34491013-ratio-analysis-of-amul.pdf

Rtaio analysisi

2. Table of Content
Introduction and History of Amul
Vision of Amul
Logo of Amul
Plants of Amul
Three Level organisation of Amul
Board Members
Servicies offered by Amul
Finance Department
Introduction
Sales Turnover
Research Methodology
Ratio Analysis
 Findings
Recommendation
Conclusion
References

3. INTRODUCTION AND HISTORY
In the year 1946 the first milk union was established.
union was started with 250 liters of milk per day.
In the year 1946 the union was known as KAIRA DISTRICT
CO-OPERATIVE MILK PRODUCERS’ UNION .
KDCMPU selected the brand name AMUL in 1955.
Today AMUL is collecting 16 lakhs liter of milk everyday.
Today Amul has more than 150 chilling centers in various
villages. Milk is collected from almost 1073 societies.

4. VISION OF AMUL
The main Motto of Amul is to help farmer. Amul system
works under objective of highest possible price to the milk
producers and lowest possible price to consumer. Farmers are
paid money in cash payment for the milk. Milk gives them
money for daily necessities. Amul is the one who started using
their profit for the milk producer common good.

5. LOGO OF AMUL

6. Contd…
First hand is for the farmer (producers), without whom the
organization would do not existed.
Second hand is for the representative of processor by whom
the raw milk processed into different finished products.
Third hand is for marketer without whom the product would
have not been able to reach to the customer
Fourth hand is for customers without whom the organization
could not carry on because they are the people who consume the
product.
By co-ordination of this four people the union runs successfully

7. Plants of Amul
Anand Plant: The products are Milk, Buttermilk, Milk
Powder, Butter, Ghee, Cheese, and Flavored Milk etc. It is
establish in 1973.
Mogar Plant: It is situated on Anand – Vadodara Highway
No.8. Its production is chocolates, Nutramul, Amul Lite and
Amul Ganthia. This plant establish in 1998.
Kanajari Plant: The product is a cattle feed. Old plant
establish in 1964 and new plant in 1980.
Khatraj Plant: It is situated between Nadiad –
Mahemdabad. The product is cheese.

8. Contd…
Chilling Center: Kapadvanj, Undel and
Balasinor.
Satellite Dairy: Balasinor, Undel , Mumbai.

9. Three level organisation of Amul

10. Board Members
Shri Ramsinh Prabhatsinh Parmar Chairman
Shri Rajendrasinh Dhirsinh Parmar Vice-Chairman
Shri Dhirubhai Amarsinh Chavda Director
Shri Mansinh Kohyabhai Chauhan Director
Shri Maganbhai Gokalbhai Zala Director
Shri Shivabhai Mahijibhai Parmar Director
Shri Pravinsinh Fulsinh Solanki Director
Shri Chandubhai Madhubhai Parmar Director
Shri Bhaijibhai Amarsinh Zala Director
Shri Bipinbhai Manishankar Joshi Director
Smt. Sarayuben Bharatbhai Patel Director
Smt. Madhuben Dharmsinh Parmar Director
Shri Ranjitbhai Kantibhai Patel Director
Shri B. M. Vyas Managing Director (G.C.M.M.F)
Shri Deepak Dalal District Registrar Co-operative Societies, Govt. of
Gujarat.
Shri Rahul Kumar Managing Director

11. Servicies offered by Amul
Medical Facilities for the Cattle Of Farmer:-
 AMUL provide a medical facility to cattle of farmer at a
concessional rate of Rs. 60/- includes medicines, treatment charge.
While AMUL bears same services at around Rs. 100 to 150.
Cattle Feeding:-
 AMUL provide the “Dan” to the cattle of member farmers.
AMUL produces the “by pass protein Dan” and “Purk Dan” to the
cattle of farmers at reasonable cost.
Artificial Insemination(Cattle Breeding):-
 AMUL has established “Artificial insemination center” at Ode
village near Anand.
 
 

12. Contd…
Free Animal Vaccination:-
 Often Animals are caught up in unknown diseases. To protect
the animals from such diseases periodical Vaccination
programme are arranged by AMUL.
Farmer Education Programmed:-
 Generally,farmers believe in superstitions. Further, he is often
not aware about how the animal should be taken care which
things should be given prime concern while milking the animal.
AMUL provide guidance and education through arranging
seminar on periodic basis.
 
AMUL also provides scholarship to children of member of
society.
 

