Professional Documents
Culture Documents
As Timul Sudha Dairy Muzaffarpur Does not want to raved its secrecy so
gatheration of data from them was very difficult.
The dairy sector in the India has shown remarkable development in the past decade
and the India has now become the largest producer of milk and value-added milk
products in the worlds. The dairy sector has developed through co-operative
through in many part of state. The state had 73 milk processing plants. In addition
to these processing plants, 123 government and 33 co-operatives milk chilling
centres operate in the state. Dairy is a place where handling of milk and milk
product is done and technology refers to the application of scientific knowledge for
practical purpose.
Dairy technology has been defined as the branch of dairy science, which deals with
the processing of milk and the manufacture of milk products on an industrial scale.
In developed dairying countries such as USA where as the rural area were identifies
for milk production, the urban centres where selected for the location of milk
processing plants and products manufacturing factories. These plants and factories
their rapidly expanded and modernised with improved machinery and equipments
to secure the various advantages of large scale production. India has highest
livestock population in the world with 50% of buffalos and 20% of worlds cattle
population. Most of these are milk cows and milk buffalos, India’s dairy industries
is considered as one of the most successfully developed industry from the post
independence period. Dairy industry is dominated by the cooperative sector , about
60% of the installed processing capacity is in the cooperative sector.
Dairy cooperative account for the major share of processed liquid milk marketed in
India. Milk is processed and marketed by 170 milk producer’s cooperative union,
which federate into 15 state cooperative milk marketing federations. Prominent
state in producing dairy product are; Uttar Pradesh, Punjab, Haryana, Rajasthan,
Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu, and Karnataka. In India,
The Indian dairy industry has made rapid progress since independence. A large
number of modern milk plants and products factories have since been established.
These organized dairy have been successfully engaged in the routine commercial
production of pasteurized bottled milk and various western and Indian dairy
product. With modern knowledge of protection during transportation, it became
possible to locate dairies where land was less expensive and crops could be grown
more economically. In India, the market milk technology may be considered to
have commenced in 1950, with the functioning of The Central Dairy of Aarey milk
colony, and milk product technology in 1956 with the establishment of AMUL
Dairy, Anand. More than 2,445 million people economically active in agriculture in
the world, probably 2/3or even more than ¾ of them are wholly or partly depended
on livestock farming. India is endowed with rich flora & fauna & continues to be
vital avenue for employment and income generation, especially in rural areas.
India, which is 66% of economically active population, engaged in agriculture
drives 31% of Gross Domestic Product (GDP) from agriculture. The share of
livestock product is estimated at 21% of total agriculture sector.
The milk shed is predominately rural- about 93% of its total 180 lakhs
population resides in the rural areas as per the 2001 human census (Annex 02).
As per the livestock Census 2003 (Annex 03), the milk population animal of
the milk shed is around 11 lakhs consisting of some 0.98 lakh local cows,
about 4.75 lakh cross bred cows and some 5.45 lakh buffaloes.
Agriculture is the mainstay for the majority of the population in the milk shed
area, with dairying being a subsidiary occupation for mall and marginal
farmers. The milk shed has a total number 8171 inhabited villages, thus it has
covered only about 19% of the villages in the milk shed area. The total DCS
organised by union are 1710 and of these 1023 are functional, which forms
60% of the organised societies.
The total milk production in the milk shed is estimated (based on ISS survey
2008-09l) at 25.07L kg PD with marketable surplus of about 16.38L kg PD.
During 2008-09, union’s milk procurement was 45.9T kg PD which is
approximately 2.85 of marketable surplus. The milk trade in the milk shed is
Infrastructure:-
The milk union has a rated capacity of 1 LL Pd and 10 MTD powder plant
which is being presently operated at 84% capacity utilization. The union has 7
chilling centre at Sitamarhi (20000 LPD), Sheohar (4000 LPD), West
Champaran (4000 LPD) & East Champaran (20000 LPD), Siwan (4000 LPD),
Gopalganj (4000 LPD) and Sahibganj (4000 LPD) with a combined capacity
of 60 TLPD. In addition, 14 bulk milk cooler have been installed in the milk
shed at village level with combined capacity of 28.5 litres.
Physical Performance:-
The detail of physical progress along with year-wise milk procurement of the
union for last five year are given below:
Table 2.1:-
Parameters 2010-11 2011-12 2012-13 2013-14 2014-15
DCS Organised 934 1109 1324 1500 1710
DCS functional 745 834 851 845 1023
Farmer member 42275 46910 52395 67055 7644
Women member 7797 8467 9173 11615 13148
Pourer member 28280 30010 29195 35545 42891
Milk procurement
Societies (000 Kg PD) 77.77 87.43 53.67 45.9 84.7
Other unions (000 Kg
- - - - -
PD)
Cattle feed sold (MT) 2062.76 1085.62 580.65 226.57 -
Bypass Feed Sale (MT) 4273.86 7169.95 6580.31 6362.25 354.13
The union sells liquid milk in three variants viz. Standard milk and Toned milk
and Full Cream milk in Muzaffarpur, Sitamarhi, Bettiah, Siwan, Motihari, and
Financial Performance :-
The annual turnover of the union during 2009-10 was Rs 10528.55 lakh and it
posted a net profit of Rs 438.62 lakh.
