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INTRODUCTION OF COMPANY

India is a country connected with agricultural and cattle rearing from ancient time
nearly more than 70 % on agriculture and cattle rearing. So dairy industry is the best
suited forth growth of India.

The full form of AMUL is ANAND MILK UNION LIMITED that is the brand name
of Kaira District Co-operative milk producers union Ltd. for its product range since 1955.
AMUL is Asias no. 1 and worlds second number co-operative dairy. It has large market
and dairy network in every state of India and across the India, like central Asian
countries, Bangladesh, Thailand, Indonesia, Malaysia, Singapore, etc. It was started
with 250 liters of milk and 2 societies and now, it produces 15 lakhs litters milk per day
and has 1113 societies and more than 6 lakes farmer members. It produces milk and
milk products. AMUL was started with little machinery and now all the production of
AMUL are produced by latest and advanced Machineries. AMUL has completed 65nd
year and entered in 66rd year on 14 December 2010.

It may be recalled that Amul had a humble beginning of two village dairy co-
operative societies collecting 247 liters of milk in 1946 which has now grown to
over14000 village dairy co-operative societies collecting more than 1 corer liters of milk
per day. Similarly the tree plantation drive which had started with 18.9 lakhs sapling in
2007 has now grown into a mass tree plantation drive with plantation of 1 corer sapling
in 2010 thereby leading the way for greening Gujarat for pestering-as per Amuls green
revolution by Burhan pathan8 [20th august 2010 : Business Category: Times of India]

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GLOBLE SCENARIO OF AMUL
International market: USA, Nepal, South Africa, Kenya, Bhutan, Australia,
Thailand, Bangladesh & gulf countries.

Prospective markets: Russia, Japan, and Sri Lanka.

Agreement with Wal-Mart: Wal-Mart agreed to sell Amul products on its shelves
under brand Amul itself.

Agreement with Glaxo: Glaxo & Amul will get together to produce baby food.

Amuls growth rate in international market is around 34%.

Based on milk processing handled by all players, the international farm


comparison network, Germany, has ranked Amul 18th across the globe.

GCMMF has registered compound annual growth rate (CAGR) of 23% during
last four years.

Amul is also being marketed in Hong Kong. Our export strategy is only to test
market our branded products, but our real market is India. At all times our effort
would be to remain market leaders in India and stave off competition, while
testing our products globally," Vyas told IANS in an interview.

The major supermarket and chain stores have been identified as the vehicle
overseas to promote Amul dairy products ranging from milk powder, butter,
ghee, cheese, butter, ice creams and tinned Indian sweets.

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The figures could have been much higher but for shortage of milk supplies early
last year leading to GCMMF dropping an export order to Iraq.

R S Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation


(GCMMF) said that Amul's initiative of planting 8-9 million saplings by its 3
million members on a single day (August 15) in 15000 villages since last 4 years
has been recognized by the consumers. The milk producers plant saplings on
their own at preidentified locations like their farm, near their homes, on farm
bunds etc. to help improve the forest cover. A total of 24 million saplings have
been planted so far and another 10 million will be planted on August 15, 2011".

The International Dairy Federation has also awarded Amul Green movement as
the Best Environment Initiative in the "Sustainability category" in 2010. It has
also been awarded Srishti's Good Green Governance Award for four
consecutive years since 2007.

The 2011 findings emphasize that brands must not only develop environmental
strategies to address their environmental impact, but they must also connect
with consumers in a compelling and relevant way on a market-by-market basis.
Today, being only ecofriendly is not enough-brands should be both green and
consumer-friendly, and only this can help them win big. The Amul model has
demonstrated that it cares for the consumers, producers and also the
environment on a sustainable basis.

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HISTORY OF AMUL
In the year 1946 the first milk union was established. This union was started with
250 liters of milk per day. In the year 1955 AMUL was established. In the year 1946 the
union was known as KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERSUNION.
This union selected the brand name AMUL in 1955.
The brand name Amul means AMULYA. This word derived from the
Sanskrit word AMULYA which means PRICELESS. A quality control expert in
Anand had suggested the brand name AMUL. Amul products have been in use in
millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray,
Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk
and Amulya have made Amul a leading food brand in India. (The total sale is Rs. 6
billion in 2005). Today Amul is a symbol of many things like of the high-quality products
sold at reasonable prices, of the genesis of a vast co-operative network, of the triumph
of indigenous technology, of the marketing savvy of a farmers' organization. And have a
proven model for dairy development (Generally known as ANAND PATTERN). In the
early 40s, the main sources of earning for the farmers of Kaira district were farming and
selling of milk. That time there was high demand for milk in Bombay. The main supplier
of the milk was Polson dairy limited, which was a privately owned company and held
monopoly over the supply of milk at Bombay from the Kaira district.
This system leads to exploitation of poor and illiterates farmers by the private
traders. The traders used to beside the prices of milk and the farmers were forced to
accept it without uttering a single word. However, when the exploitation became
intolerable, the farmers were frustrated. They collectively appealed to Sardar
Vallabhbhai Patel, who was a leading activist in the freedom movement. Sardar Patel
advised the farmers to sell the milk on their own by establishing a co-operative union,
Instead of supplying milk to private traders. Sardar Patel sent the farmers to Shri
Morarji Desai in order to gain his co-operation and help. Shri Desai held a meeting at
Samarkha village near Anand, on 4th January 1946. He advised the farmers to form a
society for collection of the milk.

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These village societies would collect the milk
themselves and would decide the prices at which they
can sell the milk. The district union was also form to
collect the milk from such village co-operative societies
and to sell them. It was also resolved that the
Government should be asked to buy milk from the union.
However, the govt. did not seem to help farmers by
any means. It gave the negative response by turning down the demand for the milk. To
respond to this action of govt., the farmers of Kaira district went on a milk strike. For 15
whole days not a single drop of milk was sold to the traders. As a result the Bombay
milk scheme was severely affected.
The milk commissioner of Bombay then visited Anand to assess the situation.
Having seemed the condition, he decided to fulfill the farmers demand.
Thus their cooperative unions were forced at the village and district level to collect and
sell milk on a cooperative basis, without the intervention of Government. Mr. Verghese
Kurien showed main interest in establishing union who was supported by Shri
Tribhuvandas Patel who lead the farmers in forming the Co-operative unions at the
village level. The Kaira district milk producers union was thus established in ANAND
and was registered formally on 14th December 1946. Since farmers sold all the milk in
Anand through a co-operative union, it was commonly resolved to sell the milk under
the brand name AMUL.
At the initial stage only 250 liters of milk was collected every day. But with the
growing awareness of the benefits of the cooperativeness, the collection of milk
increased. Today
Amul collect 11 lakhs liters of milk every day. Since milk was a perishable
commodity it becomes difficult to preserve milk flora
longer period. Besides when the milk was to be collected
from the far places, there was a fear of spoiling of milk.
To overcome this problem the union thought out to
develop the chilling unit at various junctions, which would

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collect the milk and could chill it, so as to preserve it for a
longer period. Thus, today Amul has more than 150
chilling centers in various villages. Milk is collected from
almost 1163 societies.
With the financial help from UNICEF, assistance
from the govt. of New Zealand under the Colombo plan, of Rs. 50 millions for factory to
manufacture milk powder and butter was planned. Dr.Rajendra Prasad, the president
of India laid the foundation on
November 15, 1954. Shri Pandit Jawaharlal Nehru, the prime minister of India
declared it open at Amul dairy on November 20, 1955.