14. Finance Department
In AMUL to handle the finance related matter there is an
Account Department. It contains 4 Division for different
function.
Account Division:-
The function of this Division is prepare voucher, bills. It also
issue Check for the payment.
ESTA Division:-
The function of this division is to prepare payroll of employee.
Purchase Bill Division:-
The function of this division is issue Check or Draft to party from
whom they purchse raw material

15. Contd…
MIS Division:-
The function of this division is handle Data related Account.
They have a data base system for that. They have Accounting
sofyware system Telly 6.3. in which they input all information
related Accounting.

16. Sales Turnover

17. Research Methodology
PROBLEM RECOGNITION :-
To know the financial position of the company through
various ratios.
Is Amul is able to meets its current liability against its current
assets?
OBJECTIVE OF STUDY :-
To check the financial position of Amul.
To study the liquidity position through various working
capital related ratios.
To check the return on equity and return on capital employed
of Amul.
To check the profitability of Amul.
To derive findings,conclusions and means to improve various
ratios.

18. Connt…
METHOD OF DATA COLLECTION:-
Secondary Data
LIMITATIONS:-
The research is of five years only.
No comparision with competitors.
The entire study is based on secondary data.
No avalibality of data for the separate products of Amul..

19. Ratio Analysis of Amul
MEANING OF RATIO:
Ratio analysis is a widely used tool of financial analysis. It is
defined as the systematic use of ratio to interpret the fined
statement, so that the strengths & weakness of the forms as well
as its historical performance & current financial condition can
be determined. The term ratio refers to the number or
quantitative relationship between two items or variables.
DEFINITION OF RATIO :
The term “Ratio” refers to the numerical and quantitative
relationship between two items or variables. This
relationship can be exposed as
• Percentages
• Fractions
• Proportion of numbers

20. Liquididy Ratio
Liquidity ratio includes,
Current ratio
Liquid ratio
Quick or Acid test ratio
 

21. Current Ratio
Current ratio may be defined as the relationship between
current assets and current liabilities. This ratio also known
as Working capital ratio is a measure of general liquidity and is
most widely used to make the analysis of a short-term financial
position (or) liquidity of a firm.
The standard Current Ratio is 2:1.
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITY

22. YEAR RATIO
2005-06 2.119
2006-07 1.64
2007-08 2.087
2008-09 1.622
2009-10 1.332
TABLE 1

23. Graph 1

24. INTERPRETATION :-
From above graph we can see that current ratio of Amul for the
year 2006-07, 2008-09 and 2009-10 are lower than previous year
and also lower than standard ratio.
This happened because of increase in current liabilities.
This ratio can be improved by
Increase in equity share capital.
Retaining profits in business.

25. Liquid Ratio
Although receivable, debtors and bills receivable are
generally more liquid than inventories, yet there may be
doubts regarding their realization into cash immediately or in
time. Hence, absolute liquid ratio should also be calculated
together with current ratio and quick ratio so as to exclude even
receivables from the current assets and find out the absolute
liquid assets.
The standard Liquid Ratio is 1.5:1.
LIQUID RATIO = LIQUID ASSETS
LIQUID LIABILITY

26. TABLE 2
YEAR RATIO
2005-06 1.228
2006-07 1.067
2007-08 1.117
2008-09 0.705
2009-10 0.827

27. Graph 2

28. INTERPRETATION :-
This ratio shows that the liquidity position of the AMUL is
rising slowly in 2009-10.And from graph we can see that the
liquidity position of the Amul is declining in 2008-09 as
compared to previous year but this year though it is higher than
previous year, it is not up to standard ratio.

 This ratio can be improved by reducing proportion of
inventories and increasing proportion of bank borrowings for
working capital in current liabilities.

29. Quick Ratio
Quick ratio is a test of liquidity than the current ratio. The
term liquidity refers to the ability of a firm to pay its short-term
obligations as & when they become due. Quick ratio may
be defined as the relationship between quick or liquid assets
and current liabilities. An asset is said to be liquid if it is
converted into cash with in a short period without loss of value.
The standard Liquid Ratio is 1:1.
QUICK RATIO = QUICK ASSETS
LIQUID LIABILITY

30. TABLE 3
YEAR RATIO
2005-06 1.187
2006-07 1.037
2007-08 1.088
2008-09 0.675
2009-10 0.817

31. Graph 3

32. INTERPRETATION :-
 Form above graph we can summarize that the quick ratio for the
2008-09 is lowest but in 2009-10 again it rises slowly.In 2005-06
Amul has strongest position in terms of liquidity. During 2005-06,
2006-07 and 2007-08 , this ratio is good as compared to standard
ratio but in last two years, i.e. in 2008-09 and 2009-10, it is below
the standard ratio.

