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1.

INTRODUCTION TO ORGANISATION
Verka is Co-Operative Company and is former oriented autonomous or organization based on Co-Operative pattern. It is the king of Punjab Region as far as Milk Procurement is concerned. Its daily Milk production is around 2.00 lacs liters per day o n an average and that is why huge amount of Milk production has become its core competency. It produces many daily products.

"MILKFED" is a group of Milk Unio n established under operation flood program as the implement ing agency by the government of Ropar and metropolis Chandigarh. The Ropar district co-operative milk produces unio n was established in the year of 1980.

The main object ives for its establishment were: 1. To create an organized factor to develop and command a major share of urban milk market of Chandigarh. 2. To provide year around remuneration price to the small rural Milk producers organized into co-operative. 3. To provide quality milk and milk produces to the consumers. 4. The milk plant carries out activit ies conduct ive to the economic development to agriculturist by organizing effective production, process and marketing of commodit ies. The milk plant has installed capacity of process 1,00,000 litres of milk per day and it is registered handling capacity of 2,00,000 liters by the year 2008-09. The milk plant is managed by qualified professio nals in the dairy field. The production facility are backed up by quality assurance, market ing training, financial management, data processing and other required services, providing a vibrant work environment to its personnel in pursuit of excellence. The milk plant is committed to supply quality and safe milk and milk products to its esteem customers at the right time. The milk plant has introduced ISO 9001:2000. Management system and Indian standard of hazard analysis and crit ical points (HACCP)/IS: 15000-1998 to ensure highest quality products with built in safety to consumers.

Recent ly, the Verka Milk Plant Mohali of Milkfed Punjab have bagged prest igious Nationa l Productivity Council Award at Nat ional level Compet it ion in the field of dairy processing industries conducted by National Productivity Council of India, New Delhi.

1.1 HISTORY AND PRESENT POSITION OF VERKA


A. HISTORY OF VERKA

The company has been well known by it s brand name "VERKA" especially In Punjab and Haryana. Chandigarh Milk Plant was set up in year 1961-1962 to meet the milk init ially. But it was not able to fulfill the growing requirements of Chandigarh City. Due to this reason another plant set up in September 1980 at Mohali (Punjab), which is adjoining to Chandigarh.

MILK PLANT MOHALI

"The Ropar Distt. Co-op Producer Union" It is one of the "MILKFED" group located at S.A.S Nagar, Mohali (Punjab). It is registered on 05.07.1978 under Punjab Cooperative Societ ies Act, 1961. It started its activit ies on September 1980.

B.

PRESENT POSITION OF VERKA

Present ly it has 856 Societ ies and around 46000 members are supplying milk and making their contribution to the Mohali (Punjab) Plant as follows:1. 2. 3. 4. 5. In Ropar District 520 Village Societ ies. In S.A.S Nagar, Mohali 164 Societ ies. In Fatehgarh District 109 Societ ies. In Patiala District 60 Societ ies. In UT 3 Societ ies.

In Ropar District three chilling centers are situated namely Morinda, Jhinjri and Nurpur.

The Milk Plant Mohali produces 2 Lakhs to 2.25 Lakhs liters of Milk per day during winter season and 1.50 Lakhs liters per day in summer season. About 2.00 Lakhs liters pasteurized liquid milk is being supplied to the cit izen of urban area per day. The plant runs throughout 24 hours in three shift s at about 200% of its installed capacity manner with 500 emplo yees.

The plant is supplying milk mainly to the cit ies Chandigarh, Mohali and Panchkula also covering some adjoining cit ies of Himachal Pradesh and Haryana.

It also produces PANEER, GHEE, LASSI, BIOYOGURT, GULAB JAMUN, KHEER, CURD, FLAVOURED MILK etc. All these products are marketed at the plant under the name "The Punjab State Co-operation Milk Producers Federatio n Ltd" under the Brand name of 'Verka Milk Plant".

1.2 ORGANISATION NETWORK


For the smooth running of plant, various sect ions are managed by the management. Each and every act ivity is delegated to particular sect ion. It is impossible for top management to take decisio n on every problem, so various tasks are delegated to various sections. These sect ions are interrelated to have frequent contacts with one another and it is easy to share the information. These integrated tasks teams handle their problems and make the supervisio n easy.

The following are the sections in the Verka Organisation: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Procurement Section Production Section Quality Control Sect ion Marketing Sect ion Accounts Section Administrative Section Engineering Sect ion Purchase Sect ion Store Section MIS Section Security Section

1.3 NETWORK

Verka is having an apex body at the state land known as "MILKFED" Punjab, Chandigarh. To start with funct ions in various fields of different unio ns in different Districts and to operate with Dairying and Dairy Fields that is the operation flood with assistance of Nat ional Dairy Cooperation (NDC) Delhi and later on is launched to operate flood second who is affiliated to Punjab Milk Fed. It helps to its affiliated Districts Milk Co-operations in 11 Districts. These Districts Unio n are:-

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

ROPAR PATIALA LUDHIANA FARIDKOT FEROZPUR SANGRUR BATHINDA GURDASPUR HOSHIARPUR JALANDHAR AMRITSAR

These unio ns in eleven districts of the state carry out smooth funct ioning of marketing, procurement, cattle breeding program though district co-operative unio ns.

1.4 PLANT AT A GLANCE

Establishment 1980

: The Ropar District Co-operative Milk Producers Union Milk Plant, Mohali.

Brand Name Installed Capacity Production Status Head Office Plant

: Verka : 1,00,000 Liters of Milk Per Day : 2,00,000 Liters of Milk per Day : Co-operative Society : Milkfed, Punjab, Sector 34, Chandigarh : The Ropar District Co-operative Milk Producers Union Ltd. Milk Plant, S.A.S Nagar, Mohali

Abbreviations used:DM ASSTT SUP INC. SEC Deputy Manager Assistant Supervisor Incharge Security S.R" JDC S.K F.S.R Sale Representative Junior Dairy Chemist Store Keeper Sales Representative
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2.RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is the mathemat ical relat ionship between two quantit ies in the form of a fract ion or percentage. It is essent ially concerned with the calculat ion of relat ionships which after proper identificat ion and interpretation may provide informat ion about the operations and state of affairs of a business enterprise. The analysis is used to provide indictors of past performance in terms of crit ical success factors of a business. This assistance in decisio n making reduces reliance on guesswork and intuit ion and establishes a basis for a sound judgment In financial analysis, a rat io is used as a benchmark for evaluat ing the financial posit ion 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 posit ion of a firm. Absolute figures expressed in mo netary terms in financial statements by themselves are meaningless. These figures do not convey much meaning unless expressed in relat ion to other figures. For example: One trader Rohit earns a profit of Rs. 2,00,000, whereas another trader Ronit earns a profit of Rs. 2,50,000. Which one is more efficient? Generally, we can say that Ronit is more efficient as he is earning more profits. But in order to give the correct answer, we must find out how much the capital is emplo yed by each of them? Suppose, Rohit has emplo yed a capital of Rs. 10,00,000 and Ronit has emplo yed 15,00,000. We can now calculate the percentage of profit earned by each of them on the capital emplo yed: Rohit = 2,00,000 /10,00,000*100 = 20% Ronit = 2,50,000 715,00,000*100 = 17% This shows that Rohit has earned Rs. 20 for every Rs. 100 of capital, whereas Ronit has earned Rs. 17 for every Rs. 100 of capital. As, Rohit is using his capital more efficient ly. The above example shows that figures assume significance only when expressed in relat ion to other figures. Just as in the example given above, the absolute figure of profit was meaning less but when the figure of profit was expressed in relatio n to capital, it assumed significance.

Thus, we can say that the relationship between two figures, expressed in arithmet ical terms is called a 'RATIO'. In the words of R.N. ANTHONY: "A ratio is simply one number expressed in terms of another. It is found by dividing one number into the another". Ratio may be expressed in the following three ways:

1.

Pure Ratio or Simple Rat io: It is expressed by the simple divisio n of one number by another. For example, if the Current Assets of a business are Rs. 2,00,000 and Current Liabilit ies are Rs. 1,00,000, then the ratio of "Current Assets to Current Liabilit ies" will be 2:1.

2.

Rate or So Many Times: In this type, it is calculated how many t imes a figures is, in comparison to another figure. For example, if a firm's credit sales during the. year are Rs. 2,00,000 and its debtors at the end of the year are Rs. 40,000, its DEBTORS TURNOVER RATIO = 2,00,000/40,000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors.

3.

Percentage: In this type, the relation between the two figures is expressed in hundredth. For example, if a firm's capital is Rs. 10,00,000 and its profit is Rs. 2,00,000, the ratio of profit to capital in terms of percentage = 2,00,000/10,00,000*100 = 20%.

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3. REVIEW OF LITERATURE
Review of literature is the most useful and simple method of formulat ing the research problem. The researches done by previous researchers are reviewed and their usefulness is evaluated to serve as basis for further research. Thus researcher reviews builds upon the work of others. The reviews that are collected by the researcher should give an insight into the field under study. The reviews must explain the need and scope of the study under considerat ion. It is not necessary that the reviews are to be in accordance with the object ives. Being a layman in the research field, I as a researcher have covered reviews that are related to Credit Rating Agencies.

Ria Goel (2007): Ratio Analysis Caffe Nero, Ratio Analysis is A tool used to conduct a quant itative analysis of informat ion in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry to judge the performance of the company. Caff Nero Group plc, the leading independent UK coffee house operator of 282stores, which has been voted the top rated brand by consumers for the last six consecut ive years. It had another year of solid progress, again achieving revenue and profit growth. Its revenue gone up by 29% to 90.7 millio n where as in year 2005 it was 70.1 millio n. Earnings before interest, tax , depreciat ion and amort izat ion has increased by 38% to 15.6 millio n whereas it as 11.3millio n in year 2005. Operat ing profit (before prior year goodwill write off) improved by 38% to 8.2 millio n where as in year 2005 it was 6.0 millio n). Overall Operat ing profit improved by 74% to 8.2m from 4.7millio n in 2005.

Cndymn91(2006); Financial Rat io Analysis Report Of Ford Motor Company, Any successfu l business owner or investor is constant ly evaluat ing the performance of the companies they are involved with, comparing historical figures with its industry compet itors, and even with successful businesses from other industries. To complete a thorough examinat ion of any

company's effect iveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make

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the task a bit less daunt ing. Financial rat io analysis helps ident ify and quant ify a company's strengths and weaknesses, evaluate its financial posit ion, and shows potential risks. As with any other form of analysis, financial rat ios aren't definit ive and their results shouldn't be viewed as the only possibilit ies. However, when used in conjuncture with various other business evaluat ion processes, financial rat ios are invaluable. By examining Ford Motor Company's Financial rat ios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future. This is a trend table of Ford's financial ratio for the previous five years: Ford motor company: Ratios 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000 Return on equity(%) 22.65, 7.9, 5.08, -70.04, 29.07 Return on assests(%) 1.19, 0.29, 0.1, -1.97, 1.9 Current ratio(%) 0.47, 0.52, 0.51,0.37, 0.33 Quick ratio(%) 0.29, 0.35, 0.35, 0.22, 0.22 Akehrig(2007): Ak Steel Ratio Analysis, The current ratio has shown an upward trend overall which is an indication that AK Steel is increasing their ability to meet their shortterm obligations. This ratio is increasing due to the fact that AK's current assets are

growing at a faster rate then their current liabilities. Over the 4-year span (2003-2006) their cash has increased $464,700,000 with an ending balance in 2006 of $519,400,000. The current ratio suggests that AK Steel is in very good standing with enough cash to make moves in the future. The inventory turnover ratio has increased over the 3 year span from 6.44 to 6.55 and is significantly higher then the competition. This shows a slight increase however it is still an area in which AK can work to improve. Because steel companies work on such small margins, a falling steel market can have a drastic effect on the net profit if there is leftover, high priced, inventory. This is an area in which a company can always work to improve their efficiency because it will pay off on their bottom line in the future.

