A

TRAINING REPORT

ON

RATIO ANALYSIS OF VITA MILK PLANT

Submitted in Partial Fulfillment of the Requirement for the award of

the
Degree
Of

MASTER OF BUSINESS ADMINISTRATION

CHAUDHARY DEVILAL UNIVERSITY, SIRSA

SUBMITTED TO: - SUBMITTED BY:-

MONIKA
MBA 3RD Sem. (Gen.)

R. NO. 180460210022
 DECLARATION

I Monika here by declare that this summer project report entitled " Ratio
Analysis of Vita Product At Vita Milk Plant ” submitted in partial
fulfillment of the requirements for the award of the degree of Master of
Business Administration to Chaudhary Devilal University, Sirsa is a
record of original work done by me and suggestion as approved by
supervisor are duly incorporated.

Monika

MBA-3RD Sem.
 ACKNOWLEDGMENT

The making of study report does not involve efforts of one single person.
It is possible only because of corporation and contribution of many
minds. Several eminent people have made valuable contribution to this
report through their inputs. I am thankful to each one of them.

To begin with I am thankful to The Sirsa-Distract Co-operative Milk

Producer’s Union ltd. Milk Plant , Sirsa for giving me an opportunity
to do my summer training in the organization. This report is by far the
most significant accomplishment in my post graduation and life , it would
be impossible without people who supported and believe in me.

I have immense pleasure in expressing my sincere sense of gratitude to a

Mr. Deepak for their excellent guidance , constructive criticism and
above all constant encouragement and inspiration which led to successful
completion of this project.

Monika

MBA-3rd sem.
 CONTENTS

Chapter Particular Page no.

No
1 Introduction of the project

Ratio Analysis 1-14

2 Company profile

Vita Milk Plant 15-27

3 Industry profile

Dairy Industry 28-34

4 Summer Training Work 35-48

Conclusion 49-52

Bibliography 53
 CHAPTER -1
INTRODUCTION TO TOPIC
RATIO ANALYSIS

The term “Ratio” refers to the numerical and quantitative relationship between two
items or variables. This relationship can be exposed as
• Percentages
• Fractions
• Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the financial
statements. So that the strengths and weaknesses of a firm, as well as its historical
performance and current financial condition can be determined by ratio analysis,
Ratio reflects a quantitative relationship helps to form a quantitative judgment.
Steps in Ratio Analysis
• The first task of the financial analysis is to select the information relevant to
the decision under consideration from the statements and calculates
appropriate ratios.
• To compare the calculated ratios with the ratios of the same firm relating to the
pas6t or with the industry ratios. It facilitates in assessing success or failure of
the firm.
• Third step is to interpretation, drawing of inferences and report writing
conclusions are drawn after comparison in the shape of report or
recommended courses of action.
Basis or Standards of Comparison
Ratios are relative figures reflecting the relation between variables. They enable
analyst to draw conclusions regarding financial operations. They use of ratios as a tool
of financial analysis involves the comparison with related facts. This is the basis of
ratio analysis. The basis of ratio analysis is of four types.
• Past ratios, calculated from past financial statements of the firm.
• Competitor’s ratio, of the some most progressive and successful competitor
firm at the same point of time.
• Projected ratios, ratios of the future developed from the projected or pro forma
financial statements.

1
Nature of Ratio Analysis
Ratio analysis is a technique of analysis and interpretation of financial statements. It is
the process of establishing and interpreting various ratios for helping in making
certain decisions. It is only a means of understanding of financial strengths and
weaknesses of a firm. There are a number of ratios which can be calculated from the
information given in the financial statements, but the analyst has to select the
appropriate data and calculate only a few appropriate ratios. The following are the
four steps involved in the ratio analysis.
• Selection of relevant data from the financial statements depending upon the
objective of the analysis.
• Calculation of appropriate ratios from the above data.
• Comparison of the calculated ratios with the ratios of the same firm in the
past, or the ratios developed from projected financial statements or the ratios
of some other firms or the comparison with ratios of the industry to which the
firm belongs.
Interpretation of the Ratios
The interpretation of ratios is an important factor. The inherent limitations of ratio
analysis should be kept in mind while interpreting them. The impact of factors such as
price level changes, change in accounting policies, window dressing etc., should also
be kept in mind when attempting to interpret ratios. The interpretation of ratios can be
made in the following ways.
• Single absolute ratio
• Group of ratios
• Historical comparison
• Projected ratios
• Inter-firm comparison

Guidelines or Precautions for Use of Ratios

The calculation of ratios may not be a difficult task but their use is not easy.
Following guidelines or factors may be kept in mind while interpreting various ratios.
• Accuracy of financial statements
• Objective or purpose of analysis
• Selection of ratios
• Use of standards
2
 • Caliber of the analysis
Importance of Ratio Analysis
• Aid to measure general efficiency
• Aid to measure financial solvency
• Aid in forecasting and planning
• Facilitate decision making
• Aid in corrective action
• Aid in intra-firm comparison
• Act as a good communication
• Evaluation of efficiency
• Effective tool
Limitations of Ratio Analysis
• Differences in definitions
• Limitations of accounting records
• Lack of proper standards
• No allowances for price level changes
• Changes in accounting procedures
• Quantitative factors are ignored
• Limited use of single ratio
• Background is over looked
• Limited use
• Personal bias

CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are different
parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Various accounting ratios can be classified as follows:
• Traditional Classification
• Functional Classification
• Significance ratios

1. Traditional Classification

3
 • Balance sheet (or) position statement ratio: They deal with the relationship
between two balance sheet items, e.g. the ratio of current assets to current
liabilities etc., both the items must, however, pertain to the same balance sheet.
• Profit & loss account (or) revenue statement ratios: These ratios deal with the
relationship between two profit & loss account items, e.g. the ratio of gross
profit to sales etc.,
• Composite (or) inter statement ratios: These ratios exhibit the relation between
a profit & loss account or income statement item and a balance sheet items,
e.g. stock turnover ratio, or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios
and profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and
secondary ratios. The primary ratio is one, which is of the prime importance to a
concern. The other ratios that support the primary ratio are called secondary ratios.
In The View of Functional Classification the Ratios Are
• Liquidity ratio
• Leverage ratio
• Activity ratio
• Profitability ratio
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when
there becomes due. The short term obligations of a firm can be met only when there
are sufficient liquid assets. The short term obligations are met by realizing amounts
from current, floating (or) circulating assets The current assets should either be
calculated liquid (or) near liquidity. They should be convertible into cash for paying
obligations of short term nature. The sufficiency (or) insufficiency of current assets
should be assessed by comparing them with short-term current liabilities. If current
assets can pay off current liabilities, then liquidity position will be satisfactory.

To measure the liquidity of a firm the following ratios can be calculated

• Current ratio

4
 • Quick (or) Acid-test (or) Liquid ratio
• Absolute liquid ratio (or) Cash position ratio

(a) CURRENT RATIO:

Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio also known as Working capital ratio. Working capital ratio is a
measure of general liquidity and is most widely used to make the analysis of a short-
term financial position (or) liquidity of a firm.

Current Assets
Current Ratio = Current Liabilities

Components of Current Ratio

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

(b) QUICK RATIO

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the
ability of a firm to pay its short-term obligations as & when they become due. Quick
ratio may be defined as the relationship between quick or liquid assets and current
liabilities. An asset is said to be liquid if it is converted into cash within a short period
without loss of value.
Quick or Liquid Assets
Quick Ratio = Current Liabilities

Components of Quick or Liquid Ratio

QUICK ASSETS CURRENT LIABILITIES

5
 Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Sundry debtors Short-term advances
Marketable securities Sundry creditors
Temporary investments Dividend payable
Income tax payable

(c) ABSOLUTE LIQUID RATIO

Although receivable, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash immediately
or in time. Hence, absolute liquid ratio should also be calculated together with current
ratio and quick ratio so as to exclude even receivables from the current assets and find
out the absolute liquid assets.

