Ratio Alalysis Jersey Project

Ratio Analysis
Ratio Analysis
INDUSTRY PROFILE
India is the world leader in milk production with total volume of 115 million
tons. Driven by steady population growth and rising income, milk consumption
continues to rise in India. Dairy market is currently growing at an annual growth rate
of around 7 per cent in volume terms. The market size of Indian dairy industry stands
at around US$ 45 billion.
Since Indias population is predominantly vegetarian; milk serves as an
important part of daily diet. Indians use milk in various preparations such as in
brewing tea and coffee, in making yogurt or curd and in preparing many Indian
dishes. For most households, milk is also a popular beverage due to its nutritional
value.
In India, rural households consume almost 50 percent of total milk production. The
remaining 50 percent is sold in the domestic market. Of the share of milk sold in the
domestic market, almost 50 percent is consumed in fluid form, 35 percent is
consumed as traditional products (cheese, yoghurt and milk based sweets), and 15
percent is consumed for the production of butter, ghee, milk powder and other
processed dairy products (including baby foods, ice cream, whey powder, casein, and
milk albumin).
Most dairy products are consumed in the fresh form and only a small quantity
is processed for value addition. In recent years, however, the market for branded
processed food products has expanded. Although only around 2 per cent food is
processed in India, still the highest processing happens in the dairy sector, where 35
per cent of the total produce is processed, of which only 13 per cent is processed by
the organised sector.
While world milk production declined by 2 per cent in the last three years,
according to FAO estimates, Indian production has increased by 4 per cent. The milk
production in India accounts for more than 13% of the total world output and 57% of
total Asia's production. The top five milk producing nations in the world are India
,USA, Russia, Germany and France.Although milk production has grown at a fast
pace during the last three decades (courtesy: Operation Flood), milk yield per animal
is very low.
BES Group of Institutions (GVIC), Angallu 1BES Group of Institutions (GVIC),

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The main reasons for the low yield are
Lack of use of scientific practices in milching.
Inadequate availability of fodder in all seasons.
Unavailability of veterinary health services.
MILK YIELD COMPARISON:

Country
Milk Yield (Kgs

per year)
USA
7002
UK
5417
Canada
5348
New Zealand
2976
Pakistan
1052
India
795
World (Average)
2021
Source: Export prospects for agro-based industries, World Trade Centre, Mumbai.
MARKET SIZE AND GROWTH:

Market size for milk (sold in loose/ packaged form) is estimated to be 36mn
MT valued at Rs470bn. The market is currently growing at round 4% pa in volume
terms. The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan,
Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The
manufacturing of milk products is concentrated in these milk surplus States. The top 6
states viz. Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan, Tamil Nadu and
Gujarat together account for 58% of national production.
Milk production grew by a mere 1% pa between 1947 and 1970. Since the
early 70's, under Operation Flood, production growth increased significantly
averaging over 5% pa.About 75% of milk is consumed at the household level which is
not a part of commercial dairy industry. Loose milk has a larger market in India as it

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is perceived to be fresh by most consumers. In reality however, it poses a higher risk
of adulteration and contamination.
The production of milk products, i.e. milk products including infant milk food,
malted food, condensed milk & cheese stood at 3.07 lakh MT in 1999. Production of
milk powder including infant milk-food has risen to 2.25 lakh MT in 1999, whereas
that of malted food is at 65000 MT. Cheese and condensed milk production stands at
5000 and 11000 MT respectively in the same year.
PRODUCTION OF MILK IN INDIA

Year
Production in million MT
1988-89
48.4
1989-90
51.4
1990-91
53.7
1991-92
56.3
1992-93
58.6
1993-94
61.2
1994-95
63.5
1995-96
65
1996-97
68.5
1997-98
70.8
1998-99
74.7
1999-00(E)
78.1
2000-01(T)
81.0
E= Estimated
T= Target expected

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MAJOR PLAYERS
The packaged milk segment is dominated by the dairy cooperatives. Gujarat
Co-operative Milk Marketing Federation (GCMMF) is the largest player. All other
local dairy cooperatives have their local brands (For e.g. Gokul, Warana in
Maharashtra, Saras in Rajasthan, Verka in Punjab, Vijaya in Andhra Pradesh, Aavin in
Tamil Nadu, etc). Other private players include J K Dairy, Heritage Foods, Indiana
Dairy, Dairy Specialties, etc. Amrut Industries, once a leading player in the sector has
turned bankrupt and is facing liquidation.
PACKAGING TECHNOLOGY
Milk was initially sold door-to-door by the local milkman. When the dairy cooperatives initially started marketing branded milk, it was sold in glass bottles sealed
with foil. Over the years, several developments in packaging media have taken place.
In the early 80's, plastic pouches replaced the bottles. Plastic pouches made
transportation and storage very convenient, besides reducing costs. Milk packed in
plastic pouches/bottles have a shelf life of just 1-2 days, that too only if refrigerated.
In 1996, Tetra Packs were introduced in India. Tetra Packs are aseptic laminate packs
made of aluminum, paper, board and plastic.
Milk stored in tetra packs and treated under Ultra High Temperature (UHT)
technique can be stored for four months without refrigeration. Most of the dairy cooperatives in Andhra Pradesh, Tamil Nadu, Punjab and Rajasthan sell milk in tetra
packs. However tetra packed milk is costlier by Rs5-7 compared to plastic pouches. In
1999-00 Nestle launched its UHT milk. Amul too re-launched its Amul Taaza brand of
UHT milk. The UHT milk market is expected to grow at a rate of more than 10-12%
in coming years
EXPORT POTENTIAL
India has the potential to become one of the leading players in milk and milk
product exports. Location advantage: India is located amidst major milk deficit
countries in Asia and Africa. Major importers of milk and milk products are

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Bangladesh, China, Hong Kong, Singapore, Thailand, Malaysia, Philippines, Japan,
UAE, Oman and other gulf countries, all located close to India.
LOW COST OF PRODUCTION:

Milk production is scale insensitive and labor intensive. Due to low labor cost,
cost of production of milk is significantly lower in India. Concerns in export
competitiveness are.
QUALITY:
Significant investment has to be made in milk procurement, equipments,
chilling and refrigeration facilities. Also, training has to be imparted to improve the
quality to bring it up to international standards.
PRODUCTIVITY:
To have an exportable surplus in the long-term and also to maintain cost
competitiveness, it is imperative to improve productivity of Indian cattle. There is a
vast market for the export of traditional milk products such as ghee, panzer,
shrikhand, rasgolas and other ethnic sweets to the large number of Indians scattered
all over the world.
SWOT ANALYSIS
Strength
Largest milk producer in the
Poor feeding practices
world
Poor access to institutional
A huge base of around 11

million farmers
Weakness
credit
Lack of cold storage facilities
Traditional emphasis on
consumption
Opportunity
Threat

