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A
PROJECT REPORT
ON
“FINANCIAL STATMENT ANALYSIS”
AT
KRISHAK BHARTI CO.OPERATIVE LTD.
(SURAT)
SUBMITTED TO
Sinhgad Institute of Business Administration & ResearchIn Partial Fulfillment of Requirements
for the Award of Requirement ofPost Graduation Diploma in Management
SUBMITTED BY
JITENDRA M. CHAUDHARI
PGDM (Fin)-III
PROJECT GUIDE
Prof. Sonali Saripalli
ACADEMIC YEAR 2009-2011
SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH
Sr. No. 40 / 4A + 4B / 1, Near PMC Octroi Post, Kondhwa - Saswad Road, Kondhwa
(Bk.), Pune- 411048
1
CERTIFICATE
This is to certify that Jitendra M. Chaudhari student of SINHGAD INSTITUTE OF
BUSINESS ADMINISTRATION & RESEARCH, Pune has completed his/ her summer
training at KRISHAK BHARTI CO.OPERATIV LIMITED on the topic of “Financial
Statement Analysis” and has submitted the Summer Training Project Report in partial
fulfillment of Post Graduate Diploma in Management of the Sinhgad Institute of Business
Administration and Research for the academic year 2009-2011.
He/she has worked under our guidance and direction. The said report is based on
bonafide information.
PROF. SONALI SARIPALLI PROF. AVADHOOT D. POL
Project guide Director
\Date:-
Place:-
2
ACKNOWLEDGEMENT
I take this opportunity to express the feeling of gratitude towards Sinhgad Institute of
Business Administration and Research for keeping Industrial Training as a part of Post
Graduation Diploma in Management.
It is an occasion of great pleasure and a matter of deep felt personal satisfaction to present
this complied statement of the Industrial Training undergone at a Company of great
esteemed KRISHAK BHARTI CO.OPERATIVE LTD.
A deep sense of gratitude to Mr. P. G. Soni who gives me guidance related to corporate
finance and different ratios, He guided me in many difficulties related to my project. I am
grateful to Mr. Pravin Tivari & Mr. Champak Bhatt who allow me to take summer
training.
I express gratitude to all the staff of KRIBHCO who give me guidance related to their
specialize department in which they are doing their work & give knowledge what the
work they do & how it is done.
In addition of allowing me to industrial training of the company and study of the
organization and various aspects of managerial functions, they provide me many details.
In the preparation of this report, I take this opportunity to thank my Director sir Prof.
Avadhoot D. Pol and other faculty members of the institute, SINHGAD INSTITUTE OF
BUSINESS ADMINISTRATION AND RESEARCH, who have accompanied me and
the providing me all the facilities to make the industrial training more fruitful.
Last but not least I am also grateful to my friends and all those who directly or indirectly
helped me completion of the project.
3
SINHGAD INSTITUTE OF BUSINESS
ADMINISTRATION AND RESEARCH,
KONDHWA (BK)
DECLARATION
I hereby declare that the project titled “FINANCIAL SATAMENT ANALYSIS” is an
original piece of research work carried out by me under the guidance and supervision of
Prof. Sonali Saripalli.. The information has been collected from genuine & authentic
sources. The work has been submitted in partial fulfillment of the requirement of Post
Graduate Diploma in Management to SINHGAD INSTITUTE OF BUSINESS
ADMINISTRATION AND RESEARCH.
.
Place: Signature
Date: Jitendra M. Chaudhari
4
PREFACE
Summer Training is an important and a fundamental part of Post Graduation curriculum.
We had undergone a practical training under KHRIBCO. It was a good exposure for us to
undergo training in such a company to get the knowledge and experience regarding life
insurance and recruitment of capable of life insurance Financial Consultants.
Summer training is one of the major experiencing components of the knowledge, gain of
relevant of information with respect to finance and dealing with situations in a
professional course like Post Graduation where a professional person faces different
problem. We were able to get familiarized with the different policies and their working
pattern and got to know how a company measures to resolve their grievances and service
them to the maximum for future prospect and success.
“It is good to have enthusiasm but it is essential to have training. Training can be in all
way of life.” Thus, we would say that this training was beneficial educative & good
exposure to us, which will certainly help in our near future. This project was designed
with respect to this company. The project made us to get the enhanced knowledge
regarding inventory management undertaking in the company and the different
techniques used by them to take effective measures regarding the inventory.
5
INDEX
Sr. No. Topic Page No.
1. INTRODUCTION
2. REARCH METHODOLOGY
3. ORGANIZATIONAL PROFILE
4. DATA ANALYSIS
5. SWOT ANALYSIS
6. CONCLUSION
7. SUGGESTION
8. ANNEXURE
9. BIBLIOGRAPHY
6
INTRODUCTION
1.1 Introduction to financial statement analysis
Definition of Financial statement:
A financial statement is a formal record of the financial activities of a business, person, or
other entity.
For a business enterprise, all the relevant financial information, presented in a structured
manner and in a form easy to understand, are called the financial statements.
Definitions of the Finance statement analysis:
Financial statement analysis is defined as the process of identifying financial strengths
and weaknesses of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss account.
There are various methods or techniques that are used in analyzing financial statements,
such as comparative statements, schedule of changes in working capital, common size
percentages, funds analysis, trend analysis, and ratios analysis.
Financial statements are prepared to meet external reporting obligations and also for
decision making purposes. They play a dominant role in setting the framework of
managerial decisions. But the information provided in the financial statements is not an
end in itself as no meaningful conclusions can be drawn from these statements alone.
However, the information provided in the financial statements is of immense use in
making decisions through analysis and interpretation of financial statements.
Nature and component of Financial Statement:
Companies issue annual reports after the close of each fiscal Year financial statement are
at the center of the annual report. Other component of the annual report is the board of
directors’ report, management discussion and analysis (MDA), corporate governance
report and voluntary disclosures. Board of director report provides an analysis of the
7
performance of the company during this fiscal Year covered in the report. MDA provides
futuristic information such as management perceptions about the business averment in
the next and subsequent fiscal Year company strategy to take advantage of future
opportunities and to face potential threats, and the risk management strategy corporate
governance code.
Component of financial statement:
Balance sheet- which lists the assets, liabilities and equity at the balance sheet date, thus
provides information on the financial position of the company at the end of the fiscal
Year.
Income statement -Profit and loss account-which list out income and expenses for the
fiscal Year and thus provides information on the operating result for the fiscal Year,
Cash flow statement- which present cash flow from operating activities, investing
activities, and financial activities during the fiscal Year.
Accounting policies and explanatory notes- which provide explanations and clarification
to facilitated understanding of number appearing in financial statement and also
additional information that is relevant user of financial statement
Ratio analysis:
Meaning:
Ratio analysis is the process of identifying the financial strengths and weaknesses of the
firm by properly establishing relationships between the items of the balance sheet and the
profit and loss account.
Users of ratio Analysis:
Trade Creditors: They are interested in firm’s ability to meet their claims over a very
short period of time. Their analysis will, therefore confine to the evaluation of the firm’s
liquidity position.
8
Long term debt supplier: They are concerned with the firm’s long term solvency and
survival. They analyze the firm’s profitability over time. It’s ability to generate cash to be
able to pay interest and repay principal and the relation between various sources of fund.
Investors: They are the people who invested their money in the firm’s shares are most
concerned about the firm’s earnings. They restore more confidence in those firms that
show steady growth in earnings. They are interested in firm’s earning ability, risk, present
and future profitability.
