Beruflich Dokumente
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On
Financial Statement
Analysis
Jaipur Saras Dairy
PROJECT OBJECTIVE
CONCEPTUAL
FUNCTIONAL
BRIEF HISTORY
OBJECTIVES
ORGINISATION HISTORY
FINANCIAL ANALYSIS
FINANCIAL APPRAISAL
CONCEPT
NEED OF FINANCIAL APPRAISAL
TOOLS AND TECHNIQUE OF FINANCIAL APPRAISAL
ACCOUNTING TECHIQUES
INTRODUCATION
JAIPUR DAIRY AN OVERVIEW
BRIEF HISTORY
Dairy Development was initiated by the state Government in the
early seventies under the auspices of Rajasthan State Dairy
Development Corporation (RSDDC) registered in 1975. Two
years later RCDF assumed responsibility for the functions of
RSDD. It became the nodal agency for implementation of
operation flood in the state.
The dairy procures milk through his network of more than 700
villages’ level dairy co-operative societies spread in Jaipur and
Dausa district. Dairy arranges transportation of milk from
doorsteps milk producers to the receiving points at a dairy plant
and its chilling centers. Payment of milk is distributed to the milk
producers on a ten day basis.
Procreant and input activities include farmers organization, input
services like animals health coverage and supply of balance cattle
feed and improved fodder seeds to the members, co-operative
development programme, training etc. in 1992, the Jaipur dairy
plant was handed over to Zila Dugdh Utpadak Sahakari Sangh
(Jaipur milk union) with the multiple increases in market of milk
and milk product and also in milk procurement. The capacity of
the plan was increased to 2.5 lakh ltr per day in 1998-99 to
improve the quality or raw milk the dairy has commissioned three
chilling centers at Kaladera, Dudu & Shahapura apart from
enhancing the capacity Dausa milk chilling center.
Over the year, there has been not looking back for Jaipur dairy
and the significant growth has been achieved during the year
1998-99 monthly average of milk sale has been 143000 Ltr per
day with peak milk procurement during besides the near by sale
milk unions like Sikar, Tonk, Swaimadhopur and Bharatpur also
send their milk to Jaipur dairy for processing during peak flush
season.
PRODUCTS
Skimmed
Camel Milk
Chaach Ghee
Paneer SMP
Shrikhand WMP
Icecream Cheese
Mawa
Cattle Feed
Balanced feed
High energy
Mineral Mixture
• Toned
• Double toned
The Jaipur dairy believes that the delighted customer is the only
key for overall development of the organization
Quality
Engineering
ACTIVITIES
This Dairy procures milk through its strong network of over 1200
village level Dairy Co-operative spread in Jaipur and Dausa
district. Dairy arranges transportation of milk from doorsteps of
milk producers to the receiving point at daily plant and its chilling
centers. Payments of milk are disbursed to the milk producers on
ten day basis.
BALANCE SHEET
Balance sheet is one of the most significant financial statements
of business firm. It is generally known by various titles such as;
(1) economic or general balance sheet; (2) statement of financial
position; (3) statement of assets and liabilities; (4) statement of
resources and liabilities; (5) statement of assets, liabilities and
owners’ funds etc. A balance sheet contains information about the
assets, liabilities and owners’ interest in the business at a
particular point of time. For example, a balance sheet of a firm
prepared as on 31st March, 2009 reveals the firm’s financial
position on this specific date. Thus, the balance sheet is a
statement of financial position of a business firm as on a
specific date which reports assets, liabilities, capital,
reserves and the balances of other accounts at their
respective book values. At the end of the accounting year,
after transferring all the revenue accounts to trading, profit and
loss account, the balance of remaining account are shown in it.
Out of these accounts, the debit balance of various assets such as
land, building, investments, inventory, cash at bank cash in hand,
sundry debtors etc. are shown on the right side of the balance
sheet, whereas claims against these assets i.e. liabilities and
owners’ equity such as secured and unsecured loans, sundry
creditors, capital reserve funds etc., which have credit balances,
are shown in the left side of the balance sheet. Thus, the liabilities
and owners fund are shown on the left side and various assets on
the right side of the balance sheet. This makes the total of the
both side equal. That is why the statement of assets, liabilities
and owner’s equities is generally known as balance sheet. In
other words, ‘a balance sheet is a screen picture of the financial
position of a going concern at a certain moment.’
