Study On Service Quality of Squaresoft Technologies

1
A STUDY ON FINANCIAL RATIO ANALYSIS SALEM

DISTRICT COOPERATIVE MILK PRODUCERS UNION
LTD, SALEM.
PROJECT REPORT
Submitted by
P.ANITHA
Reg no: 108001611002
In partial fulfillment for the award of the degree
of
MASTER OF BUSINESS ADMINISTRATION

IN
DEPARTMENT OF MANAGEMENT STUDIES
PAAVAI COLLEGE OF ENGINNERING

PACHAL, NAMAKKAL-637 018
JUNE 2012
BONAFIDE CERTIFICATE
PAAVAI COLLEGE OF ENGINEERING
PACHAL, NAMAKKAL 637 018
DEPARTMENT OF MANAGEMENT STUDIES
PROJECT WORK
JUNE 2012
This is to certify that the project entitled
A STUDY ON FINANCIAL RATIO ANALYSIS IN THE SALEM DISTRICT

CO-OP. MILK PRODUCERS UNION LTD., SALEM.
Is the bonafide record of project work done by
P.ANITHA
Register No: 108001611002
MBA during the year 2010 - 2012
-----------------------Project Guide
------------------------------------Head of the Department
Submitted for the Project Viva-Voce examination held on

----------------------------Examiner
------------------------------ Internal
External Examiner
DECLARATION
I affirm that the project work titled A STUDY ON FINACIAL RATIO ANALYSIS
IN THE SALEM DISTRICT CO-OP. MILK PRODUCERS UNION LTD SALEM . being
submitted
in
partial
fulfillment
for
the
award
of
MASTER
OF
BUSINESS
ADMINISTRATION is the original work carried out by me. It has not formed the part of any
other project work submitted for award of any degree or diploma, either in this or any other
University.
Signature of the Student
P.ANITHA
Reg. No.: 108001611002
I certify that the declaration made above by the candidate is true.
Signature of the Guide
ACKNOWLEDGEMENT
I am indebted to the all powerful ALMIGHTY GOD for all the blessings he showered on
me and for being with me throughout the study.
I would like to express my gratitude to Shri. N.V. Natarajan. B.Com. F.C.A., Chairman
and Smt. N. Mangaiarkarasi, M.Sc., Correspondent, Paavai Institutions, Pachal, Namakkal for
giving me an opportunity and facility to complete this training.
I wish to place my deep sense of gratitude to Prof. K.K. Ramasamy ME.,
(Ph.d).,Director- Administration and Paavai Institutions, Pachal, Namakkal for all the
encouragement received during the MBA course.
I would like to express my gratitude to Dr. V. Murali Basakaran, M.E., Ph.D.,
Principal, Paavai College of Engineering.
I would like to express my gratitude to Mr. M. Gurusamy, MBA, M.Phil, (Ph.D.),
Assistant Professor and Head, Department of Management Studies, Paavai College of
Engineering.
I owe my boundless
thanks and gratitude towards my faculty guide, Mr. T.
Ravichandran MBA, M.Phil., Assistant Professor, Department of Management Studies, Paavai

College of Engineering for his guidance and help to do my project report successfully. I also
express my gratitude to all the other faculty members of the department.
I express my sincere thanks to Mr.C.Kathiravan, Sir, General Manager (F&A), SALEM
DISTRICT CO-OP. MILK PRODUCERS UNION LTD., SALEM, for giving me permission
to undertake this project work in the esteemed company.
P.ANITHA
ABSTRACT
The researcher as part of curriculum has conducted a study to find out to financial
performance of the company. The data utilized for the study is secondary in nature. The
required data is collected from the budgeted formats, Flash results and Five year annual
diary of the company. The data has been collected for a period of five years from 20062007 to 2010-2011.
The ratios concerned in the study are profitability ratios, turnover ratios and solvency
ratios.
1. Profitability ratios:
Return on investment ratio, Return on total asset ratio, Gross profit ratio, Net
profit ratio, Operating ratio, Operating profits ratio, Expenses ratio,
2. Turnover ratios:
Inventory turnover ratio, Inventory turnover period, Debtor turnover ratio, Debt
collection period, Creditors turnover ratio, Credit payment period, Working capital
turnover ratio, Fixed assets turnover ratio, Capital turnover ratio.
3. Solvency ratios:
Current ratio, Liquid ratio, Absolute liquid ratio.
TABLE OF CONTENTS
CHAPTER
DESCRIPTION
PAGE NO
NO
ABSTRACT
LIST OF TABLES
LIST OF CHARTS
INTRODUCTION
1.1 Introduction of the study

1.2 Problem of the study
1.3 Objectives of the study

1.4 Scope of the study
3
3
1.5 Limitations of the study

Profiles
1.6 Industry profile

1.7 Company profile
3
9
Literature survey
1.8 Review of literature
1.9 Research methodology
2
15
17
Data analysis and Interpretation