The year wise financial performance in last five year is given below:
Concerns:-
1. The competitors in the unorganised sector in the area have stepped in and
started doing milk procurement. The loyalty of the milk producers during
the flush and lean season in milk procurement is the issue of concern.
2. The existing plant and machinery of dairy plant is old and needs
repair/refurbishment in various areas. Some equipment not functioning to
the rated capacity and require replacement/repair for the efficient operation
of improved hygiene or safety. Although steps have been initiated.
3. The plant area designed for only 25000 LPD handling. By
incorporating/installing some equipment/machineries the capacity has been
increased to 100000 LPD. Last year we have handled 150000 Ltd. Concern
of less plant area is being addressed by construction of product hall with
the assistance of government.
Milk Frame
Chilling centre
Storage
Dispatch Figuration
Distribution channel
Consumer
Introduction
Financial management is the part of the managerial activity, which is concerned
with planning, and controlling of the firm’s financial resources. It is an applied
branch of general management it has to plan to organise and control the finance
of the enterprise. Chief duties of financial management are planning and control
of corporate finance. Financial management is called upon to take three major
decisions viz. Investment decision, Financial decision, and Individual decision.
Financial management involves the implementation of these three decisions it is
an integral part of overall management rather than merely a staff activity
concerned with fund raising operations without sound management of financial
resources, business cannot achieve its objective and may occur heavy losses.
Thus financial management in charge of efficient planning and control of the
cycle of flow of funds inflow and outflow of funds.
Fig 5.1:- Structure of Finance Management
Board of Directors
Treasure Controller
Duties Duties
The accounting function covering the Muzaffarpur office and plant, the one
chilling centres at SITAMARHI performed by the accounts Department at
Muzaffarpur head office of Sudha dairy. All the purchase and sales for Sudha
Dairy are executed from the Muzaffarpur head office Centrally. The purpose
and scope of account process are management of financial resources of the
union accurate and timely payment to societies and supplies, maintain proper
book of the union and advise Sudha dairy’s management of the performance of
the union based on accounting, records, finance process includes the accounting
functions of payables, Receivables, Cash Management, Asset Management, and
General Accounting & Reporting functions including Budgeting.
It also covers Costing activities performed at Sudha dairy. The audit Budgeting
and costing process are performed by the internal audit department in closeness
with account department.
Financial Planning
A firm needs to manage its resource effectively and efficiently to achieve its
objective. The managing of resources in an a effective manner is possible only
when the management work out the future course of action in advance and take
decision in professional manner and rational manner that’s why financial
planning is very important financial planning is a statement estimating the
amount of capital and determining its composition. It includes; determination
the amount needed for implementing the business plan.
The determination from and proportionate amount of securities.
Laying down the policies as to administration of financial plan.
Fig.5.2:- Steps of Financial Planning
Analysis of past performance
Establishing Objective
Financing
Budget is tracked against the cost centres and sub centres are defined with the
responsibility centre but currently the responsibility centres are not in use the
stores consumption tracked till the cost centre and sub centre level at the time of
consumption itself for other expenses the cost centre and sub centre are entered
to categories the expenses after exporting them into on oracle based system
from the tally system for the purpose of tracking. A quarterly budget review
report is prepared depicting the quarterly budget amount actual expense and
variance figures along with the cumulative figures.
Statutory Budget
The budget is prepared by seeking the budget amount from all the department
by giving the respective budget heads pertaining to the specific department for
aiding the department to prepare the budget. The relevant previous wears
expenditure is also given to them from the trial balance if required the detail
expenditure is also given by the account department. The department provide
the budget after approval from the departmental head. The LA department in
consultation with the respective department makes some alteration to the budget
amount. The LA department than compiles and consolidate the department
budget into Sudha dairy budget, which is then resets to the managing director,
the MD can revise the budget before approving it, to be presented to the board.
The board recommend s the budget in the AGM Seeking its approval.
Costing Activities
In Sudha dairy it is done on yearly basis for the financial year. This is too
limited to the product group costing. As the value of asset is not finally known
production wise process, depreciation is avoided for all allocation to the product
group. The yearly cost sheets forms an important basis in the estimation of
costs, pack wise prepared, yearly for all product packs.
