Description
FINANCIAL ANALYSIS of AMUL
“FINANCIAL ANALYSIS OF KAIRA DISTRICT CO-OPERATIVE MILK PRODUCER’S UNION LIMITED (AMUL), ANAND.”
Prepared By: MONAL D. PATEL
Worked At: Sardar Patel Co-op. Credit Society Limited ABSTRACT: Financial Performance Analysis can be carried out by using various analytical tools like trend analysis, horizontal analysis, cash flow statement analysis, & various important ratios. Ratios have evolved substantially over a period of time. I have studied the effect of different variable of liquidity & profitability of AMUL for last 10 years from 2001-02 to 2010-11 by using Pearson’s correlation for analysis. The result shows that there is moderate negative correlation between liquidity & profitability. The purpose of this study is to familiarize the readers with various analytical tools and their usefulness in the financial analysis of an organization. The idea of this project is to know the short term as well as long term financial position of AMUL. KEYWORDS: Trend Analysis, Horizontal Analysis, Cash flow statement Analysis & Correlation. INTRODUCTION: AMUL is Asia’s no. 1 and world’s second number co-operative dairy. It has large market and dairy network in every state of India and across the India, like central Asian countries, Bangladesh, Thailand, Indonesia, Malaysia, Singapore, etc. It was started with 250 liters of milk and 2 societies and now, it produces 10 lakhs litters milk per day and has 1113 societies and more than 6 lakes farmer members. It produces milk and milk products. The main motto of AMUL is to help farmers. Farmers were the foundation stone of AMUL. The system works only for farmers and for consumers, not for profit. The main aim of AMUL is to provide quality products to the consumers at minimum cost. The goal of AMUL is to provide maximum profit in terms of money to the farmers. Vision of AMUL is to provide and vanish the problems of farmers (milk producers). The AMUL apparition was to run the organization with the co-operation of four main parties, the farmers, the representatives, the marketers, and the consumers. Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Milk procured (in kgs) 277840861 258692443 257957726 255856435 276150374 297436246 324410536 401718616 468587136 498033310 515900000 Sales turnover (Rs. In lack) 50919 46878 48834 54593 60047 70922 81632 107712 137807 169989 211140
OBJECTIVE OF THE STUDY:
? The objective of financial statement is to know information about the financial position, performance & cash flows of an enterprise with the help of analytical tools. ? To know the Market Position AMUL by taking Market Value Ratios ? To know the tradeoff between Liquidity & Profitability. DEVELOPMENT OF HYPOTHESIS: H0: There is no positive relationship between the Liquidity & Profitability of AMUL. H1: There is positive relationship between the Liquidity & Profitability of AMUL.
TESTING OF HYPOTHESIS: STEP 1: Financial Performance on the basis of Profitability & Liquidity Analysis Relationship Between Current Ratio & Operating Profit Ratio Years CR OPR 2001-02 2.702 88.380 2002-03 3.240 89.342 2003-04 2.376 90.460 2004-05 2.344 90.199 2005-06 2.136 91.035 2006-07 1.738 90.957 2007-08 2.136 92.178 2008-09 1.652 91.873 2009-10 1.394 92.580 2010-11 1.431 947.906 r -0.415 Relationship Between Current Ratio & Net Profit Ratio Years CR NPR 2001-02 2.702 0.314 2002-03 3.240 0.405 2003-04 2.376 0.467 2004-05 2.344 0.523 2005-06 2.136 0.461 2006-07 1.738 0.504 2007-08 2.136 0.421 2008-09 1.652 0.419 2009-10 1.394 0.436 2010-11 1.431 0.440 r -0.323
STEP 2: FIVE DIFFERENT CORRELATIONS
1) 2) 3) 4) 5)
Strong Negative Correlation (r=-0.933) Moderate Negative Correlation (r=-0.674) Moderate Positive Correlation (r=0.514) Strong Positive Correlation (r=0.909) Virtually No Correlation (r=-0.004)
STEP 3: INTERPRETATION