2.1 Analysis Part-1
2.2 Analysis Part-2
19
41
2.3 Analysis Part-3
59
Conclusion
3.1 Finding
3.2 Suggestions
3.3 Conclusion
Scope for future research
BIBLIOGRAPHY
65
67
68
69
70
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ANNEXURE
71
LIST OF TABLES
Table No.
Particulars
Page No.
2.1
Profitability Ratios
2.1.1
Table showing Return on investment ratio
19
2.1.2
Table showing Return on capital employed ratio
21
2.1.3
Table showing Return on total assets ratio
23
2.1.4
Table showing Gross profit ratio
25
2.1.5
Table showing Net profit ratio
27
2.1.6
Table showing Operating ratio
29
2.1.7
Table showing Operating profit ratio
31
2.1.8
Table showing Financial expenses ratio
33
2.1.9
Table showing Operating expenses ratio
35
2.1.10
Table showing Non-Operating expenses ratio
37
2.2
Turnover ratios
2.2.1
Table showing Inventory turnover ratio
39
2.2.2
Table showing Inventory conversion period
41
2.2.3
Table showing Debtors turnover ratio
43
2.2.4
Table showing Debtors collection period
45
2.2.5
Table showing Creditors turnover ratio
47
2.2.6
Table showing Creditors payment period
49
2.2.7
Table showing Working capital turnover ratio
51
2.2.8
Table showing Fixed assets Turnover ratio
53
2.2.9
Table showing capital turnover ratio
55
2.3
Solvency ratios
2.4.1
Table showing Current ratio
57
2.4.2
Table showing Liquid ratio
59
2.3.3
Table showing Absolute liquid ratio
61
Table No.
Particulars
Page No.
2.1
Profitability Ratios
20
2.1.1
Chart showing Return on investment ratio
22
2.1.2
Chart showing Return on capital employed ratio
24
2.1.3
Chart showing Return on total assets ratio
26
2.1.4
Chart showing Gross profit ratio
28
2.1.5
Chart showing Net profit ratio
30
2.1.6
Chart showing Operating ratio
32
2.1.7
Chart showing Operating profit ratio
34
2.1.8
Chart showing Financial expenses ratio
36
2.1.9
Chart showing Operating expenses ratio
38
2.1.10
Chart showing Non-Operating expenses ratio
40
2.2
Turnover ratios
2.2.1
Chart showing Inventory turnover ratio
42
2.2.2
Chart showing Inventory conversion period
44
10
2.2.3
Chart showing Debtors turnover ratio
46
2.2.4
Chart showing Debtors collection period
48
2.2.5
Chart showing Creditors turnover ratio
50
2.2.6
Chart showing Creditors payment period
52
2.2.7
Chart showing Working capital turnover ratio
54
2.2.8
Chart showing Fixed assets turnover ratio
56
2.2.9
Chart showing capital turnover ratio
58
2.3
Solvency ratios
2.4.1
Chart showing Current ratio
60
2.4.2
Chart showing Liquid ratio
62
2.3.3
Chart showing Absolute liquid ratio
64
LIST OF CHARTS
INTRODUCTION
1.1 INTRODUCTION
Ratio analysis is one of the techniques of financial analysis to evaluate the financial
condition and performance of a business concern. Simply, ratio means the comparison of one
figure to other relevant figure or figures.
Finance may be defined as that administrative area or set of administrative functions in
an organization which relate with the arrangement of cash and credit so that the organization may
have the means to carry out its objective as satisfactorily as possible.
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The main activities to the successful administration of finance in any organization
comprise financial planning, raising the needed funds, financial analysis and control. Analysis of
financial statement in a business deserves much attention in carrying out finance function. It
helps to regains prospective analysis of operative period for the purpose of evaluating the
wisdom and efficiency of financial planning. Analysis of what has happened should be of great
value in improving the standards, techniques and procedures of financial control involved in
carrying out finance function.
FINANCIAL MANAGEMENT
Financial management is broadly concerned with the procurement and effective
utilization of funds by a business firm. Financial management emerged as a distinct field of
study at the turn of this century. Its evolution may be divided into two broad phases.
The traditional phase and modern phase finance theory, in general resist on the premise
that the goal of the firm to its equity shareholders. This means that the goal of the firm should be
to maximization of shared as wealth, expressing the shareholders point of view, several
alternatives have been suggested, maximization of earning per share, maximization of returns on
equity etc
FINANCIAL ANALYSIS
The financial statement provides a summary of the account of a business enterprise. To
understand the financial performance and condition of a firm, its stakeholders look at the three
financial statements, via, the balance sheet, the profit and loss account and the sources and uses
of a funds statement.
MEANING OF FINANCIAL RATIO
A relationship between various accounting figures, which are connected with each other,
expressed in mathematical terms, is called accounting ratios.
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"The relationship of one item to another expressed in simple mathematical form is known
as ratio."
For example:
Profit shown by two-business concern is Rs. 50,000 and Rs. 1,00,000. It is difficult to say
which business concern is more efficient unless figures of capital investment or sales are also
available.
1.2 PROBLEM OF THE STUDY
Many ratio is are calculated on the basis of the balance sheet figures. This figures as on the
balance sheets data only and may not be indicative of the Year-round position.
Ratios are tools of quantitative analysis, which ignore qualitative point of view.
Ratios are generally distorted by inflation.
Ratios give flash result, if they are calculated form in correct accounting data.
Ratios are calculated on the basis of post data. Therefore, they do not provided complete
information for future forecasting.
Ratios may be misleading, if they are pasted on flash or window-dressed accounting
information.
1.3 OBJECTIVES OF THE STUDY
The objectives of financial ratio analysis are as follows. These,
To determine the financial condition and financial performance of the firm.
To involves comparison for a useful interpretation of the financial statements.
To helps in finding solution to unfavorable financial statements
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To helps to take suitable corrective measures when the financial condition and
performance are unfavorable to the firm in comparison to other firms in the same
industry.
1.4 SCOPE OF THE STUDY
The purpose of the study was to know the financial performance of the unit. For this the
ratio analysis tool was most suitable. This would reveal the solvency position of the unit. The
trend of sales and profitability for the past 5 Years was calculated to know if any deviations
occurred and to know the reasons for it. However the study had its own limitations like ratio
analysis is a post-mortem analysis and the data utilized were secondary in nature etc.
1.5 LIMITATIONS OF THE STUDY
In spite of many advantages, there are certain limitations of the ratio analysis techniques
and they should be kept in mind while using them in interpreting financial statements. The
following are the main limitations of accounting ratios:
Limited Comparability: Different firms apply different accounting policies. Therefore
the ratio of one firm cant always be compared with the ratio of other firm. Some firms
may value the closing stock on LIFO basis while some other firms may value on FIFO
basis. Similarly there may be difference in providing depreciation of fixed assets or
certain of provision for doubtful debts etc.
False Results: Accounting ratios are based on data drawn from accounting records. In
case that data is correct, then only the ratios will be correct. For example, valuation of
stock is based on very high price, the profits of the concern will be inflated and it will
indicate a wrong financial position. The data therefore must be absolutely correct.
Effect of Price Level Changes: Price level changes often make the comparison of
figures difficult over a period of time. Changes in price affects the cost of production,
sales and also the value of assets. Therefore, it is necessary to make proper adjustment for
price-level changes before any comparison.
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Qualitative factors are ignored: Ratio analysis is a technique of quantitative analysis
and thus, ignores qualitative factors, which may be important in decision making. For
example, average collection period may be equal to standard credit period, but some
debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis.
Effect of window-dressing: In order to cover up their bad financial position some
companies resort to window dressing. They may record the accounting data according to
the convenience to show the financial position of the company in a better way.
Costly Technique: Ratio analysis is a costly technique and can be used by big business
houses. Small business units are not able to afford it.
Misleading Results: In the absence of absolute data, the result may be misleading. For
example, the gross profit of two firms is 25%. Whereas the profit earned by one is just
Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs. 10,00,000 and
sales are Rs. 40,00,000. Even the profitability of the two firms is same but the magnitude
of their business is quite different.
Absence of standard university accepted terminology: There are no standard ratios,
which are universally accepted for comparison purposes. As such, the significance of
ratio analysis technique is reduced.
1.6 INDUSTRY PROFILE
Dairy is place where handling of milk and milk products done. Technology refers to the
applications of scientific knowledge for practical purpose. Dairy technology has been defined as
that branch of dairy science, which deals with the processing of milk manufacturing of milk
products on industrial scale.
In developed countries such as the USA the Year 1850, is seen as the dividing line between
farm and factory scale production. Various factors contributed to this changes in these countries,
via concentration of population in cities where job were plentiful, rapid industrialization
improvement of transportation facilities, development of machine & technologies, etc. Whereas
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rural areas were identified for milk production, the urban centres were selected for the location
of milk processing plants & product manufacturing factories.
The Indian diary industry has made rapid progress since independence. A large number of
modern milk plants and product factories have been established these organized dairies have
been successfully engaged in the routine commercial production of pasteurized bottle milk and
various dairy products. With modern knowledge of the protection of milk during transportation,
it becomes possible to locate dairies where land was less expensive and corps could be growth
more economically.
In India, the market milk technology maybe considered to have commence 1950, with the
functioning of aarey milk colony, and milk product technology in 1956 with the establishment of
AMUL dairy ANAND.
Dairy industry in India
More than 2500 million people economically active in agriculture in the world. Probably
75% of them are wholly or partly dependent on livestock farming. India which has 66% of
economically active population engaged in agriculture. It derives 31% of GDP from agriculture.
The share of livestock is estimated at 21% of total agriculture sector.
History of Indian milk industry
Organized milk handling was made in Indian with the establishment of military dairy farms,
with his
Handling of milk in cooperative milk unions established all over the country on a small
scale in the early stages.
Long distance refrigerated rail transport of milk form anand to Mumbai since 1945.
Pasteurization and bottling of milk on a large scale for organized distribution was started
at aarey in 1950, in Calcutta (haringhota) 1959, in Delhi 1959, in madras 1963, etc.
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Establishment of milk plants under the 5 Year plan for dairy development all over India.
Establishment of milk plants under the five Year plans for dairy development all over
India. There were taken up with the dual object of increasing the national level milk
consumption and ensuring better return to the primary milk producer. Their main aim was
to produce more, better and cheaper milk.
About Indian dairy sector
Dairy development in India has acknowledged the world over as one of modern Indias
most successful development program. Indias is the second largest milk producing country with
anticipated production of about 78 million tons during 1999-2000.
The milk surplus states are utter Pradesh, Punjab, Haryana, Rajasthan, Gujarat,
Maharashtra, anta Pradesh, Karnataka and Tamilnadu, the manufacturing of milk products in
concentrated in these milk surplus states. Dairy sector has assume much significance by
generating income not one to the rural but also to the urban and semi urban population in the
state especially to women by providing essential nutrient to all walks of life. It provides live
hood to millions of small marginal farmers in the state.
Tamilnadu is an agriculture oriented state and majority of the farmers owns cattle.
Dairying provides the main source of income next to agriculture. The state dairy development
department was established in 1958 and forms this control and administrative of milk
cooperative comes under this dairy development board.
National dairy development board (NDDB)
The national dairy board was creating to promote, finance and activities that seek strength
to farmer cooperatives and support national policies that are favorable to the growth of such
institutions. Fundamental to NDDBS effort are cooperative principles and cooperative
strategies.
The national dairy development board is an institution of national importance setup by an
act of parliament of India. The main office is located in an and, Gujarat with regional offices
17
throughout the country. NDDB,S subsidiaries include mother dairy, Delhi. It was founded by Dr.
Varghese kurien and Dr. amrita Patel is the current chairman of the national dairy development
board anand.
The national dairy development board (NDDB) was create in 1965 fulfilling the desire of
then prime minister of India-the late lal bhadur shastri to extent the success of the kaira
cooperative milk producers union (amul) of the other parts of India.
NDDB has now integrated 96,000 dairy co-operatives in what it calls the anand pattern,
linking the village society to the state federations in a three-tire structure. NDDB launched its
perspective plan 2010 with four thrust areas:
Quality assurance
Productively enhancement
Institution building
National information
World buffalo population
147 million about 142 millions in Asia & pacific India
Leading most buffalo populated country; 78 millions most of them are reverine (depending
upon variation in their habitat and genome)
Milk production
About 95% of world buffalo milk (45.3 million tons) is produced in Asia & pacific, while
64.4% is produced in India.
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Storage
Modern milk plant holds both raw and pasteurized milks for a much longer period than
before. Normally the milk storage capacity is equal to one days intake. This allows a more nearly
uniform work day for processing and bottling operations with less dependence of the time for
receiving raw milk. Storage tanks are used in milk plants for the storage of raw, pasteurized, or
processed products, often in very large volumes. Because of the longer periods of holding,
storage tanks are among the most important items of equipment. They must be designed for ease
in sanitation, preferable by the circulation- cleaning method. In addition, the tanks shout be
insulated or refrigerated, so that they can maintain the required temperature throughout the
holding period. Agitation should be adequate for homogeneous mixing, but gentle enough to
prevent churning and incorporation of air.
Purpose
To maintain a milk at low temperature so as to prevent any deterioration in quality prior
to processing/product manufacture.
To facilitate bulking of the raw milk supply, which will ensure uniform composition.
To allow for uninterrupted operation during processing and bottling.
To facilitate standardization of the milk.
Types of storage
1. Insulates or refrigerated
In the former, there are5 to 7.5 cm of insulating material between the inner and outer
linings: in the latter, the space between the linings is used for circulation of the cooling
medium. Another variation of refrigerated type is the cold-walk tank.
2. Horizontal or vertical
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While
the former
requires more floor space and more headspace. Modern
circulation cleaning methods have made very large vertical storage tanks practical.
3. Rectangular cylindrical and oval
Of these, first suffers from the disadvantage of having dead corners during
agitation while the other two do not.
4. Built for Gravity flow, air-pressure or Vacuum Operation
The first is the most common. However, air-pressure is sometimes used to
evaluate the product. This requires the special construction of the storage tank for
greater strength then necessary for normally operations under gravity flow.
5. Location
In one of system, the storage tanks are located on the upper floor. The milk is
pumped from the receiving room to the floor above. It then flows by gravity to
the pre-heater, filter or clarifier, pasteurizer. Hence it may flow by gravity to
the cooler while hot.
Distribution
Distribution of milk is the last or final stage of the market milk industry.
Others are preparatory to placing the product into the hands of the consumer. The quality
of the product alone will not assure its wide distribution, which should be planned
and executed intelligently.
1.7 COMPANY PROFILE
The prestigious Salem Dairy complex is situated in about in 46 acres of land
bound by Sithanur and Dhalavaipatty villages. It is located just 6 KM away from Salem
railway junction on the way to GOVT Medical College and Salem Steel Plant.
The Salem District Co- op Milk producers Union Ltd., has been registered on
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10.07.1978 and started functioning from 07-10-1978. To begin with, the union started
procuring 33,100 LPD of milk from 227 affiliated primary milk coop societies.
Then gradually
expanded its activities and now reached
a daily average
procurement of more than 4.0 LAKS Litters per day from 1049 functional DCS. It is a
Feeder Balancing Dairy i .e converting surplus milk solids into products like butter, ghee
and skim milk powder. The commercial production of products VIZ. Butter, Ghee and Skim
Milk Powder started on 16-08-1983. ALL the Union activities are fully computerized.
The Salem District Cooperative Milk Producers Union Limited is a replica of the district
milk union in Gujarat state based on the AMUL system. The Salem milk union is therefore
sandwiched in the middle of the 3-tier system popularly known as ANAND or AMUL
pattern consisting of an apex state level federation at Chennai, the union at the district level and
the primary cooperative societies at the village level
The national dairy development board, Anand through the Government of Tamil Nadu
and the Tamil Nadu co-operative milk Producers federation, has funded the entire project. The
project had been funded under the nationwide operation flood programmed with an aim to bring
about a socioeconomic awakening in rural India. The district union has 728 primary
milk co-operative at
its base and the Tamil Nadu Co-operative
federation as its apex body.