Absolute Liquid Assets

Absolute Liquid Ratio = Current Liabilities

Components of Absolute Liquid Ratio

ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Interest on Fixed Deposit Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income tax payable

2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term
obligations. Accordingly, long term solvency ratios indicate firm’s ability to meet the
6
fixed interest and costs and repayment schedules associated with its long term
borrowings.
The following ratio serves the purpose of determining the solvency of the concern.
• Debt Equity Ratio
• Debt to total Funds Ratio
• Proprietary Ratio
• Fixed Assets to Proprietor’s Fund Ratio
• Capital Gearing Ratio
• Interest Coverage Ratio

(a) DEBT EQUITY RATIO

Debt-Equity ratio, also known as ‘External – Internal Equity’ ratio is calculated to
measure the relative claims of outsiders and the owners (i.e., shareholders) against the
firm’s assets. This ratio indicates the relationship between the external equities or the
outsider funds and the internal equities or the shareholders’ funds
.
Outsiders Funds
Debt-Equity Ratio = Shareholder Funds

Components of Debt-Equity Ratio

OUTSIDERS FUND SHAREHOLDERS FUND

Debentures Share capital
Mortgage loan Reserves & Surplus
Bank loan
Loan from financial institutions
Public deposits

(b) DEBT TO TOTAL FUNDS RATIO

The ratio establishes a link between the long term funds raised from outsiders and
total long term funds available in the business.

Debt
Debt to Total Funds Ratio = Equity + Debt
7
 Components of Debt to Total Funds Ratio

SHAREHOLDERS FUND TOTAL CAPITALISATION

Share capital Debentures
Reserves & Surplus Mortgage loan
Bank loan
Loan from financial institutions
Public deposits
Share capital
Reserves & Surplus

(c) PROPRIETARY RATIO

A variant to the debt-equity ratio is the proprietary ratio which is also known as equity
ratio. This ratio establishes relationship between shareholders funds to total assets of
the firm.
Shareholder Funds
Proprietary Ratio = Total Assets

Components of Proprietary Ratio

SHAREHOLDERS FUND TOTAL ASSETS

Share capital Fixed assets
Reserves & Surplus Current Assets
Cash in hand & at bank
Bills receivable
Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid expenses

(d) FIXED ASSETS TO PROPRIETOR’S FUND RATIO

The ratio establishes the relationship between fixed assets and shareholder’s funds,
i.e., share capital plus reserves, surpluses and retained earnings.
Fixed Assets
Fixed Assets to Proprietor’s Ratio = Proprietor’s Funds
8
 Components of Proprietary Ratio

FIXED ASSETS PROPRIETOR’S FUNDS

Machinery Share capital
Buildings Reserves & Surplus
Plant
Vehicles

(e) CAPITAL GEARING RATIO

The term ‘capital gearing’ is used to describe the relationship between equity share
capital including reserves and surpluses to preference share capital and other fixed
interest-bearing loans. If preference share capital and other fixed interest bearing
loans exceed the equity share capital including reserves, the firm is said to be highly
geared.
Equity Share Capital + Reserves & Surplus
Capital Gearing Ratio = Fixed Cost Bearing Capital
Components of Capital Gearing Ratio

EQUITY SHAREHLDER FUND FIXED COST BEARING CAPITAL

Equity share capital Preference capital
Reserves & Surplus Debentures
Long term loans

(f) INTEREST COVERAGE RATIO

Net income to debt service ratio or interest coverage ratio is used to test the debt-
servicing capacity of a firm. The ratio is also known as Fixed Charges Cover or Times
Interest Earned. This ratio is calculated by dividing the net profit before interest and
taxes by fixed interest charges.
Net Profit (before Interest and taxes)
Interest Coverage Ratio = Fixed Interest Charges

3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The
efficiency with which assets are managed directly affects the volume of sales. Activity
ratios measure the

9
efficiency (or) effectiveness with which a firm manages its resources (or) assets.
These ratios are also called “Turn over ratios” because they indicate the speed with
which assets are converted or turned over into sales.
• Stock Turnover Ratio
• Debtors Turnover Ratio
• Creditors Turnover Ratio
• Working capital turnover ratio
• Fixed assets turnover ratio
(A) STOCK TURNOVER RATIO
Stock turnover ratio is also known as inventory stock ratio is normally calculated as
sales/ average inventory or cost of goods sold/ average inventory. It would indicate
whether inventory has been efficiently used or not. The purpose is to see whether only
the required minimum funds have been locked up in inventory. Inventory Turnover
Ratio (I.T.R.) indicates the number of times the stock has been turned over during the
period and evaluates the efficiency with which a firm is able to manage its inventory.
Cost of Goods Sold
Stock Turnover Ratio = Average Stock

Cost of Goods Sold = Net Sales – Gross Profit

Opening Stock + Closing Stock

Average Stock = 2

(b) DEBTORS TURNOVER RATIO

Debtors’ turnover ratio indicates the velocity of debt collection of firm. In simple
words, it indicates the number of times average debtors are turned over during a year.
Net Credit Sales
Debtors Turnover Ratio = Average Trade Deb.

Trade Deb. = Sundry Deb. + Bill Receivables

Opening Trade Deb. + Closing Trade Deb.

Avg. Trade Debtors = 2

(c) CREDITORS TURNOVER RATIO

A supplier of goods, i.e., creditor, is naturally interested in finding out how much time
the firm is likely to take in repaying its trade creditors. The analysis for creditors’

10
turnover is basically the same as of debtors’ turnover ratio except that in place of trade
debtors, the trade creditors are taken as one of the components of the ratio and in
place of average daily sales, average daily purchases are taken as the other component
of the ratio.
Net Credit Purchases
Creditors Turnover Ratio = Average Trade Cr.

Trade Creditors = Sundry Cr. + Bill Payable

Opening Trade Cr. + Closing Trade Cr. Avg. Trade

Creditors = 2

(d) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales. It indicates the velocity of the
utilization of net working capital. This indicates the no. of times the working capital is
turned over in the course of a year. A higher ratio indicates efficient utilization of
working capital and a lower ratio indicates inefficient utilization.
Cost of Sales
Working Capital Turnover Ratio = Working Capital

Working Capital = Current Assets - Current Liabilities

Components of Working Capital

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Outstanding or accrued expenses
Cash at bank Bank overdraft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

(e) FIXED ASSETS TURNOVER RATIO

11
It is also known as sales to fixed assets ratio. This ratio measures the efficiency and
profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization
of fixed assets. Lower ratio means under-utilization of fixed assets.
Cost of Sales
Fixed Assets Turnover Ratio = Net Fixed Assets

Cost of Goods Sold = Net Sales – Gross Profit

Net Fixed Assets = Fixed Assets - Depreciation

4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is
the engine, that drives the business enterprise. Generally, profitability ratios are
calculated either in relation to sales or in relation to investment. The various
profitability ratios are discussed below.
• GENERAL PROFITABILITY RATIO
• Gross Profit Ratio
• Net Profit Ratio
• Operating Ratio
• PROFITABILITY RATIO BASED ON INVESTMENT
• Return on Capital Employed
• Return on Shareholder’s Funds
GENERAL PROFITABILITY RATIO
(a) GROSS PROFIT RATIO
Gross profit ratio measures the relationship of gross profit to net sales and is usually
represented as a percentage. Thus, it is calculated by dividing the gross profit by sales.

Gross Profit
Gross Profit Ratio = Net Sales

Net Sales = Sales – Sales Return

(b) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit (after tax) and sales and
indicates the efficiency of the management in manufacturing, selling administrative
and other activities of the firm.

12
 Net Profit after Tax
Net Profit Ratio = Net Sales
Net Profit after Tax = Net Profit (–) Depreciation (–) Interest (–) Income Tax

Net Sales = Sales – Sales Return

(c) OPERATING PROFIT RATIO

Operating ratio establishes the relationship between cost of goods sold and other
operating expenses on the one hand and the sales on the other.