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Elastic demand; economic
Nearly 80 per cent of the Indian
growth will spur demand
dairy industry is unorganized
Increasing preference for
Removal of import duty has led
branded dairy products
to the threat of dumping
Growing focus on health and

nutrients in urban market
INDIA'S EXPORTS OF MILK PRODUCTS

Description
1995-96
(Quantity, M T.:
Value, Rs. Million) Quantity Value
1996-97
1997-98
Quantity Value Quantity
Value
Skimmed milk
powder
4,638.62
3,35.32
282.70
19.64
5.00
0.375
Milk and Milk Food

for babies
8.27
2.019
111.37
4.27
11.00
2.02
Milk cream
332.23
28.04
1.00
0.084
Sweetened
condensed milk
41.73
2.84
9.22
0.97
60.39
7.22
Whey
78.46
3.75
11.50
1.01
6.00
0.342
Ghee/Butter/Butter
oil
7,895.08
431.1
299.97
19.2
4,352.08
2,38.95
Cheese
(a) Fresh
0.10
0.013
(b) Processed
5.67
1.20
2.1
0.375
22.10
2.19
(c) Other
66.64
8.35
36.78
0.69
24.84
4.55
TOTAL
8,72.7
52.4
2,55.6
KEY FACTS
65 per cent of the milk is sold in loose form
Only 5 per cent of the milk is sold through retail chains
70 per cent is delivered to the homes by milk agents
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Carton milk or packaged milk has been growing at 24 per cent annually
Most branded FMCG companies are keen on launching flavoured dairy
products whose market size is pegged at US$ 166 million
CRITICAL ISSUES
Key success factors
Liquid milk
Sourcing
Distribution
Packaged
milk
Technology
Milk products
Branding
Refrigeration
Education
Marketing
Infant mil
Business concerns
Demand drivers
Financial distress
of co-operatives
Packaging in
smaller units
Small
size
Convenience
Health
concerns
market
Inadequate
infrastructure
Increase in per
capita income
Poor penetration
Changing food
habits
REGULATORY CHANGES
Dairy sector was de-licensed in 1991
No industrial license is required fro dairy industry
Foreign equity participation permitted to the extent of 51 per cent in dairy
processing sector
Excise duty on dairy machinery has been fully waived off
KEY LEGISLATIONS:
Milk and Milk Products Order 1992: With following controls
Collection areas/milk sheds specified
Processing capacity fixed
Revised MMPO in 2002: Controls stand withdrawn

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The production, distribution and supply of milk products are controlled by the
Milk and Milk Products Order, 1992. The order sets sanitary requirements for dairies,
machinery, and premises, and includes quality control, certification, packing, marking
and labeling standards for milk and milk products.
The Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of
Production, Supply and Distribution) Act, 1992 and Rules 1993

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COMPANY PROFILE
JERSEY CREAMLINE DAIRY PRODUCTS LTD:
it is customer centric private dairy employing modern machinery and applying
advanced technologies. It constantly endeavors to give its customers the best products
by way of continuous research and innovation.Creamline, an ISO 22000 accredited
dairy, is a leading manufacturer & supplier of milk and milk products in Southern
India spanning across Andhra Pradesh, Tamilnadu, Karnataka and with a foothold at
Nagpur in Central India. It operates its milk procurement, milk and milk products
processing and distribution through Strategic Business Units (SBUs). Its milk and
dairy products are sold under the popular brand name JERSEY. Since inception, the
company has been growing consistently under the visionary leadership of promoter
directors, business acumen of operational heads and unrelenting efforts of committed
workforce.
The Company entered into strategic partnership with M/s. Godrej Agrovet
Limited, the largest animal feed manufacturing company in the country, in the Year
2005 by offering equity stake of to strengthen its backward integration with farmers,
the primary producers of milk, for compound feed supply. The Company is open to
strategic business tie-ups at national and international level and is looking at export
opportunities to its products. The workforce of the company is composed of a
balanced mixture of technocrats, dairy engineers, production and quality specialists
besides the dedicated top-notch management team overseeing the entire corporate
functioning.
The Company has excellent infrastructure with 30 own and 9 associate milk
chilling centers, 40 BMCUs, 7 packing stations, 6 sales offices and 1 state of the art
powder plant/SBU at Ongole.
It has a combined milk processing capacity of 6.85 lakh liters per day. The
company markets its products through a well laid distribution network comprising of
company owned parlors, exclusive franchise outlets, product push carts. Besides, the
company also sells its products through 5000 agents panning across Southern India
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and Maharashtra. The company has entered the market of cultured products like
Yoghurt, Curd, Lassi and Buttermilk in 2005 and within a short span made its mark in
the dairy market.
Since its incorporation in the year 1986, the company has successfully applied
many innovative practices like 24 hour parlors with unemployed youth in 1993,
mobile milk testing labs in 1998 etc. The company is now planning to expand its
operations to Central India by setting up new Processing & Packaging Units.Jersey
has become a household name for dairy products and continues to create consumers
delight to perfection. Continued support and encouragement of customers including
households, prestigious defense establishments, railways, educational institutions, IT
Companies, star hotels, and hospitals in ever increasing numbers stand testimony to
our superior quality products.

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COMPANY PRODUCTS
MILK
Milk is regarded as the most nearly perfect single food stuff. Today, milk is the
most important single item of human diet, as it is beneficial at all stages of human
growth literally from cradle to grave due to its high nutritive value. Importance of
milk in diet is mainly due to its contribution of high quality protein, its exceptional
richness in Calcium and its general supply of pre-formed Vitamin A and of riboflavin
and other members of B2 complex.Customer priority comes first to us always.
Currently, we process and supply the following range of milk.
MILK PRODUCTS
CURD:
JERSEY curd is prepared with fresh quality milk under the influence of lactic
acid bacteria at around 40oC. The milk, inoculated with bacterial culture, is
hygienically packed in clean food grade plastic cups and sealed by an automated
packing machine prior to incubation. After curd achieved the desirable properties, it is
kept at chilled temperature until delivered to customer. JERSEY curd is a fresh, safe,
hygienic and tasty product which has all nutritious goodness of milk.
JERSEY CURD is available in quantities of 100 g, 200 g, and 500 g with a

shelf life of 7 days at chilled storage conditions
BUTTERMILK
This is an inseparable part of traditional South Indian meal since ages. It is
made from fresh pasteurized standardized milk curd that contains lactic acid bacteria,
diluted along with required amount of spices extracts and salt for added taste. Jeera
powder added for our Jeera flavored Butter Milk.
JERSEY BUTTER MILK is available in two flavors. Regular flavor is
available in 200 ml sachet and Jeera flavor is available in 200 ml plastic container.
The products have a shelf life of 5 days.
LASSI:
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Sweetened Lassi is also the most popular cultured milk beverage. It is
prepared using fresh pasteurized standardized milk curd. Sugar is added and
homogenized to give excellent mouth feel. Lassi contains appreciable amounts of
milk proteins and phospholipids.
FLAVORED MILK
Is made from sterilized double toned milk which consists of 1.5% fat and
9.0% SNF. It is available in different flavors such as badam, strawberry, banana and
chocolate. The sugar is also added to enhance the taste.
JERSEY flavored milk is available in glass bottles of 200 ml and has a shelf
life of 6 months.
GHEE:
This is very popular milk product and is widely consumed with regular meals.
It has unique pleasant flavor and grainy texture. Ghee is pure clarified butter fat with
negligible moisture content. Ghee has high nutritive value with fat-soluble vitamins
(A, D, E & K). It is widely used for shallow and deep-frying of food. Countless Indian
sweetmeats based with cereals, milk solids, fruits and vegetables are cooked in ghee.
JERSEY GHEE is available in 200 g, 500 g, and 1 L packs and has a shelf life
of 3 months. Bulk quantity also available in 15kg tins.Our Ghee also has AGMARK
certification.
COOKING BUTTER:
This is the butter obtained from cream without any additives like salt,
colouring or flavoring agents. It is concentrated form of milk fat. It contains more
than 82% milk fat, 1.5% curd and 16% moisture. It is very high in fat which contains
fat-soluble vitamins A, D, E and K.JERSEY COOKING BUTTER is available in 200
g, 500 g and 1 Kg poly packs. It has a shelf life of one month at deep freeze storage
temperatures.Butter also available in bulk packs in 20 Kg carton form.
PANEER:
It is a healthy, protein-rich food. It is a pure coagulated milk product made
from fresh milk of 6% fat and 9% SNF. Paneer is formed when milk is precipitated by
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adding sour milk, lactic acid or citric acid. It is the most common form of Indian
cheese and is a high protein food. So, panzer is often substituted for meat in Indian
vegetarian cuisine.
Panzer is packed and sold in 200 g, 500 g and 1 Kg poly packs. It has a shelf
life of 1 month.
DOODH PEDALS:
it is a desiccated sweetened product made from fresh milk and contains 45%
milk solids and 35% sugar. It is slightly brownish white in colour and has coarse
grainy structure. The product is hygienically packed. Doodhpeda is a nutritious
product with delicious taste and having a shelf life of 7 days.
BASUNDI:
It is a popular milk delicacy served on special occasions. It is prepared from
fresh milk with 6% Fat and 9% SNF. Milk is precipitated with a gentle heating
continuously scooping out the skim and adding sugar. JERSEY Burundi is packed in
attractive food grade plastic containers and has a shelf life of 7 days.
ICE CREAMS
There are certain things in life that are sheer delight to the soul and add
meaning to our existence. These go beyond the limits of age and are cherished and
adored by everybody. Ice creams certainly are among those finer things in life. Ice
cream is a power pack of nutrients. It is the most palatable source of milk proteins and
a rich source of calcium, phosphorous and other minerals vital in building strong
bones and teeth. Ice cream is also an excellent source of food energy. Having twice or
three times the fat content of milk, and more than half its total solids being sugar
(sucrose and lactose) the energy value of ice cream is very high. That makes ice
cream a very desirable food for growing children and persons who need to put on
weight.
Jersey brand of exotic ice creams are made of fresh milk based fats and are
brought to you by Creamline Dairy. A preferred choice of every connoisseur of fine
taste, what really makes the difference is the processes that are adopted at Creamline
to make our products endearing to everybody. Utmost care is taken to ensure the
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highest level of hygiene and superlative efforts are made to create the flavors which
make you to coming back to Jersey again and again.Now that is the reason why we
caution you eating Jersey Ice Cream can be addictive. Just try once and see for
yourself.
COMPANY FOOD SAFETY POLICY