This union is specially featured with
1. Training Centre
2. Progeny Testing Scheme
3. Clean Milk Production at farmer Level
4. Packaging Station
5. Milk Powder Plant
milk
producers
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6. ISO 9001:2000 Certification
7. Export.
FUNCTIONS OF DISTRICT CO-OPERATIVE MILK PRODUCERS UNION
Establishment of chilling
Formation
of
centers.
new milk routes to collect
the milk produced by
the
member
Collection of milk from societies, process and pack in modern diary
plant by
societies.
maintaining quality standards.

Fixation of procurement
and selling price of milk.
Increase of milk sales by introducing innovative sales promotion activities.

Supply of inputs to the member societies obtained
Salem union is acting
as a feeder balancing
from unions.
diary.
SPECIAL FEATURES OF THE COMPANY

Weekly four rail
milk tankers of
about 16000 liters milk is
supplied to
mother dairy, Delhi from the Salem Diary

1. Average
13000 Liters
of
pure milk is
supplied
for Chennai metro sales
from
Salem diary.
2. Milk products like butter, ghee, skimmed milk powder, bead, dates Khova flavored
milk, Butter milk, badam milk powder, ice cream are produced at Salem diary
and selling to customers according to their requirements.
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3. The company has ISO 9001-2000 certified and ISI certified for the skimmed milk powder
production and the Salem diary ghee is sold with AGMARK certificate.
4. National wide database laboratory established at Salem diary out of 15 milk producers
union selected by national diary development board in india.
5. Union is selling ghee to THIRUPPATHI THIRUMALA DEVASTHANAM in tankers for
laddu preparation.
6. The union spends 154.42 lakhs, 167.2 lakhs, 187.74 lakhs, and 219.28 lakhs for
marketing for the past five Years, which includes transport and agents commission.
7. The union spends 3 lakhs for advertisement.
OBJECTIVES:
To purchase pool process, manufacturing, distribute and sell, milk and milk by products
to the members of the affiliated societies and other private organization without affecting
the interests of the affiliated societies and their members.
To provide vednary artificial insemination services, medicines and undertake cattle
insurance.
To buy animals on behalf of the affiliated societies and their members.
To purchase of cattle feed at whole sale rate distribution to members.
To establish dairy forms and plants with equipments for pasteurization.
FUNCTIONS:
To purchase milk in both in the every day morning and evening.
Properly paying amount for milk producers at before 10 days.
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Service provide on transport activities should making
Regulating for finance, marketing, packaging, and plant activities.
To watching sub small booths and plant activities.
LOCATION:
The dairy complex is situated in about 46 acres of land bounded by sithanur and
dhalavaipatty villages in steel plant road.
PROCUREMENT:
In total 1100 milk producers co-operative societies are affiliated and 932 societies are
functioning. The milk is collected through 55 milk routes daily ranging from 2.5 lacks liters of
milk per day depending on the season.
The procurement and input operation are managed through8 milk procurement team offices
at Salem, sankari, namakkal, p.velur, attur, rasipuram, mettur, and valapady. The milk is
delivered at the dock of the three chilling centers at namakkal, p.velur, attur and the main dairy at
Salem for chilling.
INPUT:
Artificial insemination service input veterinary service and emergency veterinary service
and being provided to the animals of the producers in societies by the veterinarians of this union.
Further, artificial inseminations with exotic, cross bred and Murray
bull semen are being
undertaken through the 564 artificial insemination sub-centre of the primary societies / union and
doing on an average of 26,000 artificial insemination per month. Nutritious cattle feed is being
supplied to the members at par rate.
FODDER
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The union has taken up cultivation of fodder crops like cumbu napier, hamil grass, buffaloe
grass, subabul, sithakathi cholam, cumbu, maize, cowpea and hedge Lucerne etc. for distribution
of seed materials to the milk producers through milk cooperative societies at free of cost/at
nominal cost.
TRAINING CENTRE:
The union had setup a training center in the Year 1985 under operation flood. The training
center is imparting training to the DCS personal of our union and also from periyar, Coimbatore
and nil iris unions.
The training centre conducts the programmers such as:
1. Secretary training
2. Milk tester training
3. A.H.Worker
4. Management committee members
5. Dairy animal management training
6. A.I.Refresher training
7. Cluster A.I. Training
STEP (Support training employment program)
It is proposed to organized and assist 25 women dairy co-operatives both in Salem and
namakkal districts during the period from 2002 to 2005, involving 1750 women members
through self help groups. The proposed 25 dairy co-operative will have 70 members in each
society and they will be identified, trained in all aspects of dairying and monitored continuously
for their economic enlistment.
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DAIRY:
The dairy has installed capacity to process 3 lakes liters of milk per day, to produce 10 MT
of skim milk powder 9 MT of butter and 6 MT of ghee. The quantity of milk available after local
sales and dispatch to Chennai is converted into products viz., butter, ghee and skim milk powder.
Ghee and skim milk powder are being said in the markets all over India through the Tamil nadu
co-op.
Milk producers federation Ltd., Chennai with Agmark and ISI grades respectively. Our
products bear the famous brand name of AAVIN. I.S.O. 9002 Certificate also obtained for
production and supply of milk, skim milk powder, butter, ghee and UHT milk in tetra pack.
ASEPTIC PACKAGING STATION
Ultra high temperature treated milk has a shelf life of 120 days at room temperature without
refrigeration. For ultra high temperature treatment, milk of low bacteriological count is taken and
is subjected to high temperature of 140 degree C gradually (Exposed for 2 seconds) and cooled
back to ambient temperature and packed in sterile aluminum foil polythene paper in the shape of
brick.
The main advantages of ultra high temperature treated milk are:
No refrigeration is required.
Very hygienic and no adulteration can be done.
Single way transportation, easy for storage, pilfer-proof and convenience to consume.
Reasonable price.
QUALITY CONTROL:
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The role of the lab is to assist in stage-wise testing and reporting the quality status of milk
processed and standardized so that milk of the correct standards are prepared and marketed.
Similarly cream, butter, butter-milk, ghee and skim milk powder are tested at regular intervals
both during production and storage to check that there is no quality deterioration.
Water, cleaning chemicals acking materials, etc., are also tested regularly to ensure their
conformity to pre-set standards. The bacteriologists check incoming and processed in milk and
also milk products in addition to water & environmental air to ensure that they are they also
check the sterility of plant and equipmend to ensure their hygienic status. The dairy has an
effluent treatment plant. The effluent is tested periodically to ensure that it satisfies the standards
prescribed by the tamil nadu pollution control board.
CANTEEN
The company provides canteen facilities for all employees satisfying their physiological
needs at subsidized rate.
SAFETY
The company through safety committee provides safety measures to workers in the company.
There is first-aid and provide firing equipments.
1.8 REVIEW OF LITERATURE
The traditionally stated major purpose of using financial data in the ratio form is
making the results comparable across firms and over time by controlling for size. This basic
assertion gives rise to one of the fundamental trends in financial ratio analysis (or FRA for short,
in this paper). The usually stated requirement in controlling for size is that the numerator and the
denominator of a financial ratio are proportional.
The seminal paper is this field is lev and sunder (1979). They point out, using theoretical
deduction, that in order to control for the size effect, the financial ratio must fulfill very
restrictive proportionality assumptions (about the error term, existence of the intercept, linearity,
and dependence on other variables in the basic financial variables relationship models Y = Bx + e
27
and its ratio format Y/X = b + e/X). It is shown that the choice of the size deflator (the ratio
denominator) is a critical issue. Furthermore, lev and sunder bring up the problems caused in
multiple regression models where the explaining variables are ratios with the same denominator.
This is a fact that has been discussed earlier oriented literature like in kuh and meyer(1955).
Two interrelated trends are evident. Theoretical discussions about the ratio format in FRA
and empirical testing of the ratio model. While mostly tackling the former Whittington (1980)
independently presents illustrative results finding the ratio specification inappropriate in a
sample of U.K. firms. Whittington also discusses the usage of a quadratic form in FRA.
Significant instability in the results was reported.
The proportionality considerations have implications on various facets of FRA. Barnes
(1982) shows how the non-normality of financial ratios can results from the underlying
relationships of the constituents of the financial ratios. He is thus able to tie in the ratio format
aspects with the distributional properties of financial ratios (to be discussed later in this review).
In the discussion on barness paper (horrigan, 1983, barnes, 1983), horrigan puts forward that
financial ratio research should be more interested in the role of the financial ratios themselves
than in the nature of the ratios components or to the ratios incidental role as data size
deflators.
To extrapolate from
Horrigans critique, in our own interpretation the validity of
financial ratio analysis should be determined by its usefulness to the decision making process of
the different interested parties (owners, management, personnel,). To illustrate, consider the
potential impact of economics of scale. To assess the efficiency of management a direct
comparison of financial ratios of small and big firms would have to be adjusted for the size
effect. On the other hand, an investor evaluating different investment targets might be more
interested in the level of profitability regardless whether or not it is a result of the size effect.
McDonald and morris (1982, 1985) present the first extensive empirical studies of the statistical
validity of the statistical validity of the financial ratio method. The authors use three models with
two samples, one with a single industry the other with one randomly selected firm form each
(four-digit SIC) industry branch to investigate the implications if homogeneity on
28
proportionality. The first model is the traditional model for replacement of financial ratios by
bivariate regression, with intercept Y(i)=a+bX(i)+e(i). the above model is central in this area. It
is characteristic that the testing for proportionality is considered in terms.
1.9 RESEARCH METHODOLOGY

