KMF Final Print

Karnataka Milk Federation, Dharwad
INDUSTRY PROFILE
INDUSTRY PROFILE
DAIRY INDUSTRY IN INDIA Dairy enterprise is an important occupation of farmer. In India nearly 70% of the people depend on agriculture. It is the backbone of India. Dairy is linked with agriculture industry to a large extent. Animal husbandry in India is an essential part husbandry. It is mainly a rural occupation closely associated with agriculture.
DEVELOMENT OF DAIRY INDUSTRY IN INDIA During the Pre-independence year there was no serious stress given to dairy industry. In 1886 the Department of Defense of the British Government established the dairy farms for the supply of milk to the British troops in Alahabad. Later, in 1920 serious steps were taken by Mr. William Smith, an expert in dairy forming to improve the milk production There was discrimination done to the Indians hence this led to the rise of the first milk
R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD
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union in India. In Luck now in 1937 called the Luck now milk producers Cooperative union Ltd. In 1946 AMUL (Anand Milk Udyog Ltd ) was started in Gujarat to bring up the economic stability of villagers. When the farmer Prime Minister Lal Bahaddur Shastri visited the functioning as it was rendering a social service to the society, which helped the villagers to come in the national economic stream. The dairy and Animal Husbandry received serious attention after the independence. There were lot many of progressive steps taken by the government through five year plans. This led to the formation of National Dairy Development Board in 1965 & thus in 1970 he decided to Bring a White Revolution throughout the country, Initially 10 states were selected were for this purpose excluding Karnataka. In Karnataka in 1974 an integrated project was launched to restructure and reorganize the dairy industry on Co-operative principle of AMUL. And to lay foundation for new direction in dairy industry.
NATIONAL DARIY DEVELOMENT BOARD: History: The NDDB was founded to replace exploitation with empowerment, tradition with Modernity, Stagnation with growth, transforming dairy into and instrument for the development of Indians rural people. The NDDB was established in 1965; the board is registered under the Societies Registration Act and the public Trust Act, fulfilling the desire of the Prime Minister of India the late Lal Bhahaddur Shastri to extend the success of the Kaira Co-operative Milk producers union (AMUL) TO OTHER PARTS OF India. Dr Vergese Kurien was the founder chairman. The success combined the wisdom & energy of farmers with professional management to successful
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capture liquid milk and milk product markets while supporting farmers investment with inputs and services.
The Growth
NDDB began its operations with the mission of making dairying a vehicle to a better future for millions of gross roots milk producers. The mission archived helped to launce Operation Flood, a programme extending over 26 years and with the help of World Bank Loan India become the worlds largest milk producing country. As per March 2001 Indias 96000 Dairy Co-operative are integrated thorough a three Tier Cc-operative structure. The Anand pattern which is owned by more than 10 million formers procures an average of 1605 million liters of milk every day. The milk is processed and marketed by 170 milk producers co-operative unions which, in turn own 15 state co-operative milk marketing federation. Since its establishment the dairy development board has planned and spearheaded Indias Dairy programmer by placing dairy development in the hands of milk producers and the professionals they employ to manage their co-operatives. In addition, NDDB also promotes other commodity based co-operative, allied industries and veterinary biologically on an intensive and nationwide basis.
Objectives of NDDB: To sponsor, promote, manage, acquire, construct or control any plant or work, which promote projects of general public utility relation to dairying. To make information available on request to technical services to increase production of Milk. To prepare initial feasibility studies of dairying and other dairy related projects and undertake subsequent designing planning and start up those projects. To undertake research and development programme related to production and marketing of milk and milk products. To provide assistance for exchange of information to other international agencies.
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Services rendered by NDDB:

Planning dairy and rural development projects. Organization of farmer co-operative societies. Setting up of dairy and cattle feed plants. Manpower planning and training. Applied research and development. Implementation of milk production enchantment programme.
KARNATAKA MILK FEDERATION

The first dairy in Karnataka was started in Kudige in Kodagu district in 1955, Further in June 1974; an integrated project was launched in Karnataka to restructure and reorganize the dairy industry on the co-operative principle and to lay foundation for a new direction in dairy development. In 1975, the World Bank aided dairy development was initiated. The present Karnataka Milk Federation (KMF) came into existence in 1984-as a result of merging of Karnataka Dairy Development Co-operation, small cooperatives and Karnataka Milk Production Development and loose vendors. At the end of the March 1998, the network of 8023 Diary Co-operative Societies (DCS) have been established which are spread over 166 taluks of the total 175 taluks in all 27 districts of Karnataka. There are 13 Milk Unions and Dharwad Milk Union (DMU) is one among them. There are 35 Chilling centers, 3 Farm coolers, 15 Liquid milk plants and 2 Product dairies for chilling, processing, conservation and marketing of milk. To supply cattle feed there are 4 cattle feed plants. To ensure supply of quality germ plasma. Bull breeding farm and frozen semen bank are also available.
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Karnataka co-operative Milk Producers Federation Limited (KMF) is the apex Body in Karnataka representing Dairy Cooperatives. It is the third largest dairy co-operative amongst the dairy co-operatives in the country. To impart training, institutes at Bangalore and regional training institutes at Dharwad and Gulbarga are functioning. Three nitrogen plants (2 plants of 25 CPM and 1 plant of 5 CPM) are been set-up to supply nitrogen, which is used for Refrigeration purpose. Three diagnostic centres have been set-up for monitoring diseases: three fodder farms at Rajkunte, Kuttanahalli and Kodagu have been set-up to supply good quality of fodder and seed production farm at Shahpur has been set-up. The federation giving details of the latest technology in dairy industry etc is published Ksheer Sagar magazine monthly. KMF is a co-operative apex body in the state of Karnataka for representing dairy organizations and also implementing dairy development activities to achieve the following objectives. Providing assured and remunerative market for all the milk produced by the farmer members Providing hygienic milk to urban consumers. To build village level institutions in co-operative sector to manage the dairy activities. To ensure provision of milk production inputs, processing facilities and dissemination of know-how. To facilitate rural development by providing opportunities for selfemployment at village level, preventing migration to urban areas, etc.
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The growth process

The growth over the years and activities undertaken by KMF is summarized briefly here under: Particulars Dairy Co-operatives (Nos) Membership (Nos) Milk Procurement (Kgs/day) Milk Sales (Lts/day) Cattle Feed Consumed (Kgs/DCS) Daily Payment to Farmers (Rs. Lakhs) Turnover (Rs. Crores) 1500.00 250 1242 35050 220 1694116 1557 37000 50000 1743664 12699785 1976-77 416 2004-05 9670
FUNCTIONS OF KMF Co-ordination of activities between the unions. Developing the markets for the increasing in milk production. To make the brand Nandini as a house hold name. Excellence in quality is to be maintained to lay a solid foundation for wide spread acceptance of Nandini products. To increase the market share of Nandini.
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THE THREE- TIER STRUCTURE
KARNATAKA MILK FEDERATION
MILK UNION
MILK UNION
MILK UNION
DISTRIC COOPERATIVE SOCIETY
DISTRICT COOPERATIVE SOCIETY
DISTRIC COOPERATIVE SOCIETY
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THE DISTRICT CO-OPERATIVE SOCIETY (DCS)

It is basic organization unit, functioning at the village level, By training local people to organize and manage the activities village level institution building and development of local leadership is promoted.
FUNCTIONS
It functions daily and acts as a marketing outset for the milk produced in the village. Input facilities are also canalized to the dairy farmers through these societies and include Veterinary First Aid, Sale of Cattle Feed, Supply of Fodder Seeds, Seedling and Provisions of Mobile Veterinary Health Care etc. Payment for the milk is done through society.
THE MILK UNION

Milk union is a channel of District Co-Operative Societies in organized form for milk procurement. The procurement route is linked to chilling center or a dairy. Dharwad Milk Union is one of such Milk Unions. It is the middle tier of the complex co-operative organization network. Unions are formed by federating the societies in locating geographical area. The milk unions are organized to make them economically viable and the jurisdiction extends from one district to 3 Districts. There are 5 Milk Unions whos Jurisdiction covers a single district, 4 Unions COVER 2 District, each 3 Unions cover 3 districts and one Unions territory extends to 4 District. All Unions own their own Milk Processing Facilities.
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FUNCTIONS
These Unions help to organize new Primary Dairy Co-operative Societies. The Union also helps in managing these DCS by assisting in accounts, purchase, process and marketing liquid milk. The Union helps in providing all the input facilities to DCS and channelizes the dairy farmers through DCS. The Union provides the following facilities. Providing Balanced Cattle Feed. Providing Animal Health Care. Providing Artificial Insemination facility for breed improvement. Providing Training for breeding, feeding management.
MILK FEDERATION
The main objective of the federation is to help in formation of Milk Unions through the state and thus forming the state level apes organization. The Federation implements all the project activates. After the project activities are accomplished the federation aims at formulating Marketing strategies in marketing the Milk and Milk Product. The Karnataka Milk Federation which was setup in 1984 has the following functions: The foremost function of KMF was to co-ordinate the activities between the Union and also in making market available so that production increases The Federation also manages surpluses and deficiencies of liquid of milk among the milk union and help in disposing milk and milk product at reasonable price The Federation also manages to market the milk and milk products outside the state. Provides Balanced cattle feed, mineral mixture, frozen semen semen straws and liquid nitrogen are produced and distributed to Unions Excellence in quality is maintained to lay a solid foundation for widespread acceptance of the milk and milk products. Training and developing senior managerial personnel, acquiring and applying all recent technologies, prescribing quality guidelines and norms.
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The Karnataka Milk Federation consists of:

UNITS Milk Dairies Liquid Nitrogen Silos Product Plant Training Center Sperm Station Cattle Feed Plant Pouch Film Plant NO. 13 17 6 3 3 1 4 1
THE PRODUCTS OF KMF: Milk Toned Milk, Full Cream Milk, Good Life, Standardized Milk, Flavored Milk, Smart, Slim,Butter Milk, Homogenized Toned Milk, Milk Products Ghee, Badam Powder, Butter, Panner, Curds, Peda, Cheese, Ice Cream, Gulab jamoon mix, Khova, CashewBurfi,
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COMPANY PROFILE
A) Dharwad Milk Union Dharwad Milk Union (DMU) came into existence on 3-3-1986.DMU was established under co-operative act on 3-3-1986 at Dharwad and Gadag, Haveri, Uttar Kannada and Dharwad come under its operation.
Establishment: The Dharwad Milk Union is Co-operative society among the 13 establishment, under KMF. The Dharwad Milk Union (DMU) is one of the most modern plants in the country. It is located in the spacious 25 acres of land, located in Lakamanahalli Industrial Area, adjacent to the Nation Highway-4. It is patterned the AMUL Milk Dairy, Anand, Gujarat.
History: A group of experienced officers, appointed by the Karnataka Milk Federation surveyed the whole of Dharwad districts (includes two newly formed district Gadag and Haveri and Uttar Karnataka. Further they found out there as a need for a Milk Dairy. They traveled the surrounding villages, educated the villagers about Milk and Milk products and the benefits they would get from the Milk Dairy. Seeing the overwhelming response and untapped resources and the huge market the Federation decided to setup the Milk Union in 1984, known as the
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DHARWAD DISTRICT CO-OPERATIVE MILK PRODUCERS SOCIETIES UNION LIMITED.