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Apur Basarker(2007): financial Analysis Of Hmt,Industrializat ion commenced in earnest only after the independence in 1947. From a predominant ly agrarian economy, India has moved towards rapid industrializat ion with the state retaining the privilege of entrepreneurship an authority in a system of mixed economy. For four decades, the focus had been on the public sector, which was perceived as a means of achieving industrial growth with social just ice. It was Pandit Jawaharlal Nehru the 1st prime minister of independent India, who laid the foundat ion of a strong industrial base for the country. It was he who should be given the chie f credit for fostering the creat ion of a rich scient ific and technological pool by which the country is benefit ing today. During his time many dams were built such as the one at Bhakra Nangal. In the mixed economy followed during that period as per his brand of socialist ideology, in which both the public and private sectors were given the scope and the opportunit ies to grow. The private sector was allowed to function alo ng with public enterprises, but under the control of the government with strict licensing and supervisio n. Init ially, this led to a rapid industrializat ion with large capital-intensive industries in the public sectors. A number of state owned industria l enterprises were established in various sectors - In steel, power, heavy engineering etc. It cannot be denied that much of the industrial and scientific advance achieved by India of which are proudly boasted today owe a lot to his foresight and visio n. He called all these projects, The Temples of Modern India, that would bring about the country progress and prosperity. But unfortunately many of the state owned and run enterprises in various sectors did not funct ion successfully and sat isfactorily due to structural, operational, managerial, market ing, and other such deficiencies so that the public sector came to be looked upon as inefficient, not yielding.

Vadu Krishna(2008): Annual report analysis of Kotak Mahindra Bank Limited, Financia l statements provide an overview of a business' financial condit ion in both short and lo ng term. They help in understanding the past performance of the company and making future predict ions about the company. It thus helps us to look beyond the profit figures. There are 3 basic financia l statements are used. They are income statement, balance sheet and cash flow statement, the purpose of financial statements "The object ive of financial statements is to provide informat ion about the financial posit ion, performance and changes in financial posit ion of an enterprise that is useful to a wide range of users in making economic decisio ns."[Financial statements should be

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understandable, relevant, reliable and comparable. Reported assets, liabilit ies and equity are direct ly related to an organizat ion's financial posit ion. Reported income and expenses are direct ly related to an organizat ion's financial performance. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activit ies and account ing and who are willing to study the informat ion diligent ly."Owners and managers require financial statements to make important business decisio ns that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.Emplo yees also need these reports in making collect ive bargaining agreements (CBA) with the management, in the case of labor unio ns or for individuals in discussing their compensation, promotion and rankings, Externa l Users: are potential investors, banks, government agencies and other parties who are outside the business but need financial informat ion about the business for a diverse number of reasons.

Icarr (2006): Nike, Inc. Financial Ratio Analysis, In assessing the significance of various financial data, experts engage in financial analysis, the process of determining and evaluat ing financial ratios. A rat io is a relat ionship that indicates something about a company's act ivit ies, such as the rat io between the company's current assets and current liabilit ies or between it s accounts receivable and its annual sales. The basic source for these ratios is the company's financial statements that contain figures on assets, liabilit ies, profits, and losses. Rat ios are only meaningful when compared with other financial informat ion. Since compared with industry data, ratios help an individual understand a company's performance relative to that of compet itors, and used to trace performance over time (Venture Line, 2005).

Kalmah(2009); MODERN CEMENT, Ratio Analysis, Act ivity Analysis .Interpretations: Short Term Act ivity ratios calculate the operational efficiency regarding the utilization of short term assets. Inventory Turnover Rat io: The rat io tells about how many t imes Inventory turnover is made or complete in a given year. Higher the ratio is better that mean the inventory is turnover very quickly. Inventory Turnover Ratio 1.11 in 2003 indicates that company can sell total
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finished goods (inventory) 1.11 times every year. Increase in this ratio indicates the efficiency in managing inventory, which is not present in this company as we can the declining rate over the past years. This also indicates that the reserve of inventory and inventory holding cost is high for this company. Inventor Turnover Period: The ratio tells about number of days inventory remains in the stock and lower the ratio and better it is. From the table we can see that the ratios are too high which also indicates Modern Cement is inefficient in managing its inventory.

Sat56(2008):

Ratio

Analysis Of Bharti Airtel,

it

is India's

leading

provider

of

telecommunicat ions services. The company has 27 millio n customers across India. It is a part of Bharti Enterprises, which manufactures and exports telecom equipment, provides telecom services in Seychelles, delivers products and services to telecom carriers, offers a range of Customer Management Services (CMS) and exports fresh agricultural products exclusively to markets in Europe and the USA. Business. The business has been structured into three individua l strategic business units (SBUs) mobile services, broadband and telephone services (B&T) and enterprise services. The last group has two sub-units carriers (long distance services) and services to corporate. Brands All the services of the company are bundled under the Airtel brand. P/L account of Bhart i Airtel Year Mar 07(12) Mar 06(12) Mar 05(12) Mar 04(12) Mar 03(12) budgeted/mar08 INCOME : Sales Turnover + 17,851.60 11,231.47 7,903.03 0 0 39,808.33 Excise Duty 0 0 0 0 0 0 Net Sales 17,851.60 11,231.47 7,903.03 0 0 39,808.33 Other Income + 148.49 94.3 122.02 63.15 72.9 628.11 Stock Adjust ments + 30.07 -13.84 11.57 0 0 92.31 Total Income 18,030.16 11,311.93 8,036.62 63.15 72.9 40,528.75 EXPENDITURE : Raw Materials + 53.95 54.42 83.7 0 0 86.85 Power & Fuel Cost+ 9.72 26.98 16.69 0.38 0.1 71.89
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Emplo yee Cost + 1,102.03 754.99 488.13 16.84 18.94 3460.03 Other Manufacturing Expenses + 6,709.58 4,404.78 3,139.48 1.29 2.41 8990.83 Selling and Administration Expenses + 1,973.64 1,330.07 869.69 15 10.5 6927.22 Miscellaneous Expenses + 801.13 671.92 538.32 4.16 5.85 3036.28

Arunam Jain(2008): Ratio Analysis Of Tcs Wipro Infosys, CURRENT RATIO. It is a liquidity ratio that measures a company's ability to pay short-term obligations. Also known as "liquidity ratio", "cash asset ratio" and "cash rat io". By putting to test a company's financial strength, deduces company's ability to pay back it s short-term liabilit ies (debt and payables) with its shortterm assets (cash, inventory, receivables).The higher the current ratio, the more capable the company is of paying its obligat ions. An acceptable current ratio varies by industry. Generally, the more liquid the current assets, the smaller the current ratio can be without cause for the concern

Jitesh Chudasama(2009): Analysis Of Annual Report Of Ongc, Every limited company has to declare its annual report at the end of every year. It is compulsory for each and every limited company to do so as per companys law.. The annual report of the company gives financia l posit ion to the insiders and outsiders of the company. This pro ject report gives practica l knowledge of financial analysis, which is prepared by me on financial analysis of ONGC Ltd. for two years with interpretation. It covers financial Ratio Analysis, Commo n Size statement and Comparat ive Analysis. This rat io is made in order to analyze financial condit ion of ONGC Ltd. including tables as and when required. The project to prepare the financial analysis of an organizat ion has bridged the gap between the academics and the practical work.

Sasandifer(2009):Rat io Analysis Of Starbucks Vs Mcdonald's, McDonalds Corporation operates in the food service industry. The company has its restaurants in more than 100 countries of the world. McDonalds, the worlds largest food chain is headquartered in U.S. having an emplo yee population of 390000 (About McDonald's..., 2008), Starbucks Corporation, Seattle
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based, Starbucks Corporation is the leading coffeehouse chain in the world. The company has its operations in more than 44 countries. The main products offered by Starbucks various kinds of drinks, snacks, coffee beans. The company also operates in the field of market ing of music, books (The Company, 2008). Ratio Analysis. Ratios Starbucks McDonalds Current Ratio 0.79 0.80 Quick Rat io 0.30 0.67 Debt Equity Rat io 1.34 0.92 Proprietary Rat io 0.43 0.52 Solvency Rat io 0.57 0.48 Inventory Turnover Rat io 12.13 118.77 Gross Profit Ratio (%) 23.34 34.69 Net Profit Ratio (%) 7.15 15.67 Return on Proprietors' Funds (%) 29.45 15.67 Earning Per Share 0.91 2.06

Jain and Sharma(2008): A financial report on ratios of 3Ms corporation, in this research essay provides a detailed analysis of the success of 3M Corporatio'sn generation and management of its accounting and financial information. This information is then evaluated as it applies to decisio ns making and control process within the company. A brief introduction to 3M's main business segments is presented. Charts and graphs illustrate the company's output and financial standing throughout the paper. The author recommends an analysis of 3M's financial statements in order to understand the companys strengths and drawbacks.

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Simon Mohun (2008) In the decomposit ion of the US macroeconomic pre-tax rate of profit as the product of profit share and capital productivity, this paper considers the role of capital productivity over the period 19642001. The primary finding is that prior to 1982 capital productivity fell because capital deepening proceeded faster than labour productivity growth, whereas from 1982 to 1997 the opposite occurred. If, prior to 1982, the US economy was characterized by Marx-biased technical progress, what requires explanation is why labour productivity cont inued to grow after 1982 in the absence of sufficient capital deepening. The paper explores various hypotheses, contrasts neoclassical and classical notions of technica l change, and investigates the robustness of its results to the productiveunproductive dist inct ion and to accounting for changes in capacity utilization. Antonio C. David (2007) In this paper we attempt to analyze whether price-based controls on capital inflows are successful in insulat ing economies against external shocks. We present results from vector autoregressive (VAR) models, which indicate that Chile and Colombia, countries that adopted controls on capital inflows, seem to have been relatively well insulated against certain types of external disturbances. Subsequently, we use the autoregressive distribut ive lag (ARDL) approach to co-integration in order to isolate the effects of the capital controls on the pass-through of external disturbances to domest ic interest rates in those economies. We conclude that there is evidence that the capital controls have allowed for greater policy autonomy.

Lilia Costabile(2004) A disequilibrium between saving and invest ment decisio ns determines a maladjust ment in production, the disruption of capital, and a downturn in economic act ivity, according to the Austrian approach. By contrast, the Dynamists argue that it may lead to economic growth, as disequilibrium may well be instrumental to capital accumulat ion. What explains these different predict ions in otherwise similar models? The key is in the interplay between the analyt ical features and the ideological options underlying each of these approaches: alternat ive lines of thought, entirely compatible with their analyt ical models, were abandoned by some of these authors when they conflicted with their pre-analyt ical views. This paper illustrates the argument by exploring the models of two fathers, von Mises and Robertson.

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4.SCOPE OF THE STUDY

The scope of this study to analyze the five years financial reports of the Verka Milk Plant Mohali. And find out the ratios from balance sheets, profits and loss accounts, and from other financial papers, after the calculat ions of ratios compare them with the previous figures . the second main purpose of this study to give the yearly report to its shareholders, outsiders and to the management to make the good, sound and essent ial decisio n to run the organizat ion in a smooth and good manner. This pro ject will also helpful to everyone to tell about the financia l condit ion of the verka milk plant ,mohali . all the study has conducted in the verka milk plant, mo hali. In this study calculated ratios also tells about the performance the the plant in the years , from 01-04-2004 to 31-03-2009. This analysis also provides indictors of past performance in terms of crit ical success factors of a business. This assistance in decisio n making reduces reliance on guesswork and intuition and establishes a basis for a sound judgment. In the project financial techniques are used to calculate the ratio and do analysis , and do the interpretation of the calculated results.

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5. OBJECTIVE OF THE STUDY 1. To Analysis Financial Statements:


To acquire enough knowledge about the profitability and financial health of the business. In the light of the knowledge so acquired by us, we can take necessary decisio ns about their relat ionships with the concern.

2. To Simplify Accounting Data:


To simplifies and summaries a long array of account ing data and makes the m understandable. Also to disclose the relat ionship between two such figures have a cause and effect relat ionship with each other.

3. To Locate the Weak Spots of the Business:


We have calculated five years rat ios and compared with each other so that weak spots will be located and remedial measures will be taken.

4. For Effective Control of the Enterprise:


To disclose the liquidity, solvency and profitability of the enterprise. Such informatio n enables management to assess the changes that have taken place over a period of time in the financial act ivit ies of the business.

5. To Study the Financial Soundness:


To disclose the posit ion of business with different viewpoints. With the help of such a study we can draw conclusio ns regarding the financial health of the business enterprise.