1) Correlation Result between the Operating Profit & Current Ratio shows a “Moderate Negative Correlation” between them, & that if the current ratio increases it will have a negative impact on profitability & it will decreases because there is a correlation r=-0.41472. Here AMUL’s current ratio is more than standard of 2:1, this indicate negative reflection towards current assets 2) Correlation Result between the Net Profit & Current Ratio shows a “Moderate Negative Correlation” between them, & that if the current ratio increases it will have a negative impact on profitability & it will decreases because there is a correlation r=-0.32255. This indicates that if CR is increased by 1 Rs on liquidity basis, it reduces NPR by 0.32255 paisa on profitability. 3) Correlation result between Liquidity & Profitability have “Moderate Negative Correlation”
ANALYSIS & DISCUSSION:
Financial analysis is the starting point for the making plans, before using any sophisticated forecasting & planning procedures. A number of tools are available in the tool kit of the analyst for the purpose certain tools are: 1) 2) 3) 4) Trend analysis Horizontal analysis Cash flow statement analysis Ratio analysis
1) TREND ANALYSIS: Index in (Times)
4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
RESULT FOR THE YEAR
Sales & other Income PBDT
PBT
PAT
4
QUANTITATIVE DETAIL
3
Index in(Times)
2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Production Sales
3.5
3 2.5
Position at year end
Gross Block Net Block Net Current Assets Net Worth
Index in(Times)
2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Share Capital
INTERPRETATION: 1) Consistent rise in sales that shows overall growth in sales of their products in dairy
consumption. 2) Consistent rise in production throughout the year. Consistent rise in sales throughout the year, but production is more than the sales. 3) Growth in gross block & sales neck to neck that shows high fixed assets efficiency & its utilization of uses are more. Growth in net worth is neck to neck that shows high leverage & high dividend distribution around 75% to their consistent farmers
2)
HORIZONTAL ANALYSIS: Gross Profit PBDIT less: Depreciation EBIT less: Interest EBT less: Tax Provision PAT Net Profit
16342.74 4327.00 1614.63 2712.37 1569.38 1142.99 212.78 930.21 926.67
14314.02 3350.05 1121.41 2228.64 1252.58 976.06 255.00 721.06 735.75
2028.72 976.95 493.22 483.73 316.8 166.93 -42.22 209.15 190.92
14.173 29.162 43.982 21.705 25.292 17.102 -16.557 29.006 25.949
Shareholders' Funds: Loan Funds: FIXED ASSETS (Net Block) Investments Current Assets, Loan & Advances: Current Liabilities & Provisions Net Current Assets
INTERPRETATION:
6826.57 21227.56 15270.87 1040.58 37290.61 27362.69 9927.92
5756.61 19111.57 14046.24 515.33 40524.27 30422.64 10101.63
1069.96 2115.99 1224.63 525.25 -3233.66 -3059.95 -173.71
18.587 11.072 8.719 101.925 -7.980 -10.058 -1.720
1) The results: through profit at every stage that is PBDIT, PBIT, PBT is higher in absolute terms, it has not been able to maintain growth equal to sales. PBT has grown by just 17.10% 2) Tax provision is lower by 16.56% thus improving PAT growth to 29.01% as against PBT growth. In comparison to sales growth however PAT growth in very positive due to maintaining material cost, manufacturing cost. It shows increment in net profit. 3) Net worth (shareholder’s fund) up by 18.59% as against lower growth in loan funds by 11.07%. it shows very strong financial position. Net fixed assets higher by only 8.72% where as net sales grew by 24.69%. it shows very efficient fixed assets utilization. 4) Investment grew by 101.92%. Investment in absolute terms very high. It is much more than net worth (18.59%). So it shows a very unique feature. 3) DUPONT ANALYSIS:
OR
3) DU PONT ANALYSIS NET PROFIT MARGIN * NET WORTH TURNOVER PAT/Net Sales*100 * Net Sales/Net Worth 0.31 * 37.09 0.41 * 30.13 0.47 * 16.89 0.52 * 17.22 0.46 * 19.06 0.50 * 19.72 0.42 * 23.89 0.42 * 29.67 0.44 * 34.48 0.44 * 36.49
RATIO FORMULAE 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
= RONW = PAT/Net Worth*100 = 11.65 = 12.20 = 7.89 = 9.01 = 8.79 = 9.94 = 10.06 = 12.43 = 15.03 = 16.06
INTERPRETATION: 1) Increase in ROA contributed by improvement in both the net profit margin as well as net assets turnover. 2) This finding indicates that an ideal situation for the AMUL. OVERALL CONCLUSION: ? Financial statement summarizes an AMUL’s financial position at a given moment in time as well as over longer period. They should reflect any variance between the actual operating result & the budgeted goals that were previously approved by the company.
