Submitted By:

Under Guidance of:

Saumya Ranjan Das

Dr. Uma Chand Lal

6th year P.G. in Commerce (Finance)

College Roll No.: 509C008
Examination Roll No.: 03PG09434

Head of The Department

P.G. Department of Commerce

CERTIFICATE

This is to certify that the candidate SAUMYA RANJAN DAS of 2009 admission
batch is a bonafide student of S.C.S. (AUTONOMOUS) COLLEGE, PURI. The project entitled
FINANCIAL STATEMENT ANALYSIS OF OMFED is his original piece of work and to the
best of our knowledge, no other candidate has submitted the same project for the award of
Master Degree in Commerce under S.C.S. (A) College, Puri.

Signature of the H.O.D

Dr. Uma Chand Lal.
P.G. Department of
Commerce

DECLARATION
I do hereby declare that this project work has been submitted by me
in the P.G. Department of Commerce of S.C.S.(A) College, Puri as per the
partial fulfillment for the Master Degree of Commerce with the Specialisation
in Finance. It is further declared that this project work is exclusively the product
of myself efforts and endeavour and has not been copied from any one or any
other that has been submitted in any institute by any candidate at any time before.

SAUMYA RANJAN DAS

6th Year P.G. in Commerce
Specialisation in Finance
College Roll No-509C008
Exam. Roll No-03PG09434

ACKNOWLEDGEMENT
I gratefully acknowledge my indebtedness to Dr. Uma Chand Lal,
H.O.D. of P.G. Department of Commerce in S.C.S. (Autonomous) College, Puri,
under whose proper guidance this project has been prepared.
I am highly indebted to Sr. Lecturer in the P.G. Department of
Commerce of S.C.S. (Autonomous) College, Puri for their sincere assistance in
providing me with a lot of data which helped me in giving flesh and blood to my
project.
I also express my deep regards and reverence to my parents, who
have given me their full-fledged support and co-operation while preparing this
project.
Ultimately, I express my deep love and devotion Lord Jagannath
who bestow upon me his blessings which enabled me to prepare this project
satisfactorily.

SAUMYA RANJAN DAS

Contents
1.

Industry Analysis

2.

Organisation Analysis

3.

Financial Statement Analysis

4.

Comparative Statement Analysis

5.

Common Size Statement Analysis

6.

Findings and Recommendation

7.

Bibliography

Industry Analysis

The history of Indian Milk Products is perhaps as old as Indian civilisation

itself. Even as our ancestors began to domesticate milch animals, they found innovative
ways to convert highly perishable milk into more stable and longer lasting milk products. It
is a part of Indian culture to revere cows, and Kings of yore often gifted cattle as rewards to
their kinsmen. Therefore, it is not surprising that Indians have a deep rooted tradition of
using milk and milk products. It is a customary practice to grace Indian ceremonies and
functions with ghee, butter and sweets.
From time immemorial, India's traditional foods with their extraordinary
variety and richness have served people's needs for nutrition and sound health. Within this
wide range, dairy products from different regions of the country have provided a wide array
of sweets and other specialties that are a gourmet's delight. These also meet the needs for
proteins and calcium in people's daily diet. The story of Indian mithais is literally of epic
proportions.
From time immemorial, the foundation of our milk production has been in
hands of the landless farmers in villages. At the same time, the processing of milk into dairy
products has been handled by millions of village "halwais" and their street-corner
counterparts in towns and cities. These two groups form the core of the traditional dairy
sector, the largest and fastest growing sector of Indian dairying. The value of its products
exceeds Rs. 50,000 crores per year.
When we say 'Indian' milk products we tend to distinguish such products
from Western milk products such as cheese, yogurt, ice-creams, sweetened condensed milk
and butter oil. However, we do have parallels for all such western products in the form
of paneer, curd/lassi, kulfi, rabri and ghee. Perhaps, the only major western milk product
where it is difficult to draw comparisons is milk powder. In the days following
Independence, we have generally concentrated our efforts in encouraging milk production
through marketing of liquid milk, either as fresh milk or with the help of recombining milk
powder and white butter. This was done for three reasons. Firstly, to encourage consumption
of liquid milk since it provides nutrition in a more wholesome manner as compared to milk

products. Secondly, as compared to value added milk products, liquid milk has always
remained far more affordable. Thirdly, liquid milk has always been in demand for use as a
whitener with tea and coffee. Traditional milk products represent the most prolific segment
of our Indian Dairy Industry. Despite the immensity of volume of milk handled, preparation
and marketing are confined to the unorganized sector. Since most of the western-type dairy
products manufactured by the organized sector of the Dairy Industry are reaching near
saturation level in the existing domestic and international markets, the entire range of Indian
milk products represent the most promising venue for diversification. Furthermore, Dairying
has played a prominent role in strengthening our rural economy. It has been recognized as
an instrument to bring about socio-economic transformation by helping the landless and
marginal farmers.
One weak link in the otherwise sound growth of dairying has been the
general neglect that the traditional milk processing methods has received from the modern
sector. Although the processes of making sweets have undergone continuous change, the
time has now come to integrate traditional methods with modern culinary technology to
meet consumer demands for better standardized quality, longer shelf-life and greater
convenience. A socially responsive approach and more purposeful application of scientific
and industrial techniques is required to rebuild our age-old practices to ensure the
manufacture of indigenous milk products of uniformly high quality. However, in the past
three decades, considerable R&D work has been done to bring about the much-needed value
addition in the making of these age-old milk delicacies. Various R&D groups in different
parts of the country have initiated steps to meet these needs. As a result, better processes,
equipment, packaging materials and systems have been developed.
For sustaining further development, Nation's Dairy Industry would have to
cope with the rapid transformations that are taking place in the world economies,
consequent to the GATT Agreement. International trade is being strongly regulated by the
WTO guidelines. Newer and stricter sanitary and phytosanitary standards are being formed
for regulating quality parameters of the export products. Under these newly emerging
circumstances, quality standards for production and processing milk cannot remain at

variance with the international standards. The superior quality of dairy products coupled
with concerns for environment and product safety will require significant changes in the
way milk products are produced and packaged. India would have to critically assess the
changing global scenario if the Nation's Dairy Industry wishes to turn the opportunities in
our favour.
Over the years, efforts at expanding liquid milk availability through
increased milk production has resulted in per capita availability of liquid milk growing
from 107 grams per day in 1970 to a current level of more than 246 grams per day. The
opportunity provided by increased availability of liquid milk can now be used for efficiently
manufacturing and marketing Indian milk products with long shelf life. This will help in
tapping the potential demand for Indian milk products in both the domestic and foreign
markets. All these things could happen with a quality assurance of raw material and
technical human resource training at different levels. This can only be achieved by an
appropriate appraisal and awareness to be brought on a very large scale since this is a highly
dissipated industry and has its origin from tiny, cottage all the way to large scale industry.
The Indian milk products also need to be addressed in terms of value addition and in terms
of bringing the tradition and processing itself and extension of shelf life for the ethnic
tongue around the world.
It can easily assume that this is a very important contribution that we could
do to the rest of the world through promoting the Indian milk products both from the taste
angle as well as the health angle. In this context, we also require dedicated workers with
emphasis on packaging with a clear mandate of once again the concepts of quality and
safety engulfed into it. The Indian equipment manufacturers, many of them who are of
international standards, could really make a difference in the overall impact of this industry
through adaptable equipments.
As we know the market for the 80 million tonnes of milk in India, the figure
of 100 million tonnes does not seem to be far away. We need to strategically plan all this
into food safety, food security including nutrition to convert the dairy industry in the market