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6. RESEARCH METHODOLOGY
Research Methodology is a way to systemat ically solve the research problem. It may be understood as a science of studying how research is done systematically. According to D. Slesinger and M. Stephenson Research may be defined as the manipulatio n of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that Knowledge aids in the construction of theory or in the practice of an art. Thus it is an original contribut ion to the exist ing stock of knowledge of making for its advancement.

RESEARCH Research is the systemat ic process of collect ing and analyzing informat ion to increase our understanding of the phenomenon under study. It is the funct ion of the researcher to contribute to the understanding of the phenomenon and to communicate that understanding to others.

6.1 RESEARCH DESIGN Research design is known as framework within which the whole act ivity of research and methods or procedures is clearly ment ioned under which the research is to conduct.

Type of Research Exploratory & Descript ive research design is used for the study. Descript ive research design implies the study of complete informat ion regarding the respondents profile and his/her views/opinio ns/preferences towards some problem. It can be called a research framework whereby the complete descript ive of the respondent is studied and data in specific is collected and analyzed to draw conclusio ns for a problem. The data is analyzed in a tabular form and in well and easy to understand manner.

6.2 SAMPLING DESIGN The sample design of a sample survey refers to the techniques for select ing a probability sample and the methods to obtain estimates of the survey variables from the selected sample. (i) Universe The universe is most commo nly defined as everything that physically exists; the ent irely of space
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and t ime, all forms of matter, energy and momentum, and the physical laws and constants that govern them. And in my study all the emplo yees of accounts branch are in the universe. (ii) Sampling unit A member of a sample selected from a sampling frame is called sampling unit. The sampling units are Manager (Finance) and other Department Officials, Sr. Manager of plant.

(iii) Sample size The number of member in a sample is called sample size The sample size is 10.

(iv) Sampling technique Judgment sampling technique is used for the survey.

6.3 DATA COLLECTION Both primary and secondary data are used for the study.

PRIMARY SOURCES:

1. The first step has to do appropriate literature which was collected by consult ing various finance officers at head office. 2. Personal interview had been conducted with Mr. Chakraborthy, who is a Deputy Manager of the Finance Department, to get adequate informat ion and appropriate suggestions through out the project.

SECONDRY SOURCES:

1. 2. 3.

Balance Sheet of the Verka Milk Plant. Books for financial statement analysis. Other financial Accounts.

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6.4 TOOLS USED:

FINANCIAL TOOLS: Following financial tools were used to analyze the actual performances of organizat ion by adopting various techniques.

PRESENTATION TOOLS: The presentation tools have been used to present the facts and figures in an attractive manner. The details of the same exhibit s have been also ment ioned alongside for the easy reference of the readers. Following main presentation tools have been used for better exhibit io n of the data: Tables & Graphs

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7. Analysis of data

After data have been collected, the researcher turns to the task of analyzing them. The analysis of data requires a number of closely related operatio ns such as establishment of categories, the applicat ion of these categories to raw data through tabulat ion and drawing statically inferences. The term analysis refers to the computation of certain measure alo ng with searching for patterns of relationship that exist among data groups. Thus, in the process of analysis, relat ionships or differences, supporting or conflict ing with original or new data. After analyzing the data, the researcher should have to explain the findings on the basis of some theory. It is known as interpretation. That made possible counting of classified data easy. From the master table various summery tables were prepared. They have been presented along with their interpretation in this manner. And we have used many arithmetic methods to test the data in the manner of ratios.

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7.1 ANALYSIS OF SHORT-TERM FINACIAL POSITION OR TEST OF LIQUIDITY


The short-term creditors of a company like suppliers of goods of credit providing short-term loans are primarily interested in knowing the company's ability to meet its current or short-term obligat ion as and when these become due. Two types of ratios can be calculated for measuring short-term financial posit ion or short-term solvency of a firm.

7.1.1 Liquidity Ratios 7.1.2 Current Assets Movement or Efficiency Rat ios.

7.1.1 Liquidity Ratios:

It refers to the ability of a firm to meet its short-term financial obligat ions when and as they fall due. In fact, analysis of liquidity needs the preparat ions of cash budgets and cash and fund flow statements; but liquidity ratios by establishing a relat ionship between cash and other current assets to current obligations, provide a quick measure of liquidity. The main concern of liquidity rat io is to measure the ability of the firm to meet their short-term maturing obligations. Failure to do this will result in total failure of the business, as it would be forced into liquidat ion. To measure the liquidity of a firm, the following ratios can be calculated:

I. II. III. IV.

Current Ratio Quick or Acid Test or Liquid Rat io Absolute Liquid Rat io or Cash Posit ion Rat io Measure Ratio

26

I. Current Ratio: This rat io explains the relat ionship between Current Assets and Current Liabilit ies of a business. The formula for calculat ing the ratio is:Current Ratio= Current Assets/ Current Liabilities 'Current Assets' includes those Assets which can be converted into cash within a YEAR'S time like Cash in Hand, Cash at Bank, B/R, Short-term Invest ments, Debtors, Stock, and Inventories etc. 'Current Liabilit ies' include those liabilit ies which are repayable in a YEAR'S t ime like Bank O/D, B/P, Creditors, Provisio n for Taxat ion, Proposed Dividends, Outstanding Expense and Loans payable with in a year etc.

SIGNIFICANCE:This rat io is used to assess the firm's ability to meet its short term liabilit ies on t ime. According to accounting principals, 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 Liabilit ies. The higher the ratio, the better it is, because the firm will be able to pay it s Current Liabilit ies more easily. The reason of assuming 2:1 as the Ideal Rat io is that the Current Assets includes such Assets as Stock, Debtors etc. from which full amount cannot be realized in case of need, hence even if half the amount is realized from the Current Assets on time, the firm can st ill meet its Current liabilit ies. If the Current Rat io is less than 2:1, it indicates lack of liquidity and shortage of working capital. But a much higher ratio, even though it is beneficial to' the short term creditors, is not necessarily good for the company. A much higher ratio than 2:1 may indicate the poor investment policies of the management. While calculat ing Current Ratio, we have taken Loans & Advances as Debtors in the Current Assets. In Current Liabilit ies, we included the Provisio ns to calculate Total Current Liabilit ies.

27

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS CURRENT RATIO (in times): (Figures in rupees)
Particulars Cash in Hand Cash at Bank
Short term Securities

2004-05 116489 56707499


0

2005-06 169160 66252837


0

2006-07 402612 58962074


0

2007-08 118602 98867680


0

2008-09 63186 91224268


0

Short term Investment Bill Receivable Debtors Closing stock (Raw Material) Closing stock (Milk Products) Inventories Loans & Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities Current Ratio

4625507 2172298

5274297 1878940

4612368 2369378

6534532 2996974

10598671 2602243

46683615

78208544

122647164 129007472 141409710

11677194 95101375

10197213 86167137

8926601 74145794

9941325 63743041

14430914 87795776

217083977 248148128 272065990 311209625

83229814

105968700 119615577 162318926 187581717

20572065

20970919

18308891

14425219

11204841

103801879 126939619 137924468 176744145 198786558

2.09

1.95

1.97

1.76

1.76

28

Current Ratio
2.2

2.1

1.9 Ratio in times 1.8

1.7

1.6

1.5 2004-05 2005-06 2006-07 2007-08 2008-09

29

ANALYSIS OR INTERPRETATION:

In 2004-05: The Current ratio is 2.09 times, it has been increased from the Standard ratio i.e. 2:1. The reason for increased Current Ratio may be slow moving stocks. The stocks will pile up due to poor sales. The cash or Bank Balances may be idle because of sufficient Investments opportunit ies.

In 2005-06: The Current Ratio is 1.95 times, it has been decreased from 2004-05, and the Current Assets double the Current Liabilit ies are considered to be satisfactory.

In 2006-07: The Current Ratio is 1.97 times, it is almost same as it was in last year. It means that there is no change in working condit ions from last year.

In 2007-08: The Current Ratio is 1.76 times, it is decreasing from previous year due to increase in Current liabilit ies. It is not necessarily good for the company. The creditors of the company are less secure than previous year.

In 2008-09: Analysis the current ratio is 1.76 times, Its equal to the previous year which is a good symbol for company. But the creation of the company are less secure than last other years.

30

II

QUICK OR ACID TEST OR LIQUID RATIO:

Quick Rat io indicates whether the firm is in a positio n to pay its current liabilit ies within a month or immediately. As such the quick ratio is included by dividing liquid assets (Quick Assets) by current Liabilit ies:Quick Ratio or Acid Test Ratio = Liquid Assets/Current Liabilities 'Liquid Assets' means those assets which will yield cash very shortly. All current assets except stock and prepaid expenses are included in liquid assets. Stock is excluded from liquid assets because it has to be sold before it can be converted into cash. Prepaid expenses too are excluded from the list of liquid assets because they are not expected to be converted into cash. Liquid assets thus include cash, debtors, bill receivable and short term securit ies.

SIGNIFICANCE: An ideal quick ratio is said to be 1:1. if it is more, it is considered to be better. The idea is that for every rupee of current liabilit ies, there should be at least one rupee of liquid assets. This ratio is better test of short-term financial posit ion of the company than the current ratio, as it considers only those assets which can be easily converted into cash. Stock is not included in liquid assets as it may take a lot of time before it is converted into cash.

Quick rat io thus is more rigorous test of liquidity than the current ratio and when used together with current ratio, it gives a better picture of the short term financial posit ion of the firm.

While calculat ing Quick Assets, we have deducting Inventories assuming as a stock -from Current Assets so that Quick Assets are obtained.

31

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS Quick Ratio (in times): (Figures in rupees)
Particulars 2004-05 2005-06 2006-07 272065990 (2369378) 2007-08 311209625 (2996974) 2008-09 2602243

Current Assets Closing

217083977 248148128 (1878940)

stock (2172298)

(Raw Material) Closing stock (46683615) (78208544)


(122647164) (129007472)

(Milk Products) Inventories Total Assets Total Current Liabilities


Quick Ratio 1.51 1.24 1.00 0.95 0.95 103801879 126939619 137924468 176744145 198786558 (11677194) (10197213) 156550870 157863431 (8926601) 138122847 (9941325) 169263854 141409710 189683521

Quick

32

Quick ratio

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2004-05 2005-06 2006-07 Ration in times

2007-08

2008-09

33

ANALYSIS OR INTERPRETATION:

In 2003-04: The Quick Ratio is 0.77 times, which is less than the ideal rat io i.e. 1:1. It will not be easy to pay its creditors on time. The company's Quick Assets must be Equal of its Current liabilit ies to meet standard ratio. It is not necessarily good for the company.

In 2004-05: The Quick ratio is 1.51 t imes, it has been increased from the Standard ratio i.e. 1:1. It is good for the organizat ion. The cash or Bank Balances may be idle because of sufficient Invest ments opportunit ies.

In 2005-06: The Quick Ratio is 1.24 times, it has been decreased from previous year and the Quick Assets Equal to the Current Liabilit ies are considered to be satisfactory.

In 2006-07: The Quick Rat io is 1.00 times, it is the ideal Quick Rat io for the organization. It means that the Quick Assets are able to meet Current liabilit ies and further no quick assets are invested unproductive.

In 2007-08: The Quick Rat io is 0.95 times, it is decreasing from previous year due to increase in Current liabilit ies more than the increase in Quick Assets. But also it is almost near to the ideal ratio as it was in previous year.

In 2008-09: The Quick rat ion is .95 times it is equal to the last year ration. Which is good for the company that it is maintain its ratio. But also almost equal so the ideal ratio.

34

Ill

ABSOLUTE LIQUID RATIO OR CASH RATIO:

Generally, debtors and bill receivables are 'more liquid than inventories. There may be doubts regarding their realizat ion into cash immediately or in t ime. Some authorit ies are of the opinio n that the absolute liquid ratio should also be calculated together with current assets and find out the absolute liquid assets.

Absolute Liquid Rat io/ Cash Ratio= Cash + Short Term Securit ies/ Current Liabilit ies

SIGNIFICANCE: Absolute Liquid Assets include cash in Hand and at Bank and marketable Securit ies or temporary invest ments. The acceptance norm for this ratio is 50% or 0.5:1 or 1:2 i.e. Re. 1 worth Liquid Assets are considered adequate to pay Re. 2 worth Current Liabilit ies in time as all the creditors are not expected to demand cash at the same t ime and then cash may also be realized from debtors and inventories.