We at CDPL are committed to provide safe and nutritious Milk & Milk
products to our customers that comply with all the legal and regulatory requirements,
by adopting good manufacturing practices and good hygiene practices.We are
committed for continual improvement of our food safety management system, aiming
at customer satisfaction & delight and endeavor to become a global player.To this
effect we communicate, implement and maintain the requirements of the food safety
throughout the food chain.
COMPANY TAGLINE
Health- Fun-Excitement
COMPANY VISION, MISSION & VALUES

VISION
To emerge as a Leader in Dairy Foods with Global Presence through Business
Excellence and ensuring Customer Delight
MISSION
To grow continuously, offering value added Dairy Products and gain customers
confidence through Innovative Practices

VALUES
We act with a sense of pride adopting ethical practices and compassionate approach

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COMPANY AWARDS AND REWARDS

Won best vendor in hospitality sector award by Taj group in 2004.
Accredited with ISO 9001 certification in 2002.
Won best entrepreneur of the year 2001 award from Hyderabad management
association.
Entered in to strategic partnership with Godrej Agrovet limited.
BOARD OF DIRECTORS
CDPL has the advantage of being run by industry professionals since
incorporation in the year 1986. It is first generation entrepreneurial company
Managing Director Mr. K. Bhasker Reddy,
Director Finance Mr. M. Gangadhar,
Director Technical Mr. D. Chandrasekhar Reddy,
Executive Director Mr. C. BalrajGoud and Mr. SrinathShettkar.
The members have substantial experience in their respective fields such as
Dairy Technology, Finance, Marketing and HR & Administration.
MAJOR COMPETITORS
Vijaya milk dairy

Dodla milk dairy
Heritage milk products
Tirumala milk products

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RATIO ANALYSIS
INTRODUCTION
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationship between the items of the
balance sheet and profit and loss account. Management should be particularly
interested in knowing financial strengths and weaknesses of the firm to their their
suitable corrective actions.
Financial analysis is the starting point for marking plans, before using any
sophisticated forecasting and planning procedures.
NATURE OF RATIO ANALYSIS:

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Ratio analysis is a powerful tool of financial analysis. A ratio is defined as
The indicated quotient of mathematical expression and as the relationship between
two or more things. A ratio is used as benchmark for evaluating the financial position
and performance of firm. The relationship between two accounting figures, expressed
mathematically, is known as a financial ratio. Ratios help to summaries large
quantities of financial data and to make qualitative judgment about the firms financial
performance.
The persons interested in the analysis of financial statements can be grouped
under three heads owners (or) investors who are desire primarily a basis for
estimating earning capacity. Creditors who are concerned primarily with liquidity and
ability to pay interest and redeem loan within a specified period. Management is
interested in evolving analytical tools that will measure costs, efficiency, liquidity and
profitability with a view to make intelligent decisions.
STANDARDS OF COMPARISION:
The ratio analysis involves comparisons for a useful interpretation of the
financial statements. A single ratio in itself does not indicate favorable or unfavorable
condition.
It should be compared with some standard. Standards of comparison may
consist of:
PAST RATIOS:
Ratios calculated from the past financial statements of the same firm.
COMPETITIONS RATIOS:
Ratios of some selected firms, especially the most progressive and successful
competitor, at the same point of time.
INDUSTRY RATIOS:
The easiest way to evaluate the performance of a firm is to compare its present
ratios with past ratios. When financial ratios over a period of time are compared, it is
known as the series analysis or trend analysis.
CROSS SECTIONAL ANALYSIS:

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Another way to comparison is to compare ratios of one firm with some
selected firm in the industry at the same point in time. This kind of comparison is
known as the cross-sectional analysis.
INDUSTRY ANALYSIS:
To determine the financial condition and performance of a firm, its ratio may
be compared with average ratios of the industry of which the firm is a member. This
type of analysis is known as Industry analysis.
PROFORMA ANALYSIS:
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by properly establishing relationship between the items of the
balance sheet and the profit & loss account. Financial analysis can be undertaken by
management of the firm, or by parties outside the firm, viz., owners, creditors,
investors and others. The nature of analysis will differ depending on the purpose of
the analyst.
Trade creditors are interested in firms ability to meet claims over a very short
period of time. Their analysis will, therefore, confine to the evaluation of the
firms liquidity position.
Suppliers of Long-Term Debt are concerned with the firms long term
solvency and survival. They analyze the firms profitability over time, its ability
to generate cash to be able to pay interest and repay Ratio analysis principal and
the relationship between various sources of fund.
Long term creditors do
analyze the historical financial statements, but they place more emphasis on the
firms projected or pro forma, financial statements to make analysis about its
future solvency and profitability.
Investors, who have invested their money in the firms shares, are most
concerned about the firms that show steady growth in earnings. As such, they
concentrate on the analysis of the firms present and future profitability. They
also interested in the firms financial structure to the extent it influence the
firms earnings ability and risk.

