A STUDY ON

RATIO ANALYSIS

With reference to TIRUMALA MILK PRODUCTS PVT. LTD,

NARSARAOPET.
A Project Report Submitted to Department of MBA, in Partial Fulfillment for the Award
of Degree of MASTER OF BUSINESS ADMINISTRATION

Submitted By

B.VENU

(Reg.No.17491E00C9)

Under the Esteemed guidance of

K.UMAMAHESWARA RAO., MBA (P.hD)

Assistant Professor

DEPARTMENT OF MASTER OF BUSINESSADMINISTRATION QIS

COLLEGE OFENGINEERING &TECHNOLOGY (AUTONOMOUS)
An ISO 9001:2008Certified Institution and Accredited by NBA, (Affiliated to
JNTU, Kakinada and Approved by AICTE),
Vengamukkapalem, Pondur Road,
ONGOLE.
 DECLARATION

I hereby declare that the report entitled “A STUDY ON RATIO ANALYSIS WITH
REFERENCE TO TIRUMALA MILK PRODUCTS PVT. LTD, NARSARAOPET.”
Submitted by me under the guidance of K.UMAMAHESWARA RAO, Assistant Professor of MBA
Department in QIS COLLEGE OF ENGINEERING&TECHNOLOGY, (AUTONOMOUS), ONGOLE, is
my Original work and it has not been submitted to any University or Institute for the award of Degree of
Diploma.

Place:Ongole B.VENU

Date: (Reg. No:17491E00C9)

 QIS COLLEGE OFENGINEERING &TECHNOLOGY (AUTONOMOUS)
DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION
An ISO 9001:2008Certified Institution and Accredited by NBA, Vengamukkapalem,
Pondur Road,

ONGOLE–523272.

CERTIFICATE

This is to certify that the project titled, “A STUDY ON RATIO ANALYSIS WITH
REFERENCE TO TIRUMALA MILK PRODUCTS PVT. LTD, NARSARAOPET.” is a
bonafide work carried out by Mr. B.VENU Reg.NO.17491E00C9, under my guidance and supervision in
partial fulfillment for the award of the degree of the MASTER BUSINESS ADMINISTRATION, QIS
COLLEGE OF ENGINEERING& TECHNOLOGY (AUTONOMOUS), ONGOLE.

K.UMAMAHESWARARAO DR.D.RAGHAVA
Signature of the Project guide HOD of the MBA department

EXTERNAL EXAMINER
 ACKNOWLEDGEMENT

It gives me pleasure to present this report. This report is outcome of the “A STUDY ON RATIO
ANALYSIS WITH REFERENCE TO TIRUMALA MILK PRODUCTS PVT. LTD,
NARSARAOPET.” I got support from many people without their help I would not have got success. I
wish to record sincere appreciation and thanks to them.

I am thankful to Mr. K.UMAMAHESWARA RAO, Assistant Professor, MBA

Department, QIS College of Engineering and Technology Who helped me throughout my study
and helped me in analysis and interpretation of data for preparing the final draft.

I am thankful to Dr.D.RAGHAVA, Head of the Department MBA for his encouragement

and help throughout the M.B.A course.

I am thankful to Dr.D.VENKATA RAO, Principal of QIS College of Engineering and

Technology for his encouragement and help throughout the M.B.A course.

Finally, I am very thankful to all of my parents and friends whose cooperation and
suggestions have helped me in successful completion of this project.

B.VENU

(Reg No: 17491E00C9)

 CONTENTS

CHAPTER NO TITLE PAGE NO

CHAPTER-1
INTRODUCTION 1
1.1
NEED FOR THE STUDY 2
1.2
SCOPE OF THE STUDY 3
1.3
OBJECTIVES OF THE STUDY 4
1.4
RESEARCH METHODOLOGY 5
1.5
LIMITATIONS OF THE STUDY 6

CHAPTER-2 INDUSTRY PROFILE 7-14

CHAPTER-3 COMPANY PROFILE 15-22

CHAPTER-4 THEOROTICAL FRAME WORK 23-39

CHAPTER-5 DATA ANALYSIS &INTERPRETATION 40-71

CHAPTER-6 FINDINGS SUGGESTIONS & CONCLUSION 72-74

PROFIT & LOSS A/C 75

BALANCE SHEETS 76-77

BIBLIOGRAPHY 7
 LIST OF TABLES

Table No. Index Page No.

4.1 Current ratio 40
4.2 Quick ratio/liquid ratio 41
4.3 Cash ratio 42
4.4 Debt Equity ratio 44
4.5 Proprietary ratio 46
4.6 Fixed Assets turnover ratio 48
4.7 Working Capital turnover ratio 50
4.8 Inventory turnover ratio 52
4.9 Creditors turnover ratio 54
4.10 Debtors turnover ratio 56
4.11 Gross Profit ratio 58
4.12 Net Profit ratio 60
4.13 Operating Profit ratio 62
4.14 Return on Total Assets ratio 64
4.15 Return on Equity ratio 66
4.16 Return on Investment ratio 68
4.17 Return on Capital Employed ratio 70
 LIST OF GRAPHS

Graph No. Index Page No.

4.1 Current ratio 40
4.2 Quick ratio/liquid ratio 41
4.3 Cash ratio 43
4.4 Debt Equity ratio 45
4.5 Proprietary ratio 47
4.6 Fixed Assets turnover ratio 49
4.7 Working Capital turnover ratio 51
4.8 Inventory turnover ratio 53
4.9 Creditors turnover ratio 55
4.10 Debtors turnover ratio 57
4.11 Gross Profit ratio 59
4.12 Net Profit ratio 61
4.13 Operating Profit ratio 63
4.14 Return on Total Assets ratio 65
4.15 Return on Equity ratio 67
4.16 Return on Investment ratio 69
4.17 Return on Capital Employed ratio 71
 INTRODUCTION
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the
indicated quotient of two mathematical expressions and relationship between two or more
things. In financial analysis a ratio is used as an index for evaluating the financial
position and performance of the firm. The absolute accounting figures reported in the
financial statements do not provide a meaningful understanding of the performance and
financial position of a firm. An accounting figure conveys meaning when it is related to
some other relevantinformation.

Ratio analysis is the process of determining and interpreting numerical

relationship based on financial statements. A ratio is a statistical yard stick that provides a
measure of the relationship between variables of figures. Thus relationship can be
expressed as a percentage on as quotient.

In finance analysis ratio is used as a bench mark of a firm. Ratio help summarize
large quantities of financial data and to make qualitative judgment about the firms
financial performances.

Ratio analysis is the systematic use of ratio to interpret the “Financial Statement
so that the strength and weakness of a firm as well as its historical performance and
current financial position can be determined. The relation of ratio analysis lies in the fact
that it makes related information comparable. A single figure by itself has no meaning
but when expressed in terms of related figure. It yields significant inferences.

z 1
 NEED FOR THE STUDY

The main need of the study is to analyze the financial information of the Tirumala Milk
Products PVT Ltd.

 TofindouttheliquidityorshorttermsolvencyoftheTirumalaMilkProducts
PVT Ltd.
 To allow the relationship among various aspects in such a way that it Allows drawing
Conclusion about the performance, strength, and weaknesses of the Company.
 It is beneficial to top management of the company by providing crystal clear picture
regarding important aspects like liquidity, leverage, activity and profitability.
 The study is also beneficial and offers motivations by showing how Activity they are
contributing for the companygrowth.
 The investors who are interested in investing in the company„s Shares will also get
benefited by going though the study and can easily take a decision whether to invest
or not in the company‟sShares.
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

SCOPE OF THE STUDY

The scope of the study covers all Financials matters related to the liquidity and itsimpact on
profitability. The study appraises the company’s meeting the requirement for theprocess, industry in
core sector.

The academicians are in search of Information in related to the various aspects offinancial
management and makes way for future studies in the present areas. The present ishelpful to know the
deficiencies in the ratio analysis management steps will be taken toimprove ratio analysis practices.
For evaluating the post performance 1and to plan the futurestrategy, this study is of significant help
to the Finance manager of the Tirumala Milk Products Pvt. Ltd.

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 OBJECTIVES OF THE STUDY

The main objective of the study is to analyze the financial information of the Tirumala Milk
Products Pvt Ltd.

 To know the performance of the company in different timeperiods.

 To know the future liquidity of thecompany.

 To verify liquidity and its impact on ratioanalysis.

 To know the profitability and activity position of Tirumala Milk Products Pvt Ltd.

 To know the accurate financial position of thecompany

 To make appropriate suggestions and measures for the effective working of the
Company

 To analysis the financial performance of the company from the point of ratio analysis
is through variousratios.

