Chapter 1:

INTRODUCTION

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 INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is an essential skill in a variety of

occupations including investment management, corporate finance, commercial

lending, and the extension of credit. For individuals engaged in such activities,

or who analyse financial data in connection with their personal investment

decisions, there are two distinct approaches to the task.

The first is to follow a prescribed routine, filling in boxes with standard

financial ratios, calculated according to precise and inflexible definitions. It

may take little more effort or mental exertion than this to satisfy the formal

requirements of many positions in the field of financial analysis. Operating in a

purely mechanical manner, though, will not provide much of a professional

challenge. Neither will a rote completion of all of the “proper” standard

analytical steps ensure a useful, or even a non-harmful, result. Some

individuals, however, will view such problems as only minor drawbacks.

The corporations that issue financial statements, moreover, would appear

to have a natural interest in facilitating convenient, cookie-cutter analysis.

These companies spend heavily to disseminate information about their financial

performance. They employ investor-relations managers, they communicate

with existing and potential shareholders via interim financial reports and press

releases, and they dispatch senior management to periodic meetings with

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securities analysts. Given that companies are so eager to make their financial

results known to investors, they should also want it to be easy for analysts to

monitor their progress. It follows that they can be expected to report their

results in a transparent and straightforward fashion...or so it would seem.

THE PURPOSE OF FINANCIAL REPORTING

The primary goal in financial reporting is the dissemination of financial

statements that accurately measure the profitability and financial condition of a

company. A corporation exists for the benefit of its shareholders. Its objective

is not to educate the public about its financial condition, but to maximize its

shareholders’ wealth. If it happens that management can advance that objective

through “dissemination of financial statements that accurately measure the

profitability and financial condition of the company,” then in principle,

management should do so. At most, however, reporting financial results in a

transparent and straightforward fashion is a means unto an end.

The objective of financial statements is to provide information about the

financial position, performance and changes in financial position of an

enterprise that is useful to a wide range of users in making economic

decisions". Financial statements should be understandable, relevant, reliable

and comparable. Reported assets, liabilities, equity, income and expenses are

directly related to an organization's financial position.

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 Financial statements are intended to be understandable by readers who

have "a reasonable knowledge of business and economic activities and

accounting and who are willing to study the information diligently". Financial

statements may be used by users for different purposes:

 Owners and managers require financial statements to make important

business decisions that affect its continued operations. Financial analysis is

then performed on these statements to provide management with a more

detailed understanding of the figures. These statements are also used as part

of management's annual report to the stockholders.

 Employees also need these reports in making collective

bargaining agreements (CBA) with the management, in the case of labour

unions or for individuals in discussing their compensation, promotion and

rankings.

 Prospective investors make use of financial statements to assess the viability

of investing in a business. Financial analyses are often used by investors and

are prepared by professionals (financial analysts), thus providing them with

the basis for making investment decisions.

 Financial institutions (banks and other lending companies) use them to

decide whether to grant a company with fresh working capital or extend

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 debt securities (such as a long-term bank loan or debentures) to finance

expansion and other significant expenditures.

 Government entities (tax authorities) need financial statements to ascertain

the propriety and accuracy of taxes and other duties declared and paid by a

company.

 Vendors who extend credit to a business require financial statements to

assess the creditworthiness of the business.

 Media and the general public are also interested in financial statements for a

variety of reasons.

TOOLS AND TECHNIQUES OF FINANCIAL STATEMENT

ANALYISIS

Following are the most important tools and techniques of financial

statement analysis:

➢ Horizontal and Vertical Analysis

➢ Ratio Analysis

1. Horizontal and Vertical Analysis:

Horizontal Analysis: This technique is also known as comparative analysis.

It is conducted by setting consecutive balance sheet, income statement or

statement of cash flow side-by-side and reviewing changes in individual

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categories on a year-to-year or multiyear basis. The most important item

revealed by comparative financial statement analysis is trend.

A comparison of statements over several years reveals direction, speed

and extent of a trend(s). The horizontal financial statements analysis is done by

restating amount of each item or group of items as a percentage.

Such percentages are calculated by selecting a base year and assign a

weight of 100 to the amount of each item in the base year statement.

Thereafter, the amounts of similar items or groups of items in prior or

subsequent financial statements are expressed as a percentage of the base

year amount. The resulting figures are called index numbers or trend ratios.

Vertical Analysis: Vertical/Cross-sectional/Common size statements came

from the problems in comparing the financial statements of firms that differ in

size.

• In the balance sheet, for example, the assets as well as the liabilities

and equity are each expressed as a 100% and each item in these

categories is expressed as a percentage of the respective totals.

• In the common size income statement, turnover is expressed as 100%and

every item in the income statement is expressed as a percentage of turnover

(sales). From the vertical analysis an analyst can compare the percentage mark-

up of asset items and how they have been financed. The strategies may include

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increase/decrease the holding of certain assets. The analyst may as well observe

the trend of the increase in the assets and liabilities over several years.

2. Ratio Analysis:

A ratio is the mathematical relationship between two quantities in the

form of a fraction or percentage.

Ratio analysis is essentially concerned with the calculation of

relationships which after proper identification and interpretation may provide

information about the operations and state of affairs of a business enterprise.

The analysis is used to provide indicators of past performance in terms of

critical success factors of a business. This assistance in decision-making

reduces reliance on guesswork and intuition and establishes a basis for

sound judgement.

Significance of Using Ratios

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial statements.

2. It is compared with the same ratio in previous financial statements (trend

analysis).

3. It is compared with a standard of performance (industry average). Such a

standard may be either the ratio which represents the typical performance of the

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trade or industry, or the ratio which represents the target set by management as

desirable for the business.

Types of Ratios

A: Liquidity Ratios:

Liquidity refers to the ability of a firm to meet its short-term financial

obligations when and as they fall due. The main concern of liquidity ratio is to

measure the ability of the firms to meet their short-term maturing obligations.

Failure to do this will result in the total failure of the business, as it would be

forced into liquidation.

Current Ratio: The Current Ratio expresses the relationship between

the firm’s current assets and its current liabilities. A current asset normally

includes cash, marketable securities, accounts receivable and inventories.

Current liabilities consist of accounts payable, short term notes payable, short-

term loans, current maturities of long term debt, accrued income taxes and other

accrued expenses (wages).

The formula to calculate current ratio is:

Current ratio = Current Assets / Current Liabilities

The rule of thumb says that the current ratio should be at least 2, that is

the current assets should meet current liabilities at least twice.

Quick Ratio: Measures assets that are quickly converted into cash and

they are compared with current liabilities. This ratio realizes that some of

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current assets are not easily convertible to cash e.g. inventories.

The quick ratio, also referred to as acid test ratio, examines the ability of the

business to cover its short-term obligations from its “quick” assets only (i.e.

it ignores stock).

The quick ratio is calculated as follows:

Liquid Ratio = Liquid Assets / Current Liabilities

Clearly this ratio will be lower than the current ratio, but the difference

between the two (the gap) will indicate the extent to which current assets

consist of stock.

B: Asset Management/Activity Ratios:

If a business does not use its assets effectively, investors in the business

would rather take their money and place it somewhere else. In order for the

assets to be used effectively, the business needs a high turnover.

Unless the business continues to generate high turnover, assets will be

idle as it is impossible to buy and sell fixed assets continuously as turnover

changes. Activity ratios are therefore used to assess how active various assets

are in the business.

Average Collection Period: The average collection period measures the

quality of debtors since it indicates the speed of their collection.

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• The shorter the average collection period, the better the quality of

debtors, as a short collection period implies the prompt payment by

debtors.

• The average collection period should be compared against the firm’s credit

terms and policy to judge its credit and collection efficiency.

• An excessively long collection period implies a very liberal and inefficient

credit and collection performance.