To improve this ratio, Amul should retain its profit in business.

33. Profitability Ratio
Profitability ratio includes,
Gross Profit Ratio
Net Profit Ratio
Operating Ratio
Return On Capital Employed
Return On Shareholders Fund

34. Gross Profit Ratio
This ratio measures the gross earning of the company as
compare to its net sales .If the ratio is less it shows the in
efficiency of companies management.
The standard Gross Profit Ratio is 25%
GROSS PROFIT RATIO = GROSS PROFIT X 100
NET SALE

35. TAB
LE 4
YEAR RATIO
2005-06 20.53
2006-07 20.29
2007-08 18.68
2008-09 18.55
2009-10 17.52

36. Graph 4

37. INTERPRETATION:
 Gross profit ratio shows the declining position of Amul year
by year. During all five years it is not satisfactory level. This
happened because of decline in gross profit year by year.
To improve this ratio, Amul should try to reduce sales price of
its products.

38. Net Profit Ratio
Net Profit Ratio measures the net earnings of the company as
compared to net sales of the company. The ratio is valuable for
the purpose of ascertain the overall profitability of business
and shows the efficiency or otherwise of operating the
business. “The higher the ratio the better will be the
profitability.
The standard Net Profit Ratio is 10 to 12
Net Profit Ratio = Net Profit x100
Net Sales

39. TABLE 5
YEAR RATIO
2005-06 0.46
2006-07 0.5
2007-08 0.42
2008-09 0.42
2009-10 0.44

40. Graph 5

41. INTERPRETATION:-
Net profit ratio is very low of Amul then the ideal ratio.Net
Profit Ratio is rises for the year 2009-10. Amul is a co-operative
society and so it distributes its profit to farmers. So the net profit
of Amul is not very high in all five years and because of this net
profit ratio shows declining position of the Amul.
Favorable change can take place due to reduction in tax rate,
obtaining of some relief/allowance/reduction in tax liability

42. Operating Ratio
It is ratio showing relationship between cost of goods sold,
operating expense and net sales. It shows the efficiency of the
management.
The standard Operating Ratio is 75 to 85%.
Operating Ratio= cost of goods sold+operating expenses x100
Net Sales

43. TABLE 6
YEAR RATIO
2005-06 98.52
2006-07 98.53
2007-08 99.09
2008-09 98.8
2009-10 97.66

44. Graph 6

45. INTERPRETATION :-
Operating expense of the Amul is more than the ideal ratio for
the all five years.Amul has also reduced its operating expense for
this year. It is nearer to 97to98% for all five years

46. Return on Capital Employed
This ratio shows the relationship between net profit before
interest to capital employed of the company.The term capital
employed includes all assets except fictitious assets.
RETURN ON = NET PROFIT BEFORE INTEREST AND TAX X
100
CAPITAL EMPLOYED CAPITAL EMPLOYED
YEAR RATIO
2005-06 7.12
2006-07 8.18
2007-08 8.38
2008-09 9.11
2009-10 20.99
TABLE 7

47. Graph 7

48. INTERPRETATION :-
Return on Capial Employed increases from year to year. This
ratio shows the better position to give return to is share holders and
borrowed capital.
The improvement in ratio can be brought about by improving
profit before tax, reduction in tax rate, reduction in long term funds
including equity.

49. Return on Shareholder’s fund
It measures the return that the share holder gets as compared to
their investment.
This ratio explains the relationship between the total profits
earned by the business and total assets employed. This ratio thus
measures the overall efficiency of the business operations
Return on Shareholders fund = Net profit after tax x100
shareholders fund

50. YEAR RATIO
2005-06 8.79
2006-07 9.94
2007-08 10.06
2008-09 12.44
2009-10 15.02
TABLE 8

51. Graph 8

52. INTERPRETATION :-
From above graph we can see that every year Return on
Shareholders Fund increases. It shows that every year Amul is
giving more and more return to its shareholders. It helps to
create goodwill in the market.

