KOMUL Project
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Transcript of KOMUL Project
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Financial Analysis & Leverages
CHAPTER-1
INTRODUCTION
PART-A: ABOUT INDUSTRY
Introduction
The dairy sector in the India has shown remarkable development in the past
decade and India has now become one of the largest producers of milk and value-
added milk products in the world. The dairy sector has developed through co-
operatives in many parts of the State. During 1997-98, the State had 60 milk
processing plants with an aggregate processing capacity of 5.8 million litres per
day. In addition to these processing plants, 123 Government and 33 co-operatives
milk chilling centres operate in the State.
With the increase in milk production. Maharashtra now regularly exports milk to
neighbouring states. It has also intiated a free school feeding scheme, benefiting
more than three million school children from over 19,000 schools all over the
State.
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Financial Analysis & Leverages
Indian dairy industry
Dairy is a place where handling of milk and milk products is done and technology
refers to the application of scientific knowledge for practical purposes.
Dairy Industry in India
More than 2,445 million people economically active in agriculture in the world,
probably 2/3 or even more ¾ of them are wholly or partly dependent on livestock
farming. India is endowed with rich flora & Fauna & continues to be vital avenue
for employment and income generation, especially in rural areas. India, which has
66% of economically active population, engaged in agriculture, derives 31% of
Gross Domestic Product GDP from agriculture. The share of livestock product is
estimated at 21% of total agricultural sector.
Contribution of live stock sector to gross domestic product
(Percentage contribution)
1950-51 1990-91
63.5 67.0
12.0 16.0
4.1 3.1
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Financial Analysis & Leverages
1.3 0.3
16.5 10.0
Live stock populations:
Number of animals (in thousand)
(Source: production yearbook 1995 /FAO statistics division)
Sheeps Goats Pigs Chickens Cattle
45000 119242 11780 435 194655
Buffaloes Horses Mules Camels
79500 990 1742 1520
(Source Indian Dairy man, 50:1998)
Cattle
(millions)
Buffalo Total (1996)
196 80 276
0.68% / year 0.75% / year
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Financial Analysis & Leverages
World (1996)
1320 151 1471
0.64% / year 0.87% / year
In India In World
28 breeds of cattle
7 breeds of buffalo
1997 520.6 mt 5.5-0.75%
.2020.620 to 650 mt.
Milk Production
1950 – 17 million tonnes
1996 – 70.8 million tonnes
1997 – 74.3 mT
(Projected) 2020 – 240 mT
Expected to reach- 220 to 250 mT – 2020
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Financial Analysis & Leverages
India contributes to world milk production rise from 12-15 % & it will increase
upto 30-35% (year 2020)
Average milk production / year
America 6874 Kg/ year
Denmark 6223 Kg/year
Holland 5751 Kg/year
India 552 Kg/year
Average Productivity
2.4 kg/day or 732 kg/lactation/cow
China: 1600 kg/lactation
America 7200 kg/lactation
Percapita availability:
Recommanded – 210 gm
India
1950 132 gm
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Financial Analysis & Leverages
1997 214 gm
2020 290 gm
India contributes 35% of total Asian milk
Dairy Industry profile 1997
Human Population 953 million (70 million dairy farmers)
Milk production 74.3 million tonnes (203.5 million 1 pd)
Average annual growth rate (1996-2000) 5.6%
Per capita milk availability 214 gm/day or 78 kg/year
Milch animals 57 million cows;
39 million buffaloes
Milk yield per breedable bovine in milk 1,250kg
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Financial Analysis & Leverages
Cattle feed production (organized sector) 1.5 million
tonnes
Turnover of veterinary pharmaceuticals Rs 550 crores
Dairy plants throughout 20 mlpd
Throughout as percentage of total milk output 10
Value of output of milk group (1994-95) (Based on producers
price)
Rs 50,051 crores
Value of output of dairy industry (Based on retail price) Rs 105,000
crores
Projected milk production at different rates of annual growth 1995 to 2000
year @5% @5.5% @6%
1995 66.3 66.3 66.3
1996 69.3 70.0 70.2
1997 73.1 74.0 74.4
1998 76.7 78.0 78.8
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Financial Analysis & Leverages
1999 80.6 82.3 83.5
2000 84.6 86.8 88.5
Milk Composition
Sr.
no
Constituents Buffalo Cow Goat Liquid skimmed milk
1 Moisture (gm) 81.00 87.50 86.80 92.10
2 Protein (gm) 4.30 3.20 3.30 2.50
3 Fat (gm) 6.50 4.10 4.50 0.10
4 Minerals (gm) 0.80 0.80 0.80 0.70
5 Carbohydrates (gm) 5.00 4.40 4.60 4.60
6 Energy calories (kcal) 117.00 67.00 72.00 29.00
7 Calcium (mg) 210.00 120.00 170.00 120.00
8 Phosphorus (mg) 130.00 90.00 120.00 90.00
9 Iron (mg) 0.20 0.20 0.30 0.20
Indian Buffaloes: (Dairy business Directory 1996)
Buffaloes are classified into two categories;
1) reverine (depending upon variation in their habitat & genome)
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Financial Analysis & Leverages
2) swamp
Swamp buffaloes: - 48 chromosomes
South east asian countries
Stocky animals, marshy land habitat
River Buffaloes: - 50 chromosomes
- massive in size and curled horns
- Prefer to enter clear water
World’s Buffalo population:
147 million
about 142 millions in Asia & Pacific
India:
leading most buffalo populated country
78 millions most of reverine
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Financial Analysis & Leverages
Milk production: About 95% of world buffalo milk (45.3 million tonnes) is
produced in Asia &Pacific, while 64.4% is produced in India (FAO.1992)
From 1950 to 1992 milk production in the world increased by 4.26%
The % of total bovines slaughtered;
Total bovine slaughtered (%)
World 17.1 to 17.4% or - 1.6% per annum
India 15% per annum
Asia 6.6%
Increasing trend of buffalo population in most of the Asian countries in Brazil and
Italy
BREEDS
Classified on phenotypic & geographic locations;
Cockril (1982) = Buffalo river type; two sub groups;
1. Horns are closed and set close to head & are down swept ;eg. Murrah, Ravi,
Mehasana, Jaffarabadi, Sambalpur
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Financial Analysis & Leverages
2. Horns are sickle shaped and unswept: e.g. Bhadawari, Kalahandi, Kanara,
Manda, Nagpuri, Pandharpuri, Surti, Tarai & Toda
Breeds of Buffaloes of Indian Origin and Breeding Tracts:
Group Breed Breeding tract
Murrah
type
Murrah
Nili Ravi
Rohtak, Jind,Hisar, Bhiwari, Sonepat
(Hariyam)
Ferozepur (Punjab)
Gujarat Surti
Jaffarabadi
Mehsana
Kaira and Baroda
Kutch, Jungarh & Jamnagar dist
Mehsana, sabarkantha, Banaskantha Dist.
Uttar
pradesh
Bhadawari
Tarai
Bhadawari estate, Beh Tehsil in Agra, Gwalior &
Etawah dist. Tarai region of U.P.
Central
India
Nagpuri
Pandharpuri
Kalahandi
Sambalpur
Nagpur, Akola, Amravati dist. South maharashtra, west
A.P., north Karnataka Hilly region of Andra Pradesh and
Orissa Bilaspur dist.
South
India
Toda
South Kanara
Nilgiri Hills
West coast in Kerela
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Financial Analysis & Leverages
Buffaloes found in the north –eastern states and the eastern coastal region of India
& in China South east Asian countries e.g. Philippines, Thailand, Malaysia,
Vietnam, Srilanka, Burma, Laos, Kampuchea, Bangladesh etc. have been
classified as swamp buffaloes on the basis of their genetic constitution (2n=48) &
natural habitat.The breeds includes in these groups are Manda & Palakhemundi.
Production performance
Growth: The average birth wt.(Indian buffaloes) low 21 kg High 41 kg
Higher in male calves than in females
Average daily gain of 548 gm between 3-6 months
404 gm between birth to 36 months
Body weight at first calving- ranges from
367 kg (Dharwati) to
531 kg (Nili Ravi)
Higher growth rate in reverine breeds than swamp
MILK PRODUCTION
Production performance of different breeds of Buffaloes:
Age at 1st calving
(months)
Lactation.