35

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS

Absolute Liquid Ratio or Cash Ratio (in times): (Figures in rupees)


Particulars 2004-05 2005-06 169160 2006-07 402612 2007-08 118602 2008-09 63786

Cas h hand

in 116489

Cash at bank Short

56707499

66252837 0

58962074 0

98867680 0

91224286 0

term 0

Securities Absolute Liquid Assets Total Current Liabilities


Quick Ratio 0.55 0.52 0.43 0.56 0.45 103801879 126939619 137924468 176744145
198786558

56823988

66421997

59364685

98986281

91224286

36

Absolute liquid ratio


0.6

0.5

0.4

0.3

Absolute liquid ratio

0.2

0.1

0 2004-05 2005-06 2006-07 2007-08 2008-09

37

ANALYSIS OR INTERPRETATION:

In 2003-04: The Cash Rat io is 0.26 times, it is less than the ideal rat io and it shows that company needs to improve their short term financial posit ion.

In 2004-05: The Cash rat io is 0.55 times, it has been increased from the standard ratio i.e. 0.5:1, and it is quite sat isfactory because it is higher than the rule of thumb, it shows that company is improving their short term financial posit ion.

In 2005-06: The Cash Rat io is 0.52 t imes, it shows that Absolute Liquid Assets are considered adequate to pay its Current Liabilit ies in t ime as all .the creditors are not expected to demand cash at the same time and then cash may also be realized from debtor's inventories.

In 2006-07: The Cash Rat io is 0.43 times, it is nearer to the ideal Quick Rat io. But also it has decreased from the last year due to increase in Current Liabilit ies of the organization. It means that the organizat ion need to improve little bit on Absolute Liquid Assets.

In 2007-08: The Quick Ratio is 0.56 times, it is increasing from previous year due to increase in Absolute Liquid Assets more than the increase in Current liabilit ies. But also it is almost near to the ideal rat io as it was in 2005-06. In 2008-09 : The absolute ration is .45 times it is decreasing from previous year which is not a good sign for company.

38

III

Interval Measure or Defensive Interval Ratio:

In order to the comparison of current or liquid assets to current liabilit ies, the liquidity posit ion of a firm may also be examined to measure whether the liquied assts are sufficient relative to the firm's daily cah requirements for operating expenses. Such a measure of liquidity is called interval measure or defensive-linterval ration.

Interval measure = Liquid Assets/Average Daily cash operating expenses.

SIGNIFICANCE: This ration is calculated to measure the liquid assets whether these liquid assets are sufficient for meet ing the daily cash operating expenses. Liquid assets include cash, short-term securit ies, and receivable. Whereas, average daily operating expenses includes cost pf goods sold, distribut ion expenses. administrative & office expenses, selling &

All these above expenses are divided by number of days in a year (365).

39

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS Interval Measure of defensive-interval (in days)

Particulars Opening Stock Raw Material Milk Products Purchases Raw Material Milk Products Direct Expenses Procure ment Expenses Manufacturing Expenses Packing Expenses Purchases Tax/ Cess Total Closing Stock Raw Material Milk Products Cost of Goods Sold

2003-04

2004-05

2005-06

2006-07

2007-08

4242595 40956760

2518563

2172298

1878940 78208544

2369378 122647164

136002057 46683615

918684564 102780424

881863560 948991951 1157575427 1425081941 118084264 113417917 133907625 168226278

43952952

47939056

53236469

52088837

64560151

54998646

51529372

62962235

62973538

7355420

39226368

38963229

48266840

56126206

57631627

6058174

2184677

2214206

1692681

4596638

1210900483 1279084778 1277945531 1544448798 1918468597

(2518563)

(2172298)

(1878940)

(2369378)

(2996974)

(136002057) (46683615) (78208544) (122647164) (129007472) 1072379863' 1230228865 1197858047 1419432256 1786464151

40

Ad ministrative Expenses Store Expenses Distribution Expenses Liquid Assets Number of Days Average Daily Cash Operating Expenses. Total Quick Assets Average Daily Cash Operating Expenses

19353645

21350166

25649243

24186218

25410461'

21488791 9985722

20574656 13688584

21712945 11896308

21578939 20189201

25461485 38157296

1123208021 1285842271 1257116543 1485386614 1875493392 365 3077282 365 3522855 365 3444155 365 4069552 365 5138338

160715169

156550570 157863431 138122846

169263854

3077282

3522855

3444155

4069552

5138338

Interval Measures 53

45

46

34

33

41

Interval Measure/Defensive -interval Ratio


60

50

40

30

20

10

0 2003-04 2004-05 2005-06 2006-07 2007-08

Interval Measure/Defensive interval Ratio

42

ANALYSIS OR INTERPRETATION:
In 2003-04: The Interval Measure Rat io is 53 Days/ which indicates that it is increased from the estimated Rat io i.e. 45 Days. This shows that company's liquid assets are more sufficient for operating daily cash requirements.

In 2004-05: The Interval Measure Rat io is 45 Days, which is equivalent to the target ratio. This shows that company has achieved their target and it has neither increased nor decreased their ratio.

In 2005-06: The Interval Measure Rat io is 46 Days, it has been increased quite from the targeted ratio. This shows that company has more liquid assets to meet their daily requirements.

In 2006-07: The Interval Measure Rat io is 34 Days, it has decreased from the previous year due to increase Daily Cash requirements for Operating Expenses. It means that the organizat ion needs to improve little bit on this Rat io.

In 2007-08: The Interval Measure Rat io is 33 Days, it is almost same as it was in previous year this shows that company is not having liquid assets to meet their daily requirements.

43

7.1.2 CURRENT ASSETS MOVEMENT OR EFFICIENCY/ ACTIVITY RATIOS:

Funds are invested in various assets in business to make sales and earn profit s. The efficienc y with which assets are managed direct ly affects the volume of sales. The better the management of assets, the larger is the amount of sales and profits. Act ivity ratios measure the efficiency or effect iveness with which a firm manages its resources or assets. These rat ios are also called turnover ratios because they indicate the speed with which assets are converted or turned over into sales.

For example: Inventory turnover ratio indicates the rate at which the funds invested in inventories are converted into sales. Depending upon the purpose, a number of turn over ratios can be calculated, as Debtors or Receivable Turnover, Average Collection Period, Stock/ Inventory Turnover, Creditors/Payable Turn over, Average Payment Period, Working Capita l Turnover Ratio.

I. Inventory/Stock Turnover Ratio:

This ratio indicates the relat ionship between the cost of googs sold during the year and average stock kept during that year.

Stock Turnover Ratio= COGS/Average Stock

Cost of Goods Sold= Opening Stock + Purchases + Carriage + wages + other direct charges - Closing Stock OR Net Sales - Gross profit. Average Stock= (Opening Stock + Closing Stock)/ 2

44

SIGNIFICANCE: This ratio indicates whether stock has been efficient ly used or not. It shows the speed with which the 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 the stock is selling quickly. In a business, where stock turnover ratio is high, goods can be sold at a lower margin of profit and even the profitability may be quite high. A low stock turnover ratio indicates that stock does not sell quickly and remains lying in the godown for a long t ime. This results in increased storage cost, blocking of funds and losses on account of goods becoming obsolete. This ratio can be compared with the previous year, the management can access whether the stock has been more efficient ly used or not.

45

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS STOCK TURNOVER RATIO (in times): (Amount in figures)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-2009

Cost Goods Sold Opening Stock Raw Material Milk Products Closing Stock Raw Material Milk Products

of 1230228865 1197858047 1419432256 1786464151 2178653051

2518563

2172298

1878940

2369378

2996974

136002057

46683615

78208544

122647164

129007472

2172298

1878940

2369378

2996974

2602243

46683615

78208544

122647164

129007472

141409710

Total Stock 187376533 Average Stock


Stock Turn 13.13 Over Ratio 93688267

128943397 64471698

134716332 67358163

257020988 128510494

296015799 148007899.5

18.58

21.09

13.90

14.7

46

Stock turn over ratio


25

20

15

10

0 2004-05 2005-06 2006-07 stock turn over ratio 2007-08 2008-09

47

ANALYSIS OR INTERPRETATION:

In 2003-04: The Stock Turnover Ratio is 11.67 t imes more than its average stock. It means how efficient ly stock is being ut ilized in the company to convert into COGS or sales. The higher the ratio the better it is. So it indicates that stock is selling quickly, it is a good indicator for company that stock is being efficient ly used in the company.

In 2004-05: The Stock Turnover Ratio is 13.13 times more than its average stock, it has been increased from previous year. This shows that company is now utilizing their stock into sales.

In 2005-06: The Stock Turnover Ratio is 18.58 times more than average stock. It has been, increased from both the previous years. This shows that company is more properly ut ilizing it s stock into sales and selling quickly to earn profits.

In 2006-07: The Stock Turnover Rat io is 21.09 t imes more than average stock. This year it has been increased from all the previous years and further it is increasing yearly and the company is utilizing its stock more efficient ly.

In 2007-08: The Stock Turnover Rat io is 13.90 times it has been decreased from the last year due to increase in Average Stock from last year. Now the company has to search ways to overcome this problem and for full ut ilizat ion of stocks and to go for more sales.

In 2008-09: The Stock Turnover Ratio is 13.90 times it has been Increaseing from the last year due to increase in average stock from last year company have to work upto how increase sales.

48

7.2 ANALYSIS OF LONG-TERM FINANCIAL POSITION OR TEST OF SOLVENCY

These rat ios are calculated to assess the ability of the firm to meet its lo ng term liabilit ies as and when they become due. Long term creditors including debentures holders are primarily interested to know whether the company has ability to pay regularly interest due to them and to repay the principle amount when it become due. Solvency rat ios disclose the firm's ability to meet the interest cost regularly and long term indebtedness at maturity. Solvency rat ios include the following ratios: 7.2.1 Debt-Equity Ratio 7.2.2 Funded-Debt to Total Capitalizat ion Ratio 7.2.3 Equity Rat io 7.2.4 Solvency Ratio 7.2.5 Proprietor's Funds Rat io 7.2.6 Fixed Assets Radio 7.2.7 Ratio of Current Assets to Proprietor's Funds 7.2.8 Debt service ratio 7.2.9 Capital gearing ratio

7.2.1

Debt-Equity Ratio:

This ratio expresses the relat ionship between lo ng term debt and shareholders funds. It indicates the proportion of the funds which are acquired by lo ng term borrowings in comparison to shareholders funds. This rat io is calculated to ascertain the soundness of the lo ng term financia l policies of the firm. The Debt-Equity can be calculated are as follows: Debt-Equity= Outsiders Funds/ Shareholders Funds OR External Equities/ Internal Equities Outsiders Funds: These refer to long term liabilit ies which mature after one year. These include debentures, mortgage loans, public deposits etc.

49

Shareholder's funds: These include equity share capital, preference capital, share premium, general reserve and other reserves and credit balance of profit and loss account. However accumulated losses and fict it ious assets remaining to be written off like preliminary expenses, underwrit ing commissio n, share issue expenses should be deducted.

SIGNIFICANCE: This ratio is calculated to assess the ability of the firm to meet its lo ng term liabilit ies. Generally Debt-Equity Ratio is of 2:1 is considered safe, if this is more than that it shows a rather risky financial posit ion from the lo ng term point of view as it indicates that more and more funds are invested in the business; are provided by lo ng term lenders. The lower this ratio the better it is for lo ng term lenders because they are more secure in that case. Lower than 2:1 Debt-Equity Ratio provides sufficient protection to long term lenders. A high Debt-Equity Rat io which that the claims of Creditors are greater than those of owners, may not be considered by the t ime of liquidat ion of the firm . Current liabilities:

These are taken as an Outsider's Funds. As Current Liabilit ies which mature after one year so Current Liabilit ies are treated as Outsider's Funds. In order to calculate Shareholder's Funds, we include Share Capital and Reserves & Surplus. We deduct Depreciat ion Reserve Fund as it is included in Reserve and Surplus.