Management: The management is interested in overall financial analysis. It is their
responsibility to see that the resources are used effectively and efficiently. And firm’s
financial condition is sound.
Standards of comparison may be…
Past Ratios: i.e. ratios calculated from the past financial statements of the firm.
Competitors’ Ratios: i.e. ratios of some selected firms, especially the most progressive
and successful competitor, at the same point of time.
Industry Ratios: i.e. ratios of the industry to which the firm belongs.
Projected Ratios: i.e. ratios developed using the projected or pro forma, financial
statements of the firm.
Following are the few ways of analyzing the firm’s financial ratio:
Time series or Trend analysis, the easiest way to evaluate the performance of the firm is
to compare its present ratios with the past ratios. When financial ratios over the period of
time are compared, it is known as time series or trend analysis. It gives an indication of
the direction of change and reflects whether the firm’s financial performance has
improved, deteriorated or remained constant over the time.
9
1.2 Objective of financial statement
Useful Information:
The financial statement of business enterprise should provide information, within the
limits if financial accounting that is useful to present financial position of company.
Potential investor and creditors use these statements in making rational investment and
credit decision. Financial statement should be comprehensible to investor and creditors
who have a reasonable understanding of business and economic activities. In a financial
accounting and who are willing to spend the time effort needed to study financial
statement.
Required and sufficient information:
Financial statement of business enterprise should provide information that help investors
and creditor to asses the prospect of receiving cash in form of dividend or interest and
from the proceeds from the sale, redemption or maturely of security or loans. Their
prospects are ability to obtain enough cash through its earning and financial activities to
meet its obligation when due and its other cash operating needs, to reinvesting earning
resources and pay cash dividend above perceptions of investor and creditors.
Primary Information:
The financial statement of a business enterprise should provide information about the
economics resources of an enterprise which are sources of prospective cash inflow to the
enterprise to its obligation to transfer economic resources to other which are cusses of
prospective cash outflow from enterprise earning which are the financial result, which are
the financial result of its operation and other events and conditions that effects the
enterprise since that in information income statement useful to investor and creditors in
assessing and enterprise income statement ability to pay cash dividend, and interest and
to settle obligation when they mature it should be the focus of financial accounting and
financial statement.
10
1.3 Limitation of financial statement
They are essentially internal report and therefore, cannot be fined because the actual gain
or loss of a business can be determined only when it is sold or liquidated. The allocation
of revenue cost to an account. Period involve personal judgment. The problem involve
the achievement of satisfaction matching of cost with revenue and cost transaction flow
continuously thought the life of a business enterprise yet they must be “cut off” at each
balance sheet.
The financial statement shows exact amount, which gives an impression of finality and
which gives impression may ascribe to those amount the is own concept of value where
as the statement may have been set up on basic of value different value standard. Passels
does the stated quay on assets represent the amount of cash that would realized on
liquidation even the cash balance would be reduce in the expenses incidental to the basin
come statement of a going concern concept where it income statement assumed that the
enterprise statement will continue in business. Fixed assets are customarily stated at
historical revenue in the income statement by way of deprecation.
Both the balance sheet and income statement reflect transaction that involves money
value of the many date under in factionary condition. The deprecation against current
revenue by companies may be in inactive of current economy realities and increase in
sales volume stated in rupees may or may not be the result of a larger no. or unit.
Financial statement do not reflect many factory which affect financial condition and
operating result, because they cannot be stated in term of money such
11
RESEARCH METHODOLOGY
2.1 Objectives
Primary objective:
Financial statement analysis seeks to evaluate the performance, financial strength, ability
to generate enough cash and the growth outlook of a company.
Secondary objectives:
Financial statement analysis helps the company to know the adequacy or profits earned
by the company.
We can know the financial strength of the company by analyzing financial
statements.
Analysis of financial statements helps to generate enough cash and cash
equivalents and the timing and certainty of their generation
The future growth outlook of company can be known by doing financial statement
analysis.
Methodology:
The adoption of proper methodology is an essential step in conducting my project work.
The tactical question is to be considering after finalizing our objective “what sources are
available?” and what resources should be used?’ to acquire the desired information.
Research Design:
In the financial statement analysis of KRIBHCO within these four Years, descriptive
research design is to be used to interpret the financial position of the company.
Data collection:
Data collection is the most important part of any project. And from where those data are
taken is also very important. For my project work I have used secondary data as the main
basic of my study. These data are collected from company and from inter net. I had
collected the last four Years annual report of the “KRIBHCO” from where I get profit &
12
loss account and balance sheet of company that I had selected for my project work for
financial statement analysis.
Apart from balance sheet and profit and loss account of companies I had used internet a
lot for get information for my project work. And I also used books for analyzing of the
financial statements to gain more knowledge about financial ratios.
Period of Study:
The period of the study for project work is of eight week only from 1st June – 26th July.
Finding and analysis:
After collecting the data I did ratio analysis, trend analysis, common size statements and
cash flow statement analysis. This gives the detail of the company’s current and past
position
2.2 Tools and Techniques of Final Statement
Common size statement
Trend analysis
Analytical balance sheet
Cash flow statement
Ratio Analysis
2.3 Interpretation of the Analysis
In interpretation I have done intercompany comparison of four year data of “krishak
bharti co-operative ltd.” Through this comparison I came to know about the financial
performance of the “krishak bharti co-operative ltd.” within these four years.
2.4 Limitations
As the data available to me, has been taken from the secondary sources, it is not sure that
collected data are accurate and complete.
13
It was not possible to collect some data which are very essential for analysis of financial
statement during the project work due to the non-cooperation of higher and middle level
management.
Due to lack of experience about financial statement analysis practically, it can’t be said
that the projection has been made totally correct and accurate.
As the time period is fixed, so financial statement analysis has been done only of four
Years. This may led to misinterpretation of the industry.
14
ORGANIZATIONAL PROFILE
3.1 Introduction
Krishak Bharati Cooperative Limited (KRIBHCO), a premier Cooperative Society for
manufacture of fertilizer, registered under Multi-State Cooperative Societies Act–
1985, was promoted by the Govt. of India, IFFCO, NCDC and other agricultural co-
operative societies spread all over the country.
KRIBHCO has sated up a Fertilizer Complex to manufacture Urea, Ammonia & Bio-
fertilizers at Hazira in the State of Gujarat, on the bank of river Tapti, 15 Kms from Surat
city on Surat – Hazira State Highway.
Late Smt. Indira Gandhi, former Prime Minister of India laid the Foundation Stone on
February 5, 1982. Hazira Fertilizer Complex has 2 Streams of Ammonia Plant and 4
Streams of Urea Plant. Annual re-assessed capacity for Urea and Ammonia is 1.729
million MT and 1.003 million MT respectively, the total Project cost was Rs. 890 crores
as against the estimated cost of Rs. 957 crores. This shows a saving of Rs. 67 crores
(approximately 7%) in Capital Cost of the Project, which is a rare feature in the history of
a Public Sector Unit.
The trial production commenced from November, 1985 and within a very short time of 3
months, the commercial production commenced from March 01, 1986. Since then, it has
excelled in performance in all areas of its operations.
Bio-fertilizer plant of 100 MT per Year capacity was commissioned at Hazira in August,
1995. KRIBHCO has also completed the installation of an expansion of the Bio-
15
Fertilizer plant with an additional capacity of 150 MT and the same was commissioned in
December, 1998.Ten Seed Processing Plants are also in operation in various states.