into a very profitable sector, thus ensuring the industry stability on the one hand and the
production stability on the other hand.
Time has come for the second phase of the White Revolution to focus on the
traditional milk products by the application of modern technology for their large-scale
production. One new revolution that India has embarked on is the industrial scale production
of hitherto handmade traditional milk products. Recent innovations in technology are having
a wide-ranging impact on the growth of dairying. These technical advances are creating new
economic opportunities par excellence for a range of agribusiness enterprises to expand
avenues for enhanced income in India.
Beneficiaries of these innovative technologies are India's 70 million milk
producers, largely women, who look after cows, as they have done from time immemorial.
This group includes a large number from non-farm sector who are landless and have limited
livelihood options.
Dairy industry in Orissa
The prospect of improving the dairy income in the state of Orissa, which is
one of the poorest states in India, is highly vital for small-scale producers, which currently
form the backbone of the dairy industry. a study has been developed by an International
Farm Comparison Network (IFCN) which is based on the concept of typical farms.
Three broad farm types were selected to represent 'typical farms' in the state: farms stall
feeding two dairy animals (buffalo or local cattle), representing the most common farm type
found in the state, farms with six dairy animals, located in peri-urban areas benefiting from
good market access, and rural farms practicing a form of pastoral production system in areas
where communal grazing land is available. Each farm is described in detail with assets,
production costs, profits and other economic information presented both graphically and in
the text. A comparison with similar farms in the state of Haryana is provided. The study
finds that all farms cover the dairy cash costs but that on the smaller farms returns to family
labour are below local wage rates. However, the small scale dairy farms will persist as long

as alternative employment opportunities for family labour are scarce. It also appears that
there is a large potential to reduce milk production costs of smallholder dairy farming and
increase family farm income through milk production by better breed, feed and herd
management. Although milk yields in Orissa are much lower than in Haryana, farmers in
Orissa produce milk at competitive costs due to lower land costs and lower wage rates. The
availability of grazing land in Orissa and cheaper feed also contributes to lowering the costs
of milk production. Smallholders using buffalo for milk production in Orissa were found to
be more cost competitive than similar farms in Haryana. Hence suitable strategies to
promote such buffalo-based systems should have potential for improving the production and
competitive position of dairying in Orissa.

Organisation Analysis

Being one of the poorest states, majority of the population are dependent on
the traditional occupation like agriculture, diary and handloom in some parts of Orissa. The
process of industrialization has always been slow though the state enjoys a great variety of
mineral resources. Poor irrigation facility made agriculture as a part time occupation for a
majority of marginal farmers. The farmers use to travel to urban centres as daily wage
earners and this practice made their life more miserable due to exploitation and addictions.
There was a large concentration of cattle in the rural areas in the form of
cows and buffalos. They supported the family requirements only and the cast of Gauda
traditionally sells the milk in the area. The rich had the privilege of keeping cows for their
own use and celebrations. It was never thought of as a viable alternative of livelihood for
many farmers till Omfed came in to existence. The journey of Omfed has changed the life of
many families in Orissa, particularly in the coastal and western part of Orissa. Omfed has
emerged as the trusted milk man to all its stake holders. The urban middleclass has a product
which is safe and clean for their children and has a quality assurance on content and
hygiene. The process itself pasteurizes the milk and kills the germs and bacteria.
Milk is served fresh every day twice to the urban consumers and shopkeepers
in a fresh poly pack. This milk is collected from different parts of the state and are brought
to the chilling plant .They are packaged in assortments for sale in the markets. Other than
the different varieties of toned milk Omfed also markets various kinds of value added
products like ghee, sweet and plain curd milk, table butter and butter milk.
In the summers of 1998 Omfed experimented by test marketing horticulture
products in the form of pickle ,tomato sauce, orange squash, lemon squash ,juices , mango
and pine apple squash. These products were initially test marketed in the urban cities of
Orissa and the results were very motivating for them to go for full scale launch in the
subsequent period of time. Omfed had an advantage through its vast network of milk booths
to make the product available immediately to consumers. There was literally no investment
to market horticulture products as the customers saw them in the Omfed milk booths every
time they visited the booth. The second advantage the brand quality assurance. Though the

products were manufactured by the horticulture department, they were marketed as Omfed
brands in the market.
These products have a high seasonal demand during summers and
availability of these items in the milk booths made the customer go for an early trial with
fewer expenses in promotion and advertising. The market for sauces, squash and pickles are
traditionally concentrated in Orissa due to the availability of branded items like Kissan,
Druck and Maggi. Omfed decided to break the restrictions of selling these products from the
milk booths only and launched the items through the intermediaries .Dealers and
distributors were appointed in different area and the product moved in to the grocery
counters.
Prior to this development Omfed was selling the value added milk products
like ghee, butter and the butter milk through retailers. The butter milk was a success in the
market as people preferred it in summers to the soft drinks due to the humid conditions in
the market. The sweet curd was also a success as housewives started buying them in the
common grocery for their children and there was a liking of the product by kids.
This success makes Omfed to look beyond their core strength of marketing
milk and milk related products to other business area. This was significant for them as they
have also to perform a social obligation in generating profitable employment to the rural
poor through their cooperative society network so that more and more are brought above the
poverty line.
ACTIVITIES
The principal activities of Omfed can be divided into the following
categories:
1. Organization of Anand pattern
2. Operation Flood program in Orissa
3. Procurement of milk
4. Technical inputs

5. Womens diary Project

6. Processing and Marketing
7. Omfed Products
8. Training
Anand Pattern
The Anand Pattern is the successful formula first adopted by the Kaira
District Coop. Milk Producers UnionLtd. (AMUL). This is to collectively procure, process
and Market their surplus milk. This is a Three Tier System- the Village Society, (Concerned
Mainly with the primary producers and collection of milk), the District Milk Union,
(looking after milk procurement, chilling and supply of technical inputs like Artificial
Insemination, Animal Health Care, Supply of Balanced Cattle Feed & Fodder,
Training/Extension etc.) And the Milk Federation looks after processing and marketing of
Milk & Milk Products, Central Technical Input activities etc. for milk yield enhancement Of
the animals of the milk Producers.
Anand Pattern is a system that is collectively Owned, Operated and
Controlled by the farmers. It ensures a fair price to the farmer and high quality milk and
milk products to the consumers. In short, the Anand Pattern means the utilization of
resources in the most profitable manner at grass-root level. The maximization of profit and
production through cooperative effort is the hallmark of the .Anand Pattern
Structure of Anand Pattern
The basic unit under the Anand Pattern is a village cooperative society of
milk producers. It is a voluntary association of rural milk producers wishing to market their
milk collectively. A village coop. Society of primary producers is formed under the guidance
of a Supervisor of the milk union. A milk producer becomes a member by paying an
entrance fee of Rs.1 and buying a share of Rs.10. He/she must undertake to sell surplus milk
only to the Society after meeting his family's demand. The members elect the Managing
Committee of 9 members and the committee elects a Chairman out of themselves. Managing
Committee Members are honorary. They employ a Secretary, Milk Tester, A. I. Worker and