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 METHODOLOGY OF THE STUDY

Research methodology is a way to systematically solve the research problem. It

may be understood as a science of studying now research is done systematically. In that
various steps, those are generally adopted by a researcher in studying his problem along
with the logic behind them. It is important for research to know not only the research
method but also know methodology. ”The procedures by which researcher go about their
work of describing, explaining and predicting phenomenon are called methodology.”
Methods comprise the procedures used for generating, collecting and evaluating data. All
this means that it is necessary for the researcher to design his methodology for his
problem as the same may differ from problem to problem. Data collection is important
step in any project and success of any project will be largely depend upon now much
accurate you will be able to collect and how much time, money and effort will be
required to collect that necessary data, this is also important step. Data collection plays an
important role in research work. Without proper data available for analysis you cannot do
the research work accurately.

The study is mainly based on two sources of data. They are

(P) Primarydata
(Q) Secondarydata
Primary Data:
Interviewing a few financial departmental heads, officers and management bodies
and staff members of the TIRUMALA MILK PRODUCTS PVT Ltd collected primary
data.
Secondary Data:
The present is mostly secondary resource of the data. These sources are the annual
reports and original records of TIRUMALA MILK PRODUCTS PVT Ltd.

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 LIMITATIONS OF THE STUDY

Following limitations were encountered while preparing this project:

 Limiteddata:-
This project has completed with annual reports; It just constitutes one part of data
collection i.e. secondary. There were limitations for primary data collection
because of confidentiality.

 Limitedperiod:-
This project is based on five year annual reports. Conclusions and
recommendations are based on such limited data. The trend of last five year may
or may not reflect the real working capital position of the company

 Limitedarea:-
Also it was difficult to collect the data regarding the competitors and their
financial information. Industry figures were also difficult to get.

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 INDUSTRY PROFILE

The popular adage “nothing succeeds like success “is applicable to the dairy
development in India. If the country witnessed the “green revolution” leading to
self-reliance in food grains in the sixties and the seventies, the decades of the
eighties and the nineties witnessed the “white revolution”. Indian total milk
production is ranked first in the world followed by the United States. Initially
dairying was largely an unorganized activity.Llarge land holding farmers kept
cattle mainly for bullock production. Milk was essentially a byproduct. The
surplus after domestic consumption was either converted into conventional
products mainly ghee and sold to middle men who cater to the needs of the
market.
As India enters an era of economic reforms, agriculture, particularly the
livestock sector, is positioned to be a major growth area. The fact that dairying
could play a more constructive role in promoting rural welfare and reducing
poverty is increasingly being recognized. For example, milk production alone
involves more than 70 million producers, each raising one or two cows/buffaloes.
Cow dung is an important input as organic fertilizer for crop production and is
also widely used as fuel inn rural areas. Cattle also serve as an insurance cover for
the poor households, being sold during times ofdistress
There was an increasing demand for milk from the urban areas. There arose
a need for the farmers to increase the production of milk. Since the demand in the
urban scenario is rapidly increasing so do the farmers generate the supply? Further
the new dairy plant capacity approved under the Milk and Milk products order
(MMPO) has exceeded 100 million l/p/d. The new capacity would surpass the
projected rural marketable surplus of milk by about 40 percent by 2005.

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 HISTORY

The origin of dairy farms under public management dates back to

1886 when the department of Defense established a few dairy farms in that year to
supply milk and milk products to the British troops. The next step was initiated
during the First World War.

In 1914, the Department of Defense on the advice of the Board of

Agriculture advised the Government in 1916, to appoint imperial dairy expert. The
next important step was the decision to conduct a census of livestock. The Board
of Agriculture carried out the livestock census in 1919 as a preparatory action for
planned dairy development. In 1920, the imperial expert recommended to the
Government for the establishment of a training center to meet the manpower
requirements for managing the Dairy Farms. By this time there were there dairy
farms and until 1923 the British government’s approach towards dairying was
confined to milk requirements of the military only. After 1923,diploma course in
dairy were started atBangalore.

Dr. N.C. Wright, Director, Dairy Research institute, Scotland who was
invited to India in 1936 for reviewing the progress of dairying in the country has
made two recommendations: -

1. Industry needs have to be solved by developing own technology and

technologists in thecountry.
2. India is country of villages, of which most inhabitants are small, marginal farms
and landlesslaborers.

z 8
 In 1937, the Lucknow Milk producer’s co-operative Union limited was
established paving the way for the organization of such union in districts and state.

In 1945, the Famine enquiry commission in its report emphasized the need
for developing fodder supply for increasing milk production and recommended the
adoption of mixed farming with a place for fodder and crop rotation. As a sequel
to this, under the Greater Bombay Milk Scheme, milk was procured from kaira
district, Gujarat by the private dairy. That gave way to the idea of creating an
institutional structure for dairying on co-operativelines.

DEVELOPMENTS OF INDUSTRY
NATIONAL DAIRY DEVELOPMENT BOARD (NDDB):
The Government of India had established the National Dairy Development
Board (NDDB), an autonomous body headquartered at Anand’s Co-operative in
India. In order to develop dairy in India, NDDN drew plans for „operation flood‟.
OPERATION FLOOD:
In the late sixties, the board drew up a project called Operation Flood(OF)
– meant to crate a flood of milk in India‟s villages with funds mobilized from
foreign donations. Producer‟s co-operatives, which sought to link dairy
development with milk marketing, were central plank of this project. The
Operation Flood, which started in 1970, concludes its third phase in 1996 and has
to its credit these significant results:

1. The enormous urban market stimulus has led tosustained

2. Production increases, raising per capita availability of milk to early 200grams
Perday.
3. The dependence on commercial imports of milk solids are alone awaywith.

z 9
 4. Modernization and expansion of the dairy industry and itsinfrastructure,
Activating milkgrid.
5. Marketing expanded to supply hygienic and fair priced milk to some300
Million consumers in 550 cities andtowns.
6. A nationwide network of multi-tier producer’s co-operative, democratic in
structure and professionally managed, has come into existence. Millions of small
producers participate in an economic enterprise and improve the quality of their
life andenvironment.
7. Dairyequipmentmanufacturehasexpandedtomeetmostoftheindustry‟sneeds.

THREE PHASES OF DEVELOPMENT

The scheme sought to establish milk produces co-operatives in the villages

and make modern technology available to them.
PHASE1:

Phase 1 of Operation Flood was financed by the sale within India of

skimmed milk powder and butter oil gifted by the EC countries via the world food
program. As founder-chairman of the National Dairy Development Board
(NDDB) of India Dr.Kurien finalized the plans and negotiated the details of EEC
assistance. He looked after the administration of the scheme as found-chairman of
the erstwhile Indian Dairy Co-operation, the project authority for Operation Flood.
During its first phase, the project aimed at linking India’s 18 best milk sheds with
the milk markets of the four metropolitan cities of Delhi, Mumbai, Calcutta and
Madras.

z 10
 PHASE2:

Phase 2 of the project, implemented during 1981-85 raised this to some 136
milk sheds linked to over 290 urban markets. The seed capital rose from the sale
of WFP/EEC gift products and World Bank loan had created, by end 1985, a self-
sustaining system of 43,000 village’s co-operatives covering 4.25 million milk
producers. Milk powder production went up from 22,000 tons in the pre project
year to 1, 40,000 tons in 1989, thanks to dairies set up und Operation Flood. The
EEV gifts thus helped to promote self-reliance. Direct marketing of milk by
producer’s co-operatives resulting inn the transfer of profits from milk contracts
increased by several million liters perday.

PHASE3:

Phase 3 of Operation Flood (1985-1996) enabled dairy co-operatives to

rapidly build to the basic up the basic infrastructure required to procure and
market more and more milk daily. Facilities were created by the co-operatives to
providebetterveterinaryfirst-aidhealthcareservicestotheirproducer‟smembers.

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 Development of dairy in Nineties:
The momentum gained in the dairy through co-operatives during the
last 20 years will now take India into nineties as major dairying country of the
world.Thecountry‟smilkproductionintheearlysixtieswhichwasabout20 million tons
has touched a record of 56 million tons. It is likely to reach about 80 million tons
by 2000 AD. India which one time was dependant on other countries for products
such as milk powder, table butter and cheese has now become self sufficient. It has
even started exporting some of them in small quantities simultaneously efforts are
made to expand milk procurement, processing and marketing to meet the growing
demand for milkproducts.

MILK SHEDS/UNIONS:

Operation flood programmer has been identified into milk sheds/unions.