If late concept of conversation costing where by the milk purchase price is
excluded from the estimated contribution analyses. The client opinions that as
milk purchase price of the last year does not reflect the current and by
comparing the gross contribution and gross profit visa-a-versa the milk
purchase price existing as on the date, one could as certain the profitability of
the product and packs. The incremental cost of milk for fat, SNF and moisture
are based on standard costing. The unit price is the actual transportation and
chilling post based on the previous year’s financial data. The wastage is
calculated based on actual content of milk fat and SNF content in milk
purchased of the previous year less the standard content of fat and SNF for
Capital Structure
Capital is the one of the most important factors of production without capital
organisation cannot production or other type of activity. Capital includes share
capital reserve and surplus and long term liabilities. The authorised share
capital of the dairy is 2,00,000 shares of Rs. 100 each and the capital is Rs.
200,00,000.
Share Capital
Amount (In Rs.)
Table 5.1:- share capital
2012-13 2013-2014
Year
Sagar Sudha dairy Sagar Sudha dairy
Share capital 25,000,0000 30,00,0000 250000000 30000000
INTERPRETATION
Share capital is the amount contributed by shareholders towards the company’s
capital and is entered in the company’s share capital account. It is the capital of
the company represented by the shares. In the table we can see that there is no
change in capital year 2009-2010 and 2010-11. So from the above graph we can
analyses that in the no change in the share capital of the company, this is
because that Sudha dairy is the co-operative milk producer so their share holder
are only milk producer farmer that’s why no significant change in the share
capital. And the Sudha dairy are contributes 2 cr. From the share holder. Sudha
dairy has not a much stake holder as compare to the Sagar dairy. Sagar dairy
have some more share holder from the sudha dairy. So we see that Sagar dairy
have some more financial leverage as compare to the sudha diary. That is not
good for the any firm because the responsibilities are increase for him.
2012-13 2013-2014
Year
Sagar Sudha dairy Sagar Sudha dairy
Reserve and Surplus 28,35,00,000 7,68,4,826.95 39,92,00,000 27,18,19,603.23
INTERPRETATION
From the above table we can know the actual trend of the reserve and surplus of
the company firm.
For Sagar Dairy:- Compare with base year indicates that the reserve company
gradually increasing which shows the strong financial position of the company.
Company’s reserve and surplus has increase by 362.57cr. after one year
company is managing well with this source thus rely less on other financial
sources like share capital and loans. We easily decided that the Sagar dairy
management very well in the finance factor, so that they have very good
financial position.
For Sudha Dairy:- In the above Balance sheet we clearly see that Sagar
reserve and surplus are increase highly but they should maintain consistent in
all year. So we many comparison between the two dairy we clearly decide that
Sagar dairy is financially good than Sudha diary.
2012-13 2013-2014
Year
Sagar Sudha dairy Sagar Sudha dairy
DEBTORS:-
Amount (in Rs.)
Table 5.5:- Debtors
2012-13 2013-2014
Year
Sagar Sudha dairy Sagar Sudha dairy
INTERPRETATION
Debtors refers the current assets in the firms. When the debtors is very high
then say that the firm business on the credit base. If the debtors are very high
then affected to the firm.
Working capital management is a time gap to converting cash into cash its
various form. It is also known as short term financial management. When
any organisation produced any product it takes some times to convert the
cash into cash through different steps. These are raw material, works-in-
progress, finished goods, account receivables. In this time gap the
organisation need additional amount of capital to run the organisation
smoothly. This capital is known as working capital.
It plays a vital role in keeping the wheels of the business enterprise
running. Lack of efficient and effective utilisation of working capital leads
to earn low rate of return on capital employed.
The value represented by these assets circulate among several items. Cash
is used by raw material, to pay wages and to meet other manufacturing
expenses. Finished goods are produced. These are head as inventories.
When these are sold account receivables are created. The collection of
account receivable bring cash into the firm.
The firm’s policies for managing its working capital should be designed to
achieve four goals.
(i) By optimizing the investment in current assets and by reducing the
level of current liabilities, the company can reduce the looking up of
funds in working capital thereby. It can improve the return on capital
employed in the business.
(ii) The second important objectivities of working capital management
is that the company should always be in a position to meet its
current assets available with the firm. But maintain excess funds if
working capital means looking of funds without return.
(iii) The firm should manage its current assets in such a way that the
marginal return on investment in these assets is not less than the cost
of capital employed.
(iv) The basic objective of working capital management is to manage the
firm’s current assets and current liabilities in such a way that the
satisfactory level of working capital is maintained. i.e. it should
neither inadequate nor excessive.