Head Loader and so on to run the day-to-day business of the society. Milk producers bring
milk to the society every morning and evening. The quantity of milk is measured. A small
sample of milk is taken from the milk for testing its quality. Payment for milk is made on the
basis of its quality and quantity. The Milk Union carries this collected milk from the society
by their hired transport vehicles to their milk chilling/processing plants. This comes from
the profit of the society. The society makes profit by selling the milk to the milk union and
get bonus/price difference and milk union gets profit by selling to the federation and also
gets price difference out of the federations profit.
Milk Union
A Board of Directors who get elected in the following manner manages the
milk union:
12-are elected farmer representatives.
01- A nominee of the financing institution (NDDB).
01- A nominee of the Milk Federation (Omfed).
01- General Manager of the Milk Union as the Ex-officio Secretary.
At present, collector is the chairman of the Milk Union. General Manager is
the Chief Business Officer of the Union who in turn appoints other managerial, technical &
staff employees. This Board frames milk unions policies regarding milk procurement and
supply, fund management etc. where as the General Manager looks after the day-to-day
operation under the guidance and direction of the board.
Every society is continuously guided, supervised and controlled by the union
so that it remains efficient, strong and viable. There is a continuous and concurrent audit of
all the societies on a quality basis to ensure a clean milk business.
Milk Federation
The Federation is managed by a Board of Directors elected in the following
manner:
1. Three are Government of Orissa nominees.
2. One from the financing agency.

3. The selected chairmen of the Affiliated Milk Unions

The Chairman of the Federation is to be elected by the board of directors.
The Federation looks after processing and marketing of the milk and milk products.

Anand Pattern cooperative milk producers' organization (figure 2.1)

OPERATION FLOOD- 1
The govt. of India launches operation flood project in 1970. It was aimed
at creating flood of rurally produced milk in the urban consuming center. The first phase of
this program (operation flood 1) had five years duration from 1970-75. It was started in
1970 covering ten states and one union territory, having 18th milk sheds i.e. Andhra
Pradesh, Bihar, Gujarat, Haryana, Maharashtra, Punjab, Rajasthan, Tamilnadu, Uttarpradesh,
West Bengal and Delhi.
The project had an initial outlay of Rs. 94.5, which was later increased to Rs.
116.40 crore. It was mainly aimed at developing the milk marketing system in the country.
As such major demand center like Delhi, Kolkata, Bombay and Delhi are
linked with rural milk producing pockets in the country. The funds for the implementation of
operation flood program were generated by the sale of 127.517 tones of skim milk power
and36, 696 tones to butter oil provided by world food programme. A total of 116.4 cores
were generated for the implementation of this programme. Indian Dairy Corporation was
specially set up by the central government for receiving these gift commodities and
generating their funds by their sale for implementation of the project.
OBJECTIVES
The programme had following major co-operatives: Increase in the capacity of milk processing facilities.
Change in the urban markets form traditional raw milk supplies to the modern
dairies milk supplies.
Resettlement of city based cattle in rural areas.
Development of long distance milk transportation and storage facilities.
Development of milk procurement system like Anand pattern.
Improvement in Dairy Farming Standard.

Operation Flood Program in Orissa

Operation Flood II
The Operation Flood II Program, which was launched under the aegis of
National Dairy Development Board (NDDB) implemented in the state of Orissa from 1981,
initially covering four districts viz., Cuttack, Dhenkanal, Keonjhar, and Puri. The Orissa
State Cooperative Milk Producers Federation came in to being from the year 1980-81, after
Taking over the Phulanakhara dairy and the functioning started form 26th January 1981.
This followed an agreement signed on the 30th May 1979 between the Govt.
of Orissa and the then Indian Dairy Corporation (now amalgamated with the National Dairy
Development Board) for implementation of Operation Flood Project II by the Govt. of
India, the State Government, the Indian Dairy Corporation, the National Dairy Development
Board and the Milk Producers Cooperatives, with assistance from the international
Development Association. This was later buttressed by a guaranteed deed dated 05.09.81
given by the then Forest, Fisheries and Animal Husbandry Department on behalf of the state
Government, to the then Indian Dairy Corporation for financial assistance to be received as
per the Loans-cum-Grants Agreements by the Orissa Milk Federation from the Indian Dairy
Corporation. The Operation Flood II Program ended on 30.09.87.
OMFED started functioning from its own corporative office building at R-2
Shahid Nagar 8thAPril 1985. One chilling plant of 10,000 LPD was started at Tritol in June
1985 by Cuttack milk union and another one with 20,000 LPD capacities by Puri milk
union.
One Dairy Plant of 60,000 litres per day capacity was commissioned in
December 1985. There are 10 nos. of chilling plants with a total capacity of 48,500 litres per
day. Cattle feed plant of 100 MT capacity also started functioning from September 1985. A
Training-cum-Demonstration center was organized at Jagannathpur, Puri near CuttackBhubaneswar national highway after the State Govt. handed over the land along with the

infrastructures existing there on a management basis. Under Production Enhancement

Program input facilities were provided to the producers through District Milk Unions and
Dairy cooperative Societies under the technical and financial assistance of NDDB.
Operation Flood III
The Operation Flood III Program is implemented in Operation Flood districts
of the state from October87. Under this program the Sambalpur district is included from
August 1989. Expansion of Bhubaneswar Dairy from 60,000 LPD to 75,000 LPD;
expansion of Tirtol Milk Chilling Center from 10,000 LPD to 20,000 LPD; a new chilling
plant with a capacity of 20,000 LPD at Nimapara (Puri) in place of 4000 LPD Unit;
strengthening of Cattle feed plant at Radhadamodarpur (Cuttack) are some of the major
projects taken up under the Operation Flood III Program.
For this purpose, a letter of understanding between the State Govt.,
represented by the then forest, Fisheries and Animal Husbandry Department (latter renamed
as Fisheries and Animal Resources Development Department) and the National Dairy
Development Board, as successor of the erstwhile Indian Dairy Corporation was signed on
27.08.1988, specifying the parameters for implementing the Operation Flood III Program.
The Loan- cum-Grant Agreement between the National Dairy Development Board and the
Orissa Milk Federation as well as the concerned District Milk Unions for the financial
assistance under Operation Flood III has been executed. The state Govt. guarantee on behalf
of the Orissa Milk Federation and the District Milk Unions as the letter of understanding to
the National Dairy Development Board has been executed on 05.05.92.
The organization was established with the following objectives:
To carry out activities for promoting production, procurement, processing
and marketing of milk & milk products for economic development of the rural farming
community.

Development and expansion of such allied activities as may be conductive

for the promotion of the dairy industry. Improvement and protection of milch animals and
economic betterment of those engaged in milk production. In particular and without
prejudice to the generality of the forgoing objective, the federation may:
Purchase and/or erect building, plant machinery and other ancillary objects to carry
out business
Study problems of mutual interest related to procurement, marketing of dairy and
allied products
Purchase commodities from the members of other sources without affecting the
Interest of the members, process, manufacture, distribute and sell them same, arrange to
manufacture / purchase and distribute balanced cattle feed and for the purpose to set up Milk
collection and chilling centres, Milk Processing Plants, Product factories Etc, in any of the
district covered under its area of operation
Provide veterinary aid and artificial insemination services and to undertake animal
husbandry activities so as to improve animal health care disease control facilities
Advice, guide and assists the Milk Union in all respects of management,
supervision audit functions.
Render technical, administrative, financial and other necessary assistance to the
member unions and enter in to collaboration agreement with someone, if the need arises
Advise the member unions on price fixations, public relation and allied matters.
A brief note on sambalpur dairy
Sambalpur dairy a unit of OMFED (Orissa state co-op. Milk producers
federation) was commissioned on 01.01.1990 under operation flood programme (phase-iii)
of NDDB by an agreement with the government of orissa.

