved moisture free packing materials. we sterilized
the premium milk to make it bacteria free. We offer the milk at he pocket friendly prices to
the clients‟

Features

Delicious

Pure

Good for health

Milk Cake

We are offering our clients an extensive range of milk Cake, which is prepared from only
100%pure milk and other essential ingredients. Processed in compliance with the set norms
of food industries, these cakes are ideal to serve with tea and coffee. To ensure safe
transportation of the cakes, we pack these in air tight packaging materials. Before offering to
the clients at responsible price, we check the milk Cake on quality and taste parameters.

17
Features

Sweet &caramelized taste.

No artificial colours.

Hygienically packed.

Cooking Butter

We are offering our clients a quality assured range of Cooking Butter, which is an ideal
product for cooking, garnishing and sweets making. We process using superior quality
fermented cream or milk at our production unit. We pack using temper and moisture proof
packaging materials and store in our temperature controlled warehouse for safety reasons.
Our Cooking Butter is highly demanded in the market and offered to the clients at pocked
friendly price quality and purity parameters to provide a quality range at end. To ensure
safety to the product, we pack it using quality approved packaging materials.

Features

Highly pure.

Free from preservatives.

Quality approved.

Ghee Tins

We are a quality conscious organisation, committed to manufacture and supply a superlative

array of ghee tins. The ghee is processed under the hygienic conditions using pure and fresh
milk at our production unit. Ghee is mainly used in variety of Indian traditional cuisines as an
essential ingredient. We pack the ghee using moisture free packaging materials and store in
temperature controlled stores till the time of dispatch. Our clients can obtain ghee tins form
us at affordable price.

Features

Highly pure.

Long shelf life.

18
Rich source of energy.

Fresh paneer

We are offering to our clients a quality range of paneer, which is used a fresh cheese to
prepare various cuisines. We process the paneer using purest quality milk at our production
unit. The quality inspectors check the paneer on freshness and taste parameters to offer a
flawless range at pocket friendly price. We pack the fresh paneer using moisture free
packaging materials. Our paneer is highly demanded in hotels, restaurants and residences.

Features

Hygienic processing

Good for health

Delicious taste

Lassie Drink

We are offering our clients a quality grade Lassie Drink, which is used as a very refreshing
drink in confectionery shops, hotels, restaurant and households. The drink is processed under
the strict supervision of the expert professionals using pure quality milk. The drink is packed
using moisture and tamper proof packaging materials to ensure safe transportation.

Features

Option of sweet and source taste

Rich taste

Refreshing drink

Sweetened milk (Basundi)

We are offering our clients a quality grade Sweetened milk (Basundi) which is processed by
boiling milk at a low heat. It is used as a traditional Indian dessert, garnished with slices of
dry fruits like almonds and pistachios.

19
Milk Card

We offer a quality range of milk Curd, which is processed by coagulating milk with rennet
acid. The curd is widely used in hotels, restaurants and houses to serve as yogurt. Our quality
inspectors check the card on purity and quality parameters to ensure that only flawless range
is provided to the clients. We give lots of emphasis on packaging, so we use moisture free
packaging materials to pack the milk card and offer to the clients at responsible price

Features :

Rich source of energy

Delicious taste

Good for health

Table 2.2: Districts selected under operation flood program

SL.NO DISTRICT MILK SHEDS/UNION

1. Krishna Krishna
2. Srikakulam Visaka
3. Vijayanagaram Visaka
4. Vijayanagaram Visaka
5. East Godavari Godavari
6. West Godavari Godavari
7. Guntur Guntur
8. Prakasam Prakasam
9. Chittoor Chittoor
10. Kurnool Kurnool
11. Nalgonda Nalgonda
12. Rangareddy Nalgonda
13. Medhak Medhak
14. Nizamabad Medhak

20
OPERATION FLOOD:

The transition of the milk industry from a situation of net import to that of surplus has been
led by the efforts of National Dairy Development Board‟s operation flood. Operation flood
has led to the modernization of India‟s dairy sector and created a strong network for
procurement processing and distribution of milk by the co-operative sector . Per capita
availability of milk has increased from 132gm per day in 1950 to over 220 in 200 It has also
led to an improvement in yields, longer lactation periods, shorter calving intervals through
the use of modern breeding techniques.

Establishment of milk collection centers, and chilling centers has enhanced life of raw milk
and enabled minimization of wastage due to spoilage of milk. Operation Flood has been one
of the world‟s largest dairy development programme and looking at the success achieved in
India by adopting the co-operative route, a few other countries have also replicated the model
of India‟s White Revolution.

Table 2.3:Milk production in India

Year Production Percapita\income availability (gms/day)

2001-02 84.4 225

2002-03 86.2 230

2003-04 88.1 231

2004-05 92.5 233

2005-06 97.1 241

2006-07 102.6 251

2007-08 107.9 260

2008-09 112.2 266

2009-10 116.4 273

2010-2011 121.8 281

2011-2012 127.9 290

2012-13 132.4 299

2013-14 137.7 307

2014-15 146.3 322

21
DAIRY CO-OPERATIVES

The Nation Dairy Development Board (NDDB) (External website that opens in a new
window) was established in 1965 with the mission of making dairying a vehicle to a better
future for millions of grassroots milk producers. This commitment has been rewarded with
India‟s emergence as the world‟s largest milk producing nation. The Board‟s programmes
and activities seek to strengthen the functioning of dairy co-operatives by providing them
financial assistance and technical experts in milk production, employment generation,
availability of milk, foreign exchange savings and increased farmer incomes.

Dairy co-operatives accounts for the major share proposed liquid milk marketed in the
country .Milk producer‟s co-operatives unions and 15 state co-operative milk marketing
federations. Over the years, brands created by co-operatives have become synonymous with
quality and value. Brands like Amul (GCMMF), Vijaya (AP), Verka (PUNJAB), Sara‟s
(RAJASTHAN), Nandini (KARNATAKA), Milma (KERLA), Gokul (KOLHAPUR) are
among those that have earned customer confidence‟

Some of the major dairy co-operatives federation include;

 Andhra Pradesh dairy development cooperatives federation ltd (APDDCF)

 Bihar state cooperative milk producers federation ltd (COMPFED)
 Gujarat cooperative milk marketing federation ltd (GCMMF)
 Haryana dairy development cooperative federation ltd (HDDF)
 Himachal Pradesh state cooperative state cooperative milk producers federation ltd
(HPSCMPF)
 Karnataka cooperative milk producers federation ltd (KMF)
 Kerala state cooperative milk marketing federation ltd (KCMMF)
 Madhya Pradesh state cooperative dairy federation ltd (MPCDEF)
 Maharashtra Rajyasahakarimaryaditdugdhmahasangh
 Odessa state cooperative milk producers federation ltd (OMFED)
 Pradeshik cooperative dairy federation ltd (PCDF)
 Rajasthan cooperative dairy federation ltd (RCDF)
 Tamilnadu cooperative milk producers federation ltd (TCMPF)
 West Bengal cooperative milk producers federation ltd (WBCMPF)

22
 GRAPH 2.1: KEY FACTS OF INDIAN DAIRY INDUSTRY

Financial Assistance:

The National Cooperatives Development Corporation (NCDC) has been providing financial
assistance to dairy cooperatives for organization medium and small sized dairy processing
plants and milk chilling centres. The corporation has sanctioned a total loan assistance of
Rs.6.33 Lakh for establishing of 29 cooperative dairy units comprising 17 chilling centres
and 12 cooling centres.

DAIRING INDUSTRY IN KRISHNA DISTRICT:

Dairy occupies 2nd place in earning livelihood next to agriculture in Krishna district, as the
cattle wealth in this district is more. The dairy development union after changing different
management system is now stepping into cooperative sector to help the small and backward
farmers by making the members of the union.

23
 Krishna district with its charge area claims notable place in agriculture activities. It is a
long time aptitude for the agricultural farmers to possess dairy cattle along with cattle for
agriculture. This aspect has drawn the attention of the officials of UNICEF, FAO and
government of India. After analysing the dairy prospects, they expressed the view that there
could be bright future for dairy scheme in Krishna district. Accordingly a survey was
undertaken to explore that market for surplus milk in 1960-61. This marks the first step in
development the dairy industry in the state.

Table 2.4: DAIRY PLANTS OPERATING IN INDIA

Dairy plants Number Capacity

000’L/DAY
Cooperative 2123 28394

Private 403 32415

Others 63 12170

Total 2613 72979

Management of Labour

Labour is becoming costly and scarce and hence organising them is becoming more difficult.
The farm should be so planned that is shall be possible to completely manage with family
labour. Hired labour should be minimum and used only for such operations as sowing,
harvesting etc. Permanent labour if employed should be minimum but provided with all
facilities like housing and should be well paid and looked after so that they will work
wholeheartedly.

Management of equipment

Small dairies may have less equipment and machinery like chilling plant pasteurizing plant,
tractor trailer harvester, and such other agriculture equipments. These have to kept in good
working condition so that all dairy and agriculture operation will go on normally so that all
dairy and agricultural operations will go on normally and milk may be transported in good
condition for marketing.

24
Management of milk and milk products

The profitability of a dairy depends upon the farm in which the milk is disposed off. Selling
in cities fetches more money than in smaller towns. Milk transported to longer distance may
cost more on transported. There is a chance of spoilage if more time is allowed between
milking and sales, unless milk is pasteurized and preserved properly.

Record Keeping

Record keeping is important in a dairy which will enable us to know that actual position of
the dairy in all aspects to enable us to plan properly. Record may pertain to all aspects of
dairying viz, feeding, breeding, and management. It will enable the farmer to breed the cows
in time to give balanced rations according to mild yield to know that actual production of
milk of individual cows, to know profit and loss in the farm etc.

Opportunities in dairy farming

Dairy is one of the important sides of business. A Cattle rearing are an age old practices &
almost all the land holding people keep one agriculture operations. Dairy enterprise is an
efficient and labour intensive business, so that the whole family of the farmer is pressed into
services & they are able to produce some productive response from the limited holding,
utilizing agricultural by productive and wastes that will go to waste otherwise. Both males
and females & old and young can be usefully employed of different types of in a dairy farm.

The by-products of dairy industry like skim milk, when etc., can be fed to other
livestock. The skim milk is of high value and can be used for poultry and swim with more
profits. Farmers who sell milk are an excellent source of protein, minerals and vitamin

25
PRODUCT DEVELOPMENT:

Dairy foods can be manufactured and packaged for export to countries where Indian foods
enjoys basic acceptance. The manufacturing may be carried out in contract plants in India.
An option to market the products in collaboration with local establishments or entrepreneur
can also be explored.

DAIRY WHITENERS;

About 15% of the total milk output in India estimated to be processed in the organized dairy.
The industry has maintained a high growth profile, especially in the wake of the operation
flood, colloquially also termed as White Revolution, initiated in early 1980s. Today India
produces over 85mn tonnes of milk annually. The total milk economy is estimated at Rs 1300
billion in terms of value.

LEAD PLAYERS:

Nestle ,Amul , Britannia, Dynamix Dairy, Sterling Agro, Haryana milk foods, Mohan foods,
K Dairy, Vijaya Dairy.