Further in 1988, the Raipur Dairy and Chilling Center, setup in 1968, also came under the union. In 1989, the training center, which was controlled by KMF, came under Dharwad Milk Union. DMU was Rs.7 Crore Projects of which Government has Rs.2Crore of share capital and authorized capital of DMU is Rs.5crore. DMU formed 551 milk producers co-operative societies in Dharwad, Gadag, Haveri and Uttar Kannada districts. The prediction capacity of DMU is 2 lack liters of milk per day and also has the capacity to produce 12 tons of milk powder, 10 tones of butter, and 6 tones of ghee per day. DMU is collecting 70thousand liters of milk per day from its societies and sells 60 thousand liters of milk per day and the remaining milk is used for producing milk products.
Functions of DMU
The main function of DMU is to procure milk from villagers and pay them the right price. To educate the villagers about milk and its quality To make Nandini as a part of daily life. To provide good quality of cattle feed, fodder, veterinary properly and in an efficient manner. To see that the DCSs are carrying out their activities properly and in an efficient manner.
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Objectives of DMU:
Providing hygienic and good quality of milk to the consumers. To build the economic strength of the milk products in villages. To eliminate middlemens in the business so that the milk products receive there appropriate share of bread. To educate the villages about the adulteration of milk and its harmful effect on the body. To see that every citizen becomes healthy by consuming good quality of milk. To make villagers self-viable and build self image.
Process at DMU
The milk collected at DCSs is brought to the center thought carries trucks etc. the quality and quantity of milk bought is checked at the Reception center by a supervisor. A sample of milk is taken and is tested in a laboratory for fat content, Solid Not fat (SNF) acidity etc. As the milk is at room temperature is to be brought down to 40 c to 50 c. so that it may check the growth of bacteria. To ensure this milk is passed through a chilling chamber where the milk is chilled. Its temperature is bought down and then the milk is stored in a tank called as Ram Milk Tank From this tank milk is pumped to a pasteurizing cell where the milk is heated up to 720 c and 15 seconds, so that all the bacteria and microorganisms may be killed and then the milk is simultaneously cooled to 40 C to 5o C and is store in a Pasteurized Milk Tank From here the milk is separated according to the
requirement of production of different types of milk and the remaining milk is used for manufacturing milk products.
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B) Nature of business carried Procuring and marketing of milk production and sale of milk products. C) VISION OF THE DMU. Cleanliness Total quality maintenance Discipline Co-operation. Transparency.
DMU MISSION STATEMENT

At DMU we Endeavour to satisfy the taste and nutritional requirements of the customers. Through excellence in marketing by DMU committed team, DMU are committed to offering quality products that provide best value for money.
QUALITY POLICY OF DMU. To ensure pure, hygienic milk and milk products through continuous improvement of quality standards. D) Product/service profile: - Milk and milk products
E) Area of operation - Regional
F) Ownership pattern. DMU builds and runs under the co-operative institutions such as District Co-operative Society.(DCS) National Dairy Development Board.(NDDB)
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G) Competitors of information. DMU has various competitors in the milk products market such as Krishna Arokya Spurthi Datta Bharath Dairy
H) Infrastructural facilities. Infrastructural facilities of DMU are as follows. Security facilities. Canteen facilities. Shifts facilities-3shifts per day. Heat allowance Cold allowance
I) Achievements or awards DMU has got ENERGY SAVING award for the production activities.
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J) Workflow model. (End to End) Production process has the following work flow model.
DCS
Fresh Liquid Milk
Sample Testing
Fat and SNF
Chilling
Storing
Pasteurization
Storing
Homogenization
Separation
Packing
Dispatching
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K) Future growth and prospectus
Procuring and selling 1 lack litters per day. Preparing for ISO-9001 certification. Marketing quality improvement. Developing HACCP-hazards Analysis and Critical Control Points. Getting export Grade milk powder.
Departments of DMU: 1. 2. 3. 4. 5. 6. 7. 8. 9. Purchasing Department Quality Control Department Production Department Procurement and Input Department (P & I) Finished goods and materials storage Department (FGS) Stores Department Sales and Marketing Department Finance and Accounts Department Administration Department
Input required per day: Milk procurement up to 70000 liters 5 to 6 lakh liters of water 10,000 units of electricity 4 to 5 tones of coal Generator in case of electricity failure and manpower
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Quality Control: At different stages of production the officer from the Quality Control department keeps verifying the quality of the products frequently. Any defects or unconformity to standard containing a small percentage of fat content is sold to the soap manufactures, otherwise it is sent to a special tank with agitator rotating in it. Different chemicals are used and sterilized fresh water is released for agricultural purpose. Caution is taken with regard to the height of the chimney to avoid air pollution.
Steam Plant: In various steps of production for instance melting of butter to ghee to etc steam is required, this steam is produced in steam production plant where coal is used for this purpose, Everyday nearly 4-5 tones of cal is required the ash sold to the brick manufactures.
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DHARWAD MILK UNION

