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A PROJECT REPORT ON RATIO ANALYSIS AT VEFCO LASALGOAN, NASHIK. SUBMMITED TO UNIVERSITY OF PUNE SUBMMITED BY Mr. VISHAL K.

BORASTE (MBA Finance) PROJECT GUIDE Prof. D.D.Walke

NDMVP SAMAJS INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY, NASHIK. 2007-2008


Institute of Management Research and Technology, Nashik. 1

A PROJECT REPORT ON RATIO ANALYSIS AT VEFCO (Vegetable & Fruit Co-op Marketing Society Ltd.) Lasalgoan, Tal. Niphad, Dist. Nashik.

BY VISHAL K. BORASTE (MBA Finance) Project Guide Prof. D.D.Walke In Partial Fulfillment of M.B.A Degree Of UNIVERSITY OF PUNE NDMVP SAMAJS INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY, NASHIK. 2007-2008
Institute of Management Research and Technology, Nashik. 2

ACKNOWLEDGEMENT

It is a great pleasure to me in acknowledging my deep sense of gratitude to all those who have helped me in completing this project successfully. First of all I would like to thank Pune University, Pune for providing me an opportunity to undertake a project as a partly fulfillment of MBA degree. I would like to thank VEFCO, and Mr. Sanjay Holkar (General Manager), Mr. Sanjay Sonawane (Manager) VEFCO, for providing me an opportunity to work with them and providing me necessary information about there organization, there operation and providing guidance in developing my project. I would like to thank our director and my project guide Prof. D.D.Walke whose valuable guidance and encouragement at every phase of the project has help to prepare this project successfully. Finally, I would like to express my sincere thanks to my family, all the faculties, office staff, and library staff of IMRT Nashik and friends who helped in some or other way in making this project.

Place: Nashik Date: / / .

VISHAL K. BORASTE MBA (Finance)

Institute of Management Research and Technology, Nashik.

DECLARATION

This is to declare that I, Vishal K. Boraste, student of Management of Business Administration (2007-2009), I.M.R.T., NASHIK, have given original data and information to the best of my knowledge in the project report titled RATIO ANALYSIS under the guidance of our director Prof. D. D. Walke and that, no part this information has been used for any other assignment but for the partial fulfillment of the recruitment towards the completion of the said course. I have prepared this report independently and I have gathered all the relevant information personally. I have prepared this project for MBA for the year 2007-2009. I also agree in principle not to share the vital information with any other person out side the organization and will not submit the project report to any other university.

Place: Nashik Date: / / .

VISHAL K. BORASTE MBA (Finance)

Institute of Management Research and Technology, Nashik.

INDEX
1. Introduction
1.1.Objectives of the project 1.2.Selection of the topic 1.3.Objectives of the study 1.4.Methodology of study 1.5.Limitation of the study 1.6.Utility of the study 6 4 5 1 2 3

2. Organization Profile.
2.1 2.2 2.3 2.4 Introduction Background and history of the organization Constitution of management Service offered by organization to members 7 8 11 15

3. Concept of Ratio Analysis


3.1 3.2 3.3 3.4 3.5 Ratio analysis Objective of ratio analysis Standard of comparison Limitation of ratio analysis Classification of ratio 17 18 19 20 21

Institute of Management Research and Technology, Nashik.

4. Ratio Analysis
4.1 4.2 4.3 4.4 Liquidity ratio Turnover ratio Leverage ratio Profitability ratio 22 27 32 34

5. Conclusion 6. Recommendations Glossary Bibliography Annexure

40 42 43 45 46

Institute of Management Research and Technology, Nashik.

CHAPTER 1

NTRODUCTION

Institute of Management Research and Technology, Nashik.

1.1 OBJECTIVE OF THE PROJECT


As a part of MBA curriculum after completion of first year, we have to under go the job training for a period of two months after which we have to submit a project report to the university by the completion of 3rd semester. Each management student learns a lot during his two years of MBA program. The (summer) project provides required practical training to student and gain the practical knowledge of the topics learned in classroom and to find its relation with the real market scenario. The project gives the live experience about the various aspects of the management that is help full from future point of view. The project provides the opportunity to understand the organization very closely.

Institute of Management Research and Technology, Nashik.

1.2 SELECTION OF TIOPIC FOR STUDY


Topic selection is of the most or one of the important aspects of our project. As it decide the course of action, to be followed. The topic selected should be such that it helps in understanding the ratio concepts clearly, as was given the topic by the organization itself. The topic given by my project guide was RATIO ANALYSIS this covers all the things related to the ratio analysis provided by the organization.

Institute of Management Research and Technology, Nashik.