The old chiplima chilling unit having a capacity of 2000 LPD (litre per day)
at the state dairy farm established by the sambalpur districts milk union was closed and
OMFED started its new 10,000 ltrs plant at an estimated project cost of Rs 66.80 lakh for
the undivided sambalpur district near Goshala chhack in an area of 6.0 acres adjacent to
N.H-6. On the first day, the unit collected only 2207 Kgs of raw milk from the nearby
MPCS.
Recently the plant capacity has increased to 50,000 Ltrs at the capital cost of
approx. 1.5 crores. After expansion the unit is not only catering pasteurised full cream milk
& toned milk for the customer of sambalpur, bargarh, balangir burla, hirakud, deogarh,
padampur etc. But also added new products like ghee, sweet curd, plain curd, butter milk
etc. Within the present capacity.
SALIENT FEATURE OF OMFED DAIRY:INSTALLED CAPACITY- 50,000 LITRES PER DAY
PROJECT EXECUTED BY-NATIONAL DAIRY DEVELOPMENT BOARD
INITIAL PROJECT COST- 66.80 LAKH
EXPANSION PROJECT COST- 1.5 CRORES
TRIAL RUN STARTED ON -1ST JANUARY, 1990
MARKETING AREA- SAMBALPUR, BURLA, DEOGARH, RENGALI, REDHAKHOL,
BARGARH, PADAMPUR, SONEPUR, TITILAGARH, NUAPADA
MILK SHED AREA- DEOGARH, SAMBALPUR, BARGARH, BOLANGIR
Machineries available (table 2.1)
SL.NO
01
02
03
04
05
06
07

DESCRIPTION
S.S. Storage tanks
Pasteuriser
Homogeniser
Tripurpose separator
Reconstitution tank
Packaging unit
Refrigeration

QUANTITY
06
02
01
02
01
04
05

CAPACITY
50,000 Lts
2,000 LPH each
2,500 LPH
2500 LPH, 2000 LPH
1000 Ltrs
5000 Ltrs/ hr
30 Ton

08
09
10
11
12
13

compressor
Air compressor
D.G sets
Boilers (coal fired)
Bore well
Substation
Effluent treatment plant

02
02
02
02
01
01

06 M3/Hr
63 KVA/ 50 KVA
300 kg/ hr
800 LPH each
200 KVA
30000 Ltrs

MANAGEMENT:The orissa state co-operative milk producers federation Ltd. Is controlled by

a board of directors which consist of chairmen of affiliated milk unions. Three nominees of
the government of orissa, a nominee of the national dairy development board and managing
director of the federation (who is an ex-office member). The chairman of the board elected
amongst the member of the board. The post of chairman of the federation is honorary.
FINANCE:The federation had received funds (loan & grant) from the Indian dairy
corporation/ national dairy development board (N.D.D.B) for the implementation of
operation flood programme (OF-ii, OF-iii) in different districts for different activities such
as milk processing, technical input programme, support to dairy co-operatives, manpower
training etc. This federation also received funds towards cooperative development
programme from N.D.D.B which has been successfully implemented in the different
districts and for the implementation of technology mission on dairy development (T.M.D.D)
in the O.F districts. Apart from N.D.D.B. This federation is receiving financial assistance
from the government of Orissa as grant-in aid and share capital for different activities such
as establishment of dairy infrastructures, technical input programmes, etc.
Besides this the federation also received financial assistance from
Government of India (ministry of human resources development & department of women
and child development) for the implementation of orissa women's dairy projects in the
undivided districts of orissa.

Procurement of Milk
The milk is collected from the village based milk producers through the
village Dairy cooperative Societies. The farmers of society villages bring their surplus milk
to the society, where it is tested, quantified and the value of the milk is being fixed. Again
from the society level the milk being lifted to nearest chilling plant where it is chilled to 5 c
and the same milk after chilling is transported to the nearest Dairy for processing, packing
and marketing. After marketing of milk and milk products, the realization is financial
statement analysis routed back the producers once in 10 days in the same manner. This
organization establishes linkage from producers to consumers.
Technical Input Program
Procurement of Milk depends upon its production. If the production of milk
enhanced, the surplus of milk will be higher, and the procurement will be increased. The
production of milk depends upon the productivity of the milch animals and the productivity
of the animal depends upon its breeding, feeding, health care and maintenance. So to
enhance milk procurement, different programs are being organized in the society level and
the milk producers getting the facilities at their doorsteps, are called the Technical Input
Programs.
Artificial Insemination: The population of crossbred milch animals in our state is
very small. For better productivity good quality milch animals are essential. So 350 Dairy
Cooperative Societies provided with Artificial Insemination facilities, out of which 18
centers are cluster centers. The society secretaries have been trained as inseminators by
OMFED. For this service, the Liquid Nitrogen, Frozen semen and all the accessories are
being supplied to the societies free of cost.
Feed and Fodder Program: In addition to the marketing support the farmers are
provided with the best quality of cattle feed at a reasonable price from the Cattle Feed Plant,

which is owned and managed by OMFED. Fodder seeds and fodder slips are provided free
of cost to the farmers. OMFED sales around 10 KMT of cattle feeds annually to its farmer
members.
Animal Health Care: For better yield / productivity, maintenance of milch animal is
important. The crossbreed animals need better care than the indigenous cows. So facilities
like first aid medicines, travois are being provided to the societies free of cost. Infertility
camps, veterinary routes are being conducted by the experienced veterinarians of the Milk
Unions.
Training: The Federation has established an Integrated Training and Demonstration
Center (OMTDC) at Jagannathpur in the district of Khurdha. The Training Center has so far
imparted training to society persons in society management, artificial insemination, first aid,
dairy animal management and management committee members. Besides these, other
training programs are also conducted in this Training Center. Training has a well-furnished
hostel accommodation for 100 trainees. Interested institutions inside the state also use these
facilities on payment basis for various training programs.
Embryo Transfer Technology: A highly sophisticated Embryo Transfer Technology
Project has been implemented by the federation as a state project, since March 1992. This is
assisted by NDDB to carry the most advanced technology from the laboratory to the field
for the benefit of farmers to increase the milk production.
Programs:
National Technology mission on Dairy Development: National
Technology Mission was formulated by N.D.D.B. and was implemented in 5 Operation
Flood Districts. Its main aim was to co-ordinate among various functionaries who were
engaged in strengthening of rural farmers. Veterinary Dispensaries were equipped With
breeding facilities and these dispensaries became the nerve center of rural milk producers.