3.2 History and development
PROJECT ZERO DATE 31st MARCH, 1981
FOUNDATION STONE LAID BY Late Smt. Indira Gandhi then the Prime Minister Of
India on 5th February 1982
PROJECT COMPLETION 31st MAY 1985
TRIAL PRODUCTION PHASE Ist PHASE IInd
AMMONIA 14th NOV1985 30th NOV. 1985
UREA(STREAM 11/31) 26th NOV. 1985 1st DEC.1985
UREA (STREAM 21/41) 3rd DEC. 1985 1st DEC. 1995
FIRST RAKES DISPATCHED 1st FEB, 1986
COMMERCIAL PRODUCTION 1st MARCH, 1986
3.3 Objectives of kribhco
To increase the urea installed capacity, maintaining its market share
To ensure optimum utilisation of existing plant and machinery
To diversify into other core sectors like power, LNG terminal / port, chemicals etc
To under take the activities for the rural upliftment and agriculture development
To promote economic interest of its members by undertaking manufacturing of chemical
fertilizer and allied products
3.4 Mission and vision of kribhco
Mission
To act as a catalyst to agricultural and rural development by selecting, financing and
managing projects that are both socially desirable and commercially profitable. For doing
services to member of cooperative society by selecting financing
16
Vision
They want to be a world class organization that represents the farmer community and
maximizes returns to them through specialization in agricultural inputs and products
and other diversified businesses that maximize stakeholder value
1 Name of the
Organisation
Krishak Bharati Cooperative Limited, abbreviated KRIBHCO
2 Plant Office PO: Kribhco Nagar,
Hazira Road,
Surat 394 515
Phone-2320034
3 Head Office “A”-8-10, Sector 01, Noida,
“Distt. G. B. Nagar, U.P.”
4 Registered
Office49-50, Nehru Palace, New Delhi-19
5 Type of
Organisation
Society is registered under Multi-State Co-operative Society’s Act-
1984 and under the Administrative Control of Department of
Chemical & Fertilizer, Govt. of India.
6 Product Manufacturing Nitrogenous “Fertilizers and Allied Products” Viz:
Urea, Ammonia Liquid, Bio-Fertilizer, 30 Mega Watt Power Plant,
Operation and Maintenance of “Heavy Water Plant” of Department
of Atomic Energy.
17
7 Board of Directors
Chairman Shri Chandra Pal Singh
Vice Chairman Shri R.K.Dhami
Directors Shri V.R.Patel
Shri V. Sudhakar Chowdary
Shri Mathew C Kunnumkal
Shri Deepak Sanghal
Shri Shiv Narayan Prasad Mishra
Shri S.S.Jamgod
Shri Ponam Prabhakar
Managing Director Shri B.D.Sinha
Finance Director Shri R.Kamra
Marketing Director Shri N.Sambasiva Rao
SSOURCESOURCES OFOF THETHE E EQUITYQUITY:-:-
Government Of India : Rs. 450.00 Crores
Iffco : Rs. 97.00 Crores
Other Societies : Rs. 38.70 Crores
18
DATA ANALYSIS
4.1 Current ratio
Current ratio is the most common ratio for measuring liquidity. Current ratio expresses
the relationship between current assets and current liabilities. The current ratio is
calculated by dividing current assets by current liabilities:
Current ratio = Current assets
Current liabilities
Current assets include cash and those assets which can be converted in to cash within a
Year such as marketable securities, debtors, inventories etc. Prepaid expenses are also
included in current assets. All obligations maturing within a Year are included in current
liabilities. Current liabilities include creditors, bills payable, accrued expenses, short term
bank loan, income-tax liability and long term maturing in current Year.
Year
Current assets
Rs. In crore
Current liabilities
Rs. In crore
Current ratio
2006-2007 1577.00 342.35 4.61:1
2007-2008 1851.78 498.58 3.71:1
2008-2009 1567.97 507.76 3.09:1
2009-2010 1355.14 546.05 2.48:1
19
INTERPREATION:-
As we know the ideal current ratio is 2:1. And in the Year 2006-2007 the current ratio is
very high. One of the reasons is the dead stock lying in the inventory. More over the
debtors’ turnover ratio was very low.
Due to high dead stock in inventory and higher closing debtors the proportion of current
assets is comparatively higher then other Years.
In comparison of other Years we can see that the company is achieving ideal ratio. The
KRIBHCO has higher current ratio in all years as compared to the ideal ratio. This shows
the strong liquidity position of the company. But the higher ratio indicates higher cash
blocking in current assets.
Even the current ratio is decreasing the liquidity position of the company is strong. The
ratio is coming nearer to ideal ratio, which shows good turnover of current assets.
4.2 Net working capital ratio:
The difference between current assets and current liability is called net working capital. It
is measure the liquidity position of company. Net working capital ratio is calculated by
dividing net working capital by net assets.
20
Net working capital ratio = Net working capital
Net assets
Year
Net working capital
Rs. In crore
Net assets
Rs. In crore
Net working capital ratio
2006-2007 1234.65 2312.54 0.53:1
2007-2008 1353.20 2603.23 0.52:1
2008-2009 1060.21 2646.59 0.40:1
2009-2010 809.09 2713.99 0.30:1
INTERPREATION:-
The net working capital ratio of the company is reducing. The net working capital is
reducing as compared to net assets. But the company has sufficient working capital.
In before years the investment in working capital is very high due to blockage of capital
in dead stock. Now a day the working capital ratio is decreasing, but the company has
21
enough current assets to fulfill it current obligation. So even the working capital ratio is
decreasing the companies financial position is not affecting.
The financial position of company is improved. And the ratio shows the effective
utilization of working assets.
4.3 Quick Ratio
Quick ratio establishes relationship between quick or liquid assets and current liabilities.
The quick ratio is found out by dividing quick assets by current liabilities.
Quick ratio = (Current assets - Inventories)
Current liabilities
An asset is liquid if it can be converted into cash immediately without a loss of value.
Cash is the most liquid asset. Other assets which are considered to be relatively liquid and
included in quick assets are debtors, bills receivable and marketable securities.
Inventories are considered to be less liquid. Inventories normally require some time for realizing into cash;
their value also has a tendency to fluctuate.
Year
(Current assets -
Inventories) Rs. In crore
Current liabilities
Rs. In crore
Quick ratio
2006-2007 1326.09 342.35 3.87:1
2007-2008 1637.73 498.58 3.28:1
2008-2009 1382.46 507.76 2.72:1
2009-2010 1237.22 546.05 2.27:1
INTERPRETATION:-
22
Current ratio may be misleading, in spite of favorable current ratio, a firm may not be
able to pay off its creditor in time due to larger proportion of in stock in current assets in
such a cash liquid ratio will be more reliable and safe guide. The quick ratio of 1:1 is
considered satisfactory as a firm can easily meet all current climes. The quick ratio of
KRIBHCO is higher than ideal ratio.
The quick ratio of KRIBHCO is 2.27:1 in 2009-2010. It is lower as compared to past
company ratio but it is higher than ideal ratio. It shows a sound financial position. The
KRIBHCO sound liquidity position.
The ratio of the company is lower in 2009-2010, but it shoes that the company has 2.27
times liquid assets as compared to its current liability. This shows the very sound
liquidity position of the company.
