KOMUL Project

Financial Analysis & Leverages
CHAPTER-1
INTRODUCTION
PART-A: ABOUT INDUSTRY
Introduction The dairy sector in the India has shown remarkable development in the past decade and India has now become one of the largest producers of milk and valueadded milk products in the world. The dairy sector has developed through cooperatives in many parts of the State. During 1997-98, the State had 60 milk processing plants with an aggregate processing capacity of 5.8 million litres per day. In addition to these processing plants, 123 Government and 33 co-operatives milk chilling centres operate in the State. With the increase in milk production. Maharashtra now regularly exports milk to neighbouring states. It has also intiated a free school feeding scheme, benefiting more than three million school children from over 19,000 schools all over the
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE
Financial Analysis & Leverages State.
Indian dairy industry Dairy is a place where handling of milk and milk products is done and technology refers to the application of scientific knowledge for practical purposes. Dairy Industry in India More than 2,445 million people economically active in agriculture in the world, probably 2/3 or even more of them are wholly or partly dependent on livestock farming. India is endowed with rich flora & Fauna & continues to be vital avenue for employment and income generation, especially in rural areas. India, which has 66% of economically active population, engaged in agriculture, derives 31% of Gross Domestic Product GDP from agriculture. The share of livestock product is estimated at 21% of total agricultural sector. Contribution of live stock sector to gross domestic product (Percentage contribution) 1950-51 1990-91 63.5 67.0 12.0 16.0
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 2
Financial Analysis & Leverages 4.1 1.3 16.5 3.1 0.3 10.0
Live stock populations: Number of animals (in thousand) (Source: production yearbook 1995 /FAO statistics division) Sheeps Goats Pigs Chickens Cattle 45000 119242 11780 435 194655 Buffaloes Horses Mules Camels 79500 990 1742 1520 (Source Indian Dairy man, 50:1998) Cattle Buffalo Total (1996) (millions) 196
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276
0.68% / year 0.75% / year
World (1996) 1320 151 1471 0.64% / year 0.87% / year
Financial Analysis & Leverages In India In World 28 breeds of cattle 1997 520.6 mt 5.5-0.75% 7 breeds of buffalo .2020.620 to 650 mt.
Milk Production 1950 17 million tonnes 1996 70.8 million tonnes 1997 74.3 mT (Projected) 2020 240 mT Expected to reach- 220 to 250 mT 2020 India contributes to world milk production rise from 12-15 % & it will increase upto 30-35% (year 2020) Average milk production / year America 6874 Kg/ year Denmark 6223 Kg/year Holland 5751 Kg/year India 552 Kg/year
Average Productivity
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2.4 kg/day or 732 kg/lactation/cow
China: 1600 kg/lactation America 7200 kg/lactation Percapita availability: Recommanded 210 gm India
1950 132 gm 1997 214 gm 2020 290 gm India contributes 35% of total Asian milk Dairy Industry profile 1997
Human Population Milk production Average annual growth rate (1996-2000) Per capita milk availability Milch animals
953 million (70 million dairy farmers) 74.3 million tonnes (203.5 million 1 pd) 5.6% 214 gm/day or 78 kg/year 57 million cows;
39 million buffaloes
Milk yield per breedable bovine in milk Cattle feed production (organized sector)
1,250kg 1.5 million tonnes
Turnover of veterinary pharmaceuticals Dairy plants throughout Throughout as percentage of total milk output Value of output of milk group (1994-95) (Based on producers price) Value of output of dairy industry (Based on retail price)
Rs 550 crores 20 mlpd 10 Rs 50,051 crores
Rs 105,000 crores
Projected milk production at different rates of annual growth 1995 to 2000 year @5% @5.5% @6% 1995 66.3 66.3 66.3 1996 69.3 70.0 70.2 1997 73.1 74.0 74.4 1998 76.7 78.0 78.8 1999 80.6 82.3 83.5 2000 84.6 86.8 88.5
Financial Analysis & Leverages Milk Composition Sr. Constituents Buffalo Cow Goat Liquid skimmed milk
no 1 Moisture (gm) 2 Protein (gm) 3 Fat (gm) 4 Minerals (gm) 5 Carbohydrates (gm) 6 Energy calories (kcal) 7 Calcium (mg) 8 Phosphorus (mg) 9 Iron (mg)
81.00 4.30 6.50 0.80 5.00 117.00 210.00 130.00 0.20
87.50 86.80 3.20 3.30 4.10 4.50 0.80 0.80 4.40 4.60 67.00 72.00 120.00 170.00 90.00 120.00 0.20 0.30
92.10 2.50 0.10 0.70 4.60 29.00 120.00 90.00 0.20
Indian Buffaloes: (Dairy business Directory 1996) Buffaloes are classified into two categories; 1) reverine (depending upon variation in their habitat & genome) 2) swamp Swamp buffaloes: - 48 chromosomes South east asian countries Stocky animals, marshy land habitat River Buffaloes: - 50 chromosomes
Financial Analysis & Leverages - massive in size and curled horns - Prefer to enter clear water Worlds Buffalo population: 147 million about 142 millions in Asia & Pacific India: leading most buffalo populated country 78 millions most of reverine Milk production: About 95% of world buffalo milk (45.3 million tonnes) is produced in Asia &Pacific, while 64.4% is produced in India (FAO.1992) From 1950 to 1992 milk production in the world increased by 4.26% The % of total bovines slaughtered; Total bovine slaughtered (%) World 17.1 to 17.4% or - 1.6% per annum
Financial Analysis & Leverages India 15% per annum Asia 6.6% Increasing trend of buffalo population in most of the Asian countries in Brazil and Italy BREEDS Classified on phenotypic & geographic locations;
Cockril (1982) = Buffalo river type; two sub groups; 1. Horns are closed and set close to head & are down swept ;eg. Murrah, Ravi, Mehasana, Jaffarabadi, Sambalpur 2. Horns are sickle shaped and unswept: e.g. Bhadawari, Kalahandi, Kanara, Manda, Nagpuri, Pandharpuri, Surti, Tarai & Toda Breeds of Buffaloes of Indian Origin and Breeding Tracts: Group Murrah type Breed Murrah Nili Ravi Breeding tract Rohtak, Jind,Hisar, Bhiwari, Sonepat (Hariyam) Ferozepur (Punjab) Kaira and Baroda
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Gujarat
Surti
Financial Analysis & Leverages Jaffarabadi Mehsana Bhadawari Kutch, Jungarh & Jamnagar dist Mehsana, sabarkantha, Banaskantha Dist. Bhadawari estate, Beh Tehsil in Agra, Gwalior & Etawah dist. Tarai region of U.P. Nagpur, Akola, Amravati dist. South maharashtra, west A.P., north Karnataka Hilly region of Andra Pradesh and Orissa Bilaspur dist.
Uttar
pradesh Tarai Central Nagpuri India Pandharpuri Kalahandi Sambalpur Toda
South India
Nilgiri Hills
South Kanara West coast in Kerela
Buffaloes found in the north eastern states and the eastern coastal region of India & in China South east Asian countries e.g. Philippines, Thailand, Malaysia, Vietnam, Srilanka, Burma, Laos, Kampuchea, Bangladesh etc. have been classified as swamp buffaloes on the basis of their genetic constitution (2n=48) & natural habitat.The breeds includes in these groups are Manda & Palakhemundi. Production performance Growth: The average birth wt.(Indian buffaloes) low 21 kg High 41 kg Higher Average in daily male gain 404 of calves 548 gm gm between than between birth to in 3-6 36 females months months
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Financial Analysis & Leverages Body weight at first 367 531 calvingkg kg ranges (Dharwati) (Nili from to Ravi)
Higher growth rate in reverine breeds than swamp MILK Production performance of different breeds of Buffaloes: Age at 1st calving Lactation. (months) Buffalo Avg. Range Murrah 43.0 39.9-54.5 Nili Ravi 42.0 41.4-47.3 Surti 39.0 26.5-45.0 Bhadawari 46.0 44.3-54.2 Nagpuri 48.0 44.3-55.6 Reproduction Lactation Length (days) PRODUCTION
Yield (kg) Avg. Range Avg (Range) 1850 1476-2515 315(267-365) 1765 1596-2808 2808 (09) 1364 1304-1693 313(300-373) 1181 276 (-) 1103 926-1175 270 (-) -
Performance:
Most of the buffaloes are considered to be seasonal breeds with maximum calving taking place from July to November in almost all breeds
Buffaloes come in oestrus in cold month and are sub-fertile during hot month Sub-fertility-> due to poor thermoregulaion in buffaloes and
Poor nutrition -> poor heat symptom-low heat detection (only ligno-cellulosic material straw /dry roughages)
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Financial Analysis & Leverages Calving interval Dry period Service period (days) Murrah 454 Nili Ravi 530 Surti 410 Bhadawari 460 Nagpuri (days) 148 198 165 156 (days) 133 211 103 98
Ag. Technologies (Dairy) The dairy industry plays an important role in the socio-economic development of India. The dairy industry in India is instrumental in providing cheap nutritional food to the vast population of India and also generates huge employment opportunities for people in rural places. The Department of Animal Husbandry, Dairying, and Fisheries, which falls under the central Ministry of Agriculture, is responsible for all the matters relating to dairy development in the country. This department provides advice to the state governments and Union Territories in formulating programmes and policies for dairy development. It also looks after all the matters relating to production and preservation of livestock farms (cattle and sheep). To keep focus on the dairy