Yield (kg)
Lactation Length (days)
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Financial Analysis & Leverages
Buffalo Avg. Range Avg. Range Avg (Range)
Murrah 43.0 39.9-54.5 1850 1476-2515 315(267-365)
Nili Ravi 42.0 41.4-47.3 1765 1596-2808 2808 (09)
Surti 39.0 26.5-45.0 1364 1304-1693 313(300-373)
Bhadawari 46.0 44.3-54.2 1181 - 276 (-)
Nagpuri 48.0 44.3-55.6 1103 926-1175 270 (-)
Reproduction Performance: -
Most of the buffaloes are considered to be seasonal breeds with maximum calving
taking place from July to November in almost all breeds
Buffaloes come in oestrus in cold month and are sub-fertile during hot month
Sub-fertility-> due to poor thermoregulaion in buffaloes and
Poor nutrition -> poor heat symptom-low heat detection (only ligno-cellulosic
material straw /dry roughages)
Calving interval
(days)
Dry period
(days)
Service period
(days)
Murrah 454 148 133
Nili Ravi 530 198 211
Surti 410 165 103
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Financial Analysis & Leverages
Bhadawari 460 156 -
Nagpuri - - 98
Ag.
Technologies
(Dairy)
The dairy industry plays an important role in the socio-economic development of
India. The dairy industry in India is instrumental in providing cheap nutritional
food to the vast population of India and also generates huge employment
opportunities for people in rural places.
The Department of Animal Husbandry, Dairying, and Fisheries, which falls under
the central Ministry of Agriculture, is responsible for all the matters relating to
dairy development in the country. This department provides advice to the state
governments and Union Territories in formulating programmes and policies for
dairy development. It also looks after all the matters relating to production and
preservation of livestock farms (cattle and sheep). To keep focus on the dairy
industry a premier institution known as the National Dairy Development Board
was established. This institution is a statutory body that was established in 1987.
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Financial Analysis & Leverages
The main aim to set up the board was to accelerate the pace of dairy development
in the country and attract new investments.
India is a wonderland for investors looking for investment opportunities in the
dairy industry. The dairy industry holds great potential for investment in India and
promises high returns to the investors.
The reasons why the industry has huge potential for attracting new foreign
investment are:
1. There is a basic raw material need for the dairy industry; that is, milk is
available in abundance.
2. India has a plentiful supply of technically skilled laborers.
3. There is an easy availability of technological infrastructure.
4. India has all the key elements required for a free market system.
There are different sectors within the dairy industry that promise great business
investment opportunities:
• Biotechnology:
1. The Indian cattle yield less milk as compared to their foreign counterparts. The
Indian cattle breeders are on the lookout for ways to improve their milk yield
through cross-breeding. Thus, there is a huge potential available for foreign
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Financial Analysis & Leverages
investors to invest in dairy cattle breeding of high-quality buffaloes with hybrid
cows.
2. There is also great scope for investment in different dairy cultures, including
dairy biologics, enzymes, probiotics, and other coloring materials for food
processing.
3. Producing biopreservative ingredients based on dairy fermentation, such as
pediococcin, aciophilin, bulgarican, and Nisin contained in dairy powder, also
promise great investment opportunity.
• Dairy/Food Processing Equipment:
Great potential lies for foreign investment for manufacturing and marketing of
cost-effective, top-quality food processing machinery.
• Food Packaging Instruments:
There is a tremendous investment opportunity for foreign investors in the
manufacturing of both machinery and packaging materials that aid the
development of brand loyalty and gives a clear edge in the marketing of dairy
products.
• Retailing:
Retailing of dairy products also promises great investment opportunities for
standardization and upgrading dairy products in the main metropolitan cities.
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Financial Analysis & Leverages
• Manufacture of Ingredients:
Several ingredients are involved in the making of different dairy products like
ghee, condensed milk, and cheese. Manufacturing of ingredients for these products
offers a great potential for foreign investment in India.
• Finished Products:
There is a great scope for investment in the manufacturing of finished dairy
products such as cheese sauce and cheese powders.
• Technically Advanced Manufacturing Units:
There is a great opportunity for foreign investors to invest in establishing
manufacturing units for dairy products. The investors can build world-class
manufacturing units and let them for hire. Building manufacturing units supports
specialized dairy-related activities, such as cheese slicing, cheese packaging,
butter printing, and dicing lines, which hold greater potential over other activities.
Thus, the dairy industry in India has huge investment opportunities in a variety of
sectors. The investors are all set to gain profitable returns on their investment.
PART-B: ABOUT SUBJECT
INTRODUCTION
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Financial Analysis & Leverages
The study “Financial Analysis & Leverages” was conducted in Kolar
Milk Union Limited in order to know the financial status of the company.
The scope of the study is to know the financial activities of the company,
which serves as a support service for the manufacturing of the Milk & products
and also the contribution of the financial activities within the company. The field
of financial analysis is comprised of leverages, comparative statement and
common size statement analysis.
The study is made to analyze the financial performance with reference to
financial statements like profit and loss account and balance sheet with the help of
tables, graphs, providing suggestions for improving the methods and procedure
followed in the firm.
The main aim is to study the activities of finance department by utilizing the
theoretical knowledge relating to practical situation and to highlight differences in
practice.
MEANING OF FINANCIAL ANALYSIS:
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Financial Analysis & Leverages
One of the important steps of accounting is the analysis and interpretation of
the financial statements which results in the presentation of data that helps various
categories of persons in forming opinion about the profitability and financial
position of the business concern.
In the words of Myres, “Financial Statement Analysis is largely a study of
relationship among the various financial factors in a business as disclosed by a
single set of statement and a study of the trend of the trend of these factors as
shown in a series of statements”.
The most important objective of the analysis and interpretation of financial
statements are to understand the significance and meaning of financial statement
data to known the strength and weakness of a business undertaking so that a
forecast may be made of the prospects of that undertaking.
FINANCIAL STATEMENTS:
A Financial Statement is an organized collection of data according to
logical and consistent accounting procedures. Its purpose is to convey an
understanding of some financial aspects of business firm. It way show a position
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Financial Analysis & Leverages
at a moment of time as in the case of balance sheet, or may reveal a series of
activities over a given period of time, as in the case of and Income Statement.
Therefore, the term financial statement generally refers to two basic
statements, such as Income Statement and Balance Sheet. Apart from these two
statements, a company may also prepare a statement of Retained Earnings and
Statement of changes in financial position
OBJECTIVES OR USES OF FINANCIAL ANALYSIS:
Financial analysis is helpful in assessing the financial position and
profitability of a concern. The following are the main objectives of analysis of
financial statements:
1. To judge the present and future earning capacity or profitability of the concern.
2. To judge the operational efficiency as a whole and of its various parts or
departments.
3. To judge the short-term and long-term solvency of the concern for the benefit
of the debenture holders and trade creditors.
4. To have comparative study in regard to one department with another
department.
5. To help in assessing developments in the future by making forecasts and
preparing budgets.
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Financial Analysis & Leverages
PROCESS OF FINANCIAL ANAYSIS:
The analysis of financial statements is a process of evaluating the
relationship between component of financial statements to obtain a better
understanding of the firm’s position and performance. The functional analysis is
the process of selections, relation and evaluation.
1. The first task of the financial analyst is to select the information relevant to
the decision under consideration from the total information contained in the
financial statements.
2. The second step is to arrange the information in a highlight significant
relationship.
3. The final step is interpretation and drawing of inferences and
conclusions.
TYPES OF FINANCIAL ANALYSIS:
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Financial Analysis & Leverages
A Financial analysis can be external or internal.
External Analysis:
Those persons who are not connected with the enterprise make it. They do
not have access to the enterprise. They do not have access to the detailed record of
the company and have to depend mostly on published statements. Investors credit
agencies, governmental agencies and research Scholars make such type of
analysis.
Internal Analysis:
Those persons who have access to the books of accounts make the internal
analysis. They are members of the organization. Analysis of financial statements
or other financial data for managerial purpose is the internal type of analysis. The
internal analyst can give more reliable result than the external analyst can because
every type of information is at his disposal.
TECHNIQUES OF FINANCIAL ANALYSIS:
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Financial Analysis & Leverages
The analysis and interpretation of financial statement is used to determine
the financial position and operations as well. A number of techniques are used to
study the relationship between different statements. The following methods of
analysis are used.
COMPARATIVE FINANCIAL STATEMENTS:
The comparative financial statements are statements of the financial
position at different periods of time. The elements of financial position are shown
in a comparative form so as to give an idea of financial position at two or more
periods.