Balance sheet
Creditors
Bills Payable
Customer Advances
Unclaimed Dividend
II. Provisions
Taxation
Proposed Dividend
Balance sheet
As on 31st March, 2009
Less: Depreciation
Stock
Bills Receivable
Debtors
Creditors
Bills Payable
Customer Advances
Unclaimed Dividend
Taxation
Proposed dividend
Net Current Assets (CA-CL)
Financed by
Share Capital
Shareholders Equity
Loan Funds
Secured Loans
Unsecured Loans
Total obligations
1. Assets
2. Liabilities
Long-term Liabilities
Current Liabilities
Share Capital
ASSETS
Assets have been defined as a tangible objects or intangible
rights owned by an enterprise and carrying future economic
benefits. The future economic benefits embodied in an asset may
flow to the enterprise in a number of ways. For example, an asset
may be (a) used single or in combination with other assets in the
production of goods or services to be sold by the enterprise, (b)
exchanged for other assets; (c) used to settle a liability; (d)
distributed to the owners’ of the enterprise. These assets
represent (a) purchasing power (cash); (b) money claims
(receivables, stock etc.) and (c) tangible and intangible items the
can be sold or used in business to generate income. All the assets
in the balance sheet are listed either in order of liquidity or
permanency. These assets are grouped in different categories on
the basis of similar characteristics. From analysis point of view,
the assets are classified in the following groups:
1. Fixed Assets
Fixed assets are those assets which are acquired for the purpose
of using them in the conduct of business operations and not for
reselling to earn profits. In other words, fixed assets are assets
of a relatively permanent nature used in the conduct of
business operations and not intended for sale. These are
the long-term assets held for periods longer than accounting
period and known as ‘block or Capital assets’, fixed assets may be
either tangible or intangible.
Intangible fixed assets are those fixed assets which have neither
physical existence nor can be seen but can be imagined. They do
not represent any physical asset in the form of documents of title
like bills receivable and promissory notes. They can not be seen
or touched because they are invisible. The intangible assets
confer certain exclusive rights and facilities so that one firm is in
a position to earn more profits earning ability of the firm. These
assets include; (1) goodwill (2) patent and trade mark, (3)
copyright, (4) license and franchise, brands, intellectual capital
etc.
Current Assets
Current assets are those assets which are reasonably
expected to be realized in cash or sold or consumed
during the normal operating cycle of the business. The
operating cycle is the period which is taken to complete the
sequence of events right from purchase of materials or goods for
cash to the realization of sales in cash and normally it is of one
year. The current assets are acquired for reselling or be converted
into cash during the course of business. These are also known as
short-term assets. These current assets include (1) cash in
hand and at bank; (2) bills receivable; (3) sundry debtors,(4)
inventory raw material, work-in-progress, finished goods; (5)
marketable securities, temporary or short-term investments, (6)
advance payments; (7) prepaid expensed, accrued incomes etc.
Investments
The investments of a firm in shares, debentures and bonds of
other firms or government bodies for profit or control are known
as investments. The investments are purchased for long-term, i.e.
to hold at least for more than the accounting period. The long-
term investments are shown at their original cost, but the current
market price is usually given in parenthesis. Trade investments
mean investment by a company in share and debentures of
another company for the purpose of promoting the trade or
business of the first company. Trade investments are long-term
investments.
Miscellaneous Assets
Long-term Liabilities
Long term liabilities, sometimes also called ‘fixed liabilities’, can
be defined as, “a liability falling due on a date later than
the expiration of one whole accounting period.” Such
liabilities are of two types secured and unsecured on the basis of
charge on assets of the firm. a few examples of such liabilities
are: (1) debentures or bonds, (2) mortgages, loans; (3) long-term
loans from banks or financial institutions.
Current Liabilities:
Current liabilities, from the view point of an analyst are all short-
term obligations generally due and payable within a year
or an operating cycle. These include those parts of the long-
term obligations whose liquidation is expected within one year of
the balance sheet date. Such liabilities arise due to day-to-day
transactions. Generally, payment of these liabilities is made either
out of current assets converted into cash or by creating news
current liabilities. These are also known as ‘short-term
liabilities’. The examples of current liabilities are: (1) trade
creditors, (2) bills payable, (3) dividend and tax payable, (4) bank
overdraft, (5) outstanding expenses and deferred income etc.
OWNERS’ EQUITY
In case of a company, the owners of a business are known as
shareholders. Owners’ equity means the financial interests or
claims of owners of the business against the assets of the firm.
Alternatively, owners’ equity may be defined as the residual
interest in the assets of the enterprise after deducting all
its liabilities. It is also called ‘Net Worth’ or ‘Shareholders
Funds’ or ‘Net Capital Employed’. Thus, the owners’ interest is
residual in nature reflecting the excess of the firms’ assets over
its liabilities, current as well as long-term. This amount is not
always static, but changes with the change in the assets of the
company. The owners’ equity is different from liabilities in the
following ways.