1.3 OBJECTIVE OF THE STUDY


While going through any advertisement for recruitment it is realized that any organization call for candidates with the main condition of the work experience. It is clear cut mentioned in such advertisement that preference would be given to candidates with experience. This point out that practical exposure is extremely important. So, right the University of Pune has taken right step by making it mandatory for the students to do the project work in an organization. This would help the student to get practical knowledge along with theoretical knowledge. The objectives of the summer training are as follows: To be able to apply the theoretical knowledge obtained at the institute in a practical manner in the actual business environment. To get the knowledge about organizational problems, perceptions and challenges. To get an opportunity of real life business experience. To interact with the managers of the organization and gain knowledge through their real life experience.

Institute of Management Research and Technology, Nashik.

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1.4METHODOLOGY OF THE STUDY


The data collected for the project was in the form of written as well as verbal information regarding ratio analysis of the organization 1) Primary data: The information about the organization is gathered from the discussion with the employees/staff and from the website of the company. 2) Secondary data: The secondary data collectedThe balance sheets as on the date of 31st march of the year 2003-2004, 2005-2006, 2007-2008 The methodology of this study has been adopted on the following basis: Study of various journals, notes and books. 2004-2005, 2006-2007,

Study through websites.

Collection of primary and secondary data records of the organization.

Analysis of the collected data for its application.

Institute of Management Research and Technology, Nashik.

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1.5 LIMITATION OF THE STUDY


Generally the organization does not allow outsiders to conduct any study or research work in the organization. Therefore, get the project done in the organization it self was very difficult. Due to confidentiality sum important information, which r important for the project, could not be collected. Sum of the information is lack of accuracy, due to whish approximately values where used for the analysis. Hence, the result also revel approximate values. The project is based ion theoretical guidelines and as per situation prevalent at the time of practical training. Hence, it may not be apply to different situation. The time span for the project was very short which was of two months, which itself act as constraint. Moreover, studying the guidelines and applied it practically with in such a short time span was a task of great pressure.

Institute of Management Research and Technology, Nashik.

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1.6 UTILITY OF THE STUDY


MBAs are known for their presentation skills and practical touch to the theoretical knowledge and are counted in the professionals. A profession is a source of living hood based on substantial body of knowledge and its formal acquisition through practical training and its taste of success is the service rendered and not the profit earned there on. The reveals that the canon of any profession is placed on the ground of theoretical knowledge as well as practical training. Thus it becomes evident that the efforts to prepare this project report are certainly going to be proved as a concrete foundation for our future career. Another aspect of this study is to get acquainted with ground\ reality in the application of theoretical knowledge and to find out a way to tackle with the situation.

Institute of Management Research and Technology, Nashik.

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CHAPTER 2

RGANIZATION

ROFILE

2.1 INTRODUCTION:
Onion is cultivated on large scale in Nashik district. Lasalgaon in Nashik district is famous and also biggest market not only in India but also in Asia. Agro climatic condition in the region is suitable for growing and producing onion, grapes and other vegetable and fruits. But are cash crops of the district and also perishable commodities require proper care and timely handling, transportation and scientific storage, etc. In Nashik district the cropping pattern adopted by the farmers in the area in respect of onion is spread over thrice in a year and hence arrival of onion in the markets is through out the year. Due to huge arrivals of onion in the market, the production suffers as they are unable to market crop due to less demand. Inability to hold stock in absence of scientific storage facilities its perish ability etc. the cultivators have not proper resource to obtain the market intelligence and own mode of transportation and handling, due to this reason they are depending on traders, for all marketing operation and resultant prices. The traders exploits the farmer by not only purchasing the product at low price but also delaying the payment of sale proceeds as the farmer do not have direct link with other countries market and traders particularly in Uttar Pradesh, Bihar, M.P. and Punjab state to in this situation deceiving attitude. Central Railway line goes through Nashik district. Lasalgaon is situated at the main railway line of the central railway. Also Lasalgaon is the village well connected by roads to various markets in the country. But the agriculturist could not take the advantage of the location of market individually and group also therefore the farmers felt need for an organization to overcome and to solve the problems in marketing of fruits and vegetable at minimum support price to meet this need and guarantee for payment of sales proceeds to farmer and also to undertake timely transportation of vegetables and fruits to different markets in the country. Bringing reasonable price to the farming community at the area the vegetable and fruits co-operative marketing soc ltd Lasalgaon (VEFCO) was promoted by a farmer.

2.2 BACKGROUND AND HISTORY OF THE ORGANISATION:


The Vegetable and Fruit Co-operative Marketing Society Ltd. (VEFCO), Lasalgaon was established on 7thOct 1986 under the Reg.No NSK/NHD/AGR (M) 701. Today VEFCO is at leading age of export of onion this society performs the well to progress functioning last 20 years. The VEFCO exports to near about 35 countries across the world. The demand of their product is very much. In the year 1986-87 the first year of operation, there are 47 members, which increased to 3630 at the close of the year 2006-2007. The authorized share capital of the society is Rs. 2 lakes divided into 4000 shares of Rs. 500/- each. The paid up share capital of the society is Rs. 46000/- (as on 30th June, 1987) which increased to Rs. 195000/- at the close of the year 2006-2007. The farmers of the area contributed the entire paid up capital of VEFCO. The supreme of the society vests in general body comprising of members of the society. General body elects 11 members of the board of directors elects through amongst themselves chairman and vice chairman. The general manager is the chief executive of the society who executes policies laid down by the board of directors with the help of manager, accountant and 20 other supporting staff.