50

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS DEBT-EQUITY RATIO (in times):

(amount in rupees) Particulars Current Liabilities (outsiders) Share Capital Reserve Surplus Depreciation Reserve Fund Shareholder's Funds
Debt-Equity Ratio 1.1 1. 4 1.3 1.26 1.43 89857676 91745059 106021456 140218557 138647135 (78294915) (81971713) (85669555) (91050385) 97321702 25256000 25827120 26427245 26819655 27493755 2004-05 2005-06 2006-07 137924468 2007-08 2008-09

103801878 126939618

140218557 198786558.10

& 142896591 147889652 065263766} 204449286 208475082.78

51

Debt-Equity ratio
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2004-05 2005-06 2006-07 2007-08 2008-09

Debt-Equity ratio

52

ANALYSIS OR INTERPRETATION:
In 2003-04: The Debt-Equity Rat io is 3 t imes. It shows risky-financial posit io n from the lo ng term point of view as it indicates that more and more funds invested in the business are provided by lo ng term lenders. It has also increased from the Standard Ratio which is not good for lenders.

In 2004-05: The Debt-Equity Rat io is 1.1 times. It has been decreased from last year due to decrease in current liabilit ies. This is in favor of the lenders as their mo ney is secure and for organizat ion also as they have less liability to pay off.

In 2005-06: The Debt-Equity Rat io is 1.4 times. It has increased from the last year but it is quite Satisfactory as the company is maintaining their Debts.

In 2006-07: The Debt-Equity Rat io is 1.3 times. It is almost same like previous year as it is decreased litt le bit as the company is maintaining Debts.

In 2007-08: The Debt-Equity Rat io is 1.26 times. It is also almost same from last Three Previous Years also favorable to both Lenders and Company.

In 2008-09 : The Debt-Equity Rat io is 1.43 times. Which is increase from the last year. It is a good sign for company increase of Debt-Equity ratio shows risky financial posit ion.

53

7.2.2 FUNDED DEBT TO TOTAL CAPITALIZATION RATIO:

The ratio establishes a link between the lo ng term funds raised from outsiders and total long term funds available in the business. The debt to total capitalizat ion can be calculated are as follows:

Funded Debt to Total Capitalization Ratio= Funded Debt/Total Capitalization*100

Funded Debt= Debentures + Mortgage Loans + Bonds + other Long term Loans.

Total Capitalization Equity Share Capital + Preference Share capital + Reserve & Surplus + Other Undistributed Reserves + Debentures + Mortgage Loans + Bonds + Other Long Term loans.

SIGNIFICANCE: As funded Debt to Total Capitalizat ion represents the relationship of long term funds. There is no 'Rule of Thumb' but still the lesser the reliance on outsiders the better it will be. If this ratio is smaller, better it will be, up to 50% or 55% this ratio may be to tolerable and beyo nd.

54

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS FUNDED DEBT TO TOTAL CAPITALIZATION RATIO (in times):

(Amount in rupees)
Particulars 2004-05 2005-06 23571398 2006-07 18805950 2007-08 13579377 2008-09 10570321

Funded Debt (Secured 38947059 Loans) Share Capital Reserve & Surplus Secured Loans
25256000

25827120

26427245

26819655

27493755 208475082.78
10570321 (47321702.78)

142896591 147889652 38947059 23571398

165263766 204449286 18805950 13579377

Depreciation Reserve (78294915) (81971713) (85669555) (91050385) Fund Total Capitalization


FUNDED DEBT TO TOTAL CAPITALIZATION RATIO (in times): 128804735 115316457 0.3 0.2 124827406 153797934 0.15 0.08

149217456 0.07

55

Funded dept to total capitalization ration


0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2004-05 2005-06 2006-07 2007-08 2008-09

Funded dept to total capitalization ration

56

ANALYSIS OR INTERPRETATION:
In 2004-05: The Funded Debt to Total Capitalization Ratio is 0.30 times. It has been decreased from last year due to decrease in Total Capitalization. Now the company has reduced it s lo ng term borrowing capacity from the last year.

In 2005-06: The Funded Debt to Total Capitalization Rat io is 0.20 times. It has been reduced from both the previous years. From now the company has controlled their debt to total capitalizat ion rat io and make the efforts to reduce their rat io. The company has better long term financial posit ion.

In 2006-07: The Funded Debt to Total Capitaliz ation Rat io is 0.15 t imes. It has also reduced from previous years. We can see that the company is doing well and rat io is reducing on yearly basis.

In 2007-08: The Funded Debt to Total Capitalization Rat io is 0.08 t imes. It is also decreasing and we can say that company is not too much dependent on long term funds.

In 2008-09: The Funded Debt to Total Capitalizat ion Rat io is 0.08 t imes. It is decreasing and we can say that company is not too much dependent on long term funds.

57

7.2.3

PROPRIETORY RATIO OR EQUITY RATIO

This ratio establishes the relat ionship between shareholder's funds to total assets of the firm. This ratio is important for determining lo ng term solvency of a firm. The equity rat io may be calculated are as follows: Equity Ratio= Shareholder's Funds/Total Assets

Shareholder's Funds= We include Share Capital and Reserves & Surplus. We deduct Depreciat ion Reserve Fund as it is included in Reserve and Surplus.

Total Assets= It is calculated by deduct ing depreciat ion reserve fund from total of assets side of the balance sheet.

SIGNIFICANCE: As this ratio represents the relat ionship of owner's funds to total assets, higher the ratio better is the long term solvency posit ion of the company. This ratio indicates the extent to which the assets can be lost without affecting the interest of creditors of the company.

58

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS PROPRIETORY RATIO OR EQUITY RATIO (in times):

(Amount in Rupees)
Particulars 2004-05 89857676 2005-06 91745059 2006-07 106021456 2007-08 1402185 2008-09

Shareholder's Fund Assets Depreciation Reserve Fund Total Assets

335813735 374951084

408377953

4569675

(78294915) (81971713) (85669555) (910503

257518820 292979371 0.31

322708398 0.32

3659171 0.38

PROPRIETORY 0.35 RATIO OR EQUITY RATIO (in times):

59

The proprietary ration or Equity ratio


0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2003-04 2004-05 2005-06 2006-07 2007-08

The proprietary ration or Equity ratio

60

ANALYSIS OR INTERPRETATION:
In 2003-04: The Proprietary Ratio or Equity Ratio is 0.2 times more than it s total assets. Higher the ratio or the share of the shareholders in the total capital of the company better is the lo ng term solvency posit ion of the company.

In 2004-05: The Proprietary Rat io or Equity Rat io is 0.35 times. It has been increased from last year. It is a good indicator for the company from the lo ng term point of view. It is a healthier signal and long term lenders are secured from total funds.

In 2005-06: The Proprietary Ratio or Equity Rat io is 0.31 times. It has been reduced from the previous year but it is sat isfactory for the company.

In 2006-07: The Proprietary Rat io or Equity Ratio is 0.32 times. It is almost same as it was in previous year. It is a good sign that the company is maintaining this ratio.

In 2007-08: The Proprietary Rat io or Equity Rat io is 0.38 times. It is also increasing from the last two years and we can say that it is a healthier signal.

61

7.2.4

SOLVENCY RATIO OR THE RATIO OF TOTAL ASSETS:

This ratio indicates the relat ionship between the total liabilit ies to outsiders to total assets of a firm and can be calculated as follows:

Solvency Ratio= Total Liabilities to Outsiders/ Total Assets

SIGNIFICANCE: As this ratio represents the relationship between the total liabilit ies to outsiders to total assets, more sat isfactory of stable is the long-term solvency posit io n of firm. Total liabilit ies to outsiders are assumed as current Liabilit ies.

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS SOLVENCY RATIO (in times):

(Amount in rupees)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09

Current Liabilities (Outsiders) Total Assets


SOLVENCY RATIO (in

103801878 126939618 137924468 176744145 198786558

257518820 292979371 322708398 365917145 435831987 0.40 0.43 0.43 0.48 0.456

times):

62

0.6

0.5

0.4

0.3

0.2

0.1

0 2004-05 2005-06 2006-07 2007-08 2008-09

Sovency ration

63

ANALYSIS OR INTERPRETATION:

In 2004-05: The Solvency Rat io is 0.40 times mo re than its total assets which indicates that the company has reduced their solvency rat io and make under the control.

In 2005-06: The Solvency Rat io is 0.43 times more than its total assets. It has been increased quite but it also shows that company is now taking steps to control this ratio.

In 2006-07: The Solvency Rat io is 0.43 t imes more than its total assets. It is same as it was in previous year. It is a good sign that the company is maintaining this ratio.

In 2007-08: The Solvency Rat io is 0.48 times more than its total assets. It is also increasing from the last two years and we can say that it is not a healthier signal. It indicates that the company has to pay more liabilit ies compared to last years.

In 2008-09: The Solvency Ratio is 0.48 which is less than last year. It is healthier signal for the company. It indicates company have much pay less liabilit ies as compared to last year

64

7.2.5 FIXED ASSETS TO NET WORTH RATIO OR FIXED ASSETS TO PROPRITOR'S FUND:
The rat io establishes the relationship between fixed assets and shareholder's funds, i.e. share capital plus reserves and surplus and deduct ing depreciat ion reserve surplus from reserves and surplus.

Fixed Assets to Net Worth Ratio = Fixed Assets/Shareholder's Funds

SIGNIFICANCE:

The ratio of fixed assets to net worth indicates the extent to which shareholder's funds are sunk into fixed assets. If the rat io is less than 100%, it implies that owner's funds are more than total fixed assets. When the ratio is more than 100%, it implies that owner's funds are not sufficient to finance the fixed assets and the firm has to depend upon outsider's to finance the fixed assets. There is no 'Rule of Thumb' to interpret this ratio but 60% is considered to be satisfactory ratio.

65

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS FIXED ASSETS TO NET WORTH RATIO (in times):

Particulars

2004-05

2005-06

2006-07

2007-08

2008-09

Work Progress Plant Machinery Building Fixed Assets Total Assets Depreciation Reserve Net Assets Shareholder's Fund

in

& 564002

933703

6424176

2302675

3562286

2895711

0 167527199

100665655 106066476

108825401 125362093

Fixed 101229657 109302854 118811563 128257804 167527199

(78294915) (81971713) (8566955)

(91050384) (7321702)

Fixed

22934742

27331141

33142308

37207420

70205497

89857676

91745059

106021456 140218557

198786558

FIXEDASSETS TO NET

0.25

0.30

0.31

0.27

0.35

WORTH RATIO (in times):

66

Fixed assest to new worth ration


0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2004-05 2005-06 2006-07 2007-08 2008-09

Fixed assest to new worth ration

67

ANALYSIS OR INTERPRETATION:

In 2004-05: The Fixed Assets to Net Worth Rat io is 0.25 t imes. It has been decreased from the last year. It is not a good sign for the company. In 2005-06: The Fixed Assets to Net Worth Ratio is 0.30 times. It has been increased from previous year. It is not the healthy sign for the company. The company has to improve their rat io and make efforts to improve their long term financial posit io n.

In 2006-07: The Fixed Assets to Net Worth Ratio is 0.31 times. It has been increased from the last year. This implies that owner's funds are not sufficient to finance the fixed assets and the company has to depend upon outsider's to finance for fixed assets

In 2007-08: The Fixed Assets to Net Worth Ratio is 0.27 times. It is almost same as it was in last year. It is not a good sign for the company.

In 2008-09: The Fixed Assets to Net Worth Ratio is 0.35 t imes. It is more than last year. It is not a good signal for company.

68

7.2.6 FIXED ASSETS TO TOTAL LONG TERM FUNDS OR FIXED ASSETS RATIO:

A variant to the ratio of fixed assets to net worth is the ratio of fixed assets to total term funds which is calculated as:

Fixed Assets Ratio= Fixed Assets/ Total Long Term Funds

SIGNIFICANCE: The rat io indicates the extent to which the total of fixed assets is financed by lo ng term funds of the firm. Generally, the total of the fixed assets should be equal to the long term funds. But if the fixed assets exceed the total of the lo ng term funds it implies that the company has financed a part o the fixed assets out of current funds or the working capital which is not a good financia l policy.

69

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS FIXED ASSETS TO NET WORTH RATIO (in times):

(Amount in Rupees)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09 167527199

Total Fixed Assets Depreciation Reserve

101229657 109302854

118811563 128257804

(78294915) (81971713) (8566955)

(91050384) 973217021

Net Fixed Assets 22934742 Shareholder's Fund Funded Debt (Secured Loans)
38947059 89857676

27331141 91745059

33142308

37207420

70205497 198786558

106021456 140218557

23571398

18805950

13579377

10570321

Total Long term 128804735 115316457 124827406 153797934 209356879 Funds


FIXEDASSETS 0.18 RATIO (in times): 0.24 0.27 0.24 0.33

70

Fixed Asset Ratio


0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2004-05 2005-06 2006-07 2007-08 2008-09

Fixed Asset Ratio

71

ANALYSIS OR INTERPRETATION:

In 2004-05: The Fixed Assets Ratio is 0.18 times. It has been decreased from the last year. It is not a good sign for the company.