• The delay in collection of cash impairs the firm’s liquidity. On the other hand,

too low a collection period is not necessarily favourable, rather it may indicate a

very restrictive credit and collection policy which may curtail sales and hence

adversely affect profit.

The Average Collection Period is calculated as follows:

ACP = Accounts Receivables / Annual Credit Sales x 365 days

Inventory Turnover: This ratio measures the stock in relation to

turnover in order to determine how often the stock turns over in the business. It

indicates the efficiency of the firm in selling its product. It is calculated by

dividing he cost of goods sold by the average inventory.

Inventory Turnover is calculated as follows:

Inventory Turnover = Sales / Average Turnover

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 Total Assets Turnover: Asset turnover is the relationship between sales

and assets. The firm should manage its assets efficiently to maximise sales. The

total asset turnover indicates the efficiency with which the firm uses all its

assets to generate sales. It is calculated by dividing the firm’s sales by its total

assets. Generally, the higher the firm’s total asset turnover, the more efficiently

its assets have been utilised.

Total Asset Turnover is calculated as follows:

Total Asset Turnover = Sales / Total Asset

Fixed Asset Turnover: The fixed assets turnover ratio measures the

efficiency with which the firm has been using its fixed assets to generate sales.

It is calculated by dividing the firm’s sales by its net fixed assets as follows:

Fixed Asset Turnover = Sales / Net Fixed Asset

Generally, high fixed assets turnovers are preferred since they indicate a

better efficiency in fixed assets utilisation.

C: Financial Leverage (Gearing) Ratios:

The ratios indicate the degree to which the activities of a firm are

supported by creditors’ funds as opposed to owners. The relationship of

owner’s equity to borrowed funds is an important indicator of financial

strength. The debt requires fixed interest payments and repayment of the loan

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and legal action can be taken if any amounts due are not paid at the appointed

time. A relatively high proportion of funds contributed by the owners indicate a

cushion (surplus) which shields creditors against possible losses from default in

payment.

The following ratios can be used to identify the financial strength and

risk of the business:

Equity Ratio: This is a variant of the debt-to-equity ratio. It is also

known as equity ratio or net worth to total assets ratio. This ratio relates the

shareholder's funds to total assets. Proprietary / Equity ratio indicates the

long-term or future solvency position of the business. Shareholder's funds

include equity share capital plus all reserves and surpluses items. Total assets

include all assets, including Goodwill. Some authors exclude goodwill from

total assets. In that case the total shareholder's funds are to be divided by total

tangible assets. As the total assets are always equal to total liabilities, the total

liabilities, may also be used as the denominator in the formula

Equity Ratio is calculated as follows:

Proprietary or Equity Ratio = Shareholders funds / Total Assets

A high equity ratio reflects a strong financial structure of the company. A

relatively low equity ratio reflects a more speculative situation because of the

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effect of high leverage and the greater possibility of financial difficulty arising

from excessive debt burden.

Debt Ratio: This is the measure of financial strength that reflects the

proportion of capital which has been funded by debt, including preference

shares.

This ratio is calculated as follows:

Debt Ratio = Total Debts / Total Assets

With higher debt ratio (low equity ratio), a very small cushion has

developed thus not giving creditors the security they require. The company

would therefore find it relatively difficult to raise additional financial support

from external sources if it wished to take that route. The higher the debt ratio

the more difficult it becomes for the firm to raise debt.

Debt to Equity ratio: This ratio indicates the extent to which debt is

covered by shareholders’ funds. It reflects the relative position of the equity

holders and the lenders and indicates the company’s policy on the mix of

capital funds. The debt to equity ratio is calculated as follows:

Debt Equity Ratio = External Equities / Internal Equities

Or

= Outsiders funds / Shareholders funds

Times Interest Earned Ratio: This ratio measure the extent to which

earnings can decline without causing financial losses to the firm and creating an

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inability to meet the interest cost. The times interest earned shows how many

times the business can pay its interest bills from profit earned. Present and

prospective loan creditors such as bondholders, are vitally interested to know

how adequate the interest payments on their loans are covered by the earnings

available for such payments. Owners, managers and directors are also interested

in the ability of the business to service the fixed interest charges on outstanding

debt.

The ratio is calculated as follows:

Times Interest Earned = EBIT / Interest Charges.

D: Profitability Ratios:

Profitability is the ability of a business to earn profit over a period of

time. Although the profit figure is the starting point for any calculation of cash

flow, as already pointed out, profitable companies can still fail for a lack of

cash.

• A company should earn profits to survive and grow over a long period of

time.

• Profits are essential, but it would be wrong to assume that every action

initiated by management of a company should be aimed at maximising

profits, irrespective of social consequences.

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 Profitability is a result of a larger number of policies and decisions. The

profitability ratios show the combined effects of liquidity, asset management

(activity) and debt management (gearing) on operating results. The overall

measure of success of a business is the profitability which results from the

effective use of its resources.

Gross Profit Margin: Normally the gross profit has to rise

proportionately with sales. It can also be useful to compare the gross profit

margin across similar businesses although there will often be good reasons for

any disparity

The ratio is calculated as follows:

Gross Profit Margin = Sales – Cost of Sales / Sales

Net Profit Margin: This is a widely used measure of performance and is

comparable across companies in similar industries. The fact that a business

works on a very low margin need not cause alarm because there are some

sectors in the industry that work on a basis of high turnover and low margins,

for examples supermarkets and motorcar dealers. What is more important in

any trend is the margin and whether it compares well with similar businesses.

The ratio is calculated as follows:

Net Profit Margin = After Tax Earnings / Sales

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 Return on Equity (ROE): This ratio shows the profit attributable to the

amount invested by the owners of the business. It also shows potential investors

into the business what they might hope to receive as a return. The stockholders’

equity includes share capital, share premium, distributable and non-

distributable reserves. The ratio is calculated as follows:

ROE = After Tax Earnings / Stock Holders Equity

Earnings Per Share (EPS): Whatever income remains in the business

after all prior claims, other than owners claims (i.e. ordinary dividends) have

been paid, will belong to the ordinary shareholders who can then make a

decision as to how much of this income they wish to remove from the business

in the form of a dividend, and how much they wish to retain in the business.

The shareholders are particularly interested in knowing how much has been

earned during the financial year on each of the shares held by them. For this

reason, earnings per share figure must be calculated. Clearly then, the earning

per

share calculation will be:

EPS = Net Income after Tax – Preference dividend / No of ordinary

Shares issued

E: Market Value Ratios:

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 These ratios indicate the relationship of the firm’s share price to

dividends and earnings. Note that when we refer to the share price, we are

talking about the Market value and not the Nominal value as indicated by the

par value. For this reason, it is difficult to perform these ratios on unlisted

companies as the market price for their shares is not freely available. One

would first have to value the shares of the business before calculating the ratios.

Market value ratios are strong indicators of what investors think of the firm’s

past performance and future prospects.

Dividend Yield Ratio: The dividend yield ratio indicates the return that

investors are obtaining on their investment in the form of dividends. This yield

is usually fairly low as the investors are also receiving capital growth on their

investment in the form of an increased share price. It is interesting to note that

there is strong correlation between dividend yields and market prices.

Invariably, the higher the dividend, the higher the market value of the share.

The dividend yield ratio compares the dividend per share against the price of

the share and is calculated as:

Dividend Yield = Dividend per Share / Stock Price

Dividend per Share = Total dividend / No of Shares Outstanding

Normally a very high dividend yield signals potential financial

difficulties and possible dividend pay-out cut. The dividend per share is merely

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the total dividend divided by the number of shares issued. The price per share is

the market price of the share at the end of the financial year.

Price/Earnings Ratio (P/E ratio): P/E ratio is a useful indicator of what

premium or discount investors are prepared to pay or receive for the

investment. The higher the price in relation to earnings, the higher the P/E ratio

which indicates the higher the premium an investor is prepared to pay for the

share. This occurs because the investor is extremely confident of the potential

growth and earnings of the share.