OBJECTIVE OF THE SOCIETY:


The prime objective of the society is to promote marketing of vegetables and fruits produced by farmers. To capture the international market and increase the export so farmers will get more prices for their produce. Provide best quality and outside country importer satisfaction goods

AREA OF OPERATION:
The area of operation of the VEFCO extends to 22 villages in Niphad taluka of Nashik district; farmers in these villages grow Onion, Grapes, Tomato and other fruits and vegetables.

2.3 CONSTITUTION OF MANAGEMENT:


The supreme of the society vests in general body comprising of members of the society. General body elects 11 members of the board of directors elects through amongst themselves chairman and vice chairman. The general manager is the chief executive of the society who executes policies laid down by the board of directors with the help of manager, accountant and 20 other supporting.

The organization chart of the VEFCO is as under ; BOD

CHAIRMAN

VICE-CHAIRMAN

BOD

GENERAL MANAGER

Manager marketing

Manager Storage

Manager service

Marketing In-charge

Clerk

Purchase In-charge

Complex In-charge

Clerk

Supervisor

Business activities of marketing operation:


For business operation purpose they have head office and adat shop. VEFCO is having 5 acre of land, duly construct 2 permanent shed for onion grading, packing purpose. One pre cooling cum cold storage plant for grapes export packing purpose. One Diesel/Petrol pump for supply of fuel to member farmers. To fulfill its main objectives of marketing vegetable and fruits, bringing better returns to the farmers, the VEFCO has been undertaking marketing operations from day it was registered. The VEFCO arrange marketing of vegetable and fruits in three ways namely outright purchase, consignment basis and commission basis.

(a) Outright purchase:


The VEFCO purchase onion from farmers in competition with private trader in open auction bringing better price for farmers, VEFCO purchase onion for supply to parties who offer therein demand like NAFED, Super Bazaar, Delhi state civil supply corporation, private traders, A.P. State civil supply etc. The strategy of VEFCO while undertaking outright purchases and supplies to various agencies has been to provide competition in the Lasalgaon market to break the monopoly of private traders and provide assured market for vegetable and fruits grown by farmers. It ensures better returns for farmers in auction and spot payment of sales proceeds and saving farmer from exploitation.

(b) Consignment basis:


Since 1987-88, the society is undertaking supply of vegetable and fruits on consignment sale earlier farmers of the area were delivering their vegetable and fruits to up country buyers on receipt of past payment with the assurance that balance would be paid soon, but in many cases the farmers either did not get a part of sale proceeds. After lot of persuasion, after lapse of month to save the farmers from losses the society supplies fruits and vegetables to upcountry buyers directly or through NAFED.

(c) Commission agency:


VEFCO has started commission business since 1990 society is charging as commission (Adat) 4.00% as per the market practice, ensuring the prompt payment to farmers. VEFCO allows 1% rebate in commission to farmers members selling of onion on commission. This business has helped the society in developing close.

EXPORT:
The society has made a beginning in export trade by exporting onion since the last 17 year directly.

2.4 SERVICES OFFERED BY ORGANISATION TO MEMBERS:


The society has accelerated it operation towards achievement of its objectives impact of the management practices of the society can be gauged from the following: 1) Farmers of the area are benefited by getting better price for fruits and vegetables grown by them as the society has emerged as purchaser in competition with private trade and provide other services at reasonable cost. 2) Earlier to the organization VEFCO there was delay in payment of sale proceed by trader sometime, the farmer did not get the sale proceed at all. But with the emergence of this institution, the farmers receive promptly spot payment of sales proceeds if they sell their produce on outright or commission basis. Similarly they are sure of receiving sale proceeding even if they make consignment sale. 3) The society provides quality packing materials at reasonable rates and arranges quick road / rail transportation to consumer markets thus enhancing net realization for there produce. 4) The society has established direct link demand centers in various states by identifying a few financially sound and established private agencies for disposal of fruits and vegetables of the farming community of the area. Thus the society is providing economic protection to the farmers. 5) The small and marginal farmers who were feeling weak individually find in the society a trusted organization willing to provide marketing services at reasonable cost. 6) The society constructed onion complex with facilities for grading packing storage, dispatches of onion marketing in up country markets and export insuring better returns for farmers.

