A Summer Training project on

Financial Analysis

Submitted in partial fulfillment for the Award of degree of

Master of Business Administration

Submitted to Rajasthan Technical University, Kota

Under Supervision of Training: Dy. VINOD KANOONGO

Submitted By:Trilok Chand

2010-2012 Department of Management Studies Government Engineering College, Ajmer

(Affiliated to Rajasthan Technical University, Kota)

Govt. Engineering College, Ajmer (An Autonomous Institution of Govt. of Rajasthan) Preface:After one year of MBA this training is a chance to expose myself to the real business world and to give my theoretical knowledge a practical aspect, a training of this sort is of great help. I choose Ajmer Dairy as a platform to apply my skills. I opted for a FINANCIAL ANALYSIS project as the financial analysis of a company forms the basis of its financial health. An insight into the working of the financial matrix is a pre-requisite for any observation, as such, a detailed analysis of the financial of Ajmer ZilaDugdhUtpadakSahakariSangh has beenattempted to understand the following essentials Ratio Analysis, Cash Flow Analysis, Problem and Challenges, and suggestions. As such, this important observation has been analysed &produced for perusal.

Acknowledgement
I express my sincere thanks to my project guide, Mr.VinodKanoongo, Designation Deputy Manager, Dept. Finance, for guiding me right form the inception till the successful completion of the project. I sincerely acknowledge him for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he had provided to me with all stages of this project. I would also like to thank the supporting staff Department, for their help and cooperation throughout our project.

(Signature of Student)

TRILOK CHAND

Executive Summary
In this section, I present the summary of targets achieved by me and the task performed by me during the SIP. This summary contains details of tasks done by me from 16 May 2011 to 30 June 2011. AZDUSS Ltd. Is a cooperative organisation registered under cooperative act with registrar of cooperative, Government of Rajasthan. It was established in the year 1972 to implement dairy development activities in the Ajmer district, under operation flood programme. The milk union is managed through the elected board. All the policy decisions are taken by the Board of Directors and implemented through Managing Director. The Ajmer plant of Saras (AZDUSS Ltd., Ajmer) has been certified under internationally accepted quality and food safety management system in accordance with ISO 9001-2000 with HACCP. Saras Dairy, Ajmer has important involvement in the field of milk collection and marketing and maintain the quality of milk products. That is why Saras dairy, Ajmer has achieved important position in northern India. Tasks 1. 2. 3. 4. 5. To understand the fast changing business environment. To develop practical knowledge with theoretical aspects. To get knowledge about the companys financial position. To know the liquidity position of the company by the ratio analysis. To know the trend of the computed items in two balance sheet of enterprises on

different date. 6. 7. 8. To identify the problems of the company related to finance. To discover the area that needs improvement. To give suggestion to strengthen the financial position of the company.

Contents: Introduction Mission Quality and Food Safety Policy Pricing Policy Hierarchy of Organisation Product Profile Plant Management Financial Analysis Process of Financial Analysis Techniques used for Financial Analysis Balance Sheet for Financial Year 2006-2007 to 2009-2010 Profit &Loss A/c for Financial Year 2006-2007 to 2009-2010 Ratio Analysis Calculation of Different Ratio Cash Flow Analysis Misconception regarding Dairy Product Problem & Challenges Suggestions Conclusion Bibliography

INTRODUCTIONAjmer Zila Dugdh Utpadak Sahkari Sangh Limited (AZDUSS), popularly known as Ajmer Dairy, was establish in the year 1972 with an initial capacity of 25000 litres per day as part of operation Flood programmed. It was established by the National Dairy Development Board under the aegis of Rajasthan Co-operative Federation (RCDF), Jaipur. Presently, Ajmer Dairy has a liquid milk handling capacity of more than one lac litres per day. It has a raw milk storage capacity of 3000 LPD and pasteurized milk storage capacity is pegged at 10 metric ton per day which gives an annual yield of 600 metric tons per annum. In addition to this, it has two chilling centers at beawar and vijaynagar and tankers that care of transportation of milk. Ajmer Dairys organizational structure comprises of a Managing Director at the apex. The Second level of the organizational hierarchy comprises of Manager (Procurement and input), Manager (MIS), Purchase Manager, Stores Manager and Marketing manager. The Manager (procurement and input) is further assisted by Project Officers looking after various wings such as Farmers Organization, input, Training and Womens Dairy Project independently. They are further assisted by a deputy Manager (production), Deputy Manager (Quality) and Deputy Manager (Engineering). The Marketing Department is structured with an overall In-Charge of liquid milk and products with an Assistant Manager and Field Staff under him.

MISSION To provide good quality of milk to consumers at reasonable price. Availability of good quality milk to consumers. To provide good price of the milk to the milk producers. To contribute in country development.

QUALITY AND FOOD SAFTY POLICYAjmer Dairy is committed to delight our customer by supplying high quality and safe products at competitive price with innovative pattern. Its endeavour shall be to bring in qualitative change in the socio-economic status of its member produces by ensuring reasonable price for their product.

The dairy strives to achieve this novel goal through Understanding the dynamic needs of customers. Continually updating & upgrading technology. Selecting appropriate processes and eco-friendly operation. Providing sufficient incentive to all milk producers for production of good quality of milk. Applying ISO: 2000 & HACCP principle in quality management system. We shall endeavour to build a heritage to commitment and excellence to the most trust worthiest choice of customers and milk producers.

PRICING POLICYPricing for purchasing milk from co-operative societies is decided in the board of union. The pricing is done on the basis of two excess pricing policies. According to this policy prices are decided on the basis of the fat contents of the milk. Due consideration to SNF part of the milk is also given to control the adulteration. Price of the liquid milk to sell in the market is also decided by the board of union, whereas the interstate and inter union prices of milk are decided at RCDF, Jaipur level. Milk product pricing is also done at RCDF Jaipur level and is followed by the entire union member. The union forcefully develop network of milk distribution in Ajmer City and other cities as mentioned above. The network consists of milk supply contractors called as transporters (paid per litre of milk) and booth agents (who get commission on the milk sold). The field supervisors supervise the distribution milk.

PRODUCT PROFILEAjmer Milk Union is supplying following type of milk in the local market and nearby cities like, Nasirabad, Vijaynagar, Makrana and kuchaman. A. Saras Shakti (Fat 4.5% and SNF 8.5%) B. Saras Gold (Fat 6% and SNF 9%) C. Saras Smart (Fat 1.5% and SNF 9%) D. Saras Taza (Fat 3% and SNF 8.5%) E. Saras Lite (Fat 0.5 and SNF 8.7%)

Ajmer milk union is manufacturing following milk product and is also marketing them in Ajmer city, inter districts and inter products are moniter by the RCDF Jaipur. For this RCDF Jaipur gets 3% commission.. A. Ghee B. Table butter C. Milk Powder D. Lassi E. Curd F. ShriKhand G. Chach H. NamkinChach I. Paneer Skimmed milk and whole milk power is mainly supplied to defence and different dairies in Rajasthan and area. This dairy had the privilege to supply the milk powder to foreign under development countries.

FRESH MILKDOUBLE TONED MILK

Composition: Fat % (min.): 1.5 SNF % (min.): 9 Pack Size:200ml, & 1 litre. Shelf Life / best before:2 days from thedate of packing when store below 8 degree.

TONED MILK
Composition: Fat % (min.): 3 SNF % (min.): 8.5 Pack size: & 1 litre Shelf Life / best before:2 days from the date of packing when stored below 8 degree.

STANDARD MILK
Composition: Fat % (min.): 4.5 SNF % (min.): 8.5 Pack size: & 1 litre. Shelf Life / best before: 2 days from the dateof packing when stored below 8 degree.

FULL CREAM MILK

Composition: Fat % (min.): 6 SNF % (min.): 9 Pack size: & 1 litre Shelf Life / best before: 2 days from the date of packing when stored below 8 degree.

FRESH MILK PRODUCTS CURD

Composition: Fat % (min.): 3 SNF % (min.): 8.5 Pack Size: 200gm. Cups. Shelf Life / best before:7 days from the date of packing when stored under refrigeration below 8 degree.

PANEER
COMPOSITION: Fat % 50 on dry matters. Moisture % (max.): 60 Pack Size: 200gm Shelf Life / best before: 15 days from the date of packing when stored below 8 degree.

SHRIKHAND
Composition: Fat % (min.): 6 Acidity % (max.): 1 Added Sugar % (max.): 70% on dry matter basis. Pack Size: 100 gm and 500 gm cups. Flavours:Elaichi&kesarPista. Shelf Life / best before: 15 days from the date of packing when stored under refrigeration below 8 degree.

CANNED ICE-CREAM
Composition: Fat % 12+0.5% (min.10%) % Protein (min.) 3.5% % TS (min.) 36.0% Shelf Life / best before; 6 months from date of packing when stored under refrigeration below -20 degree.

CANNED RASGULLA
Composition; moisture % by wt. Max. 55% Fat % by wt. Min. 5.0 Protein % wt. Min. 5.0 Shelf Life / best before: 6 months from date of packing when stored under cool and dry place.

PLANT MANAGEMENT
Ajmer milk dairy is equipped with much modern machinery. Many plants are established here, which try to increase their capacity.

1.) MILK COLLECTION PLANT: -From the beginning a milk collecting & storing
plant is established here whose capacity was to collect 25000 litre milk. But its capacity is increased to 1 lac litre. This plant has the capacity to make 10 metric ton milk power, 5m. Ton butter and 5m. Tonpaneer.

2.) MILK TESTER: -This machine tests the percentage of fats in milk samples. It is
15-18 yrs. Old at present a milk tester is prepared by Rajasthan State Industrial Corporation which gives the percentage of Fat and SNF present in milk in just 2 minute. This milk tester is here since 6-7 years. Then these samples are kept for a day for judicial purpose as proof.

3.) PREPACK MACHINE: - AZDUSS in the beginning supply milk in cranes, but in
the yr. 1978 to 1980 the milk was filled in bottles and supplied. But this also created problem and there was a fear of breaking up. Thus in the last month of 1978-1980 the union decided to sell milk in the pocket polythene. The milk was measured and packed in the polythene. All this was done by machine. This machine can fill 10,000 polythene of kg. Daily. These packets are more in demand in Ajmer.

4.) CHILLING PLANT:- This plant was established in the dairy on 8th October 1975
by agriculture minister of state government. ShriShivcharanMathur. This plant helps in freezing of milk foor keeping purpose. i.e. as refrigeration plant, so that milk do not get spoil till distribution.

5.) TESTING MACHINE: - This machine test suitability of the milk, whether the milk
is suitable for sell or not. The milk samples from packed milk bags are taken, Methylene Blue, an indicator of chemical base is added and kept for some time. As soon as the bacteria develops the blue colouengets decolorize, this represents the spoiling of milk. The time taken in this process represents the stability of packed milk.

FINANCIAL ANALYSIS
Analysis of financial statements is a systematic numerical calculation of the relationship between one fact with the other to measure the profitability, operational efficiency and the growth potential of the business. Financial analysis is a multipurpose & multidimensional technique which involves a systematic & careful. I examination of information contained in the financial statements for a certain period.

PROCESS OF FINACIAL ANALYSIS

The process of financial analysis starts with understanding the company and environment it operates which helps the financier to form a risk perception of the company. The accounting due diligence and the financial analysis also form an important part of the entire assignment. The process flow diagram for financial analysis is depicted here under.

The Financial Analysis Process Flow

Understanding the need for analyzing the company

Understanding the companies operation and studying the marks in which the company operates

Analysis the company specific details on the basics of documents internal to the company, which include the financial statement. The future business plans and the projection

Working out the risk profile of the company

Final calculation for analysis

Conclusion

Techniques used for financial analysis

1. Ratio Analysis 2. Cash Flow Analysis

1.

Ratio Analysis

Ratio- Ratio are most widely used tools of financial analysis. A ratio gives the mathematical relationship between one variable and another. The analysis of a ratio can disclose relationship as well as basis of comparison that reveal conditions and trends that cannot be detected by going through the individual components of the ratio. Ratio analysis mainly helps in valuing the firms in quantitative terms, two groups of people who are interested in them are creditors and shareholders; creditors are further divided in to short-terms creditors and long term creditors. Short term creditors hold obligations that will soon mature and they are concerned with the firms ability to pay its bills promptly. In the short run, the amount of liquid assets determines the ability to clear off current liabilities. These persons are interested in liquidity. Long term creditors hold bonds or mortgages against the firm and are interested in current payments of interest and eventual repayment of principal. The firm must be sufficiently liquid in the short terms and have adequate profits for the long term. These people examine liquidity and profitability.

Advantages of Ratio Analysis 1. Accounting ratios are most commonly used for management control purpose, by comparing one performance of the other similar types of business. 2. Accounting and financial ratio can play a significant and important role in cost accounting. Financial accounting budgetary control and auditing. 3. It is one of the media link between past and future. 4. Besides it adds to management, it helps to general public to understand the financial health of the business. From ratio analysis it is possible, without any difficulties, to have a general impression of the past performance of the business and to have a forecast about the uncertain future.

5. Identification of the financial responsibility is possible from through and critical ratio analysis. 6. It is one of the factors, which accelerates the development of the art of institution of the field of financial management.