4.4 Cash to Current Liabilities Ratio
Since cash is the most liquid asset, a financial analyst may be examining cash ratio and
its equivalent to current liabilities. Trade investment or marketable securities are
equivalent of cash; therefore, they may be included in the computation of cash ratio:
Cash ratio = Cash + Marketable Securities
Current Liabilities
Marketable Securities = NIL
Year Cash
Rs. In crore
Current Liabilities
Rs. In crore
Cash Position Ratio
2006-07 802.41 342.35 2.34:1
2007-08 905.04 498.58 1.82:1
2008-09 834.56 507.76 1.64:1
2009-10 822.27 546.05 1.51:1
23
INTERPREATION:-
The ideal cash position ratio is 1:1. The company’s cash position ratio is higher then the
ideal ratio. It shows that the company has more cash on hand then current liability. So the
company is able to pay its current liability in time.
The ratio has decreasing trend throughout the last four years. The lowest cash position
ratio is 1.51:1. This shows the company has 1.51 times cash on hand as compared to
current liability.
Even high cash on hand we can not say that the company has idle fund because the
company have to pay its some creditors within three days. So the company must have to
keep some higher case on hand fore emergency purpose.
4.5 Proprietary Ratio
Proprietary ratio is relates the share holder fund to total assets. This ratio shows the long
term solvency of the business. It is calculated by dividing shareholders fund by the total
assets.
Proprietary Ratio = Share holders fund
Total assets or total resources
24
Year
share holders fund
Rs. In crore
Total assets or total resources
(Rs. In crore)
Proprietary ratio
2006-2007 2287.52 2654.89 0.86:1
2007-2008 2378.51 3101.81 0.77:1
2008-2009 2549.42 3154.35 0.81:1
2009-2010 2697.13 3260.04 0.83:1
INTERPREATION:-
The ideal Proprietary ratio is 1:3. The KRIBHCO has the ratio of 0.83:1 in 2009-2010.
The average Proprietary ratio is 0.82:1. It shows higher utilization of Proprietary fund in
company.
Most of the assets are financed by the Proprietors. The company is very less depending
on outside fund. This shows the long term solvency position of the company and the
higher secure position of creditors.
The fluctuation of the ratio is due to increase in the total assets. Shareholders und is also
increasing. This states that there is not too major fluctuation in this ratio.
25
4.6 Debt Equity Ratio
The financing of total assets of a business concern is done by owner’s equity(also as
internal equity ) as well as out side debts (known as external equity) the relationship
between borrowed fund and owner’s capital is popular measure of the long term
financial solvency of firm. This relationship is shown by the debt equity ratio.
Debt Equity Ratio = External Equity
Internal Equity
INTERPREATION:-
As per the company’s annual report the debt equity ratio is 0:1 for all four year. It means
the company has no outside debt. Company gets all funds from owner’s equity. The
company has secured loan of only 23.81 lakh in 2009-2010 which is 23.00 lakh in
previous year. But this loan is secured against pledge of fixed deposit receipts of
22.00lakh in 2009-2010, which is 50.00 lakh in previous year.
As this loan is secured against the fixed deposit receipt, it is not taken in to consideration
while calculating the debt equity ratio.
4.7 Solvency Ratio
It is also known as debt ratio. This ratio is found out between total asset and external
liability of the company. External liability means all long and short period liability.
Solvency Ratio= Total Liability
Total Assets
Year
Total Liability
Rs. In crore
Total Assets
Rs. In crore
Solvency ratio
2006-2007 367.37 2654.89 0.14:1
2007-2008 723.30 3101.81 0.23:1
2008-2009 604.93 3154.35 0.19:1
2009-2010 562.91 3260.04 0.17:1
26
INTERPREATION:-
The solvency ratio shows the position of outside liability to total assets. We can see that
the average solvency ratio is 18.25%. It means the company has average 18.25% outside
liability to its total assets. It shows the higher utilization of owner’s equity and sound
solvency position of KRIBHCO.
We can see that the solvency ratio is lower, it shows that the company’ total liability is
only 17% of its total assets in the year 2009-2010. It shows the sound financial position
of company.
The reducing ratio indicates the improvement in solvency position of the company.
4.8 Gross Profit Ratio
The gross profit ratio is also known as Gross Margin Ratio, Trading margin ratio etc. it is
expensed as a “ Per cent ratio”. The different between net sale and cost of goods sold is
known is gross profit. It is generally contented that the margin of gross profit should be
sufficient enough to recover all operating expencess and other expenses and also leave
adequate amount Net Profit in relation to sale owner’s equity. Thus, in a trading business
gross profit is net sales minus trading cost of sales.
Cost of Goods sold = Opening stock + Purchases – Closing Stock + All direct expenses
27
Gross Profit Ratio = Gross Profit
Net Sales
Gross profit = Net sales + closing stock – opening stock – purchase –direct expenses
Year
Gross profit
Rs. In crore
Net Sales
Rs. In crore
Gross profit Ratio
In %
2006-2007 486.29 1855.56 26.21
2007-2008 627.98 2230.41 28.16
2008-2009 471.41 2559.13 18.42
2009-2010 676.42 2597.07 26.03
INTERPREATION:-
The average gross profit margin of the KRIBHCO is 24.71%. The gross profit ratio is
decreased to 18.42% in the year 2008-2009. It was due to higher cost of production.
28
In this year the company gets less supply of GAS from GAIL LTD. So the company uses
NEPTHA in place of GAS. The NEPTHA is four times costlier then the GAS. So the
gross profit margin is reduced. So for this reason even the sales is higher in this year the
gross profit margin was very low.
4.9 Net Profit Ratio
Net profit is obtained when operating expenses, interest and taxes are subtracted from the
gross profit. The net profit ratio is measured by dividing profit after tax by sales
Net Profit Ratio = PAT
Sales
Net profit ratio established a relationship between net profit and sales and indicates management’s
efficiency in manufacturing, administrating and selling the products. This ratio is the overall measure of
the firm’s ability to turn each rupee sales into net profit. If the net profit is inadequate, the firm will fail to
achieve satisfactory return on share holder’s fund.
Year
Net profit
Rs. In crore
Net sales
Rs. In crore
Net profit Ratio
In %
2006-2007 193.24 1855.56 10.41
2007-2008 209.20 2230.41 9.38
2008-2009 250.13 2559.13 9.77
2009-2010 228.17 2597.07 8.78
29
INTERPREATION:-
The net profit ratio of KRIBHCO was fluctuating in nature. The net profit ratio is lowest
in the year 2009-2010. This is due to increase in operating expenses and reduction in the
other revenue.
In this year the sale was higher as compare to previous year. But the company gets less
concession from the government of India. So the gross profit was also low.
The prices are decided by government of India, and more over the company can not
charge more then 12% margin. So the net profit margin level is also depending on the
government policy regarding fertilizers.
4.10 Return on Assets Ratio
Return on assets can be measured in term of relationship between net profit to total
assets. This ratio is also known as profit to assets ratio. It measured the profitability of
investments. The overall profitability can be known.
Return on Assets= Net profit X 100
Total Assets
30
There are various approaches possible to define net profit and assets, according to the
purpose and intent of the calculated of the ratio.
Year Net profit
Rs. In crore
Total assets
Rs. In crore
Return on assets
In %
2006-2007 193.24 2654.89 7.28
2007-2008 209.20 3101.81 6.74
2008-2009 250.13 3154.35 7.93
2009-2010 228.17 3260.04 6.99
INTERPREATION:-
Return on assets shows the profitability on investment. We can see that the company has
average 7.23% return on assets. There are ups and downs in ratio every Year. We can see
that there are very negligible changes in the ratios. This ratio shows that the company has
good return on assets. The ratio of the year 2007-2008 is reduced because the increase in
assets is much higher then the increase in net profit.