Thus, in these statements, figures for two or more periods are placed side by
side by side to facilities easy comparison. Both the income Statement and Balance
Sheet can be prepared in the form of comparative financial statements.
COMPARATIVE INCOME STATEMENTS:
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Financial Analysis & Leverages
The income statement discloses net profit or net loss or account of
operations. A comparative income statement will show the absolute figures for
two or more periods, the absolute change from one period to another and if
desired the change in terms of percentages. Since the figures two or more periods
are shown side by side, with the help of this we can quickly ascertain whether
sales have increased or decreased, whether cost of sales have increased or
decreased etc…therefore, only a glance of data incorporated in this statement will
be helpful in making useful conclusions.
COMPARATIVE BALANCE SHEET:
Balance Sheet of two or more different dates can be used for comparing
assets and liabilities and finding out any increase or decrease in those items.
Therefore, in a single Balance Sheet the emphasis is on present position, it is on
change in the comparative balance sheet. This type of balance sheet is very
helpful in studying the trends in a business concern.
1. Common Size Financial Statements:
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Financial Analysis & Leverages
Common size financial statements are those in which figures reported are
converted into percentage to some common base. When this method is pursued,
the income statement exhibits each expense item or group of expense items as a
percentage of net sales, and net sales are taken at 100 percent. Similarly, each
individual asset and liability classification is shown as a percentage of total assets
and liabilities respectively. Statements prepared in this way are referred to as
Common Size statements.
Common-Size statements prepared for one firm over the years would
highlight the relative changes in each group of expenses, assets and liabilities.
These statements can be equally useful for inter-firm comparisons, given the fact
that absolute figures of two firms of the same industry are not comparable.
2. Trend percentages:
Trend percentages are very much helpful in making a comparative study of
the financial statements for several years. The way calculating trend percentages
involves the calculation of percentage relationship that each item bears to the
same item in the base year. Each item of base year is taken as 100 and on that
basis the percentages for each of the items of each of the years are calculated.
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Financial Analysis & Leverages
These percentages can be taken as index Number showing the relative changes in
the financial data resulting with the passage of time. This method is a very much
useful, analytical device for the management since by substitution of percentages
for large amounts, brevity and readability are achieved.
3. Funds flow statements:
Funds flow statement is a financial statement, which indicates the various
means by which the funds have been obtained during the certain period and the
ways to which these funds have used during that period.
In short, it is the statement, which shows the movement of funds between
two balance sheet dates.
According to Anthony, “The funds flow statements describes the sources
from which additional funds were derived and the uses to
Which these funds were put”.
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Financial Analysis & Leverages
The funds flow statement is called by different names, such as, Statement of
sources and Applications of Funds, Statement of changes in Working Capital,
Where Got and Statement and statement of Resources Provided and Applied.
4. Cash flow statement:
Cash flow statement shows the movement of cash and their causes during
the period under consideration. It may be prepared annually, half – yearly,
monthly, weekly or for any other duration.
Cash flow statement is prepared to show the impact of financial policies and
procedures on the cash position of the firm and takes into consideration all
transactions that have a direct impact upon cash.
A cash flow statement concentrates on transactions that have direct impact
on cash. It deals with the inflow and outflow of cash between two Balance Sheet
dates. In other words, a statement of changes in a financial position of a firm on
cash basis is called a Cash flow statement.
6. Leverage Ratios
Leverage refers to an increased means of accomplishing some
purpose. In financial management, it refers to employment of funds to accelerate
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Financial Analysis & Leverages
rate of return to owners. It may be favorable. An unfavorable leverage exists if the
rate of return remains to be lower. It can be used as a tool of financial planning by
the finance manager. Leverage may be.
i. Operating leverage and
ii. Financial leverage.
iii. Combined leverage
iv. Return on investment leverage
i. Operating leverage:
It occurs when with fixed costs the percentage change in profits due to
change in sales volume. It shows the extent of the change in earnings before
interest and tax (EBIT) as a result of change in sales volume. Two important
points i.e. relating to fixed costs and break-even point should be noted about
operating leverage.
The magnitude of the operating leverage is related to the fixed costs of
the firm. If the fixed costs of the firm are relatively large, substantial portion of its
contribution margin is appropriated to cover these fixed costs. Once the break-
even point is reached, all contribution margins become profit of the concern. If
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Financial Analysis & Leverages
there is small percentage of increase in earnings. On the other hand, a small drop
in sales eliminates the entire earnings near the break-even point.
The significance of operating leverage lies in the fact that it tells the
finance manager about the impact of change in sales revenue and operating
income. Thus, a firm with high degree of Operating leverage will experience much
large effect on EBIT because of small change in sales. As far as possible a firm
should avoid operating under conditions of a high degree of operating leverage, as
it is a high-risk situation. It will be desirable to operate at sufficiently above the
break –even point to avoid the danger of sharp fluctuations in profits because of
variation in sales. It may be noted carefully that the degree of operating leverage
goes on decreasing with every increase in sales volume above the break-even
point. It is calculated by the following formulas:
Operating leverage = Marginal contribution / Earnings before interest and
Tax
ii. Financial leverage:
When a firm procures debut capital to finance its needs, it is said to
have financial leverage. It tells the extent of the change in earning before tax
(EBT) due to change in operating income (EBIT). It is calculated with the help of
the following formula:
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Financial leverage = Earnings before interest and Tax / Earnings before
Tax.
iii. Return on investment leverage :
It may be favorable or unfavorable. If the rate of return on investment
(ROI) of a firm is higher than the cost of debt capital, it is said to have favorable
financial leverage. On the other hand, if the rate of return on investment (ROI) is
lower than the cost of debt capital, the firm is said to have unfavorable financial
leverage. Favorable financial leverage is also referred to as trading on equity.
iv. Combined leverage:
This leverage exhibits the relationship between a change in sales & in
corresponding variation in taxable income.
Combined leverage = Contribution
Taxable income
OR
Combined leverage = Operating leverage X Financial leverage
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Financial Analysis & Leverages
CHAPTER 2
RESEARCH DESIGN
TITLE OF THE STUDY
A STUDY ON “FINANCIAL ANALYSIS & LEVERAGES OF
KOLAR MILK UNION LIMITED”.
STATEMENT OF PROBLEM:
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After the white revaluation, many milk union limited’s came into existence.
As a result lot of competition according in the field of purchase and sale of milk in
satisfying the customers. Now a day’s KOMUL is facing lot of competition in the
market due to existence of more competitors like HERITAGE, DODLA,
TIRUMALA, AROGYA, GOOD MORNING MILK etc. In this situation, the
KOMUL should be in a position to analyses its financial and leverage factors, to
take corrective steps to overcome the competitors by doing the financial analysis,
it helps to know the financial position of the KOMUL which involves in analyzing
of various financial statement such as Profit And Loss Account, Balance Sheet etc.
and by during the leverages analysis it helps in knowing the risk involved carrying
on the operations of KOMUL so, this project is done to show how the financial
and leverages analysis to be done to overcome the competition by understanding
it’s own financial position and extent the risk taken along with its importance.
OBJECTIVE OF THE STUDY
To study and analyze the financial performance of KOMUL
To get the practical knowledge of the financial evaluation techniques and
analysis of annual reports in KOMUL
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To forecast the financial performance through Leverage analysis
To make the analysis and interpretation more effective by using various
techniques such as Trend analysis Comparative analysis, Analysis,
Comparative Common Size Analysis.
SCOPE OF THE STUDY
The current study is undertaken for the purpose of knowing the
financial Performance KOLAR MILK UNION LIMITED”
The study focuses attention mainly on the level of financial Performance
of KOLAR MILK UNION LIMITED.
REVIEW OF LITERATURE
Reviewing the text books of finance, reports provided by the finance department in
KOMUL.
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OPTIONAL DEFINITIONS OF CONCEPTS:
LEVERAGE
Definition
Leverage is “the employment of an asset or funds for which the firms pays a fixed
cost or fixed return”
James Horne
TYPES OF LEVERAGES
1. Operating leverage
2. Financial leverage.
3. Combined leverage.
4. Return on investment leverage.
Operating leverage:
Operating leverage shows the relationship between the changes in sales &
the changes in then fixed operating income. Operating leverage has impact
mainly on fixed cost & variable cost & also on contribution.
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The following equation is developed by RW Johnson to compute operating
leverage.
Contribution
Operating leverage =
Operating Profit (EBIT)
Financial leverage:
The process of variation in capital structure is called financial leverage or
trade on equity. The variation in capital composition will have an impact on
operating & taxable income of the company. It signifies the relationship between
the earning power on equity capital & rate of interest on borrowed fund or debt.
By adopting this leverage, the rate of return on equity capital is modified.
Operating income
Financial leverage =
Taxable income
Combined leverage:
This leverage exhibits the relationship between a change in sales & in
corresponding variation in taxable income.
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Contribution
Combined leverage =
Taxable income
OR
Combined leverage = Operating leverage X Financial leverage
SAMPLING:-
There are two ways in which the required information may be obtained.
They are
Complete enumeration survey
Sampling technique
Here the study is based on complete enumeration method, that is, data are
collected for each and every item of expenses, as the case may be. The
advantage of this type of survey will be that no item is left out and hence greater
accuracy may be ensured. However the effort, money and time required for
carrying out the enumeration will generally be more.
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No samples are required for this study as it is concerned with the true
financial analysis.
METHODOLOGY:
It has also been assumed that the information obtained from the respondents
were true and authentic.
SOURCES OF DATA COLLECTION:
The study is based on both primary data & secondary data.
Primary data
It was collected from over all products financial statements as per the
respective years.
Secondary data
It was collected from company annual reports, personal discussion
with executives in the company, books, etc.
PLAN OF ANALYSIS
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The data edited from the company financial statements in respect of over all
products statements or analysis of respective year’s .For better analysis profit is
computed by using leverages & financial analysis methods
Further impact of variable cost, fixed cost on profit, is also studied to made
presentation fair & adequate techniques of financial analysis were made use off.
REFERENCE PERIOD:
The reference period of this study was 30 Days i.e., 1Month
LIMITATIONS OF THE STUDY
The study no doubt with relation to objective, but it does not give complete
and total accuracy of findings.
The study was done only for the past four years only.
It is only the study of interim reports.
Due to time constraints, all the ratios could not be calculated, only few of
them were taken in to account.
Discussion about the project could be conducted only with a few officials
due to time constraints face by them.
As this study is related to the financial aspects the union could not revel all
the information, some data were confidential.
Constraints of time due to busy schedule of organizational Personnel.
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Analysis and interpretation of the report is purely based on the manual
provided by the finance department.
Time allotted by the company for the study was very short with in which
collection of all the information was not possible.
It is based on monetary information only.
CHAPTER SCHEME
The study report will be presented in 5 chapters as indicated below:
Chapter-1
Introduction:
It deals with theoretical back ground of the study.
Chapter-2
Research Design:
It deals with design of the study, Title of the project, Statement of the
problem, Objectives & Scope of the study, operational definitions of the
concept. Source of Data collection & the Methodology, Limitations of the
study & chapter scheme
Chapter-3
Profile of the Company:
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It deals with the Company Background & details.
Chapter-4
Analysis & Interpretation of Data:
It deals with the analysis & interpretation of the financial data collected
from the Company.
Chapter-5
Summary of Findings & Conclusions:
It presents the summary of all findings & Conclusions
Chapter-6
Recommendations & Suggestions
It helps to take out some unwanted information’s by giving suggestions. Chapter-
7
Appendices & Annexures
It is a copy of Balance Sheet of a Company.
Chapter-8
Bibliography
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It is the reference made from Internets, web sites and the text books etc...
CHAPTER-3
COMPANY PROFILE
INCEPTION:
Dairy development activity in the district was initiated during the year 1975
under IDA assistance as a part of Kolar Milk Union Limited (KOMUL).
Subsequently the district was bifurcated for the operational area of KOMUL to
form a separate Milk union with effect from 01-04-1987.
Total geographical area of Kolar district is 8,200sq km with 2889 inhabited
village, and the total population averaging is 26, 00,000. Average rainfall in the
area is about 750mm. Operation of the Milk union consists of all the eleven Taluks
of Kolar district. Initially the union started its function with a total number of 460
dairy co-operative societies at the time of bifurcation. The average daily
procurement of the union was 1, 56,774 kg. Of milk Today with a total number of
1497 functional Milk producers co-operative Societies (MPCS) a total
membership of 2.89 lakhs and an average daily procurement of about 6, 84,954
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Financial Analysis & Leverages
kg/day. It ranks second in the state as far as Milk procurement is concerned and
first as far as the
functional MPCS is concerned. Total cattle population in the Milk-shed area is
about 4, 36,654 that includes 1, 60,000 crossbreed cattle. At present the average
Milk procurement per society is 447 kg per day with a minimum price paid per kg
of Milk is Rs.8.58/-
TYPE:
The union has a Milk processing plant at Kolar with handling the capacity of 2,
50,000 liters per day (LPD) and has three chilling centers at.
Chintamani
Gowribidanur
Sadli
With handling capacity of one lakh LPD at Kolar, the dairy is manufacturing
Butter, Ghee, Peda, Curd, Cheese, Masala Butter Milk, UHT Milk in addition to
pasteurized toned Milk and full cream Milk. UHT Milk is being sold under the
brand name “Nandini”, “Good Life”, and “Nandini Smart” while all other
products are sold under the brand name of “Nandini”. The union started
marketing of liquid Milk in polythene sachets in entire Kolar district and in a part
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of Bangalore city since 1994. Recently it has entered Chintamani market also
selling nearly 10,000 LPD
NATURE:
DCS Organizations; the member producers and their Dairy Co-operative
Societies (DCS) are the vital constituents of the Union and their progress is the
judging yardstick on the efficiency of the Union’s operation. Hence the maximum
importance has been given to the development and the progress achieved in
various activities, is the fruit of these efforts.
Until the year 1940, there was very little published information available about the
method of preparation and use of these products. The credit for the first
publication on the subject goes to Dr. W. B. Davis, the first director of Dairy
Research. Within a span of four decades considerable research had been
conducted at the National Dairy Research Institute and other places on indigenous
dairy products.
Since then, the Dairy Industry had begun to grow at a rapid pace. There
have been tremendous efforts put in by the various organizations to assure good
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quality milk to the people and the saying “All that is white is pure milk” came in
to existence.
BOARD OF DIRECTORS
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 44
NO. NAM E DESIGNATION PLACE
1 Sir.k.N. Nagaraj President Mulbagal
2 Sir.k. V. Nagaraj Director chikkabalapu
r
3 Sir.S.Ramesh Director Gowribidanur
4 Sir.T.N. Rajgopal Director Chintamani
5 Sir.K.Gudiappa Director Shidlagatta
6 Sir.Jayasihmha Krishna Director Bangarpet
7 Sir.C.Munivenkatappa Director Srinivaspur
8 Sir.K.Ashwathareddy Director Gudibande
9 Sir.R. Krishnappa Director kolar
10 Sir.K Ramaya Director Malur
11 Sir.manjunatha Reddy Director Bageplli
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ORGANIZATION CHART
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BUSINESS OPERATIONS OF KOMAL
Milk shed area of KOMUL
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PRODUCT PROFILE:
1. Toned Milk: Karnataka’s most favorite Milk, is Nandini Toned milk. Pure
milk containing of 3.0% fat and 8.5% SNF. It is Available in 500 ml and 1-liter
packs.
2. Full Cream Milk: This pure milk Containing 6% fat and 9% SNF, A rich
Creamer and tastier milk, ideal for preparing homemade sweets and savories.
It is Available in 500 ml and 1-liter packs.
3. Cheese: Cheese plant was started in the Union in 1997 at a cost of
Rs.3.5crores. At present Cheddar Cheese is produced from Cow Milk and
ripened to various lengths of Time will be blended and processed to obtain
Processed Cheese.
4. Peda: Peda is sweetened heat desiccated Product obtained from milk. It is
Rich in Fat, Proteins, Lactose and minerals especially Iron content. On an
average 25 Kg Peda is Produced and sold in units of 250gms box. Each box
contains10 pedas weighting 25 gm each.
HOMOGENIZED MILK: This Milk is good in quality which gives you more
cups of tea or coffee and is easily digestible. This is available in 500ml, 1 liter and
5 liter packets.
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CURDS: ‘Nandini’ curds are made out of pure Milk. It is thick and delicious,
giving all the goodness of homemade curds. It is available in 200gms and 500gms
packets.
BUTTER: Rich smooth and delicious, ‘Nandini’ butter is made out of fresh
pasteurized Milk cream. Any preparations made from this will be a delicious
treat. It is available in 100gms (salted), 200gms and 500gms cartons both salted
and unsalted.