DAIRY INDUSTRY IN INDIA

India has the world‟s largest cattle & buffalo populations adopted to tropical climate and
poor nutrition and environment. Acc to livestock census 1982, India‟s bovine population
was191 million cattle and 69 million buffaloes. Milk production gives employment to 70
million dairy farmers. In terms of total production India ranks 2 nd to USA with a production
of 71 million tones in 1997-1998. The production of various products in
2002,428( 000metric tons).

26
APDDCF was formed in Oct 1981 to implement operation flood-II program through
involvement of producers in organizing milk production procurement processing and it will
low due to rapid population growth. It was 178 gram/ day in 1990. There was only an
increase of 50 grams per day from 1980-90. It is expected that milk availability will reach
213 gram/ capital/day by 200 A.D. as against 300 scientists. Today India ranks first in Milk
Production in the world.

27
 Dairy development in India :

India has the world‟s largest cattle & buffalo populations adopted to tropical climate and
poor nutrition and environment. Acc to livestock census 1982, India‟s bovine population
was191 million cattle and 69 million buffaloes. Milk production gives employment to 70
million dairy farmers. In terms of total production India ranks 2 nd to USA with a production
of 71 million tons in 1997-1998. The production of various products in 2002,428( 000metric
tons).

Dairy development in India received a fillip after independence when

industrialization and awakening warranted the establishment of organised milk collection,
processing distribution of milk to cater the needs of the expanded urban population. Planned
development was first taken up in the first 5 year plan (1951-56).

The main deterrent factors for marketed structure in the rural areas. Milk was being marketed
in the form of ghee which did not provide sufficient income to the farmers to take up the
daring. Some of the dairy units also established a chain of trill collection and chilling centers
in the rural areas to abroad necessary facilities for handling milk in large volume and for long
distance transport without spoilage. These processing centers have had a stimulating effect on
the dairy industry in the country.

India has world‟s largest cattle population however, per capital cattle population
in very less compared to developed nations. Dairy farming has now become an important
agro business.

First dairy farm was established by military at Allahabad in 1989, British troops got milk
supplies from that farm. It also organized cross breeding with European cattle breeds. India is
a country of villages where farmers have small land holdings. Money lenders lend money at
very high interest rates. They exploited the farmers who were poor.

28
 As a result large number Pune and Ahmednagar opened hostilities against
moneylenders in 1879. Subsequently land improvement Act 1883, and Agriculture Act 1884
were passed to advance loan at reasonable rates of interest to farmers. The government
realized that the cooperative Credit Society Act was essential. But enacted the following short
comings.

1. Only credit societies are registered.

2. Classification of the societies distribution of societies into urban and rural was scientific.

3. It was selected regarding distribution of profits thus another Act named the cooperative
societies Act 1912 was enacted. The act took care of credit under the supervision of central
bank.

The cooperative Unions remained control subjects. In the year 1919 cooperative societies
become a state subject & fell with in the scope of provision of legislative. Each provinces
stated formulations of their requirements. After independence the cooperative movement for
establishing economic welfare in the country. The cooperative sector were given an
implement place in the new economy and acted as a balance between private & public sector.
It becomes pace of progress of movement and there should be uniformity of cooperative
society Act 1956 was amended 19 times to suit the changing circumstances. Hence the
government of India appointed a committee in 1956 to review Cooperative Societies Acts in
different states and prepared a model bill.

AP DAIRY DEVELOPMENT COOPERATIVE FEDERATION(APDDCF)

APDDCF was formed in 1981 to implement operation flood-II program through active
involvement of produces in organizing milk production, procurement processing & marketing
on „three tier‟ cooperative structure as per the national policy of India. The Three Tire
system consists of primary dairy is operative societies at village level cooperative union at
district level and federation at the state level.

28
Dairying is an important source of subsidiary income to small/marginal farmers and
agricultural labourers. The manure from animals provides a good source of organic matter for
improving soil fertility and crop yields. The gober gas from the dung is used as fuel for
domestic purposes as also for running engines for drawing water from well. The surplus
fodder and agricultural by-products are gainfully utilised for feeding the animals. Almost all
draught power for farm operations and transportation is supplied by bullocks. Since
agriculture is mostly seasonal, there is a possibility of finding employment throughout the
year for many persons through dairy farming. Thus, dairy also provides employment
throughout the year. The main beneficiaries of dairy programmes are small/marginal farmers
and landless labourers. A farmer can earn a gross surplus of about Rs. 12,000 per year from a
unit consisting of 2 milking buffaloes. The capital investment required for purchase of 2
buffaloes is Rs. 18,223/-. 1Even after paying a sum of Rs. 4294/- per annum towards
repayment of the loan and interest the farmer can earn a net surplus of Rs. 6000 - 9000/-
approximately per year. (For details see model scheme enclosed). Even more profits can be
earned depending upon the breed of animal, managerial skills and marketing potential.

29
 According to World Bank estimates about 75 per cent of India's 940 million
people are in 5.87 million villages, cultivating over 145 million hectares of cropland. Average
farm size is about 1.66 hectares. Among 70 million rural households, 42 per cent operate upto
2 hectares and 37 per cent are landless households. These landless and small farmers have in
their possession 53 per cent of the animals and produce 51 per cent of the milk. Thus,
small/marginal farmers and land less agricultural labourers play a very important role in milk
production of the country. Dairy farming can also be taken up as a main occupation around
big urban centres where the demand for milk is high.

2. Scope for Dairy Farming and its National Importance.

The total milk production in the country for the year 2001-02 was estimated at 84.6
million metric tonnes. At this production, the per capita availability was to be 226
grams per day against the minimum requirement of 250 grams per day as
recommended by ICMR. Thus, there is a tremendous scope/potential for increasing
the milk production. The population of breeding cows and buffaloes in milk over 3
years of age was 62.6 million and
42.4 million, respectively (1992 census)

Central and State Governments are giving considerable financial assistance for
creating infrastructure facilities for milk production. The ninth plan outlay on Animal
Husbandry and Dairying was Rs. 2345 crores.

Planning investment in operation flood-II

Plan – 34.43Crs

Plan – 247.53Crs

Plan – 187.00Crs

Plan -349.17Crs

Plan – 1166.00Crs

Plan – 600.00Crs

30
Plan – 1700.00Crs

31
Organization of a dairy farm:

There are many activities involved in successful running of a dairy farm. Each on of these
activities is as important as any other for profitability dairy farming. Coordination of all these
activities in a dairy farm is known as organization of the dairy.

Management of Animals:

The successes of dairy depend upon the good health and well being of the cows and
buffaloes maintained in the dairy and their production. The various aspects to be considered
are :

 Housing
 Feeding
 Breeding
 Disease control.

Management of Labour:

Labour is becoming costly and scarce and hence organising them is becoming more difficult.
The farm should be so planned that it shall be possible to completely manage with family
labour. Hired labour should be minimum and used only for such operations as sowing
harvesting etc. Permanent labour if employed should be minimum but provided with all
facilities like housing should be well paid and looked after so that they will work
wholeheartedly.

Management of milk and milk products:

The profitability of a dairy depends upon the farm in which the milk is disposed off. Selling
in cities fetches more than in smaller towns. Milk transported to longer distance may cost
more on transport. There is a chance of spoilage if more time is allowed between milking and
sale, unless milk is pasteurized and preserved properly.

31
Record keeping :

Record keeping is important in a dairy which will enable us to know that actual position of
the dairy in all aspects to enable us to plan properly. Records may pertain to all aspects of
dairying viz, feeding, breeding and management. It will enable the farmer to breed the cows
in time to give balanced rations according to mild yield to know the actual production of milk
of individual cows, to known profit and loss in the farm etc.,

Opportunities in dairy farming :

Dairy is one of the important sides of businesses. A cattle rearing are an age old practice &
almost all the land holding people keep one agriculture operations.

White revolution :

This white Revolution or Operation Flood relates to the rapid development in milk
production that took place in India after mid 1960‟s.This name is a variation of the name
„Green Revolution‟ used earlier to describe repaid development in agriculture production in
India. A name closely associated with White Revolution is that of Dr. Verghese Kurien. This
at is because the origins of White Revolution can be traced to the efforts of Dr. Kurien at
kaiera District co-operative milk producers union situated at Anand in Gujarat State. This
organization is better known by the brand name of its product-Amul.

1. Phase I (1970-1980) was financed by the sale skimmed milk powder and butter oil donated
by the European Union through the World Food Programme. NDDB planned the programme
and negotiated the details of EEC assistance . During its first phase, Operation Flood linked
18 of India‟s premier milk sheds with consumers in India‟s major metropolitan cities. The
operation flood – I originally meant to be completed in 1975, actually spanned the period of
about nine years from 1970-79, at a total cost of Rs.116 cores.

32
2. Operation Flood Phase II (1981-1985) increased the milk sheds from 18 to 136, 290 urban
markets expanded the outlets for milk. By the end of 1985 a self-sustaining system of 43,000
village cooperatives with 4,250,000 milk producers were covered. Domestic milk powder
production increased from 22,00 tonnes in the pre-project year to 140,00 tons by 1989, all of
the increase coming from dairies set up under Operation Flood. In this way EEC gifts and
World Bank loan helped promote self-reliance.

3. Phase III ( 1985-1996) enabled dairy cooperatives to expand and strengthen the
infrastructure required to procure and market increasing volumes of milk. Veterinary first-
aid health care services, feed and artificial insemination services fir cooperative members
were extended, along with intensified member education. Operation Flood‟s Phase III
consolidated India‟s dairy cooperative movement, adding 30,000 new dairy cooperatives to
the 42,000 existing societies organized during phase II. Milk –sheds peaked to 173 in 1988-
89 with the numbers of women members and women‟s Dairy Cooperative Societies
increasing significantly. Phase III gave increased emphasis to research and development in
animal health and animal nutrition. Innovations like vaccine for Theileriosis, by passing
protein feed and Urea-molasses mineral blocks, all contributed to the enhanced productivity
of milk producing animals.

Its Impact: This is a revolution like no other in the world. Operation Flood or The White
Revolution as it is known in India has over the past five decades produced a constantly
increasing sustainable flood of milk in India. It was of high quality and available in most
parts of both urban and rural India. It helped transform the lives of more than 13.4 million
farmers and increasing, most of them poor. Of them, 3.7 million were women. It helped
women empower themselves and their families. Today, the Dairy Cooperatives Network
include 177 milk unions. It operates in over 346 districts covering around 1,28,799 village
level societies. Today , India it‟s criticism : some cities of the project argue that the emphasis
on imported is the world‟s leading dairying nation. Its helps : increasing breeds of cattle has
been instrumental in the decimation of Indian breeds. Foreign milk production and are not
suited to Indian breeds give higher yields, but require more feed Argument rural incomes Fair
prices for consumers that the focus on the dairy sector increases of conditions. Critics also
argue Employment of people during this period economy in development, Indian agriculture.

33
National Dairy Development Board:

The national dairy development board‟s creation is rooted in the conviction that our nation‟s
socio- economic progress lies largely on the development of rural India .

The National Dairy Development board was created to promote, finance and support
producer-owned and controlled organizations. NDDB‟s programmes and activities seek to
strengthen farmer cooperative strategies.

The National Dairy Development Board was founded in 1965 to replace exploitation with
empowerment tradition with modernity, stagnation with growth, transforming dairying into
an instrument for the development of India‟s rural people. NDDB began its operations with
the mission of making dairying a vehicle to a better future for millions of gross roots milk
producers. The mission achieved thrust and direction with the launching of “Operation
flood”, a programme extending over 26 years and which used World Bank loan to finance
India‟s emergence as the world‟s largest milk producing nation.