This part highlights the period of the study, sources of data and techniques used in the
analysis. It focuses on the critical assessment of the financial position of The Salem District
Co-Op Milk Producers Union Ltd. These are illustrated explained as under:
1.9.1 RESEARCH DESIGN
Research design is purely and simply the framework or plan for a study that guides the
collection and analysis
of the data. The function of researcher is to ensure that the
required data collected are accurate and economical also

Analytical research technique was adopted in the project. Generally, analytical techniques
are designed to analyze something and it collects data for a definite and certain purpose.
The project study mainly focuses on the critical assessment of the financial position of
The Salem District Co-Op Milk Producers Union Ltd, and deals with financial
statement analysis, financial planning and financial control.
PLAN OF ANAYLISIS
Data collected from all the available sources will be tabulated, analyzed, interpreted and
supported with relevant chart, ratios, tables, graphs, etc., where ever necessary and suggestions
arising thereof will also be listed in the project. An attempt has been made to study the working
capital management as part and parcel of packing operations at The Salem District Co-Op Milk
Producers Union Ltd.
1.9.2 METHODS OF COLLECTION
29
The data for the analysis are collected and gathered from the printed company reports of
The Salem District Co-Op Milk Producers Union Ltd, official files, records, ledgers and other
available related materials
PRIMARY DATA
With a purpose to strengthen and validate the study, personal contacts were made with the
executives and officials of the finance division of The Salem District Co-Op Milk Producers
Union Ltd in the form of personal discussion, data collection analysis of reports and MIS formats
etc.,
SECONDARY DATA
The secondary data are collected from Company reports, institute magazines, department
manuals, brochures mainly from the balance sheet, income and expenditure and periodicals etc.,
PERIOD OF STUDY
The study period covers the financial performance of The Salem District Co-Op Milk
Producers Union Ltd during the six Year period commencing 2006-07 to 2010- 2011.
30
2.1 PROFITABILITY RATIO

Gross turnover less excise duty, the net turnover is the value of production. Profit before
tax to gross turnover less excise duty is calculated to know the profitability for the given value of
production.
Profitability ratio=
Net profit
sales
sales
Total assets
TABLE NO. 2.1 SHOWING PROFITABILITY RATIOS

(In Rupees)
Profitability
Year
Net profit
Sales
Total assets
2006-07
Loss
1750215219
708411419.3
Nil
2007-08
39499088.8
2105029041
829565163.4
0.04
2008-09
38280580.59
2519940197
799952281.5
0.04
2009-10
59458833.5
2789242348
987708599.8
0.06
2010-11
84844351.01
2852974753
1104383837
0.07
Average
0.042
ratio
31
(Annual Reports of
the Salem District Co-Op. Milk Producers Union Ltd.)
INTERPRETATION:
Though in the first year there is no profit, the following years profitability ration started
improving from 0.04 to 0.07.
CHART NO. 2.1 SHOWING PROFITABILITY RATIO
32
Profitability ratio
0.08
0.07
0.06
0.05
Profitability ratio
0.04
0.03
0.02
0.01
0
2006-07
2007-08
2.1.1 RETURN ON INVESTMENT
2008-09
2009-10
2010-11
33
This ratio is called return on capital employed . It measures the sufficiency or otherwise
of profit in relation to capital employed.
Return on investment =
Operating profit
100
Capital employed
TABLE NO. 2.1.1 SHOWING RETURN ON INVESTMENT RATIO

(In
Rupees)
Year
Operating profits
capital employed
Return on
investment
2006-07
47762830.6
326967844.6
14.60
2007-08
50626056.7
320489113.2
15.79
2008-09
64486698.5
394186700
16.35
2009-10
71896375.5
482866505
14.88
2010-11
104585176.5
524725717.5
19.93
Average
16.31
(Annual Reports of
INTERPRETATION:
The return on investment for the five years average is 16.31%. The return on investment
rate has progressively changed from the year 2006-07 to year 2010-11. The financial year 200607 the return on investment was 14.60. It has increased in to 19.93 in year 2010-11.
34
CHART NO. 2.1.1 SHOWING RETURN ON INVESTMENT RATIO
Return on investment
25
20
15
Return on investment
10
0
2006-07
2007-08
2008-09
2009-10
2010-11
35
2.1.2 RETURN ON CAPITAL EMPLOYED RATIO
Return on capital employed (ROCE) ratio is one of the important tools used to identify
companies that offer good value and have the potential to grow. The ROCE ratio helps to identify
good business that earns more relative to the price being paid than others.
Returnon capital employed ratio=
Net profit after taxes

100
Gross capital employed
TABLE NO. 4.1.1 SHOWING RETURN ON CAPITAL EMPLOYED RATIO
Year
Net profit after taxes
Gross capital
employed
Return on capital
employed ratio
2006-07
Loss
1908411419
Nil
2007-08
39499088.8
829565163.4
4.76
2008-09
38280580.59
799952281.5
4.78
2009-10
59458833.5
987708599.8
6.01
2010-11
84844351.01
1104383837
7.68
Average
4.65
(Annual Reports of
INTERPRETATION:
The return on capital employed ratio from the year 2007-08 to 2010-11 showing
increasing trend.
36
CHART NO.2.1.2 SHOWING RETURN ON CAPITAL EMPLOYED RATIO
Return on capital employed ratio

8
5
Return on capital employed
ratio
4
0
2006-07
2007-08
2008-09
2009-10
2010-11
37
2.1.3
RETURN ON TOTAL ASSET

Return on total asset ratio is calculated to measure the productivity of total assets. In
the term of fictitious assets refer to the preliminary expenses, debit balance of profit and loss
account and other similar losses shown on balance sheet side.
Return on total asset=
Netprofit after tax+ I nterest