Operating Cost
Operating Ratio = Net Sales

Operating Profit
Operating Profit Ratio = Sales

Operating Profit = Net sales - Operating cost

PROFITABILITY RATIO BASED ON INVESTMENT

(d) RETURN ON CAPITAL EMPLOYED
Return on capital employed establishes the relationship between profits and the
capital employed. It is the primary ratio and is most widely used to measure the
overall profitability and efficiency of a business.
Adjusted Net Profits
Return on Capital Employed = Capital Employed

Adjusted Profits = Profits before Interest, Tax and Dividends

Capital Employed = Fixed Assets + Working Capital

(e) RETURN ON SHAREHOLDER’S FUNDS

Return on shareholder funds is the relationship between net profits (after interest &
tax) and the proprietors’ funds. The two basic components of this ratio are net profits
and shareholders’ funds. Shareholders’ funds include equity share capital, preference
share capital and reserves. Net profits are arrived at after deducting interest on long-
term borrowing and income tax, because those will be the only profits available for
shareholders.
Net Profits after Int. & Tax
Return on Shareholder’s Fund= Shareholder’s Funds

13
 CHAPTER 2
COMPANY PROFILE

INTRODUCTION
The Sirsa District Cooperative Milk Producers Union Limited is a unit of Haryana
Dairy Development Cooperative Federation Limited, Panchkula registered under
the Haryana Cooperatives Act, commissioned in the year 1978. Initially Milk
Union, Sirsa had only one
Chilling Plant. In the year 1996, National Dairy Development Board
commissioned a Plant of capacity One Lakh liters of milk per day. The key
products of this plant are Ghee, Skimmed Milk Powder, Lassi, Kaju Pinni, Dahi
and Paneer. Milk Union, Sirsa has seven chilling centers. The Union manufactures
& markets milk and milk products under the Brand name "VITA" which is
registered brand name of "Haryana Dairy Development Cooperative Federation"
the apex institution at the state level. The brand is highly trusted household name
for its wide rang of milk products like Packed Milk, Ghee, Skimmed Milk
Powder, Dahi, Lassi, Paneer and Kaju Pinni. Vita Milk Plant, Sirsa has taken up
the concept of total productive maintenance (TPM) entirely. The KAIZENS are
being suggested by employees time to time. Monthly review meetings are
14
conducted at plant and headquarter level to review the performance parameters.
The achievements are compared with the norms and remedial action is taken
immediately to improve the performance of the plants.
In Haryana there are six Dairy Development Federation Corporation, Hissar –
SIRSA, Rohtak, Bhalabgarh, Kurukshetra – Karnal, Ambala and Sirsa. And every
Federation is linked with village dairy development societies.
Every Dairy Federation and Dairy Societies is a unit itself. This is having its own
Directorate. The divisional Directorate elects its President. The village level
society collects the milk from milk producer and sale it to Dairy Federation.

ENERGY CONSERVATION
General

201 201
201
Description UNIT 3- 5-
4-15
14 16

Metric
Milk Handled
ton

175 249 445

I) Milk 86. 29.3 26.
77 2 83

15
 238 516. 846
Ii) Milk Powder
.50 95 .27

Rs.in 110 127. 183

Total Energy Cost
lakhs .22 11 .82

43. 39.1 38.

Energy Cost V/s Manufacturing Expenses Percent
15 7 31

Lakh 11. 14.6 18.

Total Energy Consumption-Electrical
KWH 43 2 07

KWH/to 62. 55.7 38.

Specific Energy Consumption-Electrical
n 86 5 74

289 717
Million 546
Total Energy Consumption- 5.3 5.0
kcal 1.85
6 0
Million
Thermal 0.1 0.18 0.1
KCAL
Specific Energy Consumption-Thermal 572 79 399
/Ton

29. 21.5 17.

Specific Energy Cost-Thermal Paisa/Kg
64 1 55

Consumption of energy in milk plants is usually characterized by specific energy

consumption and peak hour’s requirements, separately for each type of services.
In milk plants data are usually presented for steam, refrigeration, well water,
compressed air, electric power.
There are no common standard for service requirement for dairy industry
applicable to all plants capacities or to specific products. Such requirement
depends not only on overall capacity and the type of plant but also on source of
the energy utilization. Manufacture of milk powder consumes lot of thermal and
electrical energy as compared to handling of liquid milk the energy consumption
in the years 2013-2014, 2014-2015 and 2015-16 along with the milk handled is as
follows:
16
ENERGY CONSERVATION ACHIEVEMENTS
From the year 2005-2006, The Sirsa District Cooperative Milk Producers Union
Limited, Milk Plant, Sirsa has implemented six energy saving projects by which
we have saved energy worth Rs.25.58 lakh with investment cost of Rs.17.20lakh.
This has resulted in 31.5% reduction in specific energy consumption-thermal and
43.90% reduction in specific electrical energy consumption.

From ancient times, Haryana is known as home of milk as a famous saying tells us
"Deshon mein desh Haryana jit dooth dahi ka khana" cattle of Haryana are world
famous for their high yielding capacity for instance Haryana cows and murrah
buffaloes are among the best yielder of milk in the country.
Milk Reception:
Milk plant, Sirsa is handled by Sirsa Co-operative milk Producer's Union Limited,
Sirsa. Milk is collected from the villages through docks are used for entry of Milk
from trucks. A sample is taken from each container from testing and sample giving
17
positive test rejected and left of the milk is put into tub from which through pipes
milk goes for the further processing payment is made to milk producer by
weighing & measuring fat percentage. After reception two types of tests are done
to judge the quality of milk.
 Platform test/ organoleptic tests
 Laboratory tests
Composition of Milk:
Contents Percentage

Fat 3.75

Water 87.34

Albumin –0.40

Casein 3.00

Lactose 4.70

Ash 0.75

Other 0.06

Sales Offices

HARYANA is one of the most progressive states of Republic of India. In the

domain of dairy development it is well known for its productive milch cattle
particularly the 'Murrah' Buffaloes and Haryana Cows. The economy of the state
is predominantly based on agriculture. People rear and breed cattle as a subsidiary

18
occupation. Milk production in the State was estimated around 128.18 lacs litres
per day during 1999-2000.
There are five milk plants operating in the Cooperative Sector in Haryana. These
are located at Ambala, SIRSA, Rohtak, Sirsa and Ballabgarh having a handling
capacity of 4, 70,000 litres per day.

At present 16 brands across 15 states and one union territory are participating in the
campaign.

HARYANA DAIRY DEVELOPMENT CO-OPERATIVE FEDERATION

HARYANA is one of the most progressive states of Republic of India. In the domain
of dairy development it is well known for its productive milk cattle particularly the
‘Murrah’ Buffaloes and Haryana Cows. The economy of the state is predominantly
based on agriculture. People rear and breed cattle subsidiary occupation. Milk
production in the state was estimated around 147 lakhs liters per day during 2006-07.

The essence of various programmes launched in the State has been to adopt the
ANAND PATTERN of Milk Co-operatives. Under this system, all the functions of
dairying like milk procurement, processing and marketing are controlled by the Milk
producers themselves. It has three tier system comprising milk Producers Societies at
the village level, Milk Producers Co-operative Union at the district level and the state
Milk Federation as an apex body at the state level.

The Haryana Dairy Development Co-operative Federation Ltd. registered under

Haryana Co-operative Societies Act came into existence on April 1, 1977. Its
authorized share capital is Rs.4000 lakhs. It was established with the primary aim to
promote economic interests of the milk producers of Haryana particularly those
belonging to weaker sections of the village community by procuring and processing
milk into milk products and marketing thereof by itself or through its unions. In
furtherance of the above objects, the Federation undertakes a number of activities
such as establishment of milk plants, marketing of VITA BRAND milk products of
the Milk Unions. Its turnover during is Rs.768.00 crores. It also extends technical
guidance to the Unions in all spheres of personnel, technical, marketing and financial
management as well as makes them quality conscious, through use of modern
methods of laboratory testing of various products.

19
Quality –VITA the Hallmark of Quality
As part of stringent quality measures, milk required for processing VITA products is
procured from Dairy Co-operative Societies only. It is ensured that the milk is
transported to chilling canters and plants in clean and sterilized milk cans as quickly
as possible. All quality measures as per Standard of Bureau of Indian Standards/
Agmark are being applied before the products are marketed. Well-equipped
laboratories are functioning in the chilling centers and milk plants to maintain ideal
quality standards. VITA is the endorsement of quality, a commendation we are Proud
of. Milk Plant Rohtak, Ballabgarh, Ambala and SIRSA have obtained ISO-9002 and
IS-15000 certificates. Remaining Plants would also obtain ISO-9002 shortly. Each
Plant has taken steps for implementing Hazard Analysis and Critical Control Points
(HACCP).