GHEE: ‘Nandini’ ghee is made from pure butter. It is fresh and pure and have
delicious flavor. Hygienically manufactured and packed in a special pack to retain
the goodness of pure ghee. Shelf life of 6 months at ambient temperature. This is
available in 200ml, 500ml, 1-liter sachets, 5-liter tins and 15kg tins.
FLUID MILK: Currently two types of HTST pasteurized fluid Milk is processed
and packed. They are toned Milk with 3% fat and 8.5% SNF (Solids Non Fat) and
full cream Milk with 6% fat and 9% SNF. Both are packed in the units of ½ Later
and 1 Later Fluid Milk is sold in bulk to other dairies both inside and outside the
state.
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UHT MILK: It refers to ultra high temperature heat-treated Milk. The concept of
UHT milk is absolute i.e. bacteria free besides retaining the nutritional quality of
milk. During the process, milk is exposed to a temperature of 137ºc for 4 sec and
immediately cooled a room temperature packing it aseptically.
At present two types of UHT Milk are being produced one “Nandini Good Life”
with 3.6% fat and 8.5% SNF and another one is “NANDINI smart” with 1.5% fat
and 9% SNF. Nandini Smart being low fat products good for health conscious
people. Both the milk can be stored for at least 45 days at room temperature. It
needs no boiling before drinking. on an average 25,000 of both variety of Milk is
being sold per day.
The packing material used for UHT Milk packing consists of 6 layers consisting of
polythene, aluminum, foil and paper which prevents the center of air, water, light
and bacteria there by keeping the Milk well 60 level quality i.e. “less than one
defect out of ten lakhs products”, has been achieved in UHT Milk due to good
quality of initial raw Milk. Raw milk is used for UHT processing to get good
quality end products. The composition of the milks is more nutritious and is as
below.
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Constituters Fat Minerals Proteins Lactose Water Total
Solids
Nandini Good
Life
3.6
%
3.5% 10.7% 4.3% 87.5% 12.1%
Nandini Smart 1.5
%
3.95% 0.75% 4.3% 89.5% 10.5%
MASALA BUTTERMILK: Masala buttermilk is manufactured and sold in the
summer season, especially from month of March to July, the only period during
which it gets demand. On an average the selling mounts to about 1000lts. Per day
in 250ml sachets.
MASTI DHAI: Recently Kolar dairy was taken up the production of “Masti-dhai”
in polythene cups of units of 200gms and 400gms. The Milk used for “Masti-
dhai” preparation consists of 4, 7% of fat and 11% of SNF added with lactic stator
culture. This product is being marketed by Gujarat Co-operative Milk Marketing
Federation (G.C.M.M.F)
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SLIM MILK POWDER:
Excess Milk obtained during flush season is converted into SLIM Milk
powder at other product dairies as Mandya, Dharwad and Dempo dairies
belonging to K.M.F and packed in bulk sachets of 25kgs. Annually about 1000
tons of SMP is produced and sold to other dairies in Karnataka, Bihar Milk
federation, Delhi Mother Dairy and others the remaining is used for reconstitution
during lean.
Although KOMUL had set high standards for its products and customer
services, its prior reliance on manual operations made it difficult to keep up with
surging demand. In designing the “Mega Dairy”, Komul looked towards an
automated system that would allow it to achieve consistent quality parameters for
each product. Energy and power was more effectively optimized and controlled
and all plant equipment was integrated. Additionally, employees were given
training to use the new automated systems and valuable management information
were collected at the main server and used for marketing and evaluations.
Mega Dairy has a capacity it process 7 lakh liters of Milk per day. This Dairy has
been built by investing Rs.35.70crores obtained as a term loan from National
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Dairy Development Board. The Mega Dairy has the latest “State-of-the-Art”
technological facilities in dairy processing and the Union has the ability to
manufacture Milk and milk products to world-class standards, ultimately
consumers are at the beneficial end. Milk and Milk products now reaches the
market faster, at a higher quality and with a
Longer shelf life. This is sharp contrast to its previous reliance on manual systems
that led to time lags in each production stage.
KOMUL product range:
The products produced by KOMUL are
MILK
CURD
BUTTER Milk
PEDA
GHEE, CHEESE
GOOD LIFE and other products
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MARKET SHARE:
BRIEF OVERVIEW OF “KOMUL
PROCUREMENT & INPUTS
Inhabited Villages 2930
Milk producer Members 288751
Dairy Co-operative Societies 1497
Milk Procurement Routes 105
Artificial Insemination Centers 1475
PROCESSING PLANTS
Kolar Dairy 2,00,000 Kg’s PD
Gowribhidanur Chilling center 1,00,000 Kg’s PD
Sadil 1,00,000 Kg’s PD
Chintamani 1,00,000 Kg’s PD
MARKETING & SALES
Number of distribution routes 32
Agents 292
Milk Parlors
Every day Sachet milk sales
7
15.56 Lakhs
FINANCE
Total Share Capital 9.12 Cores
Annual Turnover 271.97 ores
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COMPETITORS:
There are 125 competitors form private factories. The main are:
HERITAGE
GOMATA
SHRUTHI
SWASTIC
GOLD FIELF
DIARY PLUS
NILGIRIS
AROKYA
DODLA etc.,
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FUNCTIONAL CHART:
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 56
FUNCTIONAL CHART
BOARD
DEPARTMENTS
PURCHASE SALES
FINANCE ADMINISTRATIONMARKETING R&D
DD HRD ENGINEERING
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GROWTH & DEVELOPMENT OF THE INDUSTRY:
Until the year 1940, there was very little published information available
about the method of preparation and use of these products. The credit for the first
publication on the subject goes to Dr. W. B. Davis, the first director of Dairy
Research. Within a span of four decades considerable research had been
conducted at the National Dairy Research Institute and other places on indigenous
dairy products.
Since then, the Dairy Industry had begun to grow at a rapid pace. There
have been tremendous efforts put in by the various organizations to assure good
quality milk to the people and the saying “All that is white is pure milk” came in
to existence
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 57
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Financial Analysis & Leverages
CHAPTER 4
DATA ANALYSIS & INTERPRETATION
TABLE 1:
SHOWING OPERATING LEVERAGES
ANALYSIS:
From the above table we can observe that operating leverage is 1.045 in
the year 2007 & it has been increased to 1.050 in the year 2008 & 1.056 in the
year 2009 & in 2010 it is 1.072. So we can say that there is a gradually
increased in leverages when compared to base year 2006-07.
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 58
Years Operating leverages
2006-07 1.045
2007-08 1.050
2008-09 1.056
2009-10 1.072
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Financial Analysis & Leverages
Graph- 1: SHOWING OPERATING LEVERAGES
1.045
1.05
1.056
1.072
1.03 1.04 1.05 1.06 1.07 1.08
2006-07
2007-08
2008-09
2009-10
Series1
Interpretation:
So we can say that there is a gradually increased in leverages when
compared to base year 2005-06.
TABLE 2: TABLE SHOWING FINANCIAL LEVERAGE
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Financial Analysis & Leverages
Year Financial leverage
2006-07 1.013
2007-08 1.007
2008-09 1.006
2009-10 1.002
Analysis:
From the above table we can observe that the financial leverage is 1.013
In the year 2007, & it has been decreased to 1.007 in the year 2008 & to 1.006 in
the year 2009 & in 2010 it is again decreased to 1.002. So we can say that there is
gradual decreased in leverages when compared to the base year 2007.
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Financial Analysis & Leverages
Graph -2: SHOWING FINANCIAL LEVERAGE
1.013
1.0071.006
1.002
0.996
0.998
1
1.002
1.004
1.006
1.008
1.01
1.012
1.014
2006-07 2007-08 2008-09 2009-10
2006-07
2007-08
2008-09
2009-10
Interpretation:
Thus, we can say that there is gradual decreased in leverages when compared to
the base year 2007.
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Financial Analysis & Leverages
TABLE 3: TABLE SHOWING RETURN ON INVESTMENT LEVERAGE
Year Return on investment
2006-07 3.537
2007-08 4.24
2008-09 3.23
2009-10 6.26
Analysis:
From the above table we can observe that the return on investment leverage is
3.537 in the year 2007 & it has been increased to 4.24 times in the year 2008 &
decreased to 3.23 in the year 2009 & in the year 2010 again increased to 6.26. So
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Financial Analysis & Leverages
we can say that there is gradual increase & decrease when compared to the base
year 2006-2007.