100
Total assets
TABLE NO. 2.1.3 SHOWING RETURN ON TOTAL ASSETS RATIO

(In Rupees)
Year
Net profits after tax and interest
Total assets
Return on total
assets ratio
2006-07
loss
708411419.3
Nil
2007-08
41258668.8
829565163.4
4.97
2008-09
50816379.59
799952281.5
6.35
2009-10
59807512.5
987708599.8
6.05
2010-11
84970087.01
1104383837
7.69
Average
5.01
(Annual Reports of the Salem District Co-Op. Milk Producers Union Ltd.)
INTERPRETATION:
In 2006-07 there was net loss, due to that there is no return on total assets. The retun on
total assets ratio for the next four years satisfactory..
38
CHART NO.2.1.3 SHOWING RETURN ON TOTAL ASSETS RATIO
Return on total assets

9
Return on total assets ratio
0
2006-07
2007-08
2008-09
2009-10
2010-11
39
2.1.4 GROSS PROFIT RATIO
This ratio is also known as gross margin or trade margin ratio. Gross profit ratio indicate
the difference between sales and direct cost. Gross profit ratio explains the relationship between
gross profit and net sales.
Gross profit ratio=
Gross profit
100
Net sales
TABLE NO. 2.1.4 SHOWING GROSS PROFIT RATIO

(In Rupees)
Year
Gross profit
Net sales
G.P ratio
2006-07
109096112.1
1750215219
6.23
2007-08
190031239.8
2105029041
9.02
2008-09
234025644.6
2519940197
9.28
2009-10
268910345.9
2789242348
9.64
2010-11
332000729.5
2852974753
11.63
Average
9.16
INTERPRETATION:
The above table indicates that the gross profit ratio of the firm has the normal growth
over the period of Years. It seems to that the gross profit ratio is satisfactory to the firm. As
during the Year increase in gross profit ratio is an indication of improving working condition
40
CHART NO. 2.1.4 SHOWING GROSS PROFIT RATIO
Gross profit ratio

14
12
10
G.P ratio
0
2006-07
2007-08
2008-09
2009-10
2010-11
41
2.1.5 NET PROFIT RATIO
This ratio is also called net profit to sales ratio. It is a measure of managements
efficiency in operating the business successfully from the owners point of view. It indicates the
return on shareholders investment. Higher the ratio better is the operational efficiency of the
business concern.
Net profit ratio=
Net profit
100
Net sales
TABLE NO. 2.1.5 SHOWING NET PROFIT RATIO

(In Rupees)
Year
Net profit
Net sales
N.P ratio
2006-07
Nil
1750215219
Nil
2007-08
39499088.8
2105029041
1.87
2008-09
38280580.59
2519940197
1.51
2009-10
59458833.5
2789242348
2.13
2010-11
84844351.01
2852974753
2.97
Average
1.70
INTERPRETATION:
The above table indicates that the net profit ratio of the firm has the normal growth
over the period of Years. It seems to that the net profit ratio is satisfactory to the firm. As during
the Year increase in net profit ratio is an indication of improvement in the business.
42
CHART NO. 2.1.5 SHOWING NET PROFIT RATIO
Net profit ratio

3.5
2.5
N.P ratio
1.5
0.5
0
2006-07
2007-08
2008-09
2009-10
2010-11
43
2.1.6 OPERATING RATIO
This ratio indicates the relationship between total operating expenses and sales.
Operating ratio measures the amount of expenditure incurred in production sales and
distribution of output. It indicates operational efficiency of the concern. Lower the ratio more is
the efficiency.
Operatingratio=
OperatingCost
100
Net sales
TABLE NO. 2.1.6 SHOWING OPERATING RATIO

(In Rupees)
Year
Operating Cost
Net sales
Operating ratio
2006-07
1743438935
1750215219
99.61
2007-08
2054402984
2105029041
97.59
2008-09
2455453499
2519940197
97.44
2009-10
2717345972
2789242348
97.42
2010-11
2748389576
2852974753
96.33
Average
97.68
INTERPRETATION:
The operating ratio for the last years are between 96.33 to 99.61. it shows that the
operation cost of the firm is closer to the net income of the firm.
44
CHART NO.2.1.6 SHOWING OPERATING RATIO
Operating ratio
100
99
98
Operating ratio
97
96
95
94
2006-07
2007-08
2008-09
2009-10
2010-11
45
2.1.7 OPERATING PROFIT RATIO

It is the ratio of profit made from operating sources to the sales usually shown as a
percentage. It shown the operational efficiency of the firm and its measure the management
efficiency in running the routine operations of the firm.
Operating profit ratio=
Operating profit
100
Net sales
TABLE NO. 4.1.7 SHOWING OPERATING PROFIT RATIO

(In Rupees)
Year
Operating profit
Net sales
Operating profit ratio
2006-07
67762836
1750215219
3.87
2007-08
50626056.7
2105029041
2.40
2008-09
64486698.5
2519940197
2009-10
71896375.5
2789242348
2.57
2010-11
104585176.5
2852974753
3.66
Average
2.55
3.01
INTERPRETATION:
The operating profit is decreasing in the mixed trend; the reason for this is to increase in
the input raw milk cost and it has been stabilized from the Year 2
46
CHART NO. 2.1.7 SHOWING OPERATING PROFIT RATIO
47

4.5
3.5
2.5
1.5
0.5
0
2006-07
2007-08
2008-09
2.1.8 OPERATING EXPENSES RATIO
2009-10
2010-11
48
A category of expenditure that a business incurs as a results of performing its normal
business operations. One of the typical responsibility that management most content with is
determining how low operating expenses can be reduced without significantly affecting the
firms ability to compete with its competitors.
Operating Expenses ratio=
Operating expenses
100
Net sa l es
TABLE NO. 2.1.8 SHOWING OPERATING EXPENSES RATIO

(In Rupees)
Operating expenses
Year
Operating expenses
Net sales
2006-07
102319824.4
1750215219
5.84
2007-08
139405183
2105029041
6.62
2008-09
169538946.1
2519940197
6.72
2009-10
197010070.4
2789242348
7.06
2010-11
227415553
2852974753
7.97
Average
ratio
6.84
INTERPRETATION:
The operating expenses ratio is increasing on slow phase year on year. It shows that the
expenses are gradually increasing.
49
CHART NO. 2.1.8 SHOWING OPERATING EXPENSES RATIO
Operating expenses ratio

9
Operating expenses ratio
0
2006-07
2007-08
2008-09
2009-10
2010-11
50
2.1.9 NON-OPERATING EXPENSES RATIO
It is expense incurred by activities not relating to the core operations of the business.
Nonoperating expensesratio=
Nonoperating expenses
100
Net sales
TABLE NO. 2.1.9 SHOWING NON- OPERATING EXPENSES RATIO

(In Rupees)
Year
Non operating
expenses
Net sales
Non operating
expenses ratio
2006-07
31800618.4
1750215219
1.81
2007-08
3515910.94
2105029041
0.16
2008-09
29019374.23
2519940197
1.15
2009-10
15442883.54
2789242348
0.55
2010-11
23941651.06
2852974753
0.83
Average
0.90
INTERPRETATION:
The non operating expenses are in line with the turnover. If the turnover goes up, the ratio
will be lower. Due to increase in the volume of business and turnover the ratio is the decreasing
trend.
51
CHART NO. 2.1.9 SHOWING NON- OPERATING EXPENSES RATIO
Non operating expenses ratio

2
1.8
1.6
1.4
1.2
Non operating expenses ratio
1
0.8
0.6
0.4
0.2
0
2006-07
2007-08
2008-09
2009-10
2010-11
52
2.1.10 FINANCIAL EXPENSES RATIO
Financial expenses include the companys interest expenses on long term debt and related
charges; foreign exchange losses on bet net expenses on the disposal of marketable securities;
Amortization of bond redemption premiums; addition to provisions for financial liabilities and
charges and impairment losses on investment.
Financial expenses ratio=
Financial expenses
100
Net sales
TABLE NO. 2.1.10 SHOWING FINANCIAL EXPENSES RATIO

(In Rupees)
Financial expenses
Year
Financial expenses
Net sales
2006-07
19773835.4
1750215219
1.12
2007-08
1759580
2105029041
0.08
2008-09
12529799
2519940197
0.49
2009-10
348679
2789242348
0.01
2010-11
125736
2852974753
0.00
Average
ratio
0.34
INTERPRETATION:
The financial expenses are in the line with the turnover. If the turnover goes up, the ratio
will be lower. Due to increase in the volume of business and turnover the ratio is the decreasing
trend.
53
CHART NO. 2.1.10 SHOWING FINANCIAL EXPENSES RATIO
Financial expenses ratio

1.2
0.8
Financie expenses ratio

0.6
0.4
0.2
0
2006-07
2007-08
2008-09
2009-10
2010-11
54
2.2 TURNOVER RATIO

2.2.1 INVENTORY TURNOVER RATIO
This ratio is called stock velocity ratio. It is calculated to ascertain the efficiency of
inventory management in terms of capital investment. It shows the relationship between the cost
of goods sold and the amount of average inventory. Stock turnover ratio is obtained by dividing
the cost of sales by average stock.
Inventory turnover ratio=
Cost of goods sold