STATUS A Co-operative society registered under the Co-operative Act 1959. NATURE OF BUSINESS Procuring & Marketing of Milk Production & Sale of Milk Products. SHARE CAPITAL PLALNT CAPACITY 3 Crores approx 2 Lakh lites/day Milk Powder Butter Ghee MILK CHILLING CENTERS AND CAPACITY Gadag CENTERS AND CAPA Haveri Hirekerur Naragund Ron Sirsi KARWAR PACKING UNIT 20.000LPD 8.000 LPD 10.000LPD
20.000 LPD
12 MT/Day 6MT/Day 6MT/Day 20.000LPD 20.000 LPD
The milk in Bulk is sent Packing and Distribution at karwar which supplies the need of Karwar, Gokarna, Honnavar, Bhatkal, Murdeshwar and Goa.
PRENSE VALUE OF ACTIVITY
Collection of Milk 70.000LPD Sale of milk 60.000LPD
AREA OF OPERATION
Dharwad, Haveri, Gadag Uttar Kannada district
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BOARD OF DIRECTORS
Elected Member EX-Officers By Govt.
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TOTAL WORKERS LOCATION
309 Workers Lakamanahalli Industrial Area, Dharwad.
DEPARTMENT BRAND NAME PROCUCTS
9 NANDINI MILK: Toned Milk, Standard Milk, Shubham Milk. MILK PRODUCTS: Butter, Ghee, Curd, Lassi, Paneer, Milk Powder
CO-OPERATIVE SOCIETIVE AT VILLAGE LEVEL
460 Societies
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PROCUCT PROFILE
KMF, Dharwad produces the following milk and Milk Products. Toned Milk: Karnatakas most favorite milk. Nadine Toned Fresh and pure milk containing 3.0% FAT and 8.5% SNF, Available in 500ml and 11tr packs.
Shubham: Buffalos milk, 100% pure pasteurized processed and packed hygienically, this milk has 5%fat and 9%snf. Available in 5ooml and 1ltr, and also Available in 5trs packs for marriages, and other functions.
Full Cream Milk: Full cream milk, containing 6% fat and 9% snf. Rich, creamier tastier milk, ideal for preparing home-made sweet & savories. Available in 500ml and 11trs packs.
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Homogenized toned milk: Nandini homogenized milk is pure milk. Which is homogenized and pasteurized, consistent right through, it gives you more cups of tea or coffee and is easily digestible. Available in 500ml packs.
Curd: Nandini curd made from pure milk, its thick delicious Giving you all the goodness of homemade curds. Available in 200gms and 500gms sachet.
Milk powder: Enjoy the taste of pure milk! Skimmed milk powder made form pure milk, processed and packed hygienically. Available in 100gms, 200mgs,
500gms, 1kg& 25kg Pack.
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Butter: Rich, smooth and delicious. Nandini butter is made out of fresh pasteurized cream, rich taste, smooth texture and the rich purity of cows milk makes any preparation a delicious treat. Available in
100gms(salted), 200gms and 500gms cartons both salted and unsalted
Peda : No matter what you ate celebrating! Made from pure milk, Nandini peda is a delicious treat for the family. It will be store at room temperature approximately 7days. Available in 250gms pack containing 10pieces each.
Ghee: A state of purity, Nandini ghee made from pure butter. It is fresh and pure with a 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. Available in 200ml, 500ml, 1000ml sachets, 51trs tins and 15kegs tins.
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ORGANISATION STRUCTURE
A) Organization structure
President
Director (Govt.)
Director (Govt.)
Director (DCS.)
Director (NDDB.)
Director (Society)
MANAGING DIRECTOR
Procuremen t Dept
Product Process Dept
Marketing Dept
Admn Dept
Finance Dept
Transport
Quality Control
FGS&Stores
MIS
Account & Purchse
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B) Sub-structure of various departments and their functions
PROCUREMENT AND INPUT DEPARTMENT (structure)
Manager (P&I)
Procurement Wing
Technical Input Wing
Deputy Manager
Deputy Manager
Assistant Manager
Assistant Manager
Extension Officer
Clerks
Clerks
Helpers
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The Union carries on procurement by setting up-operative societies at village level. Later milk is collected in the Chilling Center. Milk collected from the milk center, is first tested there are milk-testing equipments for this purpose. Then a survey on availability of transportation facilities and productive capacity of villages are conducted. If the marketable surplus is more than 150liters per day, a society is formed; further 10promeoters are selected from the village and are given the responsibility of collecting the capital for the society by selling shares. Procurement is done twice a day and payment is made on the basis of percentage of the content and SNF in the milk. After this, Milk is sent to Union else chilling center, whichever is near. At the chilling center, milk is chilled up to 4degree Celsius. Later this chilled milk is sent to Union in Insulated Tankers for further processing. The main function of this department is to procure milk different areas throughout the year. the main function of P & I Department is to organize, supervise and operate village dairy co-operative societies and to procure more milk from village societies. Other services provided are: Veterinary services to keep up the good heath of cattle through -Regular health Camps -Emergency service round the clock -First aid, Vaccination, Infertility Camp, Fodder Artificial Insemination facility for improvement of cattle breeds. Facilitating Training Programs regarding management of cattle Supply of Fodder to cattle.
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ORGANIZATION REVIEW
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PRODUCTION DEPARTMENT
The Production department has the following structure
MANAGER (DAIRY)
Deputy Manager
Office Staff
Assistant Manager
Assistant (Stores)
Assistant (Account)
Technical Officer
Clerk
Typist
Senior Spervisor
Junior Supervisor
Dairy Operator
Dairy Technician
Dairy Worker
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PRODUCTION PROCESS
DCS
Fresh Liquid Milk
Sample Testing
Fat and SNF
Chilling
Storing
Pasteurization
Storing
Homogenization
Separation
Packing
Dispatching
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The main objective of this department is to follow up production schedule as per plan and to maintain close and co-ordinate relationship with other department and ensures to upgrade the technical efficiency of production. Milk, as it is highly perishable product has to processed immediately to avoid spoilage milk with respect to its flavor, texture and taste. Production department is well equipped and has various types of highly sophisticated machines imported from Sweden and Denmark. Once the milk is received from P & I department, it is first weighed with the help of weighing bowl. Later, it is poured in dump tank. Sample testing is made through lactometer reading and other tests. The fat and SNF content of each sample of milk is accessed the cow and buffalos milk are separately received and sent too the production section separately through two different stainless steel pipes. Later, the raw milk is passed through plate chiller of variable capacity where it is cooled up to 4-5 degrees Celsius. This cooled raw material is further stored in a silo of 30,000 liters capacity.
PURPOSE OF CHILLING This is done to avoid the growth of micro organisms, which are responsible for spoilage of milk and bitter taste. The milk, which is stored in silos, is pumped through pipeline to the balance tank, which helps to maintain the steady speed flow of milk in the Pasteurization machine. In, DMU, there are 2 milk Pasteurization machine and 1 Cream Pasteurization machine.
PURPOSE OF PASTEURIZATION Pasteurization is a process where milk is heated to high temperature and cooled instantly, to destroy any microorganism. The pasteurized milk will stored in Pasteurized milk silos and then sent to pre-packing section. Packing is done in 500m l and 1000ml and stored in cold storage at 70.
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PASTEURIZATION OF CREAM: The milk in bulk is taken to the cream separator. Here, the cream is separated. The cream is passed through cream Pasteurization Unit. This cream is sent to Butter section. The milk with no fat is skimmed milk. This skim milk is pumped back to Pasteurization Unit and heated to 720 using steam and chilled to 40 using chilled water and stored silos. This skimmed milk is sent to powder section. The pasteurize cream is mixed in portion to pasteurized milk.
CURDS: Raw milk is heated to 90 0 and allowed to cool to 30 0. Later culture is added to it and packed; the curd is formed in the packet itself. It is stored and packed in 200gms and 500gms.
BUTTER: The cream, which is stored in cream refining tank, is taken to the churning section where it is churned. Here butter fat and buttermilk are
separated. The vacuum pump removed excess of moisture and butter comes out of continuous butter making machine (capacity 1500 kgs/hour). Butter is packed in 100, 200 and 500 gms and also in 10, 25 gms, these are stored in deep freezer room with temperature 22 0 and if the order of salt butter they mix the salt water with cream and other process is same.
GHEE: There are 2 Ghee Boiler of capacity 1500 kgs/batch. A Butter of 2.5 tons is melted and is brought to Ghee Boiler. Here it is heated to 116-117 degree Celsius for 15 minutes so that the residue is allowed to settle down and Ghee is passed to setting tank through clarifiers. Later Ghee is allowed for cooling (at 300-400) and packed in Tin of Liter, 500 ml and 200 ml of pack and kept in the cold storage.
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PANEER: If there is excess of milk, then Paneer is been made. The milk is heated to 900 for 15-20 minutes. Glacial acetic acid is added to milk, and then milk is strained through fine muslin cloth. The solid portion is retained and is put in water and then it is put in chilled water and left overnight. Later it is packed and stored in cold storage.
MILK POWDER: When there is excess of milk. Milk Powder is made. The capacity of the powder plant is 12 tons. There are two sections Evaporator and spray Drier through which milk is converted to Milk Powder. In Evaporator, milk is boiled for 550 at high vacuum. Milk is concentrated to drier to-45% of milk is solid, moisture is removed and the milk powder obtained consists of 4% moisture.
PEDA: Dharwad is famous for its delicious Pedhas. DMU has separate pedha section. About 8 Liters (depends upon the demand) is heated continuously for 3 hours till the milk is semi-solid, later sugar and other ingredients are added and stirred continuously on low flame. Later it cooled and it is shaped in small balls and packed.
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The milk produced here is differentiated by the content of fat and SNF
TYPE
FAT 3.1% 4.5% 6% 5.1%
SNF 8.5% 9% 9% 9%
Toned Milk Standard Milk Subham Milk Full Cream Milk
He below table gives a brief idea of the milk products, their fat SNF, moisture Content: PRODUCT Butter Ghee Panner FAT 83% 99.8% 20% SNF 1% 30% MOISTURE 16% 0.2% 50%
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TEST QUALITY CONTROL DEPARTMENT
REASON
The Quality Control department has the following structure
Deputy Manager
Assistant Manager
Assistant manager
Quality Assistant Officer (Chemicals)
Quality Assistant Officer (Chemicals)
Lab Assistant
Quality Assistant
Quality Analyst
In DMU, at every stage, care is taken to ensure that the customer gets the products, which have a very high quality. Hence there is a separate department called Quality Department here the quality testing is done. There is a separate laboratory for this. Quality control is very essential as to maintain the freshness of the milk. All the containers, pipes and other equipments are washed with hot water before starting off with new production. There are many tests conducted here. The packed milk we get will have undergone 3 quality tests. First test is done on raw milk, which get from chilling center. Next before standardization and the last test before packing. The other tests conducted are:
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Temperature Clot on Boiling Acidity Test Alcohol Test Lactometer Fat test SNF Test
Should be below 5 degrees If mill curdles soon after billing milk is rejected To test the extent of acidity To check the heat stability of milk To check the density of milk Percentage of fat determined Percentage of SNF determined for pricing SNF=CLR+FAT/4
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STORE DEPARTMENT The Stores Department in DMU follows the Cordex system (Coded Control System). A card is maintained for each item and a number is allotted. The card attached to each article consists of amount balance, date of issue, purchase etc. This is later recorded in separated ledge book. The inventories are of different kind ranging from mechanical, spares, packing items to animal drugs, and stationary and veterinary drugs. There are at least 4000 different inventories.
This department has the following services: It tries to maintain maximum and minimum level of inventory so as to avoid blockage of capital and storage. Ordinary and local available commodities are maintained at minimum possible level. Items of urgent and not easily available are stored sufficiently for further demand. The structure of this department is as shown Stores Superident Stores Assistant (Fds) Store Assistant (Gr-2)
Helpers
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Store Department has two Sub-department. STORES FINISHED GOODS STORE
FINISHED GOODS STORES: This Department acts as an interface between production and Marketing Department. It is concerned with maintenance of finishes goods connected records. It received all the finished goods and issued the stock to marketing department as per indents. It ensures that the goods are maintained properly with respect to quality Accounts are maintained and daily and daily and monthly report is submitted to the production. Marketing and Finance Departments. As the products as perishable First-In-first-Out method of inventory is followed.
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The FGS Department has the following Structure:
Stores Superident
Stores Assistant (Fds)
Store Assistant (Gr-2)
Helpers
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FINANCE DEPARTMENT
This Department is responsible for keeping all the inward and outward flow of money of union. It prepares budget every year and financial rules for receipts all payments are framed. The functions of these departments are: To prepare monthly accounts (Receipts and payment P & I Account and Balance Sheet). To prepare quarterly financial statement. To prepare integrated business plan. To prepare year ending financial statements. To get accounts audited from statutory books of accounts.
DMU Follows to types of auditing: 1. Pre-Audit System done by Finance and Account Department every year. 2. Statutory System Done by Private charted accountants every year.
The structure of finance Department is as shown:
Deputy Manager Assiatant Manager Assistant Account Officer Assistant Account
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DHARWAD MILK UNION (2008-10)
Profit and Loss A/c.

1-Apr.2008 to 31-Mar-2009.
Particulars OPENING STOCK. Stock-Milk. Stock-Milk Products. Stock-Others. Stock-P/I. 1-Apr-2008 to 31-Mar.2009 3,01,58,722-53 24,29,968-47 1,01,94,779-85 1,38,06,446-75 36,27,50-6-46 Particulars SALES ACCOUNTS Sale Cattle Feed. Sale of Milk. Sale of Milk Products. Sale of P & I. Sale Other Sales. CLOSING STOCK. Stock Milk. Stock Milk. Stock-Other. Stock-P/I. 1-Apr-2008 to 31-Mar.2009 57,37,20,167-70 6,22,89,593-00 41,09,05,845-98 8,65,73,775-50 82,32,695.80 54,37,251-50 2,34,18,532-26 35,71,249-59 29,99,884-67 1,31,83,015-00 36,64,763-00
PURCHASE ACCOUNTS Purchase of Feed. Purchase of Milk. Purchase of Milk Products. Purchase of Others. Purchase of PA. DIRECT EXPENSES: P & Wing Expenses. Prod. & Manuf. Expenses. Gross Profit C/o. INDIRECT EXPENSES. Admn Expenses. Interest and Bank Expenses. Selling and Dist.Expenses. Staff Expenses. Depreciation A/c. Net Profit.
42,23,03,354-32 5,78,91,425-00 31,71,42,751-00 55,53,438-02 3,07,12,505-57 1,09,83,224-73 6,65,85,549-58 1,08,72,793.37 5,56,12,752-19 7,80.11,473-63 59,71,39,102-04 10,57,26,304-14 1,37,03,322-80 (-) 4,50,571-03 2,36,53,414-18 6,56,91,195-30 51,768-48 70,14,021-38
11,67,40,385.53
GROSS PROFIT B/F. Indirect Incomes Other Income.
59,71,39,100-04 7,80,11,473-63 3,87,28,911-90 3,87,28,911-90
GRAND TOTAL: Rs.
GRAND TOTAL: Rs.
11,67,40,385.53
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DHARWAD MILK UNION (2008-10) Balance Sheet

