“INTRODUCTION TO AMUL”
Amul is an Indian dairy cooperative, based in Anand, Gujarat. The word Amul is derived from the Sanskrit word Amulya, meaning
invaluable. The co-operative is also sometimes referred to by the unofficial backronym: Anand Milk Union Limited. Formed in 1946, it
is a brand name managed by an Indian cooperative organisation, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF),
which today is jointly owned by 3.03 million milk producers in Gujarat.
The Kaira District Co-operative Milk Producers' Union was registered on December 1, 1946 as a response to exploitation of marginal
milk producers by traders or agents of existing dairies in the small town named Anand (in Kaira District of Gujarat). Milk Producers had
to travel long distances to deliver milk to the only dairy, the Polson (brand) dairy in Anand. Often milk went sour as producers had to
physically carry the milk in individual containers, especially in the summer season. The prices of buffalo and cow milk were arbitrarily
determined. Moreover, the government at that time had given monopoly rights to Polson Dairy to collect milk from Anand and supply it
to Bombay city in turn
The success of the dairy co-operative movement spread rapidly in Gujarat. Within a short span five other district unions – Mehsana,
Banaskantha, Baroda, Sabarkantha and Surat were organized. In order to combine forces and expand the market while saving on
advertising and avoid a situation where milk cooperatives would compete against each other it was decided to set up an apex marketing
body of dairy cooperative unions in Gujarat. Thus, in 1973, the GCMMF was established. The Kaira District Co-operative Milk
Producers’ Union Ltd. which had established the brand name Amul in 1955 decided to hand over the brand name to GCMMF (AMUL)
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HISTORY OF THE ORGANISATION
During the fourth decade of the 19th century, the basic sources of
income for farmers of the Kaira district was farming and selling milk. At that time
there was great demand of milk in Bombay. The biggest purchaser of milk was
Polson Ltd. It was a privately owned dairy that produced milk products and also
supplied milk to various regions of the state. It enjoyed monopoly. All farmers of
the Kaira district were at the mercy of the milk traders who dictated the process;
they had nowhere to turn to.
This unfair system spread widespread discontent amongst the farmers. Hence they all decided and appealed to Shri Sardar
Patel, a great leader of India’s freedom movement, for help. Shri Sardar Patel advised them to market milk through a co-operative society
that was operated by them individually. He sent his very trusted person, Shri Morarji Desai to organize the farmers. At a meeting held at
Samarkha (a
village near Anand) on January 4, 1946, it was resolved that milk co-operative societies would be organized in each village of Kaira
district to collect milk from the producers and bring it to the district union. The government should be asked to buy milk from the union.
When the government turned down the demand, Kaira district’s farmers organized a milk strike for 15 days, not a single
drop of milk was sold to traders. The Bombay Milk Scheme was badly affected. The milk commissioner of Bombay visited Anand,
assessed the situation and decided to concede to the farmers’ demands.
Thus, KDCMPUL – Kaira District Co-operative Milk Producers’ Union Limited, came to existence. It was formally
registered on December 14, 1946.
During winter season, the quantity of milk received was very high. But the Bombay Milk Scheme did not accept the excess milk
brought in by the farmers. Hence, this forced the farmers to sell excess milk to traders, which gave them very nominal amount for this
quantity. This led to the decision to set up a plant to pasteurize milk. In the beginning there were only few farmers supplying about
250 liters of milk everyday.
With the financial help from UNICEF, assistance from the government of New Zealand under the Colombo plant, and
technical assistance provided by FAO for Rs. 5 million, planning for the factory to manufacture milk powder and butter was done.
Dr. Rajendra Prasad the then President of India laid the foundation on November 15, 1954. On October 31, 1955, Pandit
Jawaharlal Nehru, the then Prime Minister of India, declared the plant open. In 1958, the plant expanded. It produced sweetened
condensed milk. Two years later, Shri Morarji Desai, the then Finance Minister, inaugurated a new wing designed to manufacture 600
tons of cheese and 2500 tons of baby food per year. This was the first time in the world that cheese and baby food was processed and
produced from buffalo’s milk on a large and commercial scale.
A plant to manufacture balanced cattle feed, donated by OXYFAM, was formally commissioned on October 31, 1964, by
Shri Lal Bahadur Shastri the then Prime Minister of India, at Boriavi. KDCMPUL then set up a plant to manufacture high protein
weaning food, chocolate and malted drink at Mogar, about 8 kms south of Anand.
AMUL means "priceless" and it comes from the Sanskrit word “Amoolya. This brand name suggested by a quality
control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in
millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul
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Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 42.78
billion in 2006-07). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices, of the genesis of a vast
co-operative network, of the triumph of indigenous technology, of the marketing survey of a farmers' organisation. And have a proven
model for dairy development.
Today there are twelve dairies producing products under the brand name of AMUL. AMUL is now Asia’s largest dairy
brand and it is the world’s second largest firm producing dairy products.
FOUNDER OF THE COMPANY
Mr. Verghese Kurien showed main interest in establishing union who was supported by Shri Tribhuvandas Patel who lead the
farmers in forming the Cooperative unions at the village level. The Kaira district milk
producers union was thus established in ANAND and was registered
formally on 14th December 1946.
Since farmers sold all the milk in Anand through a co-operative union, it was commonly resolved to sell the milk under the brand name
AMUL.
STAGES OF DEVELOPMENT
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Growth of Amul is not a one-night story. It took several decades to succeed in the present manner. Initially, Amul started
with one single society, now it has around 1231 societies in its net. It poured in 250 liters of milk per day initially, which has now
reached up to 15 lac liters per day in FLUSH (winter) season and about 8 lac to 9 lac liters of milk per day during LEAN (summer)
season.
The main stages of development of Amul are as follows:
In 1954: UNICEF provided financial help worth Rs. 50 million to Amul. This financial help led Amul to establish fully automatic plant
for producing milk and milk powder.
In 1958: Amul expands; it started producing sweetened condensed milk.
In 1960: Excess milk that was brought in by the farmers in the winter season and huge amount of profit made it possible the expansion of
Amul. Amul established producing cheese and baby food. This created history in the world dairy industry because, it was for the first
time in the world that cheese and baby food was processed from buffalo’s milk instead of cow’s milk.
In 1981: The new cattle feed plant at Kanjari was commissioned.
In 1992: For getting the benefits of excess supply of milk, Amul established another plant named Amul III. This plant has a capacity of
processing 14 lac liters of milk everyday.
In 1994: The new cheese plant was established at Khatraj. Together with it was established the Mogar plant to produce chocolates and
malted drink. Both of these plants were commenced with the help of NDDB.
In 2001: Amul launched its flavored milk variety. This was a major jump taken by Amul.
In 2003: For expanding the market share, Amul launched the ‘Snowball’ pizza and flavored lassi. These helped Amul to gain a major
chuck of market share.