NO MILK SHEDS / UNIONS DISTRICTS

1 Visakha Srikakulam, Vizianagaram, Vizag
2 Godavari East and West Godavari
3 Krishna Krishna
4 Guntur-Prakasam Guntur-Prakasam
5 Chittoor Chittoor
6 Cuddapha Cuddapha
7 Kurnool Kurnool
8 Nalgonda-Ranga Reddy Nalgonda-Ranga Reddy
9 Medak-Nizamabad Medak-Nizamabad

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 Growth of the Industry:

Before the independence of India, in the first half of the 20th century
dairying in the country was largely unorganized. Fluid milk and its products were
generally not easily marketable commodities and there was no transport of these
products to far distances. Organized dairying, as well understood in thewest started
in a small way when military dairy farms and creameries were established towards
the end of the 20th century to meet the demands of the armed forces and their
hospitals. Some private dairies, such as Kaveters and poisons' with encouraged
making pasteurized butter, primarily for the use of the British army. As a result the
imperial institute of animal Husbandry and dairying was established in 1923 at
Bangalore. There has been another major effort in theearly

1940's where milk produced in rural areas of kaira district was collected in bulk
Pasteurized and transported by distributing in Bombay by “the Bombay milk
scheme" operated by the Bombay municipality. When India become independent
in 1947, one of the major milk schemes to be included the country was "the
Greater Bombay milk scheme(GBMS)".

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 LIST OF MILK DAIRIES

Dodla Dairy Limited Nellore in ANDHRA PRADESH

Mizoram Producers Coop. Union Ltd Mizoram in ARUNACHAL PTADESH

Sihota Foods Pvt. Limited Guwahati in ASSAM

Bhawani Dairy Company Muzaffarpur in BIHAR

Baba Dairy Pvt Limited Chandigarh in CHANDIGARH

Calpro Foods Pvt. Ltd. New Delhi in DELHI

Dairy Den Limited Ahmedabad in GUJARAT

Kwality Dairy (India) Limited Faridabad in HARYANA

Mahaan Dairies Ltd. Sahib in HIMACHAL PRADESH

Vaid Milk Products Pvt. Ltd. Jammu in JAMMU&KASHMIR

z 14
 COMPANY PROFILE

Tirumala Milk Products Private Limited is a professionally managed

company engaged in the manufacture of a wide range of Dairy Products which
include Milk in Sachets, Sweets, Flavored Milk, Curd in Cups and Sachets, Milk
Powder, Butter, Ghee and Butter Oil both in bulk as well as in consumer packs...
Established in 1998, Tirumala Milk Products PVT Ltd. is one of the fastest
growing Private Sector Enterprises in India with a team of dedicated professionals.
The company has one of the most modern and versatile plants in the Indian Dairy
Industry with state-of-the-art technology. Tirumala Milk Products PVT Ltd.
Products meet stringent quality control tests and cater to the premium segment of
the market for Dairy Products. Tirumala Milk Products PVT Ltd. is presently
implementing an expansion programme and proposes to launch new products in
the nearfuture.

Presently Tirumala Milk Products market presence in Andhra Pradesh,

Karnataka and Tamil Nadu. It handle 13 Lakh liters of milk per day in packing
stations and dairy plant, which is the single largest plant in the state of Andhra
Pradesh. Its Registered Office is located at NarasaraoPet, Gutur Dist and
Corporate Office is located at Kavurihills,Hyderabad.

Tirumala Milk Products PVT Ltd. sells a rich, varied offering of nutritious,
tasty and healthy food products under well-known brand. Taste, health,
convenience, reliability and vitality for consumers are key characteristics. Milk
comes from cattle herd that receive the best care along with healthy and nutritious
diet in the form of quality feed to ensure that they produce wholesome, high-
quality milk. The major contributors to the success of Tirumala Milk Products
PVT Ltd.are:-

z 15
  Milk Procurement Network
 Superior sales and marketingprocess
 Strategic technological & infrastructuraladvantage
 Efficient humaninvestments

Vision:

“To produce and supply superior quality products with exceptional customer
service to eventually grow as market leader in diary industry.”

Mission:

Tirumala Milk Products PVT LTD. will constantly strive to market quality
products at competitive prices, provide value to our business partners, all the while
delivering exceptional customer service with the highest regard for business
ethics.

Board ofDirectors:

Tirumala Milk Products PVT Ltd. has a seasoned Board of Directors with a
collective blend of visionary leadership, consumer marketing expertise and
technologicalprowess.

 B.BrahmaNaidu - Managing Director

 D.Brahmanandam - Joint Managing Director
 B.NageswaraRao - Director
 Dr.N.VenkataRao - Director
 E.N.Rao - Executive Director

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 Areas of operation:

Tirumala distributes milk to various parts of Tamil Nadu, Andhra Pradesh,

and Karnataka. Gudur is the main source for delivering milk and milk products to
Chennai and other major parts of Tamil Nadu. The procurement and processing
section located at Pasupattur village of Chitoor district in Andhra Pradesh is the
source of milk, curd and products which are supplied in Bangalore and Mysore
Markets. The packing station located at Vellacheruvu, 20 KM away from
Registered Office and plant at Singavaram West Godavari District, Wadiyaram in
Medak District and Gunagal in Rangareddy District supplies milk, curd and other
products to major markets of Andhara Pradesh, and Telangana states which
includes Hyderabad, Vijayawada, Guntur, Rajamandry, Kakinada,
Visakhapatnam, Mahabubnagar and Karim Nagar. Skim Milk Powder, Butter and
Butter oil produced at Gudur plant are supplied to major Industrial and
Institutional customers located acrossIndia.

Certificates and Awards:

In recognition of its efforts and achievements in the dairy foods industry,

and in acknowledgment of all the challenges surmounted, Tirumala Milk Products
PVT Ltd. has won many awards and certificates.

More enduring than any public recognition for our contributions is the
satisfaction we enjoy by creating a superior product and giving back to our
communities.

Tirumala Milk Products PVT Ltd. is an ISO 9001:2000 and an ISO 2000:
2005 Certified company. The dairy is following Quality Management System and
Food Safety Standards.

z 17
 Apart from ISO certification, It has Certificate from SGS on SMP Analysis too.
Tirumala Milk Products PVT Ltd. has ISI Licence, Agmark Licence and adheres to all
other statutory standards as perrequirements.

Products:

Tirumala Milk Products PVT Ltd. covers the entire spectrum of dairy
products sold in markets. The complete range of Tirumala Milk Products PVT Ltd.
are highly nutritious, healthy and bring you a world of goodness.

Tirumala Milk Products PVT Ltd. pasteurizes and packages all fresh dairy
products in technologically superior and hygienic conditions to ensure pure natural
freshness.

Tirumala Milk Products PVT Ltd., Handles 6.5 Lakhs Liters of Milk per
day in all their packing Stations and main dairy plant which is the highest in the
state of Andhra Pradesh.

Tirumala milk products PVT ltd. Handles milk in the following locations:-

PacingLocations Handling Capacity perday

4.0 Lakhlitres
Gudur
2.0 Lakhlitres
VellalaCheruvu
1.0 Lakhlitres
Bhimadolu
2.0 Lakhlitres
Palamaner
4.0 Lakhlitres
Gungal

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 PROCUREMENT OF MILK

Tirumala Milk Products PVT Ltd. established 25 Chilling centers in

Andhra Pradesh and 8 chilling centers in Tamilnadu to procure both Cow &
Buffalo milk. Best quality milk is procured and chilled at chilling centers, to retain
freshness of milk. The strength of the Tirumala Milk Products PVT Ltd. is to
procure more than
lakh liters of milk directly from agents/farmers using state-of-the-art
machinery and professionally trainedstaff.

PRODUCTION

 Tirumala Milk Products PVT Ltd. has its main dairy plant at Kadivedu with
handling capacity of 4.0 lakhs lts of milk per day from various chilling
centers and localunits.

 Main plant processes 3.0 Lakhs Lts of milk per day in automatic sachet
filling machines for supply and distribution to Chennai, Tirupati, Nellore,
etc… in insulatedpuffs.

 There is continuous growth in sale of milk from 50000 ltrs to 350000 ltr
with in a span ofone-decade.

 Tirumala Milk Products PVT Ltd. has its own supply chain management,
which is the key to timelydistribution.

 At Palamaner unit processes and supplies 1.00 lakh liters of milk and 20000
liters of curd to Bangolorecity.

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  Vellalacheruvu & Bhimadolu packing stations processes and supplies 2.0
lakh liters of milk to Vijayawada. Guntur , Eluru, Visakhapatnam,
Kakinada andRajahmundry.

 Wadiyaram plant has capacity of 50000 Liters milk to cater to the markets
of Medak, Nizambad, Adilabad and Karim Nagar Districts ofA.P

Butter:

Is made from pure cow & Buffalo fat under hygienicially processed
through continuous butter making machine.

Ghee:

Is made from Pure cow & Buffalo butter under supervision 30 years
granulation, colour and aroma of ghee with a capacity of 8 tonnes per day. Ghee is
packed in a wide range of 7 ml to 15 Kgs.

Milk Powder:

Is made from fresh cow & buffalo milk, plant is capable of marketing
all type of milk powders with a capacity of 15 tones per day.