Financial Analysis & Leverages industry a premier institution known as the National Dairy Development Board was established. This institution is a statutory body that was established in 1987. The main aim to set up the board was to accelerate the pace of dairy development in the country and attract new investments. India is a wonderland for investors looking for investment opportunities in the dairy industry. The dairy industry holds great potential for investment in India and promises high returns to the investors. The reasons why the industry has huge potential for attracting new foreign investment are: 1. There is a basic raw material need for the dairy industry; that is, milk is available in abundance. 2. India has a plentiful supply of technically skilled laborers. 3. There is an easy availability of technological infrastructure. 4. India has all the key elements required for a free market system. There are different sectors within the dairy industry that promise great business investment opportunities: Biotechnology: 1. The Indian cattle yield less milk as compared to their foreign counterparts. The
Financial Analysis & Leverages Indian cattle breeders are on the lookout for ways to improve their milk yield through cross-breeding. Thus, there is a huge potential available for foreign investors to invest in dairy cattle breeding of high-quality buffaloes with hybrid cows. 2. There is also great scope for investment in different dairy cultures, including dairy biologics, enzymes, probiotics, and other coloring materials for food processing. 3. Producing biopreservative ingredients based on dairy fermentation, such as pediococcin, aciophilin, bulgarican, and Nisin contained in dairy powder, also promise great investment opportunity. Dairy/Food Processing Equipment: Great potential lies for foreign investment for manufacturing and marketing of cost-effective, top-quality food processing machinery. Food Packaging Instruments: There is a tremendous investment opportunity for foreign investors in the manufacturing of both machinery and packaging materials that aid the development of brand loyalty and gives a clear edge in the marketing of dairy products.
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Financial Analysis & Leverages Retailing: Retailing of dairy products also promises great investment opportunities for standardization and upgrading dairy products in the main metropolitan cities. Manufacture of Ingredients: Several ingredients are involved in the making of different dairy products like ghee, condensed milk, and cheese. Manufacturing of ingredients for these products offers a great potential for foreign investment in India. Finished Products: There is a great scope for investment in the manufacturing of finished dairy products such as cheese sauce and cheese powders. Technically Advanced Manufacturing Units: There is a great opportunity for foreign investors to invest in establishing manufacturing units for dairy products. The investors can build world-class manufacturing units and let them for hire. Building manufacturing units supports specialized dairy-related activities, such as cheese slicing, cheese packaging, butter printing, and dicing lines, which hold greater potential over other activities. Thus, the dairy industry in India has huge investment opportunities in a variety of sectors. The investors are all set to gain profitable returns on their investment.
PART-B: ABOUT SUBJECT
INTRODUCTION
The study Financial Analysis & Leverages was conducted in Kolar Milk Union Limited in order to know the financial status of the company. The scope of the study is to know the financial activities of the company, which serves as a support service for the manufacturing of the Milk & products and also the contribution of the financial activities within the company. The field of financial analysis is comprised of leverages, comparative statement and common size statement analysis.
The study is made to analyze the financial performance with reference to financial statements like profit and loss account and balance sheet with the help of tables, graphs, providing suggestions for improving the methods and procedure followed in the firm.
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Financial Analysis & Leverages The main aim is to study the activities of finance department by utilizing the theoretical knowledge relating to practical situation and to highlight differences in practice. MEANING OF FINANCIAL ANALYSIS:
One of the important steps of accounting is the analysis and interpretation of the financial statements which results in the presentation of data that helps various categories of persons in forming opinion about the profitability and financial position of the business concern.
In the words of Myres, Financial Statement Analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statement and a study of the trend of the trend of these factors as shown in a series of statements.
The most important objective of the analysis and interpretation of financial statements are to understand the significance and meaning of financial statement data to known the strength and weakness of a business undertaking so that a forecast may be made of the prospects of that undertaking.
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Financial Analysis & Leverages FINANCIAL STATEMENTS:
A Financial Statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of business firm. It way show a position at a moment of time as in the case of balance sheet, or may reveal a series of activities over a given period of time, as in the case of and Income Statement. Therefore, the term financial statement generally refers to two basic statements, such as Income Statement and Balance Sheet. Apart from these two statements, a company may also prepare a statement of Retained Earnings and Statement of changes in financial position OBJECTIVES OR USES OF FINANCIAL ANALYSIS: Financial analysis is helpful in assessing the financial position and profitability of a concern. The following are the main objectives of analysis of financial statements: 1. To judge the present and future earning capacity or profitability of the concern. 2. To judge the operational efficiency as a whole and of its various parts or departments.
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Financial Analysis & Leverages 3. To judge the short-term and long-term solvency of the concern for the benefit of the debenture holders and trade creditors. 4. To have comparative study in regard to one department with another department. 5. To help in assessing developments in the future by making forecasts and preparing budgets.
PROCESS OF FINANCIAL ANAYSIS:
The analysis of financial statements is a process of evaluating the relationship between component of financial statements to obtain a better understanding of the firms position and performance. The functional analysis is the process of selections, relation and evaluation.
1. The first task of the financial analyst is to select the information relevant to the decision under consideration from the total information contained in the financial statements. 2. The second step is to arrange the information in a highlight significant relationship.
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Financial Analysis & Leverages 3. The final step is interpretation and drawing of inferences and conclusions.
TYPES OF FINANCIAL ANALYSIS:
A Financial analysis can be external or internal.
External Analysis:
Those persons who are not connected with the enterprise make it. They do not have access to the enterprise. They do not have access to the detailed record of the company and have to depend mostly on published statements. Investors credit agencies, governmental agencies and research Scholars make such type of analysis.
Internal Analysis:
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Financial Analysis & Leverages Those persons who have access to the books of accounts make the internal analysis. They are members of the organization. Analysis of financial statements or other financial data for managerial purpose is the internal type of analysis. The internal analyst can give more reliable result than the external analyst can because every type of information is at his disposal.
TECHNIQUES OF FINANCIAL ANALYSIS:
The analysis and interpretation of financial statement is used to determine the financial position and operations as well. A number of techniques are used to study the relationship between different statements. The following methods of analysis are used.
COMPARATIVE FINANCIAL STATEMENTS:
The comparative financial statements are statements of the financial position at different periods of time. The elements of financial position are shown
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Financial Analysis & Leverages in a comparative form so as to give an idea of financial position at two or more periods. Thus, in these statements, figures for two or more periods are placed side by side by side to facilities easy comparison. Both the income Statement and Balance Sheet can be prepared in the form of comparative financial statements.
COMPARATIVE INCOME STATEMENTS:
The income statement discloses net profit or net loss or account of operations. A comparative income statement will show the absolute figures for two or more periods, the absolute change from one period to another and if desired the change in terms of percentages. Since the figures two or more periods are shown side by side, with the help of this we can quickly ascertain whether sales have increased or decreased, whether cost of sales have increased or decreased etctherefore, only a glance of data incorporated in this statement will be helpful in making useful conclusions.
COMPARATIVE BALANCE SHEET:

Balance Sheet of two or more different dates can be used for comparing assets and liabilities and finding out any increase or decrease in those items. Therefore, in a single Balance Sheet the emphasis is on present position, it is on change in the comparative balance sheet. This type of balance sheet is very helpful in studying the trends in a business concern.
1. Common Size Financial Statements:
Common size financial statements are those in which figures reported are converted into percentage to some common base. When this method is pursued, the income statement exhibits each expense item or group of expense items as a percentage of net sales, and net sales are taken at 100 percent. Similarly, each individual asset and liability classification is shown as a percentage of total assets and liabilities respectively. Statements prepared in this way are referred to as Common Size statements.
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Financial Analysis & Leverages Common-Size statements prepared for one firm over the years would highlight the relative changes in each group of expenses, assets and liabilities. These statements can be equally useful for inter-firm comparisons, given the fact that absolute figures of two firms of the same industry are not comparable.
2. Trend percentages:
Trend percentages are very much helpful in making a comparative study of the financial statements for several years. The way calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. Each item of base year is taken as 100 and on that basis the percentages for each of the items of each of the years are calculated. These percentages can be taken as index Number showing the relative changes in the financial data resulting with the passage of time. This method is a very much useful, analytical device for the management since by substitution of percentages for large amounts, brevity and readability are achieved.
3. Funds flow statements:
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Financial Analysis & Leverages Funds flow statement is a financial statement, which indicates the various means by which the funds have been obtained during the certain period and the ways to which these funds have used during that period.
In short, it is the statement, which shows the movement of funds between two balance sheet dates.
According to Anthony, The funds flow statements describes the sources from which additional funds were derived and the uses to Which these funds were put.
The funds flow statement is called by different names, such as, Statement of sources and Applications of Funds, Statement of changes in Working Capital, Where Got and Statement and statement of Resources Provided and Applied.
4.
Cash flow statement:

Cash flow statement shows the movement of cash and their causes during the period under consideration. It may be prepared annually, half yearly, monthly, weekly or for any other duration.
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Financial Analysis & Leverages Cash flow statement is prepared to show the impact of financial policies and procedures on the cash position of the firm and takes into consideration all transactions that have a direct impact upon cash. A cash flow statement concentrates on transactions that have direct impact on cash. It deals with the inflow and outflow of cash between two Balance Sheet dates. In other words, a statement of changes in a financial position of a firm on cash basis is called a Cash flow statement.
6. Leverage Ratios Leverage refers to an increased means of accomplishing some purpose. In financial management, it refers to employment of funds to accelerate rate of return to owners. It may be favorable. An unfavorable leverage exists if the rate of return remains to be lower. It can be used as a tool of financial planning by the finance manager. Leverage may be. i. Operating leverage and ii. Financial leverage. iii. Combined leverage
iv. Return on investment leverage
i. Operating leverage:
It occurs when with fixed costs the percentage change in profits due to change in sales volume. It shows the extent of the change in earnings before interest and tax (EBIT) as a result of change in sales volume. Two important points i.e. relating to fixed costs and break-even point should be noted about operating leverage. The magnitude of the operating leverage is related to the fixed costs of the firm. If the fixed costs of the firm are relatively large, substantial portion of its contribution margin is appropriated to cover these fixed costs. Once the breakeven point is reached, all contribution margins become profit of the concern. If there is small percentage of increase in earnings. On the other hand, a small drop in sales eliminates the entire earnings near the break-even point. The significance of operating leverage lies in the fact that it tells the finance manager about the impact of change in sales revenue and operating income. Thus, a firm with high degree of Operating leverage will experience much large effect on EBIT because of small change in sales. As far as possible a firm should avoid operating under conditions of a high degree of operating leverage, as it is a high-risk situation. It will be desirable to operate at sufficiently above the break even point to avoid the danger of sharp fluctuations in profits because of variation in sales. It may be noted carefully that the degree of operating leverage
Financial Analysis & Leverages goes on decreasing with every increase in sales volume above the break-even point. It is calculated by the following formulas:
Operating leverage = Marginal contribution / Earnings before interest and Tax ii. Financial leverage: When a firm procures debut capital to finance its needs, it is said to have financial leverage. It tells the extent of the change in earning before tax (EBT) due to change in operating income (EBIT). It is calculated with the help of the following formula:
Financial leverage = Earnings before interest and Tax / Earnings before Tax. iii. Return on investment leverage : It may be favorable or unfavorable. If the rate of return on investment (ROI) of a firm is higher than the cost of debt capital, it is said to have favorable financial leverage. On the other hand, if the rate of return on investment (ROI) is lower than the cost of debt capital, the firm is said to have unfavorable financial leverage. Favorable financial leverage is also referred to as trading on equity.
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Financial Analysis & Leverages iv. Combined leverage:
This leverage exhibits the relationship between a change in sales & in corresponding variation in taxable income.
Combined leverage
Contribution Taxable income
OR Combined leverage = Operating leverage X Financial leverage
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CHAPTER 2
RESEARCH DESIGN
TITLE OF THE STUDY
A STUDY ON FINANCIAL ANALYSIS & LEVERAGES OF KOLAR MILK UNION LIMITED.
STATEMENT OF PROBLEM:
After the white revaluation, many milk union limiteds came into existence. As a result lot of competition according in the field of purchase and sale of milk in satisfying the customers. Now a days KOMUL is facing lot of competition in the market due to existence of more competitors like HERITAGE, DODLA, TIRUMALA, AROGYA, GOOD MORNING MILK etc. In this situation, the KOMUL should be in a position to analyses its financial and leverage factors, to take corrective steps to overcome the competitors by doing the financial analysis, it helps to know the financial position of the KOMUL which involves in analyzing of various financial statement such as Profit And Loss Account, Balance Sheet etc.
Financial Analysis & Leverages and by during the leverages analysis it helps in knowing the risk involved carrying on the operations of KOMUL so, this project is done to show how the financial and leverages analysis to be done to overcome the competition by understanding its own financial position and extent the risk taken along with its importance.
OBJECTIVE OF THE STUDY
To study and analyze the financial performance of KOMUL
To get the practical knowledge of the financial evaluation techniques and analysis of annual reports in KOMUL
To forecast the financial performance through Leverage analysis
To make the analysis and interpretation more effective by using various techniques such as Trend analysis Comparative analysis, Analysis, Comparative Common Size Analysis.
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SCOPE OF THE STUDY
The current study is undertaken for the purpose of knowing the financial Performance KOLAR MILK UNION LIMITED The study focuses attention mainly on the level of financial Performance of KOLAR MILK UNION LIMITED.
REVIEW OF LITERATURE Reviewing the text books of finance, reports provided by the finance department in KOMUL.
OPTIONAL DEFINITIONS OF CONCEPTS: LEVERAGE
Definition
Leverage is the employment of an asset or funds for which the firms pays a fixed cost or fixed return James Horne
TYPES OF LEVERAGES
1. Operating leverage 2. Financial leverage. 3. Combined leverage. 4. Return on investment leverage. Operating leverage:
Operating leverage shows the relationship between the changes in sales & the changes in then fixed operating income. Operating leverage has impact mainly on fixed cost & variable cost & also on contribution. The following equation is developed by RW Johnson to compute operating leverage.
Contribution Operating leverage = Operating Profit (EBIT)
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Financial Analysis & Leverages Financial leverage: The process of variation in capital structure is called financial leverage or trade on equity. The variation in capital composition will have an impact on operating & taxable income of the company. It signifies the relationship between the earning power on equity capital & rate of interest on borrowed fund or debt. By adopting this leverage, the rate of return on equity capital is modified.
Operating income Financial leverage = Taxable income
Combined leverage: This leverage exhibits the relationship between a change in sales & in corresponding variation in taxable income.
Contribution Combined leverage = Taxable income
OR
Combined leverage = Operating leverage X Financial leverage

SAMPLING:There are two ways in which the required information may be obtained. They are Complete enumeration survey Sampling technique Here the study is based on complete enumeration method, that is, data are collected for each and every item of expenses, as the case may be. The
advantage of this type of survey will be that no item is left out and hence greater accuracy may be ensured. However the effort, money and time required for carrying out the enumeration will generally be more. No samples are required for this study as it is concerned with the true financial analysis.
METHODOLOGY:
It has also been assumed that the information obtained from the respondents were true and authentic.
SOURCES OF DATA COLLECTION:

Financial Analysis & Leverages The study is based on both primary data & secondary data. Primary data It was collected from over all products financial statements as per the respective years. Secondary data It was collected from company annual reports, personal discussion with executives in the company, books, etc.
PLAN OF ANALYSIS
The data edited from the company financial statements in respect of over all products statements or analysis of respective years .For better analysis profit is computed by using leverages & financial analysis methods Further impact of variable cost, fixed cost on profit, is also studied to made presentation fair & adequate techniques of financial analysis were made use off. REFERENCE PERIOD: The reference period of this study was 30 Days i.e., 1Month LIMITATIONS OF THE STUDY
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Financial Analysis & Leverages The study no doubt with relation to objective, but it does not give complete and total accuracy of findings. The study was done only for the past four years only. It is only the study of interim reports. Due to time constraints, all the ratios could not be calculated, only few of them were taken in to account. Discussion about the project could be conducted only with a few officials due to time constraints face by them. As this study is related to the financial aspects the union could not revel all the information, some data were confidential. Constraints of time due to busy schedule of organizational Personnel. Analysis and interpretation of the report is purely based on the manual provided by the finance department. Time allotted by the company for the study was very short with in which collection of all the information was not possible. It is based on monetary information only.
CHAPTER SCHEME The study report will be presented in 5 chapters as indicated below:
Financial Analysis & Leverages Chapter-1 Introduction: It deals with theoretical back ground of the study. Chapter-2 Research Design: It deals with design of the study, Title of the project, Statement of the problem, Objectives & Scope of the study, operational definitions of the concept. Source of Data collection & the Methodology, Limitations of the study & chapter scheme
Chapter-3 Profile of the Company: It deals with the Company Background & details.
Chapter-4 Analysis & Interpretation of Data: It deals with the analysis & interpretation of the financial data collected from the Company.
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Financial Analysis & Leverages Chapter-5 Summary of Findings & Conclusions: It presents the summary of all findings & Conclusions
Chapter-6 Recommendations & Suggestions It helps to take out some unwanted informations by giving suggestions. Chapter7 Appendices & Annexures It is a copy of Balance Sheet of a Company. Chapter-8 Bibliography It is the reference made from Internets, web sites and the text books etc...
CHAPTER-3
COMPANY PROFILE
INCEPTION:
Financial Analysis & Leverages Dairy development activity in the district was initiated during the year 1975 under IDA assistance as a part of Kolar Milk Union Limited (KOMUL). Subsequently the district was bifurcated for the operational area of KOMUL to form a separate Milk union with effect from 01-04-1987. Total geographical area of Kolar district is 8,200sq km with 2889 inhabited village, and the total population averaging is 26, 00,000. Average rainfall in the area is about 750mm. Operation of the Milk union consists of all the eleven Taluks of Kolar district. Initially the union started its function with a total number of 460 dairy co-operative societies at the time of bifurcation. The average daily
procurement of the union was 1, 56,774 kg. Of milk Today with a total number of 1497 functional Milk producers co-operative Societies (MPCS) a total membership of 2.89 lakhs and an average daily procurement of about 6, 84,954 kg/day. It ranks second in the state as far as Milk procurement is concerned and first as far as the
functional MPCS is concerned. Total cattle population in the Milk-shed area is about 4, 36,654 that includes 1, 60,000 crossbreed cattle. At present the average Milk procurement per society is 447 kg per day with a minimum price paid per kg of Milk is Rs.8.58/TYPE:
Financial Analysis & Leverages The union has a Milk processing plant at Kolar with handling the capacity of 2, 50,000 liters per day (LPD) and has three chilling centers at. Chintamani Gowribidanur Sadli
With handling capacity of one lakh LPD at Kolar, the dairy is manufacturing Butter, Ghee, Peda, Curd, Cheese, Masala Butter Milk, UHT Milk in addition to pasteurized toned Milk and full cream Milk. UHT Milk is being sold under the brand name Nandini, Good Life, and Nandini Smart while all other products are sold under the brand name of Nandini. The union started
marketing of liquid Milk in polythene sachets in entire Kolar district and in a part of Bangalore city since 1994. Recently it has entered Chintamani market also selling nearly 10,000 LPD
NATURE:
DCS Organizations; the member producers and their Dairy Co-operative Societies (DCS) are the vital constituents of the Union and their progress is the
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Financial Analysis & Leverages judging yardstick on the efficiency of the Unions operation. Hence the maximum importance has been given to the development and the progress achieved in various activities, is the fruit of these efforts.
Until the year 1940, there was very little published information available about the method of preparation and use of these products. The credit for the first
publication on the subject goes to Dr. W. B. Davis, the first director of Dairy Research. Within a span of four decades considerable research had been
conducted at the National Dairy Research Institute and other places on indigenous dairy products.
Since then, the Dairy Industry had begun to grow at a rapid pace. There have been tremendous efforts put in by the various organizations to assure good quality milk to the people and the saying All that is white is pure milk came in to existence.
BOARD OF DIRECTORS
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Financial Analysis & Leverages NO. 1 2 3 4 5 6 7 8 9 10 11 NAM E Sir.k.N. Nagaraj Sir.k. V. Nagaraj Sir.S.Ramesh Sir.T.N. Rajgopal Sir.K.Gudiappa Sir.Jayasihmha Krishna Sir.C.Munivenkatappa Sir.K.Ashwathareddy Sir.R. Krishnappa Sir.K Ramaya Sir.manjunatha Reddy DESIGNATION President Director Director Director Director Director Director Director Director Director Director PLACE Mulbagal chikkabalapur Gowribidanur Chintamani Shidlagatta Bangarpet Srinivaspur Gudibande kolar Malur Bageplli
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ORGANIZATION CHART
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Financial Analysis & Leverages BUSINESS OPERATIONS OF KOMAL
Milk shed area of KOMUL
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Financial Analysis & Leverages PRODUCT PROFILE: 1. Toned Milk: Karnatakas most favorite Milk, is Nandini Toned milk. Pure milk containing of 3.0% fat and 8.5% SNF. It is Available in 500 ml and 1-liter packs.
2. Full Cream Milk: This pure milk Containing 6% fat and 9% SNF, A rich Creamer and tastier milk, ideal for preparing homemade sweets and savories. It is Available in 500 ml and 1-liter packs.
3. Cheese: Cheese plant was started in the Union in 1997 at a
cost
of
Rs.3.5crores. At present Cheddar Cheese is produced from Cow Milk and ripened to various lengths of Time will be blended and processed to obtain Processed Cheese. 4. Peda: Peda is sweetened heat desiccated Product obtained from milk. It is Rich in Fat, Proteins, Lactose and minerals especially Iron content. On an average 25 Kg Peda is Produced and sold in units of 250gms box. Each box contains10 pedas weighting 25 gm each. HOMOGENIZED MILK: This Milk is good in quality which gives you more cups of tea or coffee and is easily digestible. This is available in 500ml, 1 liter and 5 liter packets.
CURDS: Nandini curds are made out of pure Milk. It is thick and delicious, giving all the goodness of homemade curds. It is available in 200gms and 500gms packets. BUTTER: Rich smooth and delicious, Nandini butter is made out of fresh pasteurized Milk cream. Any preparations made from this will be a delicious treat. It is available in 100gms (salted), 200gms and 500gms cartons both salted and unsalted.
GHEE: Nandini ghee is made from pure butter. It is fresh and pure and have delicious flavor. Hygienically manufactured and packed in a special pack to retain the goodness of pure ghee. Shelf life of 6 months at ambient temperature. This is available in 200ml, 500ml, 1-liter sachets, 5-liter tins and 15kg tins.
FLUID MILK: Currently two types of HTST pasteurized fluid Milk is processed and packed. They are toned Milk with 3% fat and 8.5% SNF (Solids Non Fat) and full cream Milk with 6% fat and 9% SNF. Both are packed in the units of Later and 1 Later Fluid Milk is sold in bulk to other dairies both inside and outside the state.
48
Financial Analysis & Leverages UHT MILK: It refers to ultra high temperature heat-treated Milk. The concept of UHT milk is absolute i.e. bacteria free besides retaining the nutritional quality of milk. During the process, milk is exposed to a temperature of 137c for 4 sec and immediately cooled a room temperature packing it aseptically. At present two types of UHT Milk are being produced one Nandini Good Life with 3.6% fat and 8.5% SNF and another one is NANDINI smart with 1.5% fat and 9% SNF. Nandini Smart being low fat products good for health conscious people. Both the milk can be stored for at least 45 days at room temperature. It needs no boiling before drinking. on an average 25,000 of both variety of Milk is being sold per day.
The packing material used for UHT Milk packing consists of 6 layers consisting of polythene, aluminum, foil and paper which prevents the center of air, water, light and bacteria there by keeping the Milk well 60 level quality i.e. less than one defect out of ten lakhs products, has been achieved in UHT Milk due to good quality of initial raw Milk. Raw milk is used for UHT processing to get good quality end products. The composition of the milks is more nutritious and is as below.
49
Constituters
Fat Minerals 3.5% 3.95%
Proteins 10.7% 0.75%
Lactose 4.3% 4.3%
Water 87.5% 89.5%
Total Solids 12.1% 10.5%
Nandini Good 3.6 Life % Nandini Smart 1.5 %
MASALA BUTTERMILK: Masala buttermilk is manufactured and sold in the summer season, especially from month of March to July, the only period during which it gets demand. On an average the selling mounts to about 1000lts. Per day in 250ml sachets.
MASTI DHAI: Recently Kolar dairy was taken up the production of Masti-dhai in polythene cups of units of 200gms and 400gms. The Milk used for Mastidhai preparation consists of 4, 7% of fat and 11% of SNF added with lactic stator culture. This product is being marketed by Gujarat Co-operative Milk Marketing Federation (G.C.M.M.F)
50
SLIM MILK POWDER: Excess Milk obtained during flush season is converted into SLIM Milk powder at other product dairies as Mandya, Dharwad and Dempo dairies belonging to K.M.F and packed in bulk sachets of 25kgs. Annually about 1000 tons of SMP is produced and sold to other dairies in Karnataka, Bihar Milk federation, Delhi Mother Dairy and others the remaining is used for reconstitution during lean. Although KOMUL had set high standards for its products and customer services, its prior reliance on manual operations made it difficult to keep up with surging demand. In designing the Mega Dairy, Komul looked towards an automated system that would allow it to achieve consistent quality parameters for each product. Energy and power was more effectively optimized and controlled and all plant equipment was integrated. Additionally, employees were given training to use the new automated systems and valuable management information were collected at the main server and used for marketing and evaluations.
Mega Dairy has a capacity it process 7 lakh liters of Milk per day. This Dairy has been built by investing Rs.35.70crores obtained as a term loan from National Dairy Development Board. The Mega Dairy has the latest State-of-the-Art
Financial Analysis & Leverages technological facilities in dairy processing and the Union has the ability to manufacture Milk and milk products to world-class standards, ultimately consumers are at the beneficial end. Milk and Milk products now reaches the market faster, at a higher quality and with a Longer shelf life. This is sharp contrast to its previous reliance on manual systems that led to time lags in each production stage.
KOMUL product range: The products produced by KOMUL are MILK CURD BUTTER Milk PEDA GHEE, CHEESE GOOD LIFE and other products
52
MARKET SHARE: BRIEF OVERVIEW OF KOMUL PROCUREMENT & INPUTS