In 2004: Amul keeps on achieving new heights in the competitive world. It has launched Chocozoo (chocolate) and Munchtime (crunchy
snack). Amul also started new satellite dairies at Pune and Kolkata. This will be a help in gaining larger portion of market share.
ORGANISATION PROFILE
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Name:
Kaira District Co-operative Milk Producers’ Union Limited
Address:
The KDCMPU Ltd.
Amul Dairy Road,
Anand – 388001
Gujarat [INDIA] E-MAIL: [email protected]
Date of Establishment:
14 December, 1946
Form of unit:
A Co-operative Society, registered under Co-operative Societies Act, 1912.
Bankers:
1. Kaira District Central Co-operative Bank Limited.
2. Axis Bank
3. Corporation Bank
4. State Bank of India
Plants:
1. Anand Plant
Anand plant is the main plant. Most of the raw-milk is procured here. Products being manufactured here are butter, flavored
milk, ghee, milk powder and baby food.
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2.Mogar Plant
It is situated on Anand-Vadodara national highway no.8. It produces chocolates, nutramul, Amul lite and, Amul Bread and
Amul ganthia.
2. Kanjari Plant
Cattle feed is produced here.
3.Khatraj Plant
This plant is situated between Nadiad and Mhemdabad highway. Cheese, Paneer and Whey powder is produced here.
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3. Satellite Dairies
Amul has got satellite dairies at Mumbai, Pune and Kolkata. It helps in handling operations of the organisation from a distant
place.
INITIAL PROMOTERS
1). Shri Tribhuvandas Patel.
2). Shri Morarjibhai Desai.
BOARD OF DIRECTORS:
Shri Ramsinh P. Parmar Chairman
Shri Rajendrasinh D. Parmar Vice Chairman
Shri Dhirubhai A. Chawda Member
Shri Mansinh K. Chauhan Member
Shri Maganbhai G. Zala Member
Shri Sivabhai M. Parmar Member
Shri Pravinsinh F. Solanki Member
Shri Chadubhai M. Parmar Member
Shri Bhaijibhai A. Zala Member
Shri Bipinbhai M. Joshi Member
Shri Madhuben D. Parmar Member
Shri Saryuben B. Patel Member
Shri Ranjitbhai K. Patel Individual Member
Shri B. M. Vyas MD (GCMMF)
Shri Rahulkumar Shrivastav MD (KDCMPU)
Shri I M Purohit District
Registrar
NUMBER OF EMPLOYEES
Approximately 1432
TOTAL NUMBER OF SOCIETY MEMBERS
Approximately 2.28 million.
TOTAL NUMBER OF SHIFTS
First Shift Time - 8:30 a.m. to 4:30 p.m.
Second Shift Time - 4:30 p.m. to 12:30 a.m.
Third Shift Time - 12:30 a.m. to 8:30 a.m.
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PEOPLE POWER: AMUL'S SECRET OF SUCCESS
The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk besides acting as
a channel to market the production enhancement package. What's more, it does not disturb the agro-system of the farmers. It also
enables the consumer an access to high quality milk and milk products. Contrary to the traditional system, when the profit of the
business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economicupliftment
and common good.Looking back on the path traversed by Amul, the following featuresmake it a pattern and model for emulation
elsewhere.
Amul has been able to:
· Produce an appropriate blend of the policy makers farmersboard of management and the professionals:
each group appreciating its rotes and limitations,
· Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment.
· Provide a support system to the milk producers without disturbing their agro-economic systems,
· Plough back the profits, by prudent use of men, material and machines, in the rural sector for the common good and betterment of the
member producers and
· Even though, growing with time and on scale, it has remainedwith the smallest producer members. In that sense. Amul is an example
par excellence, of an intervention for rural change.The Union looks after policy formulation, processing and marketing of milk, provision
of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinary care, better feeds and the like - all
through the village societies. Basically the union and cooperation of people brought Amul into fame i.e. AMUL (ANAND MILK
UNION LIMITED), a name which suggest THETASTE OF INDIA.
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PRODUCT PROFILE
Bread spreads:
Amul Butter
Amul Lite Low Fat Bread spread
Amul Cooking Butter
Cheese Range:
Amul Pasteurized Processed
Cheddar Cheese
Amul Processed Cheese
Spread
Amul Pizza (Mozzarella)
Cheese
Amul Shredded Pizza Cheese
Amul Emmental Cheese
Amul Gouda Cheese
Amul Malai Paneer (cottage cheese)
Utterly Delicious Pizza
Mithaee Range (Ethnic sweets):
Amul Shrikhand (Mango,
Saffron, Almond Pistachio,
Cardamom)
Amul Amrakhand
Amul Mithaee
Gulabjamuns
Amul Mithaee Gulabjamun Mix
Amul Mithaee Kulfi Mix
Avsar Ladoos
UHT Milk Range:
Amul Shakti 3% fat Milk
Amul Taaza 1.5% fat Milk
Amul Gold 4.5% fat Milk
Amul Lite Slim-n-Trim Milk 0% fat milk
Amul Shakti Toned Milk
Amul Fresh Cream
Amul Snowcap Softy Mix
Pure Ghee:
Amul Pure Ghee
Sagar Pure Ghee
Amul Cow Ghee
Infant Milk Range:
Amul Infant Milk Formula 1 (0-6 months)
Amul Infant Milk Formula 2 ( 6 months above)
Amulspray Infant Milk Food
Milk Powders:
Amul Full Cream Milk Powder
Amulya Dairy Whitener
Sagar Skimmed Milk Powder
Sagar Tea and Coffee Whitener
Sweetened Condensed Milk:
Amul Mithaimate Sweetened Condensed Milk
Fresh Milk:
Amul Taaza Toned Milk 3% fat
Amul Gold Full Cream Milk 6% fat
Amul Shakti Standardised Milk 4.5% fat
Amul Slim & Trim Double Toned Milk 1.5% fat
Amul Saathi Skimmed Milk 0% fat
Amul Cow Milk
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Curd Products:
Yogi Sweetened
Flavored Dahi
(Dessert)
Amul Masti Dahi
(fresh curd)
Amul Masti Spiced
Butter Milk
Amul Lassee
Amul Ice creams:
Royal Treat Range (Butterscotch, Rajbhog, Malai Kulfi)
Nut-o-Mania Range (Kaju Draksh, Kesar Pista Royale,
Fruit Bonanza, Roasted Almond)
Nature's Treat (Alphanso Mango, Fresh Litchi, Shahi
Anjir, Fresh Strawberry, Black Currant, Santra Mantra,
Fresh Pineapple)
Sundae Range (Mango, Black Currant, Sundae Magic,
Double Sundae)
Assorted Treat (Chocobar, Dollies, Frostik, Ice Candies,
Tricone, Chococrunch, Megabite, Cassatta)
Utterly Delicious (Vanilla, Strawberry, Chocolate,
Chocochips, Cake Magic)
Chocolate & Confectionery:
Amul Milk Chocolate
Amul Fruit & Nut Chocolate
Brown Beverage:
Nutramul Malted Milk Food
Milk Drink:
Amul Kool Flavored Milk (Mango, Strawberry, Saffron,
Cardamom, Rose, Chocolate)
Amul Kool Cafe
Health Beverage:
Amul Shakti White Milk Food
Bakery Products:
Bread
Bun
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PRODUCTION DEPARTMENT
Since Milk is the basic raw material that the organization procures, we shall first study the process flow chart for pasteurizing milk.