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Management of the firm would be interested in every aspect of the financial
analysis. It is their overall responsibility to see that the resources of the firm are
used most effectively, and the firms financial condition is sound.
UTILITY OF RATIO ANALYSIS:

The ratio analysis is the most powerful tool of the financial analysis. As stated
in the beginning, many diverse groups of people are interested in analyzing the
financial information to indicate the operating and financial efficiency, and growth of
the firm. These people use ratios to determine those financial characteristics of the
firm in which they are interested. With the help of ratios, one can determine:
The ability of the meet its current obligations.
The extent to which the firm has used its long-term solvency by borrowings
funds.
The efficiency with which the is firm is utilizing its assets in generating sales
revenue.
The overall operating efficiency and performance of the firm.
Utility of Share holders/Investors:

Utility to creditors
Utility to employees
Utility to Government
Uses of Ratio Analysis:
Ratio analysis is one of the most powerful tools of financial statements. Ratio
analysis will be used to know the financial position in different purpose. Ratio
analysis uses the some functions of Banks, institutions, investors, shareholders and
management.
Managerial uses of Ratio Analysis:
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Helps in decision making
Helps in financial forecasting and planning
Helps in communicating
Helps in coordination
Helps in control
LIMITATIONS OF RATIOS:
The above discussion reveals that ratios are exceptionally useful tools.
However, they should be used with extreme care as they suffer from certain serious
drawbacks. Some of them are listed below.
1. False Results: Ratios are based upon the financial statements. Incase financial
statements are incorrect or the data upon which ratios are based is incorrect,
ratios calculated will also be false and defective. The accounting system itself
suffers from many inherent weaknesses, so the ratios base upon it cannot be
said to be always reliable.
2. Limited Comparability: The ratio of the one firm cannot always be
compared with the performance of other firm, it uniform accounting policies
are not adopted by them. The difference in the methods of calculation of stock
or the methods used to record the depreciation on assets will not provide
identical data, so they cannot be compared.
3. Price level changes affect ratios: The comparability of ratios suffers, if the
price of the commodities in two different years is not the same change in price
affects the cost of production, sales and also the value of assets. It means that
the ratio will be meaningful for comparisons, if the prices do not change.
4. No single standard ratio: There is not a single standard ratio which can
indicate the true performance of the business at all time and in all
circumstances. Every form has to work in different situations and
circumstances, so a particular ratio cannot be supposed to be standard for
everyone. Strikes, lock-outs, floods, wars etc., materially affect the
performance, so it cannot be matched with the circumstances in normal days.
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5. Ignoring qualitative factors: Ratio analysis is the quantitative measurement
of the performance of the business. It ignores the qualitative aspect of the firm,
how so ever important it may be. It shows that ratio is only a one sided
approach to measure the efficiency of the business.
CLASSIFICATION OF RATIOS:
So many ratios, calculated from the accounting data can be grouped into
various according to financial activity or function to be evaluated. The parties
interested in financial analysis are short and long creditors, owners and management.
Short-term creditors main interest is in the liquidity position or the short-term
solvency of the firm. Long term creditors are interested in long-term solvency and
profitability of the firm. Owners concentrate on the firms profitability and financial
condition. Management is interested in evaluating every aspect of the firms
performance. In view of the requirement of the various users of ratios, we may
classify them into the following four important categories.
LIQUIDITY RATIOS
LEVERAGE RATIOS
ACTIVITY RATIOS
PROFITABILITY RATIOS
LIQUDITY RATIOS:
Liquidity ratios measure the ability of the firm to meet its obligations.
Liquidity ratios help in establishing a relationship between cash and other current
assets to current obligations to provide a quick measure of liquidity. A firm should
ensure that it does not have excess liquidity. A very high degree of liquidity is also
bad, idle assets earn nothing. The firms funds will be unnecessarily tied up in current
assets. Therefore it is necessary to strike a proper balance between high liquidity.
CURRENT RATIO
QUICK RATIO
CASH OR QUICK RATIO
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NET WORKING CAPITAL RATIO
LEVERAGE RATIOS:
The short-term creditors, like bankers and suppliers of raw material, are more
concerned with the firms current debt-paying ability. On the other hand, long-term
creditors like debenture holders, financial institutions are more concerned with the
firms long-term financial strength. To judge the long-term financial position of the
firm, financial leverage, or capital structure, ratios are calculated. These ratios indicate
mix of funds provided by owners and lenders. There should be an appropriate mix of
dent and owners equity in financing the firms assets.
The process of magnifying the share holders return though the use of debt is
called financial leverage or financial gearing or trading on equity.
Leverage ratios are calculated to measure the financial risk and the firms
ability to using dent to share holders advantage.
DEBT RATIO
DEBT EQUITY RATIO
INTREST COVERAGE RATIO
PROPRIETIRY RATIO
ACTIVITY RATIOS:
Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilities its assets. These ratios are also called turnover ratios because
they indicate the speed with which assets are being converted or turned over into
sales. Activity ratios thus involve a relationship between sales and assets. A proper
balance between sales and assets generally reflects that assets are managed well.
Activity ratios help to judge the effectiveness of asset utilization
INVENTORY TURNOVER RATIO
DEBTORS TURNOVER RATIO

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COLLECTION PERIOD
TOTAL ASSETS TURNOVER RATIO
NET ASSETS TURNOVER RATIO
FIXED ASSETS TURNOVER RATIO
CURRENT ASSETS TURNOVER RATIO
WORKING CAPITAL TURNOVER RATIO
PROFITABILITY RATIOS:
A company should earn profits to survive and grow over along 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 maximizing profits. Profit is the
difference between revenues and expenses over a period of time. Profitability ratios
are calculated to measure the operating efficiency of the company.
Besides
management of the company, creditors want to get interest and repayment of principal
regularly. Generally, two major types of profitability ratios are calculated.
GROSS PROFIT MARGIN
NET PROFIT MARGIN
OPERATING EXPENSES RATIO
RETURN ON INVESTMENT
RETURN ON EQUITY
EARNINGS PERSHARE
DIVIDENDS PER SHARE
DIVIDEND PAYOUT RATIO
LIQUIDITY RATIOS:
1. CURRENT RATIO:

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Ratio Analysis
The current ratio is an acceptable measure of the firms short term solvency.
Current assets include cash within a year, such as marketable securities, debtors and
inventories. Prepaid expenses are also included in current in current assets as they
represent the payments that will not be made by the firm in the future. All the
obligations maturing with in a year are included in current liabilities.
Current
liabilities included creditors, bill payable, accrued expenses, short-term bank loan,
income-tax liability and long-term debt maturing in the current year.
The current ratio is a measure of the firms short-term solvency. It indicates
the availability of current assets in rupees for every one rupee of current liability. A
current ratio of 2:1 is considered satisfactory. The higher the current ratio, the greater
the margin of safety; the larger the amount of current assets in relation to current
liabilities, the more
The firms ability to meet its obligations. It is a crude-and-quick measure of the firms
liquidity.
Current ratio is calculated by dividing current assets and current liabilities.
Current Assets
Current Ratio=
Current Liabilities
2. QUICK RATIO:
Quick ratio establishes a relationship between quick, or liquid, assets and
current liabilities. An asset is liquid if it can be converted into cash immediately or
reasonably soon without a loss of value. Cash is the most liquid asset, other assets
which are considered to be relatively liquid assets, other assets which are considered
to be relatively liquid and included in quick assets are debtors and receivables and
marketable securities (temporary quoted investments) Inventories are considered to be
less liquid. Inventories normally require some time for realizing into cash; their Value
also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets
by current liabilities.
Quick Assets
Quick Ratio=
Quick liabilities
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Ratio Analysis
3. CASH RATIO:
Since cash is the most liquid asset, a financial analyst may examine cash ratio
and its equivalent current liabilities. Trade investment or marketable securities are
equivalent of cash; therefore, they may be included in the computation of cash ratio.
If the company carries a small amount of cash there is nothing to be worried
about the lack of cash if cash if the company has reserves borrowing power. In India,
firms have credit limits sanctioned from banks, and easily draw cash. Cash ratio is
calculated as cash marketable securities divided by current liabilities.
Cash+Marketable Securities
Cash Ratio=
Current liabilities
4. NETWORKING CAPITAL RATIO:
The difference between the current assets and current liabilities excluding
short-term bank borrowings is called networking capital or net current assets.
Net Working Capital

Net working capital ratio=
Net Assets
Sometimes it is used to measure firms liquidity. If the firm is having NWC
has the greater ability to meet its current obligations.
LEVERAGE RATIOS:
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Ratio Analysis
1. DEBT RATIO:
Several debt ratios may be used to analyze the long-term solvency of a firm.
The firm may be interested in knowing the proportion of the interest-bearing debt
(also called funded debt) in the capita structure. It may be, therefore, computer debt
ratio Ratio analysis by dividing total debt by capital employed or net assets. Total
debt will include short and long-term borrowings from financial institutions,
debentures/bonds, deferred payment arrangements for buying capital equipments,
bank borrowings, public deposits and any other interest bearing loan.
Capital
employed will include total debt and net worth.