REFERENCE: 1. Sorter, G. & Becker, S. (1964),” Accounting and financial decisions and corporate personality? some preliminary findings,” Journal of Accounting Research, 183?196 2. Holdren, G.C. (1964),”LIFO and ratio analysis,” The Accounting Review, 70?85 3. From Internet 4. Sur & Rakshit (2005) “Working Capital and Liquidity Management in Factoring: A Comparative Study of SBI and Can Bank Factors”. The Management Accountant May, Vol-39, No.-5 5. Vishnani, S., and Shah, B. K. (2007), “Impact of Working Capital Management Policies on Corporate Performance An Empirical Study”, Global Business Review, vol. 8, No. 2, pp. 267281. 6. Mahindra R Gujarathi,”Sachiko Corporation: A case in International Financial Statement Analysis.” Issues is Accounting Education; Vol.23, No Feb 2008; 23, 1; ABI/INFORM GLOBAL pg.77?101 7. Burhan Pathan: 20th august 2010: Business Category: Times of India” 8. Kumar: 17th may 2011: Business Category: Economic times 9. GCMMF: 22nd June, 2011: Business Category: Times of India
WEBLIOGRAPHY
1. 2. 3. 4. 5. 6.
National Dairy Development Board - http://nddb.org/ http://www.fas.usda.gov/ http://www.cohnwolfe.com/en-insights/whitepapers/greenboardsurvey/ http://www.investopedia.com/terms/horizontalanalysis.asp#ixzz1qf9fy8kv/ http://www.amul.com/ http://www.amuldairy.com/
BIBLIOGRAPHY Ambrish Gupta: “Financial Accounting For Management” Published by pearson-2009. I M Pandey: “Financial Management” Published by Vikas publishing house-2009. Annual reports of AMUL. Ken Black: “business Statistics – for contemporary decision making” Published by Wiley India Pvt. Ltd.-2006. 5. Pamela Peterson Drake: “financial analysis” Published by Pearson company Ltd. 1. 2. 3. 4.
doc_860393649.pdf
FINANCIAL ANALYSIS of AMUL
“FINANCIAL ANALYSIS OF KAIRA DISTRICT CO-OPERATIVE MILK PRODUCER’S UNION LIMITED (AMUL), ANAND.”
Prepared By: MONAL D. PATEL
Worked At: Sardar Patel Co-op. Credit Society Limited ABSTRACT: Financial Performance Analysis can be carried out by using various analytical tools like trend analysis, horizontal analysis, cash flow statement analysis, & various important ratios. Ratios have evolved substantially over a period of time. I have studied the effect of different variable of liquidity & profitability of AMUL for last 10 years from 2001-02 to 2010-11 by using Pearson’s correlation for analysis. The result shows that there is moderate negative correlation between liquidity & profitability. The purpose of this study is to familiarize the readers with various analytical tools and their usefulness in the financial analysis of an organization. The idea of this project is to know the short term as well as long term financial position of AMUL. KEYWORDS: Trend Analysis, Horizontal Analysis, Cash flow statement Analysis & Correlation. INTRODUCTION: AMUL is Asia’s no. 1 and world’s second number co-operative dairy. It has large market and dairy network in every state of India and across the India, like central Asian countries, Bangladesh, Thailand, Indonesia, Malaysia, Singapore, etc. It was started with 250 liters of milk and 2 societies and now, it produces 10 lakhs litters milk per day and has 1113 societies and more than 6 lakes farmer members. It produces milk and milk products. The main motto of AMUL is to help farmers. Farmers were the foundation stone of AMUL. The system works only for farmers and for consumers, not for profit. The main aim of AMUL is to provide quality products to the consumers at minimum cost. The goal of AMUL is to provide maximum profit in terms of money to the farmers. Vision of AMUL is to provide and vanish the problems of farmers (milk producers). The AMUL apparition was to run the organization with the co-operation of four main parties, the farmers, the representatives, the marketers, and the consumers. Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Milk procured (in kgs) 277840861 258692443 257957726 255856435 276150374 297436246 324410536 401718616 468587136 498033310 515900000 Sales turnover (Rs. In lack) 50919 46878 48834 54593 60047 70922 81632 107712 137807 169989 211140
OBJECTIVE OF THE STUDY:
? The objective of financial statement is to know information about the financial position, performance & cash flows of an enterprise with the help of analytical tools. ? To know the Market Position AMUL by taking Market Value Ratios ? To know the tradeoff between Liquidity & Profitability. DEVELOPMENT OF HYPOTHESIS: H0: There is no positive relationship between the Liquidity & Profitability of AMUL. H1: There is positive relationship between the Liquidity & Profitability of AMUL.