Cooperative Development Program: The program is being formulated

by N.D.D.B. Its main aim was to inculcate co-operative spirit in the rural milk Farmers to
manage their own business.
Indo Swiss Project: Indo-Swiss project was a bilateral program
between Govt. of India and Swiss Govt. which is now under implementation in Gajam &
Gajapati district. Its main aim is to improve the productivity of animal and to provide round
the year marketing facilities at the door step of the farmer.
Womens Diary Project
This project started in 1995 in un-divided districts of Cuttack, Dhenkanal,
Puri, Sambalpur and Keonjhar and is implemented through respective milk unions. The
Objectives of the program include
Improvement of Economic status of the rural women through efficient and modern
Dairy management and availability of assistance for dairy farming in shape of Subsidized
cattle feed, fodder, animal health care, cattle insurance and grouped Insurance coverage and
training programs.
Improvement of social status of rural women by formation of Anand Pattern allWomen dairy co-operative societies and establishing linkage with related organization for
assistance on health, immunization, nutrition, literacy mission, drinking water income
generation and women empowerment etc.
Enabling the women groups to take up employment-cum-income generation
programs through dairying.
Processing and Marketing
The urban consumer is the last point of the Milk Flow System of Operation
Flood Program. The first point is the rural milk producer, who produces milk. Thus

Omfed not only plays a vital role to link both the points through its activities but also
channelize crores of rupees from urban sector to rural sector in this system. Out of
the five Flood Districts, only Dhenkanal & Keonjhar Milk Unions market Milk
through their respective Dairies (Dhenkanal & Keonjhar Dairy) in the brand name of
"Omfed". The Dhenkanal Milk Union markets its milk, in towns like Dhenkanal,
Talcher, Nalco Nagar, and Angul etc. And Keonjhar Milk Union markets milk in
towns Like Keonjhar, Joda, Badbil, Anandpur etc. and supply surplus milk to
Omfed. Generally Milks are being marketed by Omfed, from its dairies by its
authorized retailers in Different towns of the state.

Figure 2.2

Operational area (figure 2.3)

Managing Director
(IAS)

Personal

Material

MIS

Plant manager

Finance

Marketing

Project

Manager

Manager

Manager

(Sambalpur unit)

Manager

Manager

Manager

Affiliated
milk unionsAssistant
(figure 2.4)
Assistant
manager

manager

Superintend
ent

Superintend
ent

Plant
operator

Assistant
superintendent

Worker

Junior
Assistant

Organisation structure (figure 2.5)

Financial Statement
Analysis

Financial statements as used in business houses refer to set of reports and

schedules which an account prepared at the end of a period of time for a business enterprise.
The financial statements are the means with the help of which the accounting system
performs its main function of providing summarise information about the financial affairs of
the business. These statements comprise balance sheet and profit & loss account. In India
every company has to present its financial statements in the form and contents as prescribed
under section 211 of the companies act 1956.
The significance of these statements is as follows
Balance sheet

Balance sheet is a statement showing the nature and amount of a companies

asset on one side and liabilities and capital on the other. In other words balance sheet shows
the financial position on a particular date usually at the end of one period. Balance sheet
shows how the money has been made available to the business of the company and how the
money is employed in the business.
Profit and loss account
Earning profit is the principal objective of all the business enterprise and
profit and loss account is the document which indicates the extent of success achieved by
the business in meeting this objective. Profits are of primary importance to the board of
director in evaluating the management of a business, to banks and other creditor in judging
the loan repayment capabilities and ability of the business. It is prepared for a particular
period which is mentioned along with the title of these statements, which include the name
of the firm also.
Objective of financial statements
Financial statements analysis is highly essential for both internal and external
stake holders in addition to management and creditors.
1. The balance sheet lists the assets held by and the obligations (or liabilities) of the
enterprise. The balance sheet also summarizes the capital invested in the business.
2. The income statement provides a recap of the operating results by listing the
revenues and deducting the expenses of the company to arrive at a net income or loss for the
period.
3. The statement of cash flows quantifies the cash inflows and outflows of the
business for the reporting period.

4. The explanatory notes provide additional details to aid in understanding the

amounts reported in the financial statements and the basis under which the financial
statements have been prepared. Usually, explanatory notes are prepared only when the
financial statements will be provided to external users.
5. To provide financial information that assist in estimating the earning potential of a
business.
Tools
Here we have taken the financial statement of five years those are 2004-05,
2005-06, 2006-07, 2007-08 and 2008-09. The tools we have taken to analyse the financial
statement are as follows:
1. Ratio analysis
2. Trend analysis
3. Common size statement analysis
4. Comparative analysis
RATIO ANALYSIS
Introduction
The term ratio is used to describe significant relationships which exist
between figures shown in a balance sheet, profit and loss account of an organisation.
Financial statements contain much information relating to profit or loss and
financial position of the business. If these items in financial statements are considered
independently it will not be of much use. To make a meaningful reading of financial

statements, these items found in financial statements have to be compared with one another.
Ratio analysis, as a technique or analysis of financial statement uses this method of
comparing the various items found in financial statements.
Ratio analysis creates a relationship between figures or factors or variables.
This relationship helps to analyse and interpret the financial condition and performance
when applied to the financial data. The accounting ratio indicates a quantitave relationship
which is used for analysis and decision making.
Importance of ratio analysis
There are various kinds of benefits arising from ratio analysis are as follows:
1. Ratio analysis is a very important tool used for measuring performance of an
organisation.
2. It concentrates on the inter-relationship among the figures appearing in the
financial statement.
3. Ratio makes comparison easy. The said ratio is compared with the standard ratio
and this shows the efficiency utilisation of assets, etc.
4. Ratio analysis helps the management to analyse the past performance of the firm
and to make further projections.
5. Position can be easily ascertained with the help of ratio analysis.
6. Effective use of ratio can provide the details of the growth or decline of an
enterprise so that future action can be taken.
7. The appraisal of the ratios will make proper analysis about the strengths and
weakness of the firms operations.

Classification of Ratios
According to the requirement of different ratios it has been classified into
four important categories.
Liquidity Ratios
Activity Ratios
Profitability Ratios
Trend Ratios
1. Liquidity Ratios
The liquidity ratios measure the liquidity of the firm and its ability to meet its
maturing short term obligations. Liquidities defined as the ability to realise value in money,
most liquid of assets.
Liquidity refers to the ability to pay in cash, the obligation that are due.
Liquidity has two dimensions quantitative and qualitative concepts. The quantitative aspect
includes the quantum, structure and utilisation of liquid assets. In qualitative aspect it is the
ability to meet all present and potential demands on cash from any source in a manner that
minimises cost and maximises the value of the firm. Thus liquidity is a vital factor in
business. Excess liquidity, through a guarantor of solvency would reflect lower profitability,
and ineffective managerial efficiency, increased speculation and unjustified expansion,
extension of too liberal credit policies. Too little liquidity then may lead to frustration,
reduced rate of return, missing of profitable business opportunities and weakening of
morale. The important ratios in measuring short term solvency are as follows:
a. Current ratio
b. Quick liquid ratio

c. Absolute liquid ratio

d. Stock to working capital ratio
a. Current ratio
This ratio measures the solvency of the firm in the short term. The
constituents of the current ratio are as important as the current assets themselves for
evaluation of the company's solvency position. The higher or lower current ratio will have
the adverse impact on the profitability of the organisation.
Advantages of current ratio
1. This ratio indicates the extent of current assets available to meet the current
obligation.
2. This margin also leaves sufficient amount as working capital to carry out day to
day transactions.
3. This is useful in assessing the solvency and liquidity position of the company.
Current assets, loans and advances
Current Ratio =
Current liabilities and provision
(Table 3.1.1)
YEARS
Current
assets, loans
and
advances