The ratio for the year 2009-2010 is reduced due to less net profit margin. In the year
2009-2010 the company’s dale was increased. But due to decrease in other revenue and
increase in operating expense leads to reduction in ratio.
31
4.11 Return on shareholder Equity
The term net profit as used here means net income after payment of interest and tax
including net non-operating income (Non-operating income minus non-operating
expenses). It is the final income that is available for distribution as dividend to
shareholder. Shareholder funds include both preference and equity share capital all
reserves and surplus belonging to shareholder.
Return on Shareholder Equity= Net Profit X 100
Shareholder Fund
year
Net profit
Rs. In crore
share holders fund
Rs. In crore
Return on share
holders’ equity in%
2006-2007 193.24 2287.52 8.45
2007-2008 209.20 2378.51 8.8
2008-2009 250.13 2549.42 9.81
2009-2010 228.17 2697.13 8.46
32
INTERPREATION:-
The average return on shareholders equity is around 8.88%. Return on shareholders
equity had increasing trend from 2006-2007 to 2008-2009 but then it reduce from 9.81 in
2008-2009 to 8.46 in 2009-2010.
It is because the shareholders fund increase every Year but the net profit is not increasing
in that proportion. In 2009-2010 the net profit was decrease.
Hear we see that the return on shareholders equity was reduced in the year 2009-2010,
but the share holders worth is increasing continuously. This indicates that the company is
using the share holders fund efficiently.
4.12 Earning per share
The profitability of the shareholders’ investment can also be measured in many other
ways. One of such measure is to calculate the earning per share. The EPS calculation
made over Years indicated whether or not the firm’s earning power on per-share basis has
changed or over that period. The EPS is calculated by dividing the PAT by total number
or ordinary shares outstanding.
EPS = PAT
No. of shares outstanding
YEAR
PAT (IN RS.
‘000)
NO.OF EQUITY
SHARE
OUTSTANDING
EARNING PER SHARE
(IN '000 Rs./SHARE)
2006-2007 1932400 396502 4.9
2007-2008 2092000 396477 5.3
2008-2009 2501300 391161 6.4
2009-2010 2281700 391308 5.8
33
INTERPRETATION:-
(To calculate EPS all the shares are converted in to shares of Rs. 10000 each)
The earning per share is Rs. 4900 in 2006-2007, 5300 in 2007-2008, 6400 in 2008-2009.
We can see that the EPS is increasing over a period of time. But in 2009-2010 it reduced
to Rs. 5800. It was due to decrease in sale, low profit margin and higher operating
expenditure.
This return is on the share of Rs. 10000. This shows the EPS is more then 50% of the
face value of the share.
4.13 Inventory (Stock) turnover ratio
This is also known as stock Velocity. This ratio is calculated to consider the adequacy of
the quantum of capital and its justification for investing in inventory. This ratio reveals
the number of times finished stock is turned over during a given accounting period. This
ratio is used for measuring the profitability.
Stock Turnover Ratio = Cost of Goods Sold
Average Inventory at cost
34
Year Cost of Goods Sold
Rs. In crore
Average Inventory
Rs. In crore
Ratio
In times
Conversion
Period(Day)
2006-07 145248.1 10536.59 13.79 26.48
2007-08 156566.27 12,858.59 12.18 29.98
2008-09 200437.76 8,075.06 24.82 14.70
2009-10 188274.84 3,217.12 58.52 6.24
INTERPREATION:-
This ratio indicates that how fast inventory is used/sold. A high ratio is good from the
view point of liquidity and vice versa. A low ratio would indicate that inventory is not
used/ sold/ lost and stays in a shelf or in the warehouse for a long time.
KRIBHCO has a continuous increase in inventory turnover ratio that is visible from the
above ratios of 2008-2009 and 2009-2010. It shows good liquidity of inventory. The
inventory conversion period is decreasing. It shows the efficient utilization of inventory.
During recent years the demand for urea has increased. The domestic industry is unable
to fulfill the entire requirement as per demand. To fulfill this demand the company has
adopted the policy to import of urea from abroad. And as all plants of KRIBHCO is
35
working at more than 100% capacity. This is one the reason for good inventory
conversion period.
4.14 Debtors Turnover Ratio
This is also called ‘’ Debtor Velocity “or “Receivable Turnover”. A firm sells goods on
credit basis. When the firm extends credit to its customer, book debts are creating in the
firm account. Debater’s expected convert in to cash over short period and thus included
the current assets.
Debtors’ turnover establishes the relationship between net sales of the Year and
receivable. That is, it measured the number of times the receivable rotate in Year in terms
of sales. It shows how quickly debtors are converted into cash.
Debtors Turnover = Credit Sales
Average Debtors
Average Debtors = Opening Balance +Closing Balance
2
Debtors Turnover = Total Sales
Closing Debtors
YEAR
Total sales
Rs.In crore
Closing
debtors
Rs. In crore
Debtors turnover
ratio
In times
AVG. COLLECTION
PERIOD(IN MONTH)
(12/D.T.RATIO)
2006-2007 1855.56 140.80 13.18 0.91
2007-2008 2230.41 612.86 3.64 3.3
2008-2009 2559.13 407.53 6.28 1.91
2009-2010 2597.07 264.83 9.81 1.23
36
INTERPRETATION:-
The debtors turn over ratio is 13.18 times in 2006-2007, which reduced to 3.64 times in
2007-2008. From 2007-2008 the companies debtors turn over ratio had increasing trend.
It is 9.81 in 2009-2010. But it is very low as compared to 2006-2007. It shows that the
debtors take time to convert in to cash. So the working capital investment is high.
The debtor’s collection period is 3.3 month in 2007-2008, which is very higher as
compared to other Year. In 2009-2010 average collection period is 1.23 month.
In the year 2007-2008, due to drought the sale is low and the company can not recover
the debt on time form the debtors. So this year the closing debtors were high, and have a
very high turnover period. For this year we can see the debt collection period was of 3.3
month, which was very high.
Some of the time the government does not make payment in time so the turnover ratio
goes high.
37
4.15 Creditor Turnover Ratio
This is also known as Account payable or creditors Velocity. A business firm usually
purchases on credit good, raw materials and services from other firms. The amount of
total payable of business concern depends upon the purchases policy of the concern, the
quantity of purchases and supplier credit policy. Longer the period of outstanding
payable is. Lesser is the problem of working capital of the firm.
Payable turnover shows the relationship between net purchases for the whole Year and
total payable.
Creditor Turnover = Net Credit Purchases
Average Account Payable
Average Account Payable = Month in a Year
Creditors Turnover Ratio
Year
1.
Net credit
purchase
Rs. In crore
2.
Avg. account
payable
Rs. In crore
3.
Creditors
turnover ratio
In times
2/3=4
Avg. payment period
to creditors
(in month)
12/4=5
2006-2007 1452.48 102.03 14.24 0.84
2007-2008 1565.66 134.33 11.66 1.03
2008-2009 2028.81 130.19 15.83 0.76
2009-2010 1882.75 108.21 17.40 0.69
38
INTERPRETATION:-
The creditors’ turnover ratio shows increasing trend. It shows the company pay off it’s
creditors in time. In the Year 2009-2010 the creditors’ turnover ratio was 17.40 times.