Total Debt
Debt Ratio =
Total Debt + Net worth
A high ratio means that claims of creditors are greater than those of owner. A
high level of debt introduces inflexibility in the firms operations due to the increasing
interference and pressure from creditors.
2. DEBT EQUITY RATIO:
Debt equity ratio indicates the relationship describing the lenders contribution
for each rupee of the owners contribution is called debit-equity ratio. Debt equity
ratio is directly computed by dividing total debt by net worth. Lower the debt-equity
ratio higher the degree of protection. A debt ratio of 2:1 is considered ideal.
Total Debt
Debt-Equity Ratio=
Net worth

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Ratio Analysis
3. INTEREST COVERAGE RATIO:
This ratio is determined by debiting profit before interest charges. In this the
lender will be interested in finding out whether the business would earn sufficient
profit to pay the interest charges. Interest being paid periodically.
EBIT
Interest Coverage Ratio=
Interest
4. TOTAL LIABILITIES RATIO:
Total liabilities ratio indicated the relationship between total assets and total
liabilities.
In this we know the wealth of the organization and satisfying the
shareholders.
Total liabilities
Total liabilities Ratio =
Total Assets
ACTIVITY RATIOS:
Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called turnover ratios because
they indicate the speed with which assets are being converted or turned over into
sales. Activity ratios thus involve a relationship between sales and assets. A proper
balance between sales and assets generally reflects that assets are managed well.
Activity ratios help to judge the effectiveness of asset utilization.
1. INVENTORY TURNOVER RATIO:
Inventory turnover indicates the efficiency of the firm in producing and selling
its product.
It is calculated by dividing the cost of goods sold by the average
inventory.
2. DEBTORS OR ACCOUNTS RECEIVABLE TURNOVER RATIO:
A firm sells goods for cash and credit. Credit is used as marketing tool by a
number of companies. When the firm extends credits to its customers, debtors are
created in the firms account. Debtors turnover indicates the number of times debtors
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Ratio Analysis
Ratio Analysis
turnover each year. The higher the value of debtors turnover, the more efficient is ht
management of credit. Debtors turnover is found out by dividing credit sales by
average debtors.
Credit sales
Debtors Turnover Ratio =
Average debtors
3. COLLECTION PERIOD:
The average number of days for which debtors remain outstanding is called
period in other words its debtors remains outstanding for 12 months. The average
collection period measures the quality of debtors since it indicates the speed of their
collection.
Debtors
Collection Period =
X 360
Sales
4. NET ASSETS TURN OVER RATIO:

Assets are used to generate sales therefore a firm should manage its assets
efficiently to maximize sales. The relationship between sales and assets is called
assets turnover. A firms ability to produce a large volume of sales for a given amount
of net assets is the most important aspect of its operating performance.
Sales
Net Assets Turnover Ratio =
Net Assets
5. TOTAL ASSETS TURNOVER RATIO:
Some analysts like to compute the total assets turnover in addition to or

instead of the net assets turnover. This ratio shows the firms ability in generating
sales from all financial resources committed to total assets.
Sales
Total Assets Turnover Ratio =
Total Assets
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Ratio Analysis
6. FIXED ASSETS TURNOVER RATIO:
The firm wishes to know its efficiency of utilizing fixed assets and current
assets separately. The use of depreciated value of fixed assets in computing the fixed
assets turnover may render comparison of firms performance over period or with
other firms.
Sales
Fixed Turnover Ratio=
Fixed Assets
7. WORKING CAPITAL TURNOVER RATIO:
A firm may also like to relate net current assets or net working capital to sales.
Working capital turnover ratio indicates for one rupee of sales the company needs
how many net current assets. This ratio indicates whether or not working capital has
been effectively utilized in market sales.
Sales
Working Capital Turnover Ratio =
Net Current Assets

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Ratio Analysis
PROFITABILITY RATIOS:
A company should earn profits to survive and 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 maximizing profits. Profit is the
difference between revenues and expenses over a period of time. Profitability ratios
are calculated to measure the operating efficiency of the company.
Besides management of the firm. Creditors want to get interest and repayment
of principal regularly.
Generally, two major types of profitability ratios are calculated:
Profitability in relation to sales
Profitability in relation to investment
1. GROSS PROFIT MARGIN:

The first profitability ratio in relation to sales is the gross profit margin the
gross profit margin reflects the efficiency with which management produces each unit
of product. This ratio indicates the average speed between the cost of goods sold and
the sales revenue. When we subtract the gross profit margin from 100percent, we
obtain the ratio of cost of goods sold to sales. A high gross profit margin ratio is a
sigh of good management. A gross margin ratio may increase due to any of the
following factors: higher sales prices cost of goods sold remaining constant, lower
cost of goods sold, sales prices remaining constant. A low gross profit margin may
reflect higher cost of goods sold due to the firms inability to purchase raw materials
at favorable terms. Inefficient utilization of plant and machinery, or over investment
in plant and machinery, resulting in higher cost of due to fall in prices in the market.
Sales-cost of goods sold

Gross profit margin =
Sales
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Ratio Analysis
2. NET PROFIT MARGIN:

Net profit is obtained when operating expenses, interest and taxes are
subtracted from the gross profit. Net profit margin ratio establishes a relationship
between net profit and sales and indicates managements efficiency in manufacturing,
administering and selling the products. This ratio is the overall measure of the firms
ability to turn each rupee sales into net profit.
This ratio also indicates the firms capacity to withstand adverse economic
conditions. A firm with a high net margin ratio would be in an advantageous position
to survive in the face of falling selling price, rising cost of production or declining
demand for the product.
Profit after tax
Net profit margin =
Sales
3. OPERATING EXPENSES RATIO:
The operating expenses ratio explains the changes in the profit margin ratio. A
higher operating expenses ratio is unfavorable factors, internal factors. The ratio is
computed by dividing operating expenses by sales. Operating expenses=cost of goods
sold plus selling expenses and general administrative expenses by sales.
Operating Expanses
Operating Expenses Ratio =
Sales

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Ratio Analysis
4. RETURN ON INVESTMENT:
The term investment may refer to total assets or net assets.
The fund
employed in net assets is known as capital employed. Investment represent pool of a

funds supplied by shareholders and lenders. Net assets equal net equal net fixed
assets plus current assets amounts current liabilities excluding band loans.
Alternatively, capital employed is equal to net worth plus total debt.
The conventional approach of calculating return on investment is to divide
profit after tax by investment. Where on net assets. RONA is equivalent of return on
capital employed.
EBIT
Return on Investment =
Capital employed
5. RETURN ON EQUITY (ROE):
A return on shareholders equity is calculated to the profitability of owners
investment. ROE indicates how well they have used the resources of owners. The
ration is the most important relationships in financial analysis.
The earning of
satisfactory return is the most desirable objective of a business. The ratio of net profit
to owners equity reflects the extent to which this objective has been accomplished.
This ratio is great invested to the present as well as prospective shareholders and of
great concern to management which has the responsibility of maximizing the owners
welfare.
Profit after Taxes
Return of Equity =
Net worth
6. EARNING PER SHARE (EPS):