100
Average stock
TABLE NO. 2.2.1 SHOWING INVENTORY TURNOVER RATIO

(In Rupees)
Inventory turnover
Year
Cost of goods sold
Average stock
2006-07
1641119107
37399735
43.88
2007-08
1914997801
28509919
67.16
2008-09
2285914552
22802517.25
100.24
2009-10
2520332002
33552832
75.11
2010-11
2520974023
33555680
75.12
Average
72.30
ratio
INTERPRETATION:
The above table shows that the company has lower turnover ratio in the Year 2006-07.
But in the forthcoming two Years it has been increased. It is efficient inventory management and
55
efficiency of business operations.
CHART NO. 2.2.1 SHOWING INVENTORY TURNOVER RATIO
Inventory turnover ratio

120
100
80
60
40
20
0
2006-07
2007-08
2008-09
2009-10
2010-11
56
2.2.2 INVENTORY TURNOVER PERIOD

Inventory turnover ratio can be related to time. The rations can be expressed in term of days
or months. The general objective is to increase the stock velocity as much as possible or in effect,
decrease the days or months for which items remain in stock.
Inventory turnover period (days )=
No . ofdays
TABLE NO. 2.2.2 SHOWING INVENTORY PERIOD

(In Rupees)
Inventory turnover
Inventory turnover
ratio
period
365
43.8824251
8.31
2007-08
366
67.16952795
5.44
2008-09
365
100.2483422
3.64
2009-10
365
75.11532863
4.85
2010-11
365
75.1280863
4.85
Year
No.of days
2006-07
Average
5.42
INTERPRETATION:
The inventory turnover period is higher in the year 2006-07 but later on years the
57
turnover period is reduced. The last two years the turnover period improved again.
CHART NO. 2.2.2 SHOWING INVENTORY CONVERSION PERIOD
Inventory turnover period

9
Inventory turnover period
0
2006-07 2007-08 2008-09 2009-10 2010-11
58
2.2.3 DEBTORS TURNOVER RATIO

Debtors turnover ratio is called as receivables turnover ratio. A business concern generally
adopts different methods of sales. Goods are sold on credit based on credit policy adopted by the
firm.
Debtors
turn
Credit sales
=
ratio Average accounts receivable
TABLE NO. 2.2.3 SHOWING DEBTORS TURNOVER RATIO

(In Rupees)
Average accounts
Debtors turnover
receivable
ratio
1750215219
528660692.4
4.31
2007-08
2105029041
574877086.3
3.66
2008-09
2519940197
569125298.1
4.42
2009-10
2789242348
559003612.2
4.98
2010-11
2852974753
670227718.9
4.25
Average
4.32
Year
Credit sales
2006-07
INTERPRETATION:
The above table shows that in the Year 2006-07, the debtors turnover ratio has decreased,
59
it implies in efficient of the management of debtors.
CHART NO. 2.2.3 SHOWING DEBTORS TURNOVER RATIO
60
Debtors turnover ratio

5
4.5
3.5
3
debtors turnover ratio
2.5
1.5
0.5
0
2006-07
2007-08
2008-09
2.2.4 DEBT COLLECTION PERIOD
2009-10
2010-11
61
The average collection period measure the liquidity of the firm, since a collection period
implies the prompt payment of the debtors. It also measures the credit worthiness of the
company. The average collection should be compared against the firms credit terms and policies
to judge its credit and collection efficiency.
Debt collection period=
No . of days
Debtors turnover ratio
TABLE NO. 2.2.4 SHOWING DEBTORS COLLECTION PERIOD

(In Rupees)
debtors turnover
Debt collection
ratio
period
365
4.310658887
110.24
2007-08
366
3.661702808
99.95
2008-09
365
4.427742372
82.43
2009-10
365
4.989667843
74.15
2010-11
365
4.256724502
85.74
Year
No.of days
2006-07
Average
90.50
INTERPRETATION:
Higher turnover ratio and the shorter collection period conveys quick payment on the part
of the debtors. Collection period has been reduced from 110 days to 99.95,82.43,74.15,85.74days
shows the efficiency of the management.
62
CHART NO. 2.2.4 SHOWING DEBTORS COLLECTION PERIOD
Debt collection period

120
100
80
Debt collection period

60
40
20
0
2006-07
2007-08
2008-09
2009-10
2010-11
63
2.2.5 CREDITORS TURNOVER RATIO

This ratio is also known as accounts payable. A business concern usually purchases raw
materials, services and goods on credit. The quantum of payables of a business concern depends
upon its purchase policy, the quantity of purchase and suppliers credit policy. Creditors
turnover ratio indicates the number of times the payable rotate in a Year.
Creditorsturnover ratio
Net sales
Average accounts payable
TABLE NO. 2.2.5 SHOWING CREDITORS TURNOVER RATIO

(In Rupees)
Average accounts
Creditors turnover
payable
ratio
1496461534
453474020
4.29
2007-08
1735606814
475208115.5
3.65
2008-09
2123028913
446447362.9
4.75
2009-10
2374084372
442658868.2
5.36
2010-11
2334856808
514659228.2
4.53
Average
4.52
Year
Net credit purchase
2006-07
INTERPRETATION:
The purchase has increased due to volume of business, and the creditors turnover ratio
also increased.
64
CHART NO. 2.2.5 SHOWING CREDITORS TURNOVER RATIO
Creditors turnover ratio

6

3
0
2006-07
2007-08
2008-09
2009-10
2010-11
65
2.2.6 CREDIT PAYMENT PERIOD

The debt payment ratio indicates the interval of payment period. If the firm does not pay off
its creditors within time, it will adversely affect the goodwill of the business
Credit payment period=
No . of days
TABLE NO. 2.2.6 SHOWING CREDITORS PAYMENT PERIOD

(In Rupees)
Creditors turnover
Credit payment
ratio
period
365
4.299993975
82.60
2007-08
366
3.652308867
87.21
2008-09
365
4.755384597
76.75
2009-10
365
5.363236891
68.05
2010-11
365
4.536704445
80.45
Average
79.01
Year
No.of days
2006-07
INTERPRETATION:
The credit payment period shows the reducing trend from 2006-07 to 2009-10. In the
market, this is generally products for this company. This will raise the image of the company that
it is able to meet its financial obligation.
66
CHART NO. 2.2.6 SHOWING CREDITORS PAYMENT PERIOD
Credit payment period

120
100
80
Credit payment period

60
40
20
0
2006-07
2007-08
2008-09
2009-10
2010-11
67
2.2.7 WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working capital. It also
measures the smooth running of business or otherwise. The ratio establishes relationship between
cist if sales and working capital. Working capital turnover ratio is calculated with the help of the
following formula.
Workingcapital turnover ratio=
Cost of goods sold

Net working capital
TABLE NO. 2.2.7 SHOWING WORKING CAPITAL TURNOVER RATIO

(In Rupees)
Working capital
Year
Cost of goods sold
Net working capital
2006-07
1641119107
93023148.6
17.64
2007-08
1914997801
126267972.2
15.16
2008-09
2285914552
174766790.1
13.07
2009-10
2520332002
262263200.2
9.60
2010-11
2520974023
304304169.9
8.28
Average
12.75
turnover ratio
INTERPRETATION:
68
The above table indicates that the gradual growth of the ratio, but during the Year 201011 the ratio has been slightly decreased to 8.28. This indicates that the efficient utilization of
working capital.
CHART NO. 2.2.7 SHOWING WORKING CAPITAL TURNOVER RATIO
69
Working capital turnover ratio

18
16
14
12
Working capital turnover

ratio
10
0
2006-07
2007-08
2008-09
2009-10
2010-11
2.2.8 FIXED ASSETS TURNOVER RATIO

This ratio determines efficiency of utilizations of fixed assets and profitability of a business
70
concern. Higher the ratio, more is the efficiency in utilization of fixed assets. A lower ratio is
under utilization of fixed assets.
Net
Cost of goods sold
assets turnover ratio=
assets
TABLE NO. 2.2.8 SHOWING FIXED ASSETS TURNOVER RATIO

(In Rupees)
Fixed asset turnover
Year
Cost of goods sold
Net fixed assets
2006-07
1641119107
1333944696
12.25
2007-08
1914997801
194221141
9.85
2008-09
2285914552
219419909.9
10.41
2009-10
2520332002
220603304.8
11.42
2010-11
2520974023
220421547.9
11.43
Average
11.07
ratio
INTERPRETATION:
The ratio shows that the fixed assets are efficiently utilized. The ratios are showing up
gradual growth over the period. It implies that the company utilizes its fixed assets efficiently.
71
CHART NO. 2.2.8 SHOWING FIXED ASSETS TURNOVER RATIO
Fixed asset turnover ratio

14
12
10
Fixed asset turnover ratio
0
2006-07 2007-08 2008-09 2009-10 2010-11
72
2.2.9 CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost of
sales or sales with the amount of capital invested in the business. Lower ratio shows the lower
profit and higher ratios show the higher profit.
Capital turnover ratio=
Cost of goods sold