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MOTTO, VISION, AND QUALITY POLICY
MOTTO:

The main motto of AMUL is to help farmers. Farmers were the foundation stone
of AMUL. The system works only for farmers and for consumers, not for profit. The main
aim of AMUL is to provide quality products to the consumers at minimum cost. The goal
of AMUL is to provide maximum profit in terms of money to the farmers. The main Motto
of Amul is to help farmer. Amul system works under objective of highest possible price
to the milk producers and lowest possible price to consumer. Farmers are paid money
in cash payment for the milk. Milk gives them money for daily necessities. Amul is the
one who started using their profit for the milk producer common good.

VISION:

Vision of AMUL is to provide and vanish the problems of farmers (milk


producers). The AMUL apparition was to run the organization with the co-operation of
four main parties, the farmers, the representatives, the marketers, and the consumers.

QUALITY POLICY:

We the motivated and devoted work force of AMUL are committed to produce
whole some and safe foods of excellent quality to remain market leader through
deployment of quality management system, state-of-art technology innovation and eco-
friendly operation delightment of customer and betterment of milk producers.

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ORGANIZATION PROFILE
NAME: KAIRA DISTRICT CO-OPERATIVE MILK
PRODUCERS UNION LIMITED widely known as AMUL.

FORM: Co-Operative sector registered under the co-operative


Society Act.
LOCATION: Kaira District Co-Operative Milk Producers Ltd,
Nr. Railway station
Amul Dairy Road,
Anand-388001
Gujarat.
REGISTRATION: 14TH December 1946.
REG.OFFICE: Kaira District Co-Operative Milk Producer Union Ltd. Anand -
388001
SALES OFFICE: Gujarat Co-operation Milk Marketing Federation, Anand.
CERTIFICATES: ISO 9001:2000
ISO 2000:2005
SIZE: On Large scale basis.
PROMOTERS: (1) SHRI TRIBHOVAN DAS PATEL
(2) SHRI MORARJI DESAI
(3) SHRI VALLABH BHAI PATEL
(4) Dr. VARGHESE KURIEN
(5) Dr. H.M.DALAYA.
BANKERS: 1.Kaira District Co- Operative Bank.
2. Axis Bank
3. State Bank of India
4. Bank of Maharashtra
5. Corporation Bank
6. Bank of Baroda
7. Bank of Saurastra

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AUDITORS: Special Auditor (Milk), Milk Audit Office Anand
INTERNAL AUDITOR: B. B. Bhabhor.
NO.OF SHIFT: 1st shift time: 08:30 A.M to 04:30 P.M
2nd shift time: 10:00 A.M to 06:00 P.M
3rd shift time: 04:30 P.M to 12:30 A.M
VILLAGE COOPERATIVE
SOCIETIES: 1163
MEMBERS: 6, 34,675.
OFFICE TIME: 10:00A.M TO 6:00P.M
PREMISES: 49.55Acres.

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BOARD OF DIRECTORS

SHRI. RAMSINH PRABHATSINH PARMAR CHAIRMAN

SHRI. RAJENDRASINH DHIRSINH PARMAR VICE-CHAIRMAN

SHRI. BHAIJIBHAI AMARSINGH ZALA DIRECTOR

SHRI. RAVJIBHAI TULSIBHAI PATEL DIRECTOR

SMT. MADHUBEN DHARMSINGH PARMAR DIRECTOR

SMT. SHARDABEN HARIBHAI PATEL DIRECTOR

SHRI. GHELABHAI MANSINH ZALA DIRECTOR

SHRI. PRAVINSINH FULSINH SOLANKI DIRECTOR

SHRI. MANSINH KOHYABHAI CHAUHAN DIRECTOR

SHRI. SHIVABHAI MAHIJIBHAI PARMAR DIRECTOR

SHRI. RANJITBHAI KANTIBHAI PATEL DIRECTOR

SHRI. CHANDUBHAI MADHABHAI PARMAR DIRECTOR

SHRI. B. B. BHABHOR SPECIAL AUDITOR

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LOGO OF THE AMUL

Logo of AMUL is a ring of four hands, which are co-coordinated each other. The
actual meaning of this symbol is co-ordination of hand of different people by whom this
union is now at top.

FIRST HAND: Is for farmers (producers), without whom the organization would not be
existed. Farmers are the inspiration of the AMUL-taste of India.

SECOND HAND: Is for the representatives of processors by whom the raw milk
processed in to different finished products.

THIRD HAND: Is for marketers without whom the products would not been able to
reach to the customers.

FOURTH HAND: Is for customers without whom the organization could not carry on
because they are the people who consume the products.

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PLANT OF AMUL

AMUL PLANT MANUFACTURING PRODUCTS

Milk, butter, ghee, milk powder, flavored milk and


1) Anand
Buttermilk

2) Mogar Chocolates, nutramul, Amul Ganthia and Amullite

3) Kanjari Cattle feed

4) Khatraj Cheese

5) Pune Milk and Curd

6) Culcutta Milk, Flavored Milk, Ice-cream

PRODUCT PROFILE
The amul two type of product for the selling purpose. The first one is consumer product
and other one is an industrial product.
Pasteurized milk Butter
Cheese Amul spray
Condensed milk Amul milk powder
Amul baby food Amul baby food
Amul ghee Amul nutramul
Amul cattle feed Chocolates
Amul masti dahi (dahi) Amul buttermilk
Amul lassee Amul gathiya
Amul mithayee Amul ice-cream

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Amul flavored milk Amul panner
Amul fresh cream Amul shikhand

INDUSTRIAL PRODUCT:
Coco butter
Cream
Coco powder

Product profile:
MILK DRINK:

Amul Kool Milk Amul Lassee


Shaake Amul Masti Spiced
Kool Koko Buttermilk

Amul Kool Cafe Amul Kool Amul Kool Nutramul Energy


Thandai Drink
Chocolate Milk

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MILK POWDER:

Amul Spray Infant


Milk Food Sagar Skimmed Milk Amul Instant Full
Sagar,Tea,Coffee
Powder Cream Milk Powder
Whitener

HEALTH DRINK:

Amul Shakti Health Food Drink


Nutramul

CHEESE:

Amul Pasteurised Amul Cheese Spreads Amul Emmental Amul Pizza


Processed Cheese Cheese Mozzarella

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FOR COOKING:

Amul / Sagar Pure Cooking Butter Utterly Delicious


Ghee Amul Malai Paneer
Pizza

Mithai Mate
MastiDahi

DESSERTS:

Amul Ice Creams Amul Mithaee Gulab Amul Chocolates


Amul Basundi
Jamuns

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FRESH MILK:

Amul Taaza Double


Amul Fresh Cream Toned milk Amul Gold Milk Amul Lite Slim and
Trim Milk

Amul Fresh Milk Amul Fresh Cream

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GUJARAT CO-OPERATION MILK
MARKETING FEDERATION

Gujarat co-operation milk marketing federation (GCMMF) is Indias largest food


products marketing organization. GCMMF is performed all the marketing activity
foamed. GCMMF was established in 1972 by Dr. Varghese Kurien. Till 1965 Amul
marketed but due to progress & increasing demand many problems emerged. It was
necessary to create separate department.
It is state level apex body of milk co-operative in Gujarat which aims to provide
remunerative returns to the farmers & also serve the interests of consumer by providing
quality products which are good value for money.