By-Products:

 FlavoredMilk,
 Lassi,Khava,
 MilkCake,
 Mysorepak,
 Panner,
 IceCream,
 Curd,
 Buttermilk
z 20
Sales Information

Year Sales in Rs

2013-14 1240400781

2014-15 1483468207

2015-16 2852734310

2016-17 3738023759

2017-18 4707947739

GRAPHICAL REPRESENTATION

cr

Sales in Rs.

5000000000
4500000000
4000000000
3500000000
3000000000
2500000000
2000000000
1500000000
1000000000
500000000
0
2013-14 2014-15 2015-16 2016-17 2017-18

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z 22
 THEORETICAL FRAMEWORK

INTRODUCTION

Ratio analysis is a powerful tool of financial analysis. A ratio is defined

as the indicated quotient of two mathematical expressions and relationship
between two or more things. In financial analysis a ratio is used as an index for
evaluating the financial position and performance of the firm. The absolute
accounting figures reported in the financial statements do not provide a
meaningful understanding of the performance and financial position of a firm. An
accounting figure conveys meaning when it is related to some otherrelevant
information.
Ratio analysis is the process of determining and interpreting numerical
relationship based on financial statements. A ratio is a statistical yard stick that
provides a measure of the relationship between variables of figures. Thus
relationship can be expressed as a percentage on as quotient.
Ratio analysis is a powerful tool of financial analysis. In finance analysis
ratio is used as a bench mark of a firm. The absolute accounting figures reported in
the financial statements do provide a meaning full understanding of the
performance and financial position of the firm. Ratio help summarize large
quantities of financial data and to make qualitative judgment about the firms
financial performances.

Ratio analysis is the systematic use of ratio to interpret the “Financial

Statement so that the strength and weakness of a firm as well as its historical
performance and current financial position can be determined. The relation of ratio
analysis lies in the fact that it makes related information comparable. A single
figure by it self has no meaning but when expressed in terms of related figure.

z 23
 Definition:

“The relationship between two accounting figures expressed mathematically”.

A ratio is a simple arithmetical expression of the relationship of one number

to another. According to Wixon, Kell and Bedford a ratio “is an expression of the
quantitative relationship between two numbers”.
Ratio Analysis is a widely used tool of financial analysis. A ratio is defined
as the “indicated quotient of two mathematical expressions” and “a relationship
between two or morethings”.

A ratio is used as an index or yardstick for evaluating the financial Position

and performance of the firms. The relationship between two accounting inurs
expressed mathematically, is known as financial ratio. Ratio helps to summarize
the large quantities of financial data and to make qualitative Judgment about the
firm‟s financial position. A rational ratio analysis lies in the fact that it makes
related information comparable. A ratio may be expressed simply in one number
as the result of a comparison between two figures

Ratio may be expressed in the following ways:-

 In the pureratio.
 As arate.
 As apercentage.

z 24
 IMPORTANCE OF RATIO ANALYSIS:

The importance of ratio analysis lies in the fact that it presents facts on a
Comparative basis and enables the drawing of inferences regarding the
Performance of the firm. Ratio analysis is relevant in assessing the performance
of a firm in respect of the followingpoints.

(a) Liquidity Position: With the help of ratio analysis conclusionscan

be drawn regarding the liquidity position of the firms. The liquidity position of the
firms would be satisfactorily if it is able to meet its current obligations when they
become due. The liquidity ratios are particularly useful in credit analysis by banks
and other suppliers of short term loans.

(b) Long-term Solvency: Ratio analysis is equally useful for assessing the long
term financial viability of a firm. The long term solvency is measured by the
leverage/ capital structure and profitability ratios, which focus on earning power
and operating efficiency. Ratio analysis reveals the strength and weakness of a
firm in thisrespect.

(c) Operative Efficiency: It is relevant from the view point of management and
it throws light on the degree of efficiency in the management and utilization of its
assets. The ultimate analysis depends upon the sales revenue generated by the use
of its assets total as well as itscomponents.

(d) Overall Profitability: In this the management is constantly concerned about

the overall profitability of the enterprise. They are concerned about the ability of
the firm to meet its short term as well as long term obligation s to its creditors to
ensure a reasonable return of its owner and secure optimum utilization of the
assets of thefirm.

z 25
 (e) Inter firm comparison: Ratio analysis is also stepping stone to remedial
methods. This is made possible due to inter-firm comparison and comparison with
industry averages. One of the popular techniques is to compare the ratios of the
firm with the industry averages. An inter firm comparison would demonstrate the
relative position of its competitors.

(f)Trend Analysis: Ratio analysis enables a firm to take the time dimension into
account. In other words whether the financial position of as firm is improving or
deteriorating over the years. This is made possible by the use of trend analysis. A
significant of trend analysis of ratio lies in the fact that the analyst can know the
direction of moment. The present level may be satisfactorily but the trend may be
declining one. Thus the trend analysis is of greatsignificance.

Basis of comparison:

The ratio analysis involves several types of comparison. They are Below:-
a. A comparison of present ratio with the past and expectedfuture
Ratios for samefirm.
b. A comparison of the ratio with those of similar firm or with industry
averages at the same point time.
c. Trend series or analysis is also one of the comparison .A Financial ratio
over a period of time is compared, it is known as trend The analysis should
not simply determine the change, but more important He should understand
why the ratios havechanged.
d. The other comparison may relate to comparison of items with a single
year‟sfinancialstatementofafirmcomparisonwithstandardsorplans.

z 26
 TYPES OF RATIO’S:
The ratios are divided into 4 types. They are

Liquidity ratio
Leverage ratios
Activity ratios
Profitability ratios.
1) Liquidity ratio’s:

Liquidity means prerequisites for the survival of firm. The liquidity Ratio‟s
measures the ability of the firm to meet its short applications and reflect the short
term financial solvency of a firm. The ratios which indicate the Liquidity of the
firm are:

(a) Current Ratio: The current ratio is the ratio of total asserts to total current
liabilities. The higher the current the larger amount of rupees available per rupee
ofcurrentliabilities.Theratioismore,thefirm‟sabilitytomeetcurrentobligationand the
grater the safety of funds on short termcreditors.

Current assets include cash and those assets which can

be converted in to cash within a year, such marketable securities, debtors and
inventories. All obligations within a year are include in current liabilities. Current
liabilities include creditors, bills payable accrued expenses, short term bank loan
income tax liabilities and long term debt maturing in the current year. Current ratio
indicates the availability of current assets in rupees for every rupee of
currentliability.

Current assets
Current Ratio = ---------------------------
Current liabilities

z 27
 (b) Quick Ratio:This ratio enables the relationship between quick assets and
current liabilities. The quick ratio is found out by dividing the total of the quickest
asserts by total currentliabilities

Quick ratio establishes the relationship between quick or liquid assets and

Liabilities. An asset is liquid if it can be converted into cash immediately or

reasonably soon without a loss of value. Cash is the most liquid asset .other assets

which are consider to be relatively liquid and include in quick assets are debtors

and bills receivable and marketable securities. Inventories are considered as less

liquid. Inventory normally required some time for realizing into cash. Their value

also have tendency to fluctuate. The quick ratio is find out by dividing quick assets

by current liabilities.

Current Assets - Inventories

QuickRatio = ---------------------------------------
Current liabilities

z 28
 Basically quick ratio of 1:1 is considered satisfactorily for current financial
condition.

2. Leverage Ratios:

The second category of the financial ratios is leverage ratios. This ratio is
calculated from the balance sheet items to determine the proportion of debt in total
financing. Leverage ratios are calculated to a judge the financing position of the
firm.

(a) Debt Equity ratio: This is calculated by dividing total debt by Net worth or
capitalemployed.

Total debt
Debt EquityRatio = -------------------
Net worth
Total debt means short and long term borrowings, financial institutions
Debentures/bonds, book borrowings, public deposits and other interest bearing
Loans.

(b) Dividend coverage Ratio: It shows the relationship between the profits after
payment of interest and taxes and preferencedividend.

Profit after tax

Dividend CoverageRatio = ---------------------------------
Preference dividend

z 29
 1. Interest Coverage Ratio : It shows the relationship between the
Profits before payment of interest and taxes and fixed interestcharged.
EBIT
InterestCoverage Ratio= ---------------------
Interest
2. Capital Equity Ratio: This ratio indicates long-term solvency of the
Organization. It is computed by dividing capital employed by Networth.

Capital Employed
Capital EquityRatio = -------------------------------
Net worth

3. Activity Ratio:
Activity Ratios are concerned with measuring the efficiency in asset
Management. Sometimes these ratios are called efficiency ratios or asset
Utilization ratios. Actually ratios involve a relationship between sales and Assets.
There are various types of activity ratios.