7) VEFCO intend to supply credit to members farmers various types of firm inputs i.e. improved varieties of seed fertilizers insecticides Pesticides, agriculture implements and machineries with necessary know how to facilitate increase in per acre production. 8) Research and Development: With assistance of associated National Horticulture Research Development Foundation (NHRDF) department of agriculture, Govt. of Maharashtra and agriculture Universities. It is planning to provide knowledge of scientific development of onion, grapes, tomato and pomegranate and other fruits and vegetables especially in seed technology, plan protection practices, storage agriculture implements etc., to the farmers. It proposes to arrange demonstration on the field of farmers members with the coordination of various scientific Research and development agencies. 9) Market Intelligence: VEFCO proposed to provide market intelligence for onion, tomato, grapes and other fruits and vegetables to members farmers pertaining for price, arrivals etc., in primary, secondary and terminal market. This would help the farmers in scheduling disposal of produce profitability. 10) The society has started petrol pump at Lasalgoan of Indian Oil for service to their farmers members for Diesel and Petrol.

CHAPTER 3

CONCEPT OF RATIO ANALYSIS

3.1 RATIO ANALYSIS:


Ratio analysis is a power full tool of financial analysis based on ratio. A ratio is defined the indicate quotient up to mathematical expression. In financial analysis ratio is used as a benchmark evaluating the financial position and performance of a firm. The absolute accounting figure reported in the financial statements do not provide as mining full understanding of the financial position of a firm, but well expressed in terms of related figure, it yields significant inference. Ratio analyses reflect a quantitative relationship that helps to form qualitative judgment. Definition: Ratio analysis is a systematic use of ratio to interpret of the financial statement so that the strength and weakness of the firm, it is a historical performance and it current financial condition can be determine. --- Khan & Jain. Ratio analysis involves three steps that are as follows: 1. Selection of data, which is relevant to the objective of analysis and calculation of the appropriate ratio. 2. Comparison of the past and present ratio of the same firm and/or with the industry standard. 3. Evaluation and drawing inferences.

3.2 Objective of ratio analysis:1. To help in forecasting: - Financial manager for future financial planning can use the ratio. Ratio calculated for a number of your work as a guide for the future. 2. To help to control: - it is a very useful in controlling the areas of inefficiencies or weakness. 3. To help in efficiency appraisal: - the ratios are the scale of comparison; by conducting inter-firm and intra-firm comparison efficiency of the firm can be appraised. 4. To help in evaluation of financial position.

3.3 Standard of Comparison: Trend analysis: - The ratios are compared to those calculated for the previous year in order to know whether the financial position is improving or deteriorating. Inter-firm comparison- the ratio of the firm may be compared with ratio of competitors or industry average, which are used as benchmark. Hence the position against the competitor can be known to analysis the strength and weakness. Index analysis: - The ratio of the current year is compared to those of base year. It can be even compared to standard or planned ratio. Common sized statement: - The items of the balance sheet are stated in the terms of Percentage of total assets and items in income statement are expressed in percentage of sale.

3.4 Limitation of Ratio Analysis: Window dressing- in ratio analysis the financial position of the company can be presented by canceling the real position. Limitation use of single ratio- ratio can be useful only when they are computed in a sufficient target number. Lack of adequate standards it is very difficult to find out adequate and absolute standards, so a quality range is used. Lack of quality analysis of the problem Ratio analysis only gives good basis for a quantitative analysis, but it suffers from quality aspects. Back ground is over looked- when an inter-firm comparison is made on the base of ratio analysis and they differ substantially in size in, age and nature of products, ratio analysis cant give satisfactory result as these factors are not consider here acts only a guide rather then a solution. Limited use- Ratio analysis is not a substitute for sound judgment, rather is help full tool to aid in applying the judgment.

On the basis of financial statement, which determinants of ratio belong, however, the above basis of classification have been found to be crude and unstable, because analysis of the balance sheet and income statement cannot be done in isolation. They have to be studied together in order to determine the profitability and solvency of the business.

3.5 Classification of Ratio Thus Ratios are classified as: Turn over Ratio: - reflects the firms efficiency in utilizing its assets. Coverage Ratio: - show the proposition of debit and equity in financing the firms assets. Profitability ration: - measures all over all performance and effectiveness of the firm. Liquidity Ratio: - the ratio checks the ability of firm to fulfill in short term liability.

ACCOUNTING RATIOS

TRADIDTIONA L RATIOS

FUNCTIONA L RATIOS

LIQUIDIT Y RATIO

COVERAG E RATIOS

TURNOVE R RATIOS

PROFITABILIT Y RATIOS

CHAPTER 4

RATIO ANALYSIS

4.1 Liquidity Ratio:Liquidity means ability of the business to pay its short-term liabilities. Inability to pay-off shot term liabilities affects its creditability. These ratio are also termed as Working capital or short-term solvency Ratio. An enterprise must have adequate Working Capital to run its day-to-day operation. The liquidity ratio provides a quick measure of liquidity of the firm by establishing a relationship between current assets and current liabilities. On the basis of Liquidity Ratio, the firm ensures a proper balance between high liquidity and lack of liquidity.