The price-earnings ratio is calculated as follows:

PE Ratio = Market Price per Share / Current earnings per Share

Dividend Cover: This ratio measures the extent of earnings that are

being paid out in the form of dividends, i.e. how many times the dividends paid

are covered by earnings (similar to times interest earned ratio discussed above).

A higher cover would indicate that a larger percentage of earnings are being

retained and re-invested in the business while a lower dividend cover would

indicate the converse.

The ratio is calculated as follows:

Dividend Cover = Earnings Per share / Dividends per Share

Dividend Pay-out Ratio: Dividend pay-out ratio is calculated to find

the extent to which earnings per share have been used for paying dividend and

to know what portion of earnings has been retained in the business. It is an

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important ratio because ploughing back of profits enables a company to grow

and pay more dividends in future

The ratio is calculated as follows:

Dividend Pay-out Ratio = Dividend per Equity Share / EPS

Chapter 2:

INDUSTRY PROFILE
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 Part A

AN OVERVIEW OF CHOCOLATE INDUSTRY IN INDIA

The chocolate industry in India as it stands today is dominated by two

companies, both multinationals. The market leader is Cadbury with a lion's

share of 70 per cent. The company's brands (Five Star, Gems, Éclairs, Perk,

Dairy Milk) are leaders their segments. Till the early 90s, Cadbury had a

market share of over 80 per cent, but its party was spoiled when Nestle

appeared on the scene. The latter has introduced its international brands in the

country (Kit Kat, Lions), and now commands approximately 15 per cent market

share. The Gujarat Co-operative Milk Marketing Federation (GCMMF) and

Central Arecanut and Cocoa Manufactures and Processors Co-operative

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(CAMPCO) are the other companies operating in this segment. Competition in

the segment will get keener as overseas chocolate giants Hershey's and Mars

consolidate to grab a bite of the Indian chocolate pie.

Per Capita Chocolate Consumption (in lb.) of first 15 countries of the

world:

1. Switzerland – 22.36

2. Austria – 20.13

3. Ireland – 19.47

4. Germany – 18.04

5. Norway – 17.93

6. Denmark – 17.66

7. United Kingdom – 17.49

8. Belgium – 13.16

9. Australia – 12.99

10. Sweden – 12.90

11. United States – 11.64

12. France – 11.38

13. Netherlands – 10.56

14. Finland – 10.45

15. Italy – 6.13

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 INDIA, stands nowhere even near to these countries when compared in

terms of Per Capita Chocolate Consumption. The Indian chocolate industry is

extremely fragmented with a range of products catering to a variety of

consumers. We have the bars/slabs, jellies, lollipops, toffees and sugar candies.

Given India's mammoth population, it comes as a surprise that per capita

chocolate consumption in the country is dismally low - a mere 20 gms per

Indian. Compare this to over 7 kgs in most developed nations. However,

Indians swallowed 22,000 tonnes of chocolate last year and consumption is

growing at 10-12 per cent annually. The market size of chocolates was

estimated to be around 16,000 tonnes, valued around Rs. 4.16 billion in 1998.

Volume growth which was over 20% p.a in the 3 years preceding 1998, slowed

down thereafter.

Both chocolate and sugar confectioneries have abysmally low

penetration levels, in fact, even lower than biscuits, which reach 56 per cent of

the households. Market growth in the chocolate segment has hovered between

10 to 20%. In the last five years, the category has grown by 14-15% on an

average and will expect it to continue growing at a similar rate in the next five

years. The market presently has close to 60mn consumers and they are mainly

located in the urban areas. Growth will mainly come through an increase in

penetration as income levels improve. However, almost all of this consumption

is in the cities, and rural India is nearly ‘chocolate-free’. But the fact is that

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three quarters of Indians live in Rural Areas. “Av e r a g e summertime

temperatures reach 43 degrees Celsius in India. Chocolate melts at body

temperature of 36 degrees.” Per capita consumption of chocolates in India is

minuscule at 20gms in India as compared to around 5-8 kgs and 8-10 kgs

respectively in most European countries. ... Awareness about chocolates is very

high in urban areas at over 95%. ...

Growth of other lifestyle foods such as malted beverages and milk food

have actually declined by 3.7 per cent and 11.7 per cent, however the

CHOCOLATES continue to grow at the rate of 12.6%. Low priced unit packs,

increased distribution reach and new product launches can be said to have

fuelled this growth. The launch of lower-priced, smaller bars of chocolate in the

last two years and positioning of chocolate as a substitute to traditional sweets

during festivals, have boosted consumption. This is also because chocolate,

which was considered to be an elitist food, has caught the fancy of buyers

looking for a lifestyle item at affordable cost. Till recently, chocolate

consumption had been restricted by low purchasing power in the market.

Chocolates and other cocoa-based snack foods were looked upon as food

suitable only for the well-off.

After economic liberalization in 1991, major changes have occurred in

food habits, partly on account of rise in gross domestic product (GDP) growth

and higher purchasing power in the hands of the middle-class representing a

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third of the total population. Availability of chocolate products has also

exploded. A study had projected that sales of the Indian chocolate industry

would rise from $125/$130 million in 1998 to $175/$180 million by the year

2000 and to $450 million by the year 2005 which actually happened

irrespective of various negative factors. Per capita chocolate consumption

continues to be low at about 200g per person, being mainly consumed in urban

areas. In the middle and higher income groups, 70 per cent of children, 43 per

cent of young adults and 16 per cent of adults consume chocolate.

CONCLUSION

For nearly every industry, sustainability is a key objective. Creating a

sustainable chocolate industry benefits all of the industry’s stakeholders, from

the grower to the manufacturer. The chocolate industry is working with relevant

partners to create a sustainable future. By co-operating in this way, it is possible

to improve the sustainability of the industry: better working conditions on

farms; better quality cocoa; fair prices for all contributors; superior and more

varied chocolate; more satisfied customers.

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COMPANY PROFILE

Part B

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 COMPANY PROFILE

The CAMPCO Ltd., as a "Co-operative" is a success story of the people,

by the people for the people and successful implementation of the vision and

values of all the great founders of this country, like Mahatma Gandhi.

The early 1970's showed a glut in the market and thereby the price of

Arecanut came down sharply and consequently the growers were put into

misery and hardship. The solution for this crisis was found in the birth of

'CAMPCO' on 11th July 1973 and established itself as a multi-state co-

operative - a joint venture of the states of Karnataka and Kerala.

CAMPCO a brand name that people have come to trust through their

own experience.

About CAMPCO:

ARECANUT is an important commercial crop in India and finds a place

in all religious, social and cultural functions in India. Cultivation of Arecanut is

mostly confined to States of Karnataka, Kerala and Assam, but the

consumption is spread all over the country. India is considered as the largest

Arecanut producing country in the world.

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 The total acreage under cultivation is 264000 hectares and the annual

production estimated at 313000 metric tons, with Karnataka and Kerala

accounting for nearly 72 per cent of total production. Over six million people

are engaged in Arecanut cultivation, processing and trade. More than 85 per

cent of the area under cultivation is made up of small and marginal holdings.

A sudden marketing crisis in the year 1970-71, when prices registered a

marked fall which caused considerable concern to the growers, was the genesis

for the setting up of this Co-operative Venture (what popularly is called The

CAMPCO). Growers had been thrown into panic with the prices coming down

by half of what was prevailing till 1970-71 season.

Various measures were thought of for organized marketing management

and leaders among growers sat together to find a way out. State Government of

Karnataka, on the advice of an Expert Committee, recommended organizing a

Central Agency in the Public or Co-operative sector. With the blessings and

active support extended by the State Governments of Karnataka and Kerala, the

CAMPCO was registered on 11th July 1973 under sec.7 of the Karnataka Co-

operative Societies Act read with sec.4(2)of the Multi State Co-operative

Societies Act 1984. Through perseverant efforts of far sighted, dedicated and

resourceful leaders, with the cooperation and assistance of equally dedicated

growers under the guidance of the State Governments of Karnataka and Kerala,

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this institution took giant strides forward and has turned into a tower of strength

to the areca growing community in the country.