DISTRICT MILK PRODUCER’S CO-OPERATIVE UNIONS

The Primary Milk Societies (PMS) functioning at the village level join to form a Milk
Union for carrying out such activities which are conducive and essential for the socio-
economic development of milk producers, by procuring and processing of milk and
marketing of milk
products. The Board of Directors comprising 8 members elected out of the Chairmen
of affiliated Primary Milk Societies run the day-to-day administration through Chief
Executive officer.
These Unions either process milk at their own level or pass the same to the milk
plants of other milk unions for processing. They also organize new Primary Milk
Societies at the village level. A brief matrix of the Milk Unions is as follows:
MILK UNIONS IN HARYANA

Sr. No. Name of the Union Date of Regis.

The Ambala District Co-operative Milk Producer’s Union Ltd.,
1 10.03.1973
Ambala
The Rohtak District Co-operative Milk Producer’s Union Ltd.,
2 01.04.2003
Rohtak
3 The Hisar-Jind Co-operative Milk Producer’s Union Ltd., SIRSA 10.07.1991

20
 The Kurukshetra-Karnal Co-operative Milk Producer’s Union Ltd.,
4 05.07.1991
Kurukshetra
5 The Sirsa District Co-operative Milk Producer’s Union Ltd., Sirsa 10.01.1978
The Ballabgarh Co-operative Milk Producer’s Union Ltd.,
6 01.04.2003
Ballabgarh

There are five milk plants operating in the Co-operative Sector in Haryana. These are
located at Ambala, SIRSA, Rohtak, Sirsa and Ballabgarh having a handling capacity
of 470000 liters per day.

PRIMARY MILK SOCIETY

The Primary Milk Society is the foundation of the Co-operative structure. The
efficiency of the movement solely lies in the strength of these Societies. Primary Milk
Societies are organized at the rate of one society per village. The purpose of such a
society is to promote the economic interests of its members by improving quality, and
increasing quantity of milk production per buffalo or cow and to provide necessary
guidance and assistance to its members and supply milk to Milk Unions. These
societies also supply cattle feed etc. to their members with a view to enhancing milk
production. The Managing Committee of the Society comprises members elected by
those members who are eligible to participate and vote in the General Body Meeting.

GROWTH AT A GLANCE
Functiona 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018-
Year
l 11 12 13 14 15 16 17 18 19
Societies
(Avg) Nos. 2710 2885 3166 3350 3906 4127 5028 5980 6167

Status of Milk Booths under Union

As On 31-3-2018
21
Sr. No. Name of the Union No. of Booths

1 The Ambala District Co-operative Milk Producer’s Union Ltd., Ambala 85

2 The Rohtak District Co-operative Milk Producer’s Union Ltd., Rohtak 61

3 The Hisar-Jind Co-operative Milk Producer’s Union Ltd., SIRSA 80

The Kurukshetra-Karnal Co-operative Milk Producer’s Union Ltd.,
4 26
Kurukshetra
5 The Sirsa District Co-operative Milk Producer’s Union Ltd., Sirsa 17

6 The Ballabgarh Co-operative Milk Producer’s Union Ltd., Ballabgarh 99

Vita products

SWEETENED FLAVOURED
DOUBLE TONED
MANGO DRINK MILK

NAMKEEN LASSI MITHI

LASSI

22
TABLE BUTTER GHEE (AGMARK)

JAL JEERA
DAHI

MILK
PANEER

23
 COW MILK GHEE
KHEER

KAJU PINNI

MILK CAKE

VITA PRODUCTS PRICE

Sr. No. Product Packing Price

1 Ghee rates 1 Ltr. MP 453.00
2 Ghee rates 1 Ltr. PP 451.00
3 Ghee rates 1 Ltr. Tin 457.00
4 Ghee rates 2 Ltr. Tin 913.00
5 Ghee rates 5 Ltr. Tin 2275.00

24
6 Ghee rates 15 Ltr. Tin 6761.00
7 Cow Milk Ghee rates 1 Ltr. MP 463.00
8 Cow Milk Ghee rates 15 Ltr. Tin 6911.00
9 Table Butter 100 gm 42.00
10 Table Butter 500 gm 207.00
11 Liquid Milk (500 ml) Full Cream 50.00
12 Liquid Milk (500 ml) Standard 42.00
13 Liquid Milk (500 ml) Tonned 38.00
14 Liquid Milk (500 ml) DT 36.00
15 Milk Cake 200 gm 68.00
16 Kheer 200 gm 20.00
17 Kaju Pinni 900 gm 300.00
18 Kaju Pinni 450 gm 155.00
19 Dahi 200 gm 15.00
20 Dahi 400 gm 26.00
Sweetened Flavored Milk Butter
21 200 ml Bottle 25.00
Scotch Flavor
22 Sweetened Flavored llaichi Flavor 200 ml Bottle 25.00
23 Plain Lassi 1 Litre pouch 25.00
24 Salted Lassi 250 ml pouch 10.00
25 Mithi Lassi 200 ml cup 18.00
26 Jal Jeera 200 ml pouch 7.00
27 Plain Chhachh (BLB) 500 ml pouch 10.00
28 Mango Drink 500 ml 23.00
29 Mango Drink 1000 ml 40.00
30 Kulfi (Pista) 60 ml 15.00
31 Choco Bar 60 ml 15.00
32 Vanila Cup 100 ml 12.00
33 Butter Scotch Cup 100 ml 15.00
34 Kaju Kishmish Brick 800 ml 92.00
35 Tutti Fruity Brick 800 ml 87.00
36 Butter Scotch Brick 800 ml 85.00

25
 37 Vanila Brick 1000 ml 85.00
38 Strawberry Brick 1000 ml 85.00
39 Paneer 200 gm 52.00
40 Paneer 1 kg 255.00

CHAPTER – 3
INDUSTRY PROFILE

INTRODUCTION

The dairy industries companies run mainly on the factors such as Price, availability,
service frequency, affordability, taste and marketing. Price plays a vital role because
purchasing power is depend upon price and availability of that product, in case
distributors and retailers service matter a lot in Institution business.

From chronic shortages of milk, India has emerged today as the largest producer of
milk in the world crossing 97 million tonnes. It is 'The Oyster' of the global dairy
industry. It offers opportunities galore to entrepreneurs worldwide, who wish to
capitalize on one of the world's largest and fastest growing markets for milk and milk
products. A bagful of 'pearls' awaits the international dairy processor in India. The
Indian dairy industry is rapidly growing, trying to keep pace with the galloping
progress around the world.

The effective milk market is largely confined to urban areas, inhabited by over 25 per
cent of the country's population. An estimated 50 per cent of the total milk produced
is consumed here. By the end of 2007, the urban population is expected to increase by
more than 100 million to touch 864 million in 2007 a growth of about 40 per cent.
The expected rise in urban population would be a boon to Indian dairying. Presently,
the organized sector both cooperative and private and the traditional sector cater to
this market.

INDIAN DAIRY INDUSTRY - A PROFILE

26
India’s dairy sector is expected to triple its production in the next 10 years in view of
expanding potential for export to Europe and the West. Moreover with WTO
regulations expected to come nto force in coming years all the developed countries
which are among big exporters today would have to withdraw the support and subsidy
to their domestic milk products sector. Also India today is the lowest cost producer of
per litre of milk in the world, at 27 cents, compared with the U.S' 63 cent. Also to take
advantage of this lowest cost of milk production and increasing production in the
country multinational companies are planning to expand their activities here. Some of
these milk producers have already obtained quality standard certificates from the
authorities. This will help them in marketing their products in foreign countries in
processed form.

The urban market for milk products is expected to grow at an accelerated pace of
around 33% per annum to around Rs.83,500 crores by year 2010. This growth is
going to come from the greater emphasis on the processed foods sector and also by
increase in the conversion of milk into milk products. By 2010, the value of Indian
dairy produce is expected to be Rs 10,00,000 million.

Presently the market is valued at around Rs7,00,000 mn .

Background of Dairy Industry

Beginning in organized milk handling was made in India with the establishment of
Military Dairy Farms. Handling of milk in Co-operative Milk Unions established all
over the country on a small scale in the early stages. Long distance refrigerated rail-
transport of milk from Anand to Bombay since 1945.