The most common ratios which indicates the extent of liquidity are 5. Current Ratio 6. Quick Ratio 7. Cash Ratio

Current Ratio: Current Ratio measure short term debt paying ability. It indicates the availability of current assets in rupee of current liability. A ratio greater then one means that the firm has more current assets and current claims against them. A generally acceptable current ratio is 2 to 1. But whether or not a specific Ratio is satisfactory depends on the nature of the business and the characteristic of its current assets and liabilities.

Quick Ratio: A Quick ration is a more penetrating test of liquidity. It is a refined measure of the short-term debt paying ability by measuring short term liquidity. By excluding inventories it concentrates on the really liquid assets, with value that is fairly certain. Quick Ratio tests the ability of the business to meet its current obligation even when the sales revenue disappears. A Ratio of 1:1 is considered to represent a satisfactory current financial condition; however it does not necessarily imply sound liquidity position.

Cash Ratio: It measures the absolute liquidity of the business. This Ratio considers only the absolute liquidity available with the firm. The absolute liquidity ratio eliminates any unknown surrounding receivables, it only test short-term liquidity in term of cash and marketable securities.

Calculation of Ratios:

Current Ratio =

Current Assets Current Liabilities

Financial year Current Assets Current Liabilities Current Ratio 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 30337038 16976298 23546599 45041007 25987964 13817090 7882926 7806902 24704584 2295200 2.19 2.15 3.01 1.82 11.32

Quick Ratio =

Current Assets - Stock Current Liabilities

Current Assets Financial year Stock 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 28324453 12200780 22286951 41931526 19323267

Current Liabilities 13817090 7882926 7806902 24704584 2295200

Quick Ratio 2.04 1.54 2.85 1.69 8.41

Cash Ratio =

Cash & Marketable Securities Current Liabilities

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Cash & Marketable Securities 6048281 5977887 4509499 11320949 7884491

Current Liabilities 13817090 7882926 7806902 24704584 2295200

Cash Ratio 0.43 0.75 0.57 0.45 3.43

Liquidity Ratios
12 10 Ratios 8 6 4 2 0 2003-04 2004-05 Current Ratio 2005-06 Years Quick Ratio 2006-07 2007-08

Cash Ratio

Current assets & Liabilities


50000000 40000000 Amount 30000000 20000000 10000000 0 2003-04 2004-05 2005-06 2006-07 2007-08 Year
Current Assets Current Liabilities

Interpretation & Analysis:It is observed that the liquidity ratio of the organization have always been above the standards required. But in year 2007-08 the ratio was to high which means the current assets where to high as compare to current liabilities which that the assets where kept ideal and not brought in use. Through the ratio we can state that the financial health of a company s very strong.

4.2 TURN OVER RATIO:These ratios are concerned with measuring the efficency in assets management. The turnover with which assets are managed/ used is reflected in the speed and rapidity with which they are converted into sales. Thus, the turnover ratio are the taste of relationship between sales/cost of goods sold and assets. The most common ratio which indicate the efficiency of the business are as follows. 1) Inventory turnover ratio 2) Working capital turnover ratio 3) Fixed turnover ratio 4) Total assets turnover ratio

Inventory Turn Over Ratio:This ratio finds out the number of times inventory is turned over on an average in a year. This ratio is calculated for findings at what extent the inventory has been utilized efficiently and what proportion of working Capital has been locked up in inventory.

Working Capital Turnover Ratio:This ratio measures the number of times the working capital is turned over during the year. In a way this ratio also throws light on operating cycle (conversion of current assets into cash) of the company. A low ratio indicates slow moving operating cycle where as a high level implies that the companys current assets are utilized efficiently.

Fixed Assets Turnover Ratio:This ratio signifies the number of time to fixed assets are rotated or used in business. A high ratio indicates that fixed assets are contributing quit substantially in making sales, while low ratio indicates that fixed assets are not being used efficiently.

Total Assets Turnover Ratio:Measure the activity of the assets and the ability of the business to generate sales through the use of the assets. It revels the efficiency in managing an utilizing the total assets.

Inventory Turnover Ratio =

Cost of Goods Sold

Average Inventory

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

COGS 267185393 119320586 162379947 218921007 334931080

Avg. Inventory 20071575 3394052 3017583 2184565 4887089

Inventory Turn Over Ratio 13.31 35.15 53.81 100.21 68.53

Working Capital Turnover Ratio =

Net Sales Working Capital

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Net Sales 270816847 121881399 167993982 221185579 346006259

Working Capital Working Capital Turnover Ratio 16519948 9093372 15739697 20336423 23692764 16.39 13.40 10.67 10.87 14.60

Working Capital & Inventory Turnover Ratio


120 100
Ratios

80 60 40 20 0 2003-04 2004-05 2005-06


Years Inventory Turnover Ratio Working Capital Turnover Ratio

2006-07

2007-08

50000000 45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2003-04 2004-05 Current Assets 2005-06 2006-07 2007-08 Avg Inventory Working Capital

Interpretation & Analysis:According the ratios it is observed that the operation cycle is small. It is also observed no major of current assets is blocked in inventories as the inventory ratios are to high. According to working capital ratio it can be said that the current assets used for increasing the sales gives the high return.