Process Flow Chart for Amul 3 is as follows:
Raw chilled milk (in tankers or cans)
Tested for acidity and temperature (Fat and SNF)
Filter
Chiller (temperature up to 2 degree Celsius)
Raw milk buffer tank
Milk clarifier
Raw milk silos
Balance tank of pasteurize
1st regeneration section of milk pasteurize
Cream separator (60-65 degree Celsius)
Cream separated
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Sent to cream buffer tanks
Cream pasteurize (at 90 degree Celsius for no hold)
Cream balance tank
Sent to butter or ghee section
EXPLAINING THE PROCESS:
Milk from various villages is collected at chilling centers and from there milk is sent to the dairy in tankers. Still at some
places where a chilling center is not available, milk is collected in cans. From the milk collected at the Milk Reception Bay or the Raw
Milk Receiving Dock, samples are taken and sent for quality check at the laboratory. Various tests that are done to check the quality of
the milk tests for fat, SNF (Solid Non Fat), Bacterial count, etc. are done. Acidity and temperature of milk is recorded first because on
this basis milk is accepted or rejected.
Unloading of milk is done in a milk buffer tank. Milk stored there is cooled at 4 deg. Celsius and sent for clarification.
Clarification is a very important process wherein dust, dirt or any kind of other impurities are removed and milk is purified. From
clarifiers milk is sent to the raw milk silos and stored temporarily, from where milk is sent for pasteurization and then to further
processes.
Pasteurization is a process whereby the germs and bacteria and pathogens are killed. In this process, milk is heated up to
76 deg. Celsius and is held at that temperature for about 15 to seconds and then cooled up to 4 deg. Celsius. Simultaneously after heating
cream is separated from milk. Cream that is separated here is
used for standardization of milk and surplus cream is used for production of butter and ghee. Cream is added to milk as per the type of
milk that is low fat (skimmed) milk will have minimum fat, while ‘Amul Gold’ will have more percentage of fat.
Surplus of standardized milk is used for production of milk powder or for making flavored milk and sent to market for
sale.The separated cream is further pasteurized at 90 deg. Celsius to make it fit for human consumption. After that it is cooled and is
stored in cream tanks for ripening and then it is sent for butter manufacturing.
Reception of Milk
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Raw milk collected at Amul 3 is received through cans and in tankers from Amul 2, where three reception lines unload milk
tankers.
Each reception line is equipped with following –
1. Centrifugal pumps each of capacity of 30,000 liters per hour.
2. Deaerator tank to remove air from the milk.
3. Filters to filter out sludge and other impurities from milk.
4. One Pre-heat exchanger after each filter.
5. Raw milk silo for storing raw milk.
Milk pasteurizing has six sections:
1. Regeneration 1st – milk first enters in this section, here the heat of outgoing milk is utilized to heat the incoming chilled milk and
incoming chilled milk cools down the outgoing milk.
2. Pre-heating section – at this juncture milk is heated at 60 deg. Celsius.
3. Regeneration 2nd – now the standardized milk is further heated before going to heating section by milk coming from holding
tubes.
4. Heating section – milk from the regeneration section 2nd is heated up to the pasteurization temperature by hot water.
5. Holding tubes – pasteurized milk is held in the holding tubes, which is 42 m long, and 72 mm wide in diameter.
6. Chilling section – milk is chilled here by chilled water.
Milk Pouch Packing Process
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(Liquid Milk)
Raw Milk Receiving Dock or the Milk Reception Bay at Amul 2 receives milk twice a day. It receives cows, buffalo’s and mix
milk from different co-operative societies associated with Amul. They collect milk in the morning as well as in the evening. There are
total 102 routes and 1230 societies from where milk is collected and sent to Anand plant. Milk is then standardized to prepare flavored
milk. It is homogenized and then flavored milk is produced from it. Surplus milk is sent to Amul 3 where various other milk products are
manufactured.
The farthest milk collection centre is at Balasinor while the nearest is at Anand.
Milk Reception
For reception of milk there are two reception lines. Cans are manually put on the conveyor. At first instance the cans are tested
by the person in charge of it by putting a plunger inside the can and smelling the milk whether it is good or sour. Sour milk and curd are
dumped into another tank. Milk is then put on the weighing tank and is along with weighing it, it is tested for fat and SNF. Then the valve
of the weighing tank is opened and milk flows into the raw milk storage tank and cans move to the can washer. On each line there is a
can washer and each can washer has a capacity of 20 cans per minute.
Butter
Contents
Milk Fat – 80%
Moisture – 16%
Salt – 2.5%
Curd – 0.8%
Process
Cream for manufacturing butter in Amul 3 is to be received from following sources:
a) Cream from other dairies through tankers.
b) Cream produced in Amul 3 while standardization of milk.
c) Cream pumped from Amul 2.
Before initiating the butter making process the Continuous Butter Making Machine has to be rinsed with cold water for
about 10 to 15 minutes.
The very first step in butter making is churning of cream. Cream is churned at a speed of 800 to 1200 rpm at 12 degree Celsius. Although
the speed for churning the cream depends upon the quality of cream and the type of product that is desired from the cream. The
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properties of cream that influence and are required to be known before churning are viscosity (its thickness), ripening of cream and
whether cream is sweet or sour in taste.
The butter grains formed in the churning process enter the working cannon along with the buttermilk.