53. Leverage Ratio
Leverage Ratio includes,
Debt Equity Ratio
Proprietary Ratio
Interest Coverage Ratio

54. Debt Equity Ratio
This ratio is only another form the proprietary ratio and
establishing relationship between outside long term Liabilities
and owner’s fund. It shows the proportion of long term external
liabilities and owner’s fund
The higher the ratio means that outside creditors have a larger
claim than the owners of the business. The pressure from
creditors would increase and their interference would also
increase. This ratio shows the proportion of long term external
liabilities and equities i.e. proportion of funds provided by share
holder or proprietors.
Debt equity Ratio = Debt
Equity

55. YEAR RATIO
2005-06 3.14
2006-07 2.18
2007-08 3.77
2008-09 3.41
2009-10 3.6
TABL
E 9

56. Graph 9

57. INTERPRETATION :-
There is ups and downs in five years in Debt Equity ratio. The
ratio shows that for every ownership capital of re.1, there is 3.14
Rs. Borrowed capital in 2005-06 and likewise. This does not shows
the good position of the company. It increases the financial risk of
the Amul.

58. Properitary Ratio
This ratio indicates the relationship between proprietor’s fund
and total assets. The proprietor’s fund includes equity share
capital, preference share capital, reserves and accumulated
surplus. Total assets include fixed, current and fictitious assets.
This ratio is very important for creditors because they know
the share of proprietor’s fund in the total assets and how fair
their loan is secured. The highest ratio the more safety will be to
the creditors.
Proprietary Ratio = Proprietor’s fund x 100
Total assets

59. YEAR RATIO
2005-06 15.02
2006-07 16.12
2007-08 12.55
2008-09 12.74
2009-10 8.88
TABLE 10

60. Graph 10

61. INTERPRETATION:-
There is ups and downs in the propritory ratio during last five
years. During 2009-10, this ratio is much less than the previous
years. This ratio means that for every 100 Rs. Total assets, there is
8.88 shareholders fund employed for fixed assets in 2009-10.this
give less security to the creditors.

62. Interest Coverage Ratio
The ratio indicates as to how many times the profit covers the
payment of interest on debentures and other long-term loans.It
measures the debt service capacity of the firm in respect of
fixed interest on long-term debts.Higher the ratio more sound is
the financial strength of the company.
INTEREST = NET PROFIT BEFORE INTEREST AND
TAX
COVERAGE RATIO INTEREST

63. YEAR RATIO
2005-06 1.41
2006-07 1.58
2007-08 1.55
2008-09 1.51
2009-10 1.59
TABLE 11

64. Graph 11

65. INTERPRETATION:-
This ratio is better in this year than last four years. This shows
good position of the Amul. This means that Amul is able to pay
interest on borrowed capital. This shows financially strong position
of the company.

66. Activity Ratio
Activity Ratio includes,
Inventory Turnover Ratio
Receivable Ratio
Debtors Turnover ratio
Fixed Assets Turnover Ratio
Payable Ratio

67. Inventory Turnover Ratio
The number of times the average stock is turned over during
the year is known as stock turnover.It is computed by dividing
the cost of goods sold by average stock in the business.
INVENTORY TURNOVER RATIO = cost of goods sold

Average inventory

68. YEAR RATIO
2005-06 7.75
2006-07 8.75
2007-08 8.53
2008-09 7.5
2009-10 8.79
TABLE 12

69. Graph 12

70. INTERPRETATION :-
There are no far changes in the inventory turnover ratio. It is
lowest in 2008-09. This year means in 2009-10 it has been
increased. This means that inventory is turned over for 8.79 times
during this year. This shows increase in sales of products so it is
good position of the Amul.

71. Receivable Ratio(Collection Period)
This ratio gives us idea about in how many days we are able
to collect the payment from our debtors.This ratio can be
obtained dividing debtors by credit sales and also multiplied
by 365 days. So our answer will come in days.
RECEIVABLE RATIO = Debtors x 365 days
Credit Sales

72. YEAR RATIO
2005-06 37
2006-07 29
2007-08 30
2008-09 13
2009-10 23
TABLE 13

73. Graph 13

74. INTERPRETATION :-
 This ratio shows the average days in which we will able to get a
payment from our debtors. The lower the days, it shows good
position of the company. It is lowest in 2008-09. In 2009-10, it
increases by10 days i.e. 23 days. Compared to previous year it is
not the good position but comparing with 2005-06, 2006-07 and
2007-08, this year the position of the company is good.