Pasteurization and bottling of milk on a large scale for organized distribution was
started at Aarey (1950), Calcutta (Haringhata, 1959), Delhi (1959), Worli (1961),
Madras (1963) etc.

Establishment of Milk Plants under the Five-Year Plans for Dairy Development all
over India. These were taken up with the dual object of increasing the national level
of milk consumption and ensuing better returns to the primary milk producer. Their
main aim was to produce more, better and cheaper milk.

Milk Production
27
 • India's milk production increased from 21.2 million MT in 1968 to more than 100
million MT in 2008-09.

• India is the largest producer of Milk in the World (replacing USA)

• Per capita availability of milk presently is 250 grams per day, up from 112 grams
per day in 1968-69.

• India's 3.8 percent annual growth of milk production surpasses the 2 percent
growth in population; the net increase in availability is around 2 percent per year.

Innovation

• Bulk-vending - saving money and the environment.

• Milk travels as far as 2,200 kilometers to deficit areas, carried by innovative rail
and road milk tankers.

• Ninety-five percent of dairy equipment is produced in India, saving valuable

foreign exchange.

Macro Impact

• The annual value of India's milk production amounts to about Rs. 900 billion.

• Dairy cooperatives generate employment opportunities for some 1 million farm

families.

• Dairy Farming is the single largest contributor to the economy(5% of GDP

&13% of employment)

• Dairy industry represents a huge opportunity being the largest singl FMCG
Market

Key challenges before Indian Dairy Industry are as follows:

• Ensuring Quality

• Procurement and efficiencies in supply chain

• Product differentiation and value addition.

28
OPERATION FLOOD

Programmed implementation:

Operation Flood was implemented in three phases.

Phase Phase I (1970-1980) was financed by the sale of skimmed milk powder and
butter oil gifted by the European Union then EEC through the World Food
Programme. NDDB planned the programme and negotiated the details of EEC
assistance. During its first phase, Operation Flood linked 18 of India's premier milk
sheds with consumers in India's four major metropolitan cities: Delhi, Mumbai,
Calcutta and Chennai.

Phase Operation Flood's Phase II (1981-85) increased the milk sheds from 18 to
136; 290 urban markets expanded the outlets for milk. By the end of 1985, a self-
sustaining system of 43,000 village cooperatives covering 4.25 million milk producers
had become a reality. Domestic milk powder production increased from 22,000 tons
in the pre-project year to 140,000 tons by 1989, all of the increase coming from
dairies set up under Operation Flood. In this way EEC gifts and World Bank loan
helped to promote self-reliance. Direct marketing of milk by producers' cooperatives
increased by several million litres a day.

Phase Phase III (1985-1996) enabled dairy cooperatives to expand and strengthen
the infrastructure required to procure and market increasing volumes of milk.
Veterinary first-aid health care services, feed and artificial insemination services for
cooperative members were extended, along with intensified member education.

Operation Flood's Phase III consolidated India's dairy cooperative movement,

adding 30,000 new dairy cooperatives to the 42,000 existing societies organized
during Phase II. Milk sheds peaked to 173 in 1988-89 with the numbers of women
members and Woman’s Dairy Cooperative Societies increasing significantly.

From the outset, Operation Flood was conceived and implemented as much more than
a dairy programme. Rather, dairying was seen as an instrument of development,
29
generating employment and regular incomes for millions of rural people. "Operation
Flood can be viewed as a twenty year experiment confirming the Rural Development
Vision" (World Bank Report 1997c.)

HISTORICAL BACKGROUND OF NDDB

The National Dairy and Development Board was founded in 1965, with the mission of
organizing poor milk producers, thereby transforming dairying into an instrument for
the economic development of India’s rural people. The formation of the NDDB
stemmed from the vision of the then Prime Minister of India, the late Lal Bahadur
Shastri, to extend the success of the Kaira Cooperative Milk Producer’s Union (in the
state of Mother) to other parts of India.

NDDB began its operations with the mission of making dairying a vehicle to a better
future for millions of grassroots milk producers. The mission achieved thrust and
direction with the launching of "Operation Flood" in 1970, a programme extending
over 30 years and which used World Bank loan to finance India's emergence as the
world's largest milk producing nation. During this period, dairy commodity surpluses
were building up in Europe. Imports from Europe had already adversely affected the
dairy industry in India. Imports by individual players in India would have resulted in a
market glut and a fall in the prices throughout the country. With the backing of
government policy, and with the assistance of the World Food Program, NDDB
imported food aid in the form of milk powder and butter oil, and marketed it under its
own brand name.

The surplus from these sales was invested in the expansion of the cooperative
movement in the dairy industry. Operation Flood's third phase was completed in 1996
and has to its credit a number of significant achievements. Since its inception, the
Dairy Board has planned and spearheaded India's dairy programmes by placing dairy
development in the hands of milk producers and the professionals they employ to
manage their cooperatives. In addition, NDDB also promotes other commodity-based
co-operatives, allied industries and veterinary biologicals on an intensive and nation-
wide basis. NDDB's subsidiaries include Mother Dairy, Delhi.

30
Major Players

There are virtually 15 major Dairy Cooperative Federations in India, namely:

1) Andhra Pradesh Dairy Development Cooperative Federation Ltd

(APDDCF)

2) Bihar State Cooperative Milk Producers' Federation Ltd (COMPFED)

3) Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF)

4) Haryana Dairy Development Cooperative Federation Ltd. (HDDCF)

5) Himachal Pradesh State Cooperative Milk Producers' Federation Ltd

(HPSCMPF)

6) Karnataka Cooperative Milk Producers' Federation Ltd (KMF)

7) Kerala State Cooperative Milk Marketing Federation Ltd (KCMMF)

8) Madhya Pradesh State Cooperative Dairy Federation Ltd (MPCDF)

9) Maharashtra Rajya Sahakari Maryadit Dugdh Mahasangh (Mahasangh)

10) Orissa State Cooperative Milk Producers' Federation Ltd (OMFED)

11) Pradeshik Cooperative Dairy Federation Ltd (UP) (PCDF)

12) Punjab State Cooperative Milk Producers' Federation Ltd (MILKFED)

13) Rajasthan Cooperative Dairy Federation Ltd (RCDF)

14) Tamil nadu Cooperative Milk Producers' Federation Ltd (TCMPF)

15) West Bengal Cooperative Milk Producers' Federation Ltd. (WBCMPF)

National Dairy Development Board (NDDB) is the central cooperative board of the
country and was created to promote, finance and support producer-owned and
controlled organizations mentioned above.

Two main players – Mother of GCMMF and Mother Dairy of NDDB – is the
leading brand in India. Our main focus is to analyze the strategic move of NDDB for

31
mother Dairy from top to bottom. Thus we are going to concentrate on the progress of
Mother Diary and NDDB for their future strategies.

CHAPTER – 4
SUMMER TRAINING WORK

32
DATA ANALYSIS

1. LIQUIDITY RATIOS

Liquidity refers to the ability of a concern to meet its current obligations as & when
there becomes due. The short term obligations of a firm can be met only when there
are sufficient liquid assets. The short term obligations are met by realizing amounts
from current, floating (or) circulating assets The current assets should either be
calculated liquid (or) near liquidity. They should be convertible into cash for paying
obligations of short term nature. The sufficiency (or) insufficiency of current assets
should be assessed by comparing them with short-term current liabilities. If current
assets can pay off current liabilities, then liquidity position will be satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
• Current ratio
• Quick (or) Acid-test (or) Liquid ratio
• Absolute liquid ratio (or) Cash position ratio
LIQUIDITY RATIO
A. CURRENT RATIO
(Amount in `)
Current Ratio
Year Current Assets Current Liabilities Ratio
2013-14 123296313.00 54330888.59 2.27
2014-15 132443503.49 50127148.94 2.64
2015-16 205860507.99 71297804.34 2.89
2016-17 305913637.70 52604159.71 5.82
2017-18 493669302.07 30760257.42 16.05