TESTING OF HYPOTHESIS: STEP 1: Financial Performance on the basis of Profitability & Liquidity Analysis Relationship Between Current Ratio & Operating Profit Ratio Years CR OPR 2001-02 2.702 88.380 2002-03 3.240 89.342 2003-04 2.376 90.460 2004-05 2.344 90.199 2005-06 2.136 91.035 2006-07 1.738 90.957 2007-08 2.136 92.178 2008-09 1.652 91.873 2009-10 1.394 92.580 2010-11 1.431 947.906 r -0.415 Relationship Between Current Ratio & Net Profit Ratio Years CR NPR 2001-02 2.702 0.314 2002-03 3.240 0.405 2003-04 2.376 0.467 2004-05 2.344 0.523 2005-06 2.136 0.461 2006-07 1.738 0.504 2007-08 2.136 0.421 2008-09 1.652 0.419 2009-10 1.394 0.436 2010-11 1.431 0.440 r -0.323
STEP 2: FIVE DIFFERENT CORRELATIONS
1) 2) 3) 4) 5)
Strong Negative Correlation (r=-0.933) Moderate Negative Correlation (r=-0.674) Moderate Positive Correlation (r=0.514) Strong Positive Correlation (r=0.909) Virtually No Correlation (r=-0.004)
STEP 3: INTERPRETATION
1) Correlation Result between the Operating Profit & Current Ratio shows a “Moderate Negative Correlation” between them, & that if the current ratio increases it will have a negative impact on profitability & it will decreases because there is a correlation r=-0.41472. Here AMUL’s current ratio is more than standard of 2:1, this indicate negative reflection towards current assets 2) Correlation Result between the Net Profit & Current Ratio shows a “Moderate Negative Correlation” between them, & that if the current ratio increases it will have a negative impact on profitability & it will decreases because there is a correlation r=-0.32255. This indicates that if CR is increased by 1 Rs on liquidity basis, it reduces NPR by 0.32255 paisa on profitability. 3) Correlation result between Liquidity & Profitability have “Moderate Negative Correlation”
ANALYSIS & DISCUSSION:
Financial analysis is the starting point for the making plans, before using any sophisticated forecasting & planning procedures. A number of tools are available in the tool kit of the analyst for the purpose certain tools are: 1) 2) 3) 4) Trend analysis Horizontal analysis Cash flow statement analysis Ratio analysis
1) TREND ANALYSIS: Index in (Times)
4 3 2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
RESULT FOR THE YEAR
Sales & other Income PBDT
PBT
PAT
4
QUANTITATIVE DETAIL
3
Index in(Times)
2 1 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Production Sales
3.5
3 2.5
Position at year end
Gross Block Net Block Net Current Assets Net Worth
Index in(Times)
2 1.5 1 0.5 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Share Capital
INTERPRETATION: 1) Consistent rise in sales that shows overall growth in sales of their products in dairy
consumption. 2) Consistent rise in production throughout the year. Consistent rise in sales throughout the year, but production is more than the sales. 3) Growth in gross block & sales neck to neck that shows high fixed assets efficiency & its utilization of uses are more. Growth in net worth is neck to neck that shows high leverage & high dividend distribution around 75% to their consistent farmers
2)
HORIZONTAL ANALYSIS: Gross Profit PBDIT less: Depreciation EBIT less: Interest EBT less: Tax Provision PAT Net Profit
16342.74 4327.00 1614.63 2712.37 1569.38 1142.99 212.78 930.21 926.67
14314.02 3350.05 1121.41 2228.64 1252.58 976.06 255.00 721.06 735.75
2028.72 976.95 493.22 483.73 316.8 166.93 -42.22 209.15 190.92
14.173 29.162 43.982 21.705 25.292 17.102 -16.557 29.006 25.949
Shareholders' Funds: Loan Funds: FIXED ASSETS (Net Block) Investments Current Assets, Loan & Advances: Current Liabilities & Provisions Net Current Assets
INTERPRETATION:
6826.57 21227.56 15270.87 1040.58 37290.61 27362.69 9927.92
5756.61 19111.57 14046.24 515.33 40524.27 30422.64 10101.63
1069.96 2115.99 1224.63 525.25 -3233.66 -3059.95 -173.71
18.587 11.072 8.719 101.925 -7.980 -10.058 -1.720
1) The results: through profit at every stage that is PBDIT, PBIT, PBT is higher in absolute terms, it has not been able to maintain growth equal to sales. PBT has grown by just 17.10% 2) Tax provision is lower by 16.56% thus improving PAT growth to 29.01% as against PBT growth. In comparison to sales growth however PAT growth in very positive due to maintaining material cost, manufacturing cost. It shows increment in net profit. 3) Net worth (shareholder’s fund) up by 18.59% as against lower growth in loan funds by 11.07%. it shows very strong financial position. Net fixed assets higher by only 8.72% where as net sales grew by 24.69%. it shows very efficient fixed assets utilization. 4) Investment grew by 101.92%. Investment in absolute terms very high. It is much more than net worth (18.59%). So it shows a very unique feature. 3) DUPONT ANALYSIS:
OR
3) DU PONT ANALYSIS NET PROFIT MARGIN * NET WORTH TURNOVER PAT/Net Sales*100 * Net Sales/Net Worth 0.31 * 37.09 0.41 * 30.13 0.47 * 16.89 0.52 * 17.22 0.46 * 19.06 0.50 * 19.72 0.42 * 23.89 0.42 * 29.67 0.44 * 34.48 0.44 * 36.49
RATIO FORMULAE 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
= RONW = PAT/Net Worth*100 = 11.65 = 12.20 = 7.89 = 9.01 = 8.79 = 9.94 = 10.06 = 12.43 = 15.03 = 16.06
INTERPRETATION: 1) Increase in ROA contributed by improvement in both the net profit margin as well as net assets turnover. 2) This finding indicates that an ideal situation for the AMUL. OVERALL CONCLUSION: ? Financial statement summarizes an AMUL’s financial position at a given moment in time as well as over longer period. They should reflect any variance between the actual operating result & the budgeted goals that were previously approved by the company.
REFERENCE: 1. Sorter, G. & Becker, S. (1964),” Accounting and financial decisions and corporate personality? some preliminary findings,” Journal of Accounting Research, 183?196 2. Holdren, G.C. (1964),”LIFO and ratio analysis,” The Accounting Review, 70?85 3. From Internet 4. Sur & Rakshit (2005) “Working Capital and Liquidity Management in Factoring: A Comparative Study of SBI and Can Bank Factors”. The Management Accountant May, Vol-39, No.-5 5. Vishnani, S., and Shah, B. K. (2007), “Impact of Working Capital Management Policies on Corporate Performance An Empirical Study”, Global Business Review, vol. 8, No. 2, pp. 267281. 6. Mahindra R Gujarathi,”Sachiko Corporation: A case in International Financial Statement Analysis.” Issues is Accounting Education; Vol.23, No Feb 2008; 23, 1; ABI/INFORM GLOBAL pg.77?101 7. Burhan Pathan: 20th august 2010: Business Category: Times of India” 8. Kumar: 17th may 2011: Business Category: Economic times 9. GCMMF: 22nd June, 2011: Business Category: Times of India
WEBLIOGRAPHY
1. 2. 3. 4. 5. 6.
National Dairy Development Board - http://nddb.org/ http://www.fas.usda.gov/ http://www.cohnwolfe.com/en-insights/whitepapers/greenboardsurvey/ http://www.investopedia.com/terms/horizontalanalysis.asp#ixzz1qf9fy8kv/ http://www.amul.com/ http://www.amuldairy.com/
BIBLIOGRAPHY Ambrish Gupta: “Financial Accounting For Management” Published by pearson-2009. I M Pandey: “Financial Management” Published by Vikas publishing house-2009. Annual reports of AMUL. Ken Black: “business Statistics – for contemporary decision making” Published by Wiley India Pvt. Ltd.-2006. 5. Pamela Peterson Drake: “financial analysis” Published by Pearson company Ltd. 1. 2. 3. 4.
doc_860393649.pdf