In 2005-06: The Fixed Assets Ratio is 0.24 times. It has been increased from previous year. The company has to improve their ratio and make efforts to improve their long term financial posit ion.

In 2006-07: The Fixed Assets Ratio is 0.27 times. It has been increased from the last year. It is a good sign for the company. This implies that the company is going to improve their long term financial posit ion.

In 2007-08: The Fixed Assets Ratio is 0.24 times. It is almost same as it was in last year. It is not a good sign for the company.

In 2008-09: The Fixed Assets Rat io is 0.33 which is increase from last year. But it is not sufficient . It is not good sign for company.

72

7.2.7 RATIO OF CURRENT ASSETS TO PROPRIETOR'S FUNDS:

The ratio is calculated by dividing the total of current assets by he amount of shareholder's funds. It is calculated as follows:

C/A to Proprietor's Funds= Current Assets/Proprietor's Funds*100

SIGNIFICANCE:

The rat io indicates the extent to which proprietor's funds are invested in current assets. There is no 'Rule of Thumb' for this rat io and depending upon the nature of the business there may be different firms. Proprietor's funds are assumed as shareholder's funds.

73

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS CURRENT ASSETS TO PROPRIETOR'S FUNDS (in times):

(Amount in Rupees)
Particulars 2004-05 11677194 4625507 95101375 2172297 2005-06 10197212 5274296 86167137 1878940 2006-07 8926601 4612368 74145794 2369378 2007-08 9941325 6534532 63743041 2996974 2008-09 14430914.82 10599671.84 87795776 2602243.6

Inventories Sundry Debtors Loans & advances Closing Stock of Raw Material Closing Stock of Milk Products Cash in Hand Cash at Bank Current Assets Proprietor's fund/Shareholder's Fund

46683614

78208543

122647164 129007472 141409710

116489 56707498

169160 66252837

402612 58962074

118602 98867680

63786.36 91224286.21

217083974 248148125 272065990 311209625 348126389 89857676 91745059 106021456 140218557 198786558.01

CURRENT ASSETS 2.41


TO PROPRIETOR'S FUNDS RATIO (in times):

2.7

2.56

2.21

1.8

74

2.5

1.5

0.5

0 2004-05 2005-06 2006-07 2007-08 2008-09

Current Assest

75

ANALYSIS OR INTERPRETATION:

In 2004-05: The Current Assets to Proprietor's Funds Rat io is 2.41 times. It has been decreased from the last year. It is not a good sign for the company.

In 2005-06: The Current Assets to Proprietor's Funds Rat io is 2.7 t imes. It has been increased from previous year. It is a healthy sign for the company. The company has to improve their ratio more and make efforts to improve their long term financial posit ion.

In 2006-07: The Current Assets to Proprietor's Funds Rat io is 2.56 times. It has been decreased from the last year. It is not a good sign for the company. This implies that owner's funds are not sufficient to finance the fixed assets and the company has to depend upon outsider's to finance for fixed assets.

In 2007-08: The Current Assets to Proprietor's Funds Rat io is 2.21 t imes. It is also decreased from previous year. It is not a good sign for the company.

In 2008-09: The Current Assets to Proprietor's Funds Rat io is 1.8 times. This is decreasing from last 3 years. It is not beneficial for the company.

76

7.2.8 DEBT SERVICE RATIO RATIO:

This rat io establishes the relat ionship between equity share capital including reserve and surpluses to preference share capital and other fixed interest bearing loans. This ratio is calculated is used to test the debt-servicing capacity of a firm. The ratio is also known as Interest Coverage Rat io or Fixed Charges Cover or Times Interest Earned. This rat io is calculated by dividing the net profits before and taxes by fixed interest charges:

Debt-Service Ratio= Net Profit (B.I.T.)/Fixed Interest Charges

SIGNIFICANCE: This rat io indicates the number of t imes interest is covered by the profits available to pay the interest charges. Generally, higher the ratio the better it is and safer are the long term creditors because even if earnings of the firm fall, the firm shall be able to meet its commit ment of fixed interest charges. But a too high interest coverage ratio may not be good for the company because it may imply that firm is not using debt as a source of finance so as to increase the earnings per share.

77

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS DEBT-SERVICE RATIO (in times):

Particulars

2004-05

2005-06 38573189

2006-07 43808467

2007-08 48228847

2008-09 52819123.82

Net

Profits 32607331

after Interest & Taxes Interest on


3414642 282678 554629 508090 441281

NDDB loans Net Profit


36021973 38855867 44363096 48736937 5346040.82

before Interest & Taxes Fixed Interest Charges DEBT


SERVICE RATIO times): (in 10.5 137.4 79.9 95.92 121.1 3414642 282678 554629 508090 441281

78

160 140 120 100 80 60 40 20 0 2004-05 2005-06 2006-07 2007-08 2008-09

Debt-Service ratio

79

ANALYSIS OR INTERPRETATION:

In 2004-05: The Debt Service Ratio is 10.5 times. It has been decreased from the last year. It is not a good sign for the company.

In 2005-06: The Debt Service Rat io is 137.4 t imes. It has been increased frpm previous year. It is a healthy sign for the company. The company is improving their rat io and making efforts to improve their long term financial posit ion.

In 2006-07: The Debt Service Ratio is 79.9 times. It has been decreased from the last year. It is not a good sign for the company. This implies that owner's funds are not sufficient to finance the fixed assets and the company has to depend upon outsider's to finance for fixed assets.

In 2007-08: The Debt Service Rat io is 95.92 times. It is increased from the last year which shows that company is making efforts.

In 2008-09: The Debt Service Rat io is 121.1 times. It is increased from the last year which shows that company is doing well in this field.

80

7.2.9

CAPITAL GEARING RATIO:

This ratio establishes the relat ionship between equity share capital including reserve and surpluses to preference share capital and other fixed interest bearing loans. This ratio is calculated as follows:

Capital Gearing Ratio= Fixed Income Bearing Funds/Long term Debt Bearing Fixed Interest

SIGNIFICANCE: Capital Gearing ratio is very important leverage ratio Gearing Should be kept in such a. way that the company is able to maintain a steady rate of dividend. High Gearing ratio is not good for a new company or a company in which future earnings are uncertain. There is no preference capital so we have not included in it. We have also taken lo ng-term debt bearing fixed interest as secured loans (long-term Loans).

81

(RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS)

CAPITAL GEARING RATIO (in times):

Particulars

2004-05 25256000

2005-06 25827120

2006-07 26427245

2007-08 26819655

2008-09 27493755

Equity Share Capital Reserve Surplus

& 142896591 147889652 165263766 204449286 208475082.78

Fixed Income 168152591 173716772 191691011 231268941 235968837 Bearing Funds Secured loans 38947059 (long term Loans)
CAPITAL GEARING RATIO times): (in 4.3 7.4 10.19 17.03 22.3 23571398 18805950 13579377 10570321

82

25

20

15 Capital Gearing Ration 10

0 2004-05 2005-06 2006-07 2007-08 2008-09

83

ANALYSIS OR INTERPRETATION:

In 2004-05: The Capital Gearing Rat io is 4.3 times.

In 2005-06: The Capital Gearing Rat io is 7.4 times.

In 2006-07: The Capital Gearing Rat io is 10.19 times.

In 2007-08: The Capital Gearing Rat io is 17.03 tomes.

In 2008-09: The Capital Gearing Rat io is 22.3 times.

High Gearing rat io is not good for the company or a company in which future earnings are uncertain. It has been increasing from last five years. It shows that company has no good signa l about its profitability and its financial posit ion.

84

7.3 ANALYSIS OF PROFITABILITY OR PROFITABILITY RATIOS


The main object of all the business concerns is to earn profit. Profit is the measurement of the efficiency of the business. Equity shareholders of the company are mainly interested in the profitability of the company. Profitability Rat ios measure the various aspects of the profitability of a company such as

1.

What is the rate of the profit on sales?

2.

Whether the profits are increasing or decreasing? And if decreasing, then it helps in finding out the cause of their decrease.

3.

Whether an adequate return is being obtained on capital emplo yed?

Profitability Ratios include the following:-

6.3.1 General Profitability Rat ios 6.3.2 Overall Profitability Rat ios

1. General Profitability Ratios The following ratios are known as general profitability rat ios: I. II. III. IV. V. Gross Profit Ratio Operating Rat io Operating Profit Rat io Expenses Rat io Net Profit Ratio

85

I. Gross Profit Ratio: This ratio shows the relat ionship between gross profit and sales.

Gross Profit Ratio= Gross Profit/Net Sales*100 Net Sales= Sales- Sales Return

SIGNIFICANCE:

This ratio measures the margin of profits available on sales. The higher the ratio, the better it is. The ratio should be adequate enough not only to cover the operating expenses but also to provide for the depreciation, interest on loans, dividends and reserves. The rat io is compared with earlier ratio and important conclusio n is drawn from such comparison for instances if there is a decline in gross profit ratio in comparison to previous year it may be concluded that:

I. Price of material purchased, freight, wages and direct changes may have gone up but selling price may not have gone up in proportion to increase in the cost. II. The selling price may have fallen but the price of the materials, freight, wages and other direct charges may have not fallen relat ively. III. There is a fall in sales of more profitable variety of goods.

86

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS GROSS PROFIT RATIO (in %):

(Amount in Rupees) Particulars 2003-04 2004-05 2005-06 2006-07 2007-08

Gross Profit 96495769 Net Sales GROSS PROFIT RATIO (in %):

101273528 106155602 118319642 131687654

1168875630 1331502393 1304013647 1537754900 1935681202 8.2 7.6 8.1 7.69 6.8

87

2007-08

2006-07

2005-06

2004-05

2003-04

10

Gross profit ratio

88

ANALYSIS OR INTERPRETATION:

In 2003-04: The Gross Profit Ratio is 8.2%. Gross profit must be sufficient to provide for operating expenses, interest on loans, depreciat ion and dividends otherwise company will not operate in this environment. It must generate sufficient profits. Higher the ratio better it is.

In 2004-05: The Gross Profit Rat io is 7.6%. It has been decreased from the last year. It is not a good sign for the company. It will be beneficial for the company to reduce operating expenses, dividend and interest on loans, otherwise there will be decrease in net profits.

In 2005-06: The Gross Profit-Ratio is 8.1%. It has been increased from previous year. It is a healthy sign for the company. The company is improving from the previous year ratio.

In 2006-07: The Gross Profit Ratio 7.69%. It has been decreased from the last year. It is not a good sign the company.

In 2007-08: The Gross Profit Ratio is 6.8%. It is almost same as it was in last year. It is also not a gci6tr sign for the company because company can do well as it was in previous years.

89

II.

OPERATING RATIO:

It establishes the relat ionship between cost of goods and other operating expenses on the one hand and the sales on the other hand. It measures the cost of operations by dividing operating costs with the net sales.

Operating Ratio= Operating Cost/Net sales*100 Operating Cost= COGS+ Operating expenses

SIGNIFICANCE: This ratio indicates the percentage of net sales that is consumed by operating cost. Obviously, higher the operating ratio, the less favorable it is, because it would have margin (operating profit) to cover interest, income-tax dividend and reserves. There is no rule of thumb for this ratio as it may differ from to firm depending upon the nature of its business and its capital structure.

90

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS OPERATING RATIO (in %): (Amount in Rupees)

Particulars Cost of Goods Sold Operating Expenses:Administrative Exp. Store Exp.

2004-05 1230228864

2005-06 1197858045

2006-07 1419432256

2007-08 1786464151

2008-09 218653051

21350165

25649243

24186218

25410461

38556621.34

20574655

21712944 11896307 1257116539 1304013647 96.4

25461485 20189201 1485386614 1537754900 96.59

21578939 38157296 1875493391 1937515705 96.79

21697023.29 18521261.26 2257427157 2339977375 96.5

Distribut ion Exp. 13688584 Operating Cost Net Sales OPERATING RATIO (in %): 12858422680 1331502393 96.6

91

2008-09

2007-08

2006-07 Operating Ratio 2005-06

2004-05

96.2

96.3

96.4

96.5

96.6

96.7

96.8

96.9

92

ANALYSIS OR INTERPRETATION:

In 2004-05:

Operating Rat io of the company is 96.6%.