Or
Or
Revenue
Sales less returns ***
Total Revenues
Depreciation
Interest ---
Management
Investors
Shareholders
Debenture holders
Prospective investors
Employees
Customers
Public
Trade Associations
Stock Exchanges
1. Lack of precision
2. Incomplete Information
3. Lack of Exactness
4. Interim Reports
6. Lack of Comparability
7. Historical Costs
The income statement or the profit and loss account presents the
summary of revenues, expenses and net income (or net loss) of a
firm for a period of time. Thus, it serves as measure of the Firm’s
profit ability. It’s a systematic array of the data of the revenues,
revenues deductions (expenses, revenues, revenue deductions
expenses, losses, taxes etc.)
PARTIES INTERESTED
Accounting to the American institute of certified public
accountants, financial statement reflects,” a combination a record
facts, accounting conventions and personal judgments and
conventions applied, affect them materially”.
Debenture holders
Taxation authorities
FINANCIAL APPRAISAL
A company’s financial statements are intended to summarize the
results of its operations and its ending financial condition. The
information in the statement is studied and related to other
information by external users for several reasons. Current
shareholders, for example, are concerned about their invested
income, as well as the company’s overall profitability ad stability.
Some potential investors are interested in “solid” companies that
are companies whose financial statements indicate stable
earnings and dividends with little growth in operations. Others
prefer companies whose financial statement indicate rend for
rapid growth in different lines of business. Short-term creditors
are interested in a company’s short run solvency, its ability to pay
current obligation as they become due. Long-term creditors are
concerned about the safety of their interest; income and
company’s ability to continue earning and cash flow to meet its
financial commitments and these are only few of the users and
uses of financial statements.
But the numerical data in the financial statement are quite calm.
They cannot speak. Analytical data are not ending in themselves,
but they are meant to a end. Financial appraisal is an attempt to
determine the significance and meaning of the financial
statement data so that forecast may be may be made of the
prospects for future earnings, ability to pay interest, debts
maturities both current as well as long term profitability of a
sound dividend policy. Financial appraisal involves the
assessment of firm’s past, present and anticipated future financial
condition.
(1)Accounting technique
(3)Mathematical technique
In this study ratio analysis has been used as a tool, hence only
accounting technique has discussed in detail.
Accounting techniques:
To appraise the financial strength as well performance of a
business concern various accounting technique are applied. The
object of these techniques is to simplify to collected and
rearranged and data by which they can be made easy to
understand. These techniques are summarized as under:
Ratio analysis
Trend percentage
Ratio analysis:
TREND PERCENTAGE
A horizontal comparison of various items of one along with their
percentage to the total can be made to know the trend of
Particular Item of over a period of years. The study of trend
will indicate the direction of movement over a long time. One can
get a better view of things unaffected by short-term influences by
the study of long-term trend percentage. Another type of the
comparison by trend percentage can be termed as index
numbers. Index numbers can be computed by taking common
base.
PROJECT OBJECTIVES
CONCEPTUAL
To prepare a report after analysis and interpretation of finding
from Balance sheet as well profit and loss account through
applying various mathematical and financial tool and techniques.
FUNCTUAL
The present earning capacity or profitability of the
Jaipur Dairy Ltd.
BREAK-EVEN ANALYSIS:
The narrower interpretation of the Break-even analysis tells us
that it is a system of determination of that level of activity where
total cost equal total revenue of selling price. The broader
interpretation refers to that analysis which determines the
provable profit at any level of activity, as stated by Weton and
Briahman.” Break-even analysis is useful in studying the relations
among volume prices and cost structure, it is thus helpful in
pricing, cost control and other financial decision.” There, it is very
crucial tool to measure profitability of business. “It magnifies a
set of interrelationship of fixed costs, variable costs, level of
activity of the profitability of the concern,” Says Kulsrestha. Thus
it is a tool of financial analysis in a specific way of presenting and
studying in interrelationship among costs, volume and profits.
CONCEPT
NEED FOR WORKING CAPITAL
ANALYSIS OF WOKING CAPITAL
WORKING CAPITAL TREND ANALYSIS
RATIO ANALYSIS OF WORKING CAPITAL
CURRENT RATIO
QUICK RATIO
ABSOLUTE LIQUIDITY RATIO
INVENTORY TURNOVER
CONCEPT
The term net working capital can be defined in two ways (1) the
most common definition of Net Working Capital (NWC) is
difference between current assets and current liabilities (2) and
alternate definition of NWC is that portion of a firm’s current
assets which is financed by long term funds. The quantitative
concept or net working capital concept explains working capital
as “excess of current assets over current liabilities.” Net Working
Capital represents the amount of the current assets, which would
remain if all the current liabilities were paid,” (3) Net Working
Capital is commonly defined as difference between current assets
and current liabilities.
The term current assets may be defined as cash and other assets,
which are expected to be converted in to cash in the ordinary
course of business within one year or within such longer period as
constitutes the normal operating cycle of business. Current
liabilities are those liabilities classifiable as current assets or the
creation of other current liabilities.