1-Apr.2008 to 31-Mar-2009.
Liabilities CAPITAL ACCOUNT Reserves & surplus Govt. Loan. Share Capital-A Class. Share Capital-B Class Share Suspence LOANS (LIABILITY) CURRENT LIABILITIES Grants O.S.L. OTHER LIABILITIES Salary Recoveries. Security Deposit A/c. Paid Salary/Wages A/.c. Duties & Taxes. Sundry Creditors. Amrut Yojane. Yojane DCS Contribution. Job Loan Suspense.
GRAND TOTAL:
as at 31-Mar-2009 8,60,63,160-54 3,98,37,180-33 9,80,480-00 2,23,59,800-00 2,00,00,000-00 29,05,700-21 8,23,63,231-00 5,07,41,016-54
Assets FIXED ASSETS Fixed Assets INVESTMEN TS Investment CURRENT ASSETS Closing Stock. Deposits (Assset) Loans & Advances (Asset) Sundry Debtors. Cash-in-Hand. Bank Accounts PROFIT & LOSS ACCOUNT. Opening Balance Current Period. Less: Transferred.
as at 31-Mar-2009 10,12,78,755-23 10,12,78,75523 2,20,57,600-00 2,20,57,600-00 7,21,28,751-41 2,34,18,932-26 50,04,655-50 1,15,26,292-78
1.55.33.812-26 1,16,000-00 69,587-32 1,58,137-58
2,16,07,580-25 7,17,926-95 98,53,383-67 2,37,02,301-22
94,95,918-12 16,021-00
4,97,39,737-83 (-) 70,14,01139 1,90,23,355-00
2,24,465-88 63,17,981-30 (-) 5,27,746-00 53,15,409-00 (-) 1,79,570-00 21,91,67,406.06
GRAND TOTAL:
21,91,67,406.06
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PURCHASE DEPARTMENT
It is a sub-department, which comes under Finance Department. The main work of this department is to purchase various materials required by different department. After ascertaining the stock position by stores department and indent is sent by different department duly approved by the Managing Director. This department act to purchase materials.
It also maintains records of all the suppliers calls for Tenders, quotations etc. Quotations with lowest rate are sanctioned. Purchase up to 50,000, then the approval of Managing Director.
The structure of Purchase Department is as shown:
Purchase Officer
Purchase Suprident Assistant Purchase Officer
Helpers
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ADMINISTRATION DEPARTMENT
The Administration Department controls the overall functioning of the organization. The organization consists of the following three levels. Managerial cadre includes Managing Director, Deputy Manager, and Assistance Manager. Supervisory level included technical officers and supervisors. Worker level includes labors helpers. The department has the following structure:
Deputy Manager
Assistant Manager (Board)
Assistant Manager (Personnel)
Administration Superintendent
Administration Superintendent
Administration Assistant
Time
Canteen
Security
The Department also handles Canteen, Security and Time Keeping Machine.
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CANTEEN:
There is a Canteen in the premise itself. The employees are provided lunch, Tea etc., at reasonable rates. The Canteen is handled by the Canteen-In charge.
TIME KEEPER:
This Department records the working hours of the employees. The time machine shows the entry time and exit time of each employee. The workers divided into different shifts control the working of the Department. employee is given a Punch Card, Each
SECURITY DEPARTMENT:
Dharwad Milk occupies 25 acres of land the whole premise is been guarded by the security personnel. The security people work in three shifts. All the vehicles are checked before entering the premise. The departments is also maintains separate registers like store-in Register, Attendance register etc.
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SKILLS
The skills here refers too the various skills the workers have here the workers are further divided into three categories. This first category contains the people who are in the top-management level the second category consists of the supervisors office assistants etc. The third category consists of the supervisors office assistants etc. The third category consists of the workers at the operational. The first category consist of the people who are in the decision making process in KMF these people are highly qualified few Deputy Managers are to industries like IRMA, Anand dairy for Training. The second category is related to office work and fieldwork. These people are also trained in computer Applications, secretarial skills, accounting skills etc. The third level people consist of the workers who are actually into the operation these people are also trained into fields like checking the quality of milk processing packing etc.
TRAINING SYSTEM The Union emphasizes on training the employees. Most of the training given to the employees here are On-the-Job training and few Off-the-Job Training. Procurement and Technical Input Training (NDDB) PG Diploma in Rural Management Basic Computer Applications. Data Base Administrator Finance Training for non-Finance Officer Co-Operative management Training Programs Clean Milk Production Training
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STYLES A) DMU has follows Top to Bottom or Top down style system.
B)
The Styles of the organization is said to follow the participative type that is the management cadre follow the participative type of administration. The fact is that for a manufacturing firm like the KMF, Dharwad this type of administration is necessary.
The Indicators of the Style are: Follows Orders, rules and procedure Is always Reliable, Dependable Watches Details\Prefers to write out Communications Is Rational, Logical, Self-Controlled, Fair and Firm.
Decision making parameter for day to day operations. The marketing department provides information to production department regarding daily requirements of the sale of the milk and milk products based on the marketing demand, later the production department will take the decision about production activities.
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STRATEGIES
The Dharwad Milk Union has the following set of strategy, which will be formulated event year. The present year has the following strategies. The strategies are formulated with the help of KMF and NDDB an the union members. Below are the strategies set for this year.
MARKETING DEPARTMENT
Marketing Manager
Deputy Manager
Assistant Manager
Marketing Officer
Marketing Superiendent
Marketing Accountants
Marketing Supervisor
Marketing Clerks
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STARAGETIES OF THE MARKETING DEPARTMENT: Visit to all roots of individual points by going in a root distribution vehicle for contact with all agents. Aims to conduct 5 Consumer Awareness Program and various Seminars. Aims at conducting agents meetings. Aims at setting 10 Exclusive NANDINI Milk Parlors. Aiming to set up new sales promotional and advertisement activities. Women association programs. Joining with other programs.
Strategy Implementation system: Marketing strategy like sales promotional and advertisement activities of DMU are as follows. Press advertisements Hoardings Wall paintings Rental for KSRTC Buses Leaf lets Banners Vehicles paintings and own hoarding paintings Pole ads and Flute boards Rate display boards Milk carry bags Calendar and greetings Exhibition, drawing and consumer mela.
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SYSTEMS
STORE DEPARTMENT:
The Stores Department in DMU follows the Cordex system (Coded Control System). A card is maintained for each item and a number is allotted. The card attached to each article consists of amount balance, date of issue, purchase etc. This is later recorded in separated ledge book. The inventories are of different kind ranging from mechanical, spares, packing items to animal drugs, and stationary and veterinary drugs. There are at least 4000 different inventories.
This department has the following services: It tries to maintain maximum and minimum level of inventory So as to avoid blockage of capital and storage. Ordinary and local available commodities are maintained at minimum possible level. Items of urgent and not easily available are stored sufficiently for further demand.
STORE CONTROL SYSTEM.