Operation Flood‟s third phase was completed in 1996 and has to its credit a number of
significant achievements. Since its inception, the Dairy Board has planned and spear heard
India‟s dairy programmes by placing dairy development in the hands of milk producers and
the professionals the employ to manage their cooperatives. In addition, NDDB also promotes
other commodity based cooperatives, allied industries and veterinary biological on an
intensive and nation-wide basis.

The National Dairy Development Board has been constituted as a body corporate and
declared an institution of national importance by an Act of India‟s parliament. The national
dairy development board –initially registered as a society under the societies Act 1860-was
merged with the erstwhile Indian dairy corporation, a company formed registered under the
companies act 1956, by an Indian parliament-the NDDB Act 1987(37of 1987) with effect
from 12 October,1987. The new body corporate was declared an institution of national
importance by the Act. The general superintendence, direction, control and management of
NDDB‟s affairs and business vests with the board of directors.

34
 The national dairy development board was created to promote, finance and support
producer-owned and controlled organizations. NDDB‟s programmes and activities seek to
strengthen farmer cooperatives and support national policies that are favourable to the growth
of such institutions. Fundamental to NDDB‟s efforts are cooperative strategies.

Government Schemes to Development of Dairy Firms:

1. Integrated dairy development scheme:

This scheme is 100% financed by GOI. This scheme is run with the objective to increase
milk, milk procurement, processing and milk marketing in the state. Assistance is received
from GOI for expansion of existing dairy / chilling plant, for purchase of audio visual kit and
also for organisation of societies. Under society organisation assistance is received for testing
equipment, stationary, managerial subsidy, head loan subsidy, green fodder minikit, working
capital, vaccination, first aid milk cattle, training & for purchase of animals.

2. Assistance to cooperatives:

Under this scheme heavy subsidy is provided to such milk unions which are running in
constant loss and are financially weak, with the objective to make them viable. Milk unions-
selected under this rehabilitation plan are provided with financial assistance by ministry of
Agriculture, GOI. Accumulated losses of milk unions subsidised by GOI & state govt in the
ratio of 50:50.

3. Strengthening Infrastructure for quality & clean milk production:

Milk producers are thought to produce clean milk under this scheme. They are helped with
training, use of detergent, antiseptic solution, muslin cloth, utensils etc. Testing labs are
strengthened under this scheme for purchase of BULK MILK coolers. 75% subsidy is granted
from GOI.

35
4. Fodder Development Project:

Fodder Development project is running in this department by subsidy of GOI. Under this
scheme fodder seed is provided to milk producers for green fodder to animals. Under this
scheme 75% is borne by GOI.

5. Central Quality Assurance Lab (Central lab):

By courtesy of the food processing ministry Government of India, an amount of Rs 166.00

Lakh has been approved as grant by the Government of India for the setting up and
strengthening for the central lab . Rs 128.00lakh rupees have been received against approval.

The quality assurance department mainly develops kits and testing strips for
checking adulteration in milk and provides them to units as well as consumers.

Under the consumer awareness programme, training camps are held in different
districts and important information provided to consumers about milk adulteration. This lab
has been set up in the campus of the Luck now Milk Union and at present its in-charge is Mrs
Shabnam Chopra. Anyone can get a milk sample tested after paying the required fees.

6. Mahila Dairy Scheme (STEP):

Proposed facilities under the scheme:

1. Support to mahila dairy societies- The following items are given subsidy under this
program-Testing, equipment, managerial subsidy, first aid kit and mixing, AI equipment.

2. Support to women members- Subsidy cattle feed and subsidy de-worming and vaccination
& insurance of their cattle.

3. Training and Awareness programme-Free training is given to secretary & management

committee member, chairman of society, first aid worker, A.I. worker, health education
program, green fodder program, women education program & child care programme.

36
 UNIT-III
COMPANY PROFILE
ABOUT THE MODEL DAIRY

Model dairy was established in the year 1994 first managing director Mr. Dana Parkas
registered as private limited company is Vijayawada. Belong with procurement of such as
Guntur, Parkas am, West Godavari etc. After procurement processing and packing will be
after packing milk will be dispatched in different specifications for sale in Krishna &
surroundings districts.

DIRECTORS OF THE COMPANY

Sri P. Dasaradha ramie – chairman

Chairman – Sri P. Dhanaparkash – Founder & M.D

Director – Sri P. Ganga kumara – Director

MAJOR CUSTOMERS

Vissanapeta (Krishna D.T)

Doris (Khammam)

Bheemadole (East Godavari)

Ponnur (Guntur D.T)

Kuchipudi (Krishna D.T)

LOCATION OF THE MODEL DAIRY

The dairy is located on the Chennai to Calcutta national highway, NH-5 between Vijayawada
and Gannavaram, nearly 13 kilometres from Vijayawada City. At Nidamanuru and 7km.
Distance to Vijayawada airport.

37
PRODUCTS

 Semi instant skim milk power

 Ghee

 Cup packed
 Sachet packed toned
 A special product pot curd
 Basundi

 Butter milk

38
 Pannier

 Sweet cove
 Lassi

 Milk peasant
 Junnu
 Flavoured milk

39
Gold top milk:

We are offering our clients a quality grade top milk, which is creamy and light-beige colored
milk. The milk is processed at our production unit under the hygienic condition using pure
quality milk. Our well expert quality analyst check the milk on taste and purity parameters
before offering to the clients at reasonable price. The gold top milk is packed by using tamper
and moisture free packaging materials and delivered to the clients within the stipulated frame.

Features:

 Source of vitamin
 Sterilized at high temperature
 Free from impurities.

 Ice-cream

40
MOTIVATION

The different that the citizen of Vijayawada were facing in the 1990‟s in getting fresh,
processed and hygienically packed milk way guiding factor in taking the decision to a milk
processing and distribution unit in the city of Vijayawada a commercial and education by Sri
pinnamaneni Dasaradha ramie garu & his two younger sons Sri P. Krishna Mohan & Sri P.
Dana parkas.

THE PROJECT TAKES SHAPE

Hearing through & worked on ideal of stating a milk processing & packing plant the team
passed it up to the establishment of a model dairy plant initially to handle 10000liters per day
of & milk with all the required equipment‟s facilities and infra-structure and was christened
as model dairy private ltd.

Growth and performance:

With continuous and untiring efforts for expansion in the various areas like milk
procurement, processing facilities and distribution the handling of the dairy reached 75000
liters per day by the year 2007 .

The dairy process, packs and distributes milk with different fat percentages as per the norms
in vogue to cater the needs and paying capacity of the consumer. The milk is packed in500ml
and 200ml capacity sachets automatically, form fill and seal packing machines untouched by
the hand. Milk is also supplied of bulk users like institutions, hotels and functions in 40liters
and 20 liters aluminium and plastic cans.

41
Table 3.1 PRICES OF MODEL DAIRY PRODUCTS

PRODUCTS PRICES

Curd cup 100ml 8/-

Curd packet 200ml 12/-

Curd packet 500ml 25/-

Curd 400gm 30/-

V.I.P curd 600ml 70/-

Curd 1trs 75/-

Curd 2ltrs 140/-

Curd-5ltrs 325/-

Curd-10ltrs 630/-

Badam milk-strawberry pinapple, chocolate. 20/-

Lassi-sweet, mango, strawberry 15/-

Butter milk 6/-

Zeera buttler milk 8/-

Lassi packet 12/-

Kalakhand 85/-

Doodpad 85/-

Milk cake 85

Pulihora 15

Sweetkova 6/-

Water bottle 500ml 10/-

Water bottle 1ltr 18/-

Basundi 10/-

ICECREAMS

Mango duet 20/-

Chaco bar 20/-

Khilfi 20/-

42
A.ACCOUNTING CONVENTION

The financial statements have been preped under the historical cost convention in accordance
with the generally accepted accounting principles and the provisions of the companies act
1956.

B. Revenue Recognition

The company follows system of accounting and recognizes significant items of incomes and
expenditure on account basis.

C. Fixed assets

Fixed assets are sated at the cost of accusation less accumulated depreciation direct costs are
capitalized till the assets are ready to be put to use these costs include financial costs relating
to specific barrowing attributable to fixed assets.

D. Depreciation

Depreciation on fixed assets is provided and in them prescribed in schedule to the companies
act 1956

E. Deferred taxes

Deferred tax is provided on all temporary differences at the balance sheet data between the
tax bases of assets and liabilities and their carrying amounts for financial reporting deferred
tax assets and liabilities are measured at the rates that are expected to apply to the period
when the assets is realized or the liabilities is settled on tax rates that have been enacted or
sub sequenced at the balance sheet data.

43
F. Earnings per share

In determining earning per share the company consider the net profit after tax and includes
post tax effect of any extra ordinary it‟s the number of shares used in computing basis
earnings per share is weight average number of shares outstanding during the period the
company does not have any dilative potential equity share.

PRODUCTION PROCESS

These consists the following stage in their manufacturing process

To produce the desired out put the raw milk and other ingredients need to be mix in of milk
once the raw milk is mixed in right proportion thus the stirring process takes the grass root.

RAW MILK

 Gold milk
 STD
 Toned milk
 Double toned milk

Gold milk:

In this manufacturing of gold contains 7% fact and 9% of S.N.F so the raw material is mixed
in right proportion thus the starting process.

STD:

In the S.T.D contains with 4.5% fact and 8.5% S.N.F

Toned milk:

In the toned milk 4.5% fact and 8.5% S.N.F

44
Double toned milk:

 In the double toned milk contains with 3% fact and 8.5% S.N.F
 After achieving the desired pasteurization it is to be milk converted in to other
products i.e. sweet, butter milk.
 The next processing is packing it is different types of packing in the production i.e.
Red, bulk, curd packing, butter milk packing.
 In this situation the marketing of milk or other milk products to sell the low prices.

OPERATIONAL FLOOD PROGRAM:-

1. Operation Flood I:-

Dairy plant handing capacity of 50000liters of milk per day besides facilities to manufacture
6MTS, of skim milk powder, 4 tons of butter, 1 tons of gee and casein from sour skim milk
was established with cost of Rs. 2.88 cores facilities to provide technical inputs like free
veterinary cattle no profit and no loss basis were created with an expenditure of Rs. 1.2 cores.

2. Operation Flood II:-

Under operation flood II, the dairy processing capacity had been increased from 50000 to
75000 litters per day, with an expenditure of Rs. 1.5 cores.

3. Operations Flood III:-

Rs. 1.5 cores were allotted to this milk shed for expansion of improvement in dairy plant,
chilling centres and technical input activities.

Aseptic Packing Station:-

Popularly known as Tetra Pack Milk was established at this Dairy with a cost Rs. 1.5 cores
with this milk can be packed in a special type of laminated paper bags, which can preserve
milk for months at rooms for operation.

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TECHNICAL INPUT AND MILK ENHACEMENT:

Various technical inputs offered to the milk producers are classified as follows:

Artificial Insemination Service: The Dairy has a separate production centre. It is

maintaining 120 mural bulls for semen production purpose producing 50,000 doses of semen
every year. The dairy runs 60 artificial insemination centre‟s (A.I. Centres).