Capital employed
TABLE NO.2.2.9 SHOWING CAPITAL TURNOVER RATIO

(In Rupees)
Capital turnover
Year
Cost of goods sold
capital employed
2006-07
1641119107
226967844.6
7.23
2007-08
1914997801
320489114.2
5.97
2008-09
2285914552
394186700
5.79
2009-10
2520332002
482866505
5.21
2010-11
2520974023
524725717.5
4.80
Average
5.80
ratio
INTERPRETATION:
The capital turnover ratio from 2006-07 to 2010-11 except in 2010-11 shows a gradual
increase, which depicts that the assets as whole are efficiently utilized.
73
CHART NO. 2.2.9 SHOWING CAPITAL TURNOVER RATIO
74
Capital turnover ratio

8
5
Capital turnover ratio
4
0
2006-07
2007-08
2.3 SOLVENCY RATIO
2008-09
2009-10
2010-11
75
2.3.1 CURRENT RATIO
Current ratio is the relationship between current assets and current liabilities.
The ratio of current assets to current liabilities is called current ratio. In order to
measure the short-term liquidity or solvency of a consent , comparison of current assets and
current liabilities is inevitable. Current ratio indicates the ability of a consent to meet its current
obligations as and when they are due for payment.
Current ratio=
Current assets
Current liabilities
TABLE NO.2.3.1 SHOWING CURRENT RATIO

(In Rupees)
Year
Current assets
Current liabilities
Current ratio
2006-07
574466724.3
481443574.7
1.19
2007-08
635344022.4
509076050.2
1.24
2008-09
580532371.6
405765581.5
1.43
2009-10
767105295
504842094.5
1.51
2010-11
883962289.4
579658119.5
1.52
Average
1.39
INTERPRETATION:
The table shows the liquidity position of the company. Though the current ratio is
improving from year 2006-07 to 2010-11. The current ratio is below the industry standard ratio
of 2:1.
76
CHART NO. 2.3.1 SHOWING CURRENT RATIO
Current ratio
1.6
1.4
1.2
1
Current ratio
0.8
0.6
0.4
0.2
0
2006-07
2007-08
2.3.2 LIQUID RATIO
2008-09
2009-10
2010-11
77
Liquid ratio is also called acid-test ratio because it is the acid test of a concerns financial
soundness. It is the relationship between Liquid assets and Liquid liabilities. Liquid assets are
those assets, which are readily concerted into cash. They include cash and bank balance, bills
receivable, debtors, short-term investments. Liquid liabilities include creditors, bills payable,
outstanding expenses.
Liquid ratio=
Liquid assets
Current liabilities
TABLE NO. 2.3.2 SHOWING LIQUID RATIO

(In Rupees)
Year
Liquid assets
Current liabilities
Liquid ratio
2006-07
57114084.3
481443574.7
0.11
2007-08
634896595.4
509076050.2
1.24
2008-09
579962333.6
405765581.5
1.42
2009-10
766632258
504842094.5
1.51
2010-11
883471356.4
579658119.5
1.52
Average
1.16
INTERPRETATION:
The above table shows the liquidity position of the company. In the Year 2010-11 the
liquid ratio increases to 1.52, whereas previous Year it decrease to 1.51. In the Year by Year to
liquid ratio increased. This shows that the company has not maintained a stable liquidity
position.
78
CHART NO. 2.3.2 SHOWING LIQUID RATIO
Liquid ratio
1.6
1.4
1.2
1
Liquid ratio
0.8
0.6
0.4
0.2
0
2006-07
2007-08
2008-09
2009-10
2010-11
79
2.3.3 ABSOLUTE LIQUIDITY RATIO

This ratio is also called cash position ratio or super liquid ratio. This is a variations of
liquid ratio. This ratio is calculated when liquidity is highly restricted in terms of cash and cash
equivalence. This ratio measures liquidity in terms of cash and near cash items and short-terms
current liability. Cash position ratio is calculated with the help of the following formula
Absolute liquidity ratio=
Absolute liquid assets

Current liabilities
TABLE NO. 2.3.3 SHOWING ABSOLUTE LIQUID RATIO

(In Rupees)
Year
Absolute liquid assets
Current liabilities
Absolute liquid ratio
2006-07
2035777.23
481443574.7
4.22
2007-08
202890.45
509076050.2
3.98
2008-09
30802408.01
405765581.5
0.07
2009-10
130679094.3
504842094.5
0.25
2010-11
111857722.4
579658119.5
0.19
Average
1.74
INTERPRETATION:
The above table shows the liquidity position of the company. The ratio has contionously
declined from the year 2006-07.
80
CHART NO. 2.3.3 SHOWING ABSOLUTE LIQUID RATIO

4.5
3.5
2.5
1.5
0.5
0
2006-07
2007-08
2008-09
2009-10
2010-11
81
3.1 FINDINGS:
Financial performance of The salem district co-op milk producers union ltd., salem
using profitability ratio.
Based on return on investment ratio the financial performance the is good. Since the
average return on investment is 13.19.
Based on the return on total assets employed the financial performance of the company is
satisfactory. Because there is continues minimum improvement in the ratio.
Based on gross profit ratio the financial performance of the company since to be
satisfactory. Because the gross profit ratio has soon continues improvement.
Based on the net profit ratio the financial performance of the company against
satisfactory since the net profit ratio reached 2.97 from net loss.
Based on operating ratio the financial performance of the company is not satisfactory
since the operating cost is closer to not sales. The operating ratio of the firm
Based on operating profit ratio the financial performance of the company is not
satisfactory since the average ratio is
Based on Operating expenses ratio the financial performance of the company is not
satisfactory since the expanses are increasing from the year 2006-07
Based on financial expanses ration the financial performance the company is found to be
good because in the financial expanses dramatically.
Financial performance of The Salem district co-op milk producers union ltd., Salem
using turnover ratio.
Based on inventory turnover ratio the financial performance of the company is good.
Since the inventory turnover ratio as sternly increase.
Based on debtors turnover ratio the financial performance of the company is not
satisfactory because the ratio remains between 4 to 5.
Based on creditors turnover ratio the financial performance of the company is not
satisfactory since the ratio has increased.
Based on working capital turnover ratio the financial performance of the company is
good.
Based on fixed assed turnover ratio the financial performance of the company is good
82
because the ratio as improved from 9.85 to 11.43.
Based on capital turnover ratio the financial performance of the company is good.
Because the assets are efficiency utilized.
Financial performance of The Salem district co-op milk producers union ltd., Salem
using solvency ratio.
Based on current ratio the financial performance of the company is not satisfactory
because the current ratio is lesser then industry standard ratio tool.
Based on liquid ratio the financial performance of the company is satisfactory because
the ratio is higher than industry standard.1.1
Based on absolute liquidity ratio the financial performance of the company is not
satisfactory since it is decrease from 4.22 to .19.
3.2 SUGGESSION:
It has found that those the profitability ratio of the company is passives but the operating
expenses ratio was not satisfactory. The operating expenses ratio is very closer to the knot
sales therefore the company should censer on ways and means to reduce to cost.
The study shows that the operating profit ratio not satisfactory so more affiants need to be
paid for improving operating profit.
Though the debtors turnover ratio reached 4.98 rate this ratio lies between 3.66 to 4.98.
The company can take measures to make major improvement on debtors turnover ratio.
Both the current ratio and liquid ratio fill below the industry standard 2:1 to 1:1. This is
83
on allowing indication that the company has to pay serious attains towards its as current
asset management.
3.3 CONCLUSION:
The Salem district co-op milk producers union ltd has been performing well in the milk
and milk product goods being one of the union of The Salem district co-op milk producers
union ltd has been showing an increasing trend in its profitability position for the past 5 years
which deficits a good sign.
The turnover ratios indicate that the average collection period has been reduced from two
month to one moth and inventory ratio is a indicates that the larger part of the amount is tied up
to inventory. So the company must take steps to improve it liquidity position.
The company has a high operational efficiency and most of the ratios seem to be
satisfaction from the point of view of both the agent and customers.
The other important factor which is worth mentioning here is that the company has been
progressing steadily on its capacity utilization in line with its growing financial performs.
84
4. SCOPE FOR FUTURE RESEARCH

Financial statement analysis is done with an intention to know the financial performance
of Salem District Co-operative Milk Produces Union Limited in Salem. In order to assess the
financial performance only financial statement of the company has been used. A never statement
analysis will portray part of the company financial performance dimension therefore future
research can be done in the areas of investment analysis, inventory management, working capital
management, cash management, method of assets deployment, credit management, effective
method of source fund.
Financial performance on human resource capital also an emerging scopeful study area.
85
BIBLIOGRAPHY:
1. T.S. Reddy, Y. Hariprasad Reddy Reprint 2003, cost and management accounting,
published by Mangham publications, Chennai-600 017.
2. T.S. Reddy, Y. Hariprasad Reddy, second edition, Financial and management
accounting, published by Mangham publications, Chennai-600 017.
3. Khan & join; Thirteenth edition-1996, Financial management, published by Charity
publications, Chennai-600 023.
4. Prasanna Chandra 3rd editions Fundamental of financial management, Tata
McGraw Hill publishing company- New Delhi.
Websites referred:
www.google.com
WWW.aavin.com
www.aavindaily.com
www.salem co-op milk ltd.com
THE SALEM DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD, ED. 912,
SALEM
TRADING ACCOUNT FOR THE YEAR ENDED 31/03/2011
S.NO
DETAILS
AMOUNT
S.NO
DETAILS
AMOUNT
86
1
2
3
OPENING STOCK
PURCHASE(MILK
BY-PRODUCTS &
OTHERS)
TRADE CHARGES
PAID AND DUE
VAT AND TAX PAID
TOTAL
GROSS PROFIT
42299198.98
2334856808.0
0
276151004.02
1
2
SALES PROCEEDS
TRADE INCOME
2852974752.8
4
107400213.98
VAT AND TAX