Interpretation

As a rule, the current ratio with 2:1 or more is considered as satisfactory position of
the firm. As we can see that in the year 2016-2017 current ratio is 16.05:1 which has
reached very high as compared to previous five years which shows that the company
is not utilizing the liquid funds properly and company is in a position to pay its

33
current liabilities out of its current assets in time. As per the rule this ratio is good.
But very high ratio is not good for the company.
B. QUICK RATIO
(Amount in `)
Quick Ratio
Year Quick Assets Current Liabilities Ratio
2013-14 41284005.02 54330888.59 0.76
2014-15 65105975.12 50127148.94 1.30
2015-16 135540557.70 71297804.34 1.90
2016-17 219156085.82 52604159.71 4.17
2017-18 381937673.10 30760257.42 12.42

Interpretation

As a rule, the quick ratio with 1:1 or more is considered as satisfactory position of the
firm. As we can see that in the year 2016-2017 quick ratio is 12.42:1 which has
reached very high as compared to previous five years which shows that company is
able to pay off current obligations immediately. As per the rule this ratio is good. But
very high ratio is not good for the company

C. ABSOULTE LIQUIDITY RATIO

(Amount in `)
Absolute Liquidity Ratio
Year Absolute Liquid Assets Current Liabilities Ratio
2013-14 8687164.94 54330888.59 0.16
2014-15 5538256.14 50127148.94 0.11
2015-16 6497389.09 71297804.34 0.09
2016-17 10052927.09 52604159.71 0.19
2017-18 32755145.63 30760257.42 1.06

Interpretation
Absolute Liquid Ratio of 0.5:1 or more is supposed to be an ideal ratio. As we can see
that in the year 2016-2017 current ratio is 1.06:1 which has reached very high as
compared to previous five years which shows that company’s short-term financial
position is good. As per the rule this ratio is good and it is also good for the company.

34
2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term
obligations. Accordingly, long term solvency ratios indicate firm’s ability to meet the
fixed interest and costs and repayment schedules associated with its long term
borrowings.
The following ratio serves the purpose of determining the solvency of the concern.
• Debt Equity Ratio
• Debt to total Funds Ratio
• Proprietary Ratio
• Fixed Assets to Proprietor’s Fund Ratio
• Capital Gearing Ratio
• Interest Coverage Ratio

LEVERAGE RATIOS
A. DEBT EQUITY RATIO
(Amount in `)
Debt Equity Ratio
Year Outsider Funds Shareholder Funds Ratio
2013-14 112631760.87 54450607.74 2.07
2014-15 52861168.90 63194048.10 0.84
2015-16 61744210.40 63296365.79 0.98
2016-17 71158277.79 66921073.19 1.06
2017-18 261000000.00 71813190.97 3.63

Interpretation
Debt Equity Ratio of 2:1 or less is supposed to be an ideal ratio. As we can see that
from the year 2013-14 to 2015-16 the ratio is less than 2:1 but in the last year 2017-18
this ratio is 3.63:1 which is higher than ideal ratio which show that company claims of
outsiders in long term (creditors) are greater than those of owners.
As per the rule this ratio is not good and it is also not good for the company.

B. DEBT TO TOTAL FUNDS RATIO

(Amount in `)
Debt to Total Funds Ratio
35
 Year Outsider Funds Total Capitalization Ratio
2013-14 112631760.87 167082368.61 0.67
2014-15 52861168.90 116055217.00 0.46
2015-16 61744210.40 125040576.19 0.49
2016-17 71158277.79 138079350.98 0.52
2017-18 261000000.00 332813190.97 0.78

Interpretation

Debt to total funds Ratio of 0.67:1 or less is supposed to be an ideal ratio. As we can
see that from the year 2014-15 to 2017-2018 ratio is continuously increasing which
shows that company has relied much on outside sources for raising long-term funds.
As per the rule this ratio is not good hence it is also not good for the company.

C. PROPRIETARY RATIO
(Amount in `)
Proprietary Ratio
Year Share Holders Funds Total Assets Ratio
2013-14 54450607.74 226207675.78 0.24
2014-15 63194048.10 257932727.77 0.25
2015-16 63296365.79 331894935.48 0.19
2016-17 66921073.19 433418563.96 0.15
2017-18 71813190.97 625356345.33 0.12

Interpretation

In Proprietary Ratio there are no ‘rules of thumb’ higher the ratio better it is for the
company. As we can see that from the year 2013-14 to 2017-2018 ratio is continually
decreasing which shows that company’s long-term solvency position is not better.
As per the rule this ratio is not good hence it is also not good for the company.
D. FIXED ASSETS TO PROPRIETOR’S FUNDS
(Amount in `)
Fixed Assets to Proprietor’s Ratio
Year Fixed Assets Shareholder’s Funds Percentage
2013 – 14 90848300.09 54450607.74 167%

36
 2014 – 15 109970071.59 63194048.10 174%
2015 – 16 106193589.80 63296365.79 168%
2016 – 17 105278921.57 66921073.19 157%
2017 – 18 107153312.57 71813190.97 149%

Interpretation

Fixed Assets to proprietor’s Ratio of 65% or less is better for the company. As we can
see that from the year 2013-14 to 2017-2018 ratio is continuously decreasing which
show that company is improving this ratio but it is much higher to normal ratio this
shows that owner’s funds are not sufficient to finance the fixed assets and company
has to depend upon outsiders to finance the fixed assets.
As per the rule this ratio is not good hence it is also not good for the company.

E. CAPITAL GEARING RATIO

(Amount in `)
Capital Gearing Ratio
Fixed Cost Bearing
Year Equity Shareholder Fund Ratio
Capital
2013-14 54450607.74 112631760.87 0.48
2014-15 63194048.10 52861168.90 1.20
2015-16 63296365.79 61744210.40 1.03
2016-17 66921073.19 71158277.79 0.94
2017-18 71813190.97 261000000.00 0.28

Interpretation

In Capital Gearing Ratio there are no ‘rules of thumb’ lesser the ratio better it is for
the company. As we can see that from the year 2013-14 to 2015-16 ratio is
continuously decreasing which show that company capital gearing ratio is good.
As per the rule this ratio is good hence it is also good for the company.
F. INTEREST COVERAGE RATIO
(Amount in `)
Interest Coverage Ratio
Year EBIT Fixed Interest Charges Ratio
2013-14 7965269.89 6712032.68 1.19
2014-15 14538426.10 9958071.00 1.46

37
 2015-16 8705714.40 4580355.10 1.90
2016-17 9554336.83 8070006.02 1.18
2017-18 11216940.37 6325295.00 1.77

Interpretation

In Interest Coverage Ratio higher the ratio better it is for the company. As we can see
that from the year 2013-2014 to 2017-2018 ratio is increasing except the year 2014-15
which shows that company is able to meet its commitment of fixed interest charges.
As per the rule this ratio is good hence it is also good for the company.
3. ACTIVITY RATIOS

Funds are invested in various assets in business to make sales and earn profits. The
efficiency with which assets are managed directly affects the volume of sales. Activity
ratios measure the efficiency (or) effectiveness with which a firm manages its
resources (or) assets. These ratios are also called “Turn over ratios” because they
indicate the speed with which assets are converted or turned over into sales.
• Stock Turnover Ratio
• Debtors Turnover Ratio
• Creditors Turnover Ratio
• Working capital turnover ratio
• Fixed assets turnover ratio

ACTIVITY RATIOS
A. STOCK TURNOVER RATIO
(Amount in `)
Stock Turnover Ratio
Year Cost of Goods Sold Average Stock Ratio
2013-14 989246756.66 58569423.02 16.89
2014-15 1379748713.93 55985834.36 24.65
2015-16 1740902881.50 47855588.69 36.38
2016-17 2044892769.85 54447919.21 37.56
2017-18 2273758620.65 73474740.16 30.95

Interpretation

38
In Stock Turnover Ratio there are no ‘rules of thumb’ higher the ratio better it is for
the company. As we can see that in the year 2013-14 to 2015-16 the ratio is
continuously increasing except last year 2017-2018 ratio which show that company’s
previous year trends are good but in last year the ratio is decreasing which is not
good.
As per the rule this ratio is not good hence it is also not good for the company.
B. DEBTORS TURNOVER RATIO
(Amount in `)
Debtors Turnover Ratio
Collection
Year Net Credit Sales Avg. Trade Dr. Ratio
Period
2013-14 1031504291.53 18586934.78 55.50 7 days
2014-15 1425577500.72 28007884.85 50.90 7 days
2015-16 1781031869.07 58293047.64 30.55 12 days
2016-17 2088598137.00 137320364.22 15.21 24 days
2017-18 2323788901.21 194850640.46 11.93 31 days

Interpretation

In Debtors Turnover Ratio there are no ‘rules of thumb’ higher the ratio better it is for
the company. But as per the company policy all the sales is done on cash basis except
government organizations. As we can see that in the year 2013-14 to 2017-2018 ratio
is continuously decreasing it is due to the credit sales given to the govt. institutions.
But it is decreasing at a higher rate which is not good for the company.