DMU has follows inventory control system like, FIFO System (First In First Out System). It means milk which is procured first which is sent first to production process immediately.
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HR DEPARTMENT STAFF The staff deals with the various personnel Policies followed by the Organization. Below are given the personnel policies followed by the Organization. PERSONNEL POLICIES: There are around 339 employees working in Dharwad Milk Union. There are various policies followed by the Union. The Human Resource Department is the in Dharwad Milk Union Works as a sub Department of Administration Department. RECRUITMENT & SELECTION: Due to registration, termination, retirement and transfers, in the concerned department head will give the manpower requirement along with the job description according the HR department arranges for recruitment. The manpower sourcing is done through advertisement, manpower consultant, employment exchanges and personnel reference and available data bank. PROMOTION AND TRANSFER Promotion is solely on the basis of sensitivity and experience. Transfers are always accompanied by promotions. INDUCTION: After an employee is employed in DMU, he\she has to be made familiar to the union and also known the objective, value, functions and the operations. This helps the employee to interact with senior staff members from various departments.
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Salaries and Employee Benefits
GROSS SALARY: A regular staff member in the Union will have a gross salary consisting of Basic salary, Dearness Allowance, CCA, House Rent Allowance, and Conveyance Allowance. There are special benefits given to few employees, like:
SHIFT ALLOWANCE: There are separate allowances given to employees working in different shift like: First shift Allowance Second shift Allowance Third shift Allowance
HEAT ALLOWANCE: Separate allowance is given to those workers working near boilers and other equipments.
COLD ALLOWANCE: Separate allowance is given to workers working in Defreeze or cold storage. Further there is Uniform code for every employee. The Union
provides 2 pair of uniforms to the employees every year
HOUSE INTEREST: The employee working in the union can take a loan from other external sources and the Union will pay half the interest on the capital per month.
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OTHER BENEFITS: Canteen subsidy, Festival Advance, medical Allowance, surrender Leave.
SHARED VALUES These shared values include the mission and vision of the organization. It also includes objective values. Environment Policies etc, KMF, Dharwad has the mission to provide a lucrative market for farmers to sell their milk and to provide best milk to urban customers. Its Vision is to produce more milk and milk Products in the forth-Coming years. KMF, Dharwad also follows environment Policies. The plant doesnt pollute the environment. The organization has its own Effluent Treatment Plant in its own Premises. The Effluents are properly dumped so that on environment hazards occurs.
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EXECUTIVE SUMMERY Financial statements provide summarized view of the financial position and operation of the company. Therefore, now a day it is necessary to all companies to know as well as to show the financial soundness i.e. position and operation of company to their stakeholders. It is also necessary to company to know their financial position and operation of the company. In this report I made an effort to know the financial position of Dharwad Milk Producers union limited, by using the Annual Reports of the firm. The financial analysis of this report will show the strength and weakness of the Dharwad milk Producers union limited. Financial analysis will help the firm to take decision. Thus, we can say that, Financial Analysis is a starting point for making plans before using any sophisticated forecasting and planning. The study of Financial Position and trend Analysis through Ratio Analysis at Dharwad milk Union Ltd. Dharwad. The objectives of study: 1. Main objective is to study the different ratios used in DMUL 2. To study financial performance of the organization and suggest measures to management for improvement of profit. 3. To Study the liquidity position of the Company. The methodology includes the personal interaction with the financial manager. Collection of data from the Annual Report of the Company for last five year; i.e. of 2004-07, 2007-08 and 2008-09 Frame work analysis for the purpose of analyzing the Liquidity position of the company. The study make use of various accounting Ratios.
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The findings are: 1. Firm is more dependent Internal funds Its Good sign. 2. The firm is not utilizing assets efficiently. 3. Profit of the firm is increasing but not satisfactory.
The suggestions are as follows: Have to concentrate on short term loans to improve liquidity position. Management of manufacturing, administrative and selling expenses is necessary. The operating profit of the company is not in a good position for that company has to take alternative actions such as increasing in procurement of milk, production, and control in fixed expenses like, Administrative, Selling Etc INTRODUCTION The study paper on the topic a study financial position and Trend Analysis through Ratio Analysis at DMUL. Is partial fulfillment of requirement of BBA course in finance. It was an opportunity to learn practical aspects of industries. I have chosen this topic because Ratios are use to interpret the financial statement so that strengths and weakness of a firm as well as to know its historical performance and current financial condition can be determined. My study covers the calculation of ratios for DMUL and knows their financial performance. RATIO ANALYSIS When we observed the financial statements comprising the balance sheet and profit or loss account is that they do not give all the information related to financial operations of a firm, they can provide some extremely useful information to the extent that the balance sheet shows the financial position on a particular data in terms of structure of assets, liabilities and owners equity and profit or loss account shows the results of operation during the year. Thus the financial statements will provide a summarized view of the firm. Therefore in order to learn about the firm the careful examination of in valuable reports and statements through financial analysis or ratios is required.
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Meaning and definition Ratio analysis is one of the powerful techniques which is widely used for interpreting financial statements. This technique serves as a tool for assessing the financial soundness of the business. The idea of ratio analysis was introduced by Alexander wall for the first time in 1919. ratios are quantitative relationship between two or more variables taken from financial statements. Ratio analysis is defined as, The systematic use of ratio to interpret the financial statement so that the strength and weakness of the firm as its historical performance we can find many items are co-related with each other for example current assets and current liabilities, capital and long term debt, gross profit and net profit purchase and sales etc. To take managerial decision the ratio of such items reveals the soundness of financial position. Such information will be useful for creditors, shareholders management and all other people who deal with company. Importance As tool of financial management ratio are of crucial significance. The importance of ratio analysis is lies in the fact that it presents facts on a comparative basis and enables the drawing inferences regarding the performance of the firm. Ratio analysis is relevant in assessing the performances of a firm in respect of the following aspects; Liquidity position Long term solvency Operating efficiency Overall profitability Inter firm comparison Trend analysis Liquidity position: With the help of ratio analysis conclusions can be drawn regarding the liquidity position of a firm would be satisfactory if it is able to meet its current obligations when it become dues firm can be said to have the ability to meet its short term liabilities if it has sufficient liquid funds today the
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interest on its short maturing debt usually within a year as well as to repay the principal. This ability is reflected in the liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis by banks and other suppliers of short term loans. Long term solvency: Ratio analysis is equally useful for assessing the long term financial viability of a firm. This aspect of the financial position of a borrower is of concern to the long term creditors, security analysts and the present and potential owners of a business. The long term solvency is measured by the leverage/capital structure and profitability ratios which focus on earning power and operating efficiency. Ratio analysis reveals the strengths and weakness of a firm in this respect. The leverage ratio for instance, will indicate whether a firm has reasonable proportion of various sources of finance or if it is heavily loaded with debt in which case its solvency is exposed to serious strain. Similarly the various profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved. Operating efficiency: Yet another dimension of the usefulness of the ratio analysis, relevant from the viewpoint of management, its that it throws light on the degree of efficiency in the management and utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its asset total as well as its components. Overall profitability: Unlike the outside parties which are interested in one aspect of the financial position of a firm, the management is constantly concerned about the overall profitability of the enterprise. That is, they are concerned about the ability of the firm to meet its short term as well as long term obligations to its creditors, to ensure a reasonable return to its owners and secure optimum utilization of the assets of the firm. This is possible if an integrated view is taken and all the ratios are considered together.
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Inter firm comparison: Ratio analysis not only throws light on the financial position of a firm but also serves as a stepping stone to remedial measures. This is made possible due to inter firm comparison and comparison with industry averages. A single figure of particular ratio is meaningless unless it is related some standard or norm. One f the popular techniques are to compare the ratio of a firm with the industry average. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. An interfere comparison would demonstrate the firms positions vis--vis its compotators. If the results are at variance either with the industry average or with those of the competitors, the firm can seek to identify the probable reasons and, in that light, take remedial measures. Trend analysis: Finally, ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis the significance of a trend analysis of ratios lies in the fact that the analysis can know the direction of movement ,that is ,whether the movement is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be upward .On the other hand, though the present level may be satisfactory but the trend may be declining one. Limitations: Ratio analysis is a widely used tool of financial analysis. Yet, it suffers from various limitations the operational implication of this is that while using ratios, the conclusion should not be taken on their face value. Some of the limitations which characterize ratio analysis are: 1. Difficulty in comparison 2. Impact of inflation 3. Conceptual diversity
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Difficulty in comparison One serious limitation of ratio analysis arises out of the difficulty associated with their comparison are vitiated by different procedures adopted by various firms .The differences may relate to: Differences in the basis of inventers valuation (example, last in first out next first in first out, average cost and cost ); Different depreciation methods (I.e. .straight line vs. .written down basis ); Estimated working life of assets ,particularly of plant and equipment; Amortization of intangible assets like good will, patents and so on Amortization of differed revenue expenditure such as preliminary expenditure and discount on issue of shares; Capitalization of lease; Treatment of extraordinary items of income and expenditure; and so on...Secondly, apart from different accounting procedures, companies may have different accounting periods, implying differences in the composition of the assets ,particularly current assets. For these reasons, the ratios of two firms may not be strictly comparable. Another basis of comparison is the industry average .This presupposes the availability, on a comprehensive scale, of various ratios for each industry group over a period of time. If, however as is likely such information is not compiled and available, the utility of ratio analysis would be limited.
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Impact of inflation The second major limitation of the ratio analysis as a tool of financial analysis is associated with a price level change. This, in facts a weakness of the analysis of the traditional financial statements which are based on historical costs .An implication of this feature of the financial statements as regards ratio analysis is that assets acquired at different periods are, infect, shown at different prices I the balance sheet, as they are not adjusted for changes in the price level. As a result, ratio analysis will not yield strictly comparable and, therefore, dependable results. To illustrate there are two firms which have identical rates of return on investments ,say 15%.But one of these had acquired its fixed assets when prices were relatively low, while the other one had purchased them when prices were high . As a result, the book value of the fixed assets of the former type of firm would be lower, while that of the latter higher. From the point of profitability, the return on the investment of the firm with a lower book value would over state. Obviously, identical rate of returns on investment are not indicative of equal profitability of the two firms. This is limitations of ratios. Conceptual diversity: Yet another factor which influences the usefulness 0f ratios is that there is difference of opinion regarding the various concepts used to compute the ratios. There is always room for diversity of opinion as to what constitutes share holders equity, debt ,assets, profit and so on .Different firms may use these terms in different senses or the same the firm may use them to mean different things at different times. Reliance on the single ratio, for a particular purpose may not be a conclusive indicator. For instance the current ratio alone is not a as adequate measure of short term financial strength; it should be supplemented by the acid test ratio, debtors turnover ratio and inventory turnover ratio to have real insight into the liquidity aspect.
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Finally, ratios are only a postmortem analysis of what has happened between two balance sheet dates. For one thing, the position in the interim period us bit revealed by ratio analysis .Moreover, they give no clue about the future. In brief, ratio analysis suffers from some serious limitations. The analyses should not be carried away by its over simplified nature, easy competition with a high degree precision.
Classification of Ratio: 1. Liquidity ratio Current ratio Quick acid ratio Networking capital ratio 2. Capital structure ratio Debt equity ratio Proprietor ratio Coverage ratio 3. Activity ratio Inventory turnover ratio Debtors turnover ratio Creditors turnover ratio Assets turnover ratio 4. Profitability ratio Gross profit ratio Net profit ratio Operating expenses ratio Turnover on investment ratio Return on equity
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Liquidity Ratios: The importance of adequate liquidity in the sense of the ability of a firm to meet current /short term obligations when they become due for payment can hardly be overstressed. In fact liquidity is a pre requisite for the very survival of a firm. The short term creditors of the firm are interested in the short term solvency or liquidity of a firm. But liquidity implies, from the viewpoint of utilization of the funds of the firm that funds are ideal or earn very little. A proper balance between the two contradictory requirements, that is, liquidity and profitability required for efficient financial management. The liquidity ratios measure the ability of firm to meet its short term obligations and reflect the term financial solvency of a firm. Leverage/capital structure ratios: The second category of financial ratio is leverage or capital structure ratios. The long term creditors would judge the soundness of a firm on the basis of the long term financial strength measured in terms of its ability to pay the interests regular as well as repay the installment of the principal on due dates or in one lump sum at the time of maturity. The long term solvency ratios of a firm can be examined by using leverage or capital structure ratios. The leverage or capital structure ratios may be defined as financial ratios which throw light on the long term solvency of a firm as reflected in its ability to assure the long term creditor with regard to: 1. Periodic payment of interest during the period of the loan 2. Repayment of principal on maturity or in pre determined installments at due dates. Activity Ratios: Activity ratios are concerned with measuring the efficiency in asset management .these ratios are also called efficiency ratios or assets utilization ratios. The efficiency with which the assets are used would be reflected in the speed and rapidity with assets is converted in to sales. The greater is the rate of turnover or conversion, the more efficient is the utilization/management, other things being equal. For this reason, such ratios are also designated as turnover ratios. Turnover is the primary mode for measuring the extent of efficient employment of assets by relating the assets to sales.