Similarly the payment period to creditors is less then one month. It is around 21 day in
Year 2009-2010.
In 2007-2008 the ratio is lowest 11.6 times. In this year these ratio slightly goes up.
The company has to pay off its some of the creditors within three days. So the creditor’s
policy also affects the creditor’s turnover ratio.
39
SWOT ANALYSIS
5.1 Strength
Kribhco is having Sound financial position.
The Management of Kribhco is very professional.
Kribhco has larger proportion of reserves and surplus and further it has no debt capital.
Kribhco has long standing reputation in the Indian Fertilizer Market.
Kribhco is having own Training Centre for training of employees as well as apprentice
students of different discipline.
It is having a full support of the Government of India.
High Production capacity of Kribhco leads to low production cost.
Savings in Production cost because Kribhco is having own Nitrogen and Ammonia Plant.
5.2 Weaknesses
More government interference in the management
Kribhco is having overstaffing.
Kribhco is having demotivated employees because of less job security and safety.
Kribhco is having no debt capital so the advantage leverage can not be taken.
40
5.3 Opportunities
Investment in Oman Project will raise the profit of Kribhco.
Expansion of existing plant at Hazira.
Look for new Market with diversified product.
Diversifying the business.
5.4 Threats
The price of the Raw material, Natural Gas, is increasing continuously.
There is a chance of sharp reduction in Government subsidy in near future.
In the era of Free Trade, the import of fertilizers may affect the business of the Kribhco.
41
CONCLUSION
The financial position of the company is very strong. KRIBHCO get its all fund from
equity. The KRIBHCO is mostly using the proprietary fund.
It has the debt equity ratio of 0:1 all the years. This shows the long term solvency
position of the company.
The company has to maintain certain critical items in store for the smooth and continuous
running of plant. So this may be the reason of high current ratio in previous years.
The company has huge working capital investment as we can see that the current assets
are much higher then the current liability. The working capital turnover ratio was shows
the increasing trend. This shows the efficient utilization of working capital.
I find that the proportion of cash in current assets is high. It was higher then the total
current liability. So the liquidity position of KRIBHCO is very strong.
The company has very less total out side liability as compared with total assets.
GAS is the essential inventory for production of urea. In the year 2008-2009 company get
less GAS from its major supplier GAIL LTD. So the company uses NEPTHA in place of
GAS. The NEPTHA is four times costlier then the GAS. So during this year the cost of
production was very high.
The major stack holding in the company is of government of India. The government has
much interruption in the working of KRIBHCO LTD. The subsidy rate and the selling
prices decided by the government of India, which restrict the revenue of the company.
The company has increasing inventory turnover ratio and debtors’ turnover ratio. This
shows the high liquidity of current assets. So the working capital requirement is reduced.
And we can invest the idle fund some where else for productive use.
The net worth of the company is increasing year to year, which shows good return to
equity share holders.
42
If we see analyze the previous years, we finds the higher investment of working capital in
inventory in the year 2006-2007 and 2007-2008. It is necessary for the smooth running of
the plant. The inventory includes the critical parts of the machinery which can be needed
at any time.
43
SUGGESTIONSSUGGESTIONS
Considering the entire situation discussed above following points should be taken in to
consideration for improvement in the financial position.
The company has to control its operating expenses. The company has over staffing in
some departments. So the company has to transfer the employees where they are needed.
And stop recruiting new employees from out side.
The company can use the debt fund at certain proportion. Because the increasing in
equity capital will leads to increase in number of share holders. While the debt fund have
no right in company’s management. And the debt funds are available at very low cost.
The government must have some rules in flavor of the company for concession received.
Because even the company has increased in sale and production the government passed
fewer subsidies. This leads to reduction in profit.
The past ratio shows improvement in working capital utilization. The company has to
tray to improve it more by effective utilization of current assets.
The company have to expand their plant capacity of invest in a new plan. The reason is
higher demand of fertilizers in India. And there are only four or five major players in this
fertilizer industry. They are not able to full fill the demand. So the company has to import
it from abroad.
The main raw material for production is GAS. In the year 2008-2009 due to less supply
from the GAIL LTD. the company has to utilize NEPTHA in place of GAS.NEPTHA is
four times costlier than GAS. Due to these the production cost was very high. So
company must find out other suppliers of GAS as it can not face any difficult when its
supplier fail to fulfill need of the company.
44
ANNEXURE
PARTICULARS 2009-2010 2008-2008 2007-2008 2006-2007
SOURCES
Share capital and application money
Reserve and surplus
Net Worth
Secured loan from bank
Unsecured loan from bank
Deferred tax balance
FUND EMPLOYED
390.67
2306.46
2697.13
0.23
0.00
16.63
390.94
2158.68
2549.42
0.23
91.91
5.03
396.08
1982.43
2378.51
0.76
223.96
0.00
396.11
1891.41
2287.52
0.41
0.00
24.61
2713.99 2646.59 2603.23 2312.54
APPLICATION
Fixed Assets
Gross Block (including capital
work in process)
less:- Depreciation
Net Block (A)
Investment (B)
Deffered Tex assets (C)
Working Capital
Current assets
Less: current liabilities and
Provision
Net Working Capital (D)
NET ASSETS EMPLOYED
(A+B+C+D)
1395.36
896.31
498.45
1406.45
0.00
1355.14
546.05
809.09
1264.13
881.17
382.96
1203.42
0.00
1567.97
507.76
1060.21
1231.58
856.29
375.29
870.56
4.18
1851.78
498.58
1353.20
1115.10
844.77
270.33
807.56
0.00
1577.00
342.35
1234.65
2713.99 2646.59 2603.23 2312.54
(SOURCES AND APPLICATION OF FUND)
COMMON SIZE BALANCE SHEET
45
PARTICULARS 2006-
2007
(Rs. in
crore)
2007-
2008
(Rs. in
crore)
2008-
2009
(Rs. in
crore)
2009-
2010
(Rs. in