COLLECTED
11520860.65
CLOSING STOCK
24812101.00
GRAND TOTAL
2996707988.4
7
11400248.00
2664707259.0
0
332000729.47
GRAND TOTAL
2996707988.4
7
THE SALEM DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD,ED. 912,

SALEM
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31/03/2011
S.N
DETAILS
AMOUNT
S.NO
DETAILS
AMOUNT
O
87
1
ESTABLISHMENT &
CONTINGENCIES
PAID & DUE
227415552.99
2
3
4
5
GROSS PROFIT
FROM TRADING
ACCOUNT
332000729.4
7
MISCELLANEOUS
INCOME
RECEIVED &
ACCURED
4200825.59
GRAND TOTAL
336201555.0
6
2
INTEREST PAID &
DUE
RESERVE FOR
DEPRECIATION
PROVISION FOR
EMPLOYEE BOUNS
PROVISION FOR
INCOME TAX
125736.00
11311149.06
4440000.00
8064766.00
NET PROFIT
251357204.05
84844351.01
GRAND TOTAL
336201555.06
THE SALEM DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD,ED. 912,

SALEM
BALANCE SHEET AS ON 31/03/2011
S.
S.
N
LIABILITIES
AMOUNT
N
ASSETS
AMOUNT
O
O
88
A
B
C
D
F
G
SHARE CAPITAL
DEPOSIT AND LOANS
a Deposit
b Loans of
c Government
d TCMPF LTD
RESERVE FUND AND OTHER
FUND
a Undivided profit
NON STATUTORY RESERVES
a Deprecation reserve
b Investment allowance
c Others
PROVISIONS
a Under Sales Value
Between Cost Price &
Selling Price
b Transport cost due from
federation
c Polyfilm deficit (1994-95)
d Interest due from TCMPF
e Expenditure made to
connection with govt.
function at T.Gode
f Amount due from
federation for excess milk
g Difference in head charges
due from federation
h Butter sales price
difference due from
federation
i SMP sales price difference
from federation
j Vehicle repair charges
1 Dindigul union
2683.27
2 Dharmapuri
950.00
k Diesel price rise amount
due from TCMPF
LTD,Chennai
l Skim milk solid (fat) cost
due from federation
3640100.00
21222836.98
261374.80
87074471.00
40000000.00
5699.28
179436778.72
8246043.00
185327631.03
124096561.75
2206157.60
E
642556.00
281192.45
134150.80
863538.50
5106283.80
25140107.11
H
10345630.00
3633.27
178197.00
a
b
Cash on hand
Postal stamp 4249.00
on hand
111853473.40
c Cash with
bank
7010027.13
INVESTMENTS
120500.00
a Deposits
b Share in cooperative
2846.00
3850128.00
ACCURED
490933.00
a Trade
income
b Misc.income
24812161.00
c Prepaid
expenses
128622.25
VALUE OF
a Closing
stock
0803.25
b Trading
charges
1 Chemical
2950849.76
s
2 Glasswar 39895.20
e articles
145698627.16
3 Diesel
c Estt& cont.
225620.80
charges
12011090.90
1 Book &
forms
13166899.17
VALUE OF
a Furniture
b Library
c Plant &
machineries
d Ln2 plant
e Vehicles
f Other assets
1323231.00
10776007.80
83458.00
210099.30
21078752.07
25039713.48
746801473.09
LAND ANS
BUILDING
a Land
14762811.11
124096561.75
89
m Loss in SMP purchased

from TCMPF
n Loss in SMP stock non
liftment from dharmapuri
union
o Short settlement of product
from TCMPF
SUNDRY LIABILITIES
a sundry creditors
a
b
c
d
e
Establishment and
contingencies dues
Trade charges dues
Interest tax dues
Sales tax dues
Purchases GRN not A/C
SUBSIDY FROM
a NDDB
b Tamilnadu co-op. union
c HPC ltd
d Calf rearing scheme
e AHW & THADCO
f NDDB-establishment grant
to MPCS
g Technology mission
scheme
h Cent/state govt. (solar
plant) subsidy
i TN govt. subsidy on sale of
milk
j Govt. of india - CMP
scheme
a Vehicle redemption
fund
b Forfeiture fund
c Staff gratuity
d Profit in disposal of
assets
e Labour welfare fund
PROVISION FOR
a Staff bonus
b Income tax
b
c
132994.23
548084811.56
21077443.00
946456.00
23605259.00
917826.00
10203409.38
36345035.82
550000.00
486720.00
13800.00
1737574.65
95000.00
171289.20
144000.00
62137000.00
3412700.00
75959.23
5500.00
187808.94
6940.54
451.00
4932159.00
30655482.00
91258.00
Buildings
Building
valuation not
obtained
2206157.60
SUNDRY
642556.00
DEBTORS
a) sundry debtors
b)stock deficit
2821192.45
c)under sales value
between cost price
and selling price
134150.80
d) Transport cost
due form federation
e) polyfilm deficit
(1994-95)
f) interest due form
TCMPF
g)expenditure made
in connection with
the govt.fuction at.
T.GODE
3633.27
h) Vehicle repair
863538.50
charges
1)Dindigul union
2)Dharmapuri
3817384.78
i) amount due form
federation for excess
milk
j) Deficit in solids in 763682.00
conversion
k Deficit in
14920889.81
solids in
sachet filling
l Solid deficit
to be
recovered
form
5106283.80
concerned
CC & FED
official
m Difference in 25146107.11
overheadchar
ges due form
10345630.00
90
c
Excise duty
n
federation
Butter sales
prince
difference
due form
federation
SMP sales
price
difference
due from
federation
Diesel price
rise amount
due form
TCMPF ltd.,
Chennai.
178197.00
1323231.00
10776007.80
83458.00
132994.23
q
Skim milk
309961.00
sold (fat)
cost due
121021325.47
form
federation
Loss in SMP
purchased
form
TCMPF
Loss in SMP
stock non
liftment 0
fromdharmap
uri union.
Short
settlement of
product from
TCMPF
Excess
payment of
milk
Net loss:
carried
Down from
profit & loss
A/C
91
14549558517.4
4
14549558517.4
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1

A STUDY ON FINANCIAL RATIO ANALYSIS SALEM

MASTER OF BUSINESS ADMINISTRATION

PAAVAI COLLEGE OF ENGINNERING

A STUDY ON FINANCIAL RATIO ANALYSIS IN THE SALEM DISTRICT

------------------------------------Head of the Department

Submitted for the Project Viva-Voce examination held on

Signature of the Student

Signature of the Guide

thanks and gratitude towards my faculty guide, Mr. T.

Ravichandran MBA, M.Phil., Assistant Professor, Department of Management Studies, Paavai

1.1 Introduction of the study

1.3 Objectives of the study

1.5 Limitations of the study

1.6 Industry profile

Data analysis and Interpretation

2.3 Analysis Part-3

Table showing Return on investment ratio

Table showing Return on capital employed ratio

Table showing Return on total assets ratio

Table showing Gross profit ratio

Table showing Net profit ratio

Table showing Operating ratio

Table showing Operating profit ratio

Table showing Financial expenses ratio

Table showing Operating expenses ratio

Table showing Non-Operating expenses ratio

Table showing Inventory turnover ratio

Table showing Inventory conversion period

Table showing Debtors turnover ratio

Table showing Debtors collection period

Table showing Creditors turnover ratio

Table showing Creditors payment period

Table showing Working capital turnover ratio

Table showing Fixed assets Turnover ratio

Table showing capital turnover ratio

Table showing Current ratio

Table showing Liquid ratio

Table showing Absolute liquid ratio

Chart showing Return on investment ratio

Chart showing Return on capital employed ratio

Chart showing Return on total assets ratio

Chart showing Gross profit ratio

Chart showing Net profit ratio

Chart showing Operating ratio

Chart showing Operating profit ratio

Chart showing Financial expenses ratio

Chart showing Operating expenses ratio

Chart showing Non-Operating expenses ratio

Chart showing Inventory turnover ratio

Chart showing Inventory conversion period

Chart showing Debtors turnover ratio

Chart showing Debtors collection period

Chart showing Creditors turnover ratio

Chart showing Creditors payment period

Chart showing Working capital turnover ratio

Chart showing Fixed assets turnover ratio

Chart showing capital turnover ratio

Chart showing Current ratio

Chart showing Liquid ratio

Chart showing Absolute liquid ratio

requires more floor space and more headspace. Modern

expanded its activities and now reached