Process:
Raw cream
Pastuerisation (at 90 oC)
Cooled
Ripening (at 9 oC for 20 hours)
Cream balance tank
Heat exchanges (for temperature adjustment at
6 to 10 oC)
Churning
Unsalted Butter Salting
White Butter Grinding
Used for ghee manufacturing Brine and color
100 gm and 500 gm packs addition
PARTICULARS 06-07 07-08 08-09
Opening stock of Raw Material 154.85 207.39 266.58
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ADD: Purchase of raw material 64030.16 93690.87 114617.8
LESS: Closing stock of Raw material 207.39 266.58 415.92
COST OF RAW MATERIAL CONSUMED 63977.62 93631.68 114468.46
ADD: Labour expenses _ _ _
ADD: Opening stock of Work in Progress 1821.55 1902.08 2319.85
LESS: Closing stock of Work in Progress 1902.08 2319.85 2539.55
PRIME COST 63897.09 93213.91 114248.76
ADD: Manufacturing Expenses
1.Research and extension expenses 954.67 1182.12 910.43
2.Processing Expenses 711.64 1089.17 1581.04
3.Packaging Expenses 6438.42 8363.90 10477.66
4.Power and fuel expenses 2305.88 3046.28 4003.98
5.Salaries and wages 822.08 1006.18 1067.71
6.Staff provident fund, Gratuity and other
amenities
282.21 288.06 343.15
7.Repairs and Maintenance expenses 682.36 850.84 1024.60
8.Insurance premium 67.76 48.41 36.08
9.Rent,rates and taxes 33.15 34.89 88.52
10.Depreciation 535.35 459.16 641.74
12833.55 16359.39 20174.93
FACTORY COST/COST OF PRODUCTION 76730.64 109573.3 134423.69
ADD: Administration expenses
1.Power and fuel expenses 576.48 761.58 1001
2.Salaries and wages 548.06 670.79 711.81
3.Repaires and maintenance 170.6 212.71 256.16
4.Insurance premium 16.95 12.11 9.03
5.Rent,rates and taxes 8.29 8.73 22.13
6.Depreciation 133.83 114.75 160.43
7.Postage,Telegram,Telephone,Printing
And stationary expenses
56.51 56.14 63.05
8.Audit fees 92.87 99.66 103.79
9.Adminstration expenses 133.51 166.77 198.96
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10.Staff Provident fund, Gratuity and other
amenities
188.14 192.04 228.76
1925.24 2295.28 2755.12
OFFICE COST 78655.88 111868.58 137178.81
ADD: Opening stock of finished goods 6013.22 4843.32 10890.43
LESS: Closing stock of finished goods 4843.32 10890.43 13379.03
COST OF GOODS SOLD 79825.788 105821.47 134690.21
ADD: Selling and distribution expenses
1.Freight and forwarding expenses 695.21 1015.17 1554.12
2.Marketing expenses 106.17 109.99 125.87
801.38 1125.16 1679.99
COST OF SALES 80627.16 106946.63 136370.20
ADD: PROFIT OR SALES 1004.522 240.65 842.144
SALES 81631.69 107187.29 137212.35
Finance Department
Finance is the art and science of managing money. Financial management is concerned with the duties of the financial
managers in the business firm. Financial managers actively manage the financial affairs of any type of business namely, financial and
non- financial, private and public, large and small, profit seeking or not-for-profit.
Scope of Financial Management
The approach to the scope of financial management is divided in to two broad categories,
1. Traditional Approach
2. Modern Approach
1. Traditional Approach
The traditional approach to the scope of finance function evolved during the 1920s and 1930s. As the name suggests, the
concern of corporate finance was with the financing of corporate activities. In the other words, the scope of the finance function was
treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprise to meet their financial needs. The
term ‘procurement’ was used in a broad sense so as to include the whole gamut of raising funds externally.
There are several weaknesses of this approach forcing us to discard this as an out-dated approach.
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The first argument against the traditional approach was based on its emphasis on issues relating to the procurement of funds by corporate
enterprises. This approach ignored the views and opinions of those who are to use the funds inside the organisation. They considered the
outsider-in approach. The internal decision makers were ignored.
The second weakness was that focus was on financing problems of corporate enterprise. It did not consider non-corporate enterprises.
Finally, the traditional treatment was found to have a lacuna to the extent that the focus was on long-term financing. It believed that
issues pertaining to working capital management were not under the purview of financial management.
2. Modern Approach
The modern approach views the term financial management in a broad sense. According to it, the finance function covers
both acquisitions of funds as well as their allocations. Thus, apart from the issues involved in acquiring external funds, the main concern
of financial management is the efficient and wise allocation of funds to various uses.
The principal contents of modern approach to financial management can be said to be:
(i) How large should an enterprise be, and how fast should it grow?
(ii) In what form should it hold assets? And
(iii) What should be the composition of its liabilities?
The questions posed above cover major issues faced by any enterprise. The financial management is concerned with the solution of
investment, financing and dividend decisions.
Thus, financial management, in the modern sense of the firm, can be broken down into three major decisions as functions of finance:
(A) The Investment Decision,
(B) The Financing Decision, and
(C) The Dividend Decision.
(A) The Investment decision relates to the selection of assets in which funds will be invested by a firm. The assets which can be
acquired can be divided broadly into two groups: (i) long term assets which yield a return over a period of time in future, (ii) short term
assets, defined as those assets which in normal course of business can be converted into cash without diminution in value, usually within
a year.It normally includes decisions for capital budgeting and working capital management.
(B) The Financing decision is concern with the financing-mix or capital structure or leverage. The term capital structure refers to the
proportion of debt (fixed interest sources for financing) and equity (variable-dividend securities/source of funds). A capital structure with
a reasonable proportion of debt and equity capital is called the optimum capital structure. Thus, one dimension of the financing decision
whether there is an optimum capital structure and in what proportion should funds be raised to maximize the return to shareholders? The
second aspect of the financing decision is the determination of an appropriate capital structure given the facts and figures.
(D) The third major decision area of financial management is the decision relating to the Dividend policy. The dividend decision
should be analyzed in the relation to the financing decision of the firm. Two alternatives are available relating to the dividend
decision: (i) they can be distributed to the shareholders in the form of dividend or (ii) they can be retained in the business
itself. The decision as to which course should be followed depends largely upon the significant element in the dividend
decision, the dividend payout ratio, that is, what proportion of net profits should be paid out to the shareholders. The final
decision will rest with the preference of the shareholders and investment opportunities available within the firm. The second
major aspect of the dividend decision is the factors determining dividend policy of a firm in practice.
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Functions of Financial Management
1. Financial Forecasting
The financial management sees that an adequate supply of cash is available at the proper time for smooth flow of firm’s
activities. As cash inflow and outflow both are closely related to the volume of sales, it requires financial forecasting. The estimation of
the prospective cash inflow and cash outflow in the next quarter or year is necessary to maintain the liquidity in the funds.
2. Investment decision
The investment decision is the most important function of financial management. It involves the allocation of capital to various
investment proposals in order of their priority and profitability. As each investment decision involves risk a financial manager assists in
evaluating the various proposals in the processes of capital budgeting.
3. Management of Income
Management of income is a major function of financial executive. It includes the allocation of net earnings after payment to
taxes among shareholders and retaining earning for employers. The shareholders generally are interested in current cash dividends. In
order to provide for future contingencies, the top management (management) wants to retain earnings to the maximum possible extent.
Deciding between these two is very crucial.
4. Management of Cash
Estimating and controlling cash flows is an important function of financial management The cash must be managed for the
benefit of the owners. The financial manager tries two things: (i) how can managers choose the best among alternative uses of funds, and
(ii) how can they ascertain that this is a better use than stock-holders could find outside the company? The finance manager must choose
most desirable investment option.
5. Deciding about New Sources of Finance
A business firm is always in need of funds. Therefore, on the basis of forecast of the volume of operations the finance
manager should decide upon the needs and prepare the detailed financial plan both short term and long term for the procurement of
funds.
6. Analysis and appraisal of Financial Performance
Proper analysis, checking and appraisal of financial performance are very essential to carry out finance function
smoothly. Various financial statements are prepared, analyzed and then necessary guidelines are set for the future.