In 2005-06:

Operating Rat io of the company is 96.4%.

In 2006-07:

Operating Rat io of the company is 96.59%.

In 2007-08:

Operating Rat io of the company is 96.79%.

In 2008-09:

Operating Rat io of the company is 96.79%.

It indicates that the percentage of net sales that is consumed by operating cost. Obviously, higher the operating ratio, the less favorable it is. But the operating ratio is higher from the last five years which shows that a small margin (operating profit) cover interest, income tax, dividend and reserves is left.

93

III. OPERATING PROFIT RATIO:


This ratio is calculated by dividing operating profit by sales. This ratio is calculated are as follows:

Operating profit ratio = Operating profit x 100 Sales

Operating Profit = Net sales - Operating Cost

Operating Cost = Cost of goods sold + Administrative and office expenses + selling and distributive expenses.

This ratio can also be calculated as: Operating profit ratio = 100-operating ratio

94

OPERATING PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

(amount in Rupees)
Particulars Sales Operating Cost Operating Profit Net Sales COST OF GOODS SOLD RATIO (in %): 1331502393 3.4 1304013647 3.6 1537754900 3.4 1937515705 3.2 2339977375 3.53 45660125 46897117 52368286 62022314 82549419 2004-05 1331502393 (1285842268) 2005-06 1304013647 (1257116530) 2006-07 1537754899 (1485386613) 2007-08 1937515705 (187493391) 2008-09 2339977375 2257427950

95

2008-09

2007-08

2006-07

2005-06

2004-05

3.1

3.2

3.3

3.4

3.5

3.6

3.7

Operating Profit Ratio

96

ANALYSIS OR INTERPRETATION:

In 2004-05, The Operating Profit Rat io is 3.4% In 2005-06, The Operating Profit Rat io is 3.6% In 2006-07, The Operating Profit Rat io is 3.4% In 2007-08, The Operating Profit Rat io is 3.2% In 2008-09, The operating profit ration is 3.5%

The company in 2003 has operating profit ratio is at 3.9%. But the perating profit ratio goes on declining i.e. 3.4%. In 2007, it remains constant. In 2006, it has been increased their ratio by 3.6. Now in the 2007 it has been decrease to 3.2. In 2007 it has been drease to 302 and in 2008 it again increase by 3.53 that mean company is controlling their costs.

97

(IV)

EXPENSES RATIOS:

Expenses ratios indicate the relat ionship of various expenses to net sales. Expenses rat ios are calculated by dividing each item of expenses with the net sales to anlyse the cause of several of the operating ration. The rati can be calculated for each individual item of expenses like cost of sales ratio, administrative expenses ratio, selling expenses ratio, material consumed ratio, etc.

SIGNIFICANCE:This ratio indicates the relat ionship of various expenses to net sales. The lower the ratio, the greated is the profitability and higher the ratio, lower is the profitability. While interpreting the ratio, it must be remembered that for a fixed expenses like rent, the ratio will fall if sales increase and for a variable expense, the ratio in proportion to sales shall remain nearly the same.

EXPENSES RATIO MAY BE CALCULATED AS:

1.

Cost of goods sold ratio:

Cost of goods sold/ Sales

98

COST OF GOODS SOLD RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS) (amount in Rupees)

Particulars
Cost goods sold Net Sales
COST GOODS SOLD RATIO (in %): OF

2004-05

2005-06

2006-07

2007-08

2008-09

of 123028864

1197858045 1419432256 1786464151 2339977375

1331502393 1304013647 1537754900 1937515705 161324324 92.4 91.8 92.3 92.20 93.1

99

2008-09

2007-08

2006-07 Cost of Goods Sold Ratio 2005-06

2004-05

91

91.5

92

92.5

93

93.5

100

2. Administrative & Office expenses ratio: Ad ministrative & Office expenses x 100/ Sales

ADMINISTRATIVE & OFFICE EXPENSES (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS) (amount in Rupees)
Particulars 2004-05 2005-06 25649243 2006-07 24186218 2007-08
35649454

2008-09
38556621.34

Ad ministrativ e 21350165 & Office

expenses Net Sales


ADMINISTR ATIVE OFFICE EXPENSES RATIO (in & 1331502393 1.6 1304013647 2 1537754900 1.57 1937515705 2339977375
1.84 1.65

101

2008-09

2007-08

2006-07 Ratio Times 2005-06

2004-05

0.5

1.5

2.5

102

3. Selling & Distribution Expenses Ratio : Selling & Distribution Expenses x 100/Sales

SELLING & DISTRIBUTION EXPENSES (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS) (amount in Rupees)

Particulars Distribution Expenses Net Sales SELLING &

2004-05 13688584

2005-06 11896307

2006-07

2007-08

2008-09

20189201

18521261.26 18521261.26

1331502393 1304013647 1537754900 1937515705 2339977375 1 0.9 1.31


0.94 0.92

DISTRIBUTION EXPENSES RATIO (in %):

103

2008-09

2007-08

2006-07 Selling & Distribution Expenses Ratio

2005-06

2004-05

104

4.

Store expenses ratio Store expenses x 100/Sales

STORE EXPENSES RATIOS (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

Particulars

2004-05 20574655

2005-06 21712944

2006-07 21578939

2007-08

2008-09

Store Expenses Net Sales


STORE EXPENSES RATIO (in %):

17671840.58 21697023

1331502393 1304013647 1537754900 1937515705 2339977375 1.5 1.7 1.4


0.91 0.92

105

2008-09

2007-08

2006-07 Store Expenses Ratio 2005-06

2004-05

0.5

1.5

106

5. Non -Operating expenses ratio : Non -Operating expenses x 100/Sales

NON OPERATING EXPENSES RATIOS (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

(amount in Rupees)
Particulars Depreciation Net Sales NON OPERATING EXPENSES RATIO %): (in 2004-05 5938526 1331502393 0.5 2005-06 3676797 2006-07 3697842 2007-08 2008-09

5380822

6271318.25
2339977375 0.27

1304013647 1537754900 1939681203 0.3 0.24


0.27

107

2008-09

2007-08

2006-07 Non operating Expenses Ratio

2005-06

2004-05

0.1

0.2

0.3

0.4

0.5

0.6

108

ANALYSIS OF INTERPRETATION:

(I)

Cost of goods sold ratio:

The cost of goods sold ratio of the company in 2003-04 is 91.7%, in 2004-05 is 92.4%, in 200506 is 91.8%, in 2006-07 is 92.30% and in 2007-08 is 92.20%. In 2008-09 it becomes 9.3. This shows that the ratio is first of increased from the last three years. But after that the company has decreased their ratio because lower the ratio, better it is for the company.

(II)

Administration expenses ratio:

The company's Administration expenses ratio in 2003-04 is 1.7%, in 2004-05 is 1.6%, in 200506 is 2 %, in 2006-07 is 1.57% and in 2007-08 is l.|lj%. phis shows that the ratio is decreasing from the last three years. But after that the company has decreased their ratio because, the ratio better it is for the company. In 2008-09 it becomes 1.65.

(III) Selling & Distributive Expenses:

The company's Selling and Distribut ive Rat io in 2003-04 is 0.8%, in 2004-05 is 1%, in 2005-06 is 0.9%, in 2006-07 is 1.31% and in 2007-08 is 1.96 in 2008-09 it becomes 0.8. It shows that sometime it increasing or some time it decreasing.

(IV) Store expenses ratio:

The company's store expenses rat io in 2003-04 is 1.8%, in 2004-05 is 1.5%, in 2005-06 is 1.7 %, in 2006-07 is 1.4% and in 2007-08 is 0.94 %. In 2008-09 it becomes 9.2.

109

(V)

Distribution expenses ratio & non-operating expenses ratio:

The company's Distribut ion expenses ratio & non-operating expenses ratio has decreased. The company has reduced their expenses ratio as lower the ratio, better it is.

(VI) Net Profit ratio:

This ratio shows the relat ionship between net profit and sales. It may be calculated by two methods:

1. 2.

Net Profit ratio = Net Profit/Net sales x 100 Net Profit ratio = Operating Net Profit/Net sales x100

SIGNIFICANCE:This ratio measures the rate of net profit earned on net sale. It helps in determining the overall efficiency of the business operation. An increase in rat io over the previous year shows improvement in the overall efficiency and profitability of the business.

110

NET PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

(amount in Rupees)
Particulars 2004-05 2005-06 25811088 2006-07 34145435 _^ 2007-08 35375066 2008-09 52452906

Net Profit after 24912205 Tax Income Tax Deposit Refund of Income Tax FBT Deposited 0 Depreciation
5938526 (604875) 8300000

12753210

12102832

13000000

(198209)

(2659662)

(357922)

207100 3676797 (10824133)

219862 3697842 (13047142)

211703 5380829 13902053

366217 6271318 13322789

Miscellaneous (5848822) Income Net Operating 32697034 Profit Net Sales


NET PROFIT RATIO (in %):

31425853

34459167

35375066

45767652

1331502393 1304013647 1537754900 1935681203 2.5 2.4 2.22 1.82

23399773758 2

111

2008-09

2007-08

2006-07 Net Profit Ratio 2005-06

2004-05

0.5

1.5

2.5

112

ANALYSIS OF INTERPRETATION:

(i) From year 2003 to 2005: The net profit ratio has been increased every year. Net profits which are distributed to shareholder, funds or in reserves of the company. It is a good indicator for the financial soundness of the company. This shows that it has been increased only if the operating income will increase and operating expenses will decrease. It means company profitability and financial condit ion is sound which is beneficial for the shareholder and also for emplo yees of the company.

(ii) From year 2006 to 2007: The net profit ratio has been decreased. But in 2005-06, the rat io has been decreased by 0.1%. It is quite declined which it is sat isfactory for the company. In 2006, the ratio may decrease due to income tax, depreciat ion, etc. It means company profitability and financial condit io n is sound which is beneficial for the shareholders and also for the emplo yees of the company.

113

VII

CASH PROFIT RATIO:

The net profits of the firm are affected by the amount of depreciat ion charged. Further, depreciat ion being non-cash expense, it is better to calculate cash profit ratio. This ratio measures the relat ionship between cash generated from operations and the net sale. Thus,

Cash profit ratio = Cash profit/net sales x100

Cash profit = net profit + depreciation.

CASH PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

Particulars Net Profit Depreciat ion Cash Profit Net Sales

2004-05 32607330 5938526 38545856 1331502393

2005-06 38573189 3676797 42249986 1304013647 3.2

2006-07 43808467 3697842 47506309 1537754900 3.08

2007-08 48228847 5380829 53609676 193751705 2.76

2008-09 45767652 6271318 52038970 2339977375 2.2

CASH PROFIT 2.9 RATIO (in %):

114

2008-09

2007-08

2006-07 Cash Profit Ratio 2005-06

2004-05

0.5

1.5

2.5

3.5

115

ANALYSIS OR INTERPRETATION:

In 2004-05, The Company's cash profit ratio is 2.9%

In 2005-06, The Company's cash profit ratio is 3.2%

In 2006-07, The Company's cash profit ratio is 3.08%

In 2007-08, The Company's cash profit ratio is 2.76%

In 2008-09, The Company's cash profit ratio is 2.2%

The company's cash profit rat io is increasing every year. It is a good sign for the company. It shows that company's profitability and financial posit ion is sound. It also indicated that the cash profits have been increased over the net sales. As the net sales increases, the cash profits are also increases every year.

116

7.3.2 OVERALL PROFITABILITY RATIOS:

Profits are the measures of overall efficiency of a business. The Higher the profits, the more efficient are the business considered. Following are the important overall profitability rat ios or measures of Return on Invest ments:

I II III IV V VI

Return on Shareholder's Invest ment Return on Equity Capital Earning Per Share Return on Gross Capital Emplo yed Return on Net Capital Emplo yed Capital Turnover Ratio

1.

Return on Shareholder's Investment or Net Worth:

This ratio establishes the relat ionship between net profits (after interest and taxes) and the proprietor's funds. Thus

ROI= Net profits(after interest and taxes)/ Shareholder's funds

SIGNIFICANCE:

This ratio reveals how well the resources of a firm are being used, higher the ratio, better are the results. This rat io is calculated as a percentage by mult iplying with 100.