Inhabited Villages Milk producer Members Dairy Co-operative Societies Milk Procurement Routes Artificial Insemination Centers PROCESSING PLANTS Kolar Dairy Gowribhidanur Chilling center Sadil Chintamani MARKETING & SALES Number of distribution routes Agents Milk Parlors Every day Sachet milk sales FINANCE Total Share Capital Annual Turnover 2930 288751 1497 105 1475 2,00,000 Kgs PD 1,00,000 Kgs PD 1,00,000 Kgs PD 1,00,000 Kgs PD 32 292 7 15.56 Lakhs 9.12 Cores 271.97 ores
COMPETITORS:
There are 125 competitors form private factories. The main are:

HERITAGE GOMATA SHRUTHI SWASTIC GOLD FIELF

53

DIARY PLUS NILGIRIS AROKYA DODLA etc.,
FUNCTIONAL CHART:
FUNCTIONAL CHART BOARD
DEPARTMENTS
ENGINEERIN G
FINAN CE
R& DD D
MARKETIN G
ADMINISTRATI ON
HR D

PURCHAS SALE
54
GROWTH & DEVELOPMENT OF THE INDUSTRY:
Until the year 1940, there was very little published information available about the method of preparation and use of these products. The credit for the first publication on the subject goes to Dr. W. B. Davis, the first director of Dairy
55
Financial Analysis & Leverages Research. Within a span of four decades considerable research had been
conducted at the National Dairy Research Institute and other places on indigenous dairy products.
Since then, the Dairy Industry had begun to grow at a rapid pace. There have been tremendous efforts put in by the various organizations to assure good quality milk to the people and the saying All that is white is pure milk came in to existence
CHAPTER 4
DATA ANALYSIS & INTERPRETATION
TABLE 1: SHOWING OPERATING LEVERAGES

Financial Analysis & Leverages Years 2006-07 2007-08 2008-09 2009-10 Operating leverages 1.045 1.050 1.056 1.072
ANALYSIS: From the above table we can observe that operating leverage is 1.045 in the year 2007 & it has been increased to 1.050 in the year 2008 & 1.056 in the year 2009 & in 2010 it is 1.072. So we can say that there is a gradually increased in leverages when compared to base year 2006-07.
57
Graph- 1: SHOWING OPERATING LEVERAGES
2009-10
1.072
2008-09
1.056 Series1
2007-08
1.05
2006-07
1.045
1.03
1.04
1.05
1.06
1.07
1.08
Interpretation: So we can say that there is a gradually increased in leverages when compared to base year 2005-06.
TABLE 2: TABLE SHOWING FINANCIAL LEVERAGE
58
Year 2006-07 2007-08 2008-09 2009-10
Financial leverage 1.013 1.007 1.006 1.002
Analysis:
From the above table we can observe that the financial leverage is 1.013 In the year 2007, & it has been decreased to 1.007 in the year 2008 & to 1.006 in the year 2009 & in 2010 it is again decreased to 1.002. So we can say that there is gradual decreased in leverages when compared to the base year 2007.
59
Graph -2: SHOWING FINANCIAL LEVERAGE
1.014 1.012 1.01 1.008 1.006 1.004 1.002 1 0.998 0.996
1.013
1.007
1.006
2006-07 2007-08 1.002 2008-09 2009-10
2006-07
2007-08
2008-09
2009-10
Interpretation: Thus, we can say that there is gradual decreased in leverages when compared to the base year 2007.
60
TABLE 3: TABLE SHOWING RETURN ON INVESTMENT LEVERAGE
Year
Return on investment
2006-07
3.537
2007-08
4.24
2008-09
3.23
2009-10
6.26
Analysis:
From the above table we can observe that the return on investment leverage is 3.537 in the year 2007 & it has been increased to 4.24 times in the year 2008 & decreased to 3.23 in the year 2009 & in the year 2010 again increased to 6.26. So
Financial Analysis & Leverages we can say that there is gradual increase & decrease when compared to the base year 2006-2007.
Graph-3: SHOWING RETURN ON INVESTMENT LEVERAGE
7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 3.537 4.24 3.23
6.26
2006-07 2007-08 2008-09 2009-10
2009-10
Interpretation Hence, we can say that there is gradual increased & decreased when compared to the base year 2005-2006
62
TABLE 4: TABLE SHOWING COMBINED LEVERAGE
Years 2006-2007 2007-2008 2008-2009 2009-10
Combined leverage 1.0575 1.0563 1.0613 1.0698
Analysis:
From the above table we can observe that the combined leverage is 1.0575 in the year 2007 & it has been decreased to 1.0563 times in the year 2008 & increased to
63
Financial Analysis & Leverages 1.0613 in the year 2009 and in 2010 it is almost constant. So we can say that there are gradual fluctuations in the combined leverages.
Graph-4: SHOWING COMBINED LEVERAGE