Members :12 district co-operative milk producers union


No. of producer members : 635599
No. of village societies :1200
Total milk handling capacity :15 lack liters per day
Milk collection : 2.08 billion liters
Milk collection daily average : 15 lack kgs
Milk drying capacity : 100 metric tonnes per day
Cattle feed manufacturing : 1100 mts per day.

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SWOT ANALYSIS

A] STRENGTH:

CO-OPERATIVE CULTURE: All the co-operatives are work together to


accomplish a particular task.

BRAND STRENGTH: The strong brand equity of AMUL, which made it possible
to become a market leader in milk and milk products.

PRODUCT INNOVATION: Under its umbrella brand AMUL has added a wide
range of milk products like- cheese, butter, Srikhand, flavored milk, Ice-Cream,
Chocolate, Sugar-free Chocolate, Probiotic Ice-Cream etc. Recently AMUL
launched Pizza and milkshakes.

EXCELLENT PROMOTIONAL TOOLS: AMUL is promoting with the help of


advertisement, personal selling, sale promotion etc. AMUL generally use
hoarding for its promotion. Recently, AMUL is also sponsoring Star Channel for
its programmed star Voice of India.

B] WEAKNESSES:

Co-operative culture if not dealt properly can affect the organization.

Animals are now taken as side business. This can affect the industry as the main
raw material is milk which is provided by animals.

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C] OPPORTUNITIES:

AMUL is exporting its products in different countries like UAE, Singapore,


Australia, U.S.A. and Gulf Countries. Being, Asias largest milk brand AMUL has
acquired significant position in the global market.

Day by day increase in the collection of the milk, AMUL has wide opportunity to
produce variety of products like Choco Flakes.

Large demand in the market.

D] THREATS:

With the advent of multinational companies in India the competition has


intensified. Amul is facing a tough competition with the companies like Cadbury,
Nestle, and Britannia etc.

In the health drink segment for its Stamina Amul is facing competition with
PepsiCo India, Parle Agro etc. Similarly in beverage section also it is having a lot
of competitors.

Animals are now taken as side business by the farmers. Their illiteracy poses a
threat to change their mindset thereby affecting the organization.

Changes in government policies.

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FINANCE MANAGEMENT

Management of funds is a critical aspect of financial management. Management


of funds acts as the foremost concern whether it is in a business undertaking or in an
education institution. Financial management, which is simply meant dealing with
management of money matters.

Financial management is that managerial activity which is concerned with the


planning & controlling of the firm financial resources.

All the other departments of the organization strongly depend upon the finance
department to carry on their departmental activity efficiently. Hence it is the
responsibility of the finance functions with proper care, adequate financial availability in
time in the organization would lead to organization success & the failure manager
finance will lead to in efficiency.

Financial management was considered a branch of knowledge with focus on the


procurement of funds. Instruments of financing, formation, merger & restricting of firms,
legal & institutional frame work invaded therein occupied the prime place in this
traditional approach.

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ORGANIZATION STRUCTURE OF FINANCE
DEPARTMENT

Managing
director

Genaral
manager

Assistant
General
Manager

Account Sales Finance


Manager
manager Superintendent

Office

Clerks

Peon

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OBJECTIVE OF FINANCIAL MANAGEMENT
Efficient financial management requires the existence of some objectives, which are as
follows:

Profit maximization:

The objective of financial management is the same as the objective of a company which
is to earn profit. But profit maximization alone cannot be the sole objective of a
company. It is a limited objective. If profits are given undue important then problems
may arise as discussed below:
The term profit is vague & it involves much more contradictions.
Profit maximization must be attempted with a realization of risks involved. A
positive relationship exists between risk & profits. So both risk & profit objectives
should be balanced.
Profit maximization fails to take into account the time pattern of returns.
Profit maximization does not take into account the social consideration.

Wealth maximization:

It is commonly understood that the objective of a firm is to maximize value of a firm


is represented by the market price of the companys stock. The market price of a firms
stock represents the assessment of all market particular firms. It takes into account
present & prospective future earnings per share, the timing & risk of these earnings, the
dividend policy of the firm & many other factors that bear upon the market price of the
stock. Market price acts as the performance index or report card of the firms progress &
potential.

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PROCESS:

In Financial Management, process following points is considered:


Financial Analysis
Financial Decision-Making
Financial Planning
Financial Control
Finance department is that managerial activity concerned with the planning and
controlling of the firms financial resources. Among all the 5Ms, i.e. man, money,
machine, material, and market, money plays a vital role in the organization. Finance is
the lifeblood for the success of an organization. For the organization to grow and
develop on an even basis, availability of finance on adequate basis is the prime
requirement.

FINANCE FUNCTION:

The financial management involves critical decisions on which the very survival of the
organization depends. The main financial decisions are as follows:
Investment Decision
Financing Decision
Dividend Decision

Financial decisions are thus very crucial and important decisions for the firm. The
main function of finance department is to tackle the day-to-day financial requirement
and other short term and long-term expenses, which an organization might quite often
incur.
All the other departments of the organization strongly depend upon the finance
department to carry on their departmental activity efficiently. Hence, it is the
responsibility of the finance manger to manage the finance function with proper care.
Timely availability of finance in the organization would lead to organizational success
and the failure to do accurately manage finance will lead to inefficiency.

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IMPORTANCE:
Proper finance is the real key to the success of any business enterprise. Without proper
finance, a business can neither survive nor expand and modernize. It is the finance,
which works like a lubricant, which keeps the organization dynamics running smoothly
and efficiently. The following are the points, which highlight the importance of finance:

Finance for business promotion


Finance management for optimum use of the firm
Useful in decision-making
Determinant of business success
Measurement of performance
Basis of planning, co-operation and control
Useful to shareholders and investors

SOURCE OF CAPITAL:

Source of Capital of AMUL are:


All the products are sold and distributed by Gujarat Co-operative milk marketing
federation (GCMMF). So federation gives them daily amount decided by union if
selling of Amul products will be happened or not.
Fix deposit of society is the major source of finance.
Interest of fix deposit of bank like UTI, BOB, GEB Bond and Sardar Sarovar
Bond etc. are one of the sources of finance.
Share capital of Amul, which is not listed in market because it is not for public. It
is only for the members of societies.

ACCOUNTING POLICIES:

METHOD OF ACCOUNTING:
1) The union follows accrual system of accounting in the preparation of accounts.
2) The financial statements are prepared on the historical cost convention and
in accordance with the generally accepted accounting principles.

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FIXED ASSETS:

Fixed assets are valued at cost. The cost of assets comprises purchase price
and any directly attributable cost in bringing the assets to its present condition or
intended use.