crore)
2006-
2007
In %
2007-
2008
In %
2008-
2009
In %
2009-
2010
In %
SOURCES
Share capital and application money 396.11 396.08 390.94 390.67 17.13 15.21 14.77 14.39
Reserve and surplus 1891.4 1982.4 2158.7 2306.5 81.79 76.15 81.56 84.98
Secured loan from bank 0.41 0.76 0.23 0.23 0.02 0.03 0.01 0.01
Unsecured loan from bank 0 223.96 91.91 0 0.00 8.60 3.47 0.00
Deferred tax balance 24.61 0 5.03 16.63 1.06 0.00 0.19 0.61
FUND EMPLOYED 2312.5 2603.2 2646.6 2714 100 100 100 100
APPLICATION
Fixed Assets
Gross Block (including capital
work in process) 1115.1 1231.6 1264.1 1395.4 48.22 47.31 47.76 51.41
less:- Depreciation 844.77 856.29 881.17 896.31 36.53 32.89 33.29 33.03
Net Block (A) 270.33 375.29 382.96 498.45
Investment (B) 807.56 870.56 1203.4 1406.5 34.92 33.44 45.47 51.82
Deffered Tex assets (C) 0 4.18 0 0 0.00 0.16 0.00 0.00
Working Capital
Current assets 1577 1851.8 1568 1355.14 68.19 71.13 59.24 49.93
Less: current liabilities and
Provision 342.35 498.58 507.76 546.05 14.80 19.15 19.19 20.12
Net Working Capital (D) 1234.7 1353.2 1060.2 809.09 53.39 51.98 40.06 29.81
NET ASSETS EMPLOYED 2312.5 2603.2 2646.6 2714 100 100 100 100
(A+B+C+D)
COMMON SIZE POFIT AND LOSS ACCOUNT
46
PARTICULARS 2006-
2007
2007-
2008
2008-
2009
2009-
2010
2006-
2007
2007-
2008
2008-
2009
2009-
2010
EARNINGS
Sales 1344 1385.6 1512.4 1637.4 72.43 62.12 59.1 63.05
Concession/Remuneration
From Govt. of India 511.59 844.79 1046.7 959.69 27.57 37.88 40.9 36.95
net sales 1855.6 2230.4 2559.1 2597.1 100 100 100 100
Other Revenue 248.11 266.56 409.75 304.78 13.37 11.95 16.01 11.74
Accretion/ Decretion in
Finished Good 83.21 -36.77 -58.9 -38.2 4.484 -1.65 -2.3 -1.47
2186.9 2460.2 2910 2863.7
OUTGOING
Raw Material, Packaging,
stores,
Power, Fuel etc.. 825.43 1111.2 1501.7 966.46 44.48 49.82 58.68 37.21
Purchases-Fertilizer ,Seeds &
Chemical
627.05 454.5 527.07 916.29
33.79 20.38 20.6 35.28
Employees Remuneration &
Benefits
121.5 173.4 169.66 224.89
6.548 7.774 6.63 8.659
Other Expenses 362.27 420.89 404.25 467.45 19.52 18.87 15.8 18
Interest Expenses 1.47 5.32 10.38 5.18 0.079 0.239 0.406 0.199
Deprecation 17.63 22.79 27.53 30.62 0.95 1.022 1.076 1.179
Provision for Tax(Net) 38.29 62.94 19.21 24.6 2.064 2.822 0.751 0.947
Profit After Tax 193.24 209.2 250.13 228.17 10.41 9.379 9.774 8.786
ANALYSIS:-
47
The contribution of the share capital in total fund employed in the year 2006-2007 was
17.13%, which has been reduced to 14.39% in the year 2009-2010 and the proportion of
reserve and surplus in total fund employed has been showing the increasing trend.
The reason for decreasing in the share capital is that they have enough reserve and
surplus and due to same their outside borrowings are also negligible.
Net fixed assets have shown tremendous increase in the year of 2007-08 and 2009-10.
The company has detached their old and unproductive assets and bought new and modern
equipments that will enhance their production system.
The company is undergoing new projects so it could be also one of the reasons for the
increase in the fixed assets.
The investment is also showing an increasing trend in the year 2008- 09. The power and
fuel expense shows the tremendous increase in the year 2008-2009. It is due to less
supply of GAS by GAIL LTD, and so the company has to use NEPTHA, which is four
times costlier then the GAS.
The company purchases higher fertilizers, seed and chemical for resell in the year 2006-
2007 AND 2009-2010. It is because the demand for fertilizers in these year. And the
company is not able to fulfill the requirement.
TREND ANALYSIS
48
Balance sheet
PARTICULARS 2006-
2007
(Rs. in
crore)
2007-
2008
(Rs. in
crore)
2008-
2009
(Rs. in
crore)
2009-
2010
(Rs. in
crore)
2006-
2007
In %
2007-
2008
In %
2008-
2009
In %
2009-
2010
In %
SOURCES
Share capital and application
money
396.11 396.08 390.94 390.67
17.13 15.21 14.77 14.39
Reserve and surplus 1891.4 1982.4 2158.7 2306.5 81.79 76.15 81.56 84.98
Secured loan from bank 0.41 0.76 0.23 0.23 0.02 0.03 0.01 0.01
Unsecured loan from bank 0 223.96 91.91 0 0.00 8.60 3.47 0.00
Deferred tax balance 24.61 0 5.03 16.63 1.06 0.00 0.19 0.61
FUND EMPLOYED 2312.5 2603.2 2646.6 2714 100 100 100 100
APPLICATION
Fixed Assets
Gross Block (including capital
work in process) 1115.1 1231.6 1264.1 1395.4 48.22 47.31 47.76 51.41
less:- Depreciation 844.77 856.29 881.17 896.31 36.53 32.89 33.29 33.03
Net Block (A) 270.33 375.29 382.96 498.45
Investment (B) 807.56 870.56 1203.4 1406.5 34.92 33.44 45.47 51.82
Deferred Tex assets (C) 0 4.18 0 0 0.00 0.16 0.00 0.00
Working Capital
Current assets 1577 1851.8 1568 1355.14 68.19 71.13 59.24 49.93
Less: current liabilities and
Provision 342.35 498.58 507.76 546.05 14.80 19.15 19.19 20.12
Net Working Capital (D) 1234.7 1353.2 1060.2 809.09 53.39 51.98 40.06 29.81
NET ASSETS EMPLOYED 2312.5 2603.2 2646.6 2714 100 100 100 100
(A+B+C+D)
Profit and loss account
49
PARTICULARS 2006-
2007
(Rs. In
crore)
2007-
2008
(Rs. In
crore)
2008-
2009
(Rs. In
crore)
2009-
2010
(Rs. In
crore)
2006-
2007
In %
2007-
2008
In %
2008-
2009
In %
2009-
2010
In %
EARNINGS
Sales 1343.97 1385.62 1512.4 1637.39 100 103.10 112.53 121.83
Concession/Remuneration
From Govt. of India 511.59 844.79 1046.72 959.69 100 165.13 204.60 187.59
Other Revenue 248.11 266.56 409.75 304.78 100 107.44 165.15 122.84
Accretion/ Decretion in
Finished Good 83.21 -36.77 -58.9 -38.2 100 -44.19 -70.78 -45.91
2186.9 2460.2 2910 2863.7 100 112.50 133.06 130.95
OUTGOING
Raw Material, Packaging,
stores,
Power, Fuel etc.. 825.43 1111.16 1501.74 966.46 100 134.62 181.93 117.09
Purchases-Fertilizer ,Seeds
& Chemical
627.05 454.5 527.07 916.29
100 72.48 84.06 146.13
Employees Remuneration &
Benefits
121.5 173.4 169.66 224.89
100 142.72 139.64 185.09
Other Expenses 362.27 420.89 404.25 467.45 100 116.18 111.59 129.03
Interest Expenses 1.47 5.32 10.38 5.18 100 361.90 706.12 352.38
Deprecation 17.63 22.79 27.53 30.62 100 129.27 156.15 173.68
1955.4 2188.1 2640.6 2610.9 100 111.90 135.05 133.53
PROFIT BEFOR TAX 231.53 272.14 269.34 252.77 100 117.54 116.33 109.17
Provision for Tax(Net) 38.29 62.94 19.21 24.6 100 164.38 50.17 64.25
Profit After Tax 193.24 209.2 250.13 228.17 100 108.26 129.44 118.08
Dividend Payout 78.91 79.2 71.28 77.67 100 100.37 90.33 98.43
Contribution to cooperative
Education Fund
1.78 1.84 2.47 2.28
100 103.37 138.76 128.09
Donation 0.25 0.4 0.4 0.4 100 160.00 160.00 160.00
50
RETAINED PROFIT 112.3 127.76 175.98 147.82 100 113.77 156.71 131.63
Analysis:-
Following information we get from trend profit and loss account and balance sheet.