19
Organization Chart of Finance Department
Managing Director
Manager
Dept. Manager
Asst. Manager
Senior Executive
Executive
Senior Officer
Senior Assistant
Junior Assistant
Accounting Policies
1. Method of Accounting
(a) The union follows accrual system of accounting in preparation of accounts.
(b) The financial statements are prepared on historical costs, convention and in accordance with the generally accepted
accounting principals.
2. Fixed Assets
Fixed assets are valued at cost. The cost of assets comprises of purchase price and any directly attributable cost on
bringing the assets to its present condition or intended use.
3. Depreciation
20
Depreciation on Fixed assets is provided on Written down Value Method at the applicable rates prescribed under the
Income Tax
Act, 1961. Depreciation has been provided for the full year for the assets acquired and commissioned by September, and others acquired
later are subject to half-year depreciation. Where grant has been received against any assets the depreciation on the grant proportion has
been adjusted against the grant (except for the assets of Amul 1 & 2).
4. Inventories
(a) Raw material, Packing material, Semi-packed goods and finished goods are valued at FIFO basis.
(b) Store and spares are valued at cost on FIFO basis.
(c) Excise duty applicable on finished goods stock has been included in the valuation of finished goods.
5. Investment
Investments are primarily meant to be held on long-term basis at stated cost.
6. Retirement Benefits
Union’s contribution towards Gratuity and Super-annuation for its employees is funded with LIC of India.
7. Excise Duty
Provision has been made for the excise duty applicable on the finished goods stock in the excise expenses.
8. Income Tax
In view of the carry forward losses, there is no taxable income and hence no provision for income tax is required to be made
under the Income Tax act, 1961. The union has unabsorbed depreciation and carry forward losses under the income tax laws. In absence
of virtual certainty of sufficient future taxable income, net deferred tax assets has not been recognized by way of prudence in accordance
with the Accounting standard AS 22 – “Accounting for tax on income” issued by the ICAI.
9. Crate Accounting
Crates used in the milk distribution at Anand, Pune and Kolkata has been treated as deferred revenue expenditure and
charged to Profit and Loss A/c over a period of three years considering their life of usage
21
Inventory Management
Inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which
firms store as inventory in anticipation of need are
(i) Raw materials
(ii) Work-in-progress (semi-finished goods)
(iii) Finished goods
The raw material inventory contains items that are purchased by the firm from others and are converted into finished goods through the
manufacturing process. The firm it-self might be producing the raw material.
The work-in-progress inventory consists of items currently being used in the production process. They are normally semi-finished goods
that are at various stages of production process in a multi-stage production process.
Finished goods represent final or completed products, which are available for sale. The inventory of such goods consists of items that
have been produced but are yet to be sold.
The views concerning the appropriate level of inventory would differ among the different functional areas. The job of the financial
manager is to reconcile the conflicting viewpoints of the various functional areas regarding the appropriate inventory levels in order to
fulfill the overall objective of maximizing the owners’ wealth.
Objectives of Inventory Management can be explained as follows:
The basic responsibility of the financial manager is to make sure the firm’s cash flows are managed efficiently. Efficient management of
inventory should ultimately result in the maximization of the owner’s wealth. In order to minimize cash requirements, inventory should
be turned over as quickly as possible, avoiding stock-outs that might result in closing down the production line or lead to a loss of sales.
It implies that while the management should try to pursue the financial objective of turning inventory as quickly as possible at the same
time not affecting its production activities.
Since the production runs 24x7 it is necessary to have enough stock on hand so as to not to adversely affect the production process.
Various costs involved in inventory management are:
(i) Ordering costs
(ii) Carrying costs
The term ordering cost is used in case of raw material and includes the entire costs of acquiring raw material. They include cost include
in the following activities:
Requisition purchase, ordering transporting, receiving inspecting, and storing. The ordering costs increase in proportion to the number of
order placed, thus the more frequently the inventory is acquired the higher the firm’s ordering cost. On the other hand, if the firm
maintain large inventory levels there will be few order placed and ordering cost will be relatively small. Thus the ordering cost decrease
with increasing size of inventory.
The term carrying cost means the costs which are incurred for holding the level of inventory. They include the opportunity cost of funds
invested in inventories, storage cost, insurance, taxes, and cost in the deterioration and obsolescence. Opportunity costs are the earning
foregone on the other best available investment opportunity.
The carrying costs move in direct proportion to inventory size. Higher the inventory sizes, higher the carrying cost and lower the
inventory size, lower the inventory costs.
22
Funds Flow Statement
To understand the importance of Funds Flow Statement (FFS) it is necessary to clearly understand the meaning of the word
‘fund’. For a common layman, ‘fund’ means only cash i.e. liquid cash. But it is actually a wrong understanding. Fund is not affected by
changes in cash only; it also changes with any transaction that takes place. For example, when goods are sold on credit to any debtor then
cash is not increased or decreased but yes the funds would increase. Similarly, when we purchase goods and pay cash, our cash balance
would definitely get reduced. But when we avail credit from creditors we don’t have to pay immediately. Hence funds are affected in this
case. Increase in creditors has thus become a source of funds and in the same way increase in debtor would result into decrease in funds.
In short:
“When liabilities increase, it is a Source of Funds;
When assets increase, it is an Application of Funds.”
A summarized list of source and application of funds is given below:
A] Sources of Funds:
(i) Increase in capital (by way of issuing shares)
(ii) Borrowing or incurring any liability
(iii) Profit from operation of business
(iv) Sale of fixed assets or investments
B] Application of Funds:
(i) Purchase of fixed assets
(ii) Purchase of investments
(iii) Repayment of Capital (eg. Redemption of preference shares)
(iv) Repayment of loans or debentures
(v) Payment of cash dividends
The list reveals that funds would increase with any increase in assets or when there is any decrease in liability and vice versa.
23
WORKING CAPITAL MANAGEMENT:
THEORIES AND APPROACHES
INTRODUCTION
The operating efficiency of an organization is decided by the provision of optimum liquidity.
Working capital constitutes part of the important investments in the organization. it not only manages the current assets but also manages
the manages the current liability of the organization.In simple language working capital can be explained as the capital which is required
for the day to day expenses. Working capital can be viewed as the amount of capital required for the smooth functioning of the normal
business operation of en organization ranging from the procurement of raw material , converting the same into finished products for sale
and realizing cash along with profit from the accounts receivables that arises from the sale of finished goods on credit.
Working capital is a qualitative concept. it indicates the liquidity position of the firm and suggest the extent to which the working capital
needs are to be financed through the help of permanent sources of finance. Current assets should be in excess of current liability for
maturing the obligation in normal operating cycle.
A weak working capital position poses a threat to the management and also shows a negative liquidity, and excessive working capital is
also bad for the organization. Therefore a timely action should be taken in an organization in order to manage and improve the liquidity
position.
CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital namely
gross working capital
Net working capital.
Gross working capital means the total of current assets.