1.0698
1.07 1.065 1.0613 1.06 1.055 1.05 1.045
2006-2007 1.0575 1.0563 2007-2008 2008-2009 2009-10
2006-2007
2007-2008
2008-2009
2009-10
Interpretation
64
Financial Analysis & Leverages From the above graph we can observe that the combined leverage is 1.0575 in the year 2007 & it has been decreased to 1.0563 times in the year 2008 & to 1.0613 in the year 2009 and in the year 2010 it was 1.0698. So we can say that there is more fluctuations when compared to the base year 2006-2007.
TABLE 5: SHOWING CHANGES IN THE SHARE CAPITAL
Years Amt. 2006-07 2007-08 2008-09 2009-10 91327700 117448400 219176400 281193700 Percentage 100 128.6 239.98 324.78
Analysis:
65
Financial Analysis & Leverages From the above table we can observe that the percentage of share capital is 100 % in the year 2007 & it has been increased to 128.6% in the year 2008 & 239.98% in the year 2009 and in the year 2010 324.78%. So we can say that there is a gradually increased in the share capital when compared to base year 2006-07.
TABLE 5: SHOWING CHANGES IN THE SHARE CAPITAL
324.78 350 300 250 200 150 100 50 0 2006-07 2007-08 2008-09 2009-10 100 2006-07 128.6 2007-08 2008-09 2009-10 239.98
66
Financial Analysis & Leverages Interpretation: Thus, we can say that there is a gradually increased in the share capital when compared to base year 2006-07.
TABLE 6: CHANGES IN THE RESERVES & SURPLUS
Years 2006-07
Amt. 101111251
Percentage 100
2007-08
101556505
101
2008-09
117137541
116
2009-10
114696482
113
67
Analysis:
From the above table we can observe that the percentage of Reserves & surplus is 100 % in the year 2007 & it has been increased to 101% in the year 2008 & increased to 116% in the year 2009 & to 113% in the year 2010. So we can say that there are a more fluctuations in the Reserves & surplus when compared to base year 2006-07.
Graph- 6: CHANGES IN THE RESERVES & SURPLUS
68
120 115 110 105 100 95 90 100 101
116 113
Series1
2006-07
2007-08
2008-09
2009-10
Interpretation: From the above chart we can say that there is a more fluctuations in the Reserves & surplus when compared to base year 2006-07.
TABLE -7: SHOWING CHANGES IN THE LOAN
69
Years 2006-07
Amt. 217181741
Percentage 100
2007-08
189293306
87
2008-09
260394944
120
2009-10
299710803
138
Analysis:
70
Financial Analysis & Leverages From the above table we can observe that the percentage of loans is 100 % in the year 2007 & it has been decreased to 87% in the year 2008 & increased to 120% in the year 2009 and to 138% in the year 2010. So we can say that there are a more fluctuations in the loans compared to base year 2006-07.
Graph- 7: SHOWING CHANGES IN THE LOANS

160 140 120 100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 120 100 87 2006-07 2007-08 2008-09 2009-10 138
71
Financial Analysis & Leverages Interpretation: So we can say that there are a more fluctuations in the loans compared to base year 2006-07
TABLE- 8: SHOWING CHANGES IN THE FIXED ASSETS
Years 2006-07 2007-08 2008-09 2009-10
Amt. 17417221 15515275 18113910 14531709
Percentage 100 89 104 84
72
Analysis: From the above table we can observe that the percentage of fixed assets is 100 % in the year 2007 & it has been decreased to 89% in the year 2008 & increased to 104% in the year 2009 & again decreased to 84% in the year 2010. So we can say that there is a more fluctuations in the Fixed assets when compared to base year 2006-07.
Graph-8: SHOWING CHANGES IN THE FIXED ASSETS

84 100 2006-07 2007-08 2008-09 2009-10 104 89
73
Interpretation: We can say that there is a more fluctuations in the Fixed assets when compared to base year 2006-07.
TABLE 9: SHOWING CHANGES IN THE CURRENT ASSETS
74
Financial Analysis & Leverages Years Amt. 2006-07 2007-08 2008-09 2009-10 345166990 346147409 497244244 429398826 Percentage 100 101 144 124
Analysis: From the above table we can observe that the percentage of Current assets is 100 % in the year 2007 & it has been increased to 101% in the year 2008 & 144% in the year 2009 & decreased in 2010 to 124%. So we can say that there is a gradually reduced current assets in the year 2009-10.
Graph- 9: SHOWING CHANGES IN THE CURRENT ASSETS
75

160 140 120 100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 100 101 144 124
Interpretation: So we can say that there are gradually reduced current assets in the year 2009-10.
76
Financial Analysis & Leverages TABLE 10: SHOWING CHANGES IN THE CURRENT LIABILITIES
Years 2006-07 2007-08 2008-09 2009-10
Amt. 144444239 127370442 253148677 192963579
Analysis: From the above table we can observe that the percentage of current liabilities is 100 % in the year 2007 & it has been decreased to 88% in the year 2008 & 175% in the year 2009 & 134% in 2010. So we can say that there is a more fluctuations when compared to base year 2006-07.
77
Financial Analysis & Leverages Graph-10: SHOWING CHANGES IN THE CURRENT LIABILITIES
200 180 160 140 120 100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 100 88 175 134 2006-07 2007-08 2008-09 2009-10
Interpretation: We can say from the above diagram that there is a more fluctuations when compared to base year 2006-07.
78
TABLE -11: SHOWING CHANGES IN THE WORKING CAPITAL
Years 2006-07 2007-08 2008-09 2009-10
Amt. 200722751 218776966 244095567 236435247
Percentage 100 108 122 118
Analysis: From the above table we can observe that the percentage of Working capital is 100 % in the year 2007 & it has been increased to 108% in the year 2008 & 122% in the year 2009 & 118% in the year 2010. So we can say that there is a gradually increased in the working capital when compared to base year 2006-07.
79
Graph-11: SHOWING CHANGES IN THE WORKING CAPITAL
2009-10
118
2008-09 108
122
2009-10 2008-09 2007-08 2006-07
2007-08
2006-07 0 50 100
100
150
Interpretation:
80
Financial Analysis & Leverages Thus there is a gradually increased in the working capital when compared to base year 2006-07.
TABLE 12: SHOWING CHANGES IN THE SALES
Years 2006-07 2007-08 2008-09 2009-10
Amt. 3058526160 2987049900 3578197425 3961593839
Analysis:
81
Financial Analysis & Leverages From the above table we can observe that the percentage of sales is 100 % in the year 2007 & it has been decreased to 98% in the year 2008 & 117% in the year 2009 & 130% in 2010. So we can say that there is a variation in the sales when compared to base year 2006-07.
Graph-12: SHOWING CHANGES IN THE SALE
22% 30% 2006-07 2007-08 2008-09 2009-10 22% 26%
82
Interpretation: So we can say that there is a variation in the sales when compared to base year 2006-07.
TABLE 13: SHOWING CHANGES IN FIXED COST
Years 2006-07 2007-08 2008-09
Amt. 135966984 139735298 167089030
Percentage 100 103 123
83
Financial Analysis & Leverages 2009-10 184213082 135
Analysis:
From the above table we can observe that the percentage of fixed cost is 100 % in the year 2007 & it has been increased to 103% in the year 2008 & 123% in the year 2009 & 135% in 2010. So we can say that there is a gradually increased in the fixed cost when compared to base year 2006-07.
Graph-13: SHOWING CHANGES IN FIXED COST
84
2009-10
135
2008-09 103
123
2009-10 2008-09 2007-08 2006-07
2007-08
2006-07 0 50
100
100
150
Interpretation: So we can say that there is a gradually increased in the fixed cost when compared to base year 2006-07
TABLE 14: SHOWING CHANGES IN THE PRIME COST
85
Years 2006-07 2007-08 2008-09 2009-10
Amt. 1783510325 2074798683 2224474539 2354233629
Percentage 100 116 125 132
Analysis: From the above table we can observe that the percentage of Prime cost is 100 % in the year 2007 & it has been increased to 116% in the year 2008 & 125% in the year 2009 & 132% in 2010. So we can say that there is a gradually increased in the prime cost when compared to base year 2006-07.
Graph-14: SHOWING CHANGES IN THE PRIME COST
86