Graph-3: SHOWING RETURN ON INVESTMENT LEVERAGE
3.537
4.24
3.23
6.26
0
1
2
3
4
5
6
7
2006-07 2007-08 2008-09 2009-10
2006-07
2007-08
2008-09
2009-10
Interpretation
Hence, we can say that there is gradual increased & decreased when compared to
the base year 2005-2006
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Financial Analysis & Leverages
TABLE 4: TABLE SHOWING COMBINED LEVERAGE
YearsCombined
leverage
2006-2007 1.0575
2007-2008 1.0563
2008-2009 1.0613
2009-10 1.0698
Analysis:
From the above table we can observe that the combined leverage is 1.0575 in the
year 2007 & it has been decreased to 1.0563 times in the year 2008 & increased to
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Financial Analysis & Leverages
1.0613 in the year 2009 and in 2010 it is almost constant. So we can say that there
are gradual fluctuations in the combined leverages.
Graph-4: SHOWING COMBINED LEVERAGE
1.05751.0563
1.0613
1.0698
1.045
1.05
1.055
1.06
1.065
1.07
2006-2007 2007-2008 2008-2009 2009-10
2006-2007
2007-2008
2008-2009
2009-10
Interpretation
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Financial Analysis & Leverages
From the above graph we can observe that the combined leverage is 1.0575 in the
year 2007 & it has been decreased to 1.0563 times in the year 2008 & to 1.0613 in
the year 2009 and in the year 2010 it was 1.0698. So we can say that there is more
fluctuations when compared to the base year 2006-2007.
TABLE 5: SHOWING CHANGES IN THE SHARE CAPITAL
YearsAmt. Percentage
2006-07 91327700 100
2007-08 117448400 128.6
2008-09 219176400 239.98
2009-10 281193700 324.78
Analysis:
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Financial Analysis & Leverages
From the above table we can observe that the percentage of share capital
is 100 % in the year 2007 & it has been increased to 128.6% in the year 2008 &
239.98% in the year 2009 and in the year 2010 324.78%. So we can say that
there is a gradually increased in the share capital when compared to base year
2006-07.
TABLE 5: SHOWING CHANGES IN THE SHARE CAPITAL
100
128.6
239.98
324.78
0
50
100
150
200
250
300
350
2006-07 2007-08 2008-09 2009-10
2006-07
2007-08
2008-09
2009-10
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Financial Analysis & Leverages
Interpretation:
Thus, we can say that there is a gradually increased in the share capital
when compared to base year 2006-07.
TABLE 6: CHANGES IN THE RESERVES & SURPLUS
Years Amt. Percentage
2006-07 101111251 100
2007-08 101556505 101
2008-09 117137541 116
2009-10 114696482 113
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Financial Analysis & Leverages
Analysis:
From the above table we can observe that the percentage of Reserves &
surplus is 100 % in the year 2007 & it has been increased to 101% in the year
2008 & increased to 116% in the year 2009 & to 113% in the year 2010. So
we can say that there are a more fluctuations in the Reserves & surplus when
compared to base year 2006-07.
Graph- 6: CHANGES IN THE RESERVES & SURPLUS
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Financial Analysis & Leverages
100 101
116
113
90
95
100
105
110
115
120
2006-07 2007-08 2008-09 2009-10
Series1
Interpretation:
From the above chart we can say that there is a more fluctuations in the
Reserves & surplus when compared to base year 2006-07.
TABLE -7: SHOWING CHANGES IN THE LOAN
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Financial Analysis & Leverages
Analysis:
From the above table
we can observe that the
percentage of loans is 100 %
in the year 2007 & it has
been decreased to 87% in the year 2008 & increased to 120% in the year 2009
and to 138% in the year 2010. So we can say that there are a more fluctuations
in the loans compared to base year 2006-07.
Graph- 7: SHOWING CHANGES IN THE LOANS
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 71
Years Amt. Percentage
2006-07 217181741 100
2007-08 189293306 87
2008-09 260394944 120
2009-10 299710803 138
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Financial Analysis & Leverages
10087
120
138
0
20
40
60
80
100
120
140
160
2006-07 2007-08 2008-09 2009-10
2006-07
2007-08
2008-09
2009-10
Interpretation:
So we can say that there are a more fluctuations in the loans compared to
base year 2006-07
TABLE- 8: SHOWING
CHANGES IN THE
FIXED ASSETS
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 72
Years Amt. Percentage
2006-07 17417221 100
2007-08 15515275 89
2008-09 18113910 104
2009-10 14531709 84
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Financial Analysis & Leverages
Analysis:
From the above table we can observe that the percentage of fixed assets
is 100 % in the year 2007 & it has been decreased to 89% in the year 2008 &
increased to 104% in the year 2009 & again decreased to 84% in the year 2010.
So we can say that there is a more fluctuations in the Fixed assets when
compared to base year 2006-07.
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Financial Analysis & Leverages
Graph-8: SHOWING CHANGES IN THE FIXED ASSETS
Interpretation:
We can say that there is a more fluctuations in the Fixed assets when
compared to base year 2006-07.
TABLE 9: SHOWING CHANGES IN THE CURRENT ASSETS
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Financial Analysis & Leverages
Years
Amt. Percentage
2006-07 345166990 100
2007-08 346147409 101
2008-09 497244244 144
2009-10 429398826 124
Analysis:
From the above table we can observe that the percentage of Current
assets is 100 % in the year 2007 & it has been increased to 101% in the year
2008 & 144% in the year 2009 & decreased in 2010 to 124%. So we can say
that there is a gradually reduced current assets in the year 2009-10.
Graph- 9: SHOWING CHANGES IN THE CURRENT ASSETS
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Financial Analysis & Leverages
100 101
144
124
0
20
40
60
80
100
120
140
160
2006-07 2007-08 2008-09 2009-10
Interpretation:
So we can say that there are gradually reduced current assets in the year
2009-10.
TABLE 10: SHOWING CHANGES IN THE CURRENT LIABILITIES
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Financial Analysis & Leverages
Years Amt. Percentage
2006-07 144444239 100
2007-08 127370442 88
2008-09 253148677 175
2009-10 192963579 134
Analysis:
From the above table we can observe that the percentage of current liabilities is
100 % in the year 2007 & it has been decreased to 88% in the year 2008 & 175%
in the year 2009 & 134% in 2010. So we can say that there is a more fluctuations
when compared to base year 2006-07.
Graph-10: SHOWING CHANGES IN THE CURRENT LIABILITIES
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Financial Analysis & Leverages
134
175
88100
0
20
40
60
80
100
120
140
160
180
200
2006-07 2007-08 2008-09 2009-10
2006-07
2007-08
2008-09
2009-10
Interpretation:
We can say from the above diagram that there is a more fluctuations when
compared to base year 2006-07.
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Financial Analysis & Leverages
TABLE -11: SHOWING CHANGES IN THE WORKING CAPITAL
Years Amt. Percentage
2006-07 200722751 100
2007-08 218776966 108
2008-09 244095567 122
2009-10 236435247 118
Analysis:
From the above table we can observe that the percentage of Working capital is
100 % in the year 2007 & it has been increased to 108% in the year 2008 & 122%
in the year 2009 & 118% in the year 2010. So we can say that there is a gradually
increased in the working capital when compared to base year 2006-07.
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Financial Analysis & Leverages
Graph-11: SHOWING CHANGES IN THE WORKING CAPITAL
100
108
122
118
0 50 100 150
2006-07
2007-08
2008-09
2009-10
2009-10
2008-09
2007-08
2006-07
Interpretation:
Thus there is a gradually increased in the working capital when compared to base
year 2006-07.
TABLE 12: SHOWING CHANGES IN THE SALES
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Financial Analysis & Leverages
Years Amt. Percentage
2006-07 3058526160 100
2007-08 2987049900 98
2008-09 3578197425 117
2009-10 3961593839 130
Analysis:
From the above table we can observe that the percentage of sales is 100 % in the
year 2007 & it has been decreased to 98% in the year 2008 & 117% in the year
2009 & 130% in 2010. So we can say that there is a variation in the sales when
compared to base year 2006-07.
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Financial Analysis & Leverages
Graph-12: SHOWING CHANGES IN THE SALE
22%
22%
26%
30%
2006-07
2007-08
2008-09
2009-10
Interpretation:
So we can say that there is a variation in the sales when compared to base year
2006-07.