117

RETURN ON SHAREHOLDER'S INVESTMENT OR NET WORTH

(OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

Particulars

2004-05

2005-06

2006-07 34145435

2007-08 35375066

2008-09 92452906

Net Profit after Tax

24912205 25811088

Shareholder's Funds 89857676 91745059 106021456 140218557 198786558


RETURN ON 27.7 28.1 32.20 25.22 26.4

SHAREHOLDER'S INVESTMENTS (in%):

118

2008-09

2007-08

2006-07

2005-06

2004-05

10

15

20

25

30

35

Return on Shareholder's Investments

119

ANALYSIS OR INTERPRETATION:

In 2004-05: The Company's ROI ratio is 27.7% In 2005-06: The Company's ROI ratio is 28.1% In 2006-07: The Company's ROI ratio is 32.20% In 2007-08: The Company's ROI ratio is 25.22% In 2008-09: The Company's ROI ratio is 26.4%.

This ratio reflects the over-all profitability of the business. In 2003, it has been reduced from the previous year which shows that it has been reduced on total capital emplo yed. But from 2004 to 2009 the company has been increased its ratio which shows the company has improved its profits on capital emplo yed.

120

II.

Return on Equity Capital

This ratio establishes the relat ionship between profits of a capital and its equity capital can be calculated as:

Return on Equity Capital = Net Profit after Tax-Preference Dividend/Equity share capital (paid up)

SIGNIFICANCE:

The ratio is meaningful to the equity shareholders who are interested to fenow profits earned by the company and those profits which can be made available to pay dividend to them. Higher the ratio, better it is.

RETURN ON EQUITY CAPITAL (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

(amount in Rupees)

Particulars
Tax Equity Share Capital
RETURN ON EQUITY CAPITAL (in %):

2004-05

2005-06 25811088

2006-07 34145435

2007-08 35375066

2008-09 52452906

Net Profit after 24912205

25256000

25827120

26427245

26819655

27493755

98.6

99.9

129.20

131.89

190.7

121

2008-09

2007-08

2006-07

2005-06

2004-05

50

100

150

200

250

Return on Equity

122

ANALYSIS OR INTERPRETATION:

In 2004-05: The Company's ROI ratio is 98.6% In 2005-06: The Company's ROI ratio is 99.9% In 2006-07: The Company's ROI ratio is 129.20% In 2007-08: The Company's ROI ratio is 131.89% In 2008-09: The Company's ROI ratio is.190.7%%

This ratio measures how effectively the equity shareholder's funds are being used in the business. Higher the rat io better is the performance and prospects of the company. The company has higher return which is belonging to equity shareholders. It has been increased due to increase in net profits after interest and tax. All profits left will be available to all equity shareholders. This indicates that the company has high earning capacity. The company's profitability and financial posit ion is sound.

123

III. Earnings per Share(E.P.S):


E.P.S. is a small variat ion of return on equity capital and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity share.

E.P.S.= Net Profits after Taxes-Preference Dividend/ No. of Equity Shares

SIGNIFICANCE: The earnings per share are a good measure of profitability and when compared with E.P.S. of similar other companies, it gives a view of the comparatives earnings or earning power of the company. E.P.S. calculated for number indicates whether or not earning power of the company has increased.

EARNING PER SHARE (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)

(amount in Rupees)
Particulars 2004-05 2005-06 25811088 2006-07 34145435 2007-08 35375066 2008-09 52452906

Net

Profit 24912205

after Tax Number of


25256 25827 26427 26820 27140

Equity Shares
EARNINGS PER SHARE (in %): 986.4 999.4 1292 1318.98 1932.6

124

2008-09

2007-08

2006-07

2005-06

2004-05

500

1000

1500

2000

2500

Earning Per Share

125

ANALYSIS OR INTERPRETATION:

In 2004-05: The Company's ROI ratio is 986.4 times.

In 2005-06: The Company's ROI ratio is 999.4 times.

In 2006-07: The Company's ROI ratio is 1292 times.

In 2007-08: The Company's ROI ratio is 1318.98 times.

In 2008-09: The Company's ROI ratio is 1932.6 times.

From the above, earnings per share of the company shows that the earnings per share are increasing every year. The company has too much high earning capacity. The company has profitability posit ion as well as financial posit ion is sound. As earnings per share is a good measure of profitability.

126

IV.

Return on Capital Employed:

This ratio establishes the relat ionship between profits and the capital emplo yed. It is used to measure the overall profitability and efficiency of a business. Capital emplo yed refers to the total of invest ments made in a business and can be defined in a number of ways. The three widely used definit io n of this term are:

I. II.

Gross Capital Emplo yed Net capital Emplo yed

III. Proprietor's Net Capital Emplo yed IV. Capital Turnover Ratio

I.

Gross Capital Employed:

It is usually comprises the total assets fixed as well as current assets used in a business.

Gross Capital Employed= Fixed Assets+ Current Assets

127

GROSS CAPITAL EMPLOYED RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS
Particulars
2004-05

2005-06 27331141

2006-07 108S25401

2007-08 37207420

2008-09 46143681

Fixed after

Assets 22934742

Depreciation Investments (inside business) Current Assets Total Assets Net Profit as per P&L A/C
RETURN ON GROSS CAPITAL EMPLOYED (in %): 12.7 13.2 13.5 13.18 17.9 257518719 32607330 292979269 38573189 322708398 43808467 365917145 48228847 411770171 52819123.82 217083977 248148128 196382897 311209625 348126390.1 17500000 17500000 17500100 17500100 17500100

128

2008-09

2007-08

2006-07

2005-06

2004-05

10

15

20

Gross Capital Employed

129

ANALYSIS OR INTERPRETATION:

The company's gross capital emplo yed is increasing every year. It is a good sign for the company's. It shows that company's Profitability and financial posit io n is sound. It is the prime ratio which measures the efficiency of a business. This shows that the company has properly formulated its borrowing polic y which indicates the rate of interest on borrowing policy which indicates the rate of interest on borrowings is less than the return on capital emplo yed. As the ratio increases every year, it is also beneficial to the emplo yees of the company by providing them fair remunerat ion.

130

V. Net capital Employed:


It comprises the total assets used in a business less its Current Liabilit ies. Net Capital Employedh Total Assets-Current Liabilities.

NET CAPITAL EMPLOYED RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS

Particulars I Net Profits Total Assets Current (Liabilities (short-term) Net Capital Employed NET CAPITAL EMPLOYED (in %):

2005-06 38573189 292979269

2006-07 43808467 322708398

2007-08 48228847 365917145

2008-09 52819123 411770171

(126939618) (137924468) (176744145) (198186558)

166039651

184783930

189173000

2129973613

23.2

23.7

25.49

25

131

2008-09

2007-08

2006-07 Net Capital Employed 2005-06

2004-05

10

15

20

25

30

132

ANALYSIS OR INTERPRETATION:

The company's return on capital emplo yed is increasing every year. It is a good sign for the company's. It shows that company's Profitability and financial posit io n is sound. It is the prime ratio which measures the efficiency of a business. This shows that the company has properly formulated its borrowing polic y which indicates the rate of interest on borrowing policy which indicates the rate of interest on borrowings is less than the return on capital emplo yed. As the ratio increases every year, it is also beneficial to the emplo yees of the company by providing them fair remunerat ion.

133

IV.

Capital Turnover Ratio:

This rat io establishes the relat ionship between cost of goods sold and the capital emplo yed. This ratio is calculated to measure the efficiency of effect iveness with which a firm ut ilizes its resources or the capital emplo yed. As capital is invested in a business to make sales and earn profits, this ratio is a good indicator of overall profitability of a concern.

Capital Turnover Ratio= COGS/Capital Employed

CAPITAL TURNOVER RATIO RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS

(Amount in Rupees)

Particulars COGS Net Capital Employed


CAPITAL TURNOVER RATIO (in

2004-05 1230228864 153716841

2005-06

2006-07

2007-08

2008-09

1197858045 1419432256 1786464151 2178653051 166039651 184783930 189173000 1891783930

7.2

7.68

9.44

9. 5

134

10 9 8 7 6 5 4 3 2 1 0 2004-05 2005-06 2006-07 2007-08 2008-09

Capital Turn Over Ratio

135

ANALYSIS OR INTERPRETATION:

In 2004-05: The Company's Capital Gearing Ratio is 8 times, which is quite increased from previous year. This rat io measures the efficiency or effect iveness with which the company utilizes its resources or capital emplo yed.

In 2005-06: The Company's Capital Gearing Rat io is 7.2 t imes, it has been decreased from all the previous years. There must be improvement in capital efficiency otherwise the company might be get into trouble and its financial efficiency will be reduced.

In 2006-07: The Company's Capital Gearing Ratio is 7.68 times, it has been increased from previous year. But this improvement is not sufficient.

In 2007-08: The Company's- Capital Gearing Ratio is 9.44 t imes, it has been increased with more improvement than last year. This shows that how much t imes the capital is turned over into sales.

In 2008-09: The Company's Capital Gearing Rat io is 9.5 times, which means quicker rotation of capital to generate higher sales which in turn leads to higher profitability. It indicates that how much times the capital is turned over into sales.

136

8. CONCLUSIONS AND FINDINGS:

1.

The company's short term financial posit ions is found and sat isfactory because . its current

as well as quick ratio is double than its current liabilit ies of the company each year, which means company's creditors secured each year.

2.

From the point of view of long term financial posit ion of the company Debt Equity rat io,

debts are always less than equity in five years. It means company is less dependent on outside loans.

3.

Cash Profit Ratio, Return on Shareholders funds rat io and earnings per share are earning

per share are increasing each year. It is a good sign for the company. At the end, we can say that the financial posit io n of the company is sound.

137

9. SUGGESTIONS:

1.

The company's capital turnover ratio has been decreasing each year. It must be improved. If the capital turnover ratio is low, it will indicate that capital is lying ideal. Now this time it is decreasing otherwise company will suffer,

2.

The company's working capital turnover is also low. It has been decreasing since last four years. It means stock is not readily converted into sales. It must be increased otherwise sales can suffer.

3.

The company's gross profit rat io is decreased. But now the ratio is increased because of reduce in direct expenses. It must be reduced otherwise profits will not increased in future.

138

9.BIBLIOGRAPHY

Balance sheet of five years of Verka Milk Plant, Mohali. Balance sheet from 01-04-2004 to 31-03-2005, Balance sheet from 01-04-2005 to 31-03-2006, Balance sheet from 01-04-2006 to 31-03-2007, Balance sheet from 01-04-2007 to 31-03-2008, Balance sheet from 01-04-2008 to 31-03-2009

Kothari, C.R., Research Methodology: Method and Techniques, Wishwa Prakashan, 1990, New Delhi.

y y y y

I.M.Pandey, Financial management Vikas Publishing House, 2004. Khan and Jain, Financial management Himalaya Publishing House, 1999, Mumbai. MY Khan , P.K Jain Management accounting Tata Mc Graw Hills ,2001,Noida. I.M Pandey, Finance, a guide for managing company funds and profits, prentice hall of India, 2005.

ShashiK.GuptaandR.K.Sharma,Management accounting,Kalyani New Delhi.

publishers, 2009,

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Ria Goel : Ratio Analysis of Caffe Nero,2007,machester Cndymn91; Financial Ratio Analysis Report Of Ford Motor Company,(2006) washington Akehrig: Ak Steel Rat io Analysis,(2007)linden Apur Basarker: financial Analysis Of Hmt,(2007),Dhaka Vadu Krishna:Annual report analysis of Kotak Mahindra Bank(2008),Bangalore Icarr : Nike, Inc. Financial Rat io Analysis(2006), Nashville,TN Kalmah; Modern cement, Ratio Analysis(2009), Dhaka Sat56: Ratio Analysis Of Bharti Airtel(2008),Noida Arunam Jain: Rat io Analysis Of Tcs Wipro Infosys(2008),Pune Jitesh Chudasama: Analysis Of Annual Report Of Ongc(2009), Gujarat Sasandifer :Rat io Analysis Of Starbucks Vs Mcdonald's(2009),Portland Jain and Sharma:A financial report on ratios of 3Ms corporation, (2008)
139

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