Animal Health: The union gives veterinary aid to milk producers through some routes with
head-quarters at model dairy. The routes include Vijayawada, Ponnur, and Guntur. Each
veterinary route covers 68 MPC societies. The animals suffering from infertility problems
and illness are traded.

Fodder and multiplicative on program: The union has taken up multiplication program for
the past 7 years by supplying varieties of seed to the producers rising in farmer‟s fields
encouraging seed multiplications.

Distribution of chaff cutters: The union purchased 70 chaff cutters from Ludhiana and
supplied to the milk produces with 50% subsidy for better utilization of green fodder.

Enrichment of paddy straw with urea: The union provides necessary infrastructure and
urea required for the program on free of cost to the producers.

Cattle Feed: The company profile plant with an installed capacity of 100 mts per day was
constructed by N.D.D.B. The feed is produced by semi-automatic pre weighing with a
provision of mechanical devices to separate and take out the uneven and unwanted harmful
practices from the low materials.

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By – pass protein food: The union is providing a special feed called by-pass protein food.
This union is the only union by-pass protein feed in A.P. by-pass protein feed is of superior
quality of conventional type of concentrated feed.

Distribution of Mineral Mixture: Mineral mixture was distributed to the milk producers on
50% subsidy basis.

Cattle insurance: The union is insuring the milk cattle of the producers with a confessional
premium of 3.4% rate of the premium, 1/3 is born by union. 1/3 by the society and remaining
1/3 by the producer. The union in insuring 5000 to 6000 milk animals every year.

Dairy farming once a subsidiary occupation and a means of base substance in rural areas is
now an important industry. India is a country of village where our farmers have small land
holdings, incentives cropping therefore have been the way of planning as a result production
enhancement inputs went on increasing. Thus the input output ratio started getting
unbalanced. The need of cash was felt to by inputs so to meet these needs framers had to
borrow to buy inputs. So to meet these farmers had to borrow money at a very high rate of
interest. A large number of framers of puny and armed nagger in Maharashtra are in open
hostility against money lenders in 1879 subsequently land improvement act 1883 and
agriculture act in 1884 were passed to advance loans at reasonable rate of interest of formers.

Table 3.2 Model dairy formation

No of staff 300

Year of established 1994

No of production lines 1

Investment and manufacturing equipment 5crores

Production type Fully automatic

No of engineers 3

Standard certification ISO 9001:2000&22000-20005

Daily production capacity 75,000 liters

47
 UNIT-IV
THEORETICAL FRAMEWORK
INTRODUCTION:

Financial analysis is the process of identifying the financial strengths and weakness of the
firm by probably establishing relationship between the items of balance sheet and the profit &
loss account. The financial statement provides a summarized view of the financial position
and operations of the firm. Therefore much can be learned about the firm, a careful
examination of its financial statements as performance reports. So this is an important aid for
financial analysis.

Financial analysis can be under taken by the management of the firm (or)
outsides parties‟ viz., creditors, investors and public. The first task of the financial analysis is
to select the information relevant to the decision under consideration from the total
information contained in the financial statements. The second step involved in this financial
analysis is to arrange the information in a way to highlight significant relationships. The final
step is interpretation and drawing of inference and conclusions. The focus of this study is an
analysis of the financial performance Model Dairy Private ltd., by using ratio analysis, which
is more widely, used technique of financial analysis. Besides, solvency position of the above
said organization. This evokes the interest and need for the study.

MEANING:

Financial management is that managerial activity which is concerned with the planning and
controlling of the firm‟s financial resources. The subject of financial management is of
immense interest to both academics and practicing managers. It is of great interest to
academicians because the subject is still developing, and there are still certain areas where
controversies exist for which no unanimous solutions.

RATIO ANALYSIS:

A ratio analysis is a quantitative analysis of information contained in a company‟s financial

statements. Ratio analysis is based on line items in financial statements like the balance sheet,
income statement and cash flow statement; the ratios of one item-to another item or
combination are then calculated.
Ratio analysis is used to evaluate various aspects of a company‟s operating and financial
performance such as its efficiency, liquidity, profitability, and solvency. The trend of these
ratios over time is studied to check whether they are improving or deteriorating.

Ratio analysis is the process of determining and presenting the relationship of

items and group of items in the statements. According to Batty J. Management Accounting
“Ratio can assist management in its basic functions of forecasting, planning coordination,
control and communication”. It is helpful to know about the liquidity, solvency, capital
structure and profitability of an organization. It is helpful tool to aid in applying judgement,
otherwise complex situations.

DEFINITION:

“A Ratio is the relation, of one amount, to another, be expressed as the ratio of a to b: a: b (a

is to b); or as a simple fraction: integer decimal fraction of percentage.”

---------------------KOHLER-------------

PROCESS:

Financial ratio analysis involves three steps.

 Calculation of appropriate ratios from the financial statements.

 Comparison of ratios with standards and past ratios.
 Drawing the final conclusion so to make suitable better decisions regarding the firms
profit maximization.

USES OF RATIO ANALYSIS

Ratio analysis is used to evaluate various aspects of a company‟s operating and financial
performance such as its efficiency, liquidity, profitability and solvency.

49
  Ratios help in analysing the performance trends over a long period of time.
 They also help a business to compare the financial result to those of competitors.
 Ratio also uses to point out problem and weak areas along with the strength areas.
 Ratios assist the management in decision making
 Ratios help to develop relationship between different financial statement items.
 Ratios have the advantage of controlling for differences in size. For example, two
businesses may be quite different in size but can be compared in terms of profitability,
liquidity, etc, by the use of ratios.

USERS RATIOS:

These ratios are used by different people and organizations based upon their specific need
and convenience.

 Trade creditors use ratios in measuring the firm‟s liquidity position while granting
short-term loans where as bondholders analyses the firm‟s capital structure as their
claims are long-term.
 Investors are concerned primarily with present and expected future earnings and its
stability.
 Management also employees financial analysis for the purpose of internal controls.
 Government regulatory agencies are concerned with the rate of return company earns
on its assets as well as the proportion of non-equity funds employed in the business.

BREAKING DOWN 'Ratio Analysis'

While there are numerous financial ratios, most investors are familiar with a few key ratios
particularly the ones that are relatively easy to calculate. Some of these ratios include the
current ratio return on equity, the debt-equity ratio, the dividend payout ratio and the
price/earnings (P/E) ratio.

50
 For a specific ratio, most companies have values that fall within a certain
range. A company whose ratio falls outside the range may be regarded as grossly
undervalued or overvalued depending on the ratio.

For example, if the average P/E ratio of all companies in the S&P 500 index is
20, with the majority of companies having a P/E between 15 and 25, a stock with a single-
digit P/E would be considered undervalued, while one with a P/E of 50 would be considered
overvalued. Of course, this ratio would typically only be considered as a starting point, with
further analysis required to identify if these stocks are really as undervalued or overvalued as
the P/E ratios suggest.

As well, ratios are usually only comparable across companies in the same
sector, since an acceptable ratio in one industry may be regarded as too high in another. For
example, companies in sectors such as typically have a high debt-equity ratio but a similar
ratio for a technology company may be regarded as unsustainably high.

Ratio analysis can provide an early warning of a potential improvement or

deterioration in a company‟s financial situation or performance. Analysts engage in extensive
number-crunching of the financial data in a company‟s quarterly financial reports for any
such hints.

Successful companies generally have solid ratios in all areas, and any hints of weakness
in one area may spark a significant sell-off in the stock. Certain ratios are closely scrutinized
because of their relevance to a certain for the retail sector and days sales outstanding (DSOs)
for technology companies.

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Accounting ratios:

Accounting ratios assist in measuring the efficiency and profitability of a company based on
its financial reports. Also called financial ratios, accounting ratios provide a way of
expressing the relationship between one accounting data point and another, which is intended
to provide a useful comparison. Accounting ratios form the basis of fundamental analysis.

BREAKING DOWN 'Accounting Ratio'

An accounting ratio compares two aspects of a financial statement, such as the relationship
(or ratio) of current assets to current liabilities. The ratios can be used to evaluate the
financial condition of a company, including the company's strengths and weaknesses.
Examples of financial ratios include the gross margin ratio, operating margin ratio, the debt-
to-equity ratio and the payout ratio. Each of these ratios requires the most recent data in order
to be relevant.

Financial Statement Ratios:

Every year companies publish an annual report. The annual report contains three financial
statements: the income statement, balance sheet and cash flow statement. Each statement
provides the investor with information about the performance of the company over the most
recent fiscal year. Analysts rely on the financial statements to provide the data needed to
update accounting ratios.

Basis of comparison:

Trend analysis involves the comparison of a firm over a period of time that is present ratios
compared with past ratios of the same firm. It indicates the direction of change in the
performance improvement deterioration or constancy over the years.

52
 Inter-firm comparison involves comparing the ratios of a firm with those of
others in the same line of business or for the industry as a whole. It reflects the firms
performance with relation to its competitors.

Comparison with standards or averages of a industry.

Methods of ratio analysis

Ratio may be expressed in the following ways.

1. Pure Ratio or Simple Ratio:

It is expressed by the simple division of one number by another. For example, if the current
assets of a business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio of
„Current assets to current liabilities‟ will be 2:1.

2.’Rate’ or So Many Times’:

In this type, it is calculated how many times a figure is, in comparison to another figure. For
example, if a firm‟s credit sales during the year are Rs. 200000 and its debtors at the end of
the year Rs.40000, its Debtors Turnover Ratio is 200000/40000 = 0.5 times. It shows that the
credit sales are 5 times in comparison to debtors.

Percentages:

In this type, the relation between two figures is expressed in hundredth. For example, if a
firm‟s capital is Rs. 1000000 and its profit is Rs. 200000 the ratio of profit capital, in term of
percentage is 200000/100000*100 = 20%

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Importance of Ratio Analysis:

Ratio analysis is an important tool for analysing the company‟s financial performance. The
following are the important advantages of the accounting ratios.

1. Analysis financial statements:

Ratio analysis is an important technique of financial statement analysis. Accounting ratios are
useful for understanding the financial position of the company. Different users such as
investors, management, bankers and creditors use the ratio to analyse the financial situation
of the company for their decision making purpose.

2. Judging Efficiency :

Accounting ratios are important for judging the company‟s efficiency in terms of its
operations and management. They help judge how well the company has been able to utilize
its asset and earn profits.

3. Locating weakness:

Accounting ratios can also be used in locating weakness of the company‟s operations even
though its overall performance may be quite good. Management can then pay attention to the
weakness and take remedial measure to overcome them.

4. Formulating plans:

Although accounting ratios are used to analyse the company‟s past financial performance,
they can also be used to establish future trends of its financial performance. As a result, they
help formulate the company‟s future plans.

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5. Comparing Performance:

It is essential for a company to know how well it performing over the years and as compared
to the other firms of the similar nature. Besides, it is also important to know how well its
different divisions are performing among themselves in different years. Ratio analysis
facilities such comparison.

Advantages of Ratio Analysis:

Ratio analysis s widely used as a powerful tool of financial statement analysis. It establishes
the numerical or quantitative relationship between two figures of a financial statement to
ascertain strengths and weakness of a firm as well as its current financial position and
historical performance. It helps various interested parties to make an evaluation of certain
aspect of a firm‟s performance.

The following are the principal advantages of ratio analysis.