Fixed Assets Turnover =

Net Sales Fixed Assets

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Net Sales 270816847 121881399 167993982 221185579 346006259

Fixed Assets 12304773 12497432 12537432 14461900 16587581

Fixed Assets Turnover Ratio 22.00 9.75 13.39 15.29 20.85

Total Assets Turnover Ratio =

Net Sales Total Assets

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Net Sales 270816847 121881399 167993982 221185579 346006259

Total Assets 42641811 29473730 36084031 59502907 42575545

Total Assets Turnover Ratio 6.35 4.13 4.65 3.71 8.12

Fixed Assets & Total Assets Turnover Ratio 25 20 Ratio 15 10 5 0 2003-04 2004-05 2005-06 Years
Fixed Assets Turnover Ratio Total Assets Turnover Ratio

2006-07

2007-08

400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0 2003-04 2004-05 Fixed Assets 2005-06 2006-07 2007-08 Sales

Total Asstes

Interpretation & Analysis:It is observed that there was a decrease in sales in the year 2004-05, after it there is a remarkable rise in sales but the fixed assets have not increased in the same proportion but at the same time total assets had increased from the year 2004-05 to 2006-07 and had a fall in the year 2007-08. It can be said that the continues increase in sales volume is an output of optimum utilization of assets.

4.3 LEVERAGE RATIOS: This is calculated to judge the long-term financial position of the firm. These ratios indicate mix of fund provided by owners and lenders. These ratios indicate the extent to which the interest of the person entitled to get a fixed return or a scheduled repayment s per the agreed term, are safe. The higher the cover the better it is. Net Asset to Net-worth ratio: -This is another alternative way of expressing the basic relationship between debt & Equity. This ratio gives the funds contributed together by lenders and owners for each rupee of owners contribution. Debt equity ratio: - It is also popular known as `external internal equity ratio. It relates all short-term &long-term recorded creditors claim on assets to the owners recorded claim in order to measures the firms obligation to creditor in relation to funds provided by the owner.

Net Assets to Net-Worth Ratio =

Net Assets Net-Worth

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Net Assets 42641811 29473730 36084031 59502907 42575545

Net - Worth 35160045 41565781 45462100 50887190 57973561

Net Assets to NetWorth Ratio 1.21 0.70 0.79 1.16 0.73

Net Assets to Net-Worth Ratio

1.4 1.2 1 0.8 0.6 0.4 0.2 0 2003-04 2004-05 2005-06 Years
Net Assets to Net-Worth Ratio

Ratio

2006-07

2007-08

70000000 60000000 50000000 Amount 40000000 30000000 20000000 10000000 0 2003-04 2004-05 2005-06 Years
Net - Worth Net Asstes

2006-07

2007-08

Interpretation & Analysis:It can be seen that the net assets to net worth ratio is showing a continues decreasing trend because the net assets decreased as well as the net worth increased, but in the year 2006-07 it was observed the net assets where more than the net worth. The over all decrease in the ratios imply that the shares of the owners capital in the net asset is increasing which reduces the dependency of the company on borrowings.

4.4 PROFITABILITY RATIO:Profitability reflects the final result of business operations. Profitability ratios are calculated t measure the operating efficiency of the company. Beside management of the organization, creditors and owners are also interested in the profitability of the firm. Various profitability Ratios are, 1) Gross Profit 2) Net Profit Ratio 3) Return on Assets 4) Return on Equity 5) Return on capital Employed Gross Profit Ratio:This ratio reflects with which management produce each unit of product. Gross profit ratio show profit relative to sales after the deduction of production cost. A high gross profit margin relative to industry average implies that the firm is able to produce at relatively lower cost. Where as a low gross profit margin may reflect higher cost of goods sold. Due to the firms inability to purchase raw materials at favorable terms, inefficient utilization of plant and machinery, or over investment in plant and machinery, resulting in higher cost of production. This Ratio will also be low due to the fall in prices in the market or mark reduction in selling price. Net Profit Ratio:This ratio is the overall measure of the firms ability to turn each rupee sales into Net profit. If the net margin is inadequate, the firm will fail to achieve satisfactory return on share holder funds. This ratio also indicates the firms capacity to with stand adverse economic conditions. A firm with a higher net margin ratio would be in an advantage position to survive in the face of falling selling price, rising cost of production or decline demand for the product of net profit