DEPRECIATION:

Depreciation on fixed assets is provided on Written down Value Method at the


applicable rates prescribed under the Income Tax Act, 1961. In the case of AMUL 3
Dairy and KHATRAJ Dairy depreciation has been charged on straight line method as
per the rates prescribed under the companies Act, 1956. Depreciation has been
provided for the full year for the assets acquired and commissioned by 30th September
2007 otherwise for the half year if commissioned between 1st October 2007 and 31st
March 2008 where grant has been received against any assets, the depreciation on the
grant portion has been adjusted against the grant (except AMUL 1 & 2 Assets).

INVENTORIES:

1) Raw materials, packing materials, semi packed goods and goods in transit are
valued at cost on FIFO basis.
2) Stores and Spares are valued at cost on FIFO basis.
3) Finished goods in case of Anand, KANJARI, MOGAR and KHATRAJ are
valued at the Ex-factory price less 5% that is fair estimation of the direct Costs.
4) Excise duty is applicable on finished goods stock has been included in the
valuation of finished goods.

INVESTMENTS:

Investments are primarily meant to be held over a long term period as such are
stated at cost.

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RETIREMENT BENEFITS:

Unions contribution towards Gratuity and Superannuating for its employees is


funded with Life Insurance Corporation of India. Leave encashment is accounted for as
and when due for payment.

PYMENT OF BONUS:

Provision has been made for bonus due for the year 2007-08 which will be payable
to employees in 2008-09.

EXCISE DUTY:

The provision has been made for the excise duty applicable on the finished goods
stock in the excise expense.

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LITERATURE REVIEW

Important study was conducted by Sorter and Becker (1964)1. They found that
conservative corporations maintain higher liquidity and solvency ratios. This research
would also prove to be a valuable addition to the empirical base of ratio analysis.

The other important development since the mid1960 is the beginning of a period of
more rigorous scrutiny of the nature of financial ratios as such. First, the effects on
ratios of different accounting practices were examined. George C. Holdren (1964)2
found that different types of Inventory valuation procedures changed inventory turnover
ratios.
Another important development in managerial usage of ratios occurred at about the
same time. The DuPont Company began the most important comprehensive managerial
usage of ratios such as profits/total assets, profits/sales and sales/total assets. This
held promise for serving as the basis for a framework where ratios could be developed
in a logical fashion. However, it went unnoticed until recent times.

There is a significant overlap in the development paths of ratio analysis for creditors
purpose and managerial purposes. Credit analysis focused on the ability to pay and
managerial analysis emphasized profitability. The development of ratios for use in
credit analysis dominated the general development of ratios analysis, so one must look
primarily to credit analysis to understand the evolution of ratio analysis. (2011)

An alternative view of accrual accounting is often express in the business process


as illustrated in the institutional investor [Aug 1988, page no. 55] a growing number of
portfolio managers & analyst insist that cash flow is a more meaningful measure of a
companys value than reported earnings.

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Sur & Rakshit (2005)5 conducted a study regarding the linkage between asset
management and profitability in 25 selected companies in Indian industries. The study
registered both positive and negative association between receivable turnover and
profitability. However, L the combined provision weak evidence of an inverse
association between the profitability and inventory turnover.

Vishanani and Shah (2007)6 have studied the impact of working capital
management policies on corporate performance of Indian consumer electronic industry
by implementing simple correlation and regression models. They have found that there
is no established relationship between liquidity and profitability for the industry as a
whole; but various companies of the industry depict different types of relationship
between liquidity and profitability. However, majority of the companies revealed positive
association between liquidity and profitability.

Sachiko Corporation: A case in International Financial Statement Analysis.


By,Mahindra R Gujarathi (2008). The author does a comparative study within an
International context. Upon reviewing the financial statements and relevant footnotes of
Sachiko corporation, a Japanese Company, and U.S. based Radiance Inc., the author
has used financial ratio analysis to compare and evaluate whether the revised ratios
are consistent with each companys strategy and business environment and
subsequently, to recommend the better investment prospect. The article is useful for us
to examine the role of environmental differences (cultural, institutional, business and
financial reporting) in interpreting the risk and profitability ratios in an international
context.

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OBJECTIVES OF STUDY

Primary objective:

The objective of financial statement is to know information about the financial position,
performance & cash flows of an enterprise with the help of analytical tools.
Secondary objectives:
Based on this information, objective of analysing them is to evaluate:
1) The adequacy of the profits earned by the company
2) The adequacy of its financial strength
3) Its ability to generate enough cash & cash equivalents, timing & certainly of their
Generation.
4) The future growth outlook of the company.
5) To know the financial performance evaluation of AMUL
6) To give suggestion on the basis of Liquidity, Profitability, Efficiency and Leverage
analysis
7) To know the Market Position AMUL by taking Market Value Ratios
8) To know the trade off between Liquidity & Profitability.

Objectives of trend analysis:


1) To find out the general pattern of a relationship between associated factors or
variables.
2) To forecast the future direction of this pattern (for instance sales figure).

Objectives of horizontal analysis:


1) To compare the figures of the current period with that of the past period.
2) To analyze the performance and find out areas of improvement.

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Objectives of cash flow statement analysis:
1) To assess the quality of cash position of a company
2) To generate positive cash flows in future & aid to decision making
3) To know the impact of controversy on the treatments of dividend & interest paid
on the assessment of cash flows.

Objectives of ratio analysis:


1) To compare the actual ratios with the budgeted ratios.
2) To find out deviation in targeted and achieved results.
3) It helps in planning the future activities.
4) Comparison with Competitor Company helps in developing competitive strategy.
5) Comparison with Industry ratio, give picture about companys growth.

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RESEARCH METHODOLOGY
HYPOTHESIS TESTING:

Since the objective of this study is to examine the relationship between Profitability &
Liquidity, the study makes a Financial Performance through testable hypothesis.
Hypothesis:
H0: There is no positive relationship between the Liquidity & Profitability of AMUL.
H1: There is positive relationship between the Liquidity & Profitability of AMUL.

SAMPLE & DATA:

For trend analysis data has been taken from 2007-08 to 2011-12 that is six years
data.
For Horizontal analysis data has been taken from 2010-11 to 201-12 that is two
years data.
For cash flow statement analysis data has been taken from 2010-11 to 2011-12
that is two years data.
For Ratio analysis data has been taken from 2009-10 to 2011-12 that is ten years
data.

DETAIL OF STUDY:

Financial statement analysis seeks to evaluate the performance, financial


strength, ability to generate enough cash & the growth outlook of a company. It
determining the money needs in a business can be a tough task. The analyses of the
accounts and the economic prospects of a firm require skilled and experienced
professionals to carry out the task. But the returns are as beneficial and profitable as
much as the effort involved.

Financial analysis is the process of identifying the financial strength & weaknesses of
the firm by properly establishing relationship between the items of the balance sheet &
profit & loss account. Financial analysis is the starting point for the making plans, before

32
using any sophisticated forecasting & planning procedures. A number of tools are
available in the tool kit of the analyst for the purpose certain tools are:
1) Trend analysis
2) Horizontal analysis
3) Cash flow statement analysis
4) Ratio analysis

Trend analysis
Trend analysis is an extension of horizontal analysis in that while the latter compares
only two years position, the former the same for more than two years. Again the
methodology is very simple. The farther or the base year figure is taken as 100 or just 1
& all successive years figures are accordingly restated, or indexed.