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Profitability Ratios: A pert from the creditors, both short term and long term, also interested in the financial soundness of a firm are the owners and management or the company itself. The management of the firm is naturally eager to measure its operating efficiency of a firm and its ability to ensure adequate return to its shareholders depends ultimately on the profits earned by it. The profitability of a firm can be measured by its profitability ratios. In other words, the profitability ratios are designed to provide answers to questions such as: 1. Is the profit earned by the firm adequate? 2. What rate of return does it represent? 3. What is the rate of profit for various divisions and segments of the firm? 4. What is the rate of return to equity holders? Literature review DIARYING IN INDIA The association of Indian with Animal Husbandry and dairying is deeprooted in history. Since time immemorial, milk and milk products have been accepted in the diet of people of India as items of choice. It is said in Indian mythology that lord Krishna the god of righteousness grew up by drinking milk and eating bitter and ghee. He was nicknamed as Butter Krishna as he used to steal the butter in his neighborhood. The sage Vashistha possessed a sacred cow, donated by Lord Brahma, the god of knowledge, which was named as Nandini says Indian mythology. The word Nandini is the family brand of the Karnataka co-operative Milk Producers Federation, in short, KMF, which is engaged in marketing of milk and milk products.
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BACKGROUND: Towards the end of 1950s a development in the kaira district of Gujarat state, paved the way for co-operative dairy in India. The milk producers of this district decided to co0me together and from a co-operative as a protection against the exploitation by the private dairy owners and middlemen in the form of un-remunerative by the prices. Sardar vallabhai Patel, a great Indian freedom fighter and the first Deputy Prime Minister of independent India, provided main impetus to the farmers. He heard the formers tale of woe and was touched to the quick. The man of action took no time to find a solution; co-operation the dairy. Thus, came the era of co-operative dairying in Indian dairying. A meeting called on January 4, 1946 in samakha village decided to set up a milk producers union limited and the kaira District union was identified as Anand milk union limited. The Anand pattern is a three tier structure consisting of the producers societies at the village lavel, which collect the milk from producers daily and pay them: the district level producers unions (a representative body of the village societies) which provide the inputs required by the farmers including artificial insemination, veterinary services and the supply of feeds; and a federation of the unions of the state level, which manages the dairy with the help of elected representative of the districts unions. On behalf of the unions, the federation undertakes the collecting marketing of milk and milk products attending to quality control. The role of the government is to supervise quite and encourage the co-operatives. The Anand pattern, their establish a direct link between the producers and consumers. To achieve this objective of replicating Anand or Amul pattern dairy co-operative society, the year 1965. The NDDB was set up under the chairmanship of Dr. V. Kurien in the objective of percolating the Anand pattern in rural India. Dharwad milk producer union limited has been established in 1986 and started function in 1988. It procures milk from many villages on daily bases.
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STATEMENT IF PROBLEMS Management problem There is a fluctuation in net profit i.e. increase and decrease and also net loss in the year 2003-04 and 2005-06. So the company wants to know the reasons for declining in net profit with the help of ratio analysis. Research problem To study the financial performance and to find out the reasons form Net Loss through ratios. Hence the title of the problem is A study of financial position and trend analysis through ratios analysis at DMUL. Objectives of study: 1. Main objective is to study the different ratios used in DMUL.
2. To study financial performance of the organization and suggest measures to management for t improvement of profits.
3. To find out the firms efficiency based on past and present profitability ratios.
4. To study the liquidity position of the company.
5. To suggest possible future performance by analyzing its financial statements.
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Research methodology:
Methodology: The methodology includes the personal interaction with the finance manager. Selection of date: from the annual reports of the firm for last three years; i.e. from Annual report for the year 2000-05 Annual report for the year 2005-06 Annual report for the year 2006-07 Annual report for the year 2007-08 Annual report for the year 2008-09 Period: The study covers a period of five year data from 2005-06, 2006-07, and 2007-08 to mean an accounting year of the company consisting of 365 working days. Purpose of the study: The purpose of the study is to find out the financial performance of the firm for last 5 years through ratio analysis and their by suggest the company to take better decision for improvement of profits. The financial performance of the company is known by calculating financial statement and ratio. Scope of the study: The scope of the study is conducted only for organization level. It is done through balance sheet and profit and loss account of firm. For a period 200405,2005-06,2007-08,2008-09. DATA COLLECTION METHOD: 1. PRIMARY DATA: The information is collected from the personal interaction with the financial managers DMUL. 2. SECOUNDARY DATA: this is collected through DMUL ANNUAL REPORTS.
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MEASURMENT TECHNIQUE/STATISTICAL TOOLS: Accounting ratios. Financial statement of the company. ANALYTICAL TEHNIQUE: Statistical technique used for calculation of ratios is in terms of percentage. LIMITATION OF THE STUDY: The accuracy of the ratios is subject to the validity of information provided through Balance sheet, profit and Loss A/c and interactions with management. The standard for the ratios are suitable modified to prudently reflect the financial position keeping in mind the peculiarities of the industry/ company. FINANCIAL STATEMENT A financial statement is a organized collection of data according to logical and consistent accounting procedures. Its purpose is pose is to convey understanding of some financial aspects of business firm. It may show a position at a moment in time as in the case b/s or may reveal a series of activities over a given period of time as in case income statement. Financial statement are prepared for the management to deal with a. Status of investments. b. Results achieved during a given period under review a financial statement generally refers to the following; 1. Income statement: the income statement also termed as (profit or loss account) is generally considered to be the most useful of all financial statements. It explains what has happened to a business as a result of operations between two balance sheet dates. It discloses the revenue realized from the sale of goods and the costs incurred in the process of producing the scheme. It tells the story of progress or decline over given period and why and how an indicated result achieved.
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2. Balance sheet: It is statement of financial position of a business at particular moment of time and claims of the owners and outside against those assets at time. 3. Statement if retained earnings: the term retained earnings means the accumulated excess of earnings over losses and dividends. The balance shown income statement is transferred to the balance through this statement. After making necessary appropriations. It is thus a connecting link between the b/s and income statement. This statement is also termed as project and loss appropriation account in case of companies. 4. Statement of changes in financial position: The balance sheets show the financial condition of the business at a particulars moment of time while the income statement discloses the result of operations of business over a period of time. However for a better understanding of the affairs of the business, it is essential to identify the movement of working capital or cash in and out business. This information is available in the statement of changes in financial position of the business. ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: Analysis means methodical classification of data given in the financial statements. The figures given in the financial statements will not help for comparison unless they are put in a simplified from. Thus, the facts and figures in the financial statements can be transformed into meaningful and useful figures through a process called as analysis and interpretation.
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FINANCIAL STATEMENT OF THE FIRM Profit and loss for the year of 2004-2005 of the DMUL Particular Income Income earned Total income Expenditure Expenditure incurred Total expenditure Profit or loss Profit for the year Balance of profit transferred to balance sheet 806.90 806.90 883.14 883.14 Amt (in lacks)
76.24 76.24
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Balance sheet of the DMUL for the year ending 31-03-2005 Amt (in lacks) 345.00 490.07 1127.19 326.52
CAPITAL AND LIABILITIES Capital Reserves and surplus Borrowings Current liabilities
Total ASSETS AND PROPERTIES Investment Fixed assets Work in progress Current assets Total
2288.79
73.10 905.71 702.81 607.17 2288.79
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Profit and loss account for the year of 2005-2006 of the DMUL Particular Income Income earned Total income Expenditure Expenditure incurred Total expenditure Profit or loss Profit for the year Balance of profit transferred to balance sheet 13.53 13.53 889.29 889.29 876.76 875.76 Amt (in lacks)
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Total ASSETS AND PROPERTIES Cash in hand Cash at bank Investment Fixed assets Work in progress Current assets Total
2360.93
6.70 149.72 44.24 888.54 559.92 711.81 2360.93
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Profit and loss account for the year of 2006-2007 of the DMUL
Particular Income Income earned Total income Expenditure Expenditure incurred Total expenditure Profit or loss Profit for the year Balance of profit transferred to balance sheet
Amt (in lacks)
922.85 922.85
907.73 907.73
15.12 15.12
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Balance sheet of the DMUL for the year ending 31-03-2007 Amt (in lacks) CAPITAL AND LIABILITIES Capital Reserves and surplus Borrowings Current liabilities 401.29 589.82 983.44 359.78
Total ASSETS AND PROPERTIES Cash in hand Cash at bank Investment Fixed assets Work in progress Current assets Total
2334.33
14.18 134.08 45.08 951.47 697.21 492.31 2334.33
Page 75
Amt (in lacks)
1118.27 1118.27
916.38 916.38
201.89 201.89
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Balance sheet of the DMUL for the year ending 31-03-2008 Amt (in lacks) CAPITAL AND LIABILITIES Capital Reserves and surplus Borrowings Current liabilities 426.34 586.28 887.10 518.86
Total ASSETS AND PROPERTIES Investment Fixed assets Current assets Work in progress
2418.59
45.35 991.83 499.32 882.09
Total
2418.59
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Amt (in lacks)
1167.40 1167.40
1097.26 1097.26 70.14
70.14
Page 78
Total ASSETS AND PROPERTIES Cash in hand Cash at bank Investment Fixed assets Work in progress Current assets
21.91.67
2.34 985.33 220.57 101.27 608.8 721.28
Total
21.91.67
Page 79
Analysis and Interpretation of Ratio 1) Current ratio: This ratio indicates the rupees of current assets available for each rupee of current liability. Current Ratio= Current assets Current liabilities YEAR 2004-05 2005-06 Current assets Current liabilities Ratio 60717987 71181058
2006-07 63658413
(Amt in Rs) 2007-08 2008-09 86244063 72128952
32652240
43576691
35978861
53736056
50741016
1.86
1.63
1.76
1.60
1.42
Source: annual report of company Interpretation: according to the standards the current ratio of the firm should be 2:1, but the ratios of the company are less than 1. It tells the business cannot pay debts due within one year from assets which it expects to turn into cash within the year. In 2004-05 it was 1.41. it has gradually increased it indicates improvements in the financial position of the company; again it has decreased in 2006-08 and 2008-09 so it has to improve.
Page 80
2) Quick ratio: while calculating this ratio we will not consider inventories. Quick ratio= Quick assets Current liabilities Year Quick Assets 2004-05 30921237 2005-06 49441660 2006-07 39499293 2007-08 58065233 2008-09 50123452
Current liabilities Ratio
32652240
43576691
35978861
51886328
50741016
.95
1.13
1.1
1.12
1.11
Source: annual report of company Interpretation: The ideal ratio of the firm should be 1:1, but the ratios of the company are less than 1 in 2004-05 and 2005-06. It tells the business can not pay debts due within one year from assets that it expects to turn into cash within the year but in 2006-07 and 2008-09 it is increasing it is a good sign for organization. I. DEBT-EQUITY RATIO: It measures the relation between debt and equity in the capital structure of the firm. In other words, this ratio shows the relationship between the borrowed capital and owners capital, this ratio shows relative claim of the creditors and shareholders against the assets of the company. DER = long term debt Share-holders funds-net loss
Page 81
Generally higher the ratio greater is the possibility of increasing the ROR to equity and vice versa. A high debt equity ratio may be adopted to take advantage of cheaper debt capital. The ratio indicates the extent to which the firm depends upon outside for its existence. The ratio provides margin of safety to the creditors. It tells owners the extent to which they can gain benefits of maintaining control with a limit investment. YEAR Long term Debt 2004-05 2005-06 2006-07 98344158 2007-08 88710194 2008-09 82363231
112719511 106042793
Shareholders Fund Ratio
91132042
85120464
100623785 121452266 135797558
1.24
1.25
0.98
0.73
0.61
Interpretation: General standard of debt Equity ratio is 2:1. Since the company is using more borrowings. But compare to 2006-07 to 2007-08 it has decreased little more it good sign. Even though it has to improve.
II. PROPRITORY RATIO: It establishes relationship between the proprietor or shareholders funds and total tangible assets. It may be expressed as: Proprietor Ratio= shareholders funds Total Assets The ratio indicates properties stake in total assets. Higher the ratio lowers the risk and lower the ratio higher the risk. Debt- equity ratio and current ratio affects the proprietary ratio.
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Proprietary ratio YEAR 2004-05 Share 72180350 holders fund Total 156528692 assets ratios 0.46
2005-06 91132042
2006-07 85120464
2007-08 2008-09 100623785 121452266
15860052
164460270
163314054 191928236
0.57
0.51
0.61
0.63
Interpretation: Since company property ratio is low in 2003-04 but later it goes on increasing in 2004-05 was 0.57 and in 2005-06 was 0.51 and 2006-07 was 0.61 and 2007-08 was 0.63 its shows the little dangers to creditors and above 50% is satisfactory. III. INTEREST COVERAGE RATIO : This is a measure of the protection available to creditors for payment of interest charges by the company. The ratio shows whether the company has sufficient income to cover its interest requirements by a wide margin. The interest coverage ratio is computed by dividing profit before interest and tax by the interest expenses. A high ratio implies adequate safety for payment of interest even if there were to be a drop in the companys earnings. The interest coverage ratio is as follows: Interest coverage Ratio = profit before interest and tax Interest expenses Interest Coverage Ratio YEAR 2004-05 2005-06 2006-07 2007-08 EBIT 11917496 2429693 4830399 20762147 Interest 4284974 2889174 1910180 585744 Ratio 2.78 0.84 2.52 35.44
2008-09 4567386 236572 20.43
Interpretation: Since the company interest coverage ratio is 2.78 in the year 2004-05 the company is not able to recover their interest but later it turn into positive in the year 2007-08 the ratio is 35.44 its good sign for company but it has to increase.
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Turnover Ratio
1) INVENTORY/STOCK TURNOVER RATIO (ITR/STR). It indicates the efficiency of the firm in producing and selling its products. High ratio is good from the view point of liquidity and vice versa. A low ratio would signify that inventory does not sell fast and stably in the warehouse for a longtime. It is calculated as follows: Cost of goods sold OR Avg Inventory
sale (If there is no opening stock) Closing Stock
Hence Avg Inventory= Opening stock + Closing Stock 2 Avg Inventory is calculated by taking stock levels of raw materials, working process and finished goods at the beginning of year and at the end of the year and that is divided by 2. Inventory/Stock turnover Ratio: YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Cost of 303696602 346684069 446321775 397561562 440874259 goods sold Avg 21095190 28794258 25768074 22949259 27151621 inventory Ratio 14.39 12.04 17.32 17.32 16.23 Source: Annual Report Inventory Conversion Ratio YEAR 2004-05 No. of days 365 in a year ITR 12.04 DAYS 30.31
2005-06 365 17.32 21.07
2006-07 365 17.32 21.07
2007-08 365 16.23 22.48
2008-09 365 14.39 25.36
Interpretation: In 2004-05 and 2005-06 there is management of inventory is not good because the Convert-ion period is high As compare to 2005-06. But in 2007-08 again it increases. But in the period 2004-05 there is more inventory
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level than required by the production and sales activities. In the period 2005-06 due to increase sales inventory convert-ion period is less but it has increased in 2008-09. In the subsequent year it has improved. 2) DEBTORS TURNOVER RATIO: Debtors constitute an important constituent of current assets and therefore the quality of debtors to great extent determines that firms liquidity. There are two ratios. They are: 1) Debtor Tern-over Ratio 2) Debtor Collection Period Ratio Debtors tern-over can be calculated by dividing total sales by balance of debtors. Debtors tern-over=Sales Debtors Higher the ratio is better, since it indicate that debts are being collected more promptly. YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Sales 390565567 489014707 15577528 Avg Debtors Ratio 11152086 35.02 31.39 31.67 35.16 35.03 468283461 14783343 511817364 14555763 341538442 9748573