(a) Inventory Turnover Ratio: This ratio can be computed by dividing the cost
of goods sold by the averageinventory.

Cost of Goods sold

Inventory TurnoverRatio = ------------------------------------
Average Inventory

z 30
 Inventory Turnover Period :
No. Of. Days in a year

Inventory TurnoverPeriod = ---------------------------------------

Inventory turnover Ratio

(b) Debtors Turnover ratio: The second major activity ratio is the debtor‟sturnover
Ratio. The debtor‟s turnover ratio is a test of the liquidity of the debtors of a firm.
The debtor‟s turnover ratio is found out by dividing credit sales by averagedebtors.

Net credit sales

Debtors turnoverratio = --------------------
Averagedebtors

Debtors Collection Period : This ratio helps to identify the collection of Credit
from debtors. It is also known as Debtors Velocity. It shows the Relationship
between numbers of days in a year to Debtors turnover.
365
Debtorscollectionperiod = -------------------------------------
Debtors Turnover Ratio

(c) Assets Turnover Ratio: A firm should manage its sales sufficiently to
maximize its sales. The relationship between the sales and asset is called assets
turnover.
Sales
Assets Turnover Ratio =---------------------
Total Assets

z 31
 (d) Fixed Assets toCapitalEmployed: This ratio shows the relationship
between the fixed assets and capital employed.

Fixed Assets
Fixed asset to CapitalEmployed = -----------------------------
Capital Employed
iii) Profitability Ratio:
These ratios are determined on the bases of either sales or investments.
Profitability ratios are calculated to measure the operating efficiency of the
company. Profitability ratios are twotypes:
1. Profitability and relation tosales.

2. Profitability in relation toinvestment.

1) Profitability in relation to sales. These ratios are based on the premise that a
firm should earn sufficient profit on each rupee of sales. In this, the ratios consist
of:

(a) Gross profit: this is also known as gross margin. It is calculated by dividing
gross profit by sales.Thus
Sales –Cost of goods sold
Grossprofit = ---------------------------------------- x100
Sales
(b) Net profit: This ratio is also known as net margin. This measuresthe
Relationship between net profit and sales of afirm.

z 32
 Profit after tax
Net profit Ratio = ------------------------- x 100
Sales
2.Profitability in relation to investment:
The profitability ratios can also be computed by relating the profit of a firm to
investment.

(a) ReturnonInvestment: It is also known as “overall profitability ratio”. It

indicates earning gained from investment. It showsrelationship
Between Earnings before interest and taxes to Capital employed.
EBIT
Return on Investment = ------------------------------- x100
Capital Employed

(b) Return on Equity: In this ratio, the earnings after taxes are related
to the market value of total share holdersfund.
Profit after Tax
Return onEquity = ------------------------------
Net worth
(c) Return on Capital Employment: It shows relationship between profits after
taxes before interest to capital employed. Capital employed refers to long-term
funds provide byowners.
P.B.T
Return onCapitalEmployed = ------------------------------
Capital employed

z 33
 (d) Return on Assets: The profitability ratios are measured in terms of the
relationship between net profits andassets.

Profit after Taxes

Returnon Asserts = --------------------------------
Total Asserts
(e) Earnings per share ratio: This ratio helps in the assessment of the
profitability of the firm from the stand point of equity share holders. It calculates
the earrings per each equityshare.

Profit after Tax

Earnings pershare = --------------------------------

No. Of Shares

(f) Dividend per share ratio: This ratio represents dividend paidto
The share holder and no ofshares.

Dividend
Dividend pershare = ---------------------------

No. Of Shares

z 34
 MANAGERIAL USE OF RATIO ANALYSIS:

1) Helps in Decision- making: Financial statement is prepared primarily

for decision- making. But the information provides in financial statements is not
an end in itself and no meaningful conclusion can be drawn from these statements
alone. Ratio analysis helps in making decision on the information provide in these
financialstatements.

2) Helping in financial forecasting and Planning: Ratio analysis is of much

help in financial forecasting and planning. Planning is looking ahead and the ratios
calculated for a number of years work as a guide for the future. Meaningful
conclusions can be drawn for future from these ratios. Thus, ratio analysis helps in
forecasting andplanning.

3) Helping in Communication: The financial strength and weaknesses of a firm

are communicated in a more easy and understandable manner by the use of ratios.
The information contained in the financial statements is conveyed in a meaningful
manner to the one for whom it is meant. Thus, ratios help in communication and
enhance the value of financial statement.

4) Helps in co-ordination: Ratios even helps in co-ordination, which is of utmost

importance in effective business management. Better communication of the
efficiency and weaknesses of an enterprise results in better co- ordination in the
enterprise.

z 35
 5) Other uses: There are so many other uses of ratio analysis. It is an essential
part of the budgetary control and standard costing. Ratios are of immense
importance in the analysis and interpretations of financial statements as they bring
out the strength and weakness of thefirm.

(a) Utility of share holders / investors: an investor in the company will like to
asses the financial position of the concern where he is going to invest. His first
interest will be security of his investment and then a return in the form of dividend
or interest. For the3 first purpose he will try to asses the value of fixed loans raised
against them. The investor will feel satisfied only if the concern as sufficient
amount of asserts. Long term solvency ratios, on the other hand , will be useful to
the investorsin
Marking up his mind whether financial position of the concern warrants further

investment or not.

(b) Utility to Creditors: The creditor‟s are or suppliers extent Short-term to the
concerns. They are interested to know whether Their payments at a specified
time or not. The concerns pay short-term Creditors out of its current assets. If the
current assets are quitesufficient

To meet current liabilities then the creditors will not hesitate in

extending Credit facilities. Current and quick ratios will give an idea about the
Current financial position of the concern.

z 36
 (c) Utilities of Employees: The employees are also interest in the financial
position of the concern especially profitability. Their wage I increases and amount
of fringe benefits are related to the volume of profits earn by the concern the
employees make use of information available , in financial statements. Various
profitability ratios relating to gross profit, operating profit , Net profit etc,. enable
employees to put Forward their view point for the increase of wages and other
benefits.

(d ) Utility to government: Government is interested to know the overall strength

of the industry . Various financial statements published by industrial units are used
to calculate ratios for determining the short- term, long- term and overall financial
position of the concern. Profitability indexes can also be prepared with the help of
ratios. Government may base its future policies on the bases of industrial
information from various units. The ratios may use as indicators of overall
financial strength of public as well as private sector. In the absence of the reliable
economic information, government plans and polices may not prove successful.

z 37
 ADVANTAGES OF RATIO ANALYSIS:

The various advantages of ratio analysis are given below:

1. It becomes easier toanalysis.
(a) Liquidity (b) Solvency (c) profitability (d)Efficiency
2. It helps the management in evolution of the present healthand
The future planning can be based on theparameters.
3. The efficient with which the firm is utilizing its various assetsin
Generating sales revenue.
4. The ratio analysis helps in decision-makingprocess.
5. The ratio analysis is also helps in securityanalysis.
6. The details of cumbersome set of numbers are reduced to easily
Interpretable numbers.

z 38
 LIMITATIONS OF RATIOANALYSIS

The various limitations of ratio analysis are given below:

1. A single ratio does not cover much of sense ., To make better interpretation
a number of ratios have to calculated, which is likely to Confuse the analyst
forinterpretation.

2. Financial statements can be easily window dressed their figures. As a result

the correct picture cannot be drawn up by the ratio analysis, although
certain structural defects can bedetected.

3. Comparison between two variables proves worth provide basisof

Valuation isidentical.

4. Ratios are computed on the basis of past result. It does help properly to
predict future, to prepare budgets andestimates.

z 39
DATA ANALYSIS AND INTERPRETATION

(A). Liquidity Ratios

1. CurrentRatio:

Current Assets

TABLE NO. 4.01

Current Liabilities

TABLE NO.4.01

Year Current Current Liabilities Ratio

Assets
2012-13 1714.89 505.79 3.39
2013-14 1760.75 686.49 2.56
2015-16 4819.52 1737.35 2.77
2016-17 4992.31 2054.62 2.43
2017-18 5973.15 2194.42 2.72
GRAPHNO.4.1

Current Ratio

4
3.5
3

2.5
2

1.5

1
0.5
2013-14 2014-15 2015-16 2016-17 2017-18
0

INTERPRETAION:
The current ratio indicates the availability of funds to payment of current liabilities in the form of
current assets. A higher ratio indicates that there were sufficient assets available with the
organization which can be converted in cash, without any reduction in the value. As ideal current
ratio is 2:1, where current ratio of the firm is more than 2:1, it indicates the unnecessarily investment
in the current assets in the form of debtor and cash balance. Ratio is higher in the year 2011-12
where cash balance is more than requirement which came through encashment ofdeposits.

z 40
 2. QuickRatio:

Quick Assets
Current Liabilities
TABLE NO. 4.2

Year Quick Assets Current Liabilities Ratio

2013-14 624.14 505.79 1.23
2014-15 753.15 686.49 1.10
2015-16 2230.17 1737.35 1.28
2016-17 2278.03 2054.62 1.11
2017-18 2881.19 2194.42 1.31
GRAPHNO.4.2

Quick Ratio

1.35

1.3

1.25

1.2

1.15

1.1

1.05

1
2013-14 2014-15 2015-16 2016-17 2017-18
0.95

INTERPRETAION:

Quick ratio indicates that the company has sufficient liquid balance for the payment of current
liabilities. The liquid ratio of 1:1 is suppose to be standard or ideal but here ratio is more than 1:1
over the period of time, it indicates that the firm maintains the over liquid assets than actual
requirement of such assets. In the years 2013-14 & 2015-16 company has Rs.1.28 & 1.31 cash for
every 1 rupee of expenses; such a policy is called conservative policy of finance forworking
capital. The company maintained sufficient quickratio.

z 41
3)CashRatio:
Even though debtors and bills receivables are considered as more liquid then inventories, it
can not be converted in to cash immediately or in time. Therefore while calculation of
absolute liquid ratio only the absolute liquid assets as like cash in hand cash at bank, short
term marketable securities are taken in to consideration to measure the ability of the
company in meeting short term financial obligation. It calculates by absolute assets
dividing by currentliabilities.

Cash + Bank balance

Current Liabilities

TABLE NO. 4.3

Year Cash + Bank balance Current Liabilities Ratio

2013-14 263.67 505.79 1.52

2014-15 388.38 686.49 1.57

2015-16 1442.73 1737.35 1.83

2016-17 1295.70 2054.62 1.63

2017-18 1664.43 2194.42 1.76

z 42
 GRAPHNO.4.3

Cash Ratio

1.90
1.80
1.70
1.60
1.50
1.40
1.30
1.20
1.10
1.00
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

Absolute liquid ratio indicates the availability of cash with company is

sufficient because company also has other current assets to support current

liabilities of the company. When observe the above graph absolute liquid ratio

having some flections because of company carry more/less cash balance, as a cash

balance is ideal assets company has to take control on such availability of funds

which is affect on cost of the funds.

z 43
 (B). LEVERAGERATIOS

3.Debt Equity Ratio:

The term external equities refers to total outside liabilities that

consists of both short term and long term liabilities and the term internal equities

refer to share holders funds that consists of both equity and preference capital. In

case the ratio 1(i.e., outsiders funds are equal to shareholders funds it is considered

to be quite satisfactory). The debt equity ratio is determined to ascertain the sound

ness of the long term financial policies of the company. It is also known as

“external internal” equity ratio. It may be calculated as follows:

Debt
Equity

TABLE NO. 4.4

Year Debt Equity Ratio

2013-14 1833.26 716.29 2.56

2014-15 1042.56 875.66 1.19

2015-16 3835.48 2031.60 1.89

2016-17 3368.48 3021.48 1.11

2017-18 4480.32 4248.74 1.03

z 44
 GRAPHNO.4.4

Debt Equity Ratio

2.5

1.5

0.5

2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The general norm for debt equity ratio is 1: 2 (or) 1:1 this is applicable only

for developed countries. In case of developing countries like India, a general

norm of 3:1 or 2:1 is maintained by the firms. Because the firm is depending on

borrowed capital rather than equity capital. The debt position of the company is

fluctuating in the years 2011-12 and 2013-14 but remaining years the company

satisfied the idle ratio of debt equityratio

z 45
 4. Proprietary ratio:

It is also known as equity ratio. This ratio establishes the relationship

between shareholders‟ funds to total assets of the firm. The shareholders‟ fund isthe

sum of equity share capital, preference share capital, reserves and surpluses. Out

of this amount, accumulated losses should be deducted. On the other hand, the

total assets mean total resources of the concern. The ratio can be calculated as

under

Shareholders fund
Total Assets

TABLE NO. 4.5

Year Shareholders fund Total assets Ratio

2013-14 716.29 2549.56 1.28

2014-15 875.66 2723.66 1.32

2015-16 2031.60 5867.07 1.35

2016-17 3021.48 6389.95 1.47

2017-18 4348.75 8829.06 1.49

z 46
 ProprietoryRatio

1.55

1.5

1.45

1.4

1.35

1.3

1.25

1.2

1.15
2013-14 2014-15 2015-16 2016-17 2017-18

GRAPHNO.4.5

INTERPRETATION:

The above graph shows that the Proprietary ratio of Tirumal Milk Products

PVT. Ltd was increased gradually from the year 2011to 2016. A high ratio shows

that there is safety for creditors of all types. Here the company having nearly 0.5

percentage of proprietary ratio. So the company able to pay to the creditors.

z 47
 (C). TURNOVERRATIOS
5. Fixed Assets Turn Over Ratio:

Assets are used to generate sales therefore the firm should manage its assets

efficiently to maximize sales. The relationship between sales and assets is called

assets turnover. The firm can compute fixed assets turnover simply by dividing

sales by fixed assets.

Sales
Net Fixed Assets

TABLE NO. 4.6

Year Sales Net Fixed Assets Ratio (times)

2013-14 12404.07 1313.80 9.44

2014-15 14834.68 1623.10 9.13

2015-16 28527.34 2751.12 10.37

2016-17 37380.24 3418.40 10.93

2017-18 47079.47 5011.79 9.39

z 48
 GRAPHNO.4.6

Fixed Assets Turnover Ratio

11.5

11

10.5

10

9.5

8.5

8
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

A high fixed assets turnover ratio indicates a high degree of efficiency in

assets utilization and low relation reflects inefficient use of assets. It can be

observed from the above table the fixed assets turnover ratio is having some

fluctuations.

z 49
 6. Working Capital Turn OverRatio:

It signifies that for an amount of sales, a relative amount of working capital

is needed. If any increase in sales contemplated working capital should be

adequate and thus this ratio helps management to maintain the adequate level of

working capital. The ratio measures the efficiency with which the working capital

is being used by a firm. It may thus compute net working capital turnover by

dividing sales by workingcapital.

Sales
Networking Capital

TABLE NO. 4.7

Year Sales N.W.C Ratio (times)

2013-14 12404.07 1209.10 10.25

2014-15 14834.68 1074.26 13.80

2015-16 28507.34 3082.17 9.25

2016-17 37380.23 2937.69 12.72

2017-18 47079.47 3778.72 12.45

z 50
 GRAPHNO.4.7

Working Capital Turnover Ratio

16

14

12

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

High working capital ratio indicates the capability of the organization to

achieve maximum sales with the minimum investment in working capital.

Company‟sworkingcapitalratioshowsmostlymorethanten,exceptfortheyear 2009-10

because of excess of cash balance in current assets which occurred due to

encashment of deposits. In the year 2012 the ratio was around 14, it indicates that

the capability of the company to achieve maximum sales with the minimum

investment in working capital.

z 51
 7. Inventory turnover ratio:

In accounting, the Inventory turnover is a measure of the number of

times inventory is sold or used in a time period such as a year. The equation for

inventory turnover equals the cost of goods sold divided by the average inventory.

Inventory turnover is also known as stock turnover ratio.

Cost of goods sold

Inventory

TABLE NO. 4.8

Year C.G.S Inventory Ratio

2013-14 10235.06 1090.75 9.38

2014-15 17942.18 1007.61 11.66

2015-16 23382.61 2589.36 9.03

2016-17 30035.22 2714.29 11.07

2017-18 37040.17 3091.92 11.98

z 52
 GRAPHNO.4.8

Inventory Turnover Ratio

14

12

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The above table shows that the company maintained its inventory turnover

ratio was increased gradually from 2012 to 2016. In the year 2016 the company

increased its inventory turnover ratio. A high inventory Turnover ratio indicates

efficient management of inventory because the stocks are sold more frequently

and lesser amount of money is required to finance theinventory.

z 53
 8. Creditors Turnover Ratio:

This Ratio is similar to the debtor‟s turnover ratio. It compares

creditors with the total credit purchases. It signifies the credit period enjoyed by

the firm in paying creditors. Accounts payable include both sundry creditors and

billspayable.

Net Credit Purchases

Average Net worth

TABLE NO. 4.9

Year N.C.P Avg N.W Ratio

2013-14 10410.34 358.14 29.06

2014-15 11976.25 437.82 27.35

2015-16 23843.78 1015.79 23.47

2016-17 29893.66 1510.73 19.78

2017-18 37695.27 2174.37 17.33

z 54
 GRAPHNO.4.9

Creditors Turnover Ratio

35

30

25

20

15

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

By observing the above table, it is clear that the creditors turnover

ratio of Tirumala Milk Products PVT. Ltd was decreased its creditors turn over

ratio gradually. That mean the company decreased its credit year by year. So

decreasing credit is beneficial to the company.

z 55
 9. Debtors Turnover Ratio:

Debtors turnover ratio or accounts receivable turnover ratio indicates the

velocity of debt collection of a firm. In simple words it indicates the number of

times average debtors (receivable) are turned over during a year.