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The profitability of the common shareholders investment can also measure in
many other ways. One measure is to calculate the earnings per share. Earnings per
share indicate whether or not the firms earnings power on per share has increased or
not. Earnings per share simply show the profitability of the firm on a per share basis.
It does. Net reflect how much is paid as dividend and how much is retained in the
business. But, as profitability index, it is valuable and widely used ratio. It also helps
in estimating the companys capacity to pay dividend to its equity shareholders. It is
calculated by dividing profit after taxes by the total number of shares outstanding.
Profit after Tax
Earning Per Share =
Number of Shares
7. DIVIDENDS PER SHARE (DPS):
The net profits after taxes belong to shareholders. But the income which they
really receive is the amount of earnings distributed as cash dividends. A large number
of present and potential investors may be interest in DPS, rather than EPS. Dividend
per share is earnings distributed to ordinary shareholders dividend by the number of
ordinary share outstanding.
Dividend
Dividend per Share =
Number of shares
8. DIVIDEND PAYOUT RATIO:
A firms dividend policy has the effect of dividing its earnings into two parts
retained earnings and dividend. The retained earnings provide funds to finance the
firms long term growth. It is the most significant source of financing a firms
investment. Dividend policy of the firm has its effect on both the long term financing
and the wealth of shareholders.
Dividend per Share
Dividend Payout Ratio =
Earning Per Share

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Ratio Analysis
8. PRICE EARNINGS RATIO:

The price earning ratio is widely used by security analysis to value the firms
performance as expected by investors judgment or expectations about the firms
performance. Management is also interest in this market appraisal of the firms
performance and will take to find the cause if the P/E ratio declines. Price earnings
ratio reflects investors expectations the growth in the firms earnings. Industries
differ in their growth prospects.
Market Value per Share
Price Earnings Ratio =
Earning Per Share

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Ratio Analysis
RESEARCH METHODOLOGY
Data collection methods
Primary data
Information collected from company guide and finance manager of the
company.
Secondary data
Company balance sheet and profit and loss account of the company.
Sample size
The data of the companys profits and loss accounts, balance sheets is
collected for 4 years.
Data Analysis
Through Ratio analysis simple percentages and different types of graphs are
used.
Financial management is responsible for maintain not only the credit storing
of enterprise but also for generating the right amount of funds of the right time. It
plays an extremely crucial role in the continuity and growth of a business. No
business con is procured, established without adequate financial resources.
Through the availability of finance is of great importance, securing the
required finance from the right source is of prime concern. Improper management of
capital leads not only to loss of profit but also the ultimate failure of the business.
Financial management gas also viewed as an integral part of the over all management
rather than as staff especially concerned with funds raising operations. In other
words, financial management is directly concerned with the over all management of
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Ratio Analysis
Ratio Analysis
an enterprise and taking policy decisions relating to the line of business size of firm,
type of equipment used, extent of debt, liquidity etc,.
Which in turn determine the size of the profitability? Therefore, financial
management assumes a greater significance in any industry.
But by and large business under takings in India have not given due
importance to financial management without any factual information on the financial
management practices it is difficult to evolve norms for sound and efficient financial
management. Hence there is a need for study of financial management practices in
India.
This study is based in the data collected from primary and secondary sources.
Both qualitative and quantitative data relating to the working of company financial
performance and other related aspects were collected from individual company
thorough interview method.
Tools and Techniques of analysis:

The following tools and techniques of financial analysis are used as measures
of judging the degree of efficiency of financial management. The figures of annual
reports have been rounded off to two decimal places in crores of rupees. The analysis
of data is carried out through financial ratio.

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Ratio Analysis
STATEMENT OF THE PROBLEM

Analyzing the financial statements is very important for an organization. So,
my study is the Ratio analysis of Creamlline Diary Products company from 20092012. The study is done to find out whether the company is stable

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Ratio Analysis
OBJECTIVES OF THE STUDY

To analyze the financial performance of Creamlline Diary Products Company.
For drawing conclusions regarding the liquidity position of a firm.
To determine the long-term financial solvency of company though Ratio
analysis.
To analyze the effectiveness in the utilization of assets.
To suggest any measures for improving the financial performance of the
company.

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Ratio Analysis
Ratio Analysis
NEED FOR THE STUDY

Financial forecasting is an integral part of financial planning. Forecasting uses
past data to estimate the future financial requirements. Ratio analysis is a powerful
tool of financial analysis. A ratio is used as a benchmark for evaluating the financial
position and performance of the firm. Ratio helps to summarizes large quantities of
financial data and to make qualitative judgment about the firms financial
performance. With the help of ratios, one can determine.
The ability of the firm to meet its current obligations.
The extent to which the firms has used its long-term solvency by borrowing
funds.
The efficiency with the firm is utilizing its assets in generating sales revenue.
The overall operating efficiency and performance of the form.

Analysis and interpretation of various accounting ratios gives a skilled and
Experience analyst, a better understanding of the financial condition and performance

of the firm.
Thus ratio analysis can assist management in its basic function of forecasting,
planning, coordination, control and communication.

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Ratio Analysis
Ratio Analysis
LIMITATIONS OF THE STUDY

The study is based on the information providing by the organization in the
form of various annual reports and it is not standard.
The stuffy is based on only the balance sheets and profit and loss accounts of
the company and it has its own limitations.
Details analysis could not be carried for the project work because off limited
time span.
Ratio analysis only provides a glimpse of the past performance and forecasts
for future may not be correct since several other factors like market
conditions, management policies etc., affect the future operation.
The ratio facilitates wholly quantitative analysis only. The qualitative factors
which are so important for the successful functioning of the organization are
completely ignored.
Ration analysis suffers from the serious limitations of the statistical concepts
such as determinations of standard for comparison.
Ratio analysis helps in providing only a part of the information needed in the
process of decision-making.

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Ratio Analysis
LIQUIDITY RATIOS:
1. CURRENT RATIO:
The ratio between all current assets and all current liabilities; another way of
expressing liquidity. It is a measure of the firms short-term solvency. It indicates the
availability of current assets in rupee for every one rupee of current liability. A ratio
of greater than one means that the firm has more current assets than current claims
against them.
Current Assets
Current Ratio =
Current liabilities
Year
Current Assets
Current Liabilities
Current Ratio
2011
29741
70096
0.42
2012
214203
139791
1.53
2013
631223
806289
0.78
2014
1169091
1097208
1.07

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Ratio Analysis
Ratio Analysis
Inference:
The standard norm for ratio is 2:1. During the year 2011 the ratio is 0.423 and
it has increased to 1.53 in 2012 and it is decreased to 0.78 in the year 2013 and it has
increased to 1.06 in 2014. Though the ratio above was not standard.
Current ratio
above 1:1 is always considered healthy.

2. CASH RATIO:
The ratio between cash plus marketable securities and current liabilities.
Cash and Bank Balances

Cash Ratio =
Current Liabilities
Year
Cash & Bank Balances
Current Liabilities
Cash Ratio
2011
5470
70096
0.08
2012
113872
139791
0.82
2013
222432
806289
0.28
2014
525410
1097208
0.48

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Ratio Analysis
Ratio Analysis
Inference:
The standard norm for ratio is 1:2. During the year 2011 the rati0 is 0.08 and it
increased to 0.82 in 2012 and it is decreased to 0.28 in the year 2013 and again it
increased to 0.48 in 2014. The above Ratio has been fluctuating continuously.
3. NET WORKING CAPITAL RATIO

The difference between current assets and current liabilities excluding shortterm bank borrowing is called net working capital or net current assets.
Net Working Capital
Net working capital ratio=
Net Assets
Year
Net working Capital
Net assets
Net working capital ratio
2011
40355
94916
0.43
2012
74412
345739
0.22
2013
175066
1422606
0.12

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Ratio Analysis
Ratio Analysis
2014
71883
1244419
0.06
Inference:
During the year 2011 the Net working capital ratio is Negative i.e., (0.43) and
it increased to profit ratio of 0.22 in the year 2012 and again it has decrease to 0.12 in
the year 2013 and it increased to profit ratio of 0.06 in the year 2014. The above ratio
has been fluctuating continuously.
LEVERAGE RATIOS:
4. DEBT RATIO:
If the firm may be interested in knowing the proportion of the interest bearing
debt in the capital structure.
Total Debt
Debt Ratio =
Year
2011
Total Debt
Debt ratio
66500
0.00

