firoz mba 4 sem final prjct

8/6/2019 Firoz MBA 4 Sem Final Prjct

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Solapur District CoSolapur District Co--operative Milk operative Milk

Union Ltd, SolapurUnion Ltd, Solapur

A co A co--operative Milk Union atoperative Milk Union at

SolapurSolapur



��Project Report OnProject Report On

´Balance Sheet Analysis & comparison of performance of ´Balance Sheet Analysis & comparison of performance of Solapur District Co Operative Milk Union Solapur, Ltd Solapur District Co Operative Milk Union Solapur, Ltd

Solapur Solapur

Internal Guide Prepared By Internal Guide Prepared By

Prof. Sanjay Hanagandi Firoz . S.Shaikh Prof. Sanjay Hanagandi Firoz . S.Shaikh

MBA 4 MBA 4 th Sem th Sem

A.S.P.Commerce A.S.P.Commerce

College,Bijapur College,Bijapur



�� Solapur Zilla Sahakari Dudh Utpadak Va Prakriya Sangh Ltd SolapurSolapur Zilla Sahakari Dudh Utpadak Va Prakriya Sangh Ltd Solapuris a cooperative milk union in Maharastra ,situated at solapur.is a cooperative milk union in Maharastra ,situated at solapur.

�� The company was registered on 10 The company was registered on 10thth December 1981December 1981

�� This Union Markets Their Milk & Milk products under brand name This Union Markets Their Milk & Milk products under brand name

´́ Dudhpandhari Dudhpandhari µµ

�� The Union has average daily milk procurement of 3.5 lacks liters . The Union has average daily milk procurement of 3.5 lacks liters .

�� The union sells daily average 90000 liters of milk in packing. The union sells daily average 90000 liters of milk in packing.

�� It has marketing of milk in solapur city ,Solapur District, Marathwada,It has marketing of milk in solapur city ,Solapur District, Marathwada,Mumbai and in Karnataka.Mumbai and in Karnataka.

�� Company has production & marketing of milk products like Ghee,Company has production & marketing of milk products like Ghee,Shrikhand, Pedha ,Aamrakhand, Flavored milk, SterilizedShrikhand, Pedha ,Aamrakhand, Flavored milk, Sterilizedmilk,Icecram, Paneer & Lassi.milk,Icecram, Paneer & Lassi.

�� Number of employeesNumber of employees-- 17001700

�� Number of primary coNumber of primary co--operative societiesoperative societies -- 27112711

�� Main Raw materialMain Raw material -- Milk .Milk .

Company ProfileCompany Profile



Organizational StructureOrganizational Structure

�� A systematic & well defined organizational structure plays A systematic & well defined organizational structure plays

a vital role & provides accurate information to top levela vital role & provides accurate information to top level

management.management.

�� An organizational structure defines clear An organizational structure defines clear--cut line of cut line of authorities & responsibilities among the employees of authorities & responsibilities among the employees of

Solapur District CoSolapur District Co--operative Milk Producing & Milk operative Milk Producing & Milk

Processing Union, Ltd Solapur.Processing Union, Ltd Solapur.

�� The Organizational Structure of Dudha Pandhari is well The Organizational Structure of Dudha Pandhari is well

defined & well Arranged Structure.defined & well Arranged Structure.

�� At a glance, a person can come to know about the At a glance, a person can come to know about the

Organizational structure.Organizational structure.



Organizational StructureOrganizational Structure contcont

The Solapur District Co The Solapur District Co--operative milk union has theoperative milk union has thefollowing departmentsfollowing departments

�� Procurement DepartmentProcurement Department

�� Marketing DepartmentMarketing Department

�� Production DepartmentProduction Department�� Stores DepartmentStores Department

�� Transport Department Transport Department

�� Accounts Department Accounts Department

�� Veterinary Department Veterinary Department�� Recovery DepartmentRecovery Department

�� Animal Fodder Department Animal Fodder Department

�� Human Resources DepartmentHuman Resources Department



Balance sheetBalance sheet

�� A balance sheet is a snapshot of the assets a company owns, the A balance sheet is a snapshot of the assets a company owns, the

debts it owes, and how much it is worth.debts it owes, and how much it is worth.

�� It is one of the tools management; lenders and investors use toIt is one of the tools management; lenders and investors use to

assess a company's overall situation .assess a company's overall situation .

�� A financial statement that lists the assets, liabilities and equity A financial statement that lists the assets, liabilities and equity

of a company at a specific point in time and is used to calculateof a company at a specific point in time and is used to calculatethe net worth of a business.the net worth of a business.

�� An attempt is made by me, to compare the balance sheets of the An attempt is made by me, to compare the balance sheets of the

company , of previous five years and to track the changes incompany , of previous five years and to track the changes in

Debt, Net Worth and theB

usiness Condition over time, whichDebt, Net Worth and theB

usiness Condition over time, which will be useful in detecting the changes, will be useful in detecting the changes, ,, the reasons drivingthe reasons driving

them. and taking any proactive action if possible to control that.them. and taking any proactive action if possible to control that.

�� A standard company balance sheet has three parts: assets, A standard company balance sheet has three parts: assets,

liabilities and ownership equity.liabilities and ownership equity.



Balance SheetBalance Sheet cont«.cont«.

�� The balance sheet The balance sheet mustmust balancebalance³ ³that's why it's called a balance sheet. In otherthat's why it's called a balance sheet. In other

words, the words, the assetsassets must equal themust equal the claims on assets. The concept of balancingclaims on assets. The concept of balancingrelies on the accounting equation:relies on the accounting equation:

Assets = Liability +O wner Assets = Liability +O wner··s Equitys Equity�� The balance sheet is so The balance sheet is so--called because there is a debit entry and a credit entrycalled because there is a debit entry and a credit entry

for everything, sofor everything, so the total value of the total value of the assets is alwaysthe assets is always the same value as thethe same value as the

total of total of the liabilitiesthe liabilities..

�� T he Balance sheet is important because it: T he Balance sheet is important because it:- -

ØØ Illustrates the effect of past decisionsIllustrates the effect of past decisions

ØØ Keeps track of the business· cash position liquidityKeeps track of the business· cash position liquidity

Ø Records what the O wners· Equity position is at different timeØ Records what the O wners· Equity position is at different timeintervalsintervals

Ø Directly affected by the Cash Flow and Income Statements, whichØ Directly affected by the Cash Flow and Income Statements, whichreflect the status of the company·s operationreflect the status of the company·s operation

Ø Quickly shows the Condition of aB

usinessØ Quickly shows the Condition of aB

usiness



Objective of the StudyObjective of the Study

�� To study & compare the balance sheet of Solapur Ziila Dudha To study & compare the balance sheet of Solapur Ziila DudhaUtpadak Va Prakriya Sangh Maryadit Solapur , of Five yearsUtpadak Va Prakriya Sangh Maryadit Solapur , of Five years

(2004(2004--2009), to compare the performance of the company over that2009), to compare the performance of the company over that

period of time and find out health of company by considering period of time and find out health of company by considering

financial ratiosfinancial ratios..Limitation of StudyLimitation of Study

1. Time is the one constraint of the study.1. Time is the one constraint of the study.

2. Employees are reluctant to give detailed information regarding2. Employees are reluctant to give detailed information regarding

the financial aspects. But however attempt is made to collect thethe financial aspects. But however attempt is made to collect the

informationinformation



Data Interpretation and analysis.Data Interpretation and analysis.

�� 1.Comparison of current Assets

1.Comparison of current Assets--

The Current Assets The Current Assets

represents the liquidity of the company, these assets can easily be convertedrepresents the liquidity of the company, these assets can easily be converted

to cash within one operating cycleto cash within one operating cycle ---- the amount of time the company needsthe amount of time the company needs

to sell a product and collect cash from that sale. The graph shows that theto sell a product and collect cash from that sale. The graph shows that the

company has good amont of liquid cash and the current assets are increasingcompany has good amont of liquid cash and the current assets are increasing

consistently which is a good sign.consistently which is a good sign.



2. Comparison of Profits Earned by the company2. Comparison of Profits Earned by the company

�� Profit is supposed as indicator of efficiency of company. The performance of theProfit is supposed as indicator of efficiency of company. The performance of the

company can be compared or judged by looking at the profit earned by thecompany can be compared or judged by looking at the profit earned by thecompany. After looking at the graph we can see a drastic fall in the profitscompany. After looking at the graph we can see a drastic fall in the profits

earned Diesel & petrol, the sudden increase in the salary of employees and it isearned Diesel & petrol, the sudden increase in the salary of employees and it is

also due to increase in the raw material prices of animal fodder& introduction of also due to increase in the raw material prices of animal fodder& introduction of

new taxes by govt in 2005new taxes by govt in 2005--06.But the company seems to be recovering from that06.But the company seems to be recovering from that

phase & consistently increasing . phase & consistently increasing .



Financial RatiosFinancial Ratios

�� Working Capital Working Capital--One of the main advantages of looking at the workingOne of the main advantages of looking at the working

capital position is being able to foresee any financial difficulties that may arise.capital position is being able to foresee any financial difficulties that may arise.

Working capital = Current assets Working capital = Current assets ² ² Current LiabilitiesCurrent Liabilities

= 43.5= 43.5 -- 21.521.5

= 22 Crores= 22 Crores

oo Working Capital per rupee of sales Working Capital per rupee of sales--To find the approximate amount of To find the approximate amount of

working capital working capital a company should have, you should look at "working capitala company should have, you should look at "working capital

per rupee of sales." In other words, we are going to have to compare the amount per rupee of sales." In other words, we are going to have to compare the amount

of working capital on theof working capital on the balance sheetbalance sheet to the total sales, which is found on theto the total sales, which is found on the

income statementincome statement, not the balance sheet, not the balance sheet

working capital per rupee of sales= Working Capital working capital per rupee of sales= Working Capital ÷÷ Total Sales Total Sales

= 22= 22 ÷÷ 199.8199.8

= 0.11 or 11 %= 0.11 or 11 %

It is good or satisfactory considering they are into procurement & sales of milk.It is good or satisfactory considering they are into procurement & sales of milk.



Financial Ratios cont«.Financial Ratios cont«.

�� The current The current

ratioratio--The current ratio is another test of a company's The current ratio is another test of a company's

financial strength. It calculates how many rupees in assets are likely to befinancial strength. It calculates how many rupees in assets are likely to be

converted to cash within one year in order to pay debts that come due duringconverted to cash within one year in order to pay debts that come due during

the same year .the same year .

Current ratio = Current AssetsCurrent ratio = Current Assets ÷÷ Current liabilityCurrent liability

= 43.5= 43.5 ÷÷ 21.521.5

= 2.02 or 1: 2.02= 2.02 or 1: 2.02

This shows an ideal ratio and the liquidity position of the company is very This shows an ideal ratio and the liquidity position of the company is very

favorable.favorable.

Cash RatioCash Ratio-- is the most conservative liquidity ratio. It excludes all currentis the most conservative liquidity ratio. It excludes all current

assets except the most liquid: cash and cash equivalents. The cash ratio isassets except the most liquid: cash and cash equivalents. The cash ratio isdefined as follows:defined as follows:

Cash ratio = cashCash ratio = cash ÷÷ current liabilitiescurrent liabilities

= 0.91= 0.91 ÷÷ 21.521.5

= 0.04 or 4 %= 0.04 or 4 %

The cash is sufficient to pay only 4 % debts. The cash is sufficient to pay only 4 % debts.



Financial ratios contFinancial ratios cont

Quick Test or Acid test RatioQuick Test or Acid test Ratio--The ´Quick Ratioµ is calculated by The ´Quick Ratioµ is calculated by

Dividing a Company·s Most Liquid Assets by Current Liabilities.Dividing a Company·s Most Liquid Assets by Current Liabilities.

Quick ratio= (Current AssetsQuick ratio= (Current Assets--Inventories)Inventories) ÷÷ Current LiabilitiesCurrent Liabilities

= (43.5= (43.5--5.3)5.3) ÷÷ 21.521.5

= 1.77= 1.77

which means for every liability of 1 Rs , there is 1.77 Rs in the form of cash & which means for every liability of 1 Rs , there is 1.77 Rs in the form of cash &

accounts receivable to pay that liabilities. Thus this shows very healthy & soundaccounts receivable to pay that liabilities. Thus this shows very healthy & sound

of the business.of the business.

�� Debt to EquityDebt to Equity R atioR atio--The debt The debt--toto--Equity R atio or Debt to net worth ratio is totalEquity R atio or Debt to net worth ratio is total

liabilities divided by net worthliabilities divided by net worth -- the number of rupees in debt owed for every R upee inthe number of rupees in debt owed for every R upee in

net worth.net worth.

Debt to Equity ratio = Total DebtDebt to Equity ratio = Total Debt ÷÷ Net WorthNet Worth

= 21.7= 21.7 ÷÷ 15.115.1

= 1.63= 1.63



Financial RatiosFinancial Ratios

�� Return onReturn on assetsassets--Return on asset is a measure of how effectively the firm'sReturn on asset is a measure of how effectively the firm's

assets are being used to generate profits. It Measures the efficiency of Totalassets are being used to generate profits. It Measures the efficiency of Total Assets in generating Net Profit: The number of Rs in Net Profit produced for Assets in generating Net Profit: The number of Rs in Net Profit produced forevery Rs 1 invested in Total Assets .every Rs 1 invested in Total Assets .

Return on Assets = Net profits before taxReturn on Assets = Net profits before tax ÷÷ Total Assets Total Assets

= 1.48= 1.48 ÷÷ 62.662.6

= 0.02 or 2 %= 0.02 or 2 %

This is very serious and needs attention of management This is very serious and needs attention of management..�� Interest Coverage RatioInterest Coverage Ratio-- The The times interest earned times interest earned ratio indicates how well theratio indicates how well the

firm's earnings can cover the interest payments on its debt.firm's earnings can cover the interest payments on its debt.

Interest coverage ratio = EBITInterest coverage ratio = EBIT ÷÷ Interest ChargesInterest Charges

= 4.3= 4.3 ÷÷ 2.82.8

= 1.5= 1.5

This shows that about 2/3 part of the earning of the company goes towards This shows that about 2/3 part of the earning of the company goes towards paying the interest on the debts. This is the area of concern which should be paying the interest on the debts. This is the area of concern which should belooked carefully by the management.looked carefully by the management.



Findings«Findings«contdcontd

�� 5. The Quick ratio is = 1.77, which means for every 5. The Quick ratio is = 1.77, which means for every liability of 1 R s , there is 1.77 R s in the form of cash &liability of 1 R s , there is 1.77 R s in the form of cash &accounts receivable to pay that liabilities. Thus thisaccounts receivable to pay that liabilities. Thus thisshows very healthy & sound of the business.shows very healthy & sound of the business.

�� 6. The debt equity ratio of the company is 1.63. which is6. The debt equity ratio of the company is 1.63. which ismoderately good.moderately good.

�� 7. The company have debt ratio 0f 39 %, which means7. The company have debt ratio 0f 39 %, which meansthey have 1 R s in the form of assets for every 0.39 R sthey have 1 R s in the form of assets for every 0.39 R s

of debt.of debt.�� 8. The interest coverage ratio is 1.5 i.e 2/3 part of total8. The interest coverage ratio is 1.5 i.e 2/3 part of total

income goes in paying debt. This is very serious issue toincome goes in paying debt. This is very serious issue toattend.attend.



Findings«..Findings«..contcont

�� 9. The Gross profit margin ratio is 2.1 % , which means9. The Gross profit margin ratio is 2.1 % , which meanscompany earn only 0.02 R s from investment of R s 1. company earn only 0.02 R s from investment of R s 1. This is another serious issue. This is another serious issue.

�� 10. The return on asset is 0.02 or 2 % , which is fact10. The return on asset is 0.02 or 2 % , which is fact which needs attention. which needs attention.

�� 11. R eturn on Equity is 10 %.11. R eturn on Equity is 10 %.

�� 12. The profit of the company has deteriorated from12. The profit of the company has deteriorated from

the figures of 2004the figures of 2004--2005 in 20052005 in 2005--06.From thereon it is06.From thereon it isincreasing slowly but not reached near to the figures of increasing slowly but not reached near to the figures of 20042004--05 .05 .



SUGGESTIONSSUGGESTIONS

�� 1.Company should look for some other alternate source of financing with1.Company should look for some other alternate source of financing withless interest rate . Because most of the earning i.e 2/3 part is going as anless interest rate . Because most of the earning i.e 2/3 part is going as aninterest.interest.

�� 2.The finance or accounting department should create co2.The finance or accounting department should create co--ordinationordination with other departments rather than working as seprate,independent unit with other departments rather than working as seprate,independent unitor entity.or entity.

�� 3..The finance dept should clearly explain the financial effects of each3..The finance dept should clearly explain the financial effects of eachactivity to concerned dept.for egactivity to concerned dept.for eg-- It should explain to marketing deptIt should explain to marketing depthow the increasing of sales of milk & milk products is necessary for thehow the increasing of sales of milk & milk products is necessary for thecompany & what financial effects it will bringi.e the sales will cut downcompany & what financial effects it will bringi.e the sales will cut downthe fixed expenses such as transportation, administrative expenses afterthe fixed expenses such as transportation, administrative expenses aftercertain points of sales.certain points of sales.

�� 4.The financial department should play in parts in critical decisions like4.The financial department should play in parts in critical decisions like pricing, by explaining the effects of these decisions on financial pricing, by explaining the effects of these decisions on financial positions of company. positions of company.

�� 5.The company should benchmark its cost accounting & cost saving5.The company should benchmark its cost accounting & cost savingmethods with the best in industry and if appropriate, applying that inmethods with the best in industry and if appropriate, applying that intheir firm. For this they can send their employees to other companytheir firm. For this they can send their employees to other company

,best in their sector.,best in their sector.



Suggessions«.Suggessions«.contdcontd

6.They should try to cut down unnecessary expenses .for that they6.They should try to cut down unnecessary expenses .for that theyhave to study which expenses are necessary and where we canhave to study which expenses are necessary and where we cancut down the expenses.cut down the expenses.

7. The financial statements of the company shows a large amount of 7. The financial statements of the company shows a large amount of account receivables The account receivables chart of theaccount receivables The account receivables chart of thecompany shows more than 1 crore as marketing Outstanding,company shows more than 1 crore as marketing Outstanding,

which is carried for years as it is. For this they can create a team which is carried for years as it is. For this they can create a team which will first fix the responsibility of outstanding & then which will first fix the responsibility of outstanding & then persuade for the recovery. persuade for the recovery.

8. Company should undertake a deep look in the reasons for their8. Company should undertake a deep look in the reasons for theirdeclining sales & Profits over the period of 5 years. A thoroughdeclining sales & Profits over the period of 5 years. A thoroughinvestigation should be made regarding the reasons and theinvestigation should be made regarding the reasons and the

problem areas will come out, on which they have to work out. problem areas will come out, on which they have to work out.

9.The investment the assets should be made only after examining9.The investment the assets should be made only after examiningthe profitability of that asset. For this methods likethe profitability of that asset. For this methods likeIRR,ARR,Pay back Period, Profitability index etc are used .SoIRR,ARR,Pay back Period, Profitability index etc are used .Sothat rate of return on asset can be used.that rate of return on asset can be used.

10.The storage of unnecessary inventory is avoided. As this will10.The storage of unnecessary inventory is avoided. As this willresult in arresting or blocking of unnecessary funds. And this willresult in arresting or blocking of unnecessary funds. And this willobviously cut down the total costsobviously cut down the total costs



ConclusionConclusion

Balance sheet tells us what the company owns & what theBalance sheet tells us what the company owns & what the

company owes and the net worth of the company. But onlycompany owes and the net worth of the company. But only

balance sheet can not tell the exact position of thebalance sheet can not tell the exact position of the

company. We have to study other financial statements likecompany. We have to study other financial statements like

profit & loss statement and cash flow statement of the profit & loss statement and cash flow statement of thecompany.company.

But the financial statement analysis along withBut the financial statement analysis along with

financial ratio analysis makes us aware about thefinancial ratio analysis makes us aware about the

happening and trends in financial aspects.happening and trends in financial aspects.



Thank Thank

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firoz mba 4 sem final prjct

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