Kmf project

A study on Profitability and Financial status on BAMUL

1. INTRODUCTION Accounting is the process of identifying, measuring and communicating economic information to permit summarizing various business transactions. The end products of business transactions are the financial statements comprising primarily the position statement or the balance sheet and the income statement or the profit and loss account. These statements are the outcome of summarizing process of accounting and are; therefore the sources of information on the basis of which conclusions are drawn about the profitability and the financial position of a concern. Financial statements are the basis for decision making by the management as well as all other outsiders who are interested in the affairs of the firm such as investors, government and the general public. The analysis and interpretation of financial statements depend upon the nature and type of information available in these statements.

Meaning of financial statements A financial statement is a collection of data organized according to logical and consistent according procedures. It may show a position at a moment in time, as in the case of a balance sheet, or may reveal a series of activities over a given period of time, as in the case of an income statement.

Financial statements are the outcome of summarizing process of accounting. In the words of John N. Myer, “The financial statement provide a summary of the accounts of a business enterprise the balance sheet reflecting the assets, liabilities

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and capital as on a certain date and the income statement showing the results of operations during a certain period". These statements are used to convey to management and other interested outsiders the profitability and financial position of a firm.

OBJECTIVES OF FINANCIAL STATEMENTS  To provide reliable financial information about economic resources and obligations of a business firm.  To provide other needed information about changes in such economic resources and obligations.  To provide reliable information about changes in net resources (resources less obligations) arising out of business activities.  To provide financial information that assists in estimating the earning potential of business.  To disclose to the extent possible, other information related to the financial statement i.e. relevant to the need of the users of these statements.

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ANATOMY OR TYPE OF FINANCIAL STATEMENT  The position statement or the balance sheet.  The income statement or the profit & loss account.  A statement of changes in owner's accounts, and  A statement of changes in financial position.

BALANCE SHEET The balance sheet is one of the important statements depicting the financial strength of the concern. One hand it shows the properties that it utilizes and on the other hand the sources of these properties. The balance sheet shows all the assets owned by the concern, and all the liabilities and claims, it owes to owner and outsiders. The balance sheet is prepared on a particular data. The right hand side shows properties and assets. Normally there is no particular sequence for showing various assets and liabilities. The companies Act, 1956 has prescribed a particular form for showing assets and liabilities in the balance sheet for companies registered under this act.

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INCOME STATEMENT (PROFIT & LOSS A\C) Income statement is prepared to determine the operational position to the concern. It is a statement of revenues earned and the expenses incurred for earning that revenue. If there is excess of revenues over expenditures it will show a profit and if the expenditure are more than the income then there will be a loss. The income statement is prepared for a particular period, generally a year.

STATEMENT OF CHANGES IN OWNER'S EQUITY This statement gives details of the distribution of earning during a particular accounting period. The balance shown by the income statement is transferred to the balance sheet though this statement after making necessary appropriation. The balance sheet of this account represents the retained earnings. This statement is the connecting link between balance sheet and income statement. Statement of changes in owner's equity simply shows the beginning balance of each owner's equity account, the reasons for increase and decrease in each, and the ending balance.

STATEMENT OF CHANGES IN FINANCIAL POSITION Statement of changes in financial position has to be prepared to show the changes in assets and liabilities from the end of one period to the end of another Vijaya college, R.V road Bangalore

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point of time. The objective of this statement is to show the movement of funds (working capital or cash) during a particular period. The statement of changes in financial position may take any of the following two forms.

Trend analysis The financial statements may be analysed by computing trends of series of information. This method determines the direction upwards or downwards and computation of percentages relationship that each statement item bears to the same item in the base year. The information for a number of years is taken up and one year, generally the first year, is taken as a base year. The figures of the base year are taken as 100 and trend ratios for other years are calculated on the basis of base year.

Fund flow statement: The funds flow statement is designed to analyze the changes in the financial condition of a business enterprise between two periods. This statement enables the management to have an idea about the sources of fund and their uses for various purposes. This statement helps the management in policy formulation and performance appraisal.

Cash flow statement: A statement of changes in the financial position of a firm on cash basis is called cash flow statement. It summarizes the causes of changes in cash position of a business enterprise between dates of two balances sheets. This statement is very Vijaya college, R.V road Bangalore

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much similar to the statement of changes in working capital, i.e. funds flow statement.

USES AND IMPORTANCE OF FINANCIAL STATEMENTS  As a report of stewardship.  As a basis for fiscal policies.

 To determine the legality of dividend.  As a guide to advice dividend action.  As a basis for the granting of credit.  As an aid to government supervision.

 As a basis for price and rate regulation.  As a basis for taxation.

FINANCIAL ANALYSIS The term 'financial analysis', also known as analysis and interpretation of financial statements", refers to the process of determining the financial strengths and weakness of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data.

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DEFINITION OF FINANCIAL ANALYSIS According to Metcalf and Titard, "Financial analysis is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firm's position and performance".

From these definitions, it is clear that analysis and interpretation of financial statement is the methodical classification of the data given in the financial statement into simple component parts of elements, and evaluation of the significance of the relationship between the classified component parts of elements, with a view to provide a full diagnosis of the profitability and financial statement of an enterprise.

The term analysis can take to mean the splitting or breaking down the facts or data found in the financial statement into simple component parts of elements (i.e., the methodical classification of the facts or data given in the financial statement into simple elements).

TYPES OF FINANCIAL ANALYSIS Vijaya college, R.V road Bangalore

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Various users of financial statements study them from different angles for different purposes. However, we can classify various types of financial analysis into different categories depending upon, (1) the material used, and (2) the method of operation followed in the analysis or the modus operandi of analysis.

Chart showing the types of financial analysis TYPES OF FINANCIAL ANALYSIS

ON THE BASIS OF MATERIAL USED

EXTERNAL ANALYSIS

ON THE BASIS OF MODUS OPERANDI

INTERNAL ANALYSIS

HORIZONTAL ANALYSIS

VERTICAL ANALYSIS

Based on Material Used External analysis: It is made by those who do not have access to the detailed records of the company. This group which has to depend almost entirely on published financial statement includes investors, credit agencies and government agencies regulating a business in normal way. Internal analysis: It is accomplished by those who have access to the books of accounts and all other information relating to the business. It is conducted by

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executives and employees of the enterprise as well as government and court agencies, which may have regulatory and other jurisdiction over the business.

Based on modus operandi of analysis Horizontal analysis: When the financial statements for a number of years are reviewed and analyzed, the analysis is called horizontal analysis. This is useful for long-term trend analysis and planning. Vertical analysis: It is frequently used for referring to ratios developed for one date or one accounting period. This is not very conducive to proper analysis of the firm’s financial position and its interpretation as it does not enable to study in perspective.

Based on objective of the analysis Long-term analysis: This analysis is made in order to study the long-term financial stability, solvency and liquidity as well as profitability and earning capacity of a business. The objective of making this analysis is to know in the long-term that the concern will be able to earn a minimum amount, which will be sufficient to maintain a reasonable price if return in the investment.

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Short-term analysis: This analysis is made to determine the short-term solvency, stability, liquidity and earning capacity of the business. The objective is to know whether in the short-run, a business enterprise will have adequate funds readily available to meet its short-term requirements and sufficient borrowing capacity to meet contingencies in the near future.

METHODS OR DEVICES OF FINANCIAL ANALYSIS The analysis and interpretation of financial statements is used to determine the financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. An effort made to use those devices which clearly analyze the position of the enterprise. The following methods of analysis are generally used:  Comparative statements;  Common-size Statement;  Trend Analysis;  Funds flow Analysis;  Cash flow Analysis;  Cost-volume-profit Analysis;  Ratio Analysis. Comparative statements Vijaya college, R.V road Bangalore

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Comparative financial statements refer to those statements of the financial affairs of a business, which are prepared in such a way as to provide time perspective to the various elements contained in such statements. In other words, financial statements are those, which summarize and present relative accounting data for a number of years, incorporating therein the changes in individual items. There are two important comparative financial statements they-are: Comparative balance sheet. Comparative income statement. Common-size financial statement Common-size financial statements are those statements in which the data or figures reported in the financial statement are converted into percentages, taking some common base. It includes common-size income statements and common size balance sheet. Generally, in the common-size income statements, the net sales figures is taken as 100% and all other items of the income statements are expressed as percentages of net sales. Similarly in common size balance sheet, total of assets or the total of liabilities and capital is taken as 100% and all items in the balance sheet are expressed as percentage of this total.

Trend analysis or trend percentage Comparison of past over a period of time with base year is known as trend analysis. So, trend percentage or trend ratio analysis is a method of analysis under which the percentage relationship that each financial statement item of each year bears to same item in the base year is calculated. After the trend percentage of

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different items for various years are calculated, the trend percentages or trend ratio are shown in comparative financial statements.

Fund flow analysis The fund flow statement is the statement which shows the movement of funds and is a report of the financial operation of the business undertaking. It indicates various means by which funds were obtained during a particular period and the way in which these funds were employed. In simple words, it is a statement of source and application of funds. Cash flow analysis or cash flow statement A cash flow statement is a statement which depicts the changes in the cash position (i.e., cash and bank balance) of the concern between one balance sheet date and another. In other words, it is as statement, which indicates the cash flows during a financial period. It show as the various sources from which cash was received and the various applications or uses of cash, i.e., the various purpose for which cash was utilized during an accounting period, and also resulting cash balance at the end of the accounting period.

Cost-Volume-Profit Analysis Cost- Volume -Profit analysis is a technique for studying the relationship between cost, volume and profit. Profits of an undertaking depend upon a large number of factors. But the most important of these factors are the cost of manufacture, volume of sales and the selling prices of the products. In the words Vijaya college, R.V road Bangalore

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of Herman C. Heiser, "the most significant single factor in profit planning of the average business is the relationship between the volume of business, costs and profits".

Ratio Analysis Ratio analysis is a technique of analysis, interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. However, ratio analysis is not an end itself. It is only a means of better understanding of financial strengths and weaknesses of firm.

THE INDIAN FINANCIAL SYSTEM The financial system functions as an intermediary and facilities the flow of funds from the areas of surplus to areas of deficit. A Financial system is a combination of various institutions, markets, regulations, and laws, practices, money managers, analysts, transactions and claims and liabilities. The financial system help determine both the cost and volume of credit.

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ROLES/FUNCTIONS OF FINANCIAL SYSTEM A Financial system performs the following functions;  It -provides a payment system for the exchange of goods and services.  It enables the pooling of funds for understanding large scale enterprises.  It provides a mechanism for spatial and temporal transfer of resources.  It provides a way for managing uncertainty and controlling risk.  It generates information that helps in coordinating Decentralized decision making.

2. INDUSTRY PROFILE A dairy is a business enterprise established for the harvesting of animal milk – mostly from cows or goats, but also from buffalo, sheep, horses or camels – for human consumption. A dairy is typically located on a dedicated dairy farm or section of a multi-purpose farm that is concerned with the harvesting of milk. Terminology differs between countries. For example, in the United States, a farm building where milk is harvested is often called a "milking parlor". In New Zealand such a building is historically known as a "milking shed" or "milking parlour". Sometimes milking sheds are referred to by their type, such as "herring bone shed" or "pit parlour". In some countries, especially those with small numbers of animals being milked, as well as harvesting the milk from an animal, the dairy may also process the milk into butter, cheese and yogurt, for example. This is a traditional method of Vijaya college, R.V road Bangalore

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producing specialist milk products, especially in Europe. In the United States a dairy can also be a place that processes, distributes and sells dairy products, or a room, building or establishment where milk is stored and processed into milk products, such as butter or cheese. In New Zealand English the singular use of the word dairy almost exclusively refers to the corner convenience store, or superette. This usage is historical as such stores were a common place for the public to buy milk products.

India is the highest milk producer in the entire globe. India is well known as the 'Oyster' of the global dairy industry, with opportunities galore for the entrepreneurs globally. It might be dream for any nation in the world to capitalize on the largest and fastest growing milk and milk products' market. The dairy industry in India has been witnessing rapid growth with liberalization. As the economy provides good opportunities for MNCs and foreign investors to release the full potential of this industry. The main objective of the Indian Dairy Industry is to manage the national resources in a manner to enhance milk production and upgrade milk processing using innovative technologies.

The crossbred technology in the Indian Dairy Industry has further augmented with the viability of the dairy units by increasing the milk production per animal. Then subsequently milk production has also increased at an exponential rate while the benefits of an increase in milk production also reached the consumers from a relatively lower increase in the price of milk. The favorable price environment for milk producers for the Dairy Industry in India however appeared to have weakened

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during the 90's, a decline in the real price of milk being noticed after the year 1992. And then slowly regained it is glory after 1992 to till now. In India dairying from very much earlier is regarded as an instrument for social and economic development. The country's milk supply comes from millions of small producers, who are dispersed throughout the rural areas. All these farmers maintain an average herd of one or two milk animals, comprising cows and/or buffaloes. Mostly ample labour and a small land base encourage farmers to practice dairying as an occupation subsidiary to agriculture. As income from crop production is seasonal instead dairying provides a stable which is a year-round income and also an important economic incentive for the small farmer. India had tremendous milk production in 40 years and has become the world's largest milk-producing nation with a gross output of 84.6 million tons in 2001. The Indian Dairy Industry has achieved this strength of a producer-owned and professionally-managed cooperative system, despite the facts that a majority of dairy farmers are illiterate and run small, marginal operations and for many farmers, selling milk is their sole source of income. More than 10 million dairy farmers belong to 96,000 local dairy cooperatives, who sell their products to one of 170 milk producers' cooperative unions who in turn are supported by 15 state cooperative milk marketing federations. In India dairy business has been practiced as rural cottage industry over the years. Semi-commercial dairy started with the establishment of military dairy farms and co-operative milk unions throughout the country towards the end of the 19th century. Since Independence this Industry has made rapid progress. A large number of modern milk and milk product factories have since been established. The

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organized dairies in India have been successfully engaged in the routine commercial production of pasteurized bottled milk for Indian dairy products. The growth of Indian Dairy Industry during the last three decades has been impressive, at more than 5% per annum; and in the 90's the country has emerged as the largest producer of milk. This is not a small achievement when we consider the fact that dairying in India is largely stringent that farmers in general keep dairy animals in proportion to their free crop and also are available for family labor with little or no purchased inputs and a minimum of marketed outputs. The existence of restrictive trade policy milk in the Diary Industry and the emergence of Amul type cooperatives have changed the dairy farming practices in the country. Farmers have gained the favorable price for their milk and for their production which was essentially a self-reliant one is which are now being transformed into a commercial proposition. In India Milk production is dominated by small and marginal land-holding farmers and also by landless labourers who in aggregate own 70% of the national milk animal herd. And as the crop production on 78% of the agricultural land still depends on rain, which is prone to both drought and floods, rendering agricultural income is very much uncertain for most of the farmers. Dairying, as a subsidiary source of income and occupation, is real relief to most of the farmers in the society. Usually one or two milk animals enable the farmers to generate sufficient income to break the vicious subsistence agricultural-debt cycle. The Operation Flood which is the successful Indian dairy development programmed has analyzed that how food aid can be utilized as an investment in building the type of institutional infrastructure that can bring about national dairy

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development. Programmes like this, with similar policy orientations, may prove to be appropriate to dairy development in in India. India in the early 1950's was commercially importing around 55000 tonnes of milk powder annually to meet the urban milk demand. Most of the significant developments in dairying have taken place in India in this century only.

Total contribution to the economy/ sales

The Indian Dairy Industry engages in the production and processing of milk & cream. This industry is involved in the manufacture of various dairy products like cheese, curd, yoghurt etc. The Indian Dairy Industry specializes in the procurement, production, processing, storage and distribution of dairy products. India as nation stands first in its share of dairy production in the international scenario. The industry contributes about Rs 1,15,970 to the national economy.

Employment opportunities

The Indian Diary industry which is in the developing stage provides gainful employment to a vast majority of the rural households. It employs about 8.47 million people on yearly basis out of which 71% are women. Jobs in Indian dairy industry are mainly in the fields of production and processing of dairy products. An individual with minimum of 60% marks who has bachelor's degree course in the dairy technology can easily be availing an opportunity to work in this industry. For the graduation course in Dairy technology one has to qualify Vijaya college, R.V road Bangalore

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the All India Entrance Test that is affiliated to the Indian Council of Agricultural Research. After that the person can continue with his masters in dairy technology. Jobs would be for the following positions.  Dairy Scientists: The main job of the dairy scientists is to deal with collection of milk and taking care of the high yielding variety of animals.  Dairy Technologists: the work of Dairy technology requires procurement officers who take the responsibility of collecting milk from farmers, milk booths and cattle-rearers. This particular procurement officer should well understand the latest technology that is applicable in maintaining the quality of milk of the process of transporting it to the desired location.  Dairy Engineers: dairy engineers are usually appointed is to set up and maintain dairy plants.  Marketing Personnel: These individuals deal with the sale and marketing of milk together with milk products.

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Latest developments  Indian Dairy Industry is the largest milk producer all over the world, around 100 million MT Indian Dairy Industries value of output amounted to Rs. 1179 billion in 2004-05 which approximately equals combined output of paddy and wheat. With 1/5th of the world’s bovine population  In India the Milk animals constitutes45% indigenous cattle, 55 % buffaloes, and 10% cross bred cows Intensive Dairy Development Programmed (IDDP): The Schemes, modified under this programmes are on the basis of the recommendation of the evaluation studies which were launched during Eighth Plan period and is being continued throughout the Eleventh Plan with an outlay of Rs. 32.49 core for 2009-10. Strengthening Infrastructure for Quality and Clean Milk Production (CMP): this is a centrally sponsored scheme which was launched in October 2003, which had the main objective of improving the quality of raw milk produced at the every village level in the India. Dairy Venture Capital Fund- this is introduced in the Tenth Fiver Year Plan to bring about structural changes in unorganized sector, which would measure like milk processing at village level, marketing of pasteurized milk in a cost effective manner, quality or the up gradation of traditional technology to handle commercial scale using modern equipments and management skills.

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2. RESEARCH DESIGN It refers to the arrangements of conditions of the study and collection of data in a manner that aims to continue to combine relevance to the study purpose. It constitutes the blue print for the collection, measurement and analysis of data. A research design is a basic plan, which guides the data collection and analysis of the phases of the project.

TOPIC “Profitability and Financial status of BAMUL”

RATIONALE BEHIND THE STUDY The main reason for selecting the, " Profitability and Financial status" as a field of my project work is to know the financial activities as well as economic role played by BAMUL and to get the knowledge about the difference in theory and practice.

Purpose of study BAMUL is one which is financially sound not only the present but also would be in the future. To know the financial position of the bank, systematic financial analysis has to be done to assess its profitability and solvency position, this project deals with the financial performance of BAMUL. Vijaya college, R.V road Bangalore

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This project analysis is of the Profitability and Financial status of BAMUL by taking 3 years into consideration i.e., 2010, 2011 and 2012.

SCOPE OF THE STUDY The study was taken up to know the financial activities in BAMUL relating to their business activities and performance of the corporation. 1. The study is being done to know the financial activities of the co-operative limited. 2. The study is being done to ascertain the financial status of the co-operative limited. 3. The study on Profitability and Financial status and comprise of ratio analysis, and comparative statement analysis. 4. The study was made to analyze the financial status with reference to financial statement like profit and loss account and balance sheet with the help of tables, ratios and graphs.

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METHODOLOGY OF STUDY Place of study: The Bangalore Urban & Rural District Milk Producers CoOperative Societies Union Limited (Bamul) Dr.M.H.Marigowda Road, Dharmaram College Post BANGALORE-560 029. Karnataka. Title of the study: A study on Profitability and Financial status of, BAMUL for the period of 2010, 2011 and 2012. Method of study: 1. Discussion with the management of the co-operative limited to get general information about their activities. 2. Study of classification of items adopted in profit and loss account and balance sheet and the accounting policies of the concern. 3. Study of annual reports for collecting data for 3 years. 4. Analysis of their techniques and methods available.

DATA COLLECTION METHODS Source of data are classified into two types they are: 1. Primary data 2. Secondary data

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Primary data Primary data may be described as those data that have been observed by the researches for the first time. Primary data re-collected from the field for the specific purpose of the research.  Interview: a structured and free personnel interview was conducted with high officials of the co-operative limited.

Secondary data Secondary data are collected those data that have been complied already before conducting the research. Secondary data may be internal as well as external. Internal data are collected from the Bank’s records. External data are collected from outside the Bank like print materials, internet and newspapers.  Co-operative Limited’s previous records.  Various publications and manuals of BAMUL.  Annual reports of BAMUL.

SAMPLING SIZE Sampling size used in this project study relates to financial figures, covering the period from 2010-2012. Each data was already checked and verified by CA; hence data is straightaway taken for analysis.

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RESEARCH INSTRUMENTS The analysis interpretation of the financial statement is used to determine the financial position and result and operation as well. A number of methods and devices are used to study the relationship between different statements. The statistical tools adopted for the study is:  Financial ratio

OBJECTIVES OF THE STUDY  To understand the financial performance of BAMUL.  To analyze the actual performance of co-operative limited in the areas of liquidity, profitability through financial indicators and compare the present performance with standard norms.  To find the financial areas of BAMUL, where the ratio analysis helps to maintain balance between liquidity, solvency and profitability.  To get an idea how a financial statements can be used to predict the future trends.  To find out the solution to the unfavorable financial conditions and financial performance.  To draw the conclusions and suggestions based on the study.

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LIMITAITON OF THE STUDY The following problems were faced during the study:  The confidential of the some facts and figures has acted as a limit to BAMUL.  The study is based on the data given by the officials and reports of the cooperative limited.  It is conducted only at BAMUL, therefore it is not possible to study the actual problem faced by other co-operative limited.  Time was limited and the subject is vast and limited information resources.  The comparison and analysis are limited only for past 3 years.

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3. COMPANY PROFILE

INTRODUCTION The Bangalore Milk Union Ltd., (Bamul) was established during 1975 under Operation Flood II by keeping “Amul” as its Roll Model. At present Bamul has Bangalore Urban, Bangalore Rural & Ramanagaram Districts of Karnataka State as its area of operation for Milk Procurement and selling Milk in part of Bruhath Bangalore Mahanagara Palika (BBMP) area.

Since its inception the Union is

constantly striving further for dairy development and marketing activities in its milk shed area.

OBJECTIVES  To organize Dairy Co-operative Societies at Village level and dissemination of information like good dairy animal husbandry and breeding practices & Clean Milk Production through Extension Services.  To provide assured market & remunerative price for the milk produced by the farmer members of the co-operative societies.  To provide technical input services like veterinary services, artificial insemination, supply of balanced cattle feed & Fodder seed materials etc., to milk producers.

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 To facilitate rural development by providing opportunities for selfemployment at village level, thereby preventing migration to urban areas, introducing cash economy & opportunity for steady income.  To provide quality Milk and milk products to urban consumers at competitive prices. BACKGROUND On January 1st 1958 a pilot scheme to cater the Bangalore Milk Market, Department of Animal Husbandry, Government of Karnataka was started Milk processing facilities & Veterinary Hospitals at National Dairy Research Institute (NDRI). Later in 1962, The Bangalore Milk Supply Scheme came into existence as an independent body. With the great efforts by the then Hon’ble Minister for Revenue & Dairying, Government of Mysore Sri M V Krishnappa, A joint venture of UNICEF, Government of India & Government of Mysore was dedicated Bangalore Dairy to the people of Karnataka State on 23 rd January 1965 by the then Hon’ble Prime Minister Late Sri Lal Bahadhur Shastriji. The Bangalore Dairy scattering over an area of 52 Acres of land, the Dairy had an initial capacity to process 50,000 liters of milk per day. Bangalore Dairy underwent a structural change in December 1975, handed over to Karnataka Dairy Development Corporation (KDDC). Rural Milk Scheme of Mysore, Hassan & Kudige Districts was started under Operation Flood-II and then transferred to Karnataka Milk Federation (KMF) in May 1984 as a successor of KDDC. To cater to the growing demand for milk by the consumers of Bangalore City, the capacity was increased to 1.5 lakh liters per day under the Operation Flood-II during 1981 and later increased to 3.5 lakh liters per day under Operation Flood-III during 1994.

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As per the policies of the National Dairy Development Board (NDDB), Bangalore Dairy was handed over to Bangalore Milk Union Ltd., (Bamul) on 1 st September 1988. The Union is capable of processing the entire milk procured, by timely implementation of several infrastructure projects like commissioning of New Mega Dairy state-of-the-art technology with a processing Capacity of 6.0 Lakh liters per day, new chilling centers, renovation of product block etc.,

The milk shed area of Bamul comprises of 2611 revenue villages. As of now the Union has organized 1884 Dairy Co-operative Societies (DCS) in 2,257 villages, thereby covering 86 % of the total villages in these three districts. In these DCSs, there are 3,35,458 milk producer members. Among them 109843 members are women and 60,024 members belong to Schedule Caste and Schedule Tribes.

The philosophy of this co-operative milk producers’ organisation is to eliminate middlemen and organise institutions owned and managed by milk producers, by employing professionals. Achieve economies of scale of rural milk producers by ensuring maximum returns and at the same time providing wholesome milk at reasonable price to urban consumers. Ultimately, the complex network of cooperative organisation should build a strong bridge between masses of rural producers and millions of urban consumers & achieve a socio-economic revolution in the village community. Bamul has been registered under MMPO by Central Registration Authority. Today, the Union has become the biggest Milk Co-operative Union in Southern India.

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Bamul has been certified for ISO 22000:2005 & ISO 9001-2000 for quality management and Food Safety Systems.

In recognistion to these efforts and achievements, the National Productivity Council (NPC) of Government of India has conferred “Best Productivity Award” FIVE TIMES and “Energy Conservation Award” by Bureau of Energy Efficiency (BEE) to the Union. ORGANISATION STATUS

The member producers and their Dairy Co-operative Societies (DCS) are the vital constituents of the Union and their progress is the judging yardstick on the efficiency of the Union’s operation. Hence the maximum importance has been given to their development. The Union is making intensive efforts over the years to organize DCSs in more and more villages of the three districts in the milk-shed area.

Number of Functioning DCS 1547

1607

1657

2005-06

2006-07

2007-08

1761

1805

1853

1877

1708

2008-09

2009-10

2010-11

2011-12

2012-13

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Importance has been given to enroll more and more milk producers in the villages as members of these DCS’s. While enrolling these members, more emphasis is being accorded to enroll more number of women members and to organize more women managed DCSs under STEP (Support to Training and Employment Program for Women). It is heartening to note that there is an active participation of women/ weaker sections of the society in all the dairy development activities of the Union. They have become mainstay of all the developmental programs of the Union.

This has resulted in the buildup of economical benefits to the most

vulnerable sections of the rural mass.

As on SEPTEMBER 2012 in these DCS , there are 3,39,435 milk producer members are enrolled and out of which 1,11,460 are women and 45,206 members belong to Schedule caste and 15,644 members belongs to schedule Tribes. Total Membership & Women Membership at DCS

309597

91746

2005-06

321238

96653

2006-07

327176

99603

2007-08

331544

325854

102842

2008-09

105804

2009-10

MILK PROCUREMENT

Vijaya college, R.V road Bangalore

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340307

109834

2010-11

337419

110357

2011-12

339676

111460

2012-13

A study on Profitability and Financial status on BAMUL

The Milk produced by 102995 farmers at village level will be collected every day morning and Evening at DCS. Under Clean Milk Production programme, to maintain the freshness & quality of the milk 121 Bulk Milk Coolers covering 344 DCS of Total Capacity 215000 Lts were installed at DCS level. During the year the Unions daily average milk procurement is 10.13 Lakh Kgs, which works out to be 563 kgs per day per DCS. The milk procurement has increased by 7.65 % when compared to the last year.

Avg. Milk Procurement (Kgs Per Day) 805618

758021

710082

729564

2005-06

2006-07

2007-08

2008-09

828684

2009-10

932572

940976

2010-11

2011-12

1012769

2012-13

Bamul is offering the most remunerative milk procurement price to member producers. The operational efficiency is reflected on procurement prices paid to the member producers. The average milk procurement price paid during the year was Rs. 22.16 for every Kg of Milk supplied to the Union. Which is 80% of total cost of production.

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Milk collected at DCS will be transported to Chilling Centers, through 107 Milk Procurement Can Routes, by traveling 17,929 KM’s every day. 23 Bulk Milk Cooler (BMC) Routes are also in operation, which collects milk from 121 BMC centers of 344 DCS directly transported to Bangalore Dairy through insulated tankers.

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LIQUID MILK MARKETING The Bangalore Milk Union is marketing milk and milk products in the brand name of “Nandini” through 1280 retailers, 38 Franchisee Outlets, 26 Milk Parlors, 240 distribution routes. The key success factor of Bamul in becoming a market leader is the narrow price spread maintained between purchase & sales, marketing higher volumes of milk. The volume of sales plays a critical role in determining costs. Hence, the market strategy of Bangalore Milk Union is to regard selling of market milk as its core marketing activity and to concentrate its efforts in this direction to increase the volume of milk sales. The impressive growth in the sale of milk by Bamul over the years is due to the persistent efforts to maintain timely supply, maintaining quality and attending to the complaints of consumers and agents with prompt follow-up action. Total Milk Sales (Avg. Ltrs/Day) 751506 666714

696942

620000

448689

2003-04

484707

502000

2004-05

2005-06

570000

531000

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

Bamul is also organising Consumer Awareness Programme as a part of Market Development to create awareness of “Nandini” Milk through personal contacts, Door to Door campaigns, Organisational Meetings, School Children Mega Dairy Plant visit etc., are conducting regularly. Vijaya college, R.V road Bangalore

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Types of Milk & Milk products marketing by Bamul:

nandini Toned Milk

Karnataka's most favorite milk, Nandini Toned Milk. Fresh and Pure milk containing 3.0% fat and 8.5% SNF. Available in 500ml and 1ltr & 6 Ltr packs. Better to use within a day from the date of pack.

nandini Homogenised COW Milk

nan

Nandini Homogenised Cow Milk is pure milk containing 3.5% Fat & 8.5% SNF. Which is homogenised and pasteurised. Consistent right through, it gives you more cups of tea or coffee and is easily digestible. Available in 500 ml packets.

dini Subham Nandini Subham Milk. Containing 4.5% Fat and 8.5 % SNF. A rich, creamier and tastier milk, Ideal for preparing homemade sweets & savouries. Available in 500ml and 1ltr packs. Apart from the Milk, the different Milk Products are Curds, Butter, Ghee, Peda, Paneer, Set Curds & Spiced Butter Milk are also sold.

Vijaya college, R.V road Bangalore

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nandini Curd Nandini Curd made from pure milk. It's thick and delicious. Giving you all the goodness of homemade curds. Available in 200 gms and 500 grms & 1 Kg packs. Nandini Butter Rich, smooth and delicious. Nandini Butter is made out of fresh pasturised cream. Rich taste, smooth texture and the rich purity of cow's milk, makes any preparation a delicious treat. Available in 100 gms, 200 gms and 500gms cartons both salted and unsalted.

Curd Sales (Avg. KG's / Day)

73369

75127

2007-08

2008-09

82081

86441

92317

61696 49265 32825

8208

1999-2000

11139

2000-01

14490

16054

2001-02

2002-03

2003-04

38312

2004-05

2005-06

2006-07

nandini Ghee A taste of purity. Nandini Ghee, made from pure butter. It is fresh and pure with a delicious flavour. Hygienically manufactured and packed in a special pack to retain the goodness of pure ghee. Shelf life of 6 months at ambient temperatures. Available in 200ml, 500ml, 1000ml sachets & 15.0 kg tins.

Vijaya college, R.V road Bangalore

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2010-11

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A study on Profitability and Financial status on BAMUL

nandini Butter Rich, smooth and delicious. Nandini Butter is made out of fresh pasturised cream. Rich taste, smooth texture and the rich purity of cow's milk, makes any preparation a delicious treat. Available in 100 gms (salted), 200 gms and 500gms cartons both salted and unsalted.

nandini Butter Milk Nandini spiced Butter Milk is a refreshing health drink. It is made from quality curds and is blended with fresh green chillies, green coriander leaves, asafoetida and fresh ginger. Nandini spiced butter promotes health and easy digestion. It is available in 200ml packs and is priced at most competitive rates, so that it is affordable to all sections of people.

nandini Peda No matter what you are celebrating! Made from pure milk, Nandini Peda is a delicious treat for the family. Store at room temperature approximately 7 days. Available in 250gms pack containing 10 pieces each.

INFRASTRUCTURE DEVELOPMENT: Vijaya college, R.V road Bangalore

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The strategy of Bangalore Milk Union is “Procure More, Sell More & Serve More” and reaping the benefits of economies of scale. In order to realize this strategy, the Union has implemented the following projects so that more and more milk can be procured and processed. This will help us to serve our producer members by passing on the maximum benefits, we are consciously adopting the growthoriented strategy of helping our producers to grow by ourselves growing constantly.

Mega Dairy with a capacity to process 6 lakh litres of milk per day expandable to 10 llpd has been built by investing Rs. 38.70 crores obtained as term loan from National Dairy Development Board. The Mega Dairy, has latest technological

state-of-the-art facilities

in

dairy processing and the Union will have the ability to manufacture milk and milk products to world class standards.

Although Bamul sets standards for its products for better serve to customers, it was not possible to keep the standards stability due to manual operations. In designing mega dairy, Bamul looked towards an automated system that would allow it to achieve consistent quality parameters for each product. Energy and manpower

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would also be more effectively optimised and controlled and all plant equipment would be integrated. NEW Projects: Bamul has planned to convert Hosakote Chilling Center into a 2.0.LLPD Capacity Dairy with an investment of Rs.2427.00 Lakh and a New Product Block at Bangalore Dairy Premises with an investment of Rs. 2033.00 Lakhs .

Bamul has SEVEN Chilling Centers geographically located around Bangalore and 85 Bulk Milk Coolers at DCS Level. Milk Product Block within the campus to manufacture Butter, Ghee, Peda, Flavoured Milk, Spiced Butter Milk, Paneer, Set Curds etc.,

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FINANCE: The Union had an approximate turnover of Rs. 882.16 crores in the year 2011-12 as

against

Rs.

692.82

Crores

for

the

year

2010-11.

Share Capital (in Lakh Rupees) 2000

1728.02

1800

1487.17

1600 1400 1200

1157.11

1158.39

1158.17

1175

2005-06

2006-07

2007-08

2008-09

1278.94

1000 800 600 400 200 0

Vijaya college, R.V road Bangalore

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2009-10

2010-11

2011-12

A study on Profitability and Financial status on BAMUL

Annual Turn-over (in Lakh Rupees) 88216.00 69828.49

40374.00

39589.00

2005-06

2006-07

45206.00

2007-08

50935.00

2008-09

56633.00

2009-10

2010-11

Net Profit (in Lakh Rupees) 574.83 486.25

357.3

343.79

327.48

279.32 216.89

185.27

2005-06

2006-07

2006-07

2007-08

2008-09

TECHNICAL INPUT SERVICES: Vijaya college, R.V road Bangalore

Page 41

2009-10

2010-11

2011-12

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A study on Profitability and Financial status on BAMUL

Bangalore Milk Union is providing various Technical Input & Extension Services to the milk producer members & their Dairy animals through ELEVEN Camp Offices situated in each Taluk i.e., Anekal, Bangalore Head Office (Bangalore South),

Yelahanka

(Bangalore

North),

Channapattana,

Devanahalli,

Doddaballapura, Hosakote, Kanakapura, Solur (Magadi), Nelamangala & Ramanagara. From these camps the Technical Input services like Weekly Mobile Veterinary Service, Emergency Veterinary Service, Artificial Insemination Service, Periodical Vaccinations, Balanced Cattle Feed Sales, Mineral Mixture Sales, Fodder development and Fodder Seed Production, Clean Milk Production practices, Extension Services for Cattle Feeding, breeding, insurance and milk production etc., will be carried over.

ANIMAL HEALTH AND OTHER ACTIVITIES ANIMAL HEALTH The Union is taking special care to promote the health of the cattle of member milk producers.

Veterinary facilities have been extended to all the DCS.

Mobile

veterinary routes, emergency veterinary routes, Health camps, vaccination against foot & mouth disease and thaileriosis diseases, etc., are being regularly done. Regularly Deworming is also done for the cattle. There is also a backup of First Aid Services to needy DCS’s.

Particulars

2008-09

MVR Cases Treated Health Camp cases Treated

166198

Vijaya college, R.V road Bangalore

2009-10

2010-11

2011-12

2012-13

43761

171613

251925

147478

118307

Page 42

-

-

-

A study on Profitability and Financial status on BAMUL

Emergency Cases Treated

70420

74773

88440

96617

55371

F& M Vaccination

373107

528259

506479

757432

529845

Rakshavac

18094

26227

22176

21548

15439

ARTIFICIAL INSEMINATION Artificial Insemination (AI) has been the main functional tool in dictating this upsurge of development of Dairying in Bamul. Farmers have taken up crossbreeding from way back in 1962. The Union has surveyed and appropriately located AI centers based on cattle population. It is also popularized the idea of cluster AI centers and replace the Single AI centers in a phased manner. The use of progeny tested semen from “Nandini Sperm Station” is also giving a further boost to the breeding activities.

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Particulars No. of Single AI Centers No. of AI Done Single No. of Cluster AI Centers No. of AI Done

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

251

259

259

242

241

238

1,11,536

1,12,740

1,16,002

113300

113302

54728

94

96

101

111

114

118

1,69,185

1,92,207

1,97,645

227761

268439

141566

2,80,721

3,04,947

313647

341061

381741

196294

Clusters Total AI Done

To reduce infertility in cattle, a frontal attack has been continuously attempted by conducting Special Infertility Camps under the expert guidance and by the use of infertility connected drugs.

During 1999-2000, a Vertical Silo of 10,000 liter capacity for storing Liquid Nitrogen has been installed under TMDD program in collaboration with National Dairy Development Board and Karnataka Milk Federation. In addition this facility is being used for supplying liquid nitrogen to neighboring Unions and also to Department of Animal Husbandry. This has helped in protecting the quality of semen straws, thereby considerably increasing the probability of conception during artificial insemination of cattle.

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CATTLE FEED & FODDER DEVELOPMNET The Union is implementing several programs to increase milk production and also to reduce the cost of milk production in the milk shed area. Balanced cattle feed is being procured from the Cattle Feed Plants of KMF for distribution among member producers.

Fodder seeds are distributed to member producers at subsidized rates. In addition to this, technical advice, Silage Demonstrations, Azzolla Demonstrations and Straw Treatment Demonstrations are also being conducted at DCS level. Chaff Cutters are supplied at subsidized rates Cattle Feed Sales:

Particulars

CF Sales MT’s)

(in

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

33359

37691

40529

45233

45870

24809

A Seed Processing plant was commissioned at Rajankunte by investing Rs. 41 lakhs. The Union is catering to the Seed production needs of many Unions in Karnataka and also of Southern India. Vijaya college, R.V road Bangalore

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YASHASVINI HEALTH INSURANCE: Yashasvini Health Insurance Scheme was muted by Government of Karnataka during the year 2001-02.

This scheme was implemented by Coperative

department, Members of Co-operative Societies and their family members are the beneficiaries of this scheme. The annual premium is Rs. 120/- per beneficiary. All major hospitals are adopted for this scheme, all types of surgery will be covered under this health scheme. Bangalore Milk union has covered 1.50 Lakh beneficiaries under this scheme by contributing Rs 30/- towards premium per beneficiary. CATTLE INSURANCE: Bangalore Milk Union is providing Insurance Coverage to the Dairy animals in collaboration with United India Insurance Ltd., 40,238 animals are covered under this Insurance. The annual premium is 2.22% of the value of the animal. 50% of the annual premium of Rs. 122.99 Lakh was borne by bamul.

IN THIS MILLENNIUM: We want to become not only the largest Union, but also become one amongst the best-run milk unions in the country. The Union is aware of the challenges of the new private entrants, who are mainly thriving on unfair trade practices. They procure milk at least cost, without bothering about 1the welfare of the producers and without extending any technical inputs for improving milk production. They market milk by resorting to unhealthy and unethical practices deceiving the unsuspecting consumers. The Union wants to counter this in a positive manner by Vijaya college, R.V road Bangalore

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trying to improve its efficiency of operation and market promotion. It wants to become well trenched in the market as market leader. It wants to follow the strategy of cost-competitiveness, which is hard to match by the competitors.

PROGRESS AND ACHIEVEMENT OF THE UNION SINCE ITS INCEPTION 1. Establishment of the Union:  Bangalore Co-operative Milk Producers’ Societies Union Ltd. was established on 16th November 1976.  After the bifurcation of the above Union, into two separate union for Bangalore Districts (Urban and Rural) and Kolar District, Bangalore Urban and Rural District Co-operative Milk Producers’ Societies Union Ltd. (BAMUL) on 23rd March 1987.  Bangalore Dairy was took over by BAMUL on 1st September 1988.  Bangalore Mega Dairy started functioning on 17th December 2000  MMPO-1992 Registration No 42/R.MMPO/93

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 Bangalore Dairy ISO 22000-2005 & ISO 9001-2000 Certified by Standard Australia International (SAI) Global Ltd., a reputed Australian based company during 2006. 2. Infrastructure at the time of inception & subsequent expansion – year-wise in terms of the following: A. Capacity of the Dairy and Chilling Centers a. Main Dairy i.

Milk Processing capacity was 60,000 Liters per day (LPD) at the time of establishment of the dairy on 23rd January 1965. Milk Processing capacity was expanded to 1.5 lakh LPD on 1st February

ii.

1981. iii.

Milk Processing capacity was expanded to 3.5 lakh LPD during 1994.

iv.

Milk Condensing plant 3 Metric Tons per day.

v.

Spray Drying plant 5 Metric Tons per day.

vi.

Milk Processing capacity of 6,00,000 Liters per day (LPD) fully automated Mega Dairy started functioning from 17th December 2000. vii.

Converted the old building as a Product Block during 2002.

b.

Anekal Chilling Center Anekal Chilling Center was started on 12th September 1964 with a milk

i.

chilling capacity of 20,000 LPD. Later the milk chilling capacity was expanded to 60,000 LPD on 28 th

ii.

February 1999. c.

Byrapatna Chilling Center

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Byrapatna Chilling Center was started on 19th May 1962 with a

i.

milk chilling capacity of 20,000 LPD. ii.

Later the milk chilling capacity was expanded to 60,000 LPD d.

Doddaballapur Chilling Center Doddaballapur Chilling Center was started on 5th January 1967

i.

with a milk chilling capacity of 20,000 LPD. ii.

Later the milk chilling capacity was expanded to 60,000 LPD e.

Vijayapura Chilling Center Vijayapura CC was established on 1st February 1995 with a milk

i.

chilling capacity of 1 lakh LPD.

f.

Solur Chilling Center Solur Chilling Center was established on 31 st January 1999 with a

i.

milk chilling capacity of 60,000 LPD. g.

Hoskote Chilling Center

i. Hoskote Chilling Center was commissioned on 29 th March 2000 with a milk chilling capacity of 1.5 lakh LPD. h. Kanakapura Chilling Center i.

Kanakapura Chilling Center was commissioned on 1st October 2004 with milk chilling capacity of 60,000 LPD.

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4. DATA ANALYSIS AND INTERPRETATION RATIO ANALYSIS Ratio analysis is a powerful tool to financial analysis. The ratio analysis involves comparison for a useful interpretation of the financial statements. A single ratio in itself does not indicate favorable condition. It should be compared with some standard. Standards of comparison may consist of part ratios, projected ratios, competition ratios and industry ratios.

A ratio is simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to accounts Hand book by Wixon, Kell and Bedford, a Vijaya college, R.V road Bangalore

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ratio “is an expression of the quantitative relationship between two numbers”. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into the other. Following are the steps involved in the ratio analysis:  Selection of relevant data from financial statements depending upon the objective of the analysis.  Calculation of the appropriate ratios from the data.  Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratio developed from projected financial statements or the comparison with ratios of the industry to which the firm belong.  Interpretation of ratios which includes comparison of the two year’s financial data. It shows the trend in which direction and reason.

Significance of ratio analysis The ratio analysis is a widely used tool of financial analysis. It can be sued to compare the risk and return relationship of firms of different sizes. It is devised to analyze and interpret the financial health of the company. The use of ratio is not confined to financial managers only but also to the different parties interested in the ratios analysis for knowing the financial position of a firm for different purposes. The suppliers of goods on credits, banks, financial institutions, investor, shareholders and management all make us of the ratio analysis. And also firm to know the financial position to provide loans, advances and make investment in other sectors.

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The ratio analysis is one the most powerful analysis. It is used as a device to analyze and interpret financial health of enterprise. Thus, ratios have wide applications and are of immense use today.

Uses of ratio analysis A. Managerial uses of ratio analysis: 1. Helps in decision making: Financial statements are prepared for making decisions 2. Helps in financial forecasting and planning: Planning is looking ahead and ratios calculated for a number of years and to determine future and conclusion and be drawn for future from these ratios. 3. Helps in communicating: Financial strength and weakness of a firm are communicated in an easier manner by the use of these ratios. 4. Helps in controlling: It helps in making effective action at right time for better performance. B. Use to investor / Share holders: An investor in the company will like to assess the financial statements. His interest is to earn in the form of dividend and security of his investment. With the help of the profitability ratios investor to know the solvency position of the firm and he can decide for further investment. C. Use to creditors: Suppliers of the goods to the firm are interested to know the financial position of the company. With help of liquidity ratios creditor can know the liquidity position of the company and can decide to extend the credit facility or not.

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D. Use to employees: Employees are also interested in the financial position of the concern to know the profitability, wages, salaries and fringe benefits are depends upon the profitability of the company. E. Use to government: Government interested to know the financial strength of the industry. Various financial statement published by the units are to calculate ratios for determining short-term, long-term and overall financial position of the concerns. Based on the industrial information, government can prepare the future policies.

Limitations of ratio analysis: Ratio analysis is one of the most powerful tools of financial management. Ratios are simple and easy to calculate but they suffer from some limitations 1. No fixed standards There is no fixed standard which can be laid down for ideal ratios. For example current ratio is generally considered to be ideal if current assets are twice the current liabilities. However in case of those concerns which have adequate arrangements with their bankers for providing funds when they require. It may be perfectly ideal if current assets are equal to or slightly more than current liabilities.

Therefore it is difficult in rendering

interpretation of ratios.

2. Change of accounting procedures:

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Changes in accounting procedure by the firm often make ratio analysis misleading. For example change in the valuation methods of inventories, treatment of items etc.

3. Personal bias: Ratios are the only means of financial analysis and not an end in itself. Same ratios have to be interpreted by different way.

Classification of ratios The use of ratio analysis is not confirmed to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. In view of various users of ratios, there are many types of ratios which can be calculated from the information given in the financial statement. The particular purpose of the user determines the particular ratios that might be used for financial analysis.

Liquidity ratios These are the ratios which measure the short term solvency or financial position of a firm. These ratios are calculated to comment upon the short term paying capacity of a concern or the firm’s ability to meet its current obligations. The various liquidity ratios are: current ratio, liquid ratio and absolute liquid ratio. Vijaya college, R.V road Bangalore

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Further to see the efficiency with which the liquid resources have been employed by a firm, debtor’s turnover and creditor’s turnover ratios are calculated.

Activity ratios Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. These ratios are also called turnover ratios because they indicate the speed with which assets are being turned over into sales, for example debtor’s turnover ratio. The various activity or turnover ratios have been named in the chart classifying the ratios.

Profitability ratios These ratios measure the results of business operations or overall performance and effectiveness of the firm, for example gross profit ratio, operating ratio or return on capital employed.

Generally, two types of profitability ratios are

calculated in relation to sales and in relation to investments.

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EARNING PER SHARE The ratio measures the profit available to the equity share holders on per share basis that is the amount that they can get on every share held. The ratio between net profits after tax and number of equity shares is called as earning per share.

Profit after tax Earnings per share = Number of equity shares Profitability of the firm is also calculated in terms of number of equity shares. Earnings per share are arrived at by dividing profit after tax by the number of equity shares. Vijaya college, R.V road Bangalore

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Table showing earnings per share: Year

2009-10

2010-11

2011-12

Net profit

17393300

21689589

35142717

Equity shares

127894000

148717000

1728023000

Ratios

0.13

0.14

0.20

Graph showing earnings per share:

Ratios 0.2 0.15

Ratios

0.1 0.05 0 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: From the table in the year 2009-10 the EPS was 0.13, in the year 2010-11was 0.14 and in the year 2011-12 was 0.20. So we conclude that EPS is gradually increases from 0.20 to 0.13. Interpretation: From the graph we conclude earning per share is gradually increasing from year to year. Due to the increase in the profit, but decrease in the share capital increase the profit ratios.

GROSS PROFIT RATIO (GP Ratio): It is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.

Gross Profit Vijaya college, R.V road Bangalore

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Gross Profit Ratio =

x 100 Sales

Table showing Gross Profit Ratio: Year

2009-10

2010-11

2011-12

Gross Profit

545566605

600557582

638277808

Net Sales

5663362902

6984479869

8821734373

Ratios

9.63%

8.59%

7.23%

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Ratios 10.00% 8.00% Ratios

6.00% 4.00% 2.00% 0.00% 2009-10

2010-11

2011-12

Graph showing GP Ratio:

Analysis: From the table in the year 2009-10 the GP Ratio was 9.63%, in the year 2010-11 was 8.59% and in the year 2011-12 was 7.23%. So we conclude that GP Ratio is gradually decreasing from 9.63% to 7.23%. Vijaya college, R.V road Bangalore

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Interpretation: From the graph we conclude that the GP ratio is gradually decreasing year by year. This indicates poor results. The Company needs to take necessary actions regarding sales for better results

NET PROFIT RATIO: Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage.

Net profit after tax Net Profit Ratio =

x 100 Net Sales

Table showing Net Profit Ratio: Year

2009-10

2010-11

2011-12

Net Profit

17393300

21689589

35142747

Net Sales

5663362902

6984479869

8821734373

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Ratios

0.307%

0.31%

0.398%

Graph showing Net Profit Ratio:

Ratios 0.45% 0.40% 0.35% 0.30%

Ratios

0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: In the year 2009-10 the Net Profit Ratio was 0.307%, in the year 2010-11 it was 0.31% and in the year 2011-12 Net Profit Ratio was 0.398%.

Interpretation: From the graph we conclude that net profit of the company is increasing year by year. This indicates that the profitability of the company is good

OPERATING RATIO: A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. It is expressed as percentage

Operating Cost Operating Ratio =

x 100 Net Sales

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Table showing Operating Ratio: Year

2009-10

2010-11

2011-12

Operating cost

546418050

499655303

452193699

Net Sales

5663362902

6984479869

8821734373

Ratios

9.64%

7.15%

5.12%

Graph showing Operating Ratio:

Ratios 10.00% 8.00% Ratios

6.00% 4.00% 2.00% 0.00% 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: In the year 2009-10 the Operating Ratio was 0.305%, in the year 2010-11 it was 0.304% and in the year 2011-12 Operating Ratio was 0.38%.

Interpretation: From the graph we can conclude that Operating ratio is decreasing, lower the Operating ratio higher the Net profit and Operating profit. This ratio shows that the company’s profit is satisfactory.

OPERATING PROFIT RATIO: Gross profit ratio establishes relationship between operating profit and sales. The profit earned from a firm's normal core business operations. This value does not include any profit earned from the firm's investments (such as earnings Vijaya college, R.V road Bangalore

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from firms in which the company has partial interest) and the effects of interest and taxes. Operating Profit Operating profit Ratio =

x 100 Net Sales

Operating Profit = GP - Operating Expenses

Table showing Operating Profit Ratio: Year

2009-10

2010-11

2011-12

Operating Profit

93372906

100902279

91859758

Net Sales

5663362902

6984479869

8821734373

Ratios

1.64%

1.44%

1.04%

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Ratios 1.80% 1.60% 1.40% 1.20%

Ratios

1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2009-10

2010-11

2011-12

Graph showing Operating Profit Ratio:

Analysis: Vijaya college, R.V road Bangalore

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In the year 2009-10 the Operating Profit Ratio was 1.64%, in the year 2010-11 it was 1.44% and in the year 2011-12 Operating Profit Ratio was 1.04%. Decreasing in Operating profit ratio effect the company

Interpretation: From the graph we conclude that the Gross Profit ratio is gradually decreasing year by year. Decrease in the Ratio affects the company. The company has to take necessary steps and need to overcome the problem.

CURRENT RATIO: Current ratio may be defined as the relationship between current assets and current liabilities. Current assets refers to all those assets can be easily converted into cash within a period of 12 months. Current liabilities are those obligations which are payable within a short period generally one year. This ratio indicates the ability of a concern to meet its current liabilities. A current asset includes cash in hand, cash at bank, sundry debtors, short term loans and advance and inventories. A current liability includes sundry creditors, bills payable, provision for tax, etc.

Current Assets Current Ratio = Current Liabilities Vijaya college, R.V road Bangalore

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Table showing current ratio: Year

2009-10

2010-11

2011-12

Current assets

520640303

507409614

652980027

Current liabilities

448753260

459053915

524442417

Ratio

1.16

1.1

1.24

Graph showing Current Ratio:

Ratio 1.25 1.2 Ratio

1.15 1.1 1.05 1 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: From the table we can see that the current ratio in the year 2009-10 was 1.16 times, in the year 2010-11 was 1.1 times and in the year 2011-12 was 1.24 times. Interpretation: From the graph we conclude the current ratio has been increasing from 2010-11 to 2011-12. This is because of the increase in the current assets. Therefore it is very good working capital for the company.

LIQUIDITY RATIO: A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the

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ratio, the larger the margin of safety that the company possesses to cover shortterm debts.

Liquid Assets Liquidity Ratio = Liquid Liabilities

Table showing Liquidity ratio: Year

2009-10

2010-11

2011-12

Liquid assets

487215741

358031343

421754156

388939710

459053915

524442417

1.25

0.77

0.8

Liquid liabilities Ratio

Graph showing Liquidity Ratio:

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Ratio 1.4 1.2 1

Ratio

0.8 0.6 0.4 0.2 0 2009-10

2010-11

2011-12

Analysis: From the table we can see that the Liquidity ratio in the year 2009-10 was 1.25 times, in the year 2010-11 was 0.77 times and in the year 2011-12 was 0.8 times.

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Interpretation: A Liquidity ratio higher than 1:1 indicates that the business can meet its current financial obligations with the available quick funds on hand. A Liquidity ratio lower than 1:1 may indicate that the company relies too much on inventory or other assets to pay its short-term liabilities.

NET WORKING CAPITAL TO NET ASSETS RATIO The difference between current assets and current liabilities excluding short-term borrowing is called net working capital or net current assets. Net assets are calculated by adding net fixed assets and net current assets. Net working capital to net assets ratio is calculated by dividing net working capital by net assets.

Net working capital Net working capital ratio = Net assets

Table showing net working capital to net assets ratio: Year

2009-10

2010-11

2011-12

Net working capital

71887043

48355699

128537609

Net assets

520640303

507409614

652980027

Ratio

0.13

0.09

0.19

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Graph showing Net Working Capital to Net Assets Ratio:

Ratio 0.2 0.15 Ratio

0.1 0.05 0 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: From the table we can see that the Net working capital ratio in the year 2009-10 was 0.13 times, in the year 2010-11 was 0.09 times and in the year 2011-12 was 0.19 times.

Interpretation: From the graph we can conclude that the net working capital ratio is fluctuating every year. It is because, due to the changes in the overall current assets of the company. But the ratio has been increased in current previous year this shows increase in working capital.

CURRENT ASSETS TO NET WORTH RATIO It is obtained by dividing current assets by net worth. Where current assets include cash and those assets, which can be converted into cash within a year, such as cash in hand, cash at bank, cash with other banks etc, and net worth includes capital and reserve and surplus.

Current assets Current assets to net worth ratio = Net worth Vijaya college, R.V road Bangalore

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Table showing current assets to net worth ratio: Year

2009-10

2010-11

2011-12

Current assets

520640303

507409614

652980027

Net worth

424343915

472406096

588667870

Ratio

1.22

1.07

1.1

Graph showing Current assets to Net worth Ratio:

Ratio 1.25 1.2 Ratio

1.15 1.1 1.05 1 0.95 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: From the table we can analyze that the company’s current assets to net worth ratio was 1.22 in the year 2009-10, 1.07 in the year 2010-11 and 1.1 in the year 2011-12.

Interpretation: From the graph it shows that the company’s current asset to net worth ratio is increased from 2010-11 to 2011-12. So we conclude that the company’s return on current assets is getting better as the ratio is increasing. The increase in ratio shows they are working on it.

FIXED ASSETS TO NET WORTH RATIO Fixed assets cannot be easily converted into cash. A firm purchases fixed assets for long-term purpose. This ratio establishes the relationship between Vijaya college, R.V road Bangalore

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fixed assets and shareholders fund. The ratio indicates the extent to which shareholder’s funds are sunk in the fixed assets. Net worth includes owner’s equity or paid up capital and reserves and surplus. Generally, the purchase of fixed assets should be financed by the shareholder’s equity which includes reserves, surplus and retained earnings.

Fixed assets Fixed assets to net worth ratio = Net worth

Table showing fixed assets to net worth ratio: Year

2009-10

2010-11

2011-12

Fixed assets

547850047

526931180

522387743

Net worth

424343915

472406096

588667870

Ratio

1.29

1.11

0.88

Graph showing fixed assets to Net worth Ratio:

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Ratio 1.4 1.2 1

Ratio

0.8 0.6 0.4 0.2 0 2009-10

2010-11

2011-12

Analysis: It is analyzed that the fixed assets to net worth are 1.29, 1.11 and 0.88 in the year 2009-10, 2010-11 and 2011-12 respectively.

Interpretation: Vijaya college, R.V road Bangalore

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From the graph we conclude ratios are in decreasing position, the shareholder’s funds are not sufficient to finance the fixed assets. The company has to think about the mistakes and overcome this problem

NET PROFIT TO NET WORTH RATIO The ratio is obtained by dividing net profit by net worth. This measures the productivity of the shareholder’s funds. A higher ratio indicates the better utilization of owner’s funds and higher productivity. It is useful for inter-firm and inter-industry comparisons. This ratio is expressed as a percentage.

Net profit Net profit to net worth ratio =

x100 Net worth

Table showing net profit to net worth ratio: Year

2009-10

2010-11

2011-12

Net profit

17393300

21689589

35142747

Net worth

424343915

472406096

588667870

Ratio

4.09%

4.5%

5.96%

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Graph showing net profit to net worth ratio:

Ratio 6.00% 5.00% Ratio

4.00% 3.00% 2.00% 1.00% 0.00% 2009-10

2010-11

Vijaya college, R.V road Bangalore

2011-12

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Analysis: From the table in the year 2009-10 the net profit to net worth ratio was 4.09%, in the year 2010-11 was 4.5% and in the year 2011-12 was 5.96%.

Interpretation: The increase in ratio shows the profitability of the company. The net profit of the company is increasing. The net profit to net worth ratio is doing well to the company.

5. SUMMARY, FINDINGS AND SUGGESTIONS SUMMERY AND FINDINGS:  Earnings per share are increasing year by year. Due to the increase in the profit, but decrease in the share capital increase the profit ratios.  In Current ratio it is fluctuating year by year. The increase in current ratio in current previous year shows increase in the current assets. Therefore the company has good working capital management.

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 Net working capital ratio is fluctuating every year. It is because of the changes in the overall current assets of the company.  Current assets to net worth ratio fluctuating every year. But from latest year performance we can conclude that the company is taking better steps to overcome this problem.  Fixed assets to net worth ratio is decreasing year by year, the shareholder’s funds are also decreasing to finance it for fixed assets.  Profits had increased gradually; the net profit to net worth ratio is doing well to the company.  The Net profit of the company is increasing year by year. This shows the profitability of the company.  Operating ratio is decreasing, lower the Operating ratio higher the Net profit and Operating profit. This ratio shows that the company’s profit is satisfactory. The interest received from year to year is increasing trend. But when compared to the year 2008-09 the rate of increase is satisfactory.  The Gross Profit ratio is gradually decreasing year by year. Decrease in the Ratio effect the company. The company has to take necessary steps and need to overcome the problem.

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SUGGESTIIONS AND RECOMMENDATIONS:

 The company has to encounter the problems which are faced and has to find solution.

 Even

though the profit is increasing but the profit ratio id gradually

decreasing/fluctuating year after year. This may leads to loss in the company.

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

Company has to concentrate more on Research and Development programme. So that more products can be innovated and invented to market.



As the company is Co-operative limited it should mainly concentrate on H.R department. The products which are produced in the company should be able to purchase by all levels of customer.

 As earning per share is decreasing, the equity shares which are issued by the company should be increased. This may leads to increase in EPS.

 The company has to conduct more public related programme, this gains more goodwill to the company.

 The

company should utilize the funds properly so that cash cannot be

used unnecessarily.

 More number of branches can be opened all over the Karnataka for the benefit of customer across the state.

 MIS should be made more user friendly for better administration.  The finance manager has to plan the acquisition and utilization of cash.

6. CONCLUSION The study had undertaken on the topic “Profitability and financial status” to know the financial status and interpret the company’s performance. The

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analysis of the co-operative limited was undertaken with the help of ratios, which are important tools of financial analysis. The co-operative limited has achieved tremendous progress over the recent year. The co-operative limited has a healthy financial performance; the cooperative limited has been able to achieve growth across the multiple parameters, including customer’s acquisition, geographical spread, business volumes and revenues. It is found that the current assets are more than the current liability and we can conclude that the co-operative limited will be able to meet all its immediate, all its financial commitments, without succumbing to pressure. Therefore the short-term solvency position of the BAMUL remains healthy. After having solved the ratio and analyzing the financial data, we can conclude that the co-operative limited has gradually excelled over the years. Thus ratio analysis has been a very useful technique which has highlighted the performance of BAMUL in key-areas and also has in the avocation of certain strategies to be followed by BAMUL which is indispensable to its future growth. To conclude the co-operative Limited’s financial position is satisfactory. The analysis of the co-operative Limited was made using tools techniques like ratio analysis.

7. ANNEXURES Balance sheets (as on 31-03-2010, 31-03-2011, 31-032012) Vijaya college, R.V road Bangalore

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SL N O 1 A B C

31-03-2012

31-03-2010

31-03-2011

SOURCE OF FUND PAID UP CAPITAL NOMINAL MEMBERSHIP SHARE SUSPENSE

172802000 21400 2346422

148717000 0 2281680

127894000 320900 838030

TOTAL(A+B+C)

175169822

150998680

129052930

RESERVES AND SURPLUS RESERVES PROVISION GENERAL RESERVE OTHER FUNDS

5225348 2882166 231567781 106451462

27853117 2605895 195609600 45716960

27853117 2605895 180651555 37893421

TOTAL(A+B+C+D)

346126757

271785572

248831988

LOANS

158742333

146705048

231655460

4 A B C D E F G

CURRENT LIABILITIES DUES PAYABLE AUDIT OBJECTIONS INTER DAIRY CREDITORS OTHER CREDITORS SCHEMES DUTIES AND TAXES SALARY RECOVERIES TOTAL(A+B+C+D+E+F+G)

220807272 1169746 32972604 217987213 13383860 38109554 12168 524442417

161408350 1169745 16934964 192465898 77496997 9563820 14141 459053915

233469968 1169744 46584528 148204326 19280483 44208 0 448753260

5

PROFIT AND LOSS A/C

67371291

49621844

46458997

2 A B C D

Liabilities

3

LOAN LIABILITY

GRAND TOTAL

Vijaya college, R.V road Bangalore

1271852621 1078165059 1104752635

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SL N O 1 A B C D

2 A B C D E F

Assets

31-03-2012

31-03-2011

31-03-2010

522387743 58400201 6517499

526931180 1082115 11174997

54785047 2796794 15236340

31567152

31567152

18229152

TOTAL(A+B+C+D)

618872594

570755445

584112332

CURRENT ASSETS-LOANSADVANCES INVENTORY SUNDRY DEBTORS CASH AND BANK BALANCES LOANS AND ADVANCES SERVICE DEPOSITS OTHERS

260131301 64768886 261305225 16016622 19126831 31631161

177463614 80679442 186892996 28170751 19010726 15192086

63377705 105826408 301776956 13374223 18901028 17383982

TOTAL(A+B+C+D+E+F)

652980027

507409614

520640303

APPLICATION OF FUNDS FIXED ASSETS WORK IN PROGRESS DEFERRED REVENUE EXPENDITURE INVESTMENTS

GRAND TOTAL

Vijaya college, R.V road Bangalore

127185262 1

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8. BIBLIOGRAPHY COST AND FINANCIAL ANALYSIS: S.P.JAIN K.L.NARANG JAWAHAR LAL

MANAGEMENT ACCOUNTING: M.N.ARORA I.M.PANDEY SHASHI K.GUPTA R.K.SHARMA

ANNUAL REPORT: The Bangalore Urban & Rural District Milk Producers Co-Operative Societies Union Limited (Bamul)

WEBSITE: www.accountingformanagement.org www.investopedia.com www.wikipedia.org www.indianmirror.com Vijaya college, R.V road Bangalore

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