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DEBTORS COLLECTION PERIOD This ratio indicates the extent to which the debts have been collected in time. It gives the average debt collection period. The higher is the tern-over ratio and shorter is the average collection period the better is the trade credit management and the better is the liquidity of debtors, as short collection period and high turnover ratio imply prompt payment on the part of debtors. On the other hand, low turnover ratio and long collection period reflects that payments by debtors are delayed. Debtor collection period = No. of days DTR It is helpful to the creditors and lenders of the firm to know the firms collecting within a reasonable time. DEBTOR COLLECTION PERIOD YEAR 2004-05 2005-06 No. of days 365 365 in a year DTR 35.02 31.39 Days 10.42 11.62
2006-07 365 31.67 11.52
2007-08 365 35.16 10.38
2008-09 365 35.03 10.41
Source: Annual reports of company Interpretation: The ratios Indicates the debtors collection. In 2004-05.35.02, 2005-06 it was 35.02 and but in the year 2005-06 its decreasing the debtors collection days are increasing but again decreases to 35.03 in the year 2008-09. Collection period of WCPM is improving i.e. days are decreasing, i. e. from 11 days to only 10 days. It shows the payments of debtors are very prompt.
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3) CREDITORS TURN-OVER RATIO: It indicates the speed with which the payment for credit purchases is made to creditors. This ratio is calculated as follows: = credit purchases Avg creditor It details regarding gredit purchases, opening and closing A/c payable have not been given, and the ratio may be calculated as follows: = Total purchase Creditors CREDITORS TURN-OVER RATIO: YEAR 2004-05 2005-06 Total 303770822 371288996 Purchase Creditors Ratio 10363756 29.31 10219771 36.33
2006-07 340907385
2007-08 384036630
2008-09 27242865
12280764 27.75
10735527 35.77
12275101 22.19
Creditors payment period YEAR 2004-05 No. of days 365 in a year CTR 29.31 AYS 12.45
2005-06 365 36.33 10.04
2006-07 365 27.75 13.15
2007-08 365 35.77 10.20
2008-09 365 22.19 16.44
Source: annual reports of company Interpretation: The ratios are increasing. In 2004-05, 35.77 times. The creditor payment period is decreasing i.e. in 2003-04 is 16 days; it is decreasing continuously and in 2008-09 it become 10 days. It signifies the creditors are being paid promptly. It shows company is having credit worthiness.
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4) WORKING CAPITAL TURN-OVER RATIO: This ratio indicates whether or not working capital has been effective utilized in making sales. This ratio is calculated as follows: = sales Net Working Capital YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Sales Net Working Capital Ratio 390565567 489014707 468283461 511817364 341538442
28065747
27604367
27679552
36323028
16518934
13.91
17.72
16.91
14.09
20.67
Interpretation: The ratios are fluctuating in 2008-09 the ratio is 20.67 times, in 2004-05 it decrease to 13.91, in 2005-06 increases to 17.72. But in 2006-07 it decline to 16.91. And in 2007-08 it becomes 14.09. Overall this ratio indicates that working capital has been effectively utilized in making sales except in 2004-05 and in 2008-09 still they have to make better utilization of working capital. 5) NET ASSETS TURNOVER RATIO Net assets include net fixed assets and net current assets. A firms ability to produce large volumes of sales for a given amount of net assets is the most important aspects of its operating performance. Underutilized assets increases the firms need for costly financing as well as expenses for maintains and up keep. The ratio is calculated as follows: = Net Sales Net Assets
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NET ASSETS TURNOVER RATIO YEAR 2004-05 2005-06 Net Sales 390565567 489014707 Net 158600052 163107199 Assets Ratio 2.46 3
2006-07 468283461 163314054 2.97
2007-08 511817364 19198236 2.67
2008-09 341538442 147709374 2.31
Interpretation: The ratios are fluctuating in 2008-09 the ratio is 2.31 times, in 2004-05 it increase to 2.46, in 2005-06 increases to 3. But in 2006-07 it decrease to 2.97 And in 2008-09 it decreases to 2.31 however in 2005-06 it increases to 3. I.e. one rupee of investment they are making sales. Overall it shows they are improving their sales.
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PROFITABILITY RATIO INTRODUCTION: A company should earn profit to survive and grow over a long period of time. Profit is the ultimate output of company and company will have no future if it fails to make sufficient profits. Therefore company should continuously evaluate the efficiency of the company in terms of profits. OBJECTIVES: Profitability ratio is calculated to measures the operating efficiency of the company. Poor operational performance may indicate poor sales and hence poor profits. Lower profitability may arise due to lack of control over the expenses. INTERSTED PARTIES IN PROFITABILITY RATIOS: MANAGEMENT CREDITORS OWNERS Generally tow major types of profitability ratios are calculated: Profitability in relation to sales Profitability in relation to investment PROFITABILITY RATIOS INVOLVE: 1. GROSS PROFIT RATIO 2. NET PROFIT RATIO 3. OPERATING EXPENES RATIO 4. OPERATING PROFIT RATIO 5. RETURN ON INVESTMENT/OVERALL PROFITABILITY RATIO 6. RETURN ON EQUITY 7. RETURN ON TOTAL ASSETS
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1) GROSS PROFIT MARGIN RATIO:Gross profit is the difference between sales and the manufacturing cost of goods sold. And Gross profit is compared with the sales. Gross profit margin ratio reflects the efficiency with Which management and implies that the firm is able to produce at relatively lower cost. A low gross profit margin reflects higher cost of goods sold due to Reduction in selling price Inefficient utilization of plant and machinery etc.. It is calculated as follows: Gross profit ratio= sales cost of goods sold Net Sales = Gross profit Net Sales *100
GROSS PROFIT MARGIN RATIO YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 Gross 43881498 42692932 70721899 70943105 37841840 profit Net Sales 390565567 489014707 468283461 511817364 341538442 RATIO (%) 11.23 8.73 15.10 13.86 11.07 Interpretation: The gross profit ratio is not satisfactory its fluctuating in 2004-05 is 11.07, 2004-05 is 11.23, 2005-06is 8.73, 2006-07is 15.1 and 2007-08 is 13.86 its not good because the expenses are more.
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2) NET PROFIT MARGIN RATIO This ratio is also known as net margin. This measures the relationship between net profit and sales of a firm. Depending on the concept of net profit employed, it is calculated as follows. = Profit (loss) after tax Net Sales *100
This ratio indicates companys capacity to withstand adverse economic conditions. A company with high net margin ratio would ensure adequate return to the owners as well as enable a firm to withstand adverse economic condition when selling price is declining, cost of production is rising and demand for the product is falling. It would really be difficult for a low net margin ratio company to withstand these advantageous. NET PROFIT MARGIN RATIO 2004-05 2005-06 2006-07 2007-08 7624062 -1353071 1512197 20189449
YEAR 2008-09 Net -8819318 Profit Net 390565567 489014707 468283461 511817364 341538442 Sales Ratio 2 -0.27 0.32 3.94 3.58 (%) Source: Annual Reports of Company Interpretation: since the net profit ratio of company in 2004-05 become negative because increasing in expenses and later it has recover the profit rapti in the year 2004-05 its 2 again in 2005-06 negative but in the last 2 financial year its goes on increasing in 2008-09 was 3.94 but it has to improve.
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3) OPERATING EXPENSE RATIO: It explains the changes in the profit margin ratio. This ratio is computed by dividing opening expenses viz. cost of goods sold plus selling expenses and general and administrative expenses (excluding interest) by sales. Operating Expenses Ratio = Operating Expenses *100 Net Sales A higher operating Expenses ratio is unfavorable, since it will have a small amount of operating income to meet interest, dividends etc.. and on the othere hand lower operating expenses ratio is favorable. OPERATING EXPENSES RATIO YAER 2004-05 2005-06 Operating 378648070 486585013 expenses Net sales 390565567 489014707 Ratio (%) 96.94 99.50
2006-07 463453061 468283461 98.96
2007-08 491055215 511817364 95.94
2008-09 344171419 341538442 100.77
Interpretation: the operating expenses ratio was more in 2003-04 in 2005-06 was 100.77 and 99.50 it decreases and again in 2006-07 and 2007-08 it was 98.96 and 95.94. it indicates more operating expenses. In subsequent years it has decreased it shows changes in the sales price and demand for the products in the market it has to.
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4) OPERATING PROFIT RATIO The ratio is calculated as follows: = EBIT*100 Net Sales OPERATING PROFIT RATIO 2004-05 2005-06 2006-07 2007-08 11917497 2429694 4830400 20762149 390565567 489014707 468283461 511817364 3.05% 0.49% 1.03% 4.05%
YEAR EBIT Net Sales Ratio (%)
2008-09 -2632977 341538442 3.77%
Interpretation: The operating profit ratio in the year 2004-05 it was 3.05 because of the increasing in expenses in 2004-05 3.5 again in decline in 200506 0.49 later it recover in 2007-08 it become 4.5, it means for 100 Rupee of sale the operating profit is rupees 4.5. The ratios are decreasing due to increases in expenses ratio. 5) RETURN ON EQUITY (ROE)/ NET WORTH Return on Equity is calculated to see the profitability of owners investment. Return on Equity= PAT *100 Shareholders equity or net worth Return on Equity indicates how well the firm has used the resources of owners. This Ratio reflects the extent to which this objective has been accomplished. This ratio is of great interest to the present as well as the prospective shareholders and also of great concern to management, which has the responsibility of maximizing the owners welfare. RETURN ON EQUITY YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 PAT 7624062 -1353071 1512197 20189449 8819318 Net Worth 91132042 85120464 100623785 121452266 72180358 Ratio (%) 8.36 -1.58 1.50 16.62 12.21 Interpretation: Since return on Equity is also increasing but it is not favorable. The firm is not getting more profit by its shareholders fund because of its more operating expenses. So it has to be improved.
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6) RETURN ON TOTAL ASSETS (ROTA) This ratio is compared to know the productivity of the total assets. There are methods of computing Return on Total Assets A. ROTA = PAT Total Assets B. ROTA = PAT+ interest *100 Total Assets RETURN ON TOTAL ASSETS (ROTA) YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 PAT 11909036 1536103 3422377 20775193 2632979 Total 158600052 164460270 163314054 191928236 156528692 Assets Ratio (%) 7.50 0.93 2.092 10.82 11.68 Interpretation: in period 2003-04 there is net loss no return in 2004-05 its 7.5 again in 2005-06 it decreases to 0.93 in 2007-08 it was 10.82 and interest both are less compare to 2004-05 so there is fluctuation return on total asset ratio. There is no proper utilization of total assets in the company. *100
Page 95
7) RETURN ON INVESTMENT(ROI): It is also called as overall profitability ratio or return on capital employed (ROCE) ratio. This ratio is the broadest measure of the overall performance of business firm. It indicates the percentage of return on the total capital employed in the business. The higher ratio, the more efficient use of the capital employed. It is calculated on the bases of the following. ROI = Operating Profit *100 OR Capital employed RETURN ON INVESTMENT (ROI): YEAR 2004-05 2005-06 EBIT 11917497 2429694 Capital 203851553 191163257 employed Ratio (%) 5.84 1.27 PBIT *100 Capital Employed
2006-07 4830400 198967943 2.42
2007-08 20762149 210162460 9.87
2008-09 -2632977 185834050 -1.41
Interpretation: In 2004-05 for 100Rs. Of investment the company is getting only 0.14 Rs. Profits but in later year it has increased to Rs. 5.84, Rs. 9.87 respectively. But also it is not favorable because operating expenses are more. NOTES: Net sales= Gross Sales-Excise COGS=(Op. Stock+ Purchases of products+ Consumption of Raw materials and components + consumption of stores spares, tools + freight, transportation, port charges + power and fuel)- Closing Stock. Operating expenses = COGS + payments to and provision for employees + rent + rates and taxes + Insurance + Publicity and selling expenses work operating expenses + Repairs to building + Repairs to plant and machinery + other expenses + depreciation. Gross profit = Net Sales- COGS Total Assets = Fixed Assets + Current Assets. Net Worth = Capital + Reserves and surplus. COGS = cost of goods sold Other incomes Considered as Operating Income
Page 96
COMPARITIVE STATEMENT S. Name Of the ratio 200420052006No. 05 06 07 A Financial Ratios 1.86 1.63 1.76 Current Ratio 0.95 1.13 1.10 Quick ratio 1.24 1.25 0.98 Debt equity 0.57 0.51 0.61 ratio 2.78 0.84 2.52 Proprietary Ratio Interest Coverage Ratio Turnover Ratio Stock Turnover Ratio Inventory Conversion Period Debtors Turnover ratio Debtors Collection period Creditors turnover Ratio Creditors Collection Period Working Capital Turnover Ratio Net Asset Turnover Ratio Profitability Ratio Gross profit Ratio
200708 1.70 1.12 0.73 0.63 35.44
200809 1.41 0.72 1.57 0.46 -0.42
12.04 30 35.02 10.42 29.31 12 13.91 2.46
17.32 21 31.39 11.62 36.33 10 17.72 3
17.32 21 31.67 11.52 27.75 13 16.91 2.97
16.23 22 35.16 10.32 35.77 10 14.09 2.67
14.39 25 35.03 10.41 22.19 16 20.67 2.31
11.23 2
8.73 -0.27
15.10 0.32
13.86 3.94
11.07 -2.58
Page 97
Net profit Operating Expense Ratio Operating profit Return on investment Return on equity Return on total Assets Ratio
96.94 3.5% 5.84 8.36 7.50
99.50 0.49% 1.27 -1.58 0.93
98.96 1.03% 2.42 1.50 2.09 95.94 4.5% 9.87 16.62 10.82 100.77 -0.77% 0.14 -12.21 -1.68
Page 98
FINDINGS
1. The Current ratio is below the standard ratio and it is not good from companys point of view. It shows that it is not good position to meet the short term liabilities. 2. The liquidity ratio is according to standard ratio (1:1) and it is good from companys point of view. It show the company is able to meet its liabilities is short period. 3. The debt equity ratio is showing decreasing trend in year by years. It indicates funds means the shareholders fund, it shows that the company is financially strong(i.e., a low debt company). 4. The proprietary ratio increasing year by year, it shows that company is becoming financially strong and indicates how much share funds are invested in total assets of a firm. It also shows that the balanced risk on both parties. the ratio is 0.56, i.e. 1 Rupees of total Assets 0.56 paisa through share funds. 5. Interest coverage ratio is towards the equity shareholder it shows decreases in financial year. 6. The inventory turnover ratios are not good. Less inventory ratio i.e. holding periods are increasing in conversion of work in progress to finished goods ratio is 15.46 and days are 24(average). 7. The debtor turnover ratio is good. It shows the collection of debtors is very prompt. 8. The creditors turnover ratio goes on increasing and creditors payment period is decreasing. It signified creditors being paid promptly. But companys point of view they are not taking credit benefits provided by creditors. 9. Working capital turnover ratio is not good because its decreasingly every year it shows there no proper use of working capital ratio is 16.66. 10.A net asset turnover ratio is also not good ratio is 2.68(avg) the assets are not using properly.
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SUGGESTIONS
1. The company should increase its current assets to meet the current obligations through making credit sales, and also improve the liquidity position through increasing cash at hand and at Bank. 2. The Company can think to increase the Debt equity which is profitable to the company its helps in expansion of business or investing in some mutual funds and other market securities. Investment Is again subject to market risk, hence a special funds managers can be appointed or a broker who will take care of such aspects. 3. As is evidenced above, the resource (mainly funds) utilization of the firm has been poor. This might require an in-depth analysis of capital requirements of the firm, as the return on capital has been fluctuating even on account of increased sales. Further, the operational aspects also need to be reviewed as is in following suggestion. a. The existing debtors collection period is low and prompt, so the firm is forced to think to maintain it. But a very low collection period may also imply its inability to allow credit to its customers (dealers) and thereby losing sales and profits. Though it is a government run organization, competitiveness must be ensured, by enhanced sales through better credit policies. Conversely the credit policies with respect to purchases can adjust to the above. b. As mentioned above, the firm has small margin or Operating Profit. This can be owned to very high procurement expenses of raw-material (milk) and Staff Expenses the other operating expenses are under control. So the only remedy for the situation may be to either decrease the cost of raw material or increase the selling price of finished material. 4. As seen in the operating expenses ratio, there is increase in the operating expenses, which means there a sort of mismanagement of the expenses. Hence there is a need of better management of manufacturing, administering and selling expenses. 5. The existing capacity of DMU is 2,00,000 its of milk per day. Presently only 85,000 ltrs of milk is produced by DMU, which is not even 50% of the capacity. Hence it has to increase milk procurement routes by encourage village people to increase the cooperative milk societies (Presently 560) and add to their existing list of suppliers to DMU.
Page 100
6. It is further suggested that the firm should grow less dependent on the loans as the rates of interest are on the rise. The planning for further expansion activities should take place now. Also it is dis-heartening to find that over a long period of operation of almost 25years, the firm operates only in one state. It should plan to go national and may be even International.
Page 101
CONCLUSION
When we analysis its financial performance through ratio there is a decline of its profit in 2004-05 but in 2005-06 & there is a increment in its financial performance but it is not enough because the firm has 25 years experience. And it has great potential to increase its profit.
Page 102