Sales
Debtors

TABLE NO. 4.10

Year Sales Debtors Ratio %

2013-14 12404.07 63.58 19.50

2014-15 14834.68 68.44 21.67

2015-16 28527.34 236.66 12.05

2016-17 37380.23 181.130 20.63

2017-18 47079.47 165.041 28.52

z 56
 GRAPHNO.4.10

Debtors Turnover Ratio

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The above graph shows that the debtor’s turnover ratio of the company was

increased in the year 2011 and in the years 2012 and 2011 it was decreased after

that it was increased. The higher the value of debtor’s turnover the more efficient

is the management of debtors or more liquidity. So the company having good

position in management ofdebt.

z 57
 (D). PROFITABILITYRATIOS

11. Gross profit ratio:

It is calculated by dividing the gross margin by sales. This ratio shows the

profits relative to sales after three direct production costs are deducted. It may be

used as an indicator of the efficiency of the production operation and the relation

between production costs and selling price.

Gross Profit
X100
Net sales

TABLE NO. 4.11

Year Gross Profit Net sales Ratio %

2013-14 2163.89 1209.10 1.79

2014-15 2768.99 1074.26 2.58

2015-16 5271.38 3082.17 1.71

2016-17 7586.94 2937.70 2.58

2017-18 9746.06 3778.73 2.58

z 58
 GRAPHNO.4.11

Gross Profit Ratio

2.5

1.5

0.5

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The gross profit ratio is increased from the year 2011-2012 to 2015-2016

and in the year 2009-10 it was increased highly. In all the years the ratio was

increased due to some reasons that are operating expenses of Tirumala Milk

Products PVT. Ltd are decreased, however this ratio is satisfactory as it is showing

some increasing.

z 59
 12. Net Profitratio:

Net profit margin establishes a relationship between net profit and sales

indicatesmanagement‟sefficiencyinmanufacturingadministratingandsellingthe

product. This ratio is the overall measure of the firm’s ability to turn each rupee

sales into net profit.

The net profit margin shows the earning left for shareholders as a

percentage of net sales. This ratio also indicates the firm’s capacity to withstand

adverse economic conditions. Gross and net profit margin ratios provide a

valuable understanding of the cost and profit structure of the firm and enable to

identify the source of business efficiency /inefficiency.

Net profit
Net sales X 100

TABLE NO. 4.12

Year Net profit Net sales Ratio

2013-14 485.79 12404.07 3.92

2014-15 645.16 14834.68 4.35

2015-16 1211.27 28527.34 4.25

2016-17 2201.25 37380.23 5.89

2017-18 3528.52 47079.47 7.49

z 60
 GRAPHNO.4.12

Net Profit Ratio

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETAION:

During the period 2012-16 the net profit ratio of the company is gradually

increased year by year except the year 2013. The reason why the operating

expenses of the company is reduced year by year so the net profit of the company

was increased.

z 61
 13. Operating Profitratio

Operating Profit means profit earned by the concern from its

business operation and not from the other sources. While calculating the net profit
of the concern all incomes either they are not part of the business operation like
Rent from tenants, Interest on Investment etc. are added and all non-operating
expenses are deducted. So, while calculating operating profits these all are ignored
and the concern comes to know about its business income from its business
operations.

Operating Profit Ratio shows the relationship between Operating

Profit and Net Sales. Operating Profit Ratio can be calculated in the following
manner: -

Operating profit
Sales X 100

TABLE NO. 4.13

Year Operating Profit Net sales Ratio %

2013-14 11971.35 12404.07 96.51

2014-15 13943.79 14834.68 93.99

2015-16 27489.00 28527.34 96.36

2016-17 35600.41 37380.23 95.23

2017-18 44019.99 47079.47 93.47

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 GRAPHNO.4.13

Operating Profit Ratio

97
96.5
96
95.5
95
94.5
94
93.5
93
92.5
92
91.5
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

Operating Profit Ratio indicates the earning capacity of the concern

on the basis of its business operations and not from earning from the other sources.

It shows whether the business is able to stand in the market or not.

The above graph shows that there are some fluctuations in operating

profit ratio. From the year 2013 to 2014 it was continuously decreasing the reason

why the operating expenses are increasing year by year from 2010 to 2016.

z 63
 14. Return on TotalAssets:

The profitability ratio is measured in terms of the relationship

between net profits and assets. The Return on assets may also be called Profit – to

– asset ratio. There various approach possible to define net profits and assets. The

return on assets based on this ratio would be an under estimate as the interest paid

the credit of is excluded form the net profits in point of fact the real return on total

assets is the net earnings available to owners and interest as assets are financed by

owners as well as creditors.

Net Profit after Tax

X100
Total assets

TABLE NO. 4.14

Year Net Profit A.T Total Assets Ratio %

2013-14 124.73 2549.55 4.89

2014-15 163.46 2723.66 6.00

2015-16 464.67 5867.07 7.92

2016-17 987.86 6389.95 15.46

2017-18 1347.36 8829.06 15.16

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 GRAPHNO.4.14

ReturnonTotalAssetsRatio

18

16

14

12

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The ratio of Tirumala Milk Products PVT Ltd limited is on

increasing trend indicating the profitability with regard to the better utilization of

total assets. The increasing ratio indicates that the company has a good proportion

of return on total assets. The company return on total assets ratio was increased

year by year.

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 15. Return onEquity:

Return on equity is of great interest to equity shareholders. Ordinary

shareholders are entitled to the residual profits. If rate of dividend is not fixed the

earning may be distributed to shareholders or retained in the business. A return on

shareholders equity is calculated to see theprofitability of owner’s investment.The

return on equity is net profit after taxes divided by shareholders equity or net

worth.

Profit after Tax

Net worth

TABLE NO. 4.15

Year Profit after Tax Net worth Ratio %

2013-14 124.73 716.29 0.17

2014-15 163.46 875.65 0.19

2015-16 464.67 2031.59 0.23

2016-17 987.86 3021.47 0.33

2017-18 1347.36 4348.75 0.31

z 66
 GRAPHNO.4.15

Return on Equity Ratio

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The return on equity ratio was increased year by year due to high profits

after tax. And the net worth is also increasing year by year. This increasing ratio

indicates that the company has used the owner’s resources satisfactorily.

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 16. Return oninvestment:

ROI (Return on Investment) is probably the most important calculation one

needs to make to ensure the long-term viability of their business. It is not enough

to build in a profit margin on the product or service being offered. One must track

with proficiency the amount of dollars being invested into attracting sales and how

much ROI those dollars put back into the business. If the investment meets too

little return, a product line is doomed to fail in thelong-term.

Earning before I&T

Shareholders equity

TABLE NO. 4.16

Year E.B.I.T Shareholders equity Ratio

2013-14 270.14 716.29 37.71

2014-15 346.27 875.66 39.54

2015-16 844.10 2031.60 41.55

2016-17 1695.13 3021.48 56.10

2017-18 2233.54 4348.74 51.36

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 GRAPHNO.4.16

Return on Investment

60

50

40

30

20

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

The above graph shows that the return on investment of Tirumala

Milk Products PVT. Ltd having gradual increasing from 2011-12 to 2014-15 but in

the year 2012-13 it decreases when compared with 2015-16 year. The reason for

fluctuation of return on investment is fluctuations in market expenses.

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 17. Return on Capital employed:

The Return on Capital Employed ratio (ROCE) tells us how much

profit we earn from the investments the shareholders have made in their company.

Return on Capital Employed (ROCE) is used in finance as a measure of the returns

that a company is realizing from its capital employed. It is commonly used as a

measure for comparing the performance between businesses and for assessing

whether a business generates enough returns to pay for its cost of capital.

Profit before Tax

Capital employed X 100

TABLE NO. 4.17

Year P.B.T Capital employed Ratio

2013-14 167.71 716.29 23.41

2014-15 311.80 875.65 35.60

2015-16 608.10 2031.59 29.93

2016-17 1324.01 3021.47 43.82

2017-18 1914.72 4348.74 44.02

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 GRAPHNO.4.17

ReturnonCapitalEmployedRatio
50

45

40

35

30

25

20

15

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

INTERPRETATION:

Theabovegraphshowsthatthecompany‟sreturnoncapital employed

ratio was gradually increased year by year except the year 2013. The enhanced

return on capital employed measures the return or profit on each Naira ofexpended

by the firm for the financialperiod.