125 116 100 132
140 120 100 80 60 40 20 0 2006-07
Series1
2007-08
2008-09
2009-10
Interpretation: So we can say that there is a gradually increased in the prime cost when compared to base year 2006-07.
TABLE 15: SHOWING CHANGES IN THE VARIABLE COST
87
Years 2006-07 2007-08 2008-09 2009-10
Percentage 100 122 162 212
Difference Nil 22 40 50
Analysis:
88
Financial Analysis & Leverages From the above table we can observe that the percentage of variable cost is 100 % in the year 2007 & it has been increased to 122% in the year 2008 & 162% in the year 2009 & 212% in 2010. So we can say that there is a gradually increase in the variable cost when compared to base year 2006-07.
Graph-15: SHOWING CHANGES IN THE VARIABLE COST
250 200 150 100 50 0 2006-07 2007-08 S1 2008-09 2009-10 100 122 162 212 2006-07 2007-08 2008-09 2009-10
Interpretation:
Financial Analysis & Leverages Hence there is a gradually increased in the variable cost when compared to base year 2006-07.
TABLE 16: SHOWING CHANGES IN THE CONTRIBUTION
Years 2006-07 2007- 08 2008-09 2009-10
Percentage 100 115 127 148
Difference Nil 15 12 21
Analysis:
Financial Analysis & Leverages From the above table we can observe that the percentage of contribution is 100 % in the year 2007 & it has been increased to 115% in the year 2008 & 127% in the year 2009 & 148% in 2010. So we can say that there is a more increase when compared to base year 2006-07.
Graph-16: SHOWING CHANGES IN THE CONTRIBUTION
20% 31%
2006-07 2007- 08 2008-09

23% 26%
2009-10
91
Financial Analysis & Leverages Interpretation: So we can say that there is a more increase when compared to base year 2006-07.
CHAPTER -5
SUMMARY OF FINDINGS & CONCLUSIONS
Findings
From this table we can observe that operating leverages of KOMUL is in increasing trend in the year 2006-07 when compare to the other three years
92
Financial Analysis & Leverages From this table we can observe that the financial leverage of KOMUL are in gradual decreasing trend when compared to the other three years so we can say that the financial risk taken by KOMUL are decreasing year by year.
From this table we can observe that there was more fluctuations in the return on investment leverage .i.e. in the year 2006-07.
From this table we can observe that the combined leverage of KOMUL are having more fluctuations are due to gradual increasing trend in operating leverage & gradual decrease in trend in financial leverage. From this table we can observe that the changes in the share capital at KOMUL. In this table we can observe that there is increased in the share capital in the all 4 years so we can say that the amt. collected from the public through shares as been increased. From the above table we can observe that reserves & surplus of KOMUL is having slight fluctuations due to decreasing in profit
93
Financial Analysis & Leverages The Current assets of KOMUL is also having more fluctuations that is it has been increased extensively by in the year 2009 -10 this because of various credit policies of KOMUL in the year There are fluctuations in the liabilities over the four years. The working capital in the has been increased slightly due to increase in the risks taken by the company. The sales volume is increasing year by year. There is a gradual increase in the prime cost. Usually the fixed cost should remain constant. But here it has not happened like that so it is a bad sign to the company.
CONCLUSION From the study conducted by me a study on financial &leverage analysis. I came to know the performance of Komul. their &liabilities in the balance sheet, way of classification of assets
classification of cost particulars their method of
costing even I came to know the risks taken by Komul both financially &technically by calculating various types of leverages,
94
So thus project is concluded with the composition of performance of Komul by taking the classification in the items of balance sheet, profit and loss account trading account cost statements, progress reports for 3 accounting years along with this .I have identified several differences in the performance of Komul and also given some suggestions to overcome those differences and problems.
CHAPTER-6
RECOMMENDATIONS AND SUGGESTIONS.
SUGGESTIONS:
95
Financial Analysis & Leverages Since the operating leverages are increasing trend when compare to the other three years it is a good sign to the company & should maintain operating leverages.
Since the financial leverage are in decreasing trend so we can say that then financial risk taken by KOMUL are decreasing which is a Good sign to the company. The Komul as to continue to maintained the same rate of financial leverage.
The ROI of KOMUL in the year 2009-10 is better than other two years so Komul as to maintain the same leverages or further it should try to get more returns on investment in the fore coming years. To maintain good rate of leverages.
Fluctuations are good sign to the company because the risk is taking after knowing the competition in the market so KOMUL has to maintain the same method of combined leverage.
96
Financial Analysis & Leverages Since the share capital is increasing trend .It is a good sign to the company &it should maintain the same. Even it should try to further attract more investment from the public
The KOMUL has to maintain more reserves &surplus in order to meet UN -certain contingencies. It should try to avoid fluctuations in the maintaining the reserves &surplus by earring more profits. The fluctuations in the fixed assets are not a good signed but here KOMUL has reduced investments of fixed assets in the year 2006-07. Mainly because reduction on fixed assets in the year 2006-07 mainly because the reduction in financial risk taken by KOMUL due to heavy competition this method of reducing the financial after analyzing comp0etation is a good for a competition to survive in this competitive world.
The fluctuations in the fixed assets are not a good signed but here KOMUL has reduced investments of fixed assets in the year 2006-07. Mainly because reduction on fixed assets in the year 2006-07 mainly because the reduction in financial risk taken by KOMUL due to heavy competition this method of reducing the financial after analyzing comp0etation is a good for a competition to survive in this competitive world.
Since the KOMUL has maintain liberal credit policy in the year 2007 with attract more customer and increases it sales but cash inflows cannot been collected immediately this may also arises due to increase in bad debts also in the year 2007 it has maintained rigid policies it can be collected CIF immediately but it results in decrease in sales and also decrease in the year 2007 bad debts. So after analyzing the advantages and disadvantages of
both credit policies to it has balance in the year 2007 between these two methods.
The increase in working capital is good signed by the company as; it indicates the risk taken by the company therefore KOMUL has to maintain same.
Decrease in sales is not a good signed to the company so the company has to adopt aggressive sales policy through sales promotion activity to increase sales as well as earning capacity.
98
Financial Analysis & Leverages The increase in prime cost and decrease in sales is not a good Sign so the company has to adopt cost control technique .to reduce the cost.
In order to increase control the company has to reduce the prime cost and other variable cost not only the company should reduce the casts in the other hand. And it has been increased the sales.
The company should maintain the fixed cost at a constant rate and the it should not variable from one year to another year.
GENERAL SUGGESTIONS
In Komul they are not even able to find out steam expenses for a particular
production units of products. Since the steam is common to all in the production units and they are approximately allocating steam expenses for finding out of the cost of the products.
From the analysis I came to know that most of the expenses have been
decreasing when compared to the previous years or year by year.
It is found that Komul is not following certain cost control techniques.
Even they are not fallowing cost reduction techniques. Komul is also not fallowing responsibility accounting system.
They should use certain technical devices in order to know the steam
expenses for a particular production unit from this they can arrive at correct steam cost for a particular production department.
Komul should follow certain cost control techniques which helps in

formulation of standards & budgets that incorporate objectives and goals to be achieved & also helps in formulation of corrective measures to eliminate & reduce unforcerable variables.
Responsibility accounting system should be allowed in Komul as it

personalizes control reports by accumulating and reporting cost & revenue information according to defined responsibility areas within a company.
100
Komul should also fallow cost production techniques which helps in

eliminating waste improving operations, increasing productivity, search for cheaper materials, and improved standards of quality finding other means to reduce the costs of products.
From the above study we can conclude that financial position of the
company in good to certain extant. The solvency position of the company is acceptable to certain extant. The liquidation position is good.
CHAPTER-7
APPENDICES AND ANNEXURES
101