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Financial Analysis & Leverages
TABLE 13: SHOWING CHANGES IN FIXED COST
Years Amt. Percentage
2006-07 135966984 100
2007-08 139735298 103
2008-09 167089030 123
2009-10 184213082 135
Analysis:
From the above table we can observe that the percentage of fixed cost is
100 % in the year 2007 & it has been increased to 103% in the year 2008 &
123% in the year 2009 & 135% in 2010. So we can say that there is a gradually
increased in the fixed cost when compared to base year 2006-07.
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Financial Analysis & Leverages
Graph-13: SHOWING CHANGES IN FIXED COST
100
103
123
135
0 50 100 150
2006-07
2007-08
2008-09
2009-10
2009-10
2008-09
2007-08
2006-07
Interpretation:
So we can say that there is a gradually increased in the fixed cost when
compared to base year 2006-07
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Financial Analysis & Leverages
TABLE 14: SHOWING CHANGES IN THE PRIME COST
Years Amt. Percentage
2006-07 1783510325 100
2007-08 2074798683 116
2008-09 2224474539 125
2009-10 2354233629 132
Analysis:
From the above table we can observe that the percentage of Prime cost is 100 % in
the year 2007 & it has been increased to 116% in the year 2008 & 125% in the
year 2009 & 132% in 2010. So we can say that there is a gradually increased in
the prime cost when compared to base year 2006-07.
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Financial Analysis & Leverages
Graph-14: SHOWING CHANGES IN THE PRIME COST
100
116125
132
0
20
40
60
80
100
120
140
2006-07 2007-08 2008-09 2009-10
Series1
Interpretation:
So we can say that there is a gradually increased in the prime cost when
compared to base year 2006-07.
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Financial Analysis & Leverages
TABLE 15: SHOWING CHANGES IN THE VARIABLE COST
Analysis:
From the above table we can observe that the percentage of variable cost is 100 %
in the year 2007 & it has been increased to 122% in the year 2008 & 162% in the
year 2009 & 212% in 2010. So we can say that there is a gradually increase in the
variable cost when compared to base year 2006-07.
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 87
Years Percentage Difference
2006-07 100 Nil
2007-08 122 22
2008-09 162 40
2009-10 212 50
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Financial Analysis & Leverages
Graph-15: SHOWING CHANGES IN THE VARIABLE COST
2006-072007-08
2008-092009-10
S1
100122
162
212
0
50
100
150
200
250
2006-07
2007-08
2008-09
2009-10
Interpretation:
Hence there is a gradually increased in the variable cost when compared to base
year 2006-07.
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Financial Analysis & Leverages
TABLE 16: SHOWING CHANGES IN THE CONTRIBUTION
Years Percentage Difference
2006-07 100 Nil
2007- 08 115 15
2008-09 127 12
2009-10 148 21
Analysis:
From the above table we can observe that the percentage of contribution is 100 %
in the year 2007 & it has been increased to 115% in the year 2008 & 127% in the
year 2009 & 148% in 2010. So we can say that there is a more increase when
compared to base year 2006-07.
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Financial Analysis & Leverages
Graph-16: SHOWING CHANGES IN THE CONTRIBUTION
20%
23%
26%
31%
2006-07
2007- 08
2008-09
2009-10
Interpretation:
So we can say that there is a more increase when compared to base year 2006-07.
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Financial Analysis & Leverages
CHAPTER -5
SUMMARY OF FINDINGS & CONCLUSIONS
Findings
From this table we can observe that operating leverages of KOMUL is in
increasing trend in the year 2006-07 when compare to the other three years
From this table we can observe that the financial leverage of KOMUL are in
gradual decreasing trend when compared to the other three years so we can
say that the financial risk taken by KOMUL are decreasing year by year.
From this table we can observe that there was more fluctuations in the
return on investment leverage .i.e. in the year 2006-07.
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Financial Analysis & Leverages
From this table we can observe that the combined leverage of KOMUL are
having more fluctuations are due to gradual increasing trend in operating
leverage & gradual decrease in trend in financial leverage.
From this table we can observe that the changes in the share capital at
KOMUL. In this table we can observe that there is increased in the share
capital in the all 4 years so we can say that the amt. collected from the
public through shares as been increased.
From the above table we can observe that reserves & surplus of KOMUL is
having slight fluctuations due to decreasing in profit
The Current assets of KOMUL is also having more fluctuations that is it has
been increased extensively by in the year 2009 -10 this because of various
credit policies of KOMUL in the year
There are fluctuations in the liabilities over the four years.
The working capital in the has been increased slightly due to increase in the
risks taken by the company.
The sales volume is increasing year by year.
There is a gradual increase in the prime cost.
Usually the fixed cost should remain constant. But here it has not happened
like that so it is a bad sign to the company.
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Financial Analysis & Leverages
CONCLUSION
From the study conducted by me a study on financial &leverage analysis. I came
to know the performance of Komul. their way of classification of assets
&liabilities in the balance sheet, classification of cost particulars their method of
costing even I came to know the risks taken by Komul both financially
&technically by calculating various types of leverages,
So thus project is concluded with the composition of performance of Komul
by taking the classification in the items of balance sheet, profit and loss account
trading account cost statements, progress reports for 3 accounting years along with
this .I have identified several differences in the performance of Komul and also
given some suggestions to overcome those differences and problems.
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Financial Analysis & Leverages
CHAPTER-6
RECOMMENDATIONS AND SUGGESTIONS.
SUGGESTIONS:
Since the operating leverages are increasing trend when compare to the
other three years it is a good sign to the company & should maintain
operating leverages.
Since the financial leverage are in decreasing trend so we can say that then
financial risk taken by KOMUL are decreasing which is a Good sign to the
company. The Komul as to continue to maintained the same rate of
financial leverage.
The ROI of KOMUL in the year 2009-10 is better than other two years so
Komul as to maintain the same leverages or further it should try to get more
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 94
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Financial Analysis & Leverages
returns on investment in the fore coming years. To maintain good rate of
leverages.
Fluctuations are good sign to the company because the risk is taking after
knowing the competition in the market so KOMUL has to maintain the
same method of combined leverage.
Since the share capital is increasing trend .It is a good sign to the company
&it should maintain the same. Even it should try to further attract more
investment from the public
The KOMUL has to maintain more reserves &surplus in order to meet UN -
certain contingencies. It should try to avoid fluctuations in the maintaining
the reserves &surplus by earring more profits.
The fluctuations in the fixed assets are not a good signed but here KOMUL
has reduced investments of fixed assets in the year 2006-07. Mainly because
reduction on fixed assets in the year 2006-07 mainly because the reduction
in financial risk taken by KOMUL due to heavy competition this method of
reducing the financial after analyzing comp0etation is a good for a
competition to survive in this competitive world.
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Financial Analysis & Leverages
The fluctuations in the fixed assets are not a good signed but here KOMUL
has reduced investments of fixed assets in the year 2006-07. Mainly because
reduction on fixed assets in the year 2006-07 mainly because the reduction
in financial risk taken by KOMUL due to heavy competition this method of
reducing the financial after analyzing comp0etation is a good for a
competition to survive in this competitive world.
Since the KOMUL has maintain liberal credit policy in the year 2007 with
attract more customer and increases it sales but cash inflows cannot been
collected immediately this may also arises due to increase in bad debts also
in the year 2007 it has maintained rigid policies it can be collected CIF
immediately but it results in decrease in sales and also decrease in the year
2007 bad debts. So after analyzing the advantages and disadvantages of
both credit policies to it has balance in the year 2007 between these two
methods.
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Financial Analysis & Leverages
The increase in working capital is good signed by the company as; it
indicates the risk taken by the company therefore KOMUL has to maintain
same.
Decrease in sales is not a good signed to the company so the company has
to adopt aggressive sales policy through sales promotion activity to increase
sales as well as earning capacity.
The increase in prime cost and decrease in sales is not a good Sign so the
company has to adopt cost control technique .to reduce the cost.
In order to increase control the company has to reduce the prime cost and
other variable cost not only the company should reduce the casts in the
other hand. And it has been increased the sales.
The company should maintain the fixed cost at a constant rate and the it
should not variable from one year to another year.
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Financial Analysis & Leverages
GENERAL SUGGESTIONS
In Komul they are not even able to find out steam expenses for a particular
production units of products. Since the steam is common to all in the
production units and they are approximately allocating steam expenses for
finding out of the cost of the products.
From the analysis I came to know that most of the expenses have been
decreasing when compared to the previous years or year by year.
It is found that Komul is not following certain cost control techniques.
Even they are not fallowing cost reduction techniques.
Komul is also not fallowing responsibility accounting system.