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Ratio Analysis
Ratio Analysis
2012
8022
1858022
2013
1168834
2014
4672113
0.004
6194564
0.188
12317280
0.379
Inference:
During the year 2011 the ratio is 0.00 and it was increased to 0.04 in the year
2012 and again it increased to 0.18 in the year 2013 and again it increased to 0.38 in
the year 2014. The ratio has gradually increased year by year. So ratio is satisfactory.
5. DEBT EQUITY RATIO:

Shows the ratio between capital by the owners and the funds provided by the
lenders.
Total Debt
Debt-Equity Ratio=
Net worth
Year
Total Debt
Debt ratio
2011
60500
0.00
2012
8022
1850000
0.004

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Ratio Analysis
Ratio Analysis
2013
1168834
5025730
0.232
2014
4672113
4645167
0.611
Inference:
The standard norm for ratio is 2:1. During the year 2012 the ratio is 0.004 and
it increased to 0.23 in the year 2013 and it again increased to 0.61 in the year 2014.
The ratio above is not standard. So the ratio is not satisfactory.
6. INTEREST COVERAGE RATIO:

The ratio shows the number of times the interest charges are covered by funds
that are ordinary available for their payment.
EBIT
Interest Coverage Ratio=
Interest
Year
EBIT
Interest
Interest coverage ratio

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Ratio Analysis
Ratio Analysis
2011
35650
163
218.17
2012
300437
45478
6.61
2013
2559364
110704
23.12
2014
3568467
76544
46.62
Inference:
During the year 2011 the Interest coverage ratio was Negative i.e., (218.17)
but it improved to (6.61) in 2012 and again it fell to (23.12) in the tear 2013 and it
further fell to (46.62) in the year 2014. This ratio was Negative in all the years. So the
ratio is not satisfactory.
7. TOTAL LIABILITIES RATIO:

Total liabilities ratio indicated the relationship between total assets and total
liabilities.
In this we know the wealth of the organization and satisfying the
shareholders.
Total liabilities
Total liabilities Ratio =
Total Assets
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Ratio Analysis
Total liabilities: Current liabilities+ Secured and unsecured loans.
Total assets: Fixed assets+ Investment+ Current assets.
Year
Total liabilities
Total assets
Total liabilities ratio
2011
70096
94916
0.74
2012
147813
1661659
0.08
2013
1975123
4105485
0.48
2014
5769321
769331
0.80
Inference:
During the year 2011 the ratio is 0.74 and it decreased to 0.08 in the year 2012
and it increased to 0.48 in the year 2013 and again it increased to 0.80 in the year
2014. This ratio has seen fluctuations.
8. PROPRITORY RATIO:
It shows the difference between share holders funds to total tangible funds.
Share holders fund
Proprietary Ratio =
Total Tangible assets
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Ratio Analysis
Year
Share holders fund
Total tangible assets
Proprietary Ratio
2011
60500
59016
1.02
2012
1850000
55676
33.46
2013
5025730
682510
7.36
2014
7645167
69067
110.69
Inference:
During the year 2011 the ratio is 1.03 and it increased to 33.46 in the year
2012 and again it decreased to 7.36 in the year 2013 and again increased to 110.69 in
the year 2014.
ACTIVITY RATIO:
9. FIXED ASSETS TURNOVER RATIO:
The firm may wish to know its efficiency of utilizing fixed assets and current
assets separately. The use of depreciated value of fixed assets in computing the fixed

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Ratio Analysis
assets turnover may render comparison of firms performance over period or with
other firms.
Sales
Fixed Turn over Ratio =
Net Fixed Assets
Year
Sales
Fixed Assets
Ratio
2011
65175
2012
20056
131536
0.152
2013
307858
791383
0.389
2014
1901944
75328
25.24
Inference:
During the ratio year 2011 the ratio is 0 and it increased to 0.15 in the year
2012 and it increased to 0.39 in the year 2013 and it increased to 25.24 in the year
2014. The above ratio has been increasing continuously.
10. CURRENT ASSESTS TURNOVER RATIO:

Current assets turnover ratio shows the ratio between the current assets to
sales.
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Ratio Analysis
Sales
Current Assets Turn Over Ratio =
Current Assets
Year
Sales
Current Assets
Ratio
2011
29741
0.00
2012
20056
214203
0.093
2013
307858
631223
0.487
2014
1901944
1169091
1.626
Inference:
During the year 2012 the ratio is 0.09 and it increased to 0.49 in the year 2013
and again it increased to 1.63 in the year 2014. The ratio was gradually increasing.
11. TOTAL ASSETS TURNOVER RATIO:

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Some analysts like to compute the total assets turnover in addition to or
instead of the net assets turnover. This ratio shows the firms ability in generating
sales from all financial resources committed to total assets.
Sales
Total Assets Turnover Ratio =
Total Assets
Year
Sales
Total Assets
Ratio
2011
94916
0.00
2012
20056
1661659
0.012
2013
307858
4105485
0.074
2014
1901944
7169331
0.265
Inference:
During the year 2012 the ratio was 0.012 and it increased to 0.07 in the year
2013 and again it increased to 0.26 in the year 2014. The ratio has increasing yearby-year.
12. WORKING CAPITAL TURNOVER RATIO:

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A firm may also like to relate net current assets or net working capital to sales.
Working capital turnover indicates for one rupee of sales the company needs how
many net current assets. This ratio indicates where or not working capital has been
effectively utilized market sales.
Sales
Working capital Turn over Ratio =
Net Current Assets
Year
Sales
Working capital
Ratio
2011
40355
0.00
2012
20056
74412
0.269
2013
307858
175066
1.754
2014
1901944
71883
26.45
Inference:
During the year the 2011 the ratio is 0 and it was increased to 0.27 in the year
2012 and it decreased to a negative ratio of 1.76 in the year 2013 and it increased to
26.45 in the year 2014. The above ratio was fluctuating.
13. NET ASSETS TURN OVER RATIO:

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Assets are used to generate sales therefore a firm should manage its assets
efficiently to maximize sales. The relationship between sales and assets is called
assets turnover. A firms ability to produce a large volume of sales for a given amount
of net assets is the most important aspect of its operating performance.
Sales
Net Assets Turnover Ratio =
Net Assets
Year
Sales
Net Assets
Ratio
2011
94916
0.00
2012
20056
345739
0.058
2013
307858
1422606
0.216
2014
1901944
1244419
1.528
Inference:
During the year 2012 the ratio is 0.06 and it increased to 0.22 in the year 2013
and again it increased to 1.53 in the year 2014. This ratio is increasing steadily yearby-year.

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Ratio Analysis
Ratio Analysis
14. CAPITAL TURNOVER RATIO:
The ratio obtains by dividing sales with the capital employed.
Sales
Capital Turn over Ratio =
Capital employed
Year
Sales
Capital employed
Ratio
2011
60500
0.00
2012
20056
1858022
0.010
2013
307858
6194564
0.049
2014
1901944
12317280
0.154
Inference:
During the year 2011 the ratio was 0 and it increase to 0.01 in the year 2012
and again it increased to 0.05 in 2013 and it increased to 0.15 in the year 2014. This
ratio is increasing steadily year-by-year.