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Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

Services rendered by NDDB:

KARNATAKA MILK FEDERATION

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

The growth process

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

THE THREE- TIER STRUCTURE

KARNATAKA MILK FEDERATION

DISTRIC COOPERATIVE SOCIETY

DISTRICT COOPERATIVE SOCIETY

DISTRIC COOPERATIVE SOCIETY

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

THE DISTRICT CO-OPERATIVE SOCIETY (DCS)

THE MILK UNION

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

Karnataka Milk Federation, Dharwad

The Karnataka Milk Federation consists of:

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

DHARWAD DISTRICT CO-OPERATIVE MILK PRODUCERS SOCIETIES UNION LIMITED.

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

DMU MISSION STATEMENT

E) Area of operation - Regional

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

Fresh Liquid Milk

Fat and SNF

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

K) Future growth and prospectus

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

R.S.SHETTY COLLEGE OF BUSINESS ADMINISTRATION, DHARWAD

Karnataka Milk Federation, Dharwad

DHARWAD MILK UNION

12 MT/Day 6MT/Day 6MT/Day 20.000LPD 20.000 LPD

PRENSE VALUE OF ACTIVITY

Collection of Milk 70.000LPD Sale of milk 60.000LPD

Dharwad, Haveri, Gadag Uttar Kannada district