Net working capital is the difference between current assets and liabilities. An alternate definition of net working capital is that position
of current asset which is financed with the long term funds.
NATURE
Working capital management is concerned with the problems that arise in attempting to manage the current asset, the current liabilities
and the interrelationship hat exist between them. The term current asset refers to those assets which in the ordinary course of business can
be, or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the
firm. The current liabilities are those liabilities which are intended , at their inception ,to be paid in the ordinary course of business,
within a year out of current asset or earnings. The main goal of working capital management is to manage the firms current asset and
liability in a way as to maintain value of the company in a satisfactory way. The current assets should be large enough to cover the
current liability to maintain a margin of safety. In order to maintain the liquidity position adequate amount of current assets are required.
NEED
To maximize the shareholders wealth it is necessary to generate adequate profit which in turn depends the magnitude of sales. As the
sales may not convert into cash immediately there is a need of working for working capital in the form of current assets to deal the
problem arising out of lack of realization of cash against goods hence sufficient working capital is required to maintain the level of
activity.
24
CONSTITUENTS OF WORKING CAPITAL
The main constituents of working capital are
Current asset
Current liability
The main components under current asset in AMUL ARE
Stock
Deposits
Due from societies
Advances
Trade and sundry debtors
Income tax deposits
Cash and bank balances
The main components of current liabilities ARE
Creditors
Due to societies
Outstanding against expenses and purchases
DETERMINANTS OF WORKING CAPITAL
GENERAL NATURE OF BUSINESS
Working capital requirement of the firm are basically influenced by nature of the business. If the firm is a manufacturing industry they
have to maintain more of raw material and inventory, which means more of investments, and capital needs. if the business is a service
based , then there is less need of working capital. If sales are based on cash then there is less need of working capital and if the sale is
based on credit then working capital is needed more.
PRODUCTION CYCLE
It covers the time- span between the procurement of raw material and the completion of the manufacturing process leading to the
production of finished goods. During such cycles the funds are locked up in the business. The longer the time span the larger will be the
funds tied up and therefore the larger is the working capital needed and vice verse.
BUSINESS CYCLE
Business fluctuations lead to cyclical and seasonal changes which, in turn cause a shift in the working capital position, particular for the
temporary working capital. The variations in business conditions may be in two direction (i)upward phase when boom condition prevail
and (ii) downward phase when economic activity is marked by a decline.
CREDIT POLICY
The credit policy influences the requirement of working capital in two ways: (i) through credit terms granted by the firms to its customer
of goods. (ii) credit terms available to the firm from its creditors. The firm should be prompt in making collection. A high collection
period will mean tie up of funds in making collection.
GROWTH AND EXPANSION
As a company grows in size we can imagine that there will naturally be an increase in the capital requirement. The composition of
working capital in a growing company also shifts with the economic circumstances and corporate practices.
PROFIT LEVEL
The level of profit earned differs from enterprise. Manufacturing industries earn lesser profit if considering the scale of operation.
25
LEVEL OF TAXES
The first appropriation out of profit is payment or provision of tax. The amount of taxes to be paid is determined by the prevailing tax
regulations. If the tax liability increases, it leads to an increase in the requirement of working capital and vice-verse.
DIVIDEND POLICY
The payment of dividend consumes cash resources and thererby, affects working capital to that extent. If the firm does not pays dividend
and retains profits the working capital will increase.
DEPRECIATION POLICY
The effect of depreciation policy on working capital is therefore ,indirect. Enhanced rates of depreciation will reduce the profit and tax
liability and therefore lowers the profit.
BALANCED WORKING CAPITAL POSITION
The firm should maintain a sound working capital position. It should have adequate working capital in order to run its business operation.
Both excessive as well as inadequate working capital position are dangerous from firms point of view. Excessive working capital means
holding cost and idle funds, which earns no profit to the firm.
The dangers of excessive working capital are:
It is an indication of defective credit policy and slack collection policy. Consequently higher incidence of bad debts results, which
adversely affects the profit.
It results in unnecessary accumulation of inventories .thus chances of inventory mishandling waste ,theft and loss increases.
Excessive working capital makes management complacent ,which degenerates into management inefficiency.
Tendency of accumulating inventories tend to make speculative profits grow.
Inadequate working capital is also bad these are the following dangers:
It becomes difficult to implement operating plans and achieve the firms target.
Operating inefficiencies creep in when it becomes difficult to meet day to day commitment.
It stagnates growth, It becomes difficult for the firm to undertake profitable projects because of non-availability of working
capital funds.
Therefore a firm should maintain the right amount of working capital on a continuous basis only then proper functioning of business
operation is ensured.
OPERATING CYCLE
This figure depicts the interdependence among the components of working capital. In Amul all the operation starts with the cash
purchase of raw material .in amul the main raw material is the raw milk which is collected from the 1100 societies. This raw milk is been
converted into finished good after undergoing the stage of work in process.
For this purpose the organization has to make payment towards wages, salaries, and the other manufacturing cost. Payment to suppliers
is been made on purchase in the case of cash purchase and on expiry of credit period in the case of credit purchase. Further the
organization has to meet other operating cost such as selling and distribution cost, and non operating cost described as financial cost.Here
in amul the goods are sold on credit basis.
it will pass through one stage that is account receivables and get back cash along with profit on the expiry of credit period. And once
again the cash will be used for the purchase of material or payment to suppliers and the whole cycle is termed as working capital cycle.