When to use: Trend analysis is valuable when one wants to use historical data to
predict future values or to calculate expected values for comparison to actual current
values. Trend analysis is also useful for identifying unexpected variances that may
indicate strategic or operational changes or entity weaknesses worthy of additional
exploration and analysis.

Advantages: Trend analysis can:


1) Reveal potentially fruitful areas of audit investigation
2) Detect significant variations over time
3) Be easily understood and communicated
4) Be readily accepted due to its widespread use

33
Horizontal analysis:

Horizontal analysis is very simple tool. It facilitates a quick review of the current
years performance & financial position of a business over the previous year. The
methodology is to work out increase or decrease in each item of the balance sheet &
profit & loss account of the current year over those of the last year & to express this as
a percentage of the last years figure. The horizontal analysis is the financial statements
of a company of successive years presented side-by-side.
Advantages:
1) The first column gives the difference between the past period and the current period,
while the percentage column shows what percentage of the past figure is the figure
denoting the change.
2) It places the facts very simply in front of the shareholder and makes the job of
analyzing the improvements or the lack of it very simple for the shareholder.

Cash flow statement analysis:

An analysis of cash flow is useful for short-term planning and controlling. A firm
needs sufficient cash to pay debts maturing in the near future, to pay interest and other
expenses as well as to pay dividends to the shareholders. The firm can make
projections of cash inflows and outflows for the near future to determine the availability
of cash. This cash balance can be matched with the firms need for cash during the
period, and accordingly, arrangements can be made to meet the deficit or invest the
surplus cash temporarily. Thus, a historical analysis of cash flow projections for the
immediate future is very much necessary for the smooth and proper running of the firm.
A cash flow statement is nothing but a statement of changes occurring in financial
position of a company on basis of cash. It summarizes the causes of changes in cash
position between dates of the two balance sheets. It also indicates the sources and
uses of cash. The cash flow statement is similar to the funds flow statement except that
it focuses attention on the cash instead of working capital or funds. Thus, this statement
analysis changes in non current accounts as well as current accounts to determine the
flow of cash.

34
Structure of the Cash flow statement:
The cash flow statement is distinct from the income statement and balance sheet
because it does not include the amount of future incoming and outgoing cash that has
been recorded on credit. Therefore, cash is not the same as net income, which, on the
income statement and balance sheet, includes cash sales and sales made on credit.
Cash flow is determined by looking at three components by which cash enters and
leaves a company - Core operations, investing and Financing.
A] Cash from Operations: Cash from operations is cash generated from day-to-day
business operations.
B] Cash from Investments: Cash from investments is cash used for investing in
assets, as well as the proceeds from the sale of other businesses, equipment or other
long-term assets.
C] Cash from Financing: Cash from financing is cash paid or received from issuing
and borrowing of funds. This section also includes dividends paid (though sometimes
such a thing is listed under cash from operations).

Advantages:
It is very useful in the evaluation of cash position of the firm.
1) A projected cash flow statement can be prepared in order to know the future cash
position of the firm to plan and coordinate its financial operations properly.
2) A comparison of historical and projected cash flow statements can be done to find
out various deficiencies and take immediate and effective action.
3) Cash flow statement helps in planning the repayments of loans, replacement of
fixed assets and other similar long-term planning of cash.
4) A series of cash flow statements reveals whether the firms liquidity is improving
or deteriorating over a period of time and in comparison to other firms in the same
industry or in a different industry.
5) It is useful for capital budgeting decisions and explains causes for poor cash
positions.

35
Ratio analysis:
The most important task of a financial manager is to interpret the financial
information in such a manner, that it can be well understood by the people, who are not
well versed in financial information figures. The technique, by which it is to be
calculated, is known as Ratio Analysis. 1) Percentage 2) Rate 3) Proportion Ratio
Analysis is an important technique of financial analysis. It depicts the efficiency or
shortfall of the organization in the form of trend Analysis. Different ratio appeal to
different people managements, having the task of running business efficiency, will
interest in all ratios. A Supplier of goods on credit will be partially interested in liquidity
ratios, which indicate the ability of the business to pay its bills. Existing and future
shareholders will indicate

The ability of business to purchase. Existing and future shareholders will interest in
investment ratios, which indicate the level of return that can be expected on an
investment in business. Major customers, intent on having a continuing source of
supply, will be interested in the financial stability, as reveled by the capital structure,
liquidity and profitability ratios. Debenture and loan stock holders will be interested in
ability of a business will be interested in the ability of a business to pay interest, and
ultimately to repay capital. A banker, gibing only short-term loans, will be interested
mainly in the liquidity of the business, and its ability to repay those loans.

STEPS IN RATIO ANALYSIS:


1) Collection of information, which are relevant from the financial statements and
then to
Calculate different ratios accordingly.
2) Comparison of computed ratios of the same organization or with the industry
ratios.
3) Interpretation, drawing of the inference and report-writing.
Advantages:
1) Inter-firm comparison, because absolute figure comparison will lead to nowhere.
2) Intra-firm comparison for the same reason.

36
3) Comparison against industry benchmarks.
4) Analysis of chronological performance over a long period.
5) Cannot depend on only one ratio

37
ANALYTICAL RESULTS

A] TREND ANALYSIS:
Particular 2007-08 2008-09 2009-10 2010-11 2011-12
RESULT FOR THE YEAR:
Sales & other
Income 107187.3 137212.35 168938.7 210642.68 246634.70
Index 1 1.28 1.57 1.96 2.30
PBDT 1896.81 2604.78 3350.05 4323.04 5386.34
Index 1 1.37 1.77 2.28 2.84
PBT 508.22 680.53 976.06 1139.43 2053.37
Index 1 1.34 1.92 2.24 4.04
PAT 499.22 575.53 721.06 926.65 1070.29
Index 1 1.52 1.44 1.87 2.14

QUNTITATIVE DETAILS:
Sales 107712 137807 169489 211140 247267
Index 1 1.27 1.57 1.96 2.30

POSITION AT THE YEAR END


Gross block 27453.29 29036.16 37347.6 4014 1.86 42613.33
Index 1 1.06 1.36 1.46 1.55
Net Block 6122.97 6888.24 14046.24 15270.87 15827.85
Index 1 1.12 2.29 2.49 2.58
Net current 28995.89 30874.39 40524.27 37290.41 48815.85
assets
Index 1 1.06 1.40 1.28 1.68
Net worth 6491.55 6698.98 6887.16 8005.85 8857.28

38
Index 1 1.03 1.06 1.23 1.36
Share Capital 2229.18 2265.99 2300.73 2789.53 2832.15
Index
Reserve & 2362.18 2485.24 2720.13 3110.39 3634.67
surplus
Book value 100 100 100 100 100

Chart for Result for the year is as below:

5 5

sales & other income


3
2.84 PBDT
2.28
2.24 2.3 PBT
2 1.92 1.96
1.77
1.57
1.37
1.34
1.28
1 1

0
2007-08 2008-09 2009-10 2010-11 2011-12

INTERPRITATION:
Consistent rise in sales that shows overall growth in sales of their products in
dairy Consumption.
PBDT always growth higher than on sales, on the all the year for the compare
current year, but PBDT lower than PAT on the year 2009-10, or current year
shows heavy pressure on margin on the both PBDT and PAT.
PAT on 2008-09 lower than 2009-10, but 2010-11 higher than 2011-12.