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Ratio Analysis
Ratio Analysis
PROFITABILITY RATIO:
15. RETURN ON INVESTMENT:
The conventional approach of calculated ROI to divide to PAT by investment.
EBIT
Return on investment =
Capital employed
Year
Sales
Capital employed
Ratio
2011
35650
60500
-0.754
2012
300473
1858022
-0.161
2013
2559364
6194564
-0.413
2014
3568467
12317280
-0.289
Inference:
During the year 2011 the Return on investment was negative 0.75 and it
improved to 0.16 in the year 2012 and again it fall to 0.41 in the year 2013 and
increased to 0.29 in the year 2014. This ratio was negative in all the years.
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Ratio Analysis
Ratio Analysis
16. RETURN ON EQUITY RATIO:

Determines the rate of return on your investment in the business. As an owner
or shareholder this is one of the most important ratios as it shows the hard fact about
the business are you making enough of a profit to compensate you for the risk of
being in business
EBIT
Return on investment =
Capital employed
Year
Sales
Net worth Ratio (%)
2011
35650
60500
58.97%
2012
300473
1858000
16.24%
2013
2559371
5025730
50.92%
2014
3568467
7645167
46.67%
Inference:
During the year 2011 the ratio is 58.97% and it improved to 16.24% in the
year 2012 and again it fall to 50.92% in the year 2013 and it improved to 46.67% in
the year 2014. This ratio was fluctuating. This ratio was negative in all the years.

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Ratio Analysis
Ratio Analysis
17. EARNING PER SHARE RATIO:

The profitability of the common shareholders investment can also be
measured in many other ways. One measure is to calculate the earning per share.
Earning per share indicates whether or not the firms earnings power on per share
basis. It also helps in estimating the companys capacity to pay dividend to its equity
shareholders.
Profit after Tax
Earnings per Share =
Number of Shares
Year
Sales
Net worth
Ratio (%)
2011
35680000
50000
713.60
2012
300474000
185000000
1.624
2013
2559371000
468500000
5.462
2014
3568467000
702000000
5.083
Inference:
During the year 2011 the earning per share ratio was negative i.e., 713.6 and it
was improved to 1.62 in the year 2012 and again it was fell it 5.46 in the year 2013
and it was improved to 5.08 in the year 2014. This ratio was negative in all the years.
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Ratio Analysis
Ratio Analysis
FINDINGS
Net working capital ratio was negative in the year 2011 and 2014 i.e., 0.43 and
0.12 because current liabilities are more than the current assets.
Interest coverage ratio was negative in all the years.
The proprietary ratio was very high during the year 2014 i.e., 110.69. Because
of total tangible assets was reduced more in that year.
Fixed assets Turnover Ratio was very high in the year 2014 i.e., 25.24 because
the fixed assets was reduced more in 2014.
Working capital turnover ratio was negative in the year 2013 i.e., 1.75 because
current liabilities are more than current assets.
Return on investment ratio was better in 2012 ie.0.16 in compared with all the
years.
Return on Equity ratio was better in 2012 i.e. (16.24%) in compared with all
the years.
Earnings per share Ratio was negative in all the years.
Cash Ratio is get very low.
Because the company is failed in keeping
sufficient cash and bank balances and marketable securities.

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Ratio Analysis
Ratio Analysis
SUGGESTIONS
The Liquidity position of the company is low. It is advised that, the company
has to improve its liquidity position.
The company should increase its coverage ratio to serve long term debts.
As there is decreased in Fixed assets it is advised that the company must take
proper steps to utilize its assets in an optimum manner.
Return on investments is fluctuates every year. The company has to make
efforts in increasing return on investment by reducing its administration and
other expenses.
The company has to increase the profit maximization. By considering the
profit maximization in the company the earning per share, investment and
working capital also increases. Hence, the investors will be invested to invest.
The company should maintain cash and Bank balances. They should invest
the idle cash in Marketable securities or short term investments in shares,
debentures, bonds and other securities.

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Ratio Analysis
Ratio Analysis
CONCULSION
After undertaking the study the financial performance of the company during
the year 2009-2012. It is observed that most of the parameters are according to the
company average and the study is concluded with the observations that more care
should be taken in utilizing the companys assets and also by searching the break-even
at the earliest which will make the organization financially much more stable in the
long run.

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Ratio Analysis
Ratio Analysis
BIBLIOGRAPHY
1. FINANCIAL MANAGEMENT by I.M. Pandey, Vikas Publishing House
Pvt. Ltd., New Delhi, 9th Edition.
2. FINANCIAL MANAGEMENT by M.Y. Khan & P.K.Jain, Tata Mc GrawHill Publishing Company Ltd., New Delhi. 5th Edition.
3. FINANCIAL ACCOUNTING & ANALYSIS by S.P. Jain & K.L. Narang,
Kalyani Publishers, Ludhiana.
4. FUNDAMENTALS OF FINANCIAL MANAGEMENT by Prasanna
Chandra, Tata Mc Graw-Hill Publishing Company Ltd., New Delhi.

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Ratio Analysis
Ratio Analysis

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Ratio Analysis

BES Group of Institutions (GVIC), Angallu 1BES Group of Institutions (GVIC),

The main reasons for the low yield are

Lack of use of scientific practices in milching.

Inadequate availability of fodder in all seasons.

Unavailability of veterinary health services.

MILK YIELD COMPARISON:

Milk Yield (Kgs

MARKET SIZE AND GROWTH:

BES Group of Institutions (GVIC), Angallu 2BES Group of Institutions (GVIC),

PRODUCTION OF MILK IN INDIA

BES Group of Institutions (GVIC), Angallu 3BES Group of Institutions (GVIC),

BES Group of Institutions (GVIC), Angallu 4BES Group of Institutions (GVIC),

LOW COST OF PRODUCTION:

Largest milk producer in the

Poor feeding practices

Poor access to institutional

A huge base of around 11

Lack of cold storage facilities

BES Group of Institutions (GVIC), Angallu 5BES Group of Institutions (GVIC),

Elastic demand; economic

Nearly 80 per cent of the Indian

growth will spur demand

dairy industry is unorganized

Increasing preference for

Removal of import duty has led

branded dairy products

to the threat of dumping

Growing focus on health and

INDIA'S EXPORTS OF MILK PRODUCTS

Quantity Value Quantity

Milk and Milk Food

Collection areas/milk sheds specified

Processing capacity fixed

Revised MMPO in 2002: Controls stand withdrawn

BES Group of Institutions (GVIC), Angallu 8BES Group of Institutions (GVIC),

BES Group of Institutions (GVIC), Angallu 10BES Group of Institutions (GVIC),

JERSEY CURD is available in quantities of 100 g, 200 g, and 500 g with a

COMPANY FOOD SAFETY POLICY

COMPANY VISION, MISSION & VALUES

confidence through Innovative Practices

BES Group of Institutions (GVIC), Angallu 14BES Group of Institutions (GVIC),

COMPANY AWARDS AND REWARDS

Vijaya milk dairy

BES Group of Institutions (GVIC), Angallu 15BES Group of Institutions (GVIC),

NATURE OF RATIO ANALYSIS:

CROSS SECTIONAL ANALYSIS:

Long term creditors do

BES Group of Institutions (GVIC), Angallu 18BES Group of Institutions (GVIC),

UTILITY OF RATIO ANALYSIS:

The ability of the meet its current obligations.

The overall operating efficiency and performance of the firm.

Utility of Share holders/Investors:

BES Group of Institutions (GVIC), Angallu 22BES Group of Institutions (GVIC),

BES Group of Institutions (GVIC), Angallu 23BES Group of Institutions (GVIC),

Net Working Capital

employed will include total debt and net worth.

BES Group of Institutions (GVIC), Angallu 26BES Group of Institutions (GVIC),

In this we know the wealth of the organization and satisfying the

It is calculated by dividing the cost of goods sold by the average

4. NET ASSETS TURN OVER RATIO:

Some analysts like to compute the total assets turnover in addition to or

6. FIXED ASSETS TURNOVER RATIO: