Verka Report

1.
INTRODUCTION TO ORGANISATION
Verka is Co-Operative Company and is former oriented autonomous or organization based on Co-Operative pattern. It is the king of Punjab Region as far as Milk Procurement is concerned. Its daily Milk production is around 2.00 lacs liters per day on an average and that is why huge amount of Milk production has become its core competency. It produces many daily products.
"MILKFED" is a group of Milk Union established under operation flood program as the implementing agency by the government of Ropar and metropolis Chandigarh. The Ropar district co-operative milk produces union was established in the year of 1980.
The main objectives for its establishment were: 1. To create an organized factor to develop and command a major share of urban milk market of Chandigarh. 2. To provide year around remuneration price to the small rural Milk producers organized into co-operative. 3. To provide quality milk and milk produces to the consumers. 4. The milk plant carries out activities conductive to the economic development to agriculturist by organizing effective production, process and marketing of commodities. The milk plant has installed capacity of process 1,00,000 litres of milk per day and it is registered handling capacity of 2,00,000 liters by the year 2008-09. The milk plant is managed by qualified professionals in the dairy field. The production facility are backed up by quality assurance, marketing training, financial management, data processing and other required services, providing a vibrant work environment to its personnel in pursuit of excellence. The milk plant is committed to supply quality and safe milk and milk products to its esteem customers at the right time. The milk plant has introduced ISO 9001:2000. Management system and Indian standard of hazard analysis and critical points (HACCP)/IS: 15000-1998 to ensure highest quality products with built in safety to consumers.
Recently, the Verka Milk Plant Mohali of Milkfed Punjab have bagged prestigious National Productivity Council Award at National level Competition in the field of dairy processing industries conducted by National Productivity Council of India, New Delhi.
1.1 HISTORY AND PRESENT POSITION OF VERKA

A. HISTORY OF VERKA
The company has been well known by its brand name "VERKA" especially In Punjab and Haryana. Chandigarh Milk Plant was set up in year 1961-1962 to meet the milk initially. But it was not able to fulfill the growing requirements of Chandigarh City. Due to this reason another plant set up in September 1980 at Mohali (Punjab), which is adjoining to Chandigarh.
MILK PLANT MOHALI
"The Ropar Distt. Co-op Producer Union" It is one of the "MILKFED" group located at S.A.S Nagar, Mohali (Punjab). It is registered on 05.07.1978 under Punjab Cooperative Societies Act, 1961. It started its activities on September 1980.
B.
PRESENT POSITION OF VERKA
Presently it has 856 Societies and around 46000 members are supplying milk and making their contribution to the Mohali (Punjab) Plant as follows:1. 2. 3. 4. 5. In Ropar District 520 Village Societies. In S.A.S Nagar, Mohali 164 Societies. In Fatehgarh District 109 Societies. In Patiala District 60 Societies. In UT 3 Societies.
In Ropar District three chilling centers are situated namely Morinda, Jhinjri and Nurpur.
The Milk Plant Mohali produces 2 Lakhs to 2.25 Lakhs liters of Milk per day during winter season and 1.50 Lakhs liters per day in summer season. About 2.00 Lakhs liters pasteurized liquid milk is being supplied to the citizen of urban area per day. The plant runs throughout 24 hours in three shifts at about 200% of its installed capacity manner with 500 employees.
The plant is supplying milk mainly to the cities Chandigarh, Mohali and Panchkula also covering some adjoining cities of Himachal Pradesh and Haryana.
It also produces PANEER, GHEE, LASSI, BIOYOGURT, GULAB JAMUN, KHEER, CURD, FLAVOURED MILK etc. All these products are marketed at the plant under the name "The Punjab State Co-operation Milk Producers Federation Ltd" under the Brand name of 'Verka Milk Plant".
1.2 ORGANISATION NETWORK

For the smooth running of plant, various sections are managed by the management. Each and every activity is delegated to particular section. It is impossible for top management to take decision on every problem, so various tasks are delegated to various sections. These sections are interrelated to have frequent contacts with one another and it is easy to share the information. These integrated tasks teams handle their problems and make the supervision easy.
The following are the sections in the Verka Organisation: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Procurement Section Production Section Quality Control Section Marketing Section Accounts Section Administrative Section Engineering Section Purchase Section Store Section MIS Section Security Section
1.3 NETWORK
Verka is having an apex body at the state land known as "MILKFED" Punjab, Chandigarh. To start with functions in various fields of different unions in different Districts and to operate with Dairying and Dairy Fields that is the operation flood with assistance of National Dairy Cooperation (NDC) Delhi and later on is launched to operate flood second who is affiliated to Punjab Milk Fed. It helps to its affiliated Districts Milk Co-operations in 11 Districts. These Districts Union are:-
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
ROPAR PATIALA LUDHIANA FARIDKOT FEROZPUR SANGRUR BATHINDA GURDASPUR HOSHIARPUR JALANDHAR AMRITSAR
These unions in eleven districts of the state carry out smooth functioning of marketing, procurement, cattle breeding program though district co-operative unions.
1.4 PLANT AT A GLANCE
Establishment 1980
: The Ropar District Co-operative Milk Producers Union Milk Plant, Mohali.
Brand Name Installed Capacity Production Status Head Office Plant
: Verka : 1,00,000 Liters of Milk Per Day : 2,00,000 Liters of Milk per Day : Co-operative Society : Milkfed, Punjab, Sector 34, Chandigarh : The Ropar District Co-operative Milk Producers Union Ltd. Milk Plant, S.A.S Nagar, Mohali
Abbreviations used:DM ASSTT SUP INC. SEC Deputy Manager Assistant Supervisor Incharge Security S.R" JDC S.K F.S.R Sale Representative Junior Dairy Chemist Store Keeper Sales Representative
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2.RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is the mathematical relationship between two quantities in the form of a fraction or percentage. It is essentially concerned with the calculation of relationships which after proper identification and interpretation may provide information about the operations and state of affairs of a business enterprise. The analysis is used to provide indictors of past performance in terms of critical success factors of a business. This assistance in decision making reduces reliance on guesswork and intuition and establishes a basis for a sound judgment In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial position of a firm. Absolute figures expressed in monetary terms in financial statements by themselves are meaningless. These figures do not convey much meaning unless expressed in relation to other figures. For example: One trader Rohit earns a profit of Rs. 2,00,000, whereas another trader Ronit earns a profit of Rs. 2,50,000. Which one is more efficient? Generally, we can say that Ronit is more efficient as he is earning more profits. But in order to give the correct answer, we must find out how much the capital is employed by each of them? Suppose, Rohit has employed a capital of Rs. 10,00,000 and Ronit has employed 15,00,000. We can now calculate the percentage of profit earned by each of them on the capital employed: Rohit = 2,00,000 /10,00,000*100 = 20% Ronit = 2,50,000 715,00,000*100 = 17% This shows that Rohit has earned Rs. 20 for every Rs. 100 of capital, whereas Ronit has earned Rs. 17 for every Rs. 100 of capital. As, Rohit is using his capital more efficiently. The above example shows that figures assume significance only when expressed in relation to other figures. Just as in the example given above, the absolute figure of profit was meaning less but when the figure of profit was expressed in relation to capital, it assumed significance.
Thus, we can say that the relationship between two figures, expressed in arithmetical terms is called a 'RATIO'. In the words of R.N. ANTHONY: "A ratio is simply one number expressed in terms of another. It is found by dividing one number into the another". Ratio may be expressed in the following three ways:
1.
Pure Ratio or Simple Ratio: It is expressed by the simple division of one number by another. For example, if the Current Assets of a business are Rs. 2,00,000 and Current Liabilities are Rs. 1,00,000, then the ratio of "Current Assets to Current Liabilities" will be 2:1.
2.
Rate or So Many Times: In this type, it is calculated how many times a figures is, in comparison to another figure. For example, if a firm's credit sales during the. year are Rs. 2,00,000 and its debtors at the end of the year are Rs. 40,000, its DEBTORS TURNOVER RATIO = 2,00,000/40,000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors.
3.
Percentage: In this type, the relation between the two figures is expressed in hundredth. For example, if a firm's capital is Rs. 10,00,000 and its profit is Rs. 2,00,000, the ratio of profit to capital in terms of percentage = 2,00,000/10,00,000*100 = 20%.
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3. REVIEW OF LITERATURE
Review of literature is the most useful and simple method of formulating the research problem. The researches done by previous researchers are reviewed and their usefulness is evaluated to serve as basis for further research. Thus researcher reviews builds upon the work of others. The reviews that are collected by the researcher should give an insight into the field under study. The reviews must explain the need and scope of the study under consideration. It is not necessary that the reviews are to be in accordance with the objectives. Being a layman in the research field, I as a researcher have covered reviews that are related to Credit Rating Agencies.
Ria Goel (2007): Ratio Analysis Caffe Nero, Ratio Analysis is A tool used to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry to judge the performance of the company. Caff Nero Group plc, the leading independent UK coffee house operator of 282stores, which has been voted the top rated brand by consumers for the last six consecutive years. It had another year of solid progress, again achieving revenue and profit growth. Its revenue gone up by 29% to 90.7 million where as in year 2005 it was 70.1 million. Earnings before interest, tax , depreciation and amortization has increased by 38% to 15.6 million whereas it as 11.3million in year 2005. Operating profit (before prior year goodwill write off) improved by 38% to 8.2 million where as in year 2005 it was 6.0 million). Overall Operating profit improved by 74% to 8.2m from 4.7million in 2005.
Cndymn91(2006); Financial Ratio Analysis Report Of Ford Motor Company, Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any
company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make
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the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's Financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future. This is a trend table of Ford's financial ratio for the previous five years: Ford motor company: Ratios 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000 Return on equity(%) 22.65, 7.9, 5.08, -70.04, 29.07 Return on assests(%) 1.19, 0.29, 0.1, -1.97, 1.9 Current ratio(%) 0.47, 0.52, 0.51,0.37, 0.33 Quick ratio(%) 0.29, 0.35, 0.35, 0.22, 0.22 Akehrig(2007): Ak Steel Ratio Analysis, The current ratio has shown an upward trend overall which is an indication that AK Steel is increasing their ability to meet their shortterm obligations. This ratio is increasing due to the fact that AK's current assets are growing at a faster rate then their current liabilities. Over the 4-year span (2003-2006) their cash has increased $464,700,000 with an ending balance in 2006 of $519,400,000. The current ratio suggests that AK Steel is in very good standing with enough cash to make moves in the future. The inventory turnover ratio has increased over the 3 year span from 6.44 to 6.55 and is significantly higher then the competition. This shows a slight increase however it is still an area in which AK can work to improve. Because steel companies work on such small margins, a falling steel market can have a drastic effect on the net profit if there is leftover, high priced, inventory. This is an area in which a company can always work to improve their efficiency because it will pay off on their bottom line in the future.
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Apur Basarker(2007): financial Analysis Of Hmt,Industrialization commenced in earnest only after the independence in 1947. From a predominantly agrarian economy, India has moved towards rapid industrialization with the state retaining the privilege of entrepreneurship an authority in a system of mixed economy. For four decades, the focus had been on the public sector, which was perceived as a means of achieving industrial growth with social justice. It was Pandit Jawaharlal Nehru the 1st prime minister of independent India, who laid the foundation of a strong industrial base for the country. It was he who should be given the chief credit for fostering the creation of a rich scientific and technological pool by which the country is benefiting today. During his time many dams were built such as the one at Bhakra Nangal. In the mixed economy followed during that period as per his brand of socialist ideology, in which both the public and private sectors were given the scope and the opportunities to grow. The private sector was allowed to function along with public enterprises, but under the control of the government with strict licensing and supervision. Initially, this led to a rapid industrialization with large capital-intensive industries in the public sectors. A number of state owned industrial enterprises were established in various sectors - In steel, power, heavy engineering etc. It cannot be denied that much of the industrial and scientific advance achieved by India of which are proudly boasted today owe a lot to his foresight and vision. He called all these projects, The Temples of Modern India, that would bring about the country progress and prosperity. But unfortunately many of the state owned and run enterprises in various sectors did not function successfully and satisfactorily due to structural, operational, managerial, marketing, and other such deficiencies so that the public sector came to be looked upon as inefficient, not yielding.
Vadu Krishna(2008): Annual report analysis of Kotak Mahindra Bank Limited, Financial statements provide an overview of a business' financial condition in both short and long term. They help in understanding the past performance of the company and making future predictions about the company. It thus helps us to look beyond the profit figures. There are 3 basic financial statements are used. They are income statement, balance sheet and cash flow statement, the purpose of financial statements "The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be
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understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently."Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings, External Users: are potential investors, banks, government agencies and other parties who are outside the business but need financial information about the business for a diverse number of reasons.
Icarr (2006): Nike, Inc. Financial Ratio Analysis, In assessing the significance of various financial data, experts engage in financial analysis, the process of determining and evaluating financial ratios. A ratio is a relationship that indicates something about a company's activities, such as the ratio between the company's current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company's financial statements that contain figures on assets, liabilities, profits, and losses. Ratios are only meaningful when compared with other financial information. Since compared with industry data, ratios help an individual understand a company's performance relative to that of competitors, and used to trace performance over time (Venture Line, 2005).
Kalmah(2009); MODERN CEMENT, Ratio Analysis, Activity Analysis .Interpretations: Short Term Activity ratios calculate the operational efficiency regarding the utilization of short term assets. Inventory Turnover Ratio: The ratio tells about how many times Inventory turnover is made or complete in a given year. Higher the ratio is better that mean the inventory is turnover very quickly. Inventory Turnover Ratio 1.11 in 2003 indicates that company can sell total
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finished goods (inventory) 1.11 times every year. Increase in this ratio indicates the efficiency in managing inventory, which is not present in this company as we can the declining rate over the past years. This also indicates that the reserve of inventory and inventory holding cost is high for this company. Inventor Turnover Period: The ratio tells about number of days inventory remains in the stock and lower the ratio and better it is. From the table we can see that the ratios are too high which also indicates Modern Cement is inefficient in managing its inventory.
Sat56(2008):
Ratio Analysis
Of Bharti
Airtel, it
is
India's
leading provider of
telecommunications services. The company has 27 million customers across India. It is a part of Bharti Enterprises, which manufactures and exports telecom equipment, provides telecom services in Seychelles, delivers products and services to telecom carriers, offers a range of Customer Management Services (CMS) and exports fresh agricultural products exclusively to markets in Europe and the USA. Business. The business has been structured into three individual strategic business units (SBUs) mobile services, broadband and telephone services (B&T) and enterprise services. The last group has two sub-units carriers (long distance services) and services to corporate. Brands All the services of the company are bundled under the Airtel brand. P/L account of Bharti Airtel Year Mar 07(12) Mar 06(12) Mar 05(12) Mar 04(12) Mar 03(12) budgeted/mar08 INCOME : Sales Turnover + 17,851.60 11,231.47 7,903.03 0 0 39,808.33 Excise Duty 0 0 0 0 0 0 Net Sales 17,851.60 11,231.47 7,903.03 0 0 39,808.33 Other Income + 148.49 94.3 122.02 63.15 72.9 628.11 Stock Adjustments + 30.07 -13.84 11.57 0 0 92.31 Total Income 18,030.16 11,311.93 8,036.62 63.15 72.9 40,528.75 EXPENDITURE : Raw Materials + 53.95 54.42 83.7 0 0 86.85 Power & Fuel Cost+ 9.72 26.98 16.69 0.38 0.1 71.89
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Employee Cost + 1,102.03 754.99 488.13 16.84 18.94 3460.03 Other Manufacturing Expenses + 6,709.58 4,404.78 3,139.48 1.29 2.41 8990.83 Selling and Administration Expenses + 1,973.64 1,330.07 869.69 15 10.5 6927.22 Miscellaneous Expenses + 801.13 671.92 538.32 4.16 5.85 3036.28
Arunam Jain(2008): Ratio Analysis Of Tcs Wipro Infosys, CURRENT RATIO. It is a liquidity ratio that measures a company's ability to pay short-term obligations. Also known as "liquidity ratio", "cash asset ratio" and "cash ratio". By putting to test a company's financial strength, deduces company's ability to pay back its short-term liabilities (debt and payables) with its shortterm assets (cash, inventory, receivables).The higher the current ratio, the more capable the company is of paying its obligations. An acceptable current ratio varies by industry. Generally, the more liquid the current assets, the smaller the current ratio can be without cause for the concern
Jitesh Chudasama(2009): Analysis Of Annual Report Of Ongc, Every limited company has to declare its annual report at the end of every year. It is compulsory for each and every limited company to do so as per companys law.. The annual report of the company gives financial position to the insiders and outsiders of the company. This project report gives practical knowledge of financial analysis, which is prepared by me on financial analysis of ONGC Ltd. for two years with interpretation. It covers financial Ratio Analysis, Common Size statement and Comparative Analysis. This ratio is made in order to analyze financial condition of ONGC Ltd. including tables as and when required. The project to prepare the financial analysis of an organization has bridged the gap between the academics and the practical work.
Sasandifer(2009):Ratio Analysis Of Starbucks Vs Mcdonald's, McDonalds Corporation operates in the food service industry. The company has its restaurants in more than 100 countries of the world. McDonalds, the worlds largest food chain is headquartered in U.S. having an employee population of 390000 (About McDonald's..., 2008), Starbucks Corporation, Seattle
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based, Starbucks Corporation is the leading coffeehouse chain in the world. The company has its operations in more than 44 countries. The main products offered by Starbucks various kinds of drinks, snacks, coffee beans. The company also operates in the field of marketing of music, books (The Company, 2008). Ratio Analysis. Ratios Starbucks McDonalds Current Ratio 0.79 0.80 Quick Ratio 0.30 0.67 Debt Equity Ratio 1.34 0.92 Proprietary Ratio 0.43 0.52 Solvency Ratio 0.57 0.48 Inventory Turnover Ratio 12.13 118.77 Gross Profit Ratio (%) 23.34 34.69 Net Profit Ratio (%) 7.15 15.67 Return on Proprietors' Funds (%) 29.45 15.67 Earning Per Share 0.91 2.06
Jain and Sharma(2008): A financial report on ratios of 3Ms corporation, in this research essay provides a detailed analysis of the success of 3M Corporatio'sn generation and management of its accounting and financial information. This information is then evaluated as it applies to decisions making and control process within the company. A brief introduction to 3M's main business segments is presented. Charts and graphs illustrate the company's output and financial standing throughout the paper. The author recommends an analysis of 3M's financial statements in order to understand the companys strengths and drawbacks.
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Simon Mohun (2008) In the decomposition of the US macroeconomic pre-tax rate of profit as the product of profit share and capital productivity, this paper considers the role of capital productivity over the period 19642001. The primary finding is that prior to 1982 capital productivity fell because capital deepening proceeded faster than labour productivity growth, whereas from 1982 to 1997 the opposite occurred. If, prior to 1982, the US economy was characterized by Marx-biased technical progress, what requires explanation is why labour productivity continued to grow after 1982 in the absence of sufficient capital deepening. The paper explores various hypotheses, contrasts neoclassical and classical notions of technical change, and investigates the robustness of its results to the productiveunproductive distinction and to accounting for changes in capacity utilization. Antonio C. David (2007) In this paper we attempt to analyze whether price-based controls on capital inflows are successful in insulating economies against external shocks. We present results from vector autoregressive (VAR) models, which indicate that Chile and Colombia, countries that adopted controls on capital inflows, seem to have been relatively well insulated against certain types of external disturbances. Subsequently, we use the autoregressive distributive lag (ARDL) approach to co-integration in order to isolate the effects of the capital controls on the pass-through of external disturbances to domestic interest rates in those economies. We conclude that there is evidence that the capital controls have allowed for greater policy autonomy.
Lilia Costabile(2004) A disequilibrium between saving and investment decisions determines a maladjustment in production, the disruption of capital, and a downturn in economic activity, according to the Austrian approach. By contrast, the Dynamists argue that it may lead to economic growth, as disequilibrium may well be instrumental to capital accumulation. What explains these different predictions in otherwise similar models? The key is in the interplay between the analytical features and the ideological options underlying each of these approaches: alternative lines of thought, entirely compatible with their analytical models, were abandoned by some of these authors when they conflicted with their pre-analytical views. This paper illustrates the argument by exploring the models of two fathers, von Mises and Robertson.
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4.SCOPE OF THE STUDY
The scope of this study to analyze the five years financial reports of the Verka Milk Plant Mohali. And find out the ratios from balance sheets, profits and loss accounts, and from other financial papers, after the calculations of ratios compare them with the previous figures . the second main purpose of this study to give the yearly report to its shareholders, outsiders and to the management to make the good, sound and essential decision to run the organization in a smooth and good manner. This project will also helpful to everyone to tell about the financial condition of the verka milk plant ,mohali . all the study has conducted in the verka milk plant, mohali. In this study calculated ratios also tells about the performance the the plant in the years , from 01-04-2004 to 31-03-2009. This analysis also provides indictors of past performance in terms of critical success factors of a business. This assistance in decision making reduces reliance on guesswork and intuition and establishes a basis for a sound judgment. In the project financial techniques are used to calculate the ratio and do analysis , and do the interpretation of the calculated results.
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5. OBJECTIVE OF THE STUDY 1. To Analysis Financial Statements:

To acquire enough knowledge about the profitability and financial health of the business. In the light of the knowledge so acquired by us, we can take necessary decisions about their relationships with the concern.
2. To Simplify Accounting Data:

To simplifies and summaries a long array of accounting data and makes them understandable. Also to disclose the relationship between two such figures have a cause and effect relationship with each other.
3. To Locate the Weak Spots of the Business:

We have calculated five years ratios and compared with each other so that weak spots will be located and remedial measures will be taken.
4. For Effective Control of the Enterprise:

To disclose the liquidity, solvency and profitability of the enterprise. Such information enables management to assess the changes that have taken place over a period of time in the financial activities of the business.
5. To Study the Financial Soundness:

To disclose the position of business with different viewpoints. With the help of such a study we can draw conclusions regarding the financial health of the business enterprise.
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6. RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done systematically. According to D. Slesinger and M. Stephenson Research may be defined as the manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that Knowledge aids in the construction of theory or in the practice of an art. Thus it is an original contribution to the existing stock of knowledge of making for its advancement.
RESEARCH Research is the systematic process of collecting and analyzing information to increase our understanding of the phenomenon under study. It is the function of the researcher to contribute to the understanding of the phenomenon and to communicate that understanding to others.
6.1 RESEARCH DESIGN Research design is known as framework within which the whole activity of research and methods or procedures is clearly mentioned under which the research is to conduct.
Type of Research Exploratory & Descriptive research design is used for the study. Descriptive research design implies the study of complete information regarding the respondents profile and his/her views/opinions/preferences towards some problem. It can be called a research framework whereby the complete descriptive of the respondent is studied and data in specific is collected and analyzed to draw conclusions for a problem. The data is analyzed in a tabular form and in well and easy to understand manner.
6.2 SAMPLING DESIGN The sample design of a sample survey refers to the techniques for selecting a probability sample and the methods to obtain estimates of the survey variables from the selected sample. (i) Universe The universe is most commonly defined as everything that physically exists; the entirely of space
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and time, all forms of matter, energy and momentum, and the physical laws and constants that govern them. And in my study all the employees of accounts branch are in the universe. (ii) Sampling unit A member of a sample selected from a sampling frame is called sampling unit. The sampling units are Manager (Finance) and other Department Officials, Sr. Manager of plant.
(iii) Sample size The number of member in a sample is called sample size The sample size is 10.
(iv) Sampling technique Judgment sampling technique is used for the survey.
6.3 DATA COLLECTION Both primary and secondary data are used for the study.
PRIMARY SOURCES:
1. The first step has to do appropriate literature which was collected by consulting various finance officers at head office. 2. Personal interview had been conducted with Mr. Chakraborthy, who is a Deputy Manager of the Finance Department, to get adequate information and appropriate suggestions through out the project.
SECONDRY SOURCES:
1. 2. 3.
Balance Sheet of the Verka Milk Plant. Books for financial statement analysis. Other financial Accounts.
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6.4 TOOLS USED:
FINANCIAL TOOLS: Following financial tools were used to analyze the actual performances of organization by adopting various techniques.
PRESENTATION TOOLS: The presentation tools have been used to present the facts and figures in an attractive manner. The details of the same exhibits have been also mentioned alongside for the easy reference of the readers. Following main presentation tools have been used for better exhibition of the data: Tables & Graphs
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7. Analysis of data
After data have been collected, the researcher turns to the task of analyzing them. The analysis of data requires a number of closely related operations such as establishment of categories, the application of these categories to raw data through tabulation and drawing statically inferences. The term analysis refers to the computation of certain measure along with searching for patterns of relationship that exist among data groups. Thus, in the process of analysis, relationships or differences, supporting or conflicting with original or new data. After analyzing the data, the researcher should have to explain the findings on the basis of some theory. It is known as interpretation. That made possible counting of classified data easy. From the master table various summery tables were prepared. They have been presented along with their interpretation in this manner. And we have used many arithmetic methods to test the data in the manner of ratios.
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7.1 ANALYSIS OF SHORT-TERM FINACIAL POSITION OR TEST OF LIQUIDITY

The short-term creditors of a company like suppliers of goods of credit providing short-term loans are primarily interested in knowing the company's ability to meet its current or short-term obligation as and when these become due. Two types of ratios can be calculated for measuring short-term financial position or short-term solvency of a firm.
7.1.1 Liquidity Ratios 7.1.2 Current Assets Movement or Efficiency Ratios.
7.1.1 Liquidity Ratios:
It refers to the ability of a firm to meet its short-term financial obligations when and as they fall due. In fact, analysis of liquidity needs the preparations of cash budgets and cash and fund flow statements; but liquidity ratios by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity. The main concern of liquidity ratio is to measure the ability of the firm to meet their short-term maturing obligations. Failure to do this will result in total failure of the business, as it would be forced into liquidation. To measure the liquidity of a firm, the following ratios can be calculated:
I. II. III. IV.
Current Ratio Quick or Acid Test or Liquid Ratio Absolute Liquid Ratio or Cash Position Ratio Measure Ratio
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I. Current Ratio: This ratio explains the relationship between Current Assets and Current Liabilities of a business. The formula for calculating the ratio is:Current Ratio= Current Assets/ Current Liabilities 'Current Assets' includes those Assets which can be converted into cash within a YEAR'S time like Cash in Hand, Cash at Bank, B/R, Short-term Investments, Debtors, Stock, and Inventories etc. 'Current Liabilities' include those liabilities which are repayable in a YEAR'S time like Bank O/D, B/P, Creditors, Provision for Taxation, Proposed Dividends, Outstanding Expense and Loans payable with in a year etc.
SIGNIFICANCE:This ratio is used to assess the firm's ability to meet its short term liabilities on time. According to accounting principals, a current ratio of 2:1 is supposed to be an IDEAL RATIO. It means that Current Assets of a business should, at least, be twice of its Current Liabilities. The higher the ratio, the better it is, because the firm will be able to pay its Current Liabilities more easily. The reason of assuming 2:1 as the Ideal Ratio is that the Current Assets includes such Assets as Stock, Debtors etc. from which full amount cannot be realized in case of need, hence even if half the amount is realized from the Current Assets on time, the firm can still meet its Current liabilities. If the Current Ratio is less than 2:1, it indicates lack of liquidity and shortage of working capital. But a much higher ratio, even though it is beneficial to' the short term creditors, is not necessarily good for the company. A much higher ratio than 2:1 may indicate the poor investment policies of the management. While calculating Current Ratio, we have taken Loans & Advances as Debtors in the Current Assets. In Current Liabilities, we included the Provisions to calculate Total Current Liabilities.
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RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS CURRENT RATIO (in times): (Figures in rupees)
Particulars Cash in Hand Cash at Bank
Short term Securities
2004-05 116489 56707499

0
2005-06 169160 66252837

0
2006-07 402612 58962074

0
2007-08 118602 98867680

0
2008-09 63186 91224268

0
Short term Investment Bill Receivable Debtors Closing stock (Raw Material) Closing stock (Milk Products) Inventories Loans & Advances Total Current Assets Current Liabilities Provisions Total Current Liabilities Current Ratio
4625507 2172298 46683615 11677194 95101375
5274297 1878940 78208544 10197213 86167137
4612368 2369378
6534532 2996974
10598671 2602243
122647164 129007472 141409710 8926601 74145794 9941325 63743041 14430914 87795776
217083977 248148128 272065990 311209625 83229814 20572065 105968700 119615577 162318926 187581717 20970919 18308891 14425219 11204841
103801879 126939619 137924468 176744145 198786558 2.09 1.95 1.97 1.76 1.76
28
Current Ratio
2.2
2.1
1.9 Ratio in times 1.8
1.7
1.6
1.5 2004-05 2005-06 2006-07 2007-08 2008-09
29
ANALYSIS OR INTERPRETATION:
In 2004-05: The Current ratio is 2.09 times, it has been increased from the Standard ratio i.e. 2:1. The reason for increased Current Ratio may be slow moving stocks. The stocks will pile up due to poor sales. The cash or Bank Balances may be idle because of sufficient Investments opportunities.
In 2005-06: The Current Ratio is 1.95 times, it has been decreased from 2004-05, and the Current Assets double the Current Liabilities are considered to be satisfactory.
In 2006-07: The Current Ratio is 1.97 times, it is almost same as it was in last year. It means that there is no change in working conditions from last year.
In 2007-08: The Current Ratio is 1.76 times, it is decreasing from previous year due to increase in Current liabilities. It is not necessarily good for the company. The creditors of the company are less secure than previous year.
In 2008-09: Analysis the current ratio is 1.76 times, Its equal to the previous year which is a good symbol for company. But the creation of the company are less secure than last other years.
30
II
QUICK OR ACID TEST OR LIQUID RATIO:
Quick Ratio indicates whether the firm is in a position to pay its current liabilities within a month or immediately. As such the quick ratio is included by dividing liquid assets (Quick Assets) by current Liabilities:Quick Ratio or Acid Test Ratio = Liquid Assets/Current Liabilities 'Liquid Assets' means those assets which will yield cash very shortly. All current assets except stock and prepaid expenses are included in liquid assets. Stock is excluded from liquid assets because it has to be sold before it can be converted into cash. Prepaid expenses too are excluded from the list of liquid assets because they are not expected to be converted into cash. Liquid assets thus include cash, debtors, bill receivable and short term securities.
SIGNIFICANCE: An ideal quick ratio is said to be 1:1. if it is more, it is considered to be better. The idea is that for every rupee of current liabilities, there should be at least one rupee of liquid assets. This ratio is better test of short-term financial position of the company than the current ratio, as it considers only those assets which can be easily converted into cash. Stock is not included in liquid assets as it may take a lot of time before it is converted into cash.
Quick ratio thus is more rigorous test of liquidity than the current ratio and when used together with current ratio, it gives a better picture of the short term financial position of the firm.
While calculating Quick Assets, we have deducting Inventories assuming as a stock -from Current Assets so that Quick Assets are obtained.
31
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS Quick Ratio (in times): (Figures in rupees)
Particulars 2004-05 2005-06 2006-07 272065990 (2369378) 2007-08 311209625 (2996974) 2008-09 2602243
Current Assets
217083977 248148128 (1878940)
Closing stock (2172298) (Raw Material)
Closing stock (46683615) (78208544) (Milk Products) Inventories Total Assets Total Current Liabilities
Quick Ratio 1.51 1.24 103801879 126939619 (11677194) (10197213) 156550870 157863431
(122647164) (129007472)
(8926601) 138122847
(9941325) 169263854
141409710 189683521
Quick
137924468
176744145
198786558
1.00
0.95
0.95
32
Quick ratio
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2004-05 2005-06 2006-07 Ration in times
2007-08
2008-09
33
In 2003-04: The Quick Ratio is 0.77 times, which is less than the ideal ratio i.e. 1:1. It will not be easy to pay its creditors on time. The company's Quick Assets must be Equal of its Current liabilities to meet standard ratio. It is not necessarily good for the company.
In 2004-05: The Quick ratio is 1.51 times, it has been increased from the Standard ratio i.e. 1:1. It is good for the organization. The cash or Bank Balances may be idle because of sufficient Investments opportunities.
In 2005-06: The Quick Ratio is 1.24 times, it has been decreased from previous year and the Quick Assets Equal to the Current Liabilities are considered to be satisfactory.
In 2006-07: The Quick Ratio is 1.00 times, it is the ideal Quick Ratio for the organization. It means that the Quick Assets are able to meet Current liabilities and further no quick assets are invested unproductive.
In 2007-08: The Quick Ratio is 0.95 times, it is decreasing from previous year due to increase in Current liabilities more than the increase in Quick Assets. But also it is almost near to the ideal ratio as it was in previous year.
In 2008-09: The Quick ration is .95 times it is equal to the last year ration. Which is good for the company that it is maintain its ratio. But also almost equal so the ideal ratio.
34
Ill ABSOLUTE LIQUID RATIO OR CASH RATIO:

Generally, debtors and bill receivables are 'more liquid than inventories. There may be doubts regarding their realization into cash immediately or in time. Some authorities are of the opinion that the absolute liquid ratio should also be calculated together with current assets and find out the absolute liquid assets.
Absolute Liquid Ratio/ Cash Ratio= Cash + Short Term Securities/ Current Liabilities
SIGNIFICANCE: Absolute Liquid Assets include cash in Hand and at Bank and marketable Securities or temporary investments. The acceptance norm for this ratio is 50% or 0.5:1 or 1:2 i.e. Re. 1 worth Liquid Assets are considered adequate to pay Re. 2 worth Current Liabilities in time as all the creditors are not expected to demand cash at the same time and then cash may also be realized from debtors and inventories.
35
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS
Absolute Liquid Ratio or Cash Ratio (in times): (Figures in rupees)

Particulars 2004-05 2005-06 169160 2006-07 402612 2007-08 118602 2008-09 63786
Cash hand
in 116489
Cash at bank Short
56707499
66252837 0
58962074 0
98867680 0
91224286 0
term 0
Securities Absolute Liquid Assets Total Current Liabilities

Quick Ratio 0.55 0.52 0.43 0.56 0.45 103801879 126939619 137924468 176744145
198786558
56823988
66421997
59364685
98986281
91224286
36
Absolute liquid ratio

0.6
0.5
0.4
0.3
Absolute liquid ratio
0.2
0.1
0 2004-05 2005-06 2006-07 2007-08 2008-09
37
In 2003-04: The Cash Ratio is 0.26 times, it is less than the ideal ratio and it shows that company needs to improve their short term financial position.
In 2004-05: The Cash ratio is 0.55 times, it has been increased from the standard ratio i.e. 0.5:1, and it is quite satisfactory because it is higher than the rule of thumb, it shows that company is improving their short term financial position.
In 2005-06: The Cash Ratio is 0.52 times, it shows that Absolute Liquid Assets are considered adequate to pay its Current Liabilities in time as all .the creditors are not expected to demand cash at the same time and then cash may also be realized from debtor's inventories.
In 2006-07: The Cash Ratio is 0.43 times, it is nearer to the ideal Quick Ratio. But also it has decreased from the last year due to increase in Current Liabilities of the organization. It means that the organization need to improve little bit on Absolute Liquid Assets.
In 2007-08: The Quick Ratio is 0.56 times, it is increasing from previous year due to increase in Absolute Liquid Assets more than the increase in Current liabilities. But also it is almost near to the ideal ratio as it was in 2005-06. In 2008-09 : The absolute ration is .45 times it is decreasing from previous year which is not a good sign for company.
38
III Interval Measure or Defensive Interval Ratio:

In order to the comparison of current or liquid assets to current liabilities, the liquidity position of a firm may also be examined to measure whether the liquied assts are sufficient relative to the firm's daily cah requirements for operating expenses. Such a measure of liquidity is called interval measure or defensive-linterval ration.
Interval measure = Liquid Assets/Average Daily cash operating expenses.
SIGNIFICANCE: This ration is calculated to measure the liquid assets whether these liquid assets are sufficient for meeting the daily cash operating expenses. Liquid assets include cash, short-term securities, and receivable. Whereas, average daily operating expenses includes cost pf goods sold, distribution expenses. administrative & office expenses, selling &
All these above expenses are divided by number of days in a year (365).
39
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS Interval Measure of defensive-interval (in days)
Particulars Opening Stock Raw Material Milk Products Purchases Raw Material Milk Products Direct Expenses Procurement Expenses Manufacturing Expenses Packing Expenses Purchases Tax/ Cess Total Closing Stock Raw Material Milk Products Cost of Goods Sold
2003-04
2004-05
2005-06
2006-07
2007-08
4242595 40956760
2518563
2172298
1878940 78208544
2369378 122647164
136002057 46683615
918684564 102780424
881863560 948991951 1157575427 1425081941 118084264 113417917 133907625 168226278
43952952
47939056
53236469
52088837
64560151
54998646
51529372
62962235
62973538
7355420
39226368
38963229
48266840
56126206
57631627
6058174
2184677
2214206
1692681
4596638
1210900483 1279084778 1277945531 1544448798 1918468597
(2518563)
(2172298)
(1878940)
(2369378)
(2996974)
(136002057) (46683615) (78208544) (122647164) (129007472) 1072379863' 1230228865 1197858047 1419432256 1786464151
40
Administrative Expenses Store Expenses Distribution Expenses Liquid Assets Number of Days Average Daily Cash Operating Expenses. Total Quick Assets Average Daily Cash Operating Expenses
19353645
21350166
25649243
24186218
25410461'
21488791 9985722
20574656 13688584
21712945 11896308
21578939 20189201
25461485 38157296
1123208021 1285842271 1257116543 1485386614 1875493392 365 3077282 365 3522855 365 3444155 365 4069552 365 5138338
160715169
156550570 157863431 138122846
169263854
3077282
3522855
3444155
4069552
5138338
Interval Measures 53
45
46
34
33
41
Interval Measure/Defensive -interval Ratio

60
50
40
30
20
10
0 2003-04 2004-05 2005-06 2006-07 2007-08
Interval Measure/Defensive interval Ratio
42
In 2003-04: The Interval Measure Ratio is 53 Days/ which indicates that it is increased from the estimated Ratio i.e. 45 Days. This shows that company's liquid assets are more sufficient for operating daily cash requirements.
In 2004-05: The Interval Measure Ratio is 45 Days, which is equivalent to the target ratio. This shows that company has achieved their target and it has neither increased nor decreased their ratio.
In 2005-06: The Interval Measure Ratio is 46 Days, it has been increased quite from the targeted ratio. This shows that company has more liquid assets to meet their daily requirements.
In 2006-07: The Interval Measure Ratio is 34 Days, it has decreased from the previous year due to increase Daily Cash requirements for Operating Expenses. It means that the organization needs to improve little bit on this Ratio.
In 2007-08: The Interval Measure Ratio is 33 Days, it is almost same as it was in previous year this shows that company is not having liquid assets to meet their daily requirements.
43
7.1.2 CURRENT ASSETS MOVEMENT OR EFFICIENCY/ ACTIVITY RATIOS:

Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly affects the volume of sales. The better the management of assets, the larger is the amount of sales and profits. Activity ratios measure the efficiency or effectiveness with which a firm manages its resources or assets. These ratios are also called turnover ratios because they indicate the speed with which assets are converted or turned over into sales.
For example: Inventory turnover ratio indicates the rate at which the funds invested in inventories are converted into sales. Depending upon the purpose, a number of turn over ratios can be calculated, as Debtors or Receivable Turnover, Average Collection Period, Stock/ Inventory Turnover, Creditors/Payable Turn over, Average Payment Period, Working Capital Turnover Ratio.
I. Inventory/Stock Turnover Ratio:
This ratio indicates the relationship between the cost of googs sold during the year and average stock kept during that year.
Stock Turnover Ratio= COGS/Average Stock
Cost of Goods Sold= Opening Stock + Purchases + Carriage + wages + other direct charges - Closing Stock OR Net Sales - Gross profit. Average Stock= (Opening Stock + Closing Stock)/ 2
44
SIGNIFICANCE: This ratio indicates whether stock has been efficiently used or not. It shows the speed with which the stock is rotated into sales or the number of times the stock is turned into sales during the year. The higher the ratio the better it is. Since it indicates that the stock is selling quickly. In a business, where stock turnover ratio is high, goods can be sold at a lower margin of profit and even the profitability may be quite high. A low stock turnover ratio indicates that stock does not sell quickly and remains lying in the godown for a long time. This results in increased storage cost, blocking of funds and losses on account of goods becoming obsolete. This ratio can be compared with the previous year, the management can access whether the stock has been more efficiently used or not.
45
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS STOCK TURNOVER RATIO (in times): (Amount in figures)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-2009
Cost Goods Sold Opening Stock Raw Material Milk Products Closing Stock Raw Material Milk Products
of 1230228865 1197858047 1419432256 1786464151 2178653051
2518563
2172298
1878940
2369378
2996974
136002057
46683615
78208544
122647164
129007472
2172298
1878940
2369378
2996974
2602243
46683615
78208544
122647164
129007472
141409710
Total Stock 187376533 Average Stock

Stock Turn 13.13 Over Ratio 93688267
128943397 64471698
134716332 67358163
257020988 128510494
296015799 148007899.5
18.58
21.09
13.90
14.7
46
Stock turn over ratio

25
20
15
10
0 2004-05 2005-06 2006-07 stock turn over ratio 2007-08 2008-09
47
In 2003-04: The Stock Turnover Ratio is 11.67 times more than its average stock. It means how efficiently stock is being utilized in the company to convert into COGS or sales. The higher the ratio the better it is. So it indicates that stock is selling quickly, it is a good indicator for company that stock is being efficiently used in the company.
In 2004-05: The Stock Turnover Ratio is 13.13 times more than its average stock, it has been increased from previous year. This shows that company is now utilizing their stock into sales.
In 2005-06: The Stock Turnover Ratio is 18.58 times more than average stock. It has been, increased from both the previous years. This shows that company is more properly utilizing its stock into sales and selling quickly to earn profits.
In 2006-07: The Stock Turnover Ratio is 21.09 times more than average stock. This year it has been increased from all the previous years and further it is increasing yearly and the company is utilizing its stock more efficiently.
In 2007-08: The Stock Turnover Ratio is 13.90 times it has been decreased from the last year due to increase in Average Stock from last year. Now the company has to search ways to overcome this problem and for full utilization of stocks and to go for more sales.
In 2008-09: The Stock Turnover Ratio is 13.90 times it has been Increaseing from the last year due to increase in average stock from last year company have to work upto how increase sales.
48
7.2 ANALYSIS OF LONG-TERM FINANCIAL POSITION OR TEST OF SOLVENCY

These ratios are calculated to assess the ability of the firm to meet its long term liabilities as and when they become due. Long term creditors including debentures holders are primarily interested to know whether the company has ability to pay regularly interest due to them and to repay the principle amount when it become due. Solvency ratios disclose the firm's ability to meet the interest cost regularly and long term indebtedness at maturity. Solvency ratios include the following ratios: 7.2.1 Debt-Equity Ratio 7.2.2 Funded-Debt to Total Capitalization Ratio 7.2.3 Equity Ratio 7.2.4 Solvency Ratio 7.2.5 Proprietor's Funds Ratio 7.2.6 Fixed Assets Radio 7.2.7 Ratio of Current Assets to Proprietor's Funds 7.2.8 Debt service ratio 7.2.9 Capital gearing ratio
7.2.1
Debt-Equity Ratio:
This ratio expresses the relationship between long term debt and shareholders funds. It indicates the proportion of the funds which are acquired by long term borrowings in comparison to shareholders funds. This ratio is calculated to ascertain the soundness of the long term financial policies of the firm. The Debt-Equity can be calculated are as follows: Debt-Equity= Outsiders Funds/ Shareholders Funds OR External Equities/ Internal Equities Outsiders Funds: These refer to long term liabilities which mature after one year. These include debentures, mortgage loans, public deposits etc.
49
Shareholder's funds: These include equity share capital, preference capital, share premium, general reserve and other reserves and credit balance of profit and loss account. However accumulated losses and fictitious assets remaining to be written off like preliminary expenses, underwriting commission, share issue expenses should be deducted.
SIGNIFICANCE: This ratio is calculated to assess the ability of the firm to meet its long term liabilities. Generally Debt-Equity Ratio is of 2:1 is considered safe, if this is more than that it shows a rather risky financial position from the long term point of view as it indicates that more and more funds are invested in the business; are provided by long term lenders. The lower this ratio the better it is for long term lenders because they are more secure in that case. Lower than 2:1 Debt-Equity Ratio provides sufficient protection to long term lenders. A high Debt-Equity Ratio which that the claims of Creditors are greater than those of owners, may not be considered by the time of liquidation of the firm . Current liabilities:
These are taken as an Outsider's Funds. As Current Liabilities which mature after one year so Current Liabilities are treated as Outsider's Funds. In order to calculate Shareholder's Funds, we include Share Capital and Reserves & Surplus. We deduct Depreciation Reserve Fund as it is included in Reserve and Surplus.
50
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS DEBT-EQUITY RATIO (in times):
(amount in rupees) Particulars Current Liabilities (outsiders) Share Capital Reserve Surplus Depreciation Reserve Fund Shareholder's Funds
Debt-Equity Ratio 1.1 1.4 1.3 1.26 1.43 89857676 91745059 106021456 140218557 138647135 (78294915) (81971713) (85669555) (91050385) 97321702 25256000 25827120 26427245 26819655 27493755 2004-05 2005-06 2006-07 137924468 2007-08 2008-09
103801878 126939618
140218557 198786558.10
& 142896591 147889652 065263766} 204449286 208475082.78
51
Debt-Equity ratio
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2004-05 2005-06 2006-07 2007-08 2008-09
Debt-Equity ratio
52
In 2003-04: The Debt-Equity Ratio is 3 times. It shows risky-financial position from the long term point of view as it indicates that more and more funds invested in the business are provided by long term lenders. It has also increased from the Standard Ratio which is not good for lenders.
In 2004-05: The Debt-Equity Ratio is 1.1 times. It has been decreased from last year due to decrease in current liabilities. This is in favor of the lenders as their money is secure and for organization also as they have less liability to pay off.
In 2005-06: The Debt-Equity Ratio is 1.4 times. It has increased from the last year but it is quite Satisfactory as the company is maintaining their Debts.
In 2006-07: The Debt-Equity Ratio is 1.3 times. It is almost same like previous year as it is decreased little bit as the company is maintaining Debts.
In 2007-08: The Debt-Equity Ratio is 1.26 times. It is also almost same from last Three Previous Years also favorable to both Lenders and Company.
In 2008-09 : The Debt-Equity Ratio is 1.43 times. Which is increase from the last year. It is a good sign for company increase of Debt-Equity ratio shows risky financial position.
53
7.2.2 FUNDED DEBT TO TOTAL CAPITALIZATION RATIO:
The ratio establishes a link between the long term funds raised from outsiders and total long term funds available in the business. The debt to total capitalization can be calculated are as follows:
Funded Debt to Total Capitalization Ratio= Funded Debt/Total Capitalization*100
Funded Debt= Debentures + Mortgage Loans + Bonds + other Long term Loans.
Total Capitalization Equity Share Capital + Preference Share capital + Reserve & Surplus + Other Undistributed Reserves + Debentures + Mortgage Loans + Bonds + Other Long Term loans.
SIGNIFICANCE: As funded Debt to Total Capitalization represents the relationship of long term funds. There is no 'Rule of Thumb' but still the lesser the reliance on outsiders the better it will be. If this ratio is smaller, better it will be, up to 50% or 55% this ratio may be to tolerable and beyond.
54
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS FUNDED DEBT TO TOTAL CAPITALIZATION RATIO (in times):
(Amount in rupees)
Particulars 2004-05 2005-06 23571398 2006-07 18805950 2007-08 13579377 2008-09 10570321
Funded Debt (Secured 38947059 Loans) Share Capital Reserve & Surplus Secured Loans
25256000
25827120
26427245
26819655
27493755 208475082.78
10570321 (47321702.78)
142896591 147889652 38947059 23571398
165263766 204449286 18805950 13579377
Depreciation Reserve (78294915) (81971713) (85669555) (91050385) Fund Total Capitalization

FUNDED DEBT TO TOTAL CAPITALIZATION RATIO (in times): 128804735 115316457 0.3 0.2 124827406 153797934 0.15 0.08
149217456 0.07
55
Funded dept to total capitalization ration

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2004-05 2005-06 2006-07 2007-08 2008-09
Funded dept to total capitalization ration
56
In 2004-05: The Funded Debt to Total Capitalization Ratio is 0.30 times. It has been decreased from last year due to decrease in Total Capitalization. Now the company has reduced its long term borrowing capacity from the last year.
In 2005-06: The Funded Debt to Total Capitalization Ratio is 0.20 times. It has been reduced from both the previous years. From now the company has controlled their debt to total capitalization ratio and make the efforts to reduce their ratio. The company has better long term financial position.
In 2006-07: The Funded Debt to Total Capitalization Ratio is 0.15 times. It has also reduced from previous years. We can see that the company is doing well and ratio is reducing on yearly basis.
In 2007-08: The Funded Debt to Total Capitalization Ratio is 0.08 times. It is also decreasing and we can say that company is not too much dependent on long term funds.
In 2008-09: The Funded Debt to Total Capitalization Ratio is 0.08 times. It is decreasing and we can say that company is not too much dependent on long term funds.
57
7.2.3
PROPRIETORY RATIO OR EQUITY RATIO
This ratio establishes the relationship between shareholder's funds to total assets of the firm. This ratio is important for determining long term solvency of a firm. The equity ratio may be calculated are as follows: Equity Ratio= Shareholder's Funds/Total Assets
Shareholder's Funds= We include Share Capital and Reserves & Surplus. We deduct Depreciation Reserve Fund as it is included in Reserve and Surplus.
Total Assets= It is calculated by deducting depreciation reserve fund from total of assets side of the balance sheet.
SIGNIFICANCE: As this ratio represents the relationship of owner's funds to total assets, higher the ratio better is the long term solvency position of the company. This ratio indicates the extent to which the assets can be lost without affecting the interest of creditors of the company.
58
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS PROPRIETORY RATIO OR EQUITY RATIO (in times):
(Amount in Rupees)
Particulars 2004-05 89857676 2005-06 91745059 2006-07 2007-08 2008-09
Shareholder's Fund Assets Depreciation Reserve Fund Total Assets

RATIO OR EQUITY RATIO (in times):
106021456 1402185
335813735 374951084
408377953 4569675
(78294915) (81971713) (85669555) (910503
257518820 292979371 0.31
322708398 3659171 0.32 0.38
PROPRIETORY 0.35
59
The proprietary ration or Equity ratio

0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2003-04 2004-05 2005-06 2006-07 2007-08
The proprietary ration or Equity ratio
60
In 2003-04: The Proprietary Ratio or Equity Ratio is 0.2 times more than its total assets. Higher the ratio or the share of the shareholders in the total capital of the company better is the long term solvency position of the company.
In 2004-05: The Proprietary Ratio or Equity Ratio is 0.35 times. It has been increased from last year. It is a good indicator for the company from the long term point of view. It is a healthier signal and long term lenders are secured from total funds.
In 2005-06: The Proprietary Ratio or Equity Ratio is 0.31 times. It has been reduced from the previous year but it is satisfactory for the company.
In 2006-07: The Proprietary Ratio or Equity Ratio is 0.32 times. It is almost same as it was in previous year. It is a good sign that the company is maintaining this ratio.
In 2007-08: The Proprietary Ratio or Equity Ratio is 0.38 times. It is also increasing from the last two years and we can say that it is a healthier signal.
61
7.2.4
SOLVENCY RATIO OR THE RATIO OF TOTAL ASSETS:
This ratio indicates the relationship between the total liabilities to outsiders to total assets of a firm and can be calculated as follows:
Solvency Ratio= Total Liabilities to Outsiders/ Total Assets
SIGNIFICANCE: As this ratio represents the relationship between the total liabilities to outsiders to total assets, more satisfactory of stable is the long-term solvency position of firm. Total liabilities to outsiders are assumed as current Liabilities.
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS SOLVENCY RATIO (in times):
(Amount in rupees)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09
Current Liabilities (Outsiders) Total Assets

SOLVENCY RATIO (in
103801878 126939618 137924468 176744145 198786558
257518820 292979371 322708398 365917145 435831987 0.40 0.43 0.43 0.48 0.456
times):
62
0.6
0.5
0.4
0.3
0.2
0.1
0 2004-05 2005-06 2006-07 2007-08 2008-09
Sovency ration
63
In 2004-05: The Solvency Ratio is 0.40 times more than its total assets which indicates that the company has reduced their solvency ratio and make under the control.
In 2005-06: The Solvency Ratio is 0.43 times more than its total assets. It has been increased quite but it also shows that company is now taking steps to control this ratio.
In 2006-07: The Solvency Ratio is 0.43 times more than its total assets. It is same as it was in previous year. It is a good sign that the company is maintaining this ratio.
In 2007-08: The Solvency Ratio is 0.48 times more than its total assets. It is also increasing from the last two years and we can say that it is not a healthier signal. It indicates that the company has to pay more liabilities compared to last years.
In 2008-09: The Solvency Ratio is 0.48 which is less than last year. It is healthier signal for the company. It indicates company have much pay less liabilities as compared to last year
64
7.2.5 FIXED ASSETS TO NET WORTH RATIO OR FIXED ASSETS TO PROPRITOR'S FUND:
The ratio establishes the relationship between fixed assets and shareholder's funds, i.e. share capital plus reserves and surplus and deducting depreciation reserve surplus from reserves and surplus.
Fixed Assets to Net Worth Ratio = Fixed Assets/Shareholder's Funds
SIGNIFICANCE:
The ratio of fixed assets to net worth indicates the extent to which shareholder's funds are sunk into fixed assets. If the ratio is less than 100%, it implies that owner's funds are more than total fixed assets. When the ratio is more than 100%, it implies that owner's funds are not sufficient to finance the fixed assets and the firm has to depend upon outsider's to finance the fixed assets. There is no 'Rule of Thumb' to interpret this ratio but 60% is considered to be satisfactory ratio.
65
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS FIXED ASSETS TO NET WORTH RATIO (in times):
Particulars
2004-05
2005-06
2006-07
2007-08
2008-09
Work Progress Plant Machinery Building Fixed Assets Total Assets Depreciation Reserve Net Assets Shareholder's Fund
in
& 564002
933703
6424176
2302675
3562286
2895711
0 167527199
100665655 106066476
108825401 125362093
Fixed 101229657 109302854 118811563 128257804 167527199
(78294915) (81971713) (8566955)
(91050384) (7321702)
Fixed
22934742
27331141
33142308
37207420
70205497
89857676
91745059
106021456 140218557
198786558
FIXEDASSETS TO NET
0.25
0.30
0.31
0.27
0.35
WORTH RATIO (in times):
66
Fixed assest to new worth ration

0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2004-05 2005-06 2006-07 2007-08 2008-09
Fixed assest to new worth ration
67
In 2004-05: The Fixed Assets to Net Worth Ratio is 0.25 times. It has been decreased from the last year. It is not a good sign for the company. In 2005-06: The Fixed Assets to Net Worth Ratio is 0.30 times. It has been increased from previous year. It is not the healthy sign for the company. The company has to improve their ratio and make efforts to improve their long term financial position.
In 2006-07: The Fixed Assets to Net Worth Ratio is 0.31 times. It has been increased from the last year. This implies that owner's funds are not sufficient to finance the fixed assets and the company has to depend upon outsider's to finance for fixed assets
In 2007-08: The Fixed Assets to Net Worth Ratio is 0.27 times. It is almost same as it was in last year. It is not a good sign for the company.
In 2008-09: The Fixed Assets to Net Worth Ratio is 0.35 times. It is more than last year. It is not a good signal for company.
68
7.2.6 FIXED ASSETS TO TOTAL LONG TERM FUNDS OR FIXED ASSETS RATIO:
A variant to the ratio of fixed assets to net worth is the ratio of fixed assets to total term funds which is calculated as:
Fixed Assets Ratio= Fixed Assets/ Total Long Term Funds
SIGNIFICANCE: The ratio indicates the extent to which the total of fixed assets is financed by long term funds of the firm. Generally, the total of the fixed assets should be equal to the long term funds. But if the fixed assets exceed the total of the long term funds it implies that the company has financed a part o the fixed assets out of current funds or the working capital which is not a good financial policy.
69
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS FIXED ASSETS TO NET WORTH RATIO (in times):
(Amount in Rupees)
Particulars 2004-05 2005-06 2006-07 2007-08 2008-09 167527199
Total Fixed Assets Depreciation Reserve
101229657 109302854
118811563 128257804
(78294915) (81971713) (8566955)
(91050384) 973217021
Net Fixed Assets 22934742 Shareholder's Fund Funded Debt (Secured Loans)
38947059 89857676
27331141 91745059
33142308
37207420
70205497 198786558
106021456 140218557
23571398
18805950
13579377
10570321
Total Long term 128804735 115316457 124827406 153797934 209356879 Funds

FIXEDASSETS 0.18 RATIO (in times): 0.24 0.27 0.24 0.33
70
Fixed Asset Ratio

0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2004-05 2005-06 2006-07 2007-08 2008-09
Fixed Asset Ratio
71
In 2004-05: The Fixed Assets Ratio is 0.18 times. It has been decreased from the last year. It is not a good sign for the company.
In 2005-06: The Fixed Assets Ratio is 0.24 times. It has been increased from previous year. The company has to improve their ratio and make efforts to improve their long term financial position.
In 2006-07: The Fixed Assets Ratio is 0.27 times. It has been increased from the last year. It is a good sign for the company. This implies that the company is going to improve their long term financial position.
In 2007-08: The Fixed Assets Ratio is 0.24 times. It is almost same as it was in last year. It is not a good sign for the company.
In 2008-09: The Fixed Assets Ratio is 0.33 which is increase from last year. But it is not sufficient . It is not good sign for company.
72
7.2.7 RATIO OF CURRENT ASSETS TO PROPRIETOR'S FUNDS:
The ratio is calculated by dividing the total of current assets by he amount of shareholder's funds. It is calculated as follows:
C/A to Proprietor's Funds= Current Assets/Proprietor's Funds*100
SIGNIFICANCE:
The ratio indicates the extent to which proprietor's funds are invested in current assets. There is no 'Rule of Thumb' for this ratio and depending upon the nature of the business there may be different firms. Proprietor's funds are assumed as shareholder's funds.
73
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS CURRENT ASSETS TO PROPRIETOR'S FUNDS (in times):
(Amount in Rupees)
Particulars 2004-05 11677194 4625507 95101375 2172297 2005-06 10197212 5274296 86167137 1878940 2006-07 8926601 4612368 74145794 2369378 2007-08 9941325 6534532 63743041 2996974 2008-09 14430914.82 10599671.84 87795776 2602243.6
Inventories Sundry Debtors Loans & advances Closing Stock of Raw Material Closing Stock of Milk Products Cash in Hand Cash at Bank Current Assets Proprietor's fund/Shareholder's Fund
46683614
78208543
122647164 129007472 141409710
116489 56707498
169160 66252837
402612 58962074
118602 98867680
63786.36 91224286.21
217083974 248148125 272065990 311209625 348126389 89857676 91745059 106021456 140218557 198786558.01
CURRENT ASSETS 2.41

TO PROPRIETOR'S FUNDS RATIO (in times):
2.7
2.56
2.21
1.8
74
2.5
1.5
0.5
0 2004-05 2005-06 2006-07 2007-08 2008-09
Current Assest
75
In 2004-05: The Current Assets to Proprietor's Funds Ratio is 2.41 times. It has been decreased from the last year. It is not a good sign for the company.
In 2005-06: The Current Assets to Proprietor's Funds Ratio is 2.7 times. It has been increased from previous year. It is a healthy sign for the company. The company has to improve their ratio more and make efforts to improve their long term financial position.
In 2006-07: The Current Assets to Proprietor's Funds Ratio is 2.56 times. It has been decreased from the last year. It is not a good sign for the company. This implies that owner's funds are not sufficient to finance the fixed assets and the company has to depend upon outsider's to finance for fixed assets.
In 2007-08: The Current Assets to Proprietor's Funds Ratio is 2.21 times. It is also decreased from previous year. It is not a good sign for the company.
In 2008-09: The Current Assets to Proprietor's Funds Ratio is 1.8 times. This is decreasing from last 3 years. It is not beneficial for the company.
76
7.2.8 DEBT SERVICE RATIO RATIO:
This ratio establishes the relationship between equity share capital including reserve and surpluses to preference share capital and other fixed interest bearing loans. This ratio is calculated is used to test the debt-servicing capacity of a firm. The ratio is also known as Interest Coverage Ratio or Fixed Charges Cover or Times Interest Earned. This ratio is calculated by dividing the net profits before and taxes by fixed interest charges:
Debt-Service Ratio= Net Profit (B.I.T.)/Fixed Interest Charges
SIGNIFICANCE: This ratio indicates the number of times interest is covered by the profits available to pay the interest charges. Generally, higher the ratio the better it is and safer are the long term creditors because even if earnings of the firm fall, the firm shall be able to meet its commitment of fixed interest charges. But a too high interest coverage ratio may not be good for the company because it may imply that firm is not using debt as a source of finance so as to increase the earnings per share.
77
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS DEBT-SERVICE RATIO (in times):
Particulars
2004-05
2005-06
2006-07 43808467
2007-08 48228847
2008-09 52819123.82
Net
Profits 32607331 38573189
after Interest & Taxes Interest on

3414642 282678 554629 508090 441281
NDDB loans Net Profit

36021973 38855867 44363096 48736937 5346040.82
before Interest & Taxes Fixed Interest Charges DEBT

SERVICE RATIO times): (in 10.5 137.4 79.9 95.92 121.1 3414642 282678 554629 508090 441281
78
160 140 120 100 80 60 40 20 0 2004-05 2005-06 2006-07 2007-08 2008-09
Debt-Service ratio
79
In 2004-05: The Debt Service Ratio is 10.5 times. It has been decreased from the last year. It is not a good sign for the company.
In 2005-06: The Debt Service Ratio is 137.4 times. It has been increased frpm previous year. It is a healthy sign for the company. The company is improving their ratio and making efforts to improve their long term financial position.
In 2006-07: The Debt Service Ratio is 79.9 times. It has been decreased from the last year. It is not a good sign for the company. This implies that owner's funds are not sufficient to finance the fixed assets and the company has to depend upon outsider's to finance for fixed assets.
In 2007-08: The Debt Service Ratio is 95.92 times. It is increased from the last year which shows that company is making efforts.
In 2008-09: The Debt Service Ratio is 121.1 times. It is increased from the last year which shows that company is doing well in this field.
80
7.2.9 CAPITAL GEARING RATIO:
This ratio establishes the relationship between equity share capital including reserve and surpluses to preference share capital and other fixed interest bearing loans. This ratio is calculated as follows:
Capital Gearing Ratio= Fixed Income Bearing Funds/Long term Debt Bearing Fixed Interest
SIGNIFICANCE: Capital Gearing ratio is very important leverage ratio Gearing Should be kept in such a. way that the company is able to maintain a steady rate of dividend. High Gearing ratio is not good for a new company or a company in which future earnings are uncertain. There is no preference capital so we have not included in it. We have also taken long-term debt bearing fixed interest as secured loans (long-term Loans).
81
(RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS)
CAPITAL GEARING RATIO (in times):
Particulars
2004-05 25256000
2005-06 25827120
2006-07 26427245
2007-08 26819655
2008-09 27493755
Equity Share Capital Reserve Surplus
& 142896591 147889652 165263766 204449286 208475082.78
Fixed Income 168152591 173716772 191691011 231268941 235968837 Bearing Funds Secured loans 38947059 (long term Loans)
CAPITAL GEARING RATIO times): (in 4.3 7.4 10.19 17.03 22.3 23571398 18805950 13579377 10570321
82
25
20
15 Capital Gearing Ration 10
0 2004-05 2005-06 2006-07 2007-08 2008-09
83
In 2004-05: The Capital Gearing Ratio is 4.3 times.
In 2007-08: The Capital Gearing Ratio is 17.03 tomes.
High Gearing ratio is not good for the company or a company in which future earnings are uncertain. It has been increasing from last five years. It shows that company has no good signal about its profitability and its financial position.
84
7.3 ANALYSIS OF PROFITABILITY OR PROFITABILITY RATIOS

The main object of all the business concerns is to earn profit. Profit is the measurement of the efficiency of the business. Equity shareholders of the company are mainly interested in the profitability of the company. Profitability Ratios measure the various aspects of the profitability of a company such as
1.
What is the rate of the profit on sales?
2.
Whether the profits are increasing or decreasing? And if decreasing, then it helps in finding out the cause of their decrease.
3.
Whether an adequate return is being obtained on capital employed?
Profitability Ratios include the following:-
6.3.1 General Profitability Ratios 6.3.2 Overall Profitability Ratios
1. General Profitability Ratios
The following ratios are known as general profitability ratios: I. II. III. IV. V. Gross Profit Ratio Operating Ratio Operating Profit Ratio Expenses Ratio Net Profit Ratio
85
I. Gross Profit Ratio: This ratio shows the relationship between gross profit and sales.
Gross Profit Ratio= Gross Profit/Net Sales*100 Net Sales= Sales- Sales Return
SIGNIFICANCE:
This ratio measures the margin of profits available on sales. The higher the ratio, the better it is. The ratio should be adequate enough not only to cover the operating expenses but also to provide for the depreciation, interest on loans, dividends and reserves. The ratio is compared with earlier ratio and important conclusion is drawn from such comparison for instances if there is a decline in gross profit ratio in comparison to previous year it may be concluded that:
I. Price of material purchased, freight, wages and direct changes may have gone up but selling price may not have gone up in proportion to increase in the cost. II. The selling price may have fallen but the price of the materials, freight, wages and other direct charges may have not fallen relatively. III. There is a fall in sales of more profitable variety of goods.
86
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS GROSS PROFIT RATIO (in %):
(Amount in Rupees) Particulars 2003-04 2004-05 2005-06 2006-07 2007-08
Gross Profit 96495769 Net Sales GROSS PROFIT RATIO (in %):
101273528 106155602 118319642 131687654
1168875630 1331502393 1304013647 1537754900 1935681202 8.2 7.6 8.1 7.69 6.8
87
2007-08
2006-07
2005-06
2004-05
2003-04
10
Gross profit ratio
88
In 2003-04: The Gross Profit Ratio is 8.2%. Gross profit must be sufficient to provide for operating expenses, interest on loans, depreciation and dividends otherwise company will not operate in this environment. It must generate sufficient profits. Higher the ratio better it is.
In 2004-05: The Gross Profit Ratio is 7.6%. It has been decreased from the last year. It is not a good sign for the company. It will be beneficial for the company to reduce operating expenses, dividend and interest on loans, otherwise there will be decrease in net profits.
In 2005-06: The Gross Profit-Ratio is 8.1%. It has been increased from previous year. It is a healthy sign for the company. The company is improving from the previous year ratio.
In 2006-07: The Gross Profit Ratio 7.69%. It has been decreased from the last year. It is not a good sign the company.
In 2007-08: The Gross Profit Ratio is 6.8%. It is almost same as it was in last year. It is also not a gci6tr sign for the company because company can do well as it was in previous years.
89
II.
OPERATING RATIO:
It establishes the relationship between cost of goods and other operating expenses on the one hand and the sales on the other hand. It measures the cost of operations by dividing operating costs with the net sales.
Operating Ratio= Operating Cost/Net sales*100 Operating Cost= COGS+ Operating expenses
SIGNIFICANCE: This ratio indicates the percentage of net sales that is consumed by operating cost. Obviously, higher the operating ratio, the less favorable it is, because it would have margin (operating profit) to cover interest, income-tax dividend and reserves. There is no rule of thumb for this ratio as it may differ from to firm depending upon the nature of its business and its capital structure.
90
RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS OPERATING RATIO (in %): (Amount in Rupees)
Particulars Cost of Goods Sold Operating Expenses:Administrative Exp. Store Exp.
2004-05 1230228864
2005-06 1197858045
2006-07 1419432256
2007-08 1786464151
2008-09 218653051
21350165
25649243
24186218
25410461
38556621.34
20574655
21712944 11896307 1257116539 1304013647 96.4
25461485 20189201 1485386614 1537754900 96.59
21578939 38157296 1875493391 1937515705 96.79
21697023.29 18521261.26 2257427157 2339977375 96.5
Distribution Exp. 13688584 Operating Cost Net Sales OPERATING RATIO (in %): 12858422680 1331502393 96.6
91
2008-09
2007-08
2006-07
Operating Ratio
2005-06
2004-05 96.2 96.3 96.4 96.5 96.6 96.7 96.8 96.9
92
In 2004-05:
Operating Ratio of the company is 96.6%.
In 2005-06:
In 2006-07:
In 2007-08:
In 2008-09:
It indicates that the percentage of net sales that is consumed by operating cost. Obviously, higher the operating ratio, the less favorable it is. But the operating ratio is higher from the last five years which shows that a small margin (operating profit) cover interest, income tax, dividend and reserves is left.
93
III. OPERATING PROFIT RATIO:

This ratio is calculated by dividing operating profit by sales. This ratio is calculated are as follows:
Operating profit ratio = Operating profit x 100 Sales
Operating Profit = Net sales - Operating Cost
Operating Cost = Cost of goods sold + Administrative and office expenses + selling and distributive expenses.
This ratio can also be calculated as: Operating profit ratio = 100-operating ratio
94
OPERATING PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
(amount in Rupees)
Particulars Sales Operating Cost Operating Profit Net Sales COST OF GOODS SOLD RATIO (in %): 1331502393 3.4 1304013647 3.6 1537754900 3.4 1937515705 3.2 2339977375 3.53 45660125 46897117 52368286 62022314 82549419 2004-05 1331502393 (1285842268) 2005-06 1304013647 (1257116530) 2006-07 1537754899 (1485386613) 2007-08 1937515705 (187493391) 2008-09 2339977375 2257427950
95
2008-09
2007-08
2006-07
2005-06
2004-05
3.1
3.2
3.3
3.4
3.5
3.6
3.7
Operating Profit Ratio
96
In 2004-05, The Operating Profit Ratio is 3.4% In 2005-06, The Operating Profit Ratio is 3.6% In 2006-07, The Operating Profit Ratio is 3.4% In 2007-08, The Operating Profit Ratio is 3.2% In 2008-09, The operating profit ration is 3.5%
The company in 2003 has operating profit ratio is at 3.9%. But the perating profit ratio goes on declining i.e. 3.4%. In 2007, it remains constant. In 2006, it has been increased their ratio by 3.6. Now in the 2007 it has been decrease to 3.2. In 2007 it has been drease to 302 and in 2008 it again increase by 3.53 that mean company is controlling their costs.
97
(IV) EXPENSES RATIOS:

Expenses ratios indicate the relationship of various expenses to net sales. Expenses ratios are calculated by dividing each item of expenses with the net sales to anlyse the cause of several of the operating ration. The rati can be calculated for each individual item of expenses like cost of sales ratio, administrative expenses ratio, selling expenses ratio, material consumed ratio, etc.
SIGNIFICANCE:This ratio indicates the relationship of various expenses to net sales. The lower the ratio, the greated is the profitability and higher the ratio, lower is the profitability. While interpreting the ratio, it must be remembered that for a fixed expenses like rent, the ratio will fall if sales increase and for a variable expense, the ratio in proportion to sales shall remain nearly the same.
EXPENSES RATIO MAY BE CALCULATED AS:
1.
Cost of goods sold ratio:
Cost of goods sold/ Sales
98
COST OF GOODS SOLD RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS) (amount in Rupees)
Particulars
Cost goods sold Net Sales
COST GOODS SOLD RATIO (in %): OF
2004-05
2005-06
2006-07
2007-08
2008-09
of 123028864
1197858045 1419432256 1786464151 2339977375
1331502393 1304013647 1537754900 1937515705 161324324 92.4 91.8 92.3 92.20 93.1
99
2008-09
2007-08
2006-07
Cost of Goods Sold Ratio
2005-06
2004-05 91 91.5 92 92.5 93 93.5
100
2. Administrative & Office expenses ratio: Administrative & Office expenses x 100/ Sales
ADMINISTRATIVE & OFFICE EXPENSES (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS) (amount in Rupees)
Particulars 2004-05 2005-06 25649243 2006-07 24186218 2007-08
35649454
2008-09
38556621.34
Administrativ e 21350165 & Office expenses Net Sales

ADMINISTR ATIVE OFFICE EXPENSES RATIO (in & 1331502393 1.6
1304013647 2
1537754900 1.57
1937515705 2339977375
1.84 1.65
101
2008-09
2007-08
2006-07
Ratio Times
2005-06
2004-05 0 0.5 1 1.5 2 2.5
102
3. Selling & Distribution Expenses Ratio : Selling & Distribution Expenses x 100/Sales
SELLING & DISTRIBUTION EXPENSES (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS) (amount in Rupees)
Particulars Distribution Expenses Net Sales SELLING &
2004-05 13688584
2005-06 11896307
2006-07
2007-08
2008-09
20189201
18521261.26 18521261.26
1331502393 1304013647 1537754900 1937515705 2339977375 1 0.9 1.31

0.94 0.92
DISTRIBUTION EXPENSES RATIO (in %):
103
2008-09
2007-08
2006-07 Selling & Distribution Expenses Ratio
2005-06
2004-05 0 1 2 3 4 5
104
4.
Store expenses ratio Store expenses x 100/Sales
STORE EXPENSES RATIOS (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
Particulars
2004-05 20574655
2005-06 21712944
2006-07 21578939
2007-08
2008-09
Store Expenses Net Sales

STORE EXPENSES RATIO (in %):
17671840.58 21697023
1331502393 1304013647 1537754900 1937515705 2339977375 1.5 1.7 1.4

0.91 0.92
105
2008-09
2007-08
2006-07
Store Expenses Ratio
2005-06
2004-05 0 0.5 1 1.5 2
106
5. Non -Operating expenses ratio : Non -Operating expenses x 100/Sales
NON OPERATING EXPENSES RATIOS (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
(amount in Rupees)
Particulars Depreciation Net Sales NON OPERATING EXPENSES RATIO %): (in 2004-05 5938526 1331502393 0.5 2005-06 3676797 2006-07 3697842 2007-08 2008-09
5380822
6271318.25
2339977375 0.27
1304013647 1537754900 1939681203 0.3 0.24

0.27
107
2008-09
2007-08
2006-07 Non operating Expenses Ratio
2005-06
2004-05 0 0.1 0.2 0.3 0.4 0.5 0.6
108
ANALYSIS OF INTERPRETATION:
(I)
Cost of goods sold ratio:
The cost of goods sold ratio of the company in 2003-04 is 91.7%, in 2004-05 is 92.4%, in 200506 is 91.8%, in 2006-07 is 92.30% and in 2007-08 is 92.20%. In 2008-09 it becomes 9.3. This shows that the ratio is first of increased from the last three years. But after that the company has decreased their ratio because lower the ratio, better it is for the company.
(II) Administration expenses ratio:
The company's Administration expenses ratio in 2003-04 is 1.7%, in 2004-05 is 1.6%, in 200506 is 2 %, in 2006-07 is 1.57% and in 2007-08 is l.|lj%. phis shows that the ratio is decreasing from the last three years. But after that the company has decreased their ratio because, the ratio better it is for the company. In 2008-09 it becomes 1.65.
(III) Selling & Distributive Expenses:
The company's Selling and Distributive Ratio in 2003-04 is 0.8%, in 2004-05 is 1%, in 2005-06 is 0.9%, in 2006-07 is 1.31% and in 2007-08 is 1.96 in 2008-09 it becomes 0.8. It shows that sometime it increasing or some time it decreasing.
(IV) Store expenses ratio:
The company's store expenses ratio in 2003-04 is 1.8%, in 2004-05 is 1.5%, in 2005-06 is 1.7 %, in 2006-07 is 1.4% and in 2007-08 is 0.94 %. In 2008-09 it becomes 9.2.
109
(V) Distribution expenses ratio & non-operating expenses ratio: The company's Distribution expenses ratio & non-operating expenses ratio has decreased. The company has reduced their expenses ratio as lower the ratio, better it is.
(VI) Net Profit ratio:
This ratio shows the relationship between net profit and sales. It may be calculated by two methods:
1. 2.
Net Profit ratio = Net Profit/Net sales x 100 Net Profit ratio = Operating Net Profit/Net sales x100
SIGNIFICANCE:This ratio measures the rate of net profit earned on net sale. It helps in determining the overall efficiency of the business operation. An increase in ratio over the previous year shows improvement in the overall efficiency and profitability of the business.
110
NET PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
(amount in Rupees)
Particulars 2004-05 2005-06 25811088 2006-07 34145435 _^ 2007-08 35375066 2008-09 52452906
Net Profit after 24912205 Tax Income Tax Deposit Refund of Income Tax FBT Deposited 0 Depreciation
5938526 (604875) 8300000
12753210
12102832
13000000
(198209)
(2659662)
(357922)
207100 3676797 (10824133)
219862 3697842 (13047142)
211703 5380829 13902053
366217 6271318 13322789
Miscellaneous (5848822) Income Net Operating 32697034 Profit Net Sales

NET PROFIT RATIO (in %):
31425853
34459167
35375066
45767652
1331502393 1304013647 1537754900 1935681203 2.5 2.4 2.22 1.82
23399773758 2
111
2008-09
2007-08
2006-07
Net Profit Ratio
2005-06
2004-05 0 0.5 1 1.5 2 2.5 3
112
ANALYSIS OF INTERPRETATION:
(i) From year 2003 to 2005: The net profit ratio has been increased every year. Net profits which are distributed to shareholder, funds or in reserves of the company. It is a good indicator for the financial soundness of the company. This shows that it has been increased only if the operating income will increase and operating expenses will decrease. It means company profitability and financial condition is sound which is beneficial for the shareholder and also for employees of the company.
(ii) From year 2006 to 2007: The net profit ratio has been decreased. But in 2005-06, the ratio has been decreased by 0.1%. It is quite declined which it is satisfactory for the company. In 2006, the ratio may decrease due to income tax, depreciation, etc. It means company profitability and financial condition is sound which is beneficial for the shareholders and also for the employees of the company.
113
VII CASH PROFIT RATIO:

The net profits of the firm are affected by the amount of depreciation charged. Further, depreciation being non-cash expense, it is better to calculate cash profit ratio. This ratio measures the relationship between cash generated from operations and the net sale. Thus,
Cash profit ratio = Cash profit/net sales x100
Cash profit = net profit + depreciation.
CASH PROFIT RATIO (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
Particulars Net Profit Depreciation Cash Profit Net Sales
2004-05 32607330 5938526 38545856 1331502393
2005-06 38573189 3676797 42249986 1304013647 3.2
2006-07 43808467 3697842 47506309 1537754900 3.08
2007-08 48228847 5380829 53609676 193751705 2.76
2008-09 45767652 6271318 52038970 2339977375 2.2
CASH PROFIT 2.9 RATIO (in %):
114
2008-09
2007-08
2006-07
Cash Profit Ratio
2005-06
2004-05 0 0.5 1 1.5 2 2.5 3 3.5
115
In 2004-05, The Company's cash profit ratio is 2.9%
The company's cash profit ratio is increasing every year. It is a good sign for the company. It shows that company's profitability and financial position is sound. It also indicated that the cash profits have been increased over the net sales. As the net sales increases, the cash profits are also increases every year.
116
7.3.2 OVERALL PROFITABILITY RATIOS:
Profits are the measures of overall efficiency of a business. The Higher the profits, the more efficient are the business considered. Following are the important overall profitability ratios or measures of Return on Investments:
I II III IV V VI
Return on Shareholder's Investment Return on Equity Capital Earning Per Share Return on Gross Capital Employed Return on Net Capital Employed Capital Turnover Ratio
1.
Return on Shareholder's Investment or Net Worth:
This ratio establishes the relationship between net profits (after interest and taxes) and the proprietor's funds. Thus
ROI= Net profits(after interest and taxes)/ Shareholder's funds
SIGNIFICANCE:
This ratio reveals how well the resources of a firm are being used, higher the ratio, better are the results. This ratio is calculated as a percentage by multiplying with 100.
117
RETURN ON SHAREHOLDER'S INVESTMENT OR NET WORTH
(OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
Particulars
2004-05
2005-06
2006-07 34145435
2007-08 35375066
2008-09 92452906
Net Profit after Tax
24912205 25811088
Shareholder's Funds 89857676 91745059 106021456 140218557 198786558

RETURN ON 27.7 28.1 32.20 25.22 26.4
SHAREHOLDER'S INVESTMENTS (in%):
118
2008-09
2007-08
2006-07
2005-06
2004-05
10
15
20
25
30
35
Return on Shareholder's Investments
119
In 2004-05: The Company's ROI ratio is 27.7% In 2005-06: The Company's ROI ratio is 28.1% In 2006-07: The Company's ROI ratio is 32.20% In 2007-08: The Company's ROI ratio is 25.22% In 2008-09: The Company's ROI ratio is 26.4%.
This ratio reflects the over-all profitability of the business. In 2003, it has been reduced from the previous year which shows that it has been reduced on total capital employed. But from 2004 to 2009 the company has been increased its ratio which shows the company has improved its profits on capital employed.
120
II.
Return on Equity Capital
This ratio establishes the relationship between profits of a capital and its equity capital can be calculated as:
Return on Equity Capital = Net Profit after Tax-Preference Dividend/Equity share capital (paid up)
SIGNIFICANCE:
The ratio is meaningful to the equity shareholders who are interested to fenow profits earned by the company and those profits which can be made available to pay dividend to them. Higher the ratio, better it is.
RETURN ON EQUITY CAPITAL (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
(amount in Rupees)
Particulars
Tax Equity Share Capital
RETURN ON EQUITY CAPITAL (in %):
2004-05
2005-06 25811088
2006-07 34145435
2007-08 35375066
2008-09 52452906
Net Profit after 24912205
25256000
25827120
26427245
26819655
27493755
98.6
99.9
129.20
131.89
190.7
121
2008-09
2007-08
2006-07
2005-06
2004-05
50
100
150
200
250
Return on Equity
122
In 2004-05: The Company's ROI ratio is 98.6% In 2005-06: The Company's ROI ratio is 99.9% In 2006-07: The Company's ROI ratio is 129.20% In 2007-08: The Company's ROI ratio is 131.89% In 2008-09: The Company's ROI ratio is.190.7%%
This ratio measures how effectively the equity shareholder's funds are being used in the business. Higher the ratio better is the performance and prospects of the company. The company has higher return which is belonging to equity shareholders. It has been increased due to increase in net profits after interest and tax. All profits left will be available to all equity shareholders. This indicates that the company has high earning capacity. The company's profitability and financial position is sound.
123
III. Earnings per Share(E.P.S):

E.P.S. is a small variation of return on equity capital and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity share.
E.P.S.= Net Profits after Taxes-Preference Dividend/ No. of Equity Shares
SIGNIFICANCE: The earnings per share are a good measure of profitability and when compared with E.P.S. of similar other companies, it gives a view of the comparatives earnings or earning power of the company. E.P.S. calculated for number indicates whether or not earning power of the company has increased.
EARNING PER SHARE (OF VERKA MILK PLANT FOR THE LAST FIVE YEARS)
(amount in Rupees)
Particulars 2004-05 2005-06 25811088 2006-07 34145435 2007-08 35375066 2008-09 52452906
Net
Profit 24912205
after Tax Number of

25256 25827 26427 26820 27140
Equity Shares
EARNINGS PER SHARE (in %): 986.4 999.4 1292 1318.98 1932.6
124
2008-09
2007-08
2006-07
2005-06
2004-05
500
1000
1500
2000
2500
Earning Per Share
125
In 2004-05: The Company's ROI ratio is 986.4 times.
In 2006-07: The Company's ROI ratio is 1292 times.
From the above, earnings per share of the company shows that the earnings per share are increasing every year. The company has too much high earning capacity. The company has profitability position as well as financial position is sound. As earnings per share is a good measure of profitability.
126
IV. Return on Capital Employed:
This ratio establishes the relationship between profits and the capital employed. It is used to measure the overall profitability and efficiency of a business. Capital employed refers to the total of investments made in a business and can be defined in a number of ways. The three widely used definition of this term are:
I. II.
Gross Capital Employed Net capital Employed
III. Proprietor's Net Capital Employed IV. Capital Turnover Ratio
I.
Gross Capital Employed:
It is usually comprises the total assets fixed as well as current assets used in a business.
Gross Capital Employed= Fixed Assets+ Current Assets
127
GROSS CAPITAL EMPLOYED RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS
Particulars
2004-05
2005-06 27331141
2006-07 108S25401
2007-08 37207420
2008-09 46143681
Fixed Assets 22934742 after Depreciation Investments (inside business) Current Assets Total Assets Net Profit as per P&L A/C
RETURN ON GROSS CAPITAL EMPLOYED (in %): 12.7 257518719 32607330 217083977 17500000
17500000
17500100
17500100
17500100
248148128
196382897
311209625
348126390.1
292979269 38573189
322708398 43808467
365917145 48228847
411770171 52819123.82
13.2
13.5
13.18
17.9
128
2008-09
2007-08
2006-07
2005-06
2004-05 0 5 10 15 20
Gross Capital Employed
129
The company's gross capital employed is increasing every year. It is a good sign for the company's. It shows that company's Profitability and financial position is sound. It is the prime ratio which measures the efficiency of a business. This shows that the company has properly formulated its borrowing policy which indicates the rate of interest on borrowing policy which indicates the rate of interest on borrowings is less than the return on capital employed. As the ratio increases every year, it is also beneficial to the employees of the company by providing them fair remuneration.
130
V. Net capital Employed:

It comprises the total assets used in a business less its Current Liabilities. Net Capital Employedh Total Assets-Current Liabilities.
NET CAPITAL EMPLOYED RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS
Particulars I Net Profits Total Assets Current (Liabilities (short-term) Net Capital Employed NET CAPITAL EMPLOYED (in %):
2005-06 38573189 292979269
2006-07 43808467 322708398
2007-08 48228847 365917145
2008-09 52819123 411770171
(126939618) (137924468) (176744145) (198186558)
166039651
184783930
189173000
2129973613
23.2
23.7
25.49
25
131
2008-09
2007-08
2006-07
Net Capital Employed
2005-06
2004-05 0 5 10 15 20 25 30
132
The company's return on capital employed is increasing every year. It is a good sign for the company's. It shows that company's Profitability and financial position is sound. It is the prime ratio which measures the efficiency of a business. This shows that the company has properly formulated its borrowing policy which indicates the rate of interest on borrowing policy which indicates the rate of interest on borrowings is less than the return on capital employed. As the ratio increases every year, it is also beneficial to the employees of the company by providing them fair remuneration.
133
IV.
Capital Turnover Ratio:
This ratio establishes the relationship between cost of goods sold and the capital employed. This ratio is calculated to measure the efficiency of effectiveness with which a firm utilizes its resources or the capital employed. As capital is invested in a business to make sales and earn profits, this ratio is a good indicator of overall profitability of a concern.
Capital Turnover Ratio= COGS/Capital Employed
CAPITAL TURNOVER RATIO RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS
(Amount in Rupees)
Particulars COGS Net Capital Employed

CAPITAL TURNOVER RATIO (in
2004-05
2005-06
2006-07
2007-08
2008-09
1230228864 1197858045 1419432256 1786464151 2178653051 153716841 166039651 184783930 189173000 1891783930
7.2
7.68
9.44
9.5
134
10 9 8 7 6 5 4 3 2 1 0 2004-05 2005-06 2006-07 2007-08 2008-09
Capital Turn Over Ratio
135
In 2004-05: The Company's Capital Gearing Ratio is 8 times, which is quite increased from previous year. This ratio measures the efficiency or effectiveness with which the company utilizes its resources or capital employed.
In 2005-06: The Company's Capital Gearing Ratio is 7.2 times, it has been decreased from all the previous years. There must be improvement in capital efficiency otherwise the company might be get into trouble and its financial efficiency will be reduced.
In 2006-07: The Company's Capital Gearing Ratio is 7.68 times, it has been increased from previous year. But this improvement is not sufficient.
In 2007-08: The Company's- Capital Gearing Ratio is 9.44 times, it has been increased with more improvement than last year. This shows that how much times the capital is turned over into sales.
In 2008-09: The Company's Capital Gearing Ratio is 9.5 times, which means quicker rotation of capital to generate higher sales which in turn leads to higher profitability. It indicates that how much times the capital is turned over into sales.
136
8. CONCLUSIONS AND FINDINGS:
1.
The company's short term financial positions is found and satisfactory because .its current
as well as quick ratio is double than its current liabilities of the company each year, which means company's creditors secured each year.
2.
From the point of view of long term financial position of the company Debt Equity ratio,
debts are always less than equity in five years. It means company is less dependent on outside loans.
3.
Cash Profit Ratio, Return on Shareholders funds ratio and earnings per share are earning
per share are increasing each year. It is a good sign for the company. At the end, we can say that the financial position of the company is sound.
137
9. SUGGESTIONS:
1.
The company's capital turnover ratio has been decreasing each year. It must be improved. If the capital turnover ratio is low, it will indicate that capital is lying ideal. Now this time it is decreasing otherwise company will suffer,
2.
The company's working capital turnover is also low. It has been decreasing since last four years. It means stock is not readily converted into sales. It must be increased otherwise sales can suffer.
3.
The company's gross profit ratio is decreased. But now the ratio is increased because of reduce in direct expenses. It must be reduced otherwise profits will not increased in future.
138
9.BIBLIOGRAPHY
Balance sheet of five years of Verka Milk Plant, Mohali. Balance sheet from 01-04-2004 to 31-03-2005, Balance sheet from 01-04-2005 to 31-03-2006, Balance sheet from 01-04-2006 to 31-03-2007, Balance sheet from 01-04-2007 to 31-03-2008, Balance sheet from 01-04-2008 to 31-03-2009
Kothari, C.R., Research Methodology: Method and Techniques, Wishwa Prakashan, 1990, New Delhi. I.M.Pandey, Financial management Vikas Publishing House, 2004. Khan and Jain, Financial management Himalaya Publishing House, 1999, Mumbai. MY Khan , P.K Jain Management accounting Tata Mc Graw Hills ,2001,Noida. I.M Pandey, Finance, a guide for managing company funds and profits, prentice hall of India, 2005. ShashiK.GuptaandR.K.Sharma,Management accounting,Kalyani New Delhi. Ria Goel : Ratio Analysis of Caffe Nero,2007,machester Cndymn91; Financial Ratio Analysis Report Of Ford Motor Company,(2006) washington Akehrig: Ak Steel Ratio Analysis,(2007)linden Apur Basarker: financial Analysis Of Hmt,(2007),Dhaka Vadu Krishna:Annual report analysis of Kotak Mahindra Bank(2008),Bangalore Icarr : Nike, Inc. Financial Ratio Analysis(2006), Nashville,TN Kalmah; Modern cement, Ratio Analysis(2009), Dhaka Sat56: Ratio Analysis Of Bharti Airtel(2008),Noida Arunam Jain: Ratio Analysis Of Tcs Wipro Infosys(2008),Pune Jitesh Chudasama: Analysis Of Annual Report Of Ongc(2009), Gujarat Sasandifer :Ratio Analysis Of Starbucks Vs Mcdonald's(2009),Portland Jain and Sharma:A financial report on ratios of 3Ms corporation, (2008)
139
publishers, 2009,
Simon Mohum (2008) Oxford Journal of Working Capital, Antonio C.David (2007) K. Bers Martina (2000), The financial Review, Lilia Costabile (2004) Wang Rowe Wei (2000), The Oxford Journal. http://www.oppapers.com/essays/analysis-ratio-of-caffe-nero/1104513. http://www.oppapers.com/essays/analysis-ratio-of-ford/90818 http://www.oppapers.com/essays/analysis-ratio-of-modern cement/248168 http://www.oppapers.com/essays/analysis-ratio-of-mkds/329996 http://www.oppapers.com/essays/analysis-ratio-of-airtel/160380 http://www.oppapers.com/essays/analysis-ratio-of-ak steels/119915 http://www.oppapers.com/essays/analysis-ratio-of-wipro/165894 http://www.oppapers.com/essays/analysis-ratio-of-hmt/107968 http://www.oppapers.com/essays/analysis-ratio-of-kotak/185059
140

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1.

1.1 HISTORY AND PRESENT POSITION OF VERKA

MILK PLANT MOHALI

PRESENT POSITION OF VERKA

1.2 ORGANISATION NETWORK

1.4 PLANT AT A GLANCE

Brand Name Installed Capacity Production Status Head Office Plant

4.SCOPE OF THE STUDY

5. OBJECTIVE OF THE STUDY 1. To Analysis Financial Statements:

2. To Simplify Accounting Data:

3. To Locate the Weak Spots of the Business:

4. For Effective Control of the Enterprise:

5. To Study the Financial Soundness:

6.4 TOOLS USED:

7.1 ANALYSIS OF SHORT-TERM FINACIAL POSITION OR TEST OF LIQUIDITY

7.1.1 Liquidity Ratios 7.1.2 Current Assets Movement or Efficiency Ratios.

7.1.1 Liquidity Ratios:

I. II. III. IV.

2004-05 116489 56707499

2005-06 169160 66252837

2006-07 402612 58962074

2007-08 118602 98867680

2008-09 63186 91224268

4625507 2172298 46683615 11677194 95101375

5274297 1878940 78208544 10197213 86167137

122647164 129007472 141409710 8926601 74145794 9941325 63743041 14430914 87795776

1.9 Ratio in times 1.8

1.5 2004-05 2005-06 2006-07 2007-08 2008-09

QUICK OR ACID TEST OR LIQUID RATIO:

217083977 248148128 (1878940)

Closing stock (2172298) (Raw Material)

Ill ABSOLUTE LIQUID RATIO OR CASH RATIO:

RATIO ANALYSIS OF VERKA PLANT FOR THE LAST FIVE YEARS

Absolute Liquid Ratio or Cash Ratio (in times): (Figures in rupees)

Cash at bank Short

Securities Absolute Liquid Assets Total Current Liabilities

Absolute liquid ratio

Absolute liquid ratio

0 2004-05 2005-06 2006-07 2007-08 2008-09

III Interval Measure or Defensive Interval Ratio:

Interval measure = Liquid Assets/Average Daily cash operating expenses.

881863560 948991951 1157575427 1425081941 118084264 113417917 133907625 168226278

1210900483 1279084778 1277945531 1544448798 1918468597

156550570 157863431 138122846

Interval Measure/Defensive -interval Ratio

0 2003-04 2004-05 2005-06 2006-07 2007-08

Interval Measure/Defensive interval Ratio

7.1.2 CURRENT ASSETS MOVEMENT OR EFFICIENCY/ ACTIVITY RATIOS:

I. Inventory/Stock Turnover Ratio:

Stock Turnover Ratio= COGS/Average Stock

of 1230228865 1197858047 1419432256 1786464151 2178653051

Total Stock 187376533 Average Stock

Stock turn over ratio

0 2004-05 2005-06 2006-07 stock turn over ratio 2007-08 2008-09

7.2 ANALYSIS OF LONG-TERM FINANCIAL POSITION OR TEST OF SOLVENCY

& 142896591 147889652 065263766} 204449286 208475082.78

7.2.2 FUNDED DEBT TO TOTAL CAPITALIZATION RATIO:

Funded Debt to Total Capitalization Ratio= Funded Debt/Total Capitalization*100