The CAMPCO has been functioning effectively with the main objectives

of:

1. Procuring Arecanut and Cocoa grown by member cultivators and if

necessary, from other growers on an agency basis or on outright purchase basis

2. Sale of Arecanut and Cocoa and their products to the best advantage of

members and also to advance loans to members on the pledge of goods and to

do all other things necessary to carry out the objective.

3. To promote and develop Areca and Cocoa cultivation, marketing and

processing.

The area of operation of this cooperative for procurement and processing

of Arecanut and Cocoa extends to the States of Karnataka and Kerala, but for

the marketing activity, the area has been extended to the whole country.

Arecanut purchase operations were extended to Assam, Andaman and Goa but

in recent years purchase operations in Assam had to be closed due to

disturbances.

Starting with its Head office at Mangalore in coastal Karnataka,

the CAMPCO began with a handful of procurement centres in Karnataka and

Kerala. The CAMPCO adopted a safe policy for purchasing and marketing the

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commodity and maintaining standards in quality assiduously with the dedicated

cooperation of a network of diligent officers and workers. The society achieved

success by leaps and bounds, stood the brunt of changing trends, market

recessions and upheavals, glut in the market and even national calamities in the

marketing field for more than two and half decades. Confidence has gained

among the growers for areca cultivation as an economically viable and

comfortable proposition.

The co-operative encouraged growers to take-up Cocoa cultivation as an

inter crop in the latter half of the 70's as a supplemental crop. This grew up to

become a large scale operation with good results. A sudden withdrawal by the

buyers of Cocoa from the procurement operations due to crash in the

international market came as a shock to cultivators. Karnataka and Kerala

governments enthused at this stage the CAMPCO to enter on the scene to

rescue the farmers from distress. CAMPCO willingly took up the responsibility

to enter the cocoa market and performed a saviour’s role. As a strategy for

survival in the International scene the CAMPCO played a major role in

establishing a name for Indian Cocoa, which hitherto had not been achieved. It

procured Cocoa Pods from growers and adopting scientific processing methods

to market standards, released dry cocoa beans matching in quality in the world

market to that of Ghana, Brazil and other leading Cocoa cultivating nations.

With a view to creating a permanent demand and a steady market for the beans,

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CAMPCO established a Chocolate Manufacturing factory at Kemminje village

in Puttur Taluk in Dakshina Kannada District adopting foreign technical

collaboration in chocolate making. The factory was set up in 1986 at an initial

investment of RS.116.7million and a licensing capacity to produce 8800 metric

tons. The factory also entered into technical cooperation venture with NESTLE

(India) Ltd, for diversifying product brands. It has been producing a variety of

products - semi finished items like Cocoa Mass, Cocoa Butter and Cocoa

Powder and finished products in moulded line, count line, Chocolate drink etc. .

CAMPCO chocolate has gained extensive market popularity in India.

ORGANISATION AND MANAGEMENT

The Management of CAMPCO vests in the Board of Directors consisting

of 17 Directors. These Directors are elected or nominated as per the provisions

of Bye Laws.

The day to day activities are conducted by the Managing Director. The

Executive Committee and the Business Committee devote more time to

scrutinise and decide about the financial and business transactions of the

Institution.

CULTIVATION

In Karnataka, Arecanut is cultivated as a garden crop whereas, in Kerala,

except in Kasargod and Cannanore Districts it is grown in almost all the tracts

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of land near to the paddy fields or near to the coconut gardens. But, recently

due to dependable price of Arecanut, Scientific farming is done in Kerala,

Karnataka and Assam States. Further large scale expansion of Arecanut

farming is also taking place in non-traditional areas. Adequate and regular

supplies of plant nutrients are essential for proper growth and yield of

Arecanut.

Arecanut palm thrives well in heavy rainfall area with well-marked dry

season. Because of the high rainfall, the soil severely leached and eroded as a

result, the soil becomes very poor in plant nutrients. Thus for Arecanut

Plantation, judicious application of fertilizer and organic manures is necessary

as the tree cannot withstand water logging.

PROCESSING

There are two varieties of Arecanut, called white Supari and Red Supari.

White variety supari is prepared by harvesting fully ripe Arecanut and by Sun

drying for 40 to 50 days. After drying the nut, the shell of the nut has to be

removed by hand/machine. The nut derived from this dried fruit is called

Arecanut/Supari/Betelnut. Red variety Supari is prepared by harvesting the

tender (green) Arecanut and peeling the husk. The nut derived by peeling the

tender nut, are processed as per the variety required (i.e., wholenut, two pieces,

8pieces, etc) boiled in water and then Sun dried. The white variety i.e.,Chali

31
variety of Areca is mainly grown in South Kanara, North Kanara of Karnataka

State and northern parts of Kerala. The red variety of Arecanut is mainly

produced in Shimoga, Chickmangalur, North Kanara, Chitradurga, Tumkur

Districts of Karnataka. Trivandrum, Quilon, Alleppy, Kottayam, Ernakulam,

Trichur, Waynad Districts of kerala. The Arecanut or Supari, what we call as

Bazar stock, will have to be graded into several varieties to suit the consumer

taste. The Bazar stock received is first garbled by hand picking and classified

into different varieties like Mora, Moti, Vachras, Jamnagar, Jini, Lindi, etc..

Other varieties like fators are classified and cutting items are also prepared.

Each variety has got its own market and is consumed by people from different

part of India and outside. The cutting items are called as Fadcha, Tukada,

Choora, Choori, Dagi nuts is done to mechanical Classifiers.

In Kerala State also Red Supari is prepared by dehusking the tendernut,

boiling, Coloring, drying as mentioned above, in some cases wholenuts and

some cases making them into slices and then boiling etc. The main varieties are

called as Edi, Nayam, Iylon, Vellavichuru, Kalichuru, Iylon Veruvu, etc. In

some parts of Tumkur District, a variety called Podi, Podi Bette, Churu, Churu

Bette is prepared by cutting the tender nuts into 8 pieces and boiling, drying,

etc.

MARKETING

32
 The Arecanut/Supari/Betelnut so purchased in various Branches are

brought to main centers. Here it is garbled/graded and processed as per the

requirement of the consuming markets. CAMPCO has appointed Selling

Representatives(S.R's) for marketing its supari. These representatives canvass

for CAMPCO supari and place orders and arrange the supply of supari to their

customers and arrange the payments to CAMPCO. The goods are despatched

through CAMPCO approved transporters by holding security deposits of both

the transporters and S.R’s.

CAMPCO has opened Sales Depots at Bombay, Ahmedabad, Indore,

Jaipur, Delhi, Nagpur, Patna, Calcutta, Cuttack, Bangalore, Rajkot, and

Chennai and caters to the requirement of the local customers, in the respective

States. The customers can also directly contact the Branches for supari and their

requirement will be met without the middlemen. There are about 1000 varieties

of supari marketed by CAMPCO.

Arecanut also called as 'supari' is available in different varieties and

Categorized by grades SS, S, JJ, J namely Mora, Moti, Sevardhan, Jamnagar,

Jeeni, Lindi and Jahaji.

CAMPCO has Sales Depots at Bombay, Ahmedabad, Indore, Jaipur,

Delhi, Nagpur, Patna, Calcutta, Cuttack, Bangalore, Rajkot, and Chennai and

caters to the requirement of the local customers. The customers can also

directly contact the Branches for supari and other requirement will be met

33
without the middlemen. There are about 1000 varieties in CAMPCO brand

supari.