Return on Assets:The profitability of the firm is measured by establishing relation of net profit with the Total Assets of the organization. This ratio indicates the efficiency of utilization of assets in generating revenue. Return on Equity:A return on shareholder equity is calculated to see the profitability of owners investment. Return on equity indicates how well the firm has used the resources of owners. This ratio is, thus, of great interest to the present as well as the prospective shareholder and also of great concern to management, which has the responsibility of maximizing the owners welfare. Return on Capital Employed:This is a percentage of profit to capital employed. It is the only measure, which can be said to show the overall satisfactory performance of an under taking from the stand point of profitability. It enables the management to show whether the funds entrusted to it have been properly used or not. Higher the ratios better the result.

Gross Profit Ratio =

Gross Profit X 100 Sales

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Gross Profit 3631454 2560813 5614035 2264572 11075179

Sales 270816847 121881399 167993982 221185579 346006259

Gross Profit Ratio 1.34 2.10 3.34 1.02 3.20

Net Profit Ratio =

Net Profit X 100 Sales

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

Net Profit 5754435 3353355 5373147 6468693 13580075

Sales 270816847 121881399 167993982 221185579 346006259

Net Profit Ratio 2.12 2.75 3.19 2.92 3.92

Gross Profit & Net Profit Ratio 5 Percentage 4 3 2 1 0 2003-04 2004-05 2005-06 Years
Gross Profit Ratio Net Profit Ratio

2006-07

2007-08

400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0 2003-04 2004-05 2005-06 Years
Sales Net Profit Gross Profit

Amount

2006-07

2007-08

Interpretation & Analysis: Initially the gross profit ratio showed a continues increase up to 2005-06, but it has shown an good increment in 2007-08. As net profit ratio is also showing almost the continues increased except in the year 2006-07, it has reduce by some percent. In this year the net profit ratio had showed a high increment as compare to gross profit ratio.

Return On Assets =

PAT X 100 Total Assets

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

PAT 5754435 3353355 5373147 6468693 13580075

Total Assets 42641811 29473730 36084031 59502907 42575545

Return On Assets 13.49 11.37 14.89 10.87 31.89

Return On Assets

35 30 25 Ratio 20 15 10 5 0 2003-04 2004-05 2005-06 Years


Return On Assets

2006-07

2007-08

Interpretation & Analysis: It is observed that the PAT has shown an growth in the last year i.e.2007-08 as compared to early years and also the total asset have increased in last year 2007-2008. The profit earned by the company on its total assets is increased which implies that the assets of the company are used more proficiently at the last year.

Return On Equity =

PAT X 100 Net-Worth

Financial year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008

PAT 5754435 3353355 5373147 6468693 13580075

Net - Worth 35160045 41565781 45462100 50887190 57973561

Return On Equity 16.36 8.06 11.81 12.71 23.42

RETURN ON CAPITAL EMPLOYED =

PAT X 100 Capital employed

Financial year 2003-04 2004-05 2005-06 2006-07 2007-08

PAT 5754435 3353355 5373147 6468693 13580075

Capital Employed 28824721 21590804 28279192 34798323 40280345

ROCE Ratio 19.96 15.53 19 18.58 33.71

40 35 30 25 20 15 10 5 0 2003-04 2004-05 2005-06 2006-07 2007-08

ROCE Ratio

Return On Equity

Interpretation & Analysis: The return on Equity and return on capital employed shareholders increased every year science 2004-05 and is maximum in the year 2007-2008. The efficient utilization of capital employed is observed and is increasing year by year.

CHAPTER 5

CONCLUSION

CONCLUSION
VEFCO is doing a great job in marketing of vegetable and fruits and at the same time bringing of returns to the farmers. E.g. VEFCO purchases onion from farmers in competition with private trade in open auction thus bringing better price for farmer. VEFCO has emerged as a strong competition for the private trades and is providing various services to the farmer at reasonable price. On the basis of the ratios that have been calculated and the interpretation of those ratios, we can arrive at following conclusion: 1. The financial health of the organization has been found strong but according to the current ratio it is being observed that in the year 2007-2008 the current assets where kept idle due to which the current ratio raised up to 11.32 2. According to the cash ratio in the year 2007-2008 it has found that the cash was kept idle and not utilized which give a rise in the ratio during that year. 3. The liquidity ratio of the organizations is very good through which we can find out that the organization can pay out its debts whenever required. 4. According to inventory ratio it is found the operation cycle of organization is short and has a huge inventory ratio. 5. The working capital is utilized in proper manner to increase the sales. 6. It is also found that the assets are perfectly used for increasing sales. The fixed assets are contributing a healthy for the sales.