C. CREDITORS TURNOVER RATIO

(Amount in `)
Creditors Turnover Ratio
Year Net Credit Purchase Avg. Trade Cr. Ratio Payment Period
2012-13 862304398.38 33008439.08 26.12 14 days
2013-14 1218063363.76 34102557.54 35.72 10 days
2014-15 1569377942.91 41298110.38 38.00 10 days
2015-16 1849566173.60 35204283.19 52.54 7 days
2016-17 2048746839.00 14528146.83 141.02 3 days

Interpretation
39
In Creditors Turnover Ratio there are no ‘rules of thumb’ lesser the ratio better it is for
the company. But as per the company policy all the purchases of raw milk will be
done on 10 days payment basis. As we can see that from the year 2012-13 to 2015-16
ratio is continuously increasing which shows that company pays the credit amount
very fast.
As per the rule this ratio is not good hence it is also not good for the company.
D. WORKING CAPITAL TURNOVER RATIO
(Amount in `)
Working Capital Turnover Ratio
Year Cost of Sales Working Capital Ratio
2013-14 989246756.66 68965424.41 14.34
2014-15 1379748713.93 82316354.55 16.76
2015-16 1740902881.50 134562703.65 12.94
2016-17 2044892769.85 253309477.99 8.07
2017-18 2273758620.65 462909044.65 4.91

Interpretation

In Working Capital Ratio there are no ‘rules of thumb’ higher the ratio better it is for
the company but a high working capital turnover ratio is not a good situation for
company. This ratio should be compared with ratios of other firms doing similar
business and making a better interpretation of the ratio. As we can see that in the year
2013-14 to 2016-17 ratio is continuously decreasing which shows that company’s
working capital ratio is not good.
E. FIXED ASSETS TURNOVER RATIO
(Amount in `)
Fixed Assets Turnover Ratio
Year Cost of Sales Net Fixed Assets Ratio
2013-14 989246756.66 51349925.28 19.26
2014-15 1379748713.93 63995092.77 21.56
2015-16 1740902881.50 62018721.87 28.07
2016-17 2044892769.85 58639581.77 34.87
2017-18 2273758620.65 57137107.77 39.79

40
Interpretation

In Fixed Assets Turnover Ratio there are no ‘rules of thumb’ higher the ratio better it
is for the company. As we can see that from the year 2013-14 to 2017-18 ratio is
continuously increasing which show that company fixed assets turnover ratio is good.
As per the rule this ratio is good hence it is also good for the company.

4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is
the engine, that drives the business enterprise. Generally, profitability ratios are
calculated either in relation to sales or in relation to investment. The various
profitability ratios are discussed below.
• GENERAL PROFITABILITY RATIO
• Gross Profit Ratio
• Net Profit Ratio
• Operating Ratio
• PROFITABILITY RATIO BASED ON INVESTMENT
• Return on Capital Employed
• Return on Shareholder’s Funds

A. GROSS PROFIT RATIO

(Amount in `)
Gross Profit Ratio
Year Gross Profit Net Sales Percentage
2013-14 42257534.87 1031504291.53 4.10%
2014-15 45828786.79 1425577500.72 3.22%
2015-16 40128987.57 1781031869.07 2.25%
2016-17 43705367.15 2088598137.00 2.09%
2017-18 50030280.56 2323788901.21 2.15%

Interpretation

41
In Gross Profit Ratio there are no ‘rules of thumb’ higher the ratio better it is for the
company. As we can see that from the year 2013-14 to 2017-18 ratio is continuously
decreasing which shows that company’s gross profit ratio is not good.
As per the rule this ratio is not good hence it is also not good for the company.

B. NET PROFIT RATIO

(Amount in `)
Net Profit Ratio
Year Net Profit After Tax Net Sales Percentage
2013-14 1142222.89 1031504291.53 0.11%
2014-15 2029708.61 1425577500.72 0.14%
2015-16 2723149.30 1781031869.07 0.15%
2016-17 2676137.83 2088598137.00 0.13%
2017-18 3112890.69 2323788901.21 0.13%

Interpretation

In Net Profit Ratio there are no ‘rules of thumb’ higher the ratio better it is for the
company. As we can see that from the year 2013-14 to 2014-15 ratio is continuously
increasing but in 2015-16 and 2017-18 the ratio has decreased which shows that
company’s net profit ratio is not good.
As per the rule this ratio is not good hence it is also not good for the company.

C. OPERATING PROFIT RATIO

(Amount in `)
Operating Profit Ratio
Year Operating Profit Net Sales Percentage
2013-14 18066022.69 1031504291.53 1.75%
2014-15 19822396.49 1425577500.72 1.39%
2015-16 21065818.48 1781031869.07 1.18%
2016-17 14107379.66 2088598137.00 0.68%
2017-18 15700499.56 2323788901.21 0.68%

Interpretation

42
In Operating Profit Ratio there are no ‘rules of thumb’ higher the ratio better it is for
the company. As we can see that from the year 2013-14 to 2017-18 ratio is
continuously decreasing which shows that company’s operating profit ratio is not
good.
As per the rule this ratio is not good hence it is also not good for the company.

D. RETURN ON CAPITAL EMPLOYED

(Amount in `)
Return on Capital Employed
Year Adjusted Profit Capital Employed Percentage
2013-14 7965269.89 159813724.50 4.98%
2014-15 13014861.61 192286426.14 6.77%
2015-16 8705714.40 240756293.45 3.62%
2016-17 9554336.83 358588399.56 2.66%
2017-18 11216940.37 570062357.22 1.97%

Interpretation

In Return on Capital Employed Ratio there are no ‘rules of thumb’ higher the ratio
better it is for the company. As we can see that from the year 2013-14 to 2017-18 ratio
is continuously decreasing which shows that company’s return on capital employed
ratio is not good.
As per the rule this ratio is not good hence it is also not good for the company.

E. RETURN ON SHAREHOLER’S FUND

(Amount in `)
Return on Shareholder’s Fund
Year Adjusted Profit Shareholder’s Funds Percentage
2013-14 7965269.89 54450607.74 14.63%
2014-15 13014861.61 63194048.10 20.60%
2015-16 8705714.40 63296365.79 13.75%
2016-17 9554336.83 66921073.19 14.28%
2017-18 11216940.37 71813190.97 15.62%

43
Interpretation

In Return on Shareholder’s Fund Ratio there are no ‘rules of thumb’ higher the ratio
better it is for the company. This ratio should be compared with ratio of other firms
doing similar business and making a better interpretation of the ratio. As we can see
that from the year 2013-14 and 2014-15 ratio is decreasing but after that in 2015-16
and 2016-17 it is again increasing which show that resources of company are well
used.
As per the rule this ratio is good hence it is also good for the company.

FINDINGS

Like a traveler, who after completing his long and arduous journey reaches his
destination and looks back upon the area covered by him for recalling the important
landmarks and experiences he came across; similarly, it would be desirable to review
the various aspects of the present study. So prior to winding up this study, an attempt
is made to summarize its major findings on the basis of forgoing chapters which deals
with the analysis and interpretation of the financial statements.
To conclude, The SIRSA Co-operative Milk Producer’s Union Ltd. Milk Plant SIRSA
short term, long term and solvency financial position can be regarded as not good
which is shown through under mentioned facts and figures:-
• Liquidity position of Milk Plant SIRSA is not good because Quick ratio and
Current ratio is very high in previous year as compared to the last years which
is due to the idle funds.
• Gross Profit Ratio also shows the declining trend from year to year.
• Net profit of Milk Plant SIRSA is very low because Milk Plant SIRSA is a co-
operative society.
• Operating Profit Ratio is also showing a declining trend from year to year.
• Return on Capital employed shows decreasing trend which is not good for the
company. It shows the weaker position of the company.
• Return on shareholders’ fund shows increasing trend which is good for the
company.
• Proprietary Ratio of the Milk Plant SIRSA shows decreasing trend, which is
again not good for the company.