2004-05
788154.50

2005-06
10030349.75

2006-07
14614717.55

2007-08
12162818.48

2008-09
19933030.16

Current
liabilities
and
provision

744756.36

1101126.47

1505636.56

2107718.4 1139982.9
7
7

10.58

Current
ratio

9.10

9.70

5.77

17.48

Interpretation
A current ratio 2:1 shows a highly solvent position. The current ratio of this
organisation is always higher than the recommended level, so it can meet its entire current
obligation effectively. The ratios in the year 2004-05, 2005-06, 2006-07shows high liquidity
position which is around 10. It is not a good sign of using current asset effectively. In the
year 2007-08 the solvency position has improved but still it is higher than the recommended
level. In the year 2008-09 the ratio goes up to 17.48 which is very high than the
recommended one. It is due to the piling up of inventory and idle cash level.
b. Quick liquid ratio
Quick ratio is used as a measure of the company's ability to meet its current
obligations since bank overdraft is secured by the inventories, the other current assets must
be sufficient to meet other current liabilities. This ratio serves as a supplement to the current
ratio in analysing liquidity.
Advantages of the quick ratio
This ratio is very useful in cross checking the performance in other areas of
economic management of an enterprise. This ratio focuses on the inventory accumulation
and on certain aspects of inventory management which will be pointed out later.
1. It is an improved variant of the current ratio in arriving at a liquidity index for an
enterprise.
Current assets, loans and advances- inventories
Quick liquid ratio =

Current liabilities and provisions - bank overdraft

(Table 3.1.2)

Interpretation
A recommended ratio of acid test ratio is 1:1 but all the year starting from
2004-05 to 2008-09 shows much higher than this recommended level. In the year 2007-08 it
came nearer to the recommended level. This higher level indicates a high solvency state of
the organisation.
c. Absolute liquid ratio
Absolute liquid assets
Absolute liquid ratio =
Current liabilities
Absolute liquid assets = cash in hand + cash at bank + short term investments

(Table 3.1.3)

Interpretation
The ideal absolute liquid ratio is taken as 1:2. In all the respective year it has
gone up then the recommended level. It shows the over accumulation of cash at bank and in
hand.
d. Stock to working capital ratio
Here stock refers to inventory as the rupee value of raw materials. It may be
noted that stock is valued at cost price or market price whichever is lower. Working capital
generally means net working capital.

Inventory
Stock to working capital ratio =

X 100
Working capital

Working capital = current assets - current liabilities

(Table 3.1.4)

Interpretation
In 2004-05 the stock level was 28.23% which is quite beneficial for the
organisation but it start increasing in rest of the year and reach a peak of 70.20% in 2007-08.
It reflects over accumulation of stock.
2. Activity Ratio
Activity ratio measures how effectively the firm employees its resources.
These ratios are also called 'turn over or asset management ratio' which involve comparison
between the level of sales and investment in various accounts like inventories, debtors, fixed
assets, etc. Asset management ratios are used to measure the speed with which various
accounts are converted into sales or cash. The following activity ratios are calculated for
analysis. These ratios also analyse the use of resources and the utility of each component of
total assets.
a. Inventory turnover ratio.
b. Inventory ratio.
c. Fixed asset turnover ratio.
d. Total asset turnover ratio.
e. Working capital turnover ratio.

f. Sales to capital employed ratio.

a. Inventory turnover ratio
A considerable amount of a company's capital may be tied up in the financing
of raw materials, work in process and finished goods. It is important to ensure that the level
of stocks is kept as low as possible, consistent with the need to fulfill customers orders in
time.
The inventory turnover ratio measures how many times a company's
inventory has been sold during the year. Low liquidity turnover has impact on the liquidity
of the business.
Sales
Inventory turnover ratio =
Average inventory

Opening stock + Closing stock

Average inventory =
2

(Table 3.2.1)

Interpretation
The inventory turnover ratio shows that there is a decrease in the ratio from
the year 2004-05 to 2008-09. This is due to the piling up of stock because the selling has
increased substantially.
b. Inventory ratio
The level of inventory in a company may be assessed by the use of the
inventory ratio, which measures how much has been tied up in the inventory.
Inventory
Inventory ratio =

X 100
Current assets
(Table 3.2.2)

Interpretation
In the year 2004-05 the ratio was 26.03 which increased up to 95.00 in the
year 2006-07 it shows that the how much inventory is tied up in current assets. Then it was
reduced up to 59.24 in 2007-08 and again marks an increase up to 65.97 in the year 200809.
c. Fixed assets turnover ratio

This ratio will be analysed further with ratios for each categories of assets
this is a difficult set of ratios to interpret. As asset value are based on historic cost. An
increase in the fixed asset figure may result from the replacement of an asset at an increased
price or the purchase of an additional asset intended to increase production capacity.
Sales
Fixed assets turnover ratio =
Fixed asset
(Table 3.2.3)

Interpretation
It reflects that there is installation of plant machinery and building to increase
the productivity of the plant. The depreciation rate also shows the same. In the year 2004-05
it was 6.59 and starts decreasing up to 5.84 in the year 2006-07 and again starts increasing
and reaches up to 11.04 in 2008-09. This also helps in the increase in production which
reflects in terms of increase in sales.
d. Total assets turnover ratio
The ratio indicates the number of times total assets are being turned over in a
year.
Sales
Total assets turnover ratio =
Total assets

(Table 3.2.4)

Interpretation
It is showing that there is a good utilisation of total asset in every year but
again the rate goes down in the year 2006-07 and again goes up to 6.44 in 2008-09 which
indicates a good sign for the organisation.
e. Working capital turnover ratio
This ratio indicates the extent of working capital turned over in achieving
sales of the firm.
Sales
Working capital turnover ratio =
Working capital
(Table 3.2.5)

Interpretation
In the year 2004-05 the working capital that is turned over is only 6.49 but
the next year it goes up to 26.97 it shows excess use of working capital to meet the sales.
But there is an improvement can be observed in utilising working capital effectively in rest
of the year. Thats why the ratio starts declining but the sale has gone up.
f. Sales to capital employed ratio
This ratio indicates efficiency in utilisation of capital employed in generating
revenue.
Sales
Sales to capital employed ratio =
Capital employed

(Table 3.2.6)

Interpretation
We can observe a zigzag motion in sales to capital employed ratio. It was
4.57 in the year 2004-05, it was increased up to 5.18 then again decline up to 3.90, again
mark an steep increase up to 8.71 and in the year 2008-09 it came to 6.22. It shows that the
efficiency in using capital is improving to generate higher revenue.
3. Profitability ratios
These ratios are to help assessing the adequacy of profits earned by the
company and also to discover whether profitability in increasing or declining the
profitability of the firm is the net result of a large number of policies and decisions. The
profitability ratios show the combined effects of liquidity, asset management and debt
management on operating results. Profitability ratios are measured with the reference to
sales, capital employed total assets employed etc. These ratios are very important from the
point of view of different set of people who are interested in the business organisation like
owners, creditors, employees, suppliers, government organisation.
Gross profit margin
The gross profit represents the excess of sales proceeds during the period
under observation over their cost, before taking into account administration, selling and
distribution and financing charges. The ratio measures the efficiency of the companys
operations and this can also be compared with the previous year's result to ascertain
efficiency. This ratio also shows the gap between revenue and expenses at a point after
which an enterprise has to meet the expenses related to non manufacturing activities. It acts
as an index of the mobility of an enterprise to meet different expenses.
Gross profit
Gross profit margin =

X 100
Sales
(Table 3.3.1)

Interpretation
It shows that there is an increase and decrease prevails in this ratio it stands
around 14%. It is due to the fluctuation in the price of raw material and other expenses
related to production. We can say that the efficiency in operation is following a trend.
Net profit ratio
Net profit ratio express net profit as a percentage of sales. This ratio indicates
the profitability and efficiency of the business.
Net profit
Net profit ratio =

X 100
Net sales

(Table 3.3.2)

Interpretation

It is showing the efficiency of the organisation in earning profit. It stand

around 9% but in the year 2008-09 it goes up to 11.63% it reflects that the organisation is
growing in an apt manner in earning profit.
Cash profit ratio
Cash profit ratio measure the cash generation in the business as a result of the
operation before tax and net profit from year to year owing to differences in depreciation
charged. This ratio is more reliable indicator of performance where there is sharp volatility
in the profit.