Base year: - I had taken 2006-2007 as a base year for trend analysis. I have done 4 year
trend analysis.
The sale revenue of the company is continuously increasing. It increased to 121.83%
compare to base year.
The power and fuel expense was very high in the year 2008-2009. It was 181.93% as
compared to base year. This is mainly due to in this year company get less gas as
compared to its requirement. So the company has to use NEPTHA as fuel in place of gas.
The NEPTHA is four times costlier then gas so the cost is increase.
The purchase of fertilizer, seed for resale is decreasing. But it was increased in the year
2009-2010. This is because the fertilizer industry of India is unable to fulfill high demand
of these goods. So the company purchases these goods from abroad for resale.
The employee remuneration shows increasing trend. It was increased to 185.09% in the
year 2009-2010 with compared to base year 2006-2007. this is because of large number
of employee need with continuous growth.
The net profit after tax shows continuous increasing trend. But in 2009-2010 it was
reduced even the sale is increased. It is because of less concession from government and
reduction in other revenue.
Share capital in decreased from 100% in 2006-2007 to 98.63% in 2009-2010. Reserve
and surplus also continuously increasing trend. It shows very less utilization of the
51
reserve and surplus. Reserve and surplus increased by 21.94% in 2009-2010 as
comparing with base year 2006-2007.
As the reserve and surplus are continuously increasing the share holders fund also
increase. It shows good return to share holders as the net worth is increased.
Secured loan from bank is taken for short period of time against the pledge of fixed
deposits. It is of very minor amount. Secured loan is just remaining 56.10% outstanding
in 2009-2010 as compare to base year.
The total fund employed is increased to 117.36% in 2009-2010 as compared to base year.
It can be seen that the major fund employed is from owners’ fund.
Company has continuous rise in investment. The highest increase was in 2008-2009 to
1.49times as compared to base year.
The current assets increase in 2007-2008 and then shows continuous decrease, which
may be good sign as the working capital investment is reduced. It was reduced to 85.93%
in 2009-2010 as compared with base year.
The current liability is continuously increasing. The highest increase is in the year 2007-
2008 by 45.63%.
52
BALANCE SHEET AS ON 31 ST MARCH
(Rs. in lakhs)
Particular Years
2009-10 2008-09 2007-08 2006-07
Share Holders’ Fund:
Share Capital 39066.58 39073.33 39609.93 39610.68
Reserve & Surplus 230646.26 215867.72 198243.15 189141.73
Share Application Money 0.00 1.00 0.00 0.00
Secured Loans from Bank 22.81 23.00 75.63 40.69
Unsecured Loans From bank 0.00 9191.00 22396.87 0.00
Deferred tax liability 1663.31 502.89 0.00 2461.18
Total 271398,96 264658.61 260323.58 231254.28
Application of Fund:
Fix Assets:
Gross Block 129077.77 124060.19 122432.34 111509.51
Less: Depreciation 89690.86 88116.59 85629.82 84476.54
Net Block 39386.91 35943.60 36802.52 27032.97
Capital Work-in-process(at cost) 10457.69 2352.56 726.23 0.00
Investment 140645.23 120341.80 87056.46 80756.46
Current Assets:
Inventory 11792.02 18550.63 21404.82 25090.64
Sundry Debtors(Unsecure) 26482.74 40752.96 61285.98 14079.60
Cash & Bank balance 82227.13 83456.18 90504.27 80241.37
Loans & Advances 15012.27 14037.00 11983.23 38288.06
135514.16 156796.77 185178.30 157699.67
Less: B) Current Liabilities
Current Liabilities 30685.19 29808.48 27506.06 18542.55
Provisions 23919.84 20967.64 22352.25 15692.27
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54605.03 50776.12 49858.31 34234.82
Net Current Assets (A-B) 80909.13 106020.65 135319.99 123464.85
Total 271398.96 264658.61 260323.58 231254.28
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH
(Rs in lakh)
Particulars 2009-10 2008-09 2007-08 2006-07Income from Operations/other revenue:Sales (Net of discount/rebates) 164708.5
8153219.90
140076.09 135383.39
Less: Excise Duty (970.19) (1979.77) (1514.47) (986.29)Concession/Remuneration from Govt. Of India
95968.98 104672.55
84479.12 22463.25
Freight Subsidiary 0.00 0.00 0.00 11232.91Other Revenue 30478.17 40974.77 26656.83 42274.31Accretion/Discretion in stocks (3819.58) (5890.29) (3676.78) 8320.78
286365.96
290997.16
246020.79 218688.35
LESS: Cost of Operations/ Other outgoingsConsumption of Raw Material & Stores, etc : Raw Materials 59846.65 78759.09 65404.97 47310.96Packing Materials 7013.08 4425.19 4138.33 3933.34Chemicals & Catalysts 1122.68 846.43 724.75 505.57Power, Fuel & Water 28663.58 63699.59 40848.15 30793.20Purchases of Products for resale:Seeds & Chemicals 3390.20 2943.11 2180.02 1403.93Urea, DAP & Other Fertilizers 88238.65 49764.35 43270.05 61303.10Employees’ Remuneration & Benefits
22488.73 16966.40 17340.21 12149.55
Other Expenses on Manufacturing, Administration & Distribution
46766.67 42863.27 42160.46 36220.55
Interest 518.31 1037.52 531.99 147.25
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Depreciation/Amortization 3062.11 2752.84 2279.20 1762.54
261110.66
264057.79
218878.13 195527.99
Net Profit of the year 25255.30 26939.37 27142.66 23160.36
Prior Period Income/(Expenditure) (Net)
21.82 (5.40) 70.88 (6.92)
Profit Before Tax 25277.12 26933.97 27213.54 23153.44
Provision for Taxation 2460.42 1921.27 6293.54 3829.48
Profit After Tax 22816.70 25012.70 20920.00 19323.96
Profit Transferred to:
Capital Repatriation Fund 14.00 300.22 13.00 13.00
Dividend Equalization Fund 0.00 0.00 2500.00 1500.00
Contribution to Prime Minister’s Relief Fund
0.00
Net Profit As Per the Malty State Co-operative Societies Act (MSCS Act)
22802.70 24712.48 18407.00 17810.96
Less: Proposed Appropriations :
Reserve Fund as per Bye-Law 58(i) of the Society
5700.68 6178.12 4601.75 4452.74
Provision for Contribution to Co-operative Education Fund
228.03 247.12 184.07 178.11
Reserve Fund for Contingency as per Bye-Law 58(iii) of the Society
2280.27 2471.25 1840.70 1781.10
Reserve for Donations 40.00 40.00 40.00 25.00
Proposed Dividend 7767.40 7127.63 7920.50 7891.44
General Reserve 6786.32 8648.36 3819.98 3482.57
------- ------ ------ ----------
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BIBLIOGRAPHY
Annual report:-
27th Annual report of KRIBHCO, 2006-2007
28th Annual report of KRIBHCO, 2007-2008
29th Annual report of KRIBHCO, 2008-2009
30th Annual report of KRIBHCO, 2009-2010
Books:-
R.S.N.Pilli and Bagavati, 3rd edition 2006 reprint 2007, 2008, management accounting,
S. Chand publisher.
Ambrish gupta, 3rd edition 2009, financial accounting for management, Pearson
education.
Websites:-
http://kribhco.net/english/vision.htm
http://kribhco.net/english/mission.htm
http://kribhco.net/english/introduction.htm
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