1. Forecasting and Planning:

The trend in costs, sales, profits and other facts can be known by computing ratios of relevant
accounting figures of last few years. This trend analysis with the help of ratios may be useful
for forecasting and planning future business activities.

2. Budgeting:

Budget is an estimate of future activities on basis of past experience. Accounting ratios help
to estimate budgeted figures. For example, sales budget may be prepared with the help of
analysis of past sales.

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3. Measurement of Operating Efficiency :

Ratio analysis indicates the degree of efficiency in the management and utilization of its
assets. Different activity ratios indicate the operational efficiency. In fact, solvency of a firm
depends upon the sales revenues generated by utilizing its assets.

4. Communication:

Ratios are effective means of communication and play a vital role in informing the position
of and progress made by the business concern to the owners or other parties.

5. Control of Performance and Cost:

Ratios may also be used for control of performance of the different divisions or departments
of an undertaking as well as control of costs.

6. Inter-firm Comparison:

Comparison of performance of two or more firms reveals efficient and inefficient firms,
thereby enabling the inefficient firms to adopt suitable measures for improving their
efficiency. The best way of inter-firm comparison is to compare the relevant ratios of the
organisation with the average of the industry.

Limitations of Ratio Analysis:

Ratios are calculated from the information recorded in the financial statements. But it has
some limitations which must not be lost sight of before undertaking such analysis.

56
Some of Financial Statements

1. Limitations of financial statements:

Ratios are calculated from the information recorded in the financial statements. But financial
statements suffer from a number of limitations and may, therefore, affect the quality of ratio
analysis.

2. Historical Information:

Financial statements provide historical information. They do not reflect current conditions.
Hence, it is not useful in predicting the future.

3. Different Accounting Policies:

Different accounting policies regarding valuation of inventories, charging depreciation etc.

make the accounting data and accounting ratios of two firms non-comparable.

4. Lack of Standard of Companies:

No fixed standards can be laid down for ideal ratios. For example, current ratio is said to be
ideal if current assets are twice the current liabilities. But this conclusion may not be
justifiable in case of those concerns which have adequate arrangements with their bankers for
providing funds when they require, it may be perfectly ideal if current assets are equal to or
slightly more than current liabilities.

5. Quantitative Analysis:

Ratios are tools of quantitative analysis only and qualitative factors are ignored while
computing the ratios. For example, a high current ratio may not necessarily mean sound
liquid position when current assets include a large inventory consisting of mostly obsolete
items.

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6. Window-Dressing:

The term „window-dressing‟ means presenting the financial statements in such a way to
show a better position than what it actually is. If, for instance, low rate of depreciation is
charged, an item of revenue expenses is treated as capital expenditure etc. the position of the
concern may be made to appear in the balance sheet much better than what it is. Ratios
computed from such balance sheet cannot be used for scanning the financial position of the
business.

Asset Utilization Ratios:

Asset utilization ratios provide measures of management effectiveness. These ratios serve as
a guide to critical factors concerning the use of the firm‟s asset, inventory, and accounts
receivable collection in day-to-day operations. Assets utilization ratios are especially
important for internal monitoring concerning, performance over multiple periods, serving as
warning signals or benchmarks from which meaningful conclusions may be reached on
operational issues.

An example is the total asset turnover (TAT) ratio.

This ratio offers managers a measure of how well the firm is utilizing its assets in
order to generate sales revenue. An increasing TAT would be an indication that the firm is
using its assets more productively.

A similar measure is the fixed asset turnover ratio.

Two assets utilization ratios concern the effectiveness of a firm‟s asset

management. Inventory is an important economic variable for management to monitor since
dollars invested in inventory is an investment, and it is important for the fir, to maximize its
inventory turnover ratio is used to measure this aspect of performance.

Cost of goods sold derives from the income statement and indicates the
expenses dollars attribute to the actual production of goods sold during a specified period.
Inventory is an asset on the balance sheet. Because the balance sheet represents the firm‟s
asset and liabilities at one point in time, an average figure is often used from two successive
balance sheets. Managers attempt to increase this firm is going through its inventory stock

58
more than four and one-half times during the period measured on the income statement.

59
 One of the most critical ratios that management must monitor is days sales
outstanding (DOS) also known as average collection period.

This represents a prime example of the use of ratios as an internal monitoring

tool. Managers strive to minimize the firm‟s average collection period , since dollars become
immediately available for reinvestment. Periodic measure of DSO will “red flag” a
lengthening of the firm‟s time to collect outstanding accounts before customers get used to
taking longer to pay. A DSO of 36 days to collect on the firm‟s outstanding.

Accounts this is an especially critical measure for firms in industries where

extensive trade credit is offered, but any company that extends credit on sales should be
aware of the DSO on a regular basis.

Leverage ratios:

Leverage ratios, also known as capitalization ratios, measure the firm‟s use of debt financing.
These are extremely important for potential creditors who are concerned with the firm‟s
ability to generate cash flow necessary to make interest payments on outstanding debts. Thus,
these ratios are used extensively by analyst outside the firm to make decisions concerning the
provision of new credit. It also important for management to monitor the firms use of debt
financing. The commitment to service outstanding debt is fixed cost to a firm, resulting in
decreased flexibility and higher break-even production rates.

Therefore, the use of debt financing increases the risk associated with the firm.
Managers and creditors must constantly monitor the trade-off between the additional risk that
comes with borrowing money and the increased opportunities that new capital provides.
Leverages ratios provide a means of such monitoring.

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 Perhaps the most straight forward measure of a firm‟s use of debt financing is
the total-debt ratio.

There are two ways to finance the acquisition of any asset. Debt (using
borrowed funds) and equity ( using funds from international operations or selling stock in the
company), total debt ratio covers both. A debt ratio of 35% means that, for every dollar of
asset the firm has, thirty-five cents were financed with borrowed money. The natural
corollary is that the other sixty-five cents came from equity financing.

The total debt of a firm consist of both long-and short-term liabilities are
often a necessary part of daily operations and may fluctuate regularly depending on factors
such as seasonal sales. Many creditors prefer to focus their attention on the firm‟s use of
long-term debt ratio, which does not incorporate current liabilities in the numerator.

Similarly many analyst prefer a direct comparison of the firm‟s capital structure. Such a
measure is provided by the debt-to- equity ratio.

In sales and operating expenses. This ratio is particularly important for lenders
of short-term debt is usually paid out of current operating revenue.

The adjustments to the principal repayment reflects the fact that this portion of
the debt repayment is not tax deductible. By including the payment of both principal and
interest the fixed charge coverage ratio provides a more conservative measure of the firm‟s
ability to meet fixed obligations.

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Liquidity ratios:

Managers and creditors must closely monitor the firm‟s ability to meet short-term
obligations. The liquidity ratios are measure that indicate a firm‟s ability to repay-short term
debt. Current liabilities represents obligations that are typically due in one year or less. The
current and quick ratios are used to gauge a firm‟s ability.

One to three months, but this varies by firm and industry. The least liquid of
current assets is often inventory. Depending on the type of industry or product, some
inventory has no ready market. Since the economic definition of liquidity is the ability to turn
an asset into cash at or near fair market value, inventory that is not easily sold will not be
helpful in meeting short-term obligations.

Market value ratios:

Managers and investors are interested in market ratios, which are used in valuing the firm‟s
stock. The price-earnings ratio and the market-to-book value ratio are often used in the
valuation analysis. The price/ earnings ratio, usually known as the PE ratio, universally
known as the PE ratio, is one of the most heavily –quoted statistics concerning a firm‟s
common stock . It is reported in the financial pages of newspaper, along with the current
value of the firm‟s stock price.

Technically, the book value represents the value of the firm if all the assets were sold off,
and the proceeds used retire all outstanding debt. The reminder would represent the equity
that would be divided, proportionally, among the firm‟s shareholder‟s. many investors like to
compare the current price of the firm‟s common stock with its book, or break-up, value.

This is also known as the price/book ratio. If the ratio is greater than one, which
is often the case, then the firm is trading at a premium book value. Many investors regard a
market-to-book ratio of less than one an indication of an undervalued firm. Interpretation of
market ratios- high PEs versus low PEs – is highly subjective. Nonetheless, these measures
provides information that is value both by managers and investors regarding the market price
of a firm‟s stock.

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Common size ratios:

Common sized ratios are used to contrast and compare the financial statements of large and
small enterprises. Using the common size ratio, an analyst can determine which variables and
which trends are affecting small businesses more than large businesses (and vice versa).
Common size ratios are used to compare data about inventory, total assets, cost of goods sold,
gross profit, overhead and production cost, and overall yearly revenue from one firm to
another, usually one significantly larger than the other.

The comparison of one company to another company using common size

ratios is sometimes called a cross-sectional analysis, and will include industry averages to
draw a comparison for both entities. Often the common size ratio will use comparative data
about an industry leader by which to compare another smaller, more modest operations to see
how it might be progressing.

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 CLASSIFICATION OF RATIO

Ratio
Analysis

Liquidity Leverage/ Activity Profitability

Ratios Solvency Ratios Ratios
Ratios

Debt equity ratio Stock turnover ratio

Debt to total fund ratio Debtors or receivable turnover ratio
Current ratio Proprietary ratio Average collection period
Quick ratio or acid testFixed
ratioassets to proprietor‟sCreditors or payables turnover ratio
fund ratio
Capital gearing ratio Average payment period
Interest coverage ratio Fixed asset turnover ratio
Working capital turnover ratio

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 Gross

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 B.PROFITABILITY RATIO BASED ON INVESTMENT

I.RETURN ON CAAPITAL EMPLOYED

II.RETURN ON SHAREHOLDERS FUND

a.Return on Total Shareholders‟ Funds

b.Return on Equity Shareholders Funds

c.Earnings Per Share

d. Dividend Per Share

e. Dividend Payout Ratio

f.Earnings and Dividend Yield

g.Price Earnings Ratio

IQUIDITY RATIO:

It refers to the ability of the firm to meet its current liabilities. The liability ratio, therefore,
are also called „short-term Solvency Ratio‟. These ratio are used to assess the short-term
financial position of the concern. They indicate the firm‟s ability to meet its current
obligations out of current resources.

In the words of Saloman J. Flink, “Liquidity is the ability of the firms to meet its
current obligations as they fall due”.

LIQUIDITY RATIO IS CLASSIFIED INTO TWO TYPES.

a. Current Ratio
b. Quick Ratio or Acid Test Ratio

A.CURRENT RATIO. This ratio explains the relationship between current assets and
current liabilities of a business.

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Formula

Current assets
Current ratio =

Current liabilities

CURRENT ASSETS= cash in hand+ cash at bank + bills receivable + short term investment
+ debtors (debtors-provisions)+ stock (stock of finished good + stock of raw material + work
in progress)+ prepaid expenses.

CURREBT LIABILITIES= bank overdraft + bills payable + provision for taxation +

proposed dividend + unclaimed dividends + outstanding expenses + loans payable with in a
year.

Significance: According to accounting principles, a current ratio of 2:1 is supposed to be an

ideal ratio. It means that current assets of a business should, at least, be twice of its current
liabilities. The higher ratio indicates the better liquidity position; the firm will be able to pay
its current liabilities more easily. If the ratio is less than 2:1, it indicates lack of liquidity and
shortage of working capital. The biggest drawback of the current ratio is that it is susceptible
to “window dressing”. This ratio can be improved by an equal decrease in both current assets
and current liabilities.