They should use certain technical devices in order to know the steam
expenses for a particular production unit from this they can arrive at correct
steam cost for a particular production department.
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Financial Analysis & Leverages
Komul should follow certain cost control techniques which helps in
formulation of standards & budgets that incorporate objectives and goals to
be achieved & also helps in formulation of corrective measures to eliminate
& reduce unforcerable variables.
Responsibility accounting system should be allowed in Komul as it
personalizes control reports by accumulating and reporting cost & revenue
information according to defined responsibility areas within a company.
Komul should also fallow cost production techniques which helps in
eliminating waste improving operations, increasing productivity, search for
cheaper materials, and improved standards of quality finding other means to
reduce the costs of products.
From the above study we can conclude that financial position of the
company in good to certain extant. The solvency position of the company is
acceptable to certain extant. The liquidation position is good.
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Financial Analysis & Leverages
CHAPTER-7
APPENDICES AND ANNEXURES
AN OVER VIEW OF THE STATISTICS RELATED TO
PROCUREMENT ACTIVITIES
Particulars Uni
t
Years
91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99
DCS Registered No.
s
551 667 724 781 820 861 932 968
DCS Functional No.
s
511 624 696 760 807 841 915 943
Members Enrolled Lak
hs
0.87 1.03 1.15 1.17 1.65 1.71 1.80 1.88
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Financial Analysis & Leverages
Daily average Milk
Procurement
Kgs
.
1,75,8
66
1,92,19
7
2,11,9
39
2,09,0
80
2,06,3
24
2,39,5
01
2,60,5
06
2,64,3
24
Procurement Price
payable per Kg.
Rs. 3.16 3.14 3.53 3.48 4.45 5.72 5.54 5.58
Daily average Milk
Procurement/DCS
Kgs
.
344 308 305 275 256 285 285 280
Procurement
Transportation Cost/ Kg.
Rs. 0.13 0.14 0.16 0.19 0.21 0.19 0.21 0.22
DCS In Profit No.
s
503 609 669 732 786 827 900 920
Profit Amount Lak
hs
132.12 160.87 165.21 161.93 182.34 282.81 285.20 308.03
DCS in Loss No.
s
8 15 25 28 21 14 15 23
Loss Amount Lak
hs
0.44 2.04 2.66 2.91 2.13 1.65 2.29 3.16
Daily Average Liquid
milk sales
Litr
es
- - - - - - - 17,220
Union’s Net Profit/Loss Lak
hs
7.64 14.74 3.64 9.55 11.43 3.80 -
165.82
152.30
Date of completion of
Audit
16-09-
91
31-07-
93
20-01-
94
19-08-
94
11-09-
95
30-12-
95
20-02-
98
27-04-
98
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Financial Analysis & Leverages
Particulars Uni
t
Years
99-00 00-01 01-02 02-03 03-04 04-05 06-07 07-08
DCS Registered No.
s
1039 1150 1220 1264 1270 1322 1389 1418
DCS Functional No.
s
1013 1105 1168 1199 1199 1246 1303 1346
Members Enrolled Lak
hs
1.96 2.10 2.16 2.22 2.27 2.56 2.61 2.65
Daily average Milk
Procurement
Kgs
.
3,16,0
19
3,65,1
50
3,65,6
17
3,94,9
98
4,63,1
03
4,97,1
28
5,38,42
7
5,54,3
67
Procurement Price
payable per Kg.
Rs. 6.66 7.56 7.88 8.25 8.25 8.15 7.89 8.48
Daily average Milk
Procurement/DCS
Kgs
.
312 330 313 329 386 399 413 411
Procurement
Transportation Cost/ Kg.
Rs. 0.19 0.20 0.24 0.25 0.24 0.23 0.23 0.22
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Financial Analysis & Leverages
DCS In Profit No.
s
987 10.76 11.42 1175 1171 1227 1277 1124
Profit Amount Lak
hs
394.09 453.43 493.36 910.73 600.90 681.93 750.28 460.5
1
DCS in Loss No.
s
26 29 26 24 28 19 26 22
Loss Amount Lak
hs
5.51 6.24 5.16 4.27 7.60 18.83 5.91 11.42
Daily Average Liquid
milk sales
Litr
es
39,636 54,267 68,710 76,686 80,429 83,528 90,867 82,47
0
Union’s Net Profit/Loss Lak
hs
67.41 117.41 158.13 114.87 21.96 54.76 45.22 -
122.1
5
Date of completion of
Audit
13-12-
99
26/08/
00
23/09/
00
23/09/
00
14/05/
01
10/09/
01
27/11/0
2
-
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Financial Analysis & Leverages
AN OVER VIEW OF THE STATISTICS RELATED TO
TECHNICAL INPUT ACTIVITIES
S
l.
N
o
.
Particulars Un
it
Years
93-9494-
9595-96
96-
9797-98 98-99 99-00 00-01
0
1
Emergency Cases
Attended
No
.s
0
2
Cost/Case in
Emergency Visit
Rs.
0
3
Animal Health
Camps Conducted
No
.s
- - - - - - - 167
0
4
Cost/Case in Animal
Health Camps
Rs.
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Financial Analysis & Leverages
0
5
Total single AI
Centers
No
.s
215 291 332 335 352 344 341 355
0
6
AI done/Single AI
Center
No
.s
63,66
2
78,5
81
1,01,
491
98,7
99
1,05,
920
1,13,
662
1,18,
235
1,12,
734
0
7
Total Cluster AI
Centers
No
.s
- - - - - - - -
0
8
AI Done/Cluster AI
Centeres
No
.s
- - - - - - - 3829
54
0
9
FMD Vaccination
done
Do
ses
1
0
Villages Covered
Under FMD Vaccn.
No
.s
1
1
Theileriasis (T)
Vaccination Done
Do
ses
1
2
Villages Covered
Under T. Vaccn.
No
.s
1
3
Brucellosis (B)
Vaccination Done
Do
ses
- - - - - - - -
1
4
Villages covered
Under B. Vaccn.
No
.s
- - - - - - - -
1
5
Sample Analysed in
ADDL
No
.s
- - - - - - - -
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Financial Analysis & Leverages
1
6
Cattlefeed Sold M.t
on
3,995 4,78
9
5,250 4,42
7
3,726 4,726 3,068 2,718
Sl
.
N
o.
Particulars Uni
t
Years
01-02 02-03 03-04 04-05 05-06 06-07 07-08 02-03
0
1
Emergency Cases
Attended
No.
s
49406 53006 60021 70260 54873
0
2
Cost/Case in Emergency
Visit
Rs.
0
3
Animal Health Camps
Conducted
No.
s
280 307 - - - -
0
4
Cost/Case in Animal
Health Camps
Rs.
0
5
Total single AI Centers No.
s
339 369 372 378 383 387 390 379
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Financial Analysis & Leverages
0
6
AI done/Single AI
Center
No.
s
1,26,2
69
1,26,5
33
1,17,7
37
1,23,4
21
12449
8
14332
7
15061
6
10652
0
7
Total Cluster AI Centers No.
s
- - - - - - -
0
8
AI Done/Cluster AI
Centeres
No.
s
- - - - - - -
0
9
FMD Vaccination done Dos
es
33073
6
31971
0
36505 53319
1
44995
4
45100
0
1
0
Villages Covered Under
FMD Vaccn.
No.
s
1
1
Theileriasis (T)
Vaccination Done
Dos
es
1
2
Villages Covered Under
T. Vaccn.
No.
s
1
3
Brucellosis (B)
Vaccination Done
Dos
es
- - - - - - -
1
4
Villages covered Under
B. Vaccn.
No.
s
- - - - - - -
1
5
Sample Analysed in
ADDL
No.
s
- - - - - - 962 953
1
6
Cattlefeed Sold M.t
on
4,920 6,795 5,586 9,698 14,956 18,087 15,455 9,588
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Financial Analysis & Leverages
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Financial Analysis & Leverages
CHAPTER-8
BIBLIOGRAPHY
BOOKS:
Business research methodology - K. Aswathappa
Financial management - R.K.Jain & kulkerni.
Business Finance - Reddy & Appaniah.
Financial accounting - B.S.Raman.,
Cost & Management accounting - Shahsi.K.gupta,
Cost & financial analysis - B S Raman
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Financial Analysis & Leverages
KOMUL Annual report
KOMUL progress report
Website
WWW.KOMUL.COM
ADARSHA COLLEGE OF MANAGEMENT AND SCIENCE 110