COCOA

A sudden withdrawal by the buyers of cocoa from the procurement

operations due to crash in the international market came as a shock to

cultivators. Karnataka and Kerala Governments enthused, at this stage, the

CAMPCO to enter on the scene to rescue the farmers from distress. CAMPCO

willingly took up the responsibility to enter the cocoa market and performed a

saviour’s role.

As a strategy for survival in the International scene the CAMPCO played

a major role in establishing a name for Indian Cocoa, which hitherto had not

been achieved. It procured cocoa pods from growers and adopting scientific

processing methods to market standards, released dry cocoa beans matching in

quality in the world market equal to that of Ghana, Brazil and other cocoa

cultivation nations.

After entering into the Cocoa market the Co-operative was able to export

Cocoa Beans worth Rs. 40 million to European countries in the initial phase of

operations. India was not known as a Cocoa producer in the international

Trading Community, since yearly production was hardly 5 to 6 thousand tonnes

which is not even 0.3% of the total world consumption.

34
 Through sustained efforts CAMPCO has been able to ensure reasonable

prices to Cocoa growers. The Co-operative had to face the problem of a limited

internal market and un-remunerative export market.

With the setting up of the chocolate manufacturing factory at Puttur,

50KM from Mangalore, the Co-operative has been able to increase local

consumption of cocoa based products and to export value added semi-finished

products. With a view to creating a permanent demand and a steady market for

the beans, CAMPCO established a Chocolate Manufacturing Factory at

Kemminje village in Puttur Taluk in Dakshina Kannada district, adopting

foreign technical advancement in chocolate making. The Factory was set up in

1986 at an initial investment of Rs.116.7 Million.

Processing Cocoa

Stage 1: The cocoa beans are cleaned to remove all extraneous material.

Stage 2: To bring out the chocolate flavour and colour the beans are roasted.

The temperature, time and degree of moisture involved in roasting depend on

the type of beans used and the sort of chocolate or product required from the

process.

Stage 3: A winnowing machine is used to remove the shells from the beans to

leave just the cocoa nibs.

35
Stage 4: The cocoa nibs undergo alkalization, usually with potassium

carbonate, to develop the flavour and colour.

Stage 5: The nibs are then milled to create cocoa liquor (cocoa particles

suspended in cocoa butter). The temperature and degree of milling varies

according to the type of nib used and the product required.

Stage 6: Manufacturers generally use more than one type of bean in their

products and therefore the different beans have to be blended together to the

required formula.

Stage 7: The cocoa liquor is pressed to extract the cocoa butter leaving a solid

mass called cocoa press cake. The amount of butter extracted from the liquor is

controlled by the manufacturer to produce press cake with different proportions

of fat.

Stage 8: The processing now takes two different directions. The cocoa butter is

used in the manufacture of chocolate. The cocoa press cake is broken into small

pieces to form kibbled press cake which is then pulverized to form cocoa

powder.

Stage 9: Cocoa liquor is used to produce chocolate through the addition of

cocoa butter. Other ingredients such as sugar, milk, emulsifying agents and

cocoa butter equivalents are also added and mixed. The proportions of the

different ingredients depend on the type of chocolate being made.

36
Stage10: The mixture then undergoes a refining process by traveling through a

series of rollers until a smooth paste is formed. Refining improves the texture of

the chocolate and reduces the particle size of sugar and cocoa to around 30

microns.

Stage 11: The next process, conching, further develops flavour and texture.

Conching is a kneading or smoothing process. The speed, duration and

temperature of the kneading affect the flavour.

Stage 12: The mixture is then tempered or passed through a heating, cooling

and reheating process. This prevents discoloration and fat bloom in the product

by preventing certain crystalline formations of cocoa butter developing.

Stage 13: The mixture is then put into moulds or used for enrobing fillings and

cooled in a cooling chamber.

Stage 14: The chocolate is then packaged for distribution to retail outlets.

CHOCOLATE

The Chocolate Manufacturing Unit is located at Kemminje Village near

Puttur in Dakshina Kannada District, Karnataka, India.

A youngster of 30 years old with vigour and valour, it had taken giant

steps in its toddling stage itself to fulfil the growers aspirations. Undisputedly,

CAMPCO can claim the credit of establishing the areca and cocoa market. The

37
CAMPCO was encouraging the growers to grow cocoa as an intercrop to

Arecanut as cocoa has an international market.

Cocoa cultivation is of recent origin in India; being an inter crop it has a

great potential for growth in the vast plantations of areca and coconut in

southern states of Kerala, Karnataka, Tamilanadu and most recently in a few

places of Andhra Pradesh. CAMPCO, through its undeterent efforts over the

years has been able to install a sense of confidence in the cocoa cultivators

through its procurement policy that has ensured reasonable prices to them. In

purport of this, CAMPCO has decided to establish cocoa liquor, butter and

powder processing facilities and a chocolate manufacturing plant as an

extension of its activities for achieving its overall corporate objective of

safeguarding the interests of cocoa growers with better economic returns.

Salient features of the chocolate factory:

• The factory is the largest in south East Asia.

• The factory is one of the most modern in the world. The factory is equipped

with the most modern machineries imported from five firms of four European

countries.

• The factory is equipped with services installed by the best firms of India.

• The well-experienced architects and consultants designed the factory.

38
• The factory has been completed in a record time. The factory is situated in an

industrially backward rural area in the midst of cocoa cultivation area.

• The CAMPCO ltd. earns foreign exchange.

• Being a co-operative venture, this factory provides an opportunity to further

strengthen the co-operative movement by bringing in the dispersed marginal

and small cocoa growers under one umbrella.

• Quality of product manufactured is of international standard.

Chocolate Manufacturing Process:

39
Source: CAMPCO website

FOOD SAFETY POLICY:

CAMPCO Ltd is committed to,

1. Implementing a Food Safety Management System with an aim to produce

and supply safe quality Cocoa, Chocolate and Confectionery Products that meet

customers’ satisfaction and expectations.

40
2. Comply with legal obligations and to protect the end users with consistent

safe products through the application of good manufacturing, hygiene practices,

good distribution practices and HACCP principles.

3. Ensure all employees involved in production receive appropriate and

adequate training in food safety and handling.

4. Ensuring that both internal and external communications regarding food

safety are fully addressed.

5. Meeting all the Food Safety Management objectives and continually improve

on processes and resources.

QUALITY CONTROL

1. CAMPCO quality control department ensures the Production and Marketing

of high quality, superior value products that consistently meet our

specifications and comply with local regulatory requirements.

2. CAMPCO assures the customers and consumers by considering their

expectations towards quality and price factors and to supply the materials

accordingly at the point of consumption and to continuously improve by

considering the customers feedback.

3. CAMPCO Chocolate Factory Quality control department is committed

towards supplying high quality chocolate products by applying HACCP, Good

41
Manufacturing Practices and Good Sanitary Principles in the process and

thereby assuring the safe quality food.

4. HACCP ensures the safety of the products as per Codex Alementarius

standards while GMP ensures the implementation of the Good manufacturing

practices and both in turn are ensured by Quality Control Department.

5. CCF Quality Assurance also covers the periodical verification and

calibration of the equipment’s used for process control and hence ensures the

correct proportions of the ingredients.

6. Inspection of the raw materials for stipulated specifications and final

products for its physical, chemical and microbiological parameters to ensure the

full safe quality food to the consumers and customers.

7. Final inspection of the products as per set norms along with products sensory

evaluation by the well trained and screened tasters to ensure the consistency of

the products.

8. Continual improvement with respect to technology and process for the

delivery of safe quality products to Customers/Consumers.

9. Review and update this policy ensuring it continues to reflect CAMPCO’s

products value in concurrence to the expectations of consumers.

RUBBER

42
 As most of our grower members also grow Rubber, CAMPCO has

decided to enter Rubber procurement in the year 2010-11. It has started the

Procurement at our Bandadka, Uppinangady, Padpinangady, Mulleria, Alankar,

Kadaba & Ninthikal Branches and in the process of expansion of Rubber

Procurement in a phased manner spreading to other Branches also.