B .QUICK RATIO

Quick ratio indicates whether the firm is in a position to pay its current liabilities within a
month or immediately. „Liquid Assets‟ means those assets, which will yield cash very
shortly.

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Formula

Liquid assets
Quick ratio =

Current liabilities

Liquid Assets = Current Assets –stock-prepaid expenses

Significance: An ideal quick ratio is said to be 1:1. If is more, it is considered to be better.

This ratio is better test of short-term financial position of the company .

LEVERAGE OR CAPITAL STRUCTURE RATIO

THESE RATIO CAN BE CLASSIFIED INTO SIX TYPES

This ratio discloses the firm‟s ability to meet the interest costs regularly and long term
indebtedness at maturity.

These ratios include the following ratios.

a.Debt Equity Ratio: This ratio expresses the relationship between long term debts and
shareholder‟s fund

Formula

Long term loans

Debt equity ratio =

Shareholder’s funds or Net worth

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Long term Loans: These refer to long term liabilities which mature after one year. These
include Debentures, Mortgage Loan, Bank Loan, and Loan from Financial institutions and
Public Deposits etc.

Shareholder‟s Funds ; These include Equity Share Capital , Preference Share Capital , Share
premium , General Reserve , Capital Reserve , Other Reserve and Credit Balance of profit &
Loss Account.

Significance: This ratio is calculated to assess the ability of the firm to meet its long term
liabilities. Generally, debt equity ratio of is considered safe. If the debt equity ratio is more
than that, it show a rather risky financial position from the long- term point of view, as it
indicates that more and more funds invested in the business are provided by long-term
lenders. The lower this ratio, the better it is long-term lenders because they are more secure in
that case. Lower than 2:1debt equity ratio provides sufficient protection to long-term lenders.

b.Debt to Total Funds Ratio: This ratio is a variation of the debt equity ratio and gives the
same indication as the debt equity ratio. In the ratio, debt is expressed in relation to total
funds, i:e both equity and debt.

Formula

Long – term loans

Debt to total funds ratio =

Shareholder’s funds + Long-term loans

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Significance: Generally, debt to total funds ratio of 0.67:1 ( or 67%) is considered
satisfactory. In other words, the proportion of long term loans should not be more than 67%
of total funds. A higher ratio indicates a burden of payment of large amount of interest
charges periodically and the repayment of large amount of loans at maturity. Payment of
interest may become difficult if profit is reduced. Hence, good concerns keep the debt to total
funds ratio below 67%. The lower ratio is below from the long-term solvency point of view.

c.Proprietary Ratio: This ratio indicates the proportion of total funds provide by owners or
shareholders.

Formula

Shareholder’s funds
Proprietary ratio =

Shareholder’s funds + Long-term loans

Significance: This ratio should be 33% or more than that. In other words, the proportion of
shareholders‟ funds to total funds should be 33% or more. A higher proprietary ratio is
generally treated an indicator of sound financial position from long-term point view, because
it means that the firm is less dependent on external source of finance. If the ratio is low it
indicates that long-term loans are less secured and they face the risk of losing their money.

d.Fixed Assets to proprietor’s Fund Ratio: This ratio is also known as fixed assets to net
worth ratio.

Formula

Fixed Assets
Fixed Asset to Proprietor’s Fund Ratio =

Proprietor’s Funds (i.e.; Net worth)

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Significance: The ratio indicates the extent to which proprietor‟s (Shareholders) funds are
sunk into fixed assets. Normally, the purchase of fixed assets should be financed by
proprietor‟s fund. If this ratio is less than 100%, it would mean that proprietor‟s fund are
more than fixed assets and a part of working capital is provided by the proprietors. This will
indicate the long-term financial soundness of business.

e.Capital Gearing Ratio: This ratio establishes a relationship between equity capital
(including all reserves and undistributed profits) and fixed cost bearing capital.

Formula

Equity Share Capital + Reserves + P&L Balance

Capital Gearing Ratio :

Fixed Cost Bearing Capital

Whereas, Fixed Cost Bearing Capital = Preference Share Capital + Debentures + Long Term
Loan

Significance: If the amount fixed cost bearing capital is more than the equity share capital
including reserves undistributed profits, it will be called high capital gearing if it is less, it
will be called low capital gearing. The high gearing will be beneficial to equity shareholders
when the rate of interest /dividend payable on fixed cost bearing capital is lower than the rate
of return on investment in business. Thus, the main objective of using fixed cost bearing
capital is to maximize the profits available to equity shareholders.

f.Interest Coverage Ratio: This ratio is also termed as „Debt Service Ratio‟. This ratio is
calculated as follows.

69
Formula

Net Profit before charging interest and tax

Interest Coverage Ratio =

Fixed interest charges

Significance: This ratio indicates how many times the interest charges are covered by the
profits available to pay interest charges. This ratio measures the margin of safety for long-
term lenders. This higher the ratio, more secure the lenders is in respect of payment of
interest regularly. If profit just equals interest, it is an unsafe position for the lender as well as
for the company also, as nothing will be left for shareholders. An interest coverage ratio of 6
or 7 times is considered appropriate.

ACTIVITY RATIO OR TURNOVER RATIO

ACITIVITY RATIO CAN BE CLASSIFIED INTO SEVEN TYPES

These ratios are calculated on the basis of „cost of sales‟ or sales, therefore, these ratio are
also called as „Turnover indicates the speed or number of times the capital employed has
been rotated in the process of doing business. Higher turnover ratio indicates the better use of
capital resources and in turn leads to higher profitability.

It includes the following.

a. Stock Turnover Ratio: This ratio indicates the relationship between the cost of goods
during the year and average stock kept during that year.

70
Formula

Cost of Goods Sold

Stock Turnover Ratio =

Average Stock

Here, Cost of goods sold = Net Sales – Gross Profit

Average Stock = Opening stock + Closing stock / 2

Significance: This ratio indicates whether stock has been used or not. It shows the speed with
which stock is rotated into sales or the number of times the stock is turned into sales during
the year. The higher the ratio, the better it is, since it indicates that stock is selling quickly. In
a business where stock turnover ratio, is high, goods can be sold at a low margin of profit and
even than the profitability may be quite high.

b.Debtors Turnover Ratio: This ratio indicates the relationship between credit sales and
average debtors during the year.

Formula

Net Credit Sales

Debtors Turnover Ratio =

Average Debtors + average B/R

While calculating this ratio, provision for bad and doubtful debts is not detected from the
debtors, so that it may not give a false impression that debtors are collected quickly.

71
Significance: This ratio indicates the speed with which the amount is collected from debtors.
The higher the ratio, the better it is, since it indicates that amount from debtors is being
collected more quickly. The more quickly the debtors pay, the less the risk from bad-debts,
and so the lower the expenses of collection and increases in the liquidity of the firm.

By comparing the debtor‟s turnover ratio of the current year with the previous year, it may be
assessed whether the sales policy of the management is efficient or not.

c.Average Collection Period: This ratio indicates the time with in which the amount is
collected from debtors and bills receivables.

Formula

Debtors + Bills Receivable

Average collection period =

Credit Sales per Day

Here, Credit Sales per day = Net credit sales of the year /365

Second formula: Average collection period = Average Debtors *365/ Net credit sale

Average collection period can also be calculated on the basis of „Debtors Turnover Ratio‟.
The formula will be.

Average collection period =12 months or 365 days / Debtors Turnover Ratio

Significance: This ratio shows the time in which the customers are paying for credit sales. A
higher debt collection period in thus, it indicates of the inefficiency and negligence on the
part of management. On the other hand, if there are decreases in debt collection period, it
indicates prompt payment by debtors which reduces the chance of bad debts.

72
d.Creditors Turnover Ratio: This ratio indicates the relationship between credit purchases
and average creditors during the year.

Formula

Net credit Purchases

Creditors Turnover Ratio =

Average Creditors + Average B/P

Note: If the amount of credit purchase is not given, the ratio may be calculated on the basis of
total purchases.

Significance: This ratio indicates the speed with which the amount is being paid to creditors.
The higher the ratio, the better it is, since it will indicate that the creditors are being paid
more quickly which increases the credit worthiness of the firm.

e. Average payment period: This ratio indicates the period which is normally taken by the
firm to make payment to its creditors.

Formula

Creditors + Bills payable

Average payment period =

Credit Purchase per day

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Significance: The lower the ratio, the better it is, because a shorter payment period implies
that the creditors are paying paid rapidly.

f. Fixed assets turnover ratio: This ratio reveals how efficiently the fixed assets are being
utilized.

Formula

Cost of goods sold / net fixed assets

Fixed assets turnover ratio =

Net fixed assets

Here, Net fixed assets = Fixed assets – Depreciation

Significance: This ratio is particular importance in manufacturing concerns where the

investment in fixed asset is quite high. Compared with the previous year, if there is increase
in this ratio, it will indicate that there is better utilization of fixed assets. If there is a fall in
this ratio, it will show that fixed assets have not been used as efficiently, as they had been
used in this previous year.

g.Working capital turnover ratio: This ratio reveals how efficiently working capital has
been utilized in making sales.

Formula

Cost of goods sold

Working capital turnover ratio =

Working capital
74
Here, cost of goods sold = opening stock + purchases + carriage + wages + other direct
expenses – closing stock

Working capital = current assets – current liabilities

Significance: This ratio is of particular importance in non-manufacturing concerns where

capital has been rotated in producing sales. A high working capital turnover ratio shows
efficient use of working capital and quick turnover of current assets like stock and debtors. A
low working capital turnover ratio indicates under-utilisation of working capital.

F.Profitability ratios or income ratios:

PROFITABILITY RATIO CAN BE CLASSIFIED INTO FOUR TYPES

The main object of every business concern is to earn profits. A business must be able to earn
adequate profits in relation to the risk and capital invested in it. The efficiency and the
success of a business can be measured with the help of profitability ratio.

Profitability ratios are calculated to provide answers to the following

questions: I .Is the firm earning adequate profits?

ii. What is the rate of gross profit and net profit on sales?

iii. What is the rate of return on capital employed in the firm?

iv. What is the rate of return on proprietor‟s (shareholder‟s) funds?

v. What is the earning per share?

Profitability ratio can be determined on the basis of either sales or investment into business.

A) a. Gross profit ratio: This ratio shows the relationship between gross profit and sales

75
Formula

Gross profit
* 100
Gross profit ratio =

Net Sales

Here, Net sales = sales – sales returns

Significance: This ratio measures the margin of profit available on sales. The higher the
gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but the gross profit
ratio should be adequate enough not only to cover the operating expenses but also to provide
for depreciation, interest on loans, dividends and creation of reserves.

b) Net profit ratio: This ratio shows the relationship between net profit and sales. It may be
calculated by two methods.

Formula

Net profit
*100
Net profit ratio =

Net sales

Operating net profit = operating net profit / net sales *100

Here, operating net profit = gross profit – operating expenses such as office and
administrative expenses, selling and distribution expenses , discount , bad debts, interest on
short-term debts etc.