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 FINDINGS

 The current ratio of Tirumala Milk Products PVT. Ltd does not maintain idle

Ratio of current ratio. It maintained 2.5:1 but the idle ratio of current ratio is2:1.

 The quick ratio of Tirumala Milk Products PVT. Ltd has somefluctuations.

The idle ratio of quick ratio is 1:1. The company maintains its quick ratio in

satisfactory position.

 It is found that the absolute liquid ratio of Tirumala Milk Products PVT. Ltd

maintained very low. So the company on a whole is said to be not satisfactory

 The debt to equity ratio of the company having some fluctuations but in th 2015,

2016 it maintained idle ratios of debt equity ratio. The idle ratio of debt equity

ratio is1:2.

 The proprietary ratio of Tirumala Milk products PVT. Ltd was continuously

increased year byyear.

 The fixed assets turnover ratio of the company fluctuating through out the period

of the study. The Ratio of the company is not said to besatisfactory.

 The working capital turnover ratio of the company having some fluctuations
during the period. The working capital turnover ratio of the company said to be
satisfactorylevel.

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 SUGGESTIONS

 As the current ratio was not satisfactory. It is advisable to it should

maintain idle ratio of current ratio.

 The company maintaining idle ratio of its quick ratio. So it should maintain

same in thefuture.

 It is suggested that the company should utilize its idle cash assets towards

appropriate investment to maintain an optimal absolute liquidratio.

 It is suggested for the company to reduce its debt level to the equity of the

company as the ratio is Very high thus creating highrisk.

 As the proprietary ratio is suggested for the firm maintains effective level

so as to maintain in the Futurealso.

 It is suggested for the time to maintain fixed assets in a stable manner for a

good. Fixed assets Turnover ratio as the sales are influenced by

environmentalconditions.

 It is suggested that the working capital turnover ratio they maintained good

position. So it should maintain same in thefuture.

 The inventory turnover ratio is suggested the overall observation so it is

good Position in the same futurealso.

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 CONCLUSION

Tirumala Milk Products PVT Ltd is a successful company as is evidenced by

its financial performance. The present study is undertaken to understanding the
direction in which the company is moving so as decides and implement future
course of action with a view to achieve the objectives in the best interest of the
organization.

Analysis of Tirumala Milk Products PVT Ltd through ratio analysis has
revealed that during the early years of analysis the current ratio and quick ratio
were far above the standard norms. But in recent years it has reached near the
standard which indicates that the company has made profitable investment of these
idle balances. The company is making optimum utilization of fixed assets for
generation of sales and increase of profits. The debt equity ratio of the company is
also stable. On an overall it can be concluded that the overall financial position
and liquidity position of the company is quitesatisfactory.

At the end of the study certain suggestions are given to further enhance the
profitability and liquidity position of the company.

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 Balance sheet Mar 18 Mar 17 Mar 16Mar 15 Mar 14
12mths 12 mths 12 mths 12 mths 12mths

EQUITIES AND LIABILITIES

SHAREHOLDER’S FUNDS
Equity Share Capital 27.49 27.49 27.49 27.49 27.49
Total Share Capital 27.49 27.49 27.49 27.49 27.49
Reserves and Surplus 69.64 56.84 27.30 116.87 114.66
Total Reserves and Surplus 69.64 56.84 27.30 116.87 114.66
Total Shareholders Funds 42.14 29.34 54.79 144.36 142.15
NON-CURRENT LIABILITIES
Long Term Borrowings 127.76 130.18 117.16 45.60 1.59
Deferred Tax Liabilities [Net] 6.47 6.28 5.71 4.33 3.73
Long Term Provisions 1.25 0.63 0.79 0.44 0.36
Total Non-Current Liabilities 135.47 137.09 123.67 50.37 5.68
CURRENT LIABILITIES
Short Term Borrowings 88.08 88.54 86.07 105.20 83.09
Trade Payables 17.82 14.63 20.84 27.50 31.90
Other Current Liabilities 0.68 1.54 1.76 5.21 2.10
Short Term Provisions 2.36 2.63 1.61 2.72 0.82
Total Current Liabilities 108.93 107.34 110.28 140.63 117.91
Total Capital And Liabilities 202.26 215.09 288.73 335.36 265.74
ASSETS
NON-CURRENT ASSETS
Tangible Assets 70.50 77.03 82.14 52.18 40.89
Intangible Assets 0.09 0.14 0.35 0.78 0.99
Capital Work-In-Progress 29.56 34.99 50.20 56.67 28.09
Fixed Assets 100.15 112.15 132.70 109.63 69.97
Non-Current Investments 4.11 4.12 31.20 30.27 29.72
Long Term Loans And Advances 3.78 4.54 5.78 3.96 3.12
Other Non-Current Assets 0.00 0.00 0.00 3.38 1.45
Total Non-Current Assets 108.04 120.81 169.67 147.24 104.26
CURRENT ASSETS
Inventories 22.88 21.26 70.42 85.18 69.38

z 75
Standalone Profit & Loss account ------------------- in Rs. Cr. -------------------

Trade Receivables 64.04 64.97 36.08 76.96 80.56

Cash And Cash Equivalents 2.21 3.05 4.55 13.97 4.62
OtherCurrentAssets 5.09 5.00 8.01 12.01 6.92
Total Current Assets 94.22 94.29 119.06 188.12 161.48
Total Assets 202.26 215.09 288.73 335.36 265.74
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES,
COMMITMENTS
Contingent Liabilities 0.27 0.16 0.02 7.16 1.42
CIF VALUE OF IMPORTS
Raw Materials 0.00 0.00 0.00 0.00 1.18
Stores, Spares And Loose Tools 0.00 0.00 0.00 0.01 0.00
Capital Goods 0.00 0.00 0.00 0.36 0.00
EXPENDITURE IN FOREIGN EXCHANGE
REMITTANCES IN FOREIGN
CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign Currency - - - - -
EARNINGS IN FOREIGN EXCHANGE
FOB Value Of Goods - - - - -
Other Earnings - - - - -
BONUS DETAILS
Bonus Equity Share Capital 2.84 2.84 2.84 2.84 2.84
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted Market Value - - - - -
Non-Current Investments Unquoted Book Value 3.46 4.12 31.20 30.27 29.72
CURRENT INVESTMENTS
Current Investments Quoted Market Value - - - - -
Current Investments Unquoted Book Value - - - - -

z 76
 Mar18 Mar '17 Mar '16 Mar '15 Mar '14

12mths 12 mths 12 mths 12 mths 12 mths

Income
Sales Turnover 57.55 89.11 83.54 194.82 185.73
Excise Duty 0.22 0.92 2.15 0.00 0.00
Net Sales 57.33 88.19 81.39 194.82 185.73
Other Income 0.41 18.87 5.44 1.93 2.05
Stock Adjustments 0.75 22.70 27.28 3.51 9.30
Total Income 58.49 46.62 48.67 200.26 197.08
Expenditure
Raw Materials 48.19 50.07 57.95 133.39 134.93
Power & Fuel Cost 3.48 2.93 2.71 7.15 6.48
Employee Cost 5.37 6.75 9.42 10.44 8.80
Other Manufacturing Expenses 1.65 1.78 1.96 0.00 6.97
Miscellaneous Expenses 4.83 44.68 41.24 26.57 17.37
Total Expenses 63.52 106.21 113.28 177.55 174.55
Mar18 Mar '17 Mar '16 Mar '15 Mar '14

12mths 12 mths 12 mths 12 mths 12 mths

Operating Profit 5.44 40.72 59.17 20.78 20.48

PBDIT 5.03 59.59 64.61 22.71 22.53
Interest 0.73 16.55 19.85 15.94 15.13
PBDT 5.76 76.14 84.46 6.77 7.40
Depreciation 6.85 7.02 6.13 4.47 4.30
Profit Before Tax 12.61 83.16 90.59 2.30 3.10
PBT (Post Extra-ord Items) 12.61 83.16 90.59 2.30 3.10
Tax 0.19 0.97 0.92 0.00 0.89
Reported Net Profit 12.80 84.13 91.53 2.30 2.21
Total Value Addition 15.34 56.14 55.33 44.16 39.62
Per share data (annualised)
Shares in issue (lakhs) 274.95 274.95 274.95 274.95 274.95
Earning Per Share (Rs) 4.66 30.60 33.29 0.83 0.80
Book Value (Rs) 15.33 10.67 19.93 55.54 52.50

z 77
 BIBLIOGRAPHY

Book name author publisher edition

1. Financial Management by M.Y. Khan &P.K Jain, Tata McGraw hill,

4th edition.

2. Financial Management by Dr.S.N.Maheshwari, Sultan Chand & sons

17th edition

3. Financial Management theory and practice by Prasanna Chandra,

Tata McGraw hill 5th edition.

OTHER SOURCES

http://www.tirumalamilkproducts.comwww.google.co
m

z 78