AGREEMENT WITH NESTLE LTD

CAMPCO has entered into an agreement with M/S Food Speciality Ltd.

known as Nestle India Ltd on 7th February 1990 for manufacturing and supply

of bulk quantity of chocolates and cocoa products ranging from 2500MX to

3750 M.T. per annum for a chapter Tzuoimk company profile agreed

manufacturing fee of 12000 per M.T. plus cost of raw materials. On 12th

November 1990 they modified certain conditions, the manufacturing fee for

finished products is increased and the commitment charge is, fixed at Rs 15000

per M.T. for finished product.

VISION, MISSION and QUALITY POLICY VISION

CAMPCO’s aim is to meet the various needs of the consumer everyday

by marketing and selling chocolate of a consistently high quality to serve the

farmers of agricultural product. The confidence that consumers have in our

brands is a result of our company’s many years of knowledge in research and

development, as well as continuity – consumers relate to this and feels they can

trust our products.

43
Mission

People: People from all diverse backgrounds are our most important asset and

the source of our competitive advantage. We operate in teams where we expect

and reward responsible risk taking.

Quality: We are dedicated to continuous improvement in the food safety and

quality of every product we make and in every activity we perform.

Brands: Our strong brands ensure the continuity of our growth and

profitability. Their support is every associate’s responsibility.

Consumers: Our reason for being is to understand, anticipate and best fulfil

our customer’s needs.

Customers: We appreciate and support the critical role our customers play in

getting our brands to the consumer while working closely together to achieve

mutual value.

AREA OF OPERATION

The area of operation of this co-operative for procurement and

processing of Arecanut and cocoa extents to not only in the country itself but

also it spread throughout the world. The CAMPCO exporting cocoa butter to

United States and keeping pace with the consumer needs of the new products,

CAPMCO has recently exported instantised milk flavouring beverage products

and chocolate éclairs to Australia. That are formulated at product development

44
cell of chocolate factory export of cocoa butter to European countries also takes

the cue.

The CAMPCO ltd. already started marketing offices all over the country

and also they are planning to start more marketing outlets to serve customers in

a better manner.

The CAMPCO ltd. adopted a safe policy for purchasing and marketing

standards in quality undoubtedly with the dedicated co-operation of a network

of diligent officers and workers confidence has gained among the growers.

PRODUCT PROFILE

Year wise performance of various units of the co-operative

Arecanut Unit:

Table showing Arecanut purchases: Table No 1

Year Qty in MTs Value in Lakhs

2006 - 07 38766.00 39820.28
2007 - 08 39175.00 34589.28
2008 - 09 50247.98 42634.50
2009 - 10 53937.55 43109.08

Chart showing Arecanut purchase: Chart No 1

45
Table showing Arecanut sales: Table No 2

Year Qty in MTs Value in Lakhs

2006 - 07 35021.00 37394.99

2007 - 08 42483.00 41063.38

2008 - 09 50401.98 46479.29

2009 - 10 50313.57 48414.94

Chart showing Arecanut Sales: Chart No 2

COMPETITORS INFORMATION

In the field of chocolate products the main competitors of CAMPCO are

Cadbury, Nestle, Britannia, Smith Kline Beechem, Parle etc.

AWARDS

In the year 2004 – 05 CAMPCO has earned the highest tax payer award

from Karnataka Government.

46
INFRACTURAL FACILITIES

The CAMPCO chocolate Factory is one of the largest factories in South

Asia. It is situated in Puttur. The main reason behind the selection of the

location is the development of the rural area and the availability of raw

materials. The head office of CAMPCO Ltd. is situated in Mangalore.

The CAMPCO Ltd. is fully air conditioned factory because they give

prime importance to the quality of the product. The CAMPCO Ltd also

provides various facilities like good transportation facilities, canteen facilities

for employees, warehousing facilities for the finished products and semi-

finished products, labour welfare and adequate working conditions for the

employees.

Being a co-operative venture, this factory provides an opportunity to

further strengthen the co-operative movement by bringing in the dispersed

marginal and small cocoa growers under one umbrella.

To provide quality service to compete in global market, the co-operative

has taken up work on upgrading infrastructure at the chocolate factory. Rs 2

crores have been spent for upgrading infrastructure at the factory. As a part of

this project, Rs 25 lakhs has been already been invested in upgrading the

quality control laboratory, which is ready for use.

47
 The original laboratory, which was set up in 1986 during the inception of

the factory, was found inadequate in meeting the diversified requirements of

sophisticated customers. The new laboratory can accept any sort of challenges

for food testing.

A new warehouse is coming up on the premises of the factory at a cost of

around Rs 1 crore for storing finished chocolate products.

FUTURE GROWTH AND PROSPECTS

Cocoa cultivation is of recent origin in India, being an inter crop it has a

great potential for growth in the vast plantations of areca and coconut in

southern states of Kerala, Karnataka, Tamil Nadu and most recently in a few

places of Andhra Pradesh.

CAMPCO, through its undeterent efforts over the years has been able to

install a sense of confidence in the cocoa cultivators through its procurement

policy that has ensured reasonable prices to them. In purport of this, CAMPCO

has decided to establish cocoa liquor, butter and power processing facilities and

a chocolate manufacturing plant.

CAMPCO to explore Pak market for cocoa

Taking advantage of the improvements in Indo-Pak relationship,

CAMPCO is planning to explore the Pakistan market for its products.

48
Functional departments in CAMPCO chocolate factory

There are mainly 6 departments in CAMPCO chocolate factory. They

are:

Production department: The main function of this is to achieve the target. The

production department is headed by the production manager. Under him there

are supervisors to look after the production activities. The production activities

are in 3 shifts by rotation. The packaging supervisor also comes under the

production department. They supervise the work of packaging department and

personnel work peace rate system. The organised activity of this department is

to achieve targeted production objectives. They are:

• To follow daily production schedule as per plan

• To upgrade the technical efficiency of production

• To maintain good relationship with other departments

Administrative department: This department looks after the day to day

administration activity of the factory. At the top there is an administrative

officer in the factory who is assisted by various departments in the factory. The

general manager is accountable to the head office. Under this dept there are 3

49
sub departments. They are accounts department, personnel department and

security department.

Quality Control Department: This department maintains and checks the quality

of chocolate which is going to meet the expectations of the customers. The

quality control department is headed by the quality control manager, under him

3 supervisors. In this department there is one biologist under the quality control

manager. The technical assistants are appointed to help the microbiologist.

They check the quality of the chocolate. If they are not satisfied with the quality

of the chocolate, they may reject and they give suggestions to the production

department to improve the production quality.

Stores Department: The main function of stores departments is purchasing and

storing of raw materials and finished goods. This department receives raw

material for chocolate manufacturing and sending packaged materials to

godown. The stores department is headed by the store’s manager.

Marketing Department: The main function of marketing department is to sell

and market the products all over the country. Some of the highlights are:

• To plan marketing programmes

• To analyse the marketing strategies

• To develop marketing strategies

• To connect consumer with product

50
Maintenance Department: The main function of this department is to maintain

machines, tools and equipment’s. This department contains 2 divisions, that is

mechanic division and electric division. This department is headed by

maintenance manager, under him there are maintenance assistants and

engineers. They are responsible for the maintenance and working of the

machines.

SHARED VALUES

Shared value of an organisation refers to a set of values and aspirations

that goes beyond the conventional formal statement of corporate observes.

Shared values are the fundamental idea around which business is built. In

CAMPCO employees share the same guiding values and responsibilities for

particular task provided to them. Each and every department is interrelated in

such a way that the values are shared with the work and the success of the firm

is vision of the employee.

Chapter 3:
51
 RESEARCH DESIGN

Financial analysis being an integral part of overall corporate management

and it is one of the powerful tools of financial performance analysis. The

analysis of financial statement of CAMPCO is done in order to know the

company’s financial position of the year.