OPERATING CYCLE:
26
1. RAW-MATERIAL CONVERSION PERIOD:
=AVERAGE STOCK OF RAW-MATERIAL/PER DAY RAW-MATERIAL CONSUMPTION
AVERAGE STOCK OF RAW-MATERIAL:
=OPENING STOCK OF RAW-MATERIAL + CLOSING STOCK OF RAW- MATERIAL/2
PER DAY RAW-MATERIAL CONSUMPTION:
=RAW-MATERIAL CONSUMPTION/360
2. WORK-IN PROCESS CONVERSION PERIOD:
=WORK-IN PROCESS INVENTORY * 360/COST OF PRODUCTION
3. FINISHED GOODS INVENTORY CONVERSION PERIOD:
=FINISHED GOODS INVENTORY * 360/COST OF GOODS SOLD
4. DEBTORS CONVERSION PERIOD:
=DEBTORS * 360/CREDIT SALES
5. CREDITORS DEFERRAL PERIOD:
=CREDITORS * 360/CREDIT PURCHASES
RAW-MATERIAL STORAGE PERIOD (IN DAYS):
PARTICULARS 2007-08 2008-09 2009-10
RAW-MATERIAL
CONSUMPTION
93631.68 114468.46 129967.85
PER DAY RAW-
MATERIAL
CONSUMPTION
260.08 317.96 361.02
AVERAGE STOCK
OF RAW
MATERIAL
236.985 341.85 471.85
RAW-MATERIAL
STORAGE PERIOD
0.91 1.07 1.31
WORK-IN PROCESS CONVERSION PERIOD(IN DAYS)
PARTICULARS 2007-08 2008-09 2009-10
WORK-IN PROCESS
INVENTORY
1902.08 2319.85 2539.55
COST OF
PRODUCTION
71441.49 91427.30 103972.69
WORK-IN PROCESS
INVENTORY
CONVERSION
PERIOD
10.64 9.57 10.82
27
FINISHED GOODS INVENTORY CONVERSION
PERIOD(IN DAYS)
PARTICULARS 2007-08 2008-09 2009-10
FINISHED GOODS
INVENTORY
7866.88 12134.73 12252.00
COST OF GOODS
SOLD
71441.49 91427.30 103972.69
FINISHED GOODS
INVENTORY
CONVERSION
PERIOD
39.64 47.78 42.42
DEBTORS CONVERSION PERIOD (IN DAYS)
PARTICULARS 2007-08 2008-09 2009-10
DEBTORS 7625.86 7437.28 5302.24
CREDIT SALES 107187.29 137212.35 169700.00
DEBTORS
CONVERSION
PERIOD
25.61 19.51 42.42
CREDITORS DEFERRAL PERIOD (IN DAYS)
PARTICULARS 2007-08 2008-09 2009-10
CREDITORS 12228.14 15322.54 19195.23
CREDIT
PURCHASE
93690.87 114617.80 129967.85
CREDITORS
DEFERRAL
PERIOD
46.99 48.13 53.17
28
OPERATING CYCLE (A+B+C+D-E)
PARTICULARS 2007-08 2008-09 2009-10
RAW-MATERIAL
CONVERSION
PERIOD(A)
0.91 1.07 1.31
WORK IN
PROCESS
INVENTORY
PERIOD(B)
10.64 9.57 10.82
FINISHED GOODS
INVENTORY(C)
39.64 47.78 42.42
DEBTORS
CONVERSION
PERIOD(D)
25.61 19.51 11.25
CREDITORS
DEFERRAL
PERIOD(E)
46.99 48.13 53.17
[1] CURRENT RATIO
Current assets
Current Ratio = ________________
Current liabilities
YEAR CURRENT ASSETS CURRENT LIABILITIES RATIO=
CA/CL
06-07 19874.21 12106.54 1.64
07-08 28995.9 13892.41 2.08
08-09 28874.39 17798.69 1.62
[2] QUICK RATIO
Quick Ratio= Quick Assets
_____________
29
RATIO ANALYSIS
Quick Liabilities
YEAR QUICK ASSETS CURRENT
LIABILITY
RATIO
(Q.A/C.L)
06-07 10796.31 12106.54 0.89
07-08 13258.02 13892.41 .095
08-09 9433.42 17798.69 0.53
INTERPRETATION:
The quick ratio signifies more liquidity, and out of the three years, its was best in 2007-08.The ideal Quick Ratio is 1:1. . In AMUL the
Quick Ratio is less than 1 in all the three years. The reason is increase in the current liability.
[3] CASH RATIO
Cash Ratio= (Cash+Marketable securities)
_______________________________
Current Assets
[4] DEBTORS TURNOVER RATIO
D.T.R= NET CREDIT SALES
AVERAGE ACCOUNTS RECEIVABLE
YEAR NET CREDIT
SALES
AAR RATIO=
NCS/AAR
06-07 81631.69 6759.24 12.07
07-08 107187.29 7625.77 14.06
08-09137212.35 7437.28 18.45
INTERPRETATION:
From the above ratios we can say that AMUL’S Debtors remain outstanding for 12.07 days in 2006-07,14.05 in 2007-08,19.83 in 2008-
09 respectively. The Collection period of Debtors is decreasing day by day. It is good sign for AMUL.
[4A] AVERAGE COLLECTION PERIOD
ACP=(AAR*365)/NCS
30
YEAR CASH + BANK CURRENT ASSETS RATIO=
(CASH/CA)
06-07 224.93 19874.21 0.01
07-08 160.55 28995.9 0.005
08-09 584.65 28874.39 0.02
YEAR AAR*365 NCS RATIO=
AAR*365/NCS
06-07 6759.24*365 81631.69 30.22
07-08 7625.77*365 107187.29 25.96
08-09 6916.46*365 137212.35 18.39
[5] CREDITORS TURNOVER RATIO
CTR = NET CREDIT PURCHASE
______________________________
AVERAGE ACCOUNTS PAYMENT
YEAR NCP AAP RATIO=NCP/AAP
06-07 52312.16 387.93 134.84
07-08 93690.87 12228.14 7.66
08-09 114617.80 15322.54 7.48
INTERPRETATION:
From the above we can say that the payment of Creditors is outstanding by AMUL.134.84 days in 2006-07,195.84 days in 2007-
08,237.01 days in 2008-09. The payment period to Creditor remain same in every year. It is good for AMUL.
[5A] AVERAGE PAYMENT PERIOD
AAP= AVERAGE PAYMENT PERIOD*365
_____________________________________
NET CREDIT PERIOD
YEAR AAP*365 NCP RATIO=
AAP*365/NCP
06-07 387.935*365 52312.16 2.71
07-08 398.1*365 77965.56 1.86
08-09 397.81*365 94284.94 1.54
[6]CAPITAL TURNOVER RATIO
CTR= NET SALES
______________
CAPITAL EMPLOYED
YEAR NET SALES CAPITAL RATIO=NS/CE
31
EMPLOYED
06-07 81631.69 13572.19 6.01
07-08 107187.29 12367.04 8.66
08-09 137212.35 13499.5 10.16
INTERPRETATION:
It will be good if capital turnover ratio is increasing year by year,and it shows how efficiently AMUL has invested in capital.
[7] TOTAL ASSETS TURNOVER
RATIO= NET SALES
_____________
TOTAL ASSETS
YEAR NET SALES TOTAL ASSETS RATIO=NS/TA
06-07 81631.69 25678.73 3.17
07-08 107187.29 35759.45 2.99
08-09 137212.35 36298.19 3.78
INTERPRETATION
From the above data we can say that in AMUL Total Asset Turnover is recovered 3.17 times in 06-07,2.99 times in 07-08,3.78 times in
08-09. But in 2007-08 the Total Assets is increasing by 40% from 2006-07. So the turnover ratio is declining in that year.
[8] FIXED ASSETS TURNOVER
RATIO= NET SALES
_______________
FIXED ASSETS TURNOVER
YEAR NET SALES FIXED ASSETS
TURNOVER
NS/FAT
06-07 81631.69 5371.69 15.19
07-08 107187.29 6122.97 17.50
08-09 137212.35 6888.25 19.91
INTERPRETATION
From the above ratio we can say that in AMUL Fixed Assets is recovered in 15.19 times in 06-07,17.50 times in 07-08,19.91 times in 08-
09 respectively. We can say that the total Fixed Assets Turnover is increasing day by day. It is good sign for AMUL.