44
 • Receivable ratio show decreasing trend which has negative effect on liquidity
position of the company.
• Payable ratio shows that Milk Plant SIRSA gets less days in previous year for
payment to its creditors.

SUGGESTIONS

A company’s performance is reflected through its turnover, profitability and long term
& short term financial position. From the above analysis it is clear that the financial
position of the plant is not sound. There is a need to apply long term as well as
immediate stern steps. To improve the financial position of the company, following
measures are suggested:
• Efforts should be made to improve internal equity over external equity.
• Proper utilization of fixed assets is required.
• Current assets management should be checked & its level should be decreased
to overcome the problem of idle funds.
• To control the cost of goods sold, the purchase policy should be revised and
purchases should be made on favorable basis.
• To reduce administration expenses. Proper utilization of employees and
workforce should be made. There is a need to recruit and retain more efficient
employees in the plant.
• To control operating cost, cost of goods sold & administration expenses should
be reduced.
• There is also a need of better inventory management, effective steps should be
taken to control inventory conversion period.
• To improve the sales, the plant should move along with the advanced
technology by modifying its sales policies, so that stock can be easily
converted into sales.
• Receivable and payable ratio is also to control by extending the payment
period and receive the payment as fast as possible.
• Profitability can be increased by reduction in cost of power and fuel, higher
utilization of labor, use of higher skilled labor etc.
• The company has idle funds which can be utilized by improving the
management system.

45
CONCLUSION

The overall conclusion of study is that the overall position of Milk Plant SIRSA is not
good. This is due to the taking of long term unsecured loan which also effect the bank
balance of the current asset that effect the overall ratios of the study. Hence, we can
say that the short term, long term and solvency positions of Milk Plant SIRSA are not
good as compared to the previous years.

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 BALANCE SHEET

The Sirsa Co-operative Milk Producer’s Union Ltd.

BALANCE SHEET AS AT 31ST MARCH 2013, 2014, 2015, 2016, 2017 & 2018

BALANCE SHEET OF LAST FIVE YEARS

2013-14 2014-15 2015-16 2016-17 2017-18
LIABILITIES
Share
1338487.21 14764221.84 15973199.73 17180431.73 18258876.65
Capital
Reserves
& 39923513.64 46400117.65 44600016.76 47064503.63 50441423.63
Surplus
Grant & 138112996.4 242568345.4 258940051.2
10522791.53 96336511.89
Subsidies 0 2 6
Unsecure 112631760.8 261000000.0
52861168.90 61744210.40 71158277.79
d Loans 7 0
Current
Liabilitie
s& 54330888.59 50127148.94 71297804.34 52604159.71 30760257.42
Provision
s
230793825.8 260489169.2 331728227.6 430575718.2 619400608.9
TOTAL
4 2 3 8 6
ASSETS
Fixed 109970071.5 106193589.8 105278921.5 107153312.5
90848300.09
Assets 9 0 7 7
Investme
12063062.69 15519152.69 19840837.69 22226004.69 24533730.69
nts
47
Current 123296313.0 132443503.4 205860507.9 305913637.7 493669302.0
Assets 0 9 9 0 7
Losses
Upto
Last Year
5728372.95 4586150.06 2556441.45 -166707.85 -2842845.68
Profit/Lo
ss A/C
During
the Year
-1142222.89 -2029708.61 -2723149.30 -2676137.83 -3112890.69
Profit/Lo
ss A/C
230793825.8 260489169.2 331728227.6 430575718.2 619400608.9
TOTAL
4 2 3 8 6

PROFIT & LOSS ACCOUNT

The Sirsa Co-operative Milk Producer’s Union Ltd.

PROFIT & LOSS FOR THE YEAR ENDING 31ST MARCH 2013,
2014,2015,2016,2017 & 2018

P&L ACCOUNT OF LAST FIVE YEARS

2013-14 2014-15 2015-16 2016-17 2017-18
REVENUE INCOME (` In
Thousands)
Sale of
1650720818.3 1933704108.7
Milk & 980536.32 1336611.83 2182890.26
3 9
Milk Prod
Sale of
Trading 49750.59 87824.78 129134919.55 153455194.24 139477.80
Goods
Sale of
1217.37 1140.88 1176131.19 1438833.97 1420.82
Scrap
Closing
Stock
Finished
61121.15 45626.77 46996890.46 58079612.47 84402.19
Goods
Trading
3461.56 1762.18 1325328.52 2494006.98 1973.66
Goods
SUB
1096087.00 47388.95 48322218.98 60573619.45 86375.86
TOTAL
Misc
793.78 1364.40 1729965.42 1962865.04 1682.34
Income
Income
13.53 26.62 6050.00 0.00 0.00
From TIP

48
By Gross
42257.53 45828.78 40128987.57 43705367.15 50030.28
Profit
1831090103.4 2151134621.4
TOTAL 43064.85 1474357.48 2411847.11
7 9
REVENUE EXPENSES
(` In Thousands)
O-Stock
Finished 51406.93 61121.15 4562.67 46996.89 58079.61
Good
O-Stock
Trading 1149.20 3461.56 1762.18 1325.32 2494.00
Goods
R-Material
814172.43 1128694.51 1434723.76 1703316.02 1895842.39
Consumed
Manufacturi
99081.12 124271.56 132558.35 153400.95 175994.79
ng Exp.
Procuremen
30173.59 35714.41 38529.72 43094.31 48496.64
t Exp.
Purchase of
57846.17 73874.46 136024.29 157332.87 179227.03
Tar. Good
Gross Profit 42257.53 45828.78 40128.98 43705.36 50030.28
SUB
1096087.002900104.13 3618579.18 2149171.75 2410164.76
TOTAL
Administrat
14049.98 18250.36 17498.80 20564.63 25545.32
ive Exp.
Selling Exp. 10092.36 7756.02 10140.27 9033.35 8784.45
Prior Period
49.15 0.00 -1564.36 0.00 0.00
Exp.
NON
OPERATIN
G EXP.
Royalty
551.00 500.00 500.00 500.00 551.50
Paid
Lease
4438.28 1221.96 1221.96 1221.96 1221.96
Money
Depreciatio
5918.79 6476.60 5362.60 4793.94 4392.44
n
Int. on Loan
187.80 9958.07 4580.35 5500.19 307.78
HDDC
Int. on Cash
6137.49 0.00 0.00 0.00 6404.24
Cr. Limit
Net Profit
Before I. 1639.97 3056.79 4125.35 4054.14 4504.90
Tax
Income Tax
-497.75 -1027.08 -1402.21 -1378.00 -1392.01
on Profits
Add Back I. 0.00 0.00 0.00 306.60 0.00
Tax of Pre.
49
 Year
Net Profit
1142.22 2029.70 2723.14 2676.13 3112.89
after I. Tax
TOTAL 43064.85 1474357.48 1831090.10 2151134.62 2411847.11

BIBLIOGRAPHY

In completing this project report many books, annual reports of The Sirsa Co-
operative Milk Producer’s Union Ltd. Milk Plant SIRSA and many websites are being
used. I pay my respect and thanks to them.

• Annual report of The SIRSA Co-operative Milk Producer’s Union Ltd. Milk
Plant Rohtak for the last 5 years.

• GUPTA, Arun gupta, and Sharma, R.K., Management Accounting, 11nt ed.,
New Delhi, Kalyani Publishers, 2009

• Kothari, C.R., Research Methodology Methods & Techniques, 2nd ed., New
Delhi, New Age International (P) Limited Publishers, 2008

• Pandey, I.M., Financial Management, 9th ed.,Vikas Publishing House Pvt. Ltd.,
2007

• Websites referred

• www.vitaindia.com

• www.google.com

• www.wikipedia.com

• www.nddb.org

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