The study of the financial position of a company was accomplished by

various tools and techniques like Comparative statement analysis, Common

52
size statement analysis, trend analysis and Ratio analysis, Financial planning

with financial ratios to support the above with the appropriate graphs and

tables. Thus, we can say that, Financial Analysis is a starting point for making

plans before using any sophisticated forecasting and planning.

Objective of study:

1) To understand the financial performance of the CAMPCO Ltd

2) To know the financial strategies adopted by the CAMPCO Ltd.

3) To know whether management generating adequate operating profit on

the firm’s assets.

4) To know the history and background of the company.

5) To study the liquidity , profitability position of CAMPCO through ratio

analysis

6) To determine the progress of the company.

7) To study different ratios in CAMPCO Ltd

8) To compare the present and previous year’s performance of CAMPCO

Ltd.

9) To assess the company’s trends for the last five years with regard to

liquidity performance

Scope of the Study:

53
 The scope of the study is conducted is only for organizational level. It is

done through the Balance sheet &, Profit & Loss of the company, for the

periods 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10.

The project report covers different financial aspects, which have been

covered under the subject matter of the report. They are:

• Collection of the information as per the requirements of subject matter.

• Sequencing the information as per the use.

• Analysis part of the information.

• Predicting some financial results.

• Interpreting the data and giving recommendations.

Collection of Data:

The data for obtained to study the financial performance of CAMPCO

Ltd is mostly taken from secondary sources. The primary data was obtained

mainly by interacting with the employees of CAMPCO Ltd Head Office in

Mangalore. But the main source of data was secondary data.

The secondary data where mainly collected from the company itself that

is the annual reports of the company which provided almost 90 % of the

information. Data were also collected from other sources like the internet,

mainly the CAMPCO website which provided sufficient amount of data.

Methodology:

54
 The data collected are analysed on different basis depending on the type

of analysis. The analysis made is based on different methods like comparative

analysis, trend analysis and finally ratio analysis.

The comparative analysis is made to analysis the balance sheet of the last

2 years along with the profit and loss or income statement. The trend analysis is

made with the help of the financial information of the previous 5 years that is

from 2005 – 06 to 2009 – 10 and comparing them with the help of graphs,

tables and charts. Finally the ratio analysis is made with the help of taking

information of the last 2 years and comparing them.

Limitations while working on the project:

At the last instance, I try my best to collect adequate data for completing

all the aspect of Financial Condition of CAMPCO Ltd in a collective manner.

Though, it is a time consuming process, which will carry more result-oriented

information to the organization. But to some extent I tried my all effort to make

it best inspite of my following limitation:

• The study is done only within a few months, along with regular classes

added to the limitation. So there was time constraint.

• The study of financial statements was only done with the help of balance

sheet and profit and loss account and income statements.

• There were problems of analysing ratios.

55
• The generated information is not sufficient enough to draw conclusion.

• Lack of sufficient magazines and publications.

• Finally the normal system of questioners where not made so as to know

the present standing of the company better.

Chapter 4:

56
 ANALYSIS AND

INTERPRETATION

Comparative Analysis

In comparative analysis the balance sheet and income statements of the

previous 2 years that is 2008-09 and 2009-10 is taken into account.

Comparative Balance Sheet

Particulars 2008 – 09 2009–10 Increase/decrease Increase/decrease

(x 10000) (x 10000) amount percentage

57
Sources of funds
Share capital
A Authorised capital 50000 50000 Nil Nil
B Paid up Capital 17400.97 19325.75 1924.78 11.06
Reserves fund 36320.69 51928.93 15608.24 42.97
Borrowings 92434.18 114349.50 21915.32 23.70
Deposits 36891.99 39578.14 2686.15 7.28
Current Liabilities 21549.42 33093.97 11544.55 53.53
Unpaid dividend 517.50 1082.46 564.96 109.17
Interest accrued on deposits 1461.37 1766.74 305.37 20.89
Other liabilities/provisions
A Gratuity 78.99 78.49 (0.5) (0.63)
B Provision against misapp 305.53 305.53 Nil Nil
Profit and loss account 8011.58 9403.82 1392.24 17.37
Grand Total 214972.26 270913.37 55941.11 26.02
Application of Funds
Fixed assets
Net Block 22636.98 25263.15 2626.17 11.60
Investments & Deposits 3117.18 3268.57 151.39 4.85
Inventories 93890.60 142708.17 48817.57 51.99
Sundry debtors 84262.35 74066.02 (10196.33) (12.1)
Cash in hand and at bank 7992.00 13448.18 5456.18 68.27
Loans and Advances 1501.04 1301.94 (199.1) (13.26)
*MIS Areca 2002-03 895.70 895.70 Nil Nil
*MSP Areca 2004-05 370.85 370.85 Nil Nil
*MIS 2009-10 Nil 9285.23 9285.23 100
Misapp amount recoverable 305.53 305.53 Nil Nil
*= Market Intervention
Scheme
And Market Support Price

Grand Total 214972.26 270913.37 55941.11 26.02

Source: CAMPCO annual report 2008-09 and 2009-10

58
Interpretation

• By looking at the comparative analysis table for balance sheet it’s clear

that the paid up capital has increased by 11.06 %.

• Along with paid up capital all other liabilities have an increasing trend

except for gratuity which has decreased by 0.63 %

• Moreover the unpaid dividend has doubled from last year. It has

increased by 109 %.

• And the profits have gone up by 17.37 % which is a good sign.

• On the other hand the application of funds has also increased or is having

an increasing trend except for sundry debtors and other receivables. It has

decreased by 12.1 %.

• Along with sundry debtors, loans and advances have also decreased

by13.26 %.

• There is a new scheme for market intervention.

• The inventories and cash in hand and at bank are considerably good

compared to the previous year.

Trend Analysis:

Trend analysis is a technique of studying several financial statements

over a series of years. In TPA the trend percentage are calculated for each item

by taking the figure of that item for some base year as RS. 100. So, the trend

59
 percentage is the percentage relationship which each item of different years

bears to the same item in the base year. Any year may be taken as the base year,

but generally the starting/initial year is taken as the base year. So, each item for

base year is taken as 100 and then the same item for other years is expressed as

a percentage of the base year.

Trend analysis (in lakhs): Table No 3

Particular 2005 - 06 2006 - 07 2007 - 08 2008 – 09 2009 - 10

Sales (Areca) 34484.38 37394.99 41850.74 47395.06 49653.86
Purchases (Areca) 27883.02 39820.43 34791.26 42732.69 49866.83
Purchases (cocoa) 1195.18 1184.01 859.61 1467.16 1426.11
Net Profit (Consolidated) 1625.36 271.06 693.36 801.15 940.38
Current Liabilities 1728.67 3091.97 2266.59 2154.94 3309.39
Fixed Asset 1274.67 1372.68 1614.48 2263.69 2526.31
Cash in hand and bank 1439.66 2341.66 951.77 799.20 1344.81

Trend Analysis (charts)

Graph: Chart No 3

Interpretation:

From the above the chart it’s clear that the sales of Aerca has increased

or is having an increasing trend from 2009 to 2010.

60
Graph: Chart No 4

Interpretation:

There is an uneven movement in the purchases of Areca here. It was low

in 2006 and had an immediate increase in the next year but the coming year the

purchases where reduced. And finally in the coming years there were increase

in purchases of Areca.

Graph: Chart No 5

Interpretation:

Here also the trend is in a zig zac manner which is moving up and down.

The lowest amount of purchases was made in the year 2007-08 and the highest

in the next year. And in the year 2009-10 the purchases was low by a small

margine.

Graph: Chart No 6

61
Interpretation:

The net profit (consolidated) has a very interesting movement in the past

5 years. The year 2005-06 was the year where the profits where at the

maximum. In the year 2006-07 the net profits came down by a huge margin.