76
Significance: This ratio measures the rate of net profit earned on sales. It helps in
determining the overall efficiency of the business operations. An increase in the ratio over the
previous year shows improvement in the overall efficiency and profitability of the business.

c) Operating Ratio: This ratio measures the proportion of an enterprise cost of sales and
operating expenses in comparison to its sales

Formula

Cost of goods sold + Operating expenses

* 100
Operating sales =

Net sales

Where, Cost of goods sold = Opening stock + Purchases + Carriage + Wages + Other direct
expenses – Closing stock.

„Operating Ratio „and „Operating Net Profit Ratio‟ are inter-related. Total of both these
ratios will be 100.

Significance: Operating Ratio is measured of the efficiency and profitability of the business
enterprise. The ratio indicates the extent of sales that is absorbed by the cost of goods sold
and operating expenses. Lower the operating ratio is better, because it will leave higher
margin of profit on sales.

77
d) Expenses Ratio: This ratio indicates the relationship between expenses and sales.
Although the operating ratio reveals the ratio of total operating expenses in relation to sales
but some of the expenses include in operating ratio may be increasing while some way be
decreasing. Hence, specific ratio was computed by dividing each type of expense with the net
sales to analyse the causes of variation in each type of expenses.

The ratio may be calculated as:

It may be calculated as: cost of goods sold = cost of goods sold / net sales * 100

Office and Administration expenses Ratio = Office and Administration exp / net sales * 100

Selling expenses ratio = Selling expenses / net sales * 100

Non – operating expenses ratio = non-operating exp / net sales * 100

Significance: Various expenses ratio when compared with the same ratio of the previous year
give a very important indication whether these expenses in relation to sales are increasing,
decreasing or remain stationery. If the expenses ratio is lower, the profitability will be greater
and if the expenses ratio is higher, the profitability will be lower.

B) Profitability ratio based on the investment in the business.

These ratio reflect the true capacity of the resources employed in the enterprise.
Sometimes the profitability ratios based on sales are high whereas profitability ratio based on
investment are low. Since the capital employed to earn profit, these ratios are the real
measures of the success of the business and managerial efficiency.

These ratios may be calculated into two categories:

 Return on capital employed

 Return on shareholder‟s funds

I Return on Capital Employed: This reflects the overall profitability of the business. It is
calculated by comparing the profit earned and the capital employed to earn it. This ratio is
usually in percentage and is also known as „Rate of Return‟ or „Yield on Capital‟.

78
Formula

profit before tax, tax and dividends

Return on capital employed = * 100

Capital employed

Where, capital employed = equity share capital+ preference share capital + all reserves + P&l
balance + long term loans fictitious assets ( such a preliminary expenses etc) – non –
operating assets like investment made outside the business. Capital employed = fixed assets +
working capital.

Significance: Since profit is the overall objective of a business enterprise, this ratio is a
barometer of the overall performance of the enterprise. It measures how efficiently the capital
employed in the business is being used. Even the performance of two dissimilar firms may be
compared with the help of this ratio. The ratio can be used to judge the borrowing policy of
the enterprise. This ratio in taking decisions regarding capital investment in new projects. The
new projects will be commenced only if the rate of return on capital employees in such
projects is expected to be more than the rate of borrowing. This ratio helps in affecting the
necessary changes in the financial policies of the firm. Lenders like bankers and financial
institutions will be determine whether the enterprise is viable for giving credit or extending
loans or not. With the help of this ratio, shareholders can also find out whether they will
receive regular and higher dividend or not.

II Return on Shareholder’s Funds: Return on capital employed shows the overall

profitability of the funds supplied by long term lenders and shareholders taken together.
Whereas, return on shareholders‟ funds measures only the profitability of the funds invested
by shareholders.

These are several measures to calculate the return on shareholders‟ funds:

79
a) Return on total Shareholders’ funds:

For calculating the ratio „Net profit after interest and tax is divided by total shareholders‟
funds.

Formula

Net profit after interest and tax

Return on shareholders funds =

Total shareholders‟ funds

Where, total shareholders‟ funds = Equity share capital + preference share capital + all
reserves + p&l A/c balance – fictitious assets.

Significance: This ratio reveals how profitability the proprietor‟s funds have been utilized by
the firm. A comparison of this ratio with that of similar firms will be throw light on the
relative profitability and strength of the firm.

b) Return on Equity Shareholders Funds: Equity shareholders of a company are more

interested in knowing the earning capacity of their funds in the business. As such, this ratio
measures the profitability of the funds belonging to the shareholders.

Formula

Net profit
Return on equity shareholders‟ funds = *100
Equity shareholders‟ funds

80
Where, equity shareholders‟ funds = equity share capital + all reserves + p&l A/c balance –
fictitious assets.

Significance: This ratio measures how efficiently the equity shareholders‟ funds are being
used in the business. It is a true measure of the efficiency of the management since it shows
what the earning capacity of the company to declare dividends on shares.

Dividend per Share (D.P.S): Profits remaining after payment of tax and preference dividend
are available to equity shareholders. But of these are not distributed among them as dividend.
Out of these profits is retained in the business and the remaining is distributed among equity
shareholders as dividend. D.P.S is the dividend distributed to equity shareholders divided by
the number of equity shares.

Formula

Dividend paid to equity shareholders

Dividend paid to equity shareholders = *100

No. of equity shares

e) Dividend Pay out Ratio: It measures the relationship between the earning available to
equity shareholders and the dividend distributed among them.

Formula

Dividend paid to equity shareholders

Dividend paid to equity shareholders = *100

Total net profit belonging to equity share holders

81
f) Earning and Dividend Yield: This ratio is closely related to E.P.S and D.P.S while the
E.P.S and D.P.S are calculated on the basis of the book value of shares, this ratio is calculated
on the basis of the market value of share.

g) Price Earning Ratio: Price earnings ratio is the ratio between market price per equity
share & earnings per share. The ratio is calculated to make an estimate of appreciation in the
value of a share of a company & is widely used by investor to decide whether or not to buy
shares in a particular company.

Significance: This ratio show how much is to be invested in the market in these companies‟
shares to get each rupee of earning on it shares. This ratio is used to measure whether the
market price of a share is high or low

83
 UNIT-V
DATA ANALYSIS AND
INTERPRETATION
A.LIQUIDITY RATIO

1. Current ratio:

Current ratio = current assets/ current liabilities

Table.5.1 The Current Ratio of Model Dairy Private Limited during the period 2015-19.

Year Current assets current Ratios

liabilities

2015 42435539 179515508 0.23

2016 714012110 34282364 2.08

2017 40996941 24567715 1.67

2018 76723872 40697358 1.89

2019 65487655 23454683 2.79

Source: Annual reports of the Model Dairy Private Limited

Current ratio

3 2.79

2.5
2.08
1.89
2
1.67
year
1.5 ratios

0.5 0.23
0 0 0 0 0
0
1 2 3 4 5 6

Chart 5.1 The above graph indicates the Current Ratio of Model Dairy Private Limited
during the period 2015-2019.

Interpretation

 In the year 2015-16 the Current Ratio was 0.23.

 The Current Ratio was high in the year 2018-19 i.e. 2.79.
2.Quick Ratio:
Quick ratio= liquid assets / current liabilities

Table 5.2 The Quick Ratio of Model Dairy Private Limited during the period 2015-2019

Year Liquid assets Current Ratios

liabilities
2015-2016 10543137 179515508 0.058
2016-2017 13795016 3428264 0.40
2017-2018 10530262 24567715 0.43
2018-2019 11236217 40697358 0.28

Source: Annual reports of the Model Dairy Private Limited.

Quick ratio

1
0.8
0.6
0.4
Ratios

0.2 Ratios
0

2015-2016-2017-2018-2019-
2016 20172018 20192020
Years

Chart 5.2 The above graph indicates the Quick Ratio of the Model Dairy Private Limited.

Interpretation

 In the year 2018-19the Quick Ratio was high i.e. 0.82.

 The Quick Ratio was increased till 2016-17 i.e. 0.45 from 0.058 in 2010-11.

85
B) LEVERAGE OR CAPITAL STUCTURE RATIO

3. Debt equity ratio.

Debt to total fund ratio= loans/ shareholder’s funds or net worth

Table 5.3 The Debt Equity Ratio of Model Dairy Private Limited during the period 2015-19.

Year Long term loans Current Ratios

liabilities

2015-16 45599280 8185650 5.57

2016-17 49157800 9417637 5.21

2017-18 28466552 10358416 2.74

2018-19 433441068 12138825 3.57

Source: Annual reports of Model Dairy Private Limited.

Debt equity ratio

7
6
5
4
3
ratios

2 ratios
1
0

2015-16 2016-17 2017-18 2018-19 2019-20

years

Chart 5.3 The above graph indicates the Debt Equity Ratio of Model Dairy Private Limited
during the period 2015-19.

Interpretation

 The Debt Equity Ratio was high in the year 2015-19 i.e. 5.86.
 The Debt Equity Ratio was decreased in the year 2017-18 i.e. 2.74.

86
4. DEBT TO TOTAL FUND RATIO

Debt to total funds ratio = long-term loans / shareholder’s funds + long-term funds

Table 5.4 The Debt to Total Fund Ratio of Model Dairy Private Limited.

Year Long term loans Shareholder’s funds Ratios

+long term funds

2015-16 45599280 53784930 0.84

2016-17 49157800 58575437 0.83

2017-18 28466552 38824968 0.73

2018-19 43341068 55479893 0.78

Source: Annual reports of the Model Dairy Private limited.

Debt to total fund ratio

0.9

0.85
ratios

0.8
Ratios
0.75

0.7

0.65
2015-2016-2017-2018-2019-
1617 18 19 20
years

Chart 5.4 The above graph indicates the Debt to Total Fund Ratio of Model Dairy Private
Limited.

Interpretation:

 The Debt to Total Fund Ratio was high in the year 2018-19 i.e. 0.85.
 The Debt to Total Fund Ratio was low in the year 2016-17

87
5. PROPRIETARY RATIO

Proprietary ratio = shareholder’s funds/ shareholder’s funds + long term loans

Table: 5.5 The Proprietary Ratio of Model Dairy Private Limited during the period 2015-19

Year Shareholder’s Shareholder’s funds + long ratios

funds term funds

2015-16 8185650 53784930 0.15

2016-17 9417637 58575437 0.16

2017-18 10358416 38824968 0.26

2018-19 12138825 55479893 0.21

Source Annual reports of the Model Dairy Private Limited.

Proprietary ratio

0.3
0.25
0.2
0.15
0.1
ratios

0.05 ratios
0

2015-2016-2017-2018- 2019-
1617 18 1920
years

Chart 5.5 The above graph indicates the Proprietary Ratio of Model Dairy Private Limited
during the period 2015-19.

Interpretation:

 The Proprietary Ratio was increasing from 2015-16 i.e. 0.15 to 0.26 in 2017-18.
 The Proprietary Ratio was low in the year 2018-19 i.e. 0.15.

88
6. INTEREST COVERAGE RATIO

Interest coverage ratio = net profit before charging interest and tax / fixed interest charges

Table 5.6 Interest Coverage Ratio of Model Dairy Private Limited during the period 2015-19

Year Net profit before Fixed interest Ratios

charging interest and tax charges

2015-16 4086972 2271209 1.80

2016-17 7011000 4190000 1.67

2017-18 7992000 2710000 2.94

2018-19 9550000 2678000 3.38

Source: Annual reports of the model dairy private limited.

