28-08-2012, 12:03 PM
RATIO ANALYSIS UNDERTAKEN AT KRISHAK BHARATI CO-OPERATIVE LIMITED
SURAT
KRISHAK BHARATI CO-OPERATIVE LIMITED.pdf (Size: 757.42 KB / Downloads: 293)
EXECUTIVE SUMMARY
This summer project report is prepared at “KRISHAK BHARATI COOPERATIVE LIMITED.” at Surat on “RATIO ANALYSIS” as a part of curriculum of the MBA program.
I have selected this topic to measures the financial position of the company and firm profit ability as well as its credit policy with the help of ratio analysis. Ratio analysis is a widely used of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that strengths and weakness of a firm as well as its historical performance and current financial condition can be determined.
INTRODUCTION OF INDUSTRY
Before introducing organization KRIBHCO (a Fertilizer producing unit). I feel necessary to give an overview of the Indian Fertilizer Industries.
“India lives in villages,” said Mahatma Gandhi decades ago. It is true even today. Like every developing economy, the economy of India is also agro-based. Agriculture accounts for nearly 1/4th of India's GDP and more importantly, about 2/3rd of the country's population is dependent on agriculture and allied activities for their livelihood. As per statistics nearly 175 lakhs MT of fertilizer nutrients are required every year in this country. The demand of fertilizers was so high that India had to import almost 30% of its requirement from other countries. Therefore, to achieve the economic growth, agriculture base of the country must be strengthened. To attain this objective, agriculture practices have to be improved from their traditional pattern to a higher technological track involving better irrigation and use of better quality seeds, fertilizers, insecticides & pesticides. Therefore, chemical fertilizers are key player in this process and fertilizer industries plays quite a major role in increasing food production in the country and also helps to modernize the out look of the common farmers and make them innovative and respective to the new technology change.
Growth of Fertilizer Industry
One of the most significant achievement of the post Independence period of our Country has been the ability to achieve self-sufficiency in food grain production. This achievement is due to the rapid growth and improvement of Fertilizer industry. The Fertilizer industry is growing at the rate of 4% for the last 10 years and has been contributing a significant part of G.D.P.
The growth and importance of Fertilizer industry in India can be divided in to three distinct phases, these are given below.
RATIO ANALYSIS
Ratio analysis is a widely used of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that strengths and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items variables.
The alternative, methods of expressing items, which are related to each other , are for purposes of financial analysis, referred to as ratio analysis. It should be noted that computing the ratio does not add any information not already inherent in the above figures of profits and sales. What ratios do is that they reveal the relationship in a more meaningful way so as to enable us to draw conclusions from them.
The rational 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 a related figure, it yields significant inferences. For instance, the fact that net profits of a firm amount to say, Rs. 10 lacks throws no light on its adequacy or otherwise. Figure of net profit has to be considered in relation to other variables. How does it stand relation to sales? What does it represent by way of return on total assets used or total capital employed? If therefore net profits are shown in terms of their relationship with items such as sales, assets, capital employed equity capital and so on; meaningful conclusions can be drawn regarding their adequacy.
Review of previous study
Ratio-analysis is a concept or technique which is as old as accounting concept. Financial analysis is a scientific tool. It has assumed important role as a tool for appraising the real worth of an enterprise, its performance during a period of time and its pit falls. Financial analysis is a vital apparatus for the interpretation of financial statements. It also helps to find out any cross-sectional and time series linkages between various ratios.
Unlike in the past when security was considered to be sufficient consideration for banks and financial institutions to grant loans and advances, nowadays the entire lending is need-based and the emphasis is on the financial viability of a proposal and not only on security alone. Further all business decision contains an element of risk. The risk is more in the case of decisions relating to credits. Ratio analysis and other quantitative techniques facilitate assessment of this risk.
Trend ratio involve a comparison of the ratio of a firm over time, that is present ratio are compared with past ratio for the same firm. The comparison of the profitability of a firm, say year 1 though 5 is an illustration of a trend ratio. Trend ratio indicate the direction of change in the performance-improvement, deterioration or constancy-over the years.
Conclusion
From the study of ratio analysis, I have found that it is a very difficult task to maintain ideal ratios in such a big organization. There are various factors affecting while managing ratio analysis like credit policy, inventory management system , production cycle etc. But it is very important to manage it every situation.
Fertilizer is a product whose price is highly controlled by Government. of India Where by it may not be easily possible to increase the sales. Because the product is sold as per Government of India allocated area. But efforts can surely be made to reduce the cost factors. It is suggested that cost may highly be control through effective budgeting and continuous analysis there off.
IFFCO playing a big role in deciding price factors, so kribhco can’t set its own price and sale to directly to farmers
Kribhco’s current ratio is far more better than its ideal ratio, so in the future if kribhco can borrow some money from the market, if It’s necessary.
Kribhco’s net profit is almost 15% every year its very good for the company who’s main objective is to not earn a profit
In Kribhco all financial year have the double current assets compare to current liabilities & all years satisfy sound financial condition requirement & more liquidity of company indicate safe and sound position.