Cash profit
Cash profit ratio =

X 100
Sales

Cash profit= net profit + depreciation

(Table 3.3.3)

Interpretation

This ratio is also fluctuating a little bit from its trend which is around 11%. It
is following the same path as the gross profit and net profit ratios are following. There is
seen an increase up 13.53% in the year 2008-09 which is sowing a hike in earning cash
profit.
Operating cost ratio
Operating cost ratio expresses the relationship of cost of goods sold plus
operating expense to net sales. It may be expressed as

Operating cost ratio =

Operating cost
X 100
Net sales
(Table 3.3.4)

Interpretation
The operating ratio following a trend of around 83%. It is showing the
operational efficiency of the organisation. In 2008-09 the organisation is able to reduce the
operating cost so the net profit has increased.
Expense ratio

Expense ratio shows the relationship between operating costs and expenses
on the one hand and volume of sale on the other. In other words, these ratios express each
element of cost and expenses as percentage of sales.
Advantages:1. These ratios are useful in knowing the following aspects relating to profit
and help the management to know the position of profit. That is whether the profit is on the
increase or on the decrease.
i. Higher the expense ratio lowers the profit and vice-versa.
ii. Higher the non manufacturing expenses ratio (marketing, administration)
lower the net profit.
Expenses
Expense ratio =

X100
Net sales
(Table 3.3.5)

Interpretation
The expense ratio in terms of sale in the year 2005-06 was higher than any
other year which is 92.65. It is showing the reduced in the profit level. But the condition
starts improving in the respective year and reach up to 85.72 in the year 2008-09.
Administrative cost of sales ratio

Administrative cost of sales

Administrative cost of sales ratio=

X 100
Sales

Interpretation
The administrative cost is increased heavily in the year 2005-06 due to
increase in expenses of different items and usage of the items which was 6.31. Again it goes
down to 0.71 and again goes up to 2.71 and finally reaches to 0.60 in 2008-09 which was
lower than all the respective year.
Selling and distribution cost to sales ratio
Selling and distribution cost
Selling and distribution cost to sales ratio =

X 100
Sales

(Table 3.3.6)

Interpretation
The selling and distribution cost was 3.25 in the year 2004-05 it increase
slowly and reach up to 4.19 in the year 2006-07 and then decrease up to 2.63 in the year
2008-09. It is due to the effective distribution channel. It also helps in the rate of selling of
products.
Cost of goods sold to net sale ratio
Cost of goods sold
Cost of goods sold to net sale ratio =

X 100
Net Sales

(Table 3.3.7)

Interpretation
It is following a trend of around 81%. It is not deviating more from its trend
but it has been decreased down to 80.59 in 2008-09 which increase in profit level.
Return on capital employed

The rate of return on investment is determined by dividing net profit by the

capital employed. It consists of two components that is profit margin and investment
turnover.
Advantages:1. It helps in measuring the profitability of the firm.
2. It indicates how effectively the operating assets are used in earning return.
3. It focuses the attention on efficiency of management in managing the investments
made into the business.
Net profit
Return on capital employed ratio =

X 100
Capital employed

(Table 3.3.8)

Interpretation
In the year 2004-05 the return on capital employed was 40.69. By following
a zigzag motion it goes up to 50.28. In 2006-07 it was reduced to 28.32 it is due to increase
in amount of work in progress and other fixed assets. But again it gained momentum and the
return reach up to 72.45 in the year 2008-09.

4. Trend Ratios
Trend ratio can be defined as index numbers of the movements of the various
financial items in the financial statements for a number of periods. It is a statistical device
applied in the analysis of financial statements to reveal the trend of the items with the
passage of time. Trend ratio shows the nature and rate of movements in various financial
factors. Trend ratio can be graphically presented for better understanding by the
management. They are very useful in predicting the behaviour of the various financial
factors in future. Trends of related items should be carefully studied, before drawing any
final conclusion. Since trends are sometime significantly affected by externalities e.g
government policies, economic conditions etc.
Limitations of trend ratios
Trend ratios are not calculated for all the items. They are only calculated for
the logically connected items enabling a meaningful analysis.
A. if the accounting practices have not been followed consistently year after year,
these ratios become incomparable and misleading.
B. the trend ratios have to be interpreted in the light of certain non-financial factors
like economic conditions, government policies and management policies etc.

Interpretation
The sale is following a trend that is going upward. As the sales are going
upward the purchase of trade goods has been goes up accordingly. The rate of increase in
purchase of goods is quite lower than the increase in sales. It shows the operational
efficiency. The manufacturing expenses and distribution expenses are also increasing
according to increase in production and sale but it is less than the increase in the rate of sale.

It is showing the efficiency in operating and distribution activity of the management. The
rate of increase in other expenses is increased higher than the rate of increase in other
income and also then the rate of sales.
The share holders fund, reserve and surplus have been increasing gradually
but the trend is increasing in higher rate. Application of fund is increasing but the rate is
very low, still this is favourable for the organisation. The rate of receiving grant has been
reduced but attains a constant position from the year 2006-07 to 2008-09.The rate of
increase in inventory is similar and logical with increase in sale but the rate sky rocketed in
the year 2008-09 by 202.27 %. The trend is following a zigzag motion in case of bank
balances and cash at hands. The loan and advances is quite lower in the year 2004-05 to
2006-07 but increase soaringly to 279.17% in the next year but again it come down to
150.85%.
The rate of increase in current liability follows first four year but it again start
decreasing up to 86.37% in the year 2008-09 which shows a good financial health of the
organisation.

Comparative
Statement Analysis

These financial systems are so designed as to provide time perspective to the

various elements of financial position contained therein. These statements give the data for
all the periods stated so as to show.
A. absolute money values of each item separately for each of the periods stated.
B. increase and decrease in absolute data in terms of money values.
C. increase and decrease in terms of percentage.