32
[9] CURRENT ASSETS TURNOVER
RATIO= NET SALES
______________
CURRENT ASSETS
YEAR NET SALES CURRENT ASSETS RATIO=NS/CA
06-07 81631.69 19874.21 4.10
07-08 107187.29 28995.9 3.69
08-09 137212.35 28874.39 4.75
[10] NET WORKING CAPITAL TURNOVER
RATIO= NET SALES
__________________
NET WORKING CAPITAL
YEAR NET SALES NWC RATIO=
NS/NWC
06-07 81631.69 7767.67 10.50
07-08 107187.29 15103.49 7.096
08-09 137212.35 11075.7 12.3
INTERPRETATION
From the above we can say that AMUL is able to recover its Working Capital 10.50 times in 06-07,7.096 times in 07-08,12.3 times in
08-09 respectively. If working capital turnover ratio increases, it is good for AMUL as it can generate more and more sales.
33
[11] OWNER’S EQUITY TO TOTAL EQUITY
RATIO= OWNER’S EQUITY
_____________________
TOTAL EQUITY
YEAR OWNER’S EQUITY TOTAL EQUITY RATIO=
OWNER’S/TOTAL
06-07 6208.48 13572.19 0.45
07-08 6492.09 12367.04 0.52
08-09 6698.98
[12] DEBT EQUITY RATIO
RATIO= LONG TERM DEBT
_________________________
SHAREHOLDERS EQUITY
YEAR LONG TERM
DEBT
SHAREHOLDERS RATIO=
LTD/SHAREHOLDERS
06-07 7363.71 6208.48 1.18
07-08 14873.32 6492.09 2.29
08-09 6800.52 6698.98 1.01
[12A] DEBT RATIO
DEBT RATIO= TOTAL DEBT
_________________
CAPITAL EMPLOYED
34
YEAR TOTAL DEBT CAPITAL
EMPLOYED
RATIO=
TD/CE
06-07 7363.71 13572.19 0.54
07-08 14873.32 12367.04 1.20
08-09 6800.52 13499.5 0.50
[13]CAPITAL GEARING RATIO
RATIO= FIXED INCOME-BEARING FUNDS
_____________________________________
EQUITY
YEAR FIXED INCOME EQUITY RATIO=
FI/EQUITY
06-07 7363.71 6208.48 1.18
07-08 14873.32 6492.09 2.29
08-09 6800.52 6698.98 1.01
[14] FIXED ASSETS TO LONG TERM FUND
RATIO= FIXED ASSETS
____________________
LONG TERM FUND
YEAR FIXED ASSETS LONG TERM FUND RATIO=
FA/LTF
06-07 5371.69 7363.71 0.72
07-08 6122.97 14873.32 0.41
08-09 9888.25 6800.5 1.01
[15] INTEREST COVERAGE RATIO
RATIO= EBIT
____________
INTEREST
35
YEAR EBIT INTEREST RATIO=
EBIT/INTEREST
06-07 1131.64 705.14 1.60
07-08 1275.3 814.81 1.57
08-09 1802.6 1122.07 1.60
[16] RETURN ON CAPITAL EMPLOYED
RATIO= (RETURN*100)
__________________
CAPITAL EMPLOYED
YEAR RETURN*100 CAPITAL EMPLOYED RATIO=
RETURN*100/CE
06-07 1131.64*100 9500 8.33
07-08 1840.09*100 12367.04 14.87
08-09 1802.6*100 13499.5 13.35
INTERPRETATION
From the above data we can say that Return on Capital Employed,if the recover Ratio of Capital Employed in the business is increasing it
is good sign for AMUL.
[17] RETURN ON EQUITY
RATIO= (PAT-PREF.DIVIDEND)
________________________________
SHAREHOLDERS’ EQUITY
YEAR PAT-PREF.DIVIDEND SHAREHOLDERS’
EQUITY
RATIO=
PAT/SHAREHOLDER
06-07 411.50 6208.48 0.066
07-08 451.51 6492.09 0.069
08-09 575.53 6698.98 0.085
[18] EARNING PER SHARE(EPS)
36
RATIO= NET PROFIT AVAILABLE TO EQUITY SHAREHOLDERS
_________________________________________________________
NO. OF EQUITY SHARES OUTSTANDING
YEAR NET PROFIT EQUITY SHARES RATIO=
NP/EQUITY
06-07 411.50 19800000 20.78
07-08 451.51 2229180 20.25
08-09 575.53 2265990 25.39
[19] DIVEDEND PER SHARE(DPS)
RATIO= PROFIT DISTRIBUTED TO EQUITY SHAREHOLDERS
_______________________________________________________
NO. EQUITY SHARES OUTSTANDING
YEAR PROFIT NO.EQUITY SHARES RATIO=
PROFIT/NO.EQUITY
SHARES
06-07 287.10 1980000 14.50
07-08 325.50 2229180 14.60
08-09 337.15 2265990 14.87
[20] DIVEDEND PAYOUT RATIO
RATIO= DIVEDEND PER SHARE
__________________________
EARNINGS PER SHARE
YEAR DPS EPS RATIO=
DPS/EPS
06-07 14.5 20.78 0.006
07-08 14.60 20.25 0.72
08-09 14.87 25.39 0.58
37
Suggestions & Recommendations
The first and foremost recommendation to be made is to have a proper and well defined inventory management procedure and
process.
There is lot of undue wastage of raw materials as well as packing materials, which can be minimized if proper supervision and
control is there.
Proper ABC classification would help in reducing the cash expenses also sufficient goods would be bought under each category.
On the other hand, the required storage facility can be set up for different materials as required by them.
A minimum stock level should be set up so that the firm does not run out of stock or do not have to handle the surplus stock.
Since Amul’s chocolates are good in taste and also with high nutrition value, due to lack of marketing people get diverted to the
competitors’ brands rather than buying Amul’s chocolates.
Lots of packing materials are wasted and no account of such looses is maintained, this makes people working there to resort to
undue use and hence wasting the materials.
38
CONCLUSION
Amul has developed itself to a great extent since its establishment. Still it has been trying hard to expand its activities and
also to diversify itself. There are very good opportunities lying ahead for Amul not only at the domestic level but also at the international
front. Since India is the largest producer of milk it can export its milk and dairy products to other countries and can help them nurture
their nation with more nutritious food.
There are certain points where the firm needs to take steps to check undue activities and wastages made by its employees.
Its working capital management is not as efficient as it should be. They have no well defined principles and policies through which they
can manage their working capital, so they can have policies for inventory management like ABC classification, EOQ level, Miller & Orr
Model for cash management. They can co-ordinate their receivables’ and payables’ standards so as to efficiently utilize cash and hence
save interest paid on Cash Credit taken form various banks. There are loopholes where the organization itself can get stuck up if not
taken care of. But since last 60 years it has been working making profits all the way.
The year 2007-08, Amul has out performed in terms of milk receipts, sales turn over and profits. I expect the same trend would
continue for years to come. And this project would help Amul a lot.
In all, my experience at Amul was very good. I have learnt many practical things at Amul and how actually real time people work in
organizations.
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