Then in the coming years the profits had an upward movement which was made

up slowly.

Graph: Chart No 7

Interpretation:

The movement of current liabilities as per the chart is fluctuating in

nature. The current liabilities were low during the initial years that are during

2005-06, and had a sudden upward movement in the subsequent year. It had a u

turn later from the year 2007 to 2010.

Graph: Chart No 8

Interpretation:
62
 The chart for fixed asset shows a simple increasing curve movement

from the year 2005-06 to the year 2009-10. These charts indicate the positive

growth of the company. Fixed assets and total liabilities contributed more in

separating the good performance years from the bad years.

Graph: Chart No 9

Interpretation:

The above graph shows a fluctuating movement in the available cash in

hand and at bank. The cash in hand was at its peak during the year 2006-07 and

it drastically came down the next year that is in 2007-2008 and still further

decreased in the year 2008-09. But it gradually increased its balance of cash in

the year 2009-10.

Ratio Analysis

Here the analysis is made taking into account the figures of the past 2

years.

Particulars 2008-09 2009-10

1, Current Ratio: CA / CL 18764.59 / 2154.94 = 8.71 23152.41 / 3309.39 = 6.99

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2, Quick Ratio: QA / CL
3, Fixed assets to Net worth: FA/NW
(Net worth = TA – TL)
4, Current Assets to Net worth: CA / NW
5, Current Liabilities to Net Worth:CL/NW 2154.94 / 5372.15 = 0.40
6, Debtors turnover ratio: Net Sales /
Average debtors
7, Working capital Turnover Ratio:
Net Annual Sales / Working Capital
8, Gross profit Ratio: GP / Net Sales x 100
9, Net Profit Ratio: NP / Sales x 100
9375.53 / 2154.94 = 4.35 8881.60 / 3309.39 = 2.68
2263.69 / 5372.15 = 0.42 2526.31 / 7125.46 = 0.35
18764.59 / 5372.15 = 3.49 23152.41 / 7125.46 = 3.25
3309.39 / 7125.46 = 0.46
56899.04 / 8426.23 = 6.75 59187 / 7406.60 = 7.99
56899.04 / 16609.65 = 3.42 59187 / 19843.02 = 2.98
3082.11 / 56899.04 = 5.42 3454.92 / 59187 = 5.84
801.15 / 56899.04 = 1.41 940.38 / 59187 = 1.59

Chapter 5:

FINDINGS
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 To draw some findings of the study the different techniques of financial

analysis like comparative statement analysis, common size statement analysis,

trend analysis, and ratio analysis have been used. The following are the some

findings out of them.

• To make study more reliably and in detail, Balance Sheet and P&L A/c

of last five years were considered. The sales of the company are

increasing so is the profits. In the initial year, that is in the year 2005-06

the company had a huge profit which drastically came down in the year

2006-07 because the sales was very low in that period. But later the

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 company got an upward movement in its profits because of increased

sales.

• From the calculation of ratios, it is found that the company is liquid. In

the sense that the current assets are more than current liabilities. Though

the current liabilities is lesser to current assets it has decreased in the year

2009-10, comparing to the previous year which had 8.71 and now in the

year 2009-10 it has come down to 6.99 which tells that the current

liabilities have increased compared to the previous year.

• The company can settle all the current liabilities with the help of only

quick assets. The quick ratio in the previous year that is in 2008-09 was

4.35 which are sufficient enough because the minimum requirement for

quick ratio is 1. But the quick ratio has come down this year to 2.68

which indicate that there is increase in the current liabilities.

• The company can manage its working capital highly efficiently because

it has a good standing which is understood with the help of working

capital ratio. But the working capital ratio has come down this year

compared to last year which was the highest.

• The debtor’s turnover ratio of CAMPCO Ltd is very good throughout the

years and it was maintaining higher debtor’s turnover ratio which shows

the companies efficiency in settling and dealing with the debts. The

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 debtors turnover ratio has increased over the period compared to 2008-09

in 2009-10 it has come up to 7.99.

• The gross profit ratio is reasonable. It has a small growth. In the year

2008-09 the ratio was 5.42 which increased slightly by 5.84 in 2009-10.

But Gross operating cycle is the absolute measure of funds invested in

working capital. The profitability ratio has improved over the years due

to increase sales and profits.

• The net profit ratio has a steady increase. It was 1.41 in 2008-09 and the

next year came to 1.59. But the problem is that net profit was at its best

in the year 2005-06 on the basis of the graph, which suddenly came

drastically down the next year. But later in the coming years it tried to

make up, that is, its profits increased slowly.

Chapter 6:

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 SUGGESTIONS and

CONCLUSION

Suggestions:

The firm is performing well and its sales are increasing over the years.

But still the following suggestion if considered will prove to be beneficial to the

company.

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• There is huge investment in the current assets of the concern. The current

ratio of the firm is very much higher than the normal standards.

• The firm should not unnecessarily block excess money in the current

assets than normal requirement of the business.

• The firm should give attention to maximize the sale and minimize the

direct costs.

• CAMPCO Ltd has net working capital more than requirements an

unhealthy sign of profitability of the company.

• The company should change its credit policy because it is selling more

on credit and this has reduced the debtor’s turnover ratio in the recent

years and so it is better to reduce the credit period or change the credit

terms to bring back the favourable debtors turnover ratio. But the

company has improved its debtors T/O ratio in the last year that is in

2009-10.

• There is an excessive invest on inventories mainly on some of the non-

moving and absolute non-moving items. Hence it has affected liquidity

as well as profitability of the company. But in the year 2009-10 it has

come down.

• The company can decrease the cost of production by removing the labour

where it can and arranging for the better production methods and

policies.

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 • Production schedule should be fully followed so that the performance of

work can be increased and slowness in production can be decreased. This

will enable the company to meet the orders in time.

Conclusion:

The tittle of the Project ‘Financial Statement Analysis of CAMPCO

Ltd’ was started with a prime objective of knowing the financial performance

of the company over the past 5 years to understand how sound the company is

financially. To draw the results, different financial analysis techniques like

comparative statement, common size statement, trend analysis and ratio

analysis have been used. Without these techniques of analysis it would be very

difficult to analyse these financial statements.

Finance is life blood of business not only to CAMPCO Ltd but also for

all business organizations. The present analysis of financial statement revealed

that the company is in good position. It has shown an increase in net profit

earning and decrease in the expenses of the concern, inspite of a sudden fall of

net profits in the year 2006-07. The main factors leading to variations are

reduction in production by captive users, government policy in export, import

trade, growth of Gross National Product, inflationary aspects, Balance of

payment situation etc.

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 Different techniques impose different interpretations to the analyst, as the

results are not similar. To conclude with the report, the short–term liquidity of

the branch is quite satisfactory as compared to the performance of last financial

years. The branch was under loss in the past years and presently it has started

recovering the loss of those years.

APPENDIX

Bibliography:
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Books:

➢ Chandra Prasanna “Financial management”, Tata MC Grew Hill

Publishing,6/e 2004, pp – 557- 580

➢ Pandey I.M “Financial Management,Vikas Publishing House, New Delhi

9/e,2005,pp-108-180

➢ Khan& Jain “Management Accounting, Tata McGraw-Hill Publishing

company Ltd. New Delhi.

➢ S.N. Maheshwari “Elements of Management Accounting.

Websites:

http://en.wikipedia.org/wiki/Financial_statement#Purpose_of_financial_statem

ents_by_business_entities

http://www.scribd.com/doc/2433224/Financial-Statement-Analysis

http://www.accountingformanagement.com/accounting_ratios.htm

http://www.scribd.com/doc/15515594/An-Analytical-Study-of-Chocolate-

Industry-in-India-With-Special-Reference-to-Cadbury-India

www.campco.org

Journals: 5 years annual reports from 2005-06 to 2009-10

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