AN OVER VIEW OF THE STATISTICS RELATED TO PROCUREMENT ACTIVITIES
Years Particulars DCS Registered DCS Functional Members Enrolled Daily average Uni t No. s No. s Lak hs Milk Kgs . Price Rs. Milk Kgs . Rs. No. s Lak hs No. s Lak hs 91-92 551 511 0.87 1,75,8 66 3.16 344 0.13 503 132.12 8 0.44 92-93 667 624 1.03 1,92,19 7 3.14 308 0.14 609 160.87 15 2.04 93-94 724 696 1.15 2,11,9 39 3.53 305 0.16 669 165.21 25 2.66 94-95 781 760 1.17 2,09,0 80 3.48 275 0.19 732 161.93 28 2.91 95-96 820 807 1.65 2,06,3 24 4.45 256 0.21 786 182.34 21 2.13 96-97 861 841 1.71 2,39,5 01 5.72 285 0.19 827 282.81 14 1.65 97-98 932 915 1.80 2,60,5 06 5.54 285 0.21 900 285.20 15 2.29 98-99 968 943 1.88 2,64,3 24 5.58 280 0.22 920 308.03 23 3.16
Procurement Procurement payable per Kg. Daily average Procurement/DCS Procurement
Transportation Cost/ Kg. DCS In Profit Profit Amount DCS in Loss Loss Amount
102

Daily Average Liquid Litr es Lak hs Date of completion of Audit 16-0991 31-0793 20-0194 19-0894 11-0995 30-1295 7.64 14.74 3.64 9.55 11.43 3.80 165.82 20-0298 17,220 152.30 27-0498
milk sales Unions Net Profit/Loss
Years Particulars DCS Registered DCS Functional Members Enrolled Daily average Uni t No. s No. s Lak hs Milk Kgs . Price Rs. Milk Kgs . 103 99-00 1039 1013 1.96 3,16,0 19 6.66 312 00-01 1150 1105 2.10 3,65,1 50 7.56 330 01-02 1220 1168 2.16 3,65,6 17 7.88 313 02-03 1264 1199 2.22 3,94,9 98 8.25 329 03-04 1270 1199 2.27 4,63,1 03 8.25 386 04-05 1322 1246 2.56 4,97,1 28 8.15 399 06-07 1389 1303 2.61 5,38,42 7 7.89 413 07-08 1418 1346 2.65 5,54,3 67 8.48 411
Procurement Procurement payable per Kg. Daily average Procurement/DCS

Procurement Transportation Cost/ Kg. DCS In Profit Profit Amount DCS in Loss Loss Amount Daily Average Rs. No. s Lak hs No. s Lak hs Liquid Litr es Lak hs Date of completion of Audit 13-1299 26/08/ 00 23/09/ 00 23/09/ 00 14/05/ 01 10/09/ 01 27/11/0 2 0.19 987 394.09 26 5.51 39,636 67.41 0.20 10.76 453.43 29 6.24 54,267 117.41 0.24 11.42 493.36 26 5.16 68,710 158.13 0.25 1175 910.73 24 4.27 76,686 114.87 0.24 1171 600.90 28 7.60 80,429 21.96 0.23 1227 681.93 19 18.83 83,528 54.76 0.23 1277 750.28 26 5.91 90,867 45.22 0.22 1124 460.51 22 11.42 82,470 122.15 -
milk sales Unions Net Profit/Loss
104
AN OVER VIEW OF THE STATISTICS RELATED TO TECHNICAL INPUT ACTIVITIES
S l. N o . 0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 Emergency Attended Cost/Case Cases No .s in Rs. Particulars Un it 9493-94 95 95-96 97 96-
Years
97-98
98-99
99-00
00-01
Emergency Visit Animal Health No Camps Conducted .s Cost/Case in Animal Rs. Health Camps Total single AI No
167
215 63,66 2 -
291 78,5 81 -
332 1,01, 491 -
335 98,7 99 -
352 1,05, 920 -
344 1,13, 662 -
341 1,18, 235 -
355 1,12,7 34 38295 4
Centers .s AI done/Single AI No Center Total Cluster .s AI No
Centers .s AI Done/Cluster AI No Centeres .s
105

0 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 FMD done Villages Vaccination Do ses Covered No
Under FMD Vaccn. .s Theileriasis (T) Do Vaccination Done ses Villages Covered No Under T. Vaccn. .s Brucellosis (B) Do Vaccination Done ses Villages covered No Under B. Vaccn. .s Sample Analysed in No ADDL Cattlefeed Sold .s M.t on 3,995 4,78 9 5,250 4,42 7 3,726 4,726 3,068 2,718
Sl . N o. Particulars Uni t 01-02 02-03 03-04
Years
04-05
05-06
06-07
07-08
02
106

0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 1 0 1 1 1 2 1 3 1 4 Emergency Cases No. 49406 53006 60021 70260
54
Attended s Cost/Case in Emergency Rs. Visit Animal Health Camps No. Conducted Cost/Case in s Animal Rs. No. 339 1,26,2 69 33073 6 369 1,26,5 33 31971 0 372 1,17,7 37 378 1,23,4 21 36505 383 12449 8 53319 1 387 14332 7 44995 4 390 15061 6 45100 0 280 307 -
Health Camps Total single AI Centers AI done/Single
s AI No. s No.
10
Center Total Cluster AI Centers AI Done/Cluster
s AI No. s Dos
Centeres FMD Vaccination done
es Villages Covered Under No. FMD Vaccn. Theileriasis s (T) Dos
Vaccination Done es Villages Covered Under No. T. Vaccn. Brucellosis s (B) Dos -
Vaccination Done es Villages covered Under No. B. Vaccn. s
107

1 5 1 6 Sample Analysed in No. s M.t on 4,920 6,795 5,586 9,698 14,956 18,087 962 15,455
ADDL Cattlefeed Sold
9,
108
CHAPTER-8
BIBLIOGRAPHY
BOOKS:
Business research methodology K. Aswathappa
Financial management Business Finance
R.K.Jain & kulkerni. Reddy & Appaniah.
109
Financial accounting Cost & Management accounting Cost & financial analysis
B.S.Raman., Shahsi.K.gupta, B S Raman
KOMUL Annual report
KOMUL progress report
Website WWW.KOMUL.COM
110

KOMUL Project

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Financial Analysis & Leverages

PART-A: ABOUT INDUSTRY

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages State.

0.68% / year 0.75% / year

World (1996) 1320 151 1471 0.64% / year 0.87% / year

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages

2.4 kg/day or 732 kg/lactation/cow

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages

1,250kg 1.5 million tonnes

Rs 550 crores 20 mlpd 10 Rs 50,051 crores

81.00 4.30 6.50 0.80 5.00 117.00 210.00 130.00 0.20

92.10 2.50 0.10 0.70 4.60 29.00 120.00 90.00 0.20

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

pradesh Tarai Central Nagpuri India Pandharpuri Kalahandi Sambalpur Toda

South Kanara West coast in Kerela

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages

PART-B: ABOUT SUBJECT

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages FINANCIAL STATEMENTS:

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

PROCESS OF FINANCIAL ANAYSIS:

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

TYPES OF FINANCIAL ANALYSIS:

A Financial analysis can be external or internal.

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

TECHNIQUES OF FINANCIAL ANALYSIS:

COMPARATIVE FINANCIAL STATEMENTS:

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

COMPARATIVE INCOME STATEMENTS:

COMPARATIVE BALANCE SHEET:

Financial Analysis & Leverages

1. Common Size Financial Statements:

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

3. Funds flow statements:

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Cash flow statement:

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

iv. Return on investment leverage

Financial Analysis & Leverages

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages iv. Combined leverage:

Contribution Taxable income

OR Combined leverage = Operating leverage X Financial leverage

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages

TITLE OF THE STUDY

A STUDY ON FINANCIAL ANALYSIS & LEVERAGES OF KOLAR MILK UNION LIMITED.

OBJECTIVE OF THE STUDY

To study and analyze the financial performance of KOMUL

To forecast the financial performance through Leverage analysis

ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE

Financial Analysis & Leverages

SCOPE OF THE STUDY

OPTIONAL DEFINITIONS OF CONCEPTS: LEVERAGE

Financial Analysis & Leverages