Interest coverage ratio

4
3.5
3
2.5
Ratios

2
1.5 Ratios
1
0.5
0

2015- 2016-2017- 2018- 2019-

1617 18 19 20
Years

Chart 5.6 The above graph indicates Interest Coverage Ratio of Model Dairy Private Limited
during the period 2015-19

Interpretation: From the table it is clear that there is a fluctuation in this ratio

 The Interest Coverage Ratio of model dairy decreased in the year 2016-12 1.80 to
1.67.
 The ratio increased in the year increased 2017-18 from 1.67 to 2.94.
 And again increased in the year 2016-17 2.94 to 3.38 and decreased from 3.38 to 1.44.

89
(C) ACTIVITY RATIO OR TURNOVER RATIO

7. STOCK TURNOVER RATIO

Stock turnover ratio = cost of goods sold / average stock

Table 5.7 Stock Turnover Ratio of Model Dairy Private Limited during the period 2015-19

Year Cost of goods sold Average stock Ratio

2015-16 377017420 32491951 11.60

2016-17 397254941 59696435 6.65

2017-18 413172500 42385039 9.75

2018-19 441364006 46568009 9.48

Source: Annual reports of the Model Dairy Private Limited.

Stock turnover ratio

14
12
10
8
Ratios

6 Ratio
4
2
0

2015-2016-2017-2018-2019-
1617 18 19 20
Years

Chart 5.7 The above graph indicates the Stock Turnover Ratio of the Model Dairy Private
Limited.

Interpretation:
From the above graph it is clear that there is are fluctuations in the Stock Turnover Ratio.

 The Stock Turnover Ratio of the model dairy was decreased in the year 2016-17 to
6.65 from 11.6 in the year 2015-16.
 Increased in the year 2017-18 is 9.75 and again it decreased to 9.48 in the year 2017-
18.

90
8. FIXED ASSETS TURNOVER RATIO

Fixed assets turnover ratio = cost of goods sold/net fixed assets

Table 5.8 Fixed Assets Turnover Ratio of Model Dairy Private Limited during the period
2015-19
Year Cost of goods sold Average stock Ratios

2015-16 377017420 20368610 18.51

2016-17 397254941 21456591 18.51

2017-18 413172500 22395742 18.49

2018-19 441364006 19453379 22.68

Source: Annual reports of the Model Dairy Private Limited.

Fixed Asset Turnover Ratio

25
20
15
10
Ratios

Ratios
5
0
2015-16 2016-17 2017-18 2018-19 201-20
Years

Chart 5.8 The graph indicates the Fixed Asset Turnover Ratio of the Model Dairy Private
Limited during the period 2015-19.

Interpretation:

From the above graph it is observed that there is not much of fluctuations in the fixed assets
turnover ratio of the model dairy.

 Fixed Asset Turnover Ratio maintained same for first three years i.e.,from2015-16 to
2017-18
 In the year 2018-19 Fixed Asset Turnover Ratio was increased to 22.68 from 18.49 in
2017-18.

91
9.WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio = cost of goods sold / working capital

Table 5.9 Working Capital Turnover Ratio of Model Dairy Private Limited during the period
2015-19
Year Cost of goods Net fixed assets Ratios
sold

2015-16 377017420 24484031 15.40

2016-17 397254941 37118846 10.70

2017-18 413172500 16429226 25.14

2018-19 441364006 36026514 12.25

Source: Annual reports of the Model Dairy Private Limited

Working capital turnover ratio

30
25
20
15
Ratios

10 Ratios
5
0

2015- 2016- 2017- 2018- 2019-

6117 18 19 20
Years

Chart 5.9 The above graph indicates the Working Capital Turnover Ratio of Model Dairy
Private Limited during the period 2015-19.

Interpretation:

 The highest Working Capital Turnover Ratio was 25.14 during the period 2016-17.
 The ratio decreased during the period 2018-19 i.e. 12.25

92
(D) PROFITABILITY RATIOS OR INCOME RATIOS

10. GROSSPROFIT RATIO

Gross profit ratio = gross profit / net sales *100

Table 5.10. Net Gross Profit Ratio of Model Dairy Private Limited during the period 2015-19

Years Gross profit Net sales Ratios

2015-16 36412904 413430324 8.81

2016-17 40025032 437279973 9.15

2017-18 40292822 453465322 8.89

2018-19 46725229 416725229 9.57

Source: Annual reports of the Model Dairy Private Limited.

Gross profit ratio

9.8
9.6
9.4
Ratios

9.2
9
8.8 Ratios
8.6
8.4
2015-16 2016-17 2017-18 2018-1 2019-20
Years

Chart 5.10 The above graph indicates the Gross Profit Ratio of the Model Dairy Private
Limited.

Interpretation:

 The highest Gross Profit ratio of Model Dairy Private Limited was observed as 9.57
in the year 2017-18.
 Over all there was a increase in the Gross Profit ratio from 2015-16 to 2018-19.

93
11. NET PROFIT RATIO

Net profit = net profit / net sales *100

Table 5.11 This table shows the Net Profit Ratio during the period 2015-19

Year Net profit Net sales Ratio

2015-16 3395850 413430324 0.82

2016-17 4618336 437279973 1.06

2017-18 940779 453465322 0.20

2018-19 1780404 416725229 0.36

Source: Annual reports of the Model Dairy Private Limited.

Net profit ratio

1.2

0.8
Ratios

0.6
Ratio
0.4
0.2

0
2010-11 2011-12 2012-13 2013-14 2014-15
Years

Chart 5.11 The above graph indicates the Net Profit Ratio of Model Dairy Private Limited
during the period 2015-19.

Interpretation:

 The highest ratio of Net Profit Ratio was 1.06 during the period 2016-17.
 From 2016-17 to 2018-19 the Net Profit Ratio was showing decreasing trend.

94
12. OPERATING RATIO

Operating ratio = cost of goods sold +operating expenses / net sales

Table 5.12 The Operating Ratio of Model Dairy Private Limited during the period 2015-19

Year Operating profit Net sales Ratios

2015-16 407298008 413430324 0.98

2016-17 421230377 437279973 0.96

2017-18 437548806 453465322 0.96

2018-19 470022492 416725229 0.96

Source: Annual reports of the model dairy private limited

Operating ratio

0.99
0.98
0.97
0.96
Ratios

Ratios
0.95
0.94
0.93

2015- 2016- 2017- 2018- 2019-

1617 18 19 20
Years

Chart 5.12 The above graph indicates the Operating Ratio of Model Dairy Private Limited
during the period 2015-19

Interpretation:

 The Operating Ratio was high in the year 2015-16 i.e. 0.98.
 The Operating Ratio was constant for 3years i.e. from 2016-17 to 2018-19.

95
13.Expenses Ratio:

Cost of goods sold ratio = cost of goods sold/net sales * 100

Table 5.13 The Expenses Ratio of Model Dairy Private Limited during the period 2015-19.

Year Cost of goods sold Net sales Ratios

2015-16 67412583 413430324 16.30

2016-17 64214254 437279973 14.68

2017-18 67558008 453465322 14.29

2018-19 74936916 416725229 15.35

Source : Annual reports of the Model Dairy Private Limited.

Expenses ratio

20

15
Ratios

10 Ratios

2015-2016-2017-2018-2019-
1617 18 19 20
Years

Chart5.13: The above chart indicates the Expenses Ratio of the Model Dairy Private
Limited.

Interpretation :

 The highest Expenses Ratio was observed as 18.21 in the year 2018-19
 Overall there was a increasing in the Expenses Ratio from 2015-16 to 2018-19 .

96
14.Return on capital employed:

Return on capital employed = profit before interest, tax and dividends net sales *100

Table 5.14 The Return on Capital Employed ratio of Model Dairy Private Limited during the
period 2015-19.

Year Profit before interest, tax and Capital employed Ratios

dividends

2015-16 613200 44852641 13.67

2016-17 8558000 58575437 14.65

2017-18 7992000 38824968 20.58

2018-19 11822000 55479893 21.30

Source: Annual reports of the Model Dairy Private Limited

Return on capital employed

25

20
Ratios

15 Ratios
10

0 2015- 2016- 2017-2018- 2019-

16 17 18 19 20
Years

Chart 5.14: The above chart indicates the Return on Capital Employed of the Model Dairy
Private Limited.

Interpretation:

 The ratio was low in the year 2015-16 was 13.67.

 The return on Capital Employed was increased in the year 2018-19 i.e. 22.30.

97
 UNIT-VI
FINDINGS, SUGGESTION AND
CONCLUSION
 FINDINGS

1. The Current Ratio of Model Dairy Private Limited was high in the year 2018-19 i.e.
2.79.
2. The Quick Ratio of Model Dairy Private Limited was increased during the period
2015-16 from 0.058 to 0.82.
3. The debt Equity Ratio of the company decreased in the year 2015-16 to 2.74 from
5.21 in 2016-17.
4. The Proprietary Ratio increased year by year up to 2018. It indicates that the company
is facing lower risk and again in the year 2019 it decreased from 0.21 to 0.15 it
indicates that it is unfavourable to the company.
5. The Interest Coverage ratio of the Model Dairy Private Limited decreased in the year
2017-18 from 2015-16 i.e. 1.80 to 1.67.
6. There are fluctuations in the Stock Turnover ratio the company however the ratio
increased in the year 2014 it indicates the firm is using stock properly.
7. The Fixed Asset turnover ratio was increased up to 2016-17 from 2015-16 i.e. from
18.51 to 22.68.
8. Overall there was increase in Gross Profit ratio from 8.81 in 2015-16 to 9.20 in 2018-
19.
9. The Working Capital turnover ratio was high in the year 2017-18 i.e. 25.14.
10. The Net profit Ratio was increased in the year 2016-17 i.e. 1.06 from 0.82 in 2010-
11. Continuously there was a decreasing trend in Operating Ratio from 2015-16 to 2018-
19.
 SUGGESTIONS

1. The company need to increase the Quick Assets in order to meet current liabilities.
2. There is a need to increase the Debt Equity Ratio of the firm in order to meet needs of
the company.
3. They need to control fluctuations in the Interest Coverage Ratio in order to meet their
payments regularly.
4. The company increase usage of stock and they need to increase the ratio of Stock
Turnover of the firm.
5. The firm needs to concentrate on its expenses in order to control the cost of
production and in order to reduce the Expenses Ratio of the company.
6. It is better to maintain the Gross Profit ratio as like previous years.
7. It is better to maintain the same range of ratio of Return on Capital Employed.

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 CONCLUSON

To know the current financial position of the Model Dairy Private Limited, the study was
conducted on the financial performance through ratio analysis during the period 2015-19.

After analysing the data analysis we can find that the company giving priority to the liquid
funds. It can be useful that the company can able to meet future uncertainties effectively. But
need to concentrate on the proprietary ratio because it is decreased in the past years and also
concentrate on quick assets to meet its long term liabilities. Any have the net profit ratio was
satisfactory.

The overall position of the Model Dairy Private Limited was satisfactory.

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BIBLIOGRAPHY
 BIBLIOGRAPHY

AUTHOR BOOK TITLE

H.A.FINNEY Accounting Analysis

G.C. JOHNSON Ratio Analysis and prediction.

CHARLES K. VANDYCK Management Accounting .

CIARAN WALSH Financial and Management

Accounting .

ANTHONEY Accounting Management.

WEB SITES

 www.5 paisa.com
 www.google.com
 www.Model dairy.com

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