39
Chart for Quantitative Details is as below:

sales
2.5

1.5

sales
1

0.5

0
2007-08 2008-09 2009-10 2010-11 2011-12

Interpretation:
Consistent rise in sales that shows overall growth in sales.

It shows positive volume value growth in all the years. There is a no pressure
on margins.

40
Chart for Position at year end is as below:

2.58
2.5 2.49
2.29
2

1.68 gross block


1.5 net block
1.4 1.36
1.28
1.23
1.12 net current assets
1 1 1.06
1.03 1.06
net worth

0.5

0
2007-08 2008-09 2009-10 2010-11 2011-12

Interpretation:
Growth in gross block & sales neck to neck that shows high fixed assets
efficiency & its utilization of uses are more.

Net current asset shot up to year 2008-09 but increasing compared 2009-10
and further made compared to 2009-10 decreasing & raising current year 1.68
compared to based year.

Growth in net worth is neck to neck that shows high leverage & high dividend
Distribution around 75% to their consistent farmers

41
B] HORIZONTAL ANALYSIS:
Table for Profit & Loss Horizontal Analysis is as below:

Particulars 2011-12 2010-11 Increase/Decrease over


Gross Sales 247267.02 211140.2 36126.82 17.11%
less: Excise duty 632.32 497.55 134.77 27.09
Net Sales 246634.70 210642.68 35992.02 17.09
Add: Closing
Stock 19965.14 12404.31 7560.83 60.95
266599.84 223046.99 43552.85 19.53
less: Material Cost:
Opening Stock 12404.32 15362.4 -2958.08 19.26
Milk Purchase 159452.14 144763.7 14688.44 10.15
Oil Purchase 0 1123.63 1123.63 0
R.M.Consumption 57527.08 28151.9 29375.18 104.35
229383.54 189401.63 39981.91 21.10

less: Manufacturing Expenses:


Research & 744.39 16.79 2.26
Extension 761.18
Processing 3623.2 -362.58 -10.0
Expenses 3260.62
Packaging 12935.08 878.8 6.36
Expenses 13813.88
17302.67 533.01 3.08
17835.68
Gross Profit 256292.08 8812.00 247480.08 2808.44

less: Factory Expenses:


Power & Fuel
Expenses 7233.73 5719.15 1514.58 26.48

42
Salaries & Wages 2518.81 2651.94 -133.13 5.02
Staff Provident
Fund, Gratuity 1068.27 808.58 258.69 32.11
Repair &
Maintenance 2140.12 1577.01 563.11 35.71
Expenses
Freight &
Forwarding 818.34 1839.47 -1021.13 55.51
Expenses
13779.27 12596.15 1183.12 9.39

less: Administrative, Selling & Distribution Expenses:

Postage &
Telegram
106.24 64.93 41.31 63.62
Expenses
Insurance 100.40 50.73 49.67 97.91
Premium
Audit Fess 201.19 178.67 22.52 12.60
Rent, Rate & 168.38 129.19 39.19 30.34
Taxes
Administrative 266.85 355.79 -88.94 -25
Expenses
Marketing 106.45 149.36 -42.91 -28.73
Expenses
949.51 928.68 20.83 2.24
Add: Operating Income:
Interest Income 332.77 300.02 32.75 10.92
Dividend Income 127.52 106.73 20.79 19.48
Other Income 274.21 1102.33 -828.12 -75.12
Prior Period 0 0 0 0
Income

PBDIT 5386 4327 1059.00 24.47


less: Depreciation 1891.72 1614.63 277.09 17.16
EBIT 3494.62 2712.37 782.252 28.84

43
less: Interest 1441.25 1569.38 -128.13 -8.16
EBT 2053 1142.99 910.01 79.62
less: Tax 983.08 212.78 770.30 362.02
Provision
PAT 1070 930.21 139.79 15.03
less: Other Provision:
Bed-Debt 0 0 0 0.00
Provision
Leave 0 0 0 0.00
Encashment
Provision
Provision For 0 0 0 0.00
Gratuity
Prior Period 0 3.54 -3.54 -100
Expenses
Net Profit 1070.29 926.65 143.64 15.50

44
C) Table For Balance Sheet Horizontal Analysis Is As Below:
Increase/Decrease
particular 2011-12 2010-11 over 2011-12 %
SOURCES OF FUNDS
Shareholders' Funds:
Capital 2832.15 2789.53 42.62 1.53
Reserve &
Surplus 4704.96 4037.04 667.92 16.54
7537.11 6826.51 694.99 10.18
Loan Funds:
Secured Loans 11308.48 11484.72 -176.24 -1.53
Unsecured
Loans 7787.71 7787.71 0 0

18264.39 18440.63 -176.24 0.96

TOTAL 25801.50 25267.14 534.36 2.11

APPLICATION OF FUNDS
Fixed Assets:
Gross Block 42613.33 40141.86 2471.44 6.16
less: 26785.48 24870.99 1914.49 7.70
Depreciation
Net Block 15827.85 15270.87 556.98 3.65
Capital Work-
in-Progress 6592.37 1687.12 4905.25 290.74
Investments 1040.58 1040.58 0 0
Current Assets, Loan & Advances
Advances &
Debt 18886.40 6344.09 14542.31 229.22

45
Stock 25723.86 16462.38 9261.48 56.25
Cash & Bank
Balance 4205.59 14484.14 -10278.55 70.96
Total Current 48815.67 37290.61 11525.06 30.91
Assets

less: Current Liabilities & Provisions:


Current
Liabilities 41033.55 26061.01 14972.54 57.24
Provisions 1790.38 1301.68 488.7 37.54
Total Current 42823.93 27362.69 15461.24 56.50
Liabilities
Net Current 5591.74 9927.91 -4336.17 -43.68
Assets
Deferred
Revenue 146.75 127.64 19.11 14.97
Expenses

46
D] CASH FLOW STATEMENT ANALYSIS:
Table For cash flow statement Analysis is as below:

Particular 2011-12 2010-11 INC/DEC Change


(Amt in lac) (Amt in lac) in %

Operating activity
Net Profit before tax &
extra-ordinary items 1070.29 926.65 143.64 15.50
Adjustments for: Non-cash & non-operating activities
Depreciation 1891.72 1614.63 277.09 17.16
provision for gratuity -405.91 -106.29 -298.62 -280.94
Provision For Leave
Encashment 29.40 -153.24 182.64 199.19
Interest Expenses 1441.25 1569.38 128.13 8.16
Interest Income -332.77 -300.02 -32.75 -10.92
Dividend Income 127.52 106.73 20.79 19.47
Profit on sale of Assets -129.80 -64.20 -65.6 102.22
Provision For Income Tax 983.08 212.78 770.3 362.02
Decrease in Deferred
Revenue Expenditure -19.11 -5.98 -13.13 -219.56