75. Fixed Assets Turnover Ratio
To ascertain the efficiency and profitability of business the
total fixed assets the more compared to sales. The more the
sales in relation to the amount invested in fixed assets the more
efficient is the use of fixed assets. It indicates higher efficiency.
If sales are less as composed to investments in fixed assets it
means that fixed asset are not adequately utilized in business.
An excessive sale is an indication of over trading which is
dangerous.
Fixed assets turnover Ratio = sales
Total assets

76. YEAR RATIO
2005-06 14.13
2006-07 15.2
2007-08 17.51
2008-09 19.92
2009-10 12.03
TABL
E 14

77. Graph 14

78. INTERPRETATION :-
The Fix Assets Turnover ratio was consequently increasing
during the last four years but this year has been declined. This
does not show a good position of Amul. It causes because of
either increase in total assets or decrease in net sales.

79. Payable Ratio(in days)
The number of days within which we make payment to our
creditors for credit purchase its obtained by creditors ratio.
PAYABLE RATIO = CREDITORS X 365 DAYS
CREDIT PURCHASE

80. YEAR RATIO
2005-06 3
2006-07 2
2007-08 2
2008-09 1
2009-10 18
TABLE 15

81. Graph 15

82. INTERPRETATION:-
Payable ratio shows that how many days the creditors are giving
us for payment. During last four years it was much lesser but in
this year, it has been tremendously increased. This shows good
position of Amul. This may happen because of increase in the
goodwill of Amul.

83. Findings
Liquidity position of Amul is going down every year.Quick
ratio and Current ratio decreases in year 2009-10 i.e.this year.
Gross Profit Ratio is also shows the declining trend from
year to year.
Net profit of Amul is very low because Amul is a co-
operative society and so they distribute the profit to the
farmers as a bonus.
Operating Ratio for all five year is very high.It is near about
97 to 98 percentage in all five year.
Operating expense is also high for all five years.

84. Contd…
Return on Capital employed shows increasing trend which is
good for the company. It shows the stronger position of the
company.
Net profit for the year 2009-10 increasing, which has positive
effects on some ratios.
Return on shareholders fund is also shows increasing
trend.For 2009-10 it is highest so shareholders will get more
return on their share.
Proprietary Ratio of the Amul decreases in 2009-10, which is
again not good for the company.

85. Contd…
Receivable ratio increases in 2006-10 from the previous year,
which has positive effects on liquidity position of the company.
Payable ratio shows that Amul gets more days then in previous
year in payment to its creditors.

86. Recomendation
Amul should try to decrease the price of the products.
Operating expenses of Amul should be reduced by reducing
the unnecessary expenses.
Amul should retain some amount of money as a reserve to
meet its current liabilities and for the liquidity purpose.
Company should raise funds through short term sources for
short term requirement of funds, which comparatively
economical as compare to long term funds
Amul should increase its marketing efforts for the products
like Amul Bread, Amul Chocolates. So that sales of these
products can be increased.

87. Contd…
Amul should increase the commission to agents who are
selling their products. Other competitors give good commission
and it will help the company to increase in its sales.
For the product Amul Kool, Amul should reuse the bottles to
reduce the expenses. This will help to reduce the prices and
increase in sales.
Amul is now going to launch Amul Tea for the rural market.
So, Amul should distribute the sample packets to get the
response of the rural people.
The quality of Amul Tea should be good because as per our
survey, rural people are conscious about quality and price.

88. Contd…
Profitability can be increased by reduction in cost of power
and fuel, higher utilization of labour, use of higher skilled
labour etc.

89. Conclusion
Amul is a successful co-operative dairy and it becomes a
household name in India and abroad, we visited this unit. So we
feel satisfactory on our modest efforts. During my visit in this
unit. I observed the Amul is more progressive sector; at present
its biggest dairy in Asia. The unit has bright future because if
it’s scientific and flexible management. The unit turnover is
increase day by day.
From the ratio we can see that overall position of the company
is good and strong.Sales and Net Profit also shows increasing
trend from last year but the Amul should worry about
controlling operating expense.

90. References
WWW.AMUL.COM
 WWW.NDDB.COM
 WWW.WIKIPEDIA.COM
 PERSONAL DISCUSSION WITH VARIOUS
DEPARTMENT HEAD.
 ANNUAL REPORTS OF LAST FIVE YEARS
 FINANCIAL MANAGEMENT BY PRASSUN
CHANDRA,5
TH
EDITION.
 

I. M. Pandey – FINANCIAL MANAGEMENT - VIKAS
PUBLISHING HOUSE PVT.LTD. 9
TH
EDITION.
 M.Y. KHAN and P.K. JAIN, FINANCIAL
MANAGEMENT ,VIKAS PUBLISHING HOUSE
PVT.LTD. NEW DELHI.
 OLD REPORTS OF PREVIOUS TRAINEES.