Financial Analysis Of Amul

Posted in Finance Articles, Total Reads: 23849 , Published on 27 October 2012
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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.

 

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

Milk procured (in kgs)

Sales turnover (Rs. In lack)

2000-01

277840861

50919

2001-02

258692443

46878

2002-03

257957726

48834

2003-04

255856435

54593

2004-05

276150374

60047

2005-06

297436246

70922

2006-07

324410536

81632

2007-08

401718616

107712

2008-09

468587136

137807

2009-10

498033310

169989

2010-11

515900000

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) Strong Negative Correlation (r=-0.933)

2) Moderate Negative Correlation (r=-0.674)

3) Moderate Positive Correlation (r=0.514)

4) Strong Positive Correlation (r=0.909)

5) 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. Trend analysis
  2. Horizontal analysis
  3. Cash flow statement analysis
  4. Ratio analysis

1) TREND ANALYSIS:

 

 

 

 

 

 

 

 

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

16342.74

14314.02

2028.72

14.173

PBDIT

4327.00

3350.05

976.95

29.162

less: Depreciation

1614.63

1121.41

493.22

43.982

EBIT

2712.37

2228.64

483.73

21.705

less: Interest

1569.38

1252.58

316.8

25.292

EBT

1142.99

976.06

166.93

17.102

less: Tax Provision

212.78

255.00

-42.22

-16.557

PAT

930.21

721.06

209.15

29.006

Net Profit

926.67

735.75

190.92

25.949

Shareholders' Funds:

6826.57

5756.61

1069.96

18.587

Loan Funds:

21227.56

19111.57

2115.99

11.072

FIXED ASSETS (Net Block)

15270.87

14046.24

1224.63

8.719

Investments

1040.58

515.33

525.25

101.925

Current Assets, Loan & Advances:

37290.61

40524.27

-3233.66

-7.980

Current Liabilities & Provisions

27362.69

30422.64

-3059.95

-10.058

Net Current Assets

9927.92

10101.63

-173.71

-1.720

INTERPRETATION:

  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

RATIO

NET PROFIT MARGIN

*

NET WORTH TURNOVER

=

RONW

FORMULAE

PAT/Net Sales*100

*

Net Sales/Net Worth

=

PAT/Net Worth*100

2001-02

0.31

*

37.09

=

11.65

2002-03

0.41

*

30.13

=

12.20

2003-04

0.47

*

16.89

=

7.89

2004-05

0.52

*

17.22

=

9.01

2005-06

0.46

*

19.06

=

8.79

2006-07

0.50

*

19.72

=

9.94

2007-08

0.42

*

23.89

=

10.06

2008-09

0.42

*

29.67

=

12.43

2009-10

0.44

*

34.48

=

15.03

2010-11

0.44

*

36.49

=

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.

This article has been authored by Monal Dharamdas Patel from Sardar Patel Co-operative Credit Society Limited.

Image: FreeDigitalPhotos.net


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