Operating Profit before


Working Capital
4400.63 3586.99 813.64 22.60
Changes

Add: Increase in Current Liabilities & Decrease in Current Asset


(less): Decrease in Current Liabilities & Increase in Current Asset
Increase/decrease in stock -9261.48 1923.42 -11184.9 -581.51
Increase in advance and

47
debtors ( excluding income -12446.26 4854.72 -17300.98 356.63
tax deposit)
Increase in current liability 7472.54 4486.80 2985.74 66055
Cash generated from
operating activities -9534.57 17851.93 -27386.5 153.41
Direct tax paid (net refund ) -213.93 12.43 -226.36 -
1821.07
(a) Net cash flow from
operating activities 10048.50 17839.50 -7791 -43.67

CASH FLOW FROM INVESTING ACTIVITIES:


Plus: increase in liability and decrease in assets
(less) decrease in liability and increase in assets

Purchase of Fixed Assets -2289.51 -2900.92 611.41 21.08


Sales of Assets 132.48 83.13 49.35 59.36
Increase in Capital Work in -5109.71 -1603.80 -3505.91 210.60
Progress
Increase in Investment - -525.25 -525.25 -100
Interest Received 332.77 300.02 32.75 10.91
Dividend Received 127.52 106.73 20.79 19.48

(b) Net Cash flow from


Investing activities -6806.46 -4540.06 -2266.4 49.92

CASH FLOW FROM FINANCING ACTIVITIES:


Plus: increase in liability and decrease in assets
(less) decrease in liability and increase in assets
Increase in Share Capital 42.62 488.80 -446.18 91.28
Grant received 2.61 97.40 -94.79 97.32

48
Increase in BMC Project loan
- 148.00 148.0 148.0
Decrease in NCDC BMC
Project loan -49.91 -33.66 -16.25 48.28

Decrease in HDFC bank


short term loan - -5000.00 -5000 -5000

Increase long term loan 9616.29 50 9566.29 19132.58

Repayment of long term loan


-2242.62 -2244.50 -4485.12 200

Contribution to charity fund - -

Contribution to bad debt


reserve fund -.89 - -89 0

Contribution to education
fund -3.00 -3.00 0 0

interest paid -1441.25 -1569.38 128.13 8.16

Decrease in redeemable
debenture -12.98 146.75 -159.73 108.84

Increase in fixed deposit 1064.01 1752.19 -688.18 39.28

Dividend paid -398.48 -342.49 -56 -16.35

49
(c) Net Cash Flow
Financing Activities 6576.40 -6767.69 13344.09 197.17

Net increase/(decrease) in
cash & cash -10278.56 6532.05 -16810.61 257.36
equivalents [A+B+C]

Add: Opening cash & cash


equivalents as at 01/04/2011 14484.14 7952.09 6532.05 83.40

Closing cash & cash


equivalents (as on 31-3-
4205.59 14484.14 -10278.55 70.96
2012)

Actual Closing cash &


cash equivalents 4205.59 14484.14 -10278.55 70.96

50
E] RATIO ANALYSIS:

The most important task of a financial manager is to interpret the financial


information in such a manner, that it can be well understood by the people, who are not
well versed in financial information figures. The technique, by which it is to be
calculated, is known as Ratio Analysis.

1) Percentage 2) Rate 3) Proportion

Ratio Analysis is an important technique of financial analysis. It depicts the


efficiency or shortfall of the organization in the form of trend Analysis.

Different ratio appeal to different people managements, having the task of


running business efficiency, will interest in all ratios.

A ratio analysis is powerful tools of financial analyses. A ratio is defined as the


indicted quotient of two mathematical expressions and as the relationship between two or
more things. In financial analyses, a ratio is used as benchmark for evaluating the financial
position and performance of the firm.

Types of Ratios:

Liquidity Ratios

Leverage Ratios

Activity Ratios

Profitability Ratios

Equity Ratios

51
1 Liquidity Ratios

Liquidity ratios measure the firms ability to make current obligations. The most common
ratios which indicate the extent of liquidity or lack of it are,

Current Ratio
Quick Ratio
Liquid Ratio

2 Leverage Ratios

Leverage ratio shows the proportions of debt and equity in financing the firms assets. The
short term creditors like bankers and suppliers of raw materials are more concerned with the
firms the current debts paying ability. The leverage ratios are as

Debt ratio
Debt equity Ratio

3. Profitability ratios

Profitability measure overall performance and effectiveness of the firm. They are as:

Gross Profit ratio


Net Profit ratio
Operating ratio
Operating Exp. ratio

4 Activity Ratios

Activity ratio is employed to evaluate the efficiency with which the firms manages and
utilizes its assets. This ratio is also called turnover ratio assets because they indicate the
speed with which assets are being converted or turn over in to sales. The activity ratios are
as

Assets turn over


Net turn over
Inventory turnover
Debtors turnover
Collection Period
Creditor turnover
Payment Period
Profitability Ratio

52
5 Equity Ratios

Dividend per share


Earnings per share
Book value per share
Payout ratio
Dividend yield ratio
Earning yield ratio

Importance of ratio analysis

The ratio analyses are the most important tool of the analyses. The various groups of
people having different investors are interested in analyzing the financial information.

The importance of the ratio can be summarized for the various groups vested with
diversified interest as follow

For short term creditors


For long term creditors
For management
For Investor

Steps in ratio analysis

Collection of information, which are relevant from the financial statements and
then to calculate different ratios accordingly.
Comparison of computed ratios of the same organization or with the industry
ratios.
Interpretation, drawing of the inference and report-writing

Limitation of the ratio analysis

The major limitation of the ratio analyses are summarized as follows

Only quantities analysis and not qualitative analyses


Historical analyses
Only symptoms not cure

53
Ratio analysis at amul:
1) Liquid Ratio:

a) Current Ratio:

Current ratio is calculated by dividing current assets by current liabilities. Current


assets include cash and those assets that can be converted into cash within a year, such as
marketable securities, debtors and inventories. Current liabilities include creditors, bills
payable, accrued expenses, short-term bank loan, income tax liability and long term debt
maturing in the current year. The current ratio is a measure of the firms short-term solvency.
It indicates the availability of current assets in rupees for every one rupee of current liability.
A ratio is greater than one means that the firm has more current assets than current claims
against them.

Current Ratio = Current Assent

Current Liability

2009-2010 2010-2011 2011-2012


Current Assent 40524.27 37290.61 48815.85
Current Liability 30422.64 34862.69 42823.93
Result 1.33 1.069 1.1399

Current ratio

1.33
1.5 1.1399
1.069

1
Current ratio
0.5

0
2009-10 2010-11 2011-12

54
INTERPRETATION:

A current ratio of 2:1 considered to be a satisfactory ratio. On the basis of these


traditional rules, if the current ratio is 2 or more, it means that the firms is adequately
liquid and has the ability to meet its currents obligation but if the current ratio is less
than 2 it means that the firm has difficulty in meeting in its current obligations. Higher
the ratio, greater the margin of safety for short term creditors and vice a versa

In the Amul, the current ratio of the year 2009-10 is 1.332, 2010-11 is 1.069 and 2011-
12 is 1.1399. The ratio is Decreasing 2010-11 then increasing in 2011-12 in every financial
year but it is less than the ideal ratio.