D. comparison expressed in ratios.

E. percentage of totals.
Such comparative statements are necessary for the study of trends and
direction of movements in the financial position and operating results. This call for a
consistency in the practice of preparing these statements, otherwise comparability may be
distorted.
Comparative profit and loss account shows the operating results for a number
of accounting period and changes in the data significantly. In absolute period and changes in
the dan significantly in absolute money terms as well as relative percentage.
Comparative balance sheet shows the balance of account of asset and liability
in different dates and also the extent of their increase and decrease between these dates
showing light on the trends and direction of changes over the period.
Interpretation
Study of income statement reveals that there has been an increase of Rs
65223435.09 in sales, but at the same time cost of goods sold has also increased by
Rs.37055707.05. In relative term sales increased by 34.88% while cost of good sold
21.21%. It means due to the operational efficiency the rate of increase in cost of goods sold
is lesser then the rate of increase in sales. The rate of advertising is 27.18% which is lower
then the rate of increase in sales and also in absolute term it is only increased 6411, which is
quite negligible as compared to sales volume. Processing expense has been increased
Rs.1263428 but in relative term the rate of increase in processing expense is quite nearer to
the rate of increase in sales.
There has been a substantial decrease in other incomes both in relative term
and absolute term. It reflects that the management is giving more emphasis on its core

business rather than other miscellaneous activity. There has been an increase in selling
expenses in absolute term which is Rs.2696835.87 and it helps in the increase in sales up to
Rs.65223435. in relative term the rate is much higher then the rate of increase in sales. It is
due to the increase in the rate of expense in marketing expense and purchase of crate for
distribution at a rate of 583% and 805.78% respectively.
There is a 50.60% increase in gross profit which is due to the less increase in
the rate of cost of goods sold and processing expenses which is 21.21% and 30.03%
respectively. The depreciation rate is increase up to 1187549.79 in absolute terms and
31.15% in relative term which indicates that improved plant machinery has been installed
which helps I the increase of the productivity, and the productivity reflects in the sales
volume. Insurance charges have been increased 58.94% in the relative term which will
impart a secure operational function. Printing and stationary is increased up to Rs. 48464.15
which is 203.12% then the previous year. It indicates that there must be wastage or improper
handling of this material. Sales promotion has been decreased by 25.56% which is not a
good sign for the organisation. As the sales promotion is an inevitable part of a good
business. The sales have been increased and the sales promotion should also increase
accordingly. Staff welfare and canteen expense has been increased by Rs.34572.25 which is
26.13% higher than the previous year. It is helpful in motivating the staff. The entertainment
expense has been increased by Rs.10963 from its previous year. In absolute term it is less
but in relative term the increase is 174.85% which is not a favourable condition. Liveries
and safety materials are used and maintained properly so the expenses have been reduced by
3.92% which is contributing towards organisational profit. Building and gardening cost has
been increasing soaringly which is 850.83% higher than the previous year and rupees 45919
in absolute terms which is due to the development and maintenance of the infrastructure.
Bonus is hike up to 66.43% then the last year which indicates the profitability and
transparency of the organisation which leads to organisational efficiency. Other expense has
been increased by Rs 105402.21 in absolute term and 24.67% in relative term then the
previous year.

The current asset has been increased by 67.38% and the current liability has
been decreased drastically by -45.01% which is showing over solvency of the organisation.
It is severely affecting the current ratio by increasing it to a very high level then the
recommended one. Cash in hand and bank, inventories has been increased which is due to
the improper investment of the funds. Loans and advances have been decreased by 45.96%
in relative term and Rs. 704986.65 in absolute term which is a good sign for the
organisation. There is a soaring hike can be seen in case of sundry debtors which is
183274.88 in absolute term and 4147.50 % I relative term. It is showing the inefficient use
of current assets. Government and other grants have been increased by 12720788.12 in
absolute term and 2488.49% in relative term which is enhancing the strength of the
organisation. The computer expenses are increased by Rs. 88850.00 due to installation of
new computers and printers. All these increase in fixed asset is reflecting in the provision for
depreciation which is increased 2944601.41 and 143.26% in relative term. The share holders
fund, reserve & surplus have been increased by 42.90% and Rs. 30638760.05 in absolute
term which is showing high financial viability of the organisation.

Common Size
Statement Analysis

Common size financial statements are those in which figures reported are
converted into percentages to some common base. For this, items in the financial statement
are presented as percentages or ratios to total of the item and a common base for the
comparison is provided. Each percentage shows the relation of the individual item to its
respective total. In a common size income statement the sales figure is assumed to be equal
to 100 and all other figures of cost or expenses are expressed as percentage of sales. A
common size income statement for different periods helps to reveal the efficiency or

otherwise of incurring any cost or expense. In a common size balance sheet total of assets
and liability are taken as 100 and all the respected figures are expressed as the percentage of
total. Comparative common size balance sheet for different period helps to highlight the
trends in different items.
Interpretation
The cost of goods sold has been decreased from 93.43% to 83.96% in the
year 2008-09. Which increase in the gross profit level up to 17.37% which was previously
15.56% in 2007-08. Other expense like selling expenses is increased. It is due to the
increase in sale but effective use of funds as the increase in relative term then the previous
year is very little.
Despite of increase in sales the processing expenses was less then the
previous year it is indicating the operational efficiency of the firm. Other income has been
declined as the firm is concentrating only upon its core activity.
Omfed appears to be a traditionally financed with share holders fund and
reserve & surplus. It doesnt have any long term liability. In the year 2008-09, 50% of the
reserve and surplus and shareholders fund has been invested which was 97.13 % in the year
2007-08. Total liability also constitutes of 50% of total liability and capital which is very
high then the previous year 2007-08. Out of total assets, fixed asset constitute the major part
which is 63.66^ in 2007-08 and 64.20% in the year 2008-09. It shows the fixed productive
asset of the firm. Piling up of inventories increased up to 22.17%. Cash in hand and bank
was reduced to 11.85% which shows investment of funds. Loans and advances also
decreased which is 1.46% in 2008-09 then 4.58 % in 2007-08 which shows healthy financial
system of OMFED.

Findings
and
Recommendation

The financial statement of OMFED Sambalpur unit has given a broad idea
about the organization. The tools that we used to analyse the financial statement reveals
many vital information regarding the organisations financial strength. The findings of this
analysis show that the financial strength of this organization is very healthy. It is earning
profit at a higher rate. The accounts of reserve and surplus, share holders fund is very high.
As the organization is enhancing the livelihood, socio economic condition of poor people so
government is providing huge grants to it.

The labour cost in this area is very low; availability of raw material in this
area is more. There persists a technological, product, raw material transfer among the
different unit of OMFED.
The entire above factor helping the organization to grow at a faster rate. We
have found out a small weak link in the organization. Despite of huge asset possessed by the
organization the investment opportunity is very thin. The liquidity ratio shows that asset
remain idle without any proper investment. So we would like to add that if sophisticated
machinery will be installed or the capacity of the plant will be enhanced and maintaining a
high level of distribution channel would hike the quality of the product and easy availability
of product to the customer. So it will lead to increase in the profitability up to many folds.
The financial statement also shows that the expenditure on sales promotion and advertising
is very depressing as compared to the sales. Yes it is very eloquent that the rate of sales is
very high but there is a huge potential for increase the sales in dairy product. This can only
be achieved by sales promotion. Inventory management is not satisfactory as it is seen on
the balance sheet that inventory is piling up heavily.
Rest we can say that the organization is developing since inception. It has
also gained a momentum of incurring profit. They are moving from the stage of maximum
utilization of resource to optimum utilization of resource which is very important for the
organization.

Bibliography

Financial Management-By I.M. Pandey

Financial Management-By Khan and Jain
Financial Statement Analysis: - By Gupta
and Mehra.
Financial Management: - BySudhindra
Bhat
www.omfed.org
www.google.co.in