2006-2007 TO 2008-2009
Quick ratio
Absolute ratio
A. Current ratio:
Current Assets
Current Liabilities
With the help of this ratio the analyst can review the extent to
which the company can cover such liabilities with current
assets. The current ratio gives the analyst a general picture of
the adequacy of the working capital of a company and ability of
the company to meet its day-to-day payment obligation. “It
likewise measures the margin of safety provided for paying
current debts in the event of a reduction in the values of
current assets.”
Walker and Boughn have the same view they are a good
current ratio may mean a good umbrella for creditors against
the rainy days. But the management it reflects bad financial
planning or presence of idle assets or over capitalization.”
Under trading
Over trading
INFERENCE
This table reveals that current ratio increased that is making
improvements in its short-term solvency. It is because of increase
in current assets as compared to current liabilities. Still this is
lower than standard current assets Ratio that shows a little bit
unsatisfactory liquidity position of the company.
Quick Assets
Current Liabilities
The term liquid assets include cash bank balance and marketable
securities, if current liabilities are to pay at once, only balance of
cash and bank and marketable securities will be utilized.
Therefore, to measure the absolute liquidity of a business, this
ratio is calculated.
The table shown on the next page reflects the absolute liquidity
ratio Jaipur Dairy Ltd.
RESEARCH METHODOLOGY
This is the first step under which the problem is stated in general
way and then ambiguities i.e. understanding and rephrasing the
problem thoroughly and rephrasing the same into a meaningful
terms from an analysis point of view.
Research design
• Type of research
• Sample design
Type of research
SAMPLING DESIGN
Primary data
Secondary data
PRIMARY DATA
Primary data is collected a fresh and for the first time. Thus
happens to be in character. Primary data can be collected by
various methods i.e.
1. Observation
2. Interview
3. Schedules
4. Questionnaires
Secondary Data
The sources of secondary data are:-
1. Corporative magazines
5. Employment exchange
THE PROLOGUE
Today India is a biggest milk producer in the Asia. After
independence and milk revelation the production of milk
increased manifolds. Milk is an essential utility in every body’s
life. It is one of the basic needs of human life. Now a day
production of milk and milk products is most important in India,
both in terms of generating employment opportunities and for
meeting the basic requirement of people. It yields manifold
returns. This industry has contributed in a significant manner to
the faster and quicker economic development of this members
and country. The plant of Jaipur Dairy Ltd. is located on Jawaharlal
Nehru Marg. This is the biggest milk supplier in Jaipur district
PROFITABLITY
WORKING CAPITAL
However, the Jaipur Dairy Ltd. has shortage of capacity to pay its
entire current liabilities at once. Inventory turnover ratio is very
good that reveals that dairy can increase its sales at lower profits.
Proper attention should be paid by management towards this side
to utilize funds blocked in stock. Number of days to collect
receivable requires improvement on the part of management. But
since milks are a seasonal crop type business, stocks do get
complied for a few months and that is why the funds get blocked.
It is suggested in this respect that the Jaipur Dairy Ltd. should try
to balance the proportion of cash and bank balance in current
assets. The management should take steps for proper utilization
dependence on equity capital, which shows bright prospects of
Jaipur Dairy Ltd.
It is suggested in this respect that the Jaipur Dairy Ltd. should try
to balance the proportion of cash and bank balance in current
assets. The management should take steps for proper utilization
dependence on equity capital that shows bright prospects of
Jaipur Dairy Ltd.
CAPITAL STRUCTURE
Capital structure means the financial plan of an organization. In
which the various sources of capital are mixed in such a
proportion that they provide a distinct capital set up more suited
to the requirement of that particular organization. Capital
structure of Jaipur Dairy Ltd. has been analyzed with the help of
various ratios.
The various source of finance in the dairy are share capital and
loan from different banks. These are:-
During the last two years the amount of net worth increased from
20.20 cores to 21.02 cores. There was decrease in the amount of
reserve and surplus. Increase outsiders’ funds have been found
82.31 to 101.22 cores.
REFRENCES
I.M.Pandey, (1978), financial management, Ninth
addition, UBS Publication New Delhi.
S.P. Gupta, Management Accounting, Sahitya Bhawan
Publications, Agra
Van Horn,(2002),Financial Management and Policy,12th
edition, Publisher Dorling Kindersley India ltd.
Horne Wwachonicz, J.R.Bhaduri (2005), Fundamentals
and Financial management, 12th edition, Pearson
publisher.
MY Khan, P.K.Jain (1981), Financial Management, 5th
edition, Publisher Mc grew hill companies.
Income statement and financial statement of 206-07 to
2008-09 as obtained from Jaipur Dairy.
Financial dailies.
Economic Times
Business Standard
Business Magazines
Business India
Business World
Internet Portals:
www.jaipurdairy.com
www.dairyindia.com
www.scribd.com