B) Liquid Ratio
Liquidity Ratio is a relationship of liquid assets with current liabilities and is
computed to assess the short- term liquidity of the enterprise in its correct form.

A variant of current ratio is the liquid ratio which is designed to show the amount
of cash available to meet immediate payment. If the liquid assets are equal to or more
than liquid liability the condition may be considered as satisfactory.

Liquid Ratio = Liquid Assets / Liquid Liabilities

Liquid Assets = Current Assets Stock

Liabilities = Current Liabilities

Liquid Ratio = Liquid Assent


Liquid Liability

Particular 2009-10 2010-11 2011-12


Liquid Assent 22138.47 20828.23 23091.99
Liquid Liability 30422.64 34862.89 42823.93
result 0.728 0.597 0.539

55
Liquid Ratio

0.728
0.8 0.597 0.539
0.6
0.4 Liquid Ratio
0.2
0
2009-10 2010-11 2011-12

INTERPRETATION:

For satisfactory position Liquid ratio is 1:1. In the Amul, the Liquid ratio of the year
2009-10 is 0.728, 2010-11 is 0.597and 2011-12 is 0.539 in every financial year but it is less
than the ideal ratio.

c) Quick Ratio:

Quick ratio, also called Acid test ratio, establishes a relationship between quick or
liquid assets and current liabilities. An asset is liquid if it can be converted into cash
immediately or reasonably soon without a loss of value.

Quick Ratio = quick Assent

Liquid Liability

2009-10 2010-11 2011-12


Quick Assent 7952.09 14484.14 4205.59
Liquid Liability 30422.64 34862.69 42823.93
result 0.261 0.415 0.098

56
Quick Ratio

0.5 0.415
0.4
0.261
0.3
0.2
0.098 Quick Ratio
0.1
0
2009-10 2010-11 2011-12

INTERPRETATION:

A quick ratio of 1:1 is usually considered favorable, since for every rupee of current
liabilities, there is a rupee of current assets.

A high liquidity ratio compared to current ratio may indicate under stocking while a low
liquidity ratio while a low liquidity ratio indicated overstocking.

In the Amul, the quick ratio for the year 2009-10 is 0.261 2010-11 is 0.415 and
2011-12 is 0.098. The quick ratio is very near to the ideal ratio.

2) Leverage Ratio

Debt - Equity Ratio

It is clear that from the total debt ratio that lenders have contributed more fund
than owners, these is relationship describing the lenders contribution from each rupees
of the owners contributed is called debt equity ratio. Debt equity ratio is directly
computed by dividing total debt by net worth.

57
Debt-Equity Ratio = All long term fund borrowed

Equity fund

2009-10 2010-11 2011-12


All long term fund borrowed 12659.36 12220.64 20595.43
Equity fund 3638.38 4146.8 4220.33
Total 3.48 2.95 4.88

Debt-Equiy Ratio

4.88
5
3.48
4 2.95
3
2
1
0
2009-10 2010-11 2011-12

INTERPRETATION:

This ratio is significant to access the soundness of long term financial position.
It also indicates the extent to which firm depends upon outsiders for its existence. It
portrays the proportion of total funds acquired by a firm by way of loans.

In the Amul, the debt-equity ratio for the year 2009-10 is 3.48 2010-11 is 2.95 and
2011-12 is 4.88 The debt-equity ratio is very near to the ideal ratio.

58
3) Profitability ratio:
a) Net profit ratio:

Essentially the net profit ratio tells us about how the company's profits relate to their
sales. Different industries have fundamentally different net profit ratios. The net profit
ratio can tell us about the nature of the industry the company is operating in as well as
serving to compare past performances of a company.


Net profit ratio= * 100

Net profit ratio 2009-10 2010-11 2011-12


Net profit 735.750 926.650 1070.29
sales 168938.96 210642.68 246634.70
result 0.436 0.440 0.433

Net profit ratio


0.44
0.44
0.436
0.435 0.433

0.43 Net profit ratio

0.425
2009-10 2010-11 2011-12

b) Gross profit ratio:

The gross profit ratio tells us how the company's gross profits relate to their sales.
Different industries have fundamentally different gross profit ratios. The gross profit ratio can
tell us about the nature of the industry the company is operating in as well as serving to
compare past performances of a company.

59

Gross profit ratio = * 100

Gross profit ratio 2009-10 2010-11 2011-12


Gross profit 14314.020 16342.740 25903.61
Sales 168938.730 210642.680 246634.70
result 8.473 7.759 10.502

Gross profit ratio

15
10.502
8.473 7.759
10

5 Gross profit ratio

0
2009-10 2010-11 2011-12

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CONCLUSION AND FINDINGS

CONCLUSION OF TREND ANALASIS:

1) Margin not under pressure, High fixed Assets efficiency.

2) Large amounts locked up in working capital due to higher net current assets growth.

3) High Dividend only due to small capital base & no bonus issue.

4) Production & Sales both are consistently rising throughout the year.

CONCLUSION OF HORIZONTAL ANALYSIS:

1) PAT growth is higher than sales growth. It shows margins are under control.
2) Need to contain material cost.
3) Very efficient fixed asset utilization.
4) Investment higher than the net worth, which means operations are being funded by
Current liabilities & some loans.
5 )Extremely strong financial position.

CONCLUSION OF CASH FLOW STSTEMENT ANALYSIS:

1) Operating activities indicates a very strong cash position.


2) It also indicates an efficient management of working capital.
3) Investment activities are an indication of an expanding business.
4) Financing activities indicates that the management has aggressive growth plans.

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CONCLUSION OF RATIO ANALYSIS:

1) By analyzing the results we conclude that the AMUL is able to reduce the liquidity,
then
the AMUL is efficient in managing their profitability.
2) We found Moderate negative relationship between the measure the liquidity with
Corporate profitability.
3) AMUL is maintaining 30 to 40 percentage liquidity from other sources not from profit.
4) The Liquidity & Profitability have Moderate Negative Correlation that means liquidity
is dependent on Profitability.
5) So here, we conclude that There is significance relationship between the Liquidity &
Profitability of AMUL

LIMITATION OF STUDY:

1) As data provide to us, has been taken from the secondary source, it is not sure that
collected data is perfectly accurate.
2) Companywide factors.only use of numerical or accounting information [avoid best
human resource, automation in production such a non-account factors are ignored.]
3) Study based on historical data & records.
4) Fail to indicate what the entitys normal or benchmark position is
5) Be heavily influenced by the choice of the base fiscal period
6) Cash flow statement is based on cash basis of accounting; it ignores the basic
accounting concept of accrual basis.

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BIBLIOGRAPHY

1) I M Pandey: Financial Management Published by Vikas publishing house-2009

2) Annual reports of AMUL.

3) http://www.amul.com/

4) http://www.wikipedia.com

5) National Dairy Development Board - http://nddb.org/

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