CHAPTER 6

RECOMMENDATIONS

RECOMMANDTION
1. The organization can have a better utilization of asset, for e.g., by investing excess cash in liquid assets, it can be utilize as idle cash as well as earn some returns. 2. As we have found that the fixed assets contributed a good support to increase the net sales but it is also found that there is no proportionate increase of the fixed assets as to the net sales. Thus the organization can utilized the idle cash with them to increase the fixed assets for the increase of net sales and gaining high return. 3. The organization should trade in such businesses which have a good return and a healthy margin. 4. The organization perform multi business processes which are nearly interrelated with each other belonging to agriculture sector and having similar customer base, of one business activity for other business activities by providing some attractive schemes due to which the customer will be bounded to the organization and will have not for one but for multi facilities.

GLOSSARY

GLOSSARY
Annual Report: - The report issued annually by a company to its shareholder. It primarily contains financial statements. In addition, it presents the managements view of the operation of the previous years and prospective for future. Balance Sheet: - A summary of firms financial position on a given date that shows Total Assets equal to total liabilities and owners equity. Current Assets: - Assets that normally get converted into cash during the operating cycle of the firm. Current Liabilities: - Liabilities that are payable with in a year. Dividend: - Cash distribution of earnings to shareholders, usually or a quarterly basis. Du-pont System: - A system of financial analysis, pioneered by the du-pont company which helps in understanding profitability in terms of profit margin and assets Turnover. Earnings Per Share: - Earning after tax dividend by the number of common share outstanding. Equity: - Debt that cant exchange for another asset. Fixed Assets: - Tangible long-lived resources ordinarily use for producing other goods and services. Income Statement: - Summary of firms revenue and expenses over a specified period, ending with net income or loss for the period.

Leverage Ratio: - the term leverage refers to the ability of a concern its long-term obligation, which indicates a firms ability to meet its long-term borrowings and its interest. Liquidity Ratio: - This ratio finds the liquidity of the firm that refers to the ability of a concern to meet its current obligation as and when they became due. Profitability Ratio: - It measures the overall efficiency of the business. Trend Analysis: - It shows the changes in the direction of the financial performance over period of years. Turnover Ratio: - This ratio measures the efficiency or effectiveness with which a firm manages its resources or assets.

BIBLOGRAPHY

BIBLOGRAPHY
Financial Management (9th Edition), I.M.Pandey. Financial Management (5th Edition), Prassana Chandra. Part VIII Financial Analysis and Panning. Financial Management Dr. S.N.Maheshwari. Annual Report of VEFCO, from 2003-04 to 2007-08.

Annexure

Annexure
Balance sheet for the years 2003-04 to 2007-08 Balance sheet Liabilities Authorized Capital 400 Shares of Rs.500/- each Paid up Capital 391 Shares of Rs.500/-each Reserve & Surplus Other Liabilities Profit & loss A/c. Amount 2,00,000 195500 34764545 13817090 5754435 Assets Cash At Bank & Cash in Hand Investment Other income Current Assets Stock 2003-2004 Amount 6048281 3828893 30337038 12304773 2012585

Total

54531570

Total

54531570

Balance sheet Liabilities Authorized Capital 400 Shares of Rs.500/- each Paid up Capital 391 Shares of Rs.500/-each Reserve & Surplus Other liabilities Profit and loss a/c. Amount 200000 195500 41170281 7882926 3353355 Assets Cash At Bank Cash in Hand Investment Other income Current Assets Stock

2004-2005 Amount 5977887 12374927 16976298 12497432 4775518

TOTAL

52602062

TOTAL

52602062

Balance sheet Liabilities Authorized Capital 400 Shares of Rs.500/- each Paid up Capital 391 Shares of Rs.500/-each Reserve & Surplus Other liabilities Profit and loss a/c. Amount 200000 195500 45066600 7826902 53337314 7 Assets

2005-2006 Amount 5409499 15688971 23546599 12537432 1259648

Cash At Bank Cash in Hand Investment Other income Current Assets Stock

TOTAL

58442149

TOTAL

58442149

Balance sheet Liabilities Authorized Capital 400 Shares of Rs.500/- each Paid up Capital 391 Shares of Rs.500/-each Reserve & Surplus Other liabilities Profit and loss a/c. Amount 200000 194500 50492690 24704584 6468693 Assets

2006-2007 Amount 11320949 9477042 45041007 14461900 31109481

Cash At Bank Cash in Hand Investment Other income Current Assets Stock

TOTAL

83410379

TOTAL

83410371

Balance sheet Liabilities Authorized Capital 400 Shares of Rs.500/- each Paid up Capital 391 Shares of Rs.500/-each Reserve & Surplus Other liabilities Loan Profit and loss a/c. Amount 200000 194500 57579061 2295200 1388020 13580075 Assets

2007-2008 Amount 7884491 17912123 25987964 16587581 6664697

Cash At Bank Cash in Hand Investment Other income Current Assets Stock

TOTAL

75036856

TOTAL

75036856