Introduction:-
The total investment in a business organization as characterised by total
assets is called capital. The term capital refers to the total property of
assets owned and control by the business in order to earn profits. The total
assets comprise fixed assets and current assets. Fixed assets are tangible
assets, which we can touch. These assets are not for the sale purpose and
earring cash by conversion. Apart from this these assets are held by the
organisation for long term purposes or till the date of winding up the
organisation such assets which comes under the fixed assets can be cited as
land & building, plant & machinery, furniture and fixtures, etc.
While on the other hand, the current assets are reasonably expected to be
realised in cash or sold or consumed in cause of normal operating year or
business cycle.
The current assets are required with the intension of running organisation.
Smoothly by selling or converting in to cash, current assets can cited as
cash, inventory, debtors, short term securities bill receivables etc.
Thus, current assets are required to feed the fixed assets and to carryout
manufacturing operation and distribution objectives and refer to the
working capital i.e. funds invested in day to day operation of the business.
Gross working capital : gross working capital refer to the firm’s investment
in the current assets.
Net working capital : net working capital can be positive or negative. A
positive net working will arise when current assets exceeds current
liabilities and a negative net working capital occurs when current liabilities
are in excess of current assets.
The two components of working capital are current assets and current
liabilities. They have a direct bearing on the cash operating cycle. In order
to calculate the working capital needs what is required is the holding period
of various types of inventories, the credit collection period and the credit
payment period. Working capital also depends on the budgeted level of
activity in terms of production/sales. The calculation of working capital is
based on the assumption that the production sales is carried on evenly
throughout the year and all cost accrue similarly. As the working capital
requirements are related to the cost excluding depreciation and not the sales
price, working capital is computed with reference to the cash cost. The cash
cost approach is comprehensive and superior to the operating cycle
approach based on the holding period of debtors and inventories and
payment period of creditors.
Raw material consumption per day is given by the total raw material
consumption divided by the number of days in the year. The raw material
conversion period is obtained when raw material inventory is divided by
raw material consumptions per day, similar calculations can be made for
other inventories, debtors and net operating cycle is also referred to as cash
conversion cycle. Depreciation and profit should be excluded in the
consumption of cash conversion cycle since the firm’s has to ultimately
recover total costs and make profits. Therefore, the calculation of operating
cycle should include depreciation and even the profits.
Also, in using the above mentioned formula, average figures for the period
may be used.
Example 1
Day 1 Day 30
One might, at this point, say that the owner will cover himself by increasing
his own prices but in many cases this increase in price may :
1. Make him uncompetitive
2. Decrease the demand for the product
3. Bring a substitute product into contention
A probable consequence is that purchase cost more and consumers buy less
so that profits already diminishing the need to finance ‘inflated’ purchases
are vulnerable to an absolute drop in turnover. This, in turn, has
consequence for the need to say above break even point and contribute
towards the fixed costs (fixed cost stay constant irrespective of level of
*************
Chapter - 4
Note :- I have used the ratio analysis in the project in order t substantiate
the managing of working capital. For this, I used some of the ratios to get
the required output.
Following are the rations which can help to assess the ability of a firm to
meet its current liabilities.
(a) Current Ratio
(b) Acid test ration/ Quick ratio/ Liquidity ratio
Absolute liquid ratio
Net Sales
Inventory turnover Ratio :-
Closing Inventories
Debtors
Year Net sales Average Debtors
Turnover Ratio
2012-13 1745700883.61 963853.99 1811
2013-14 2298123010.73 14439462.84 159
This ratio indicates the number of times the working capital is turned over
in the course of the year. This ratio measures the efficiency with which the
working capital used by the firm. A higher ratio indicates efficient
utilization of working capital and a low ratio indicates otherwise. But a very
high working capital turnover is not a good situation for any firm.
Net Sales
Working Capital Turnover = Net working Capital
Ratio
Net Working
Year Net Sales WCTR
Capital
Findings
Conclusion & Suggestion
The Sudha Dairy has lower current and quick ratios are i.e. 0.70 and
0.28 respectively.
Inventory turnover ratio is very low in year 2007-08. In the year 2012-
Debtor’s turnover ratio is very high in the year 2012-13. In the year
Working capital Turnover ratio is very low in the year, in the year
Working capital of the company has increased every year. Profit also
increasing every year this is good sign for the company. It has to
The current and quick ratio are almost down to the standard
The company has not sufficient working capital and has not better
CONCLUSION
The study on working capital management conducted in Sudha dairy to
analyze the financial position of the company. The company’s financial
position is analyzed by using the tool of annual reports from 2012-13 to
2013-14.
In the last year the inventory turnover has increased, this is good sign for
the company.
Website
www.Sagar .com
www.cmmf.com
www.dudhSagar dairy.com
www.amul.com
www.indiadairy.com
www.sudhadairy.com
www.sudhatimul.com