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 relevant 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.
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.

Definition:
The relationship between two accounting figures expressed mathematically.
It helps in making certain decision calculation of more ratios does not serve
any purpose. Unless several appropriate ratios are analyzed and interpreted.
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 more things.
A ratio is used as an index or yardstick for evaluating the financial Position
and performance of the firms. The relationship between two accounting figures
expressed mathematically, is known as financial ratio. Ratio helps to summarize
the large quantities of financial data and to make qualitative Judgment about the
firms financial position. A ratio may be expressed simply in one number as the
result of a comparison between two figures.

NEED FOR THE STUDY

The main need of the study is to analyze the financial information of the Tirumala
Milk Products (P) Ltd.
To find out the liquidity or short term solvency of the Tirumala Milk Products
(P) 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 company growth.
The investors who are interested in investing in the companys Shares will also
get benefited by going though the study and can easily take a decision whether
to invest or not in the companys Shares.

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 time periods.
To know the future liquidity of the company.
To verify liquidity and its impact on ratio analysis.
To know the profitability and activity position of Tirumala Milk Products Pvt
Ltd.
To know the accurate financial position of the company
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 various ratios.

SIGNIFICANCE OF THE STUDY

This study is useful to academicians and scholars.
This study is useful to other researchers.
This study is useful to the organization to make the necessary decision making .
This study is useful to the management, employees, suppliers and society.
This study is useful to the research who conduct in depth research.
This study is useful to the similar organization in assessing their financial

performance.

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
Primary data
Secondary data
Primary Data:
Interviewing a few financial departmental heads, officers and management
bodies and staff members of the TIRUMALA MILK PRODUCTS (P) 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 (P) Ltd.

LIMITATIONS OF THE STUDY

Following limitations were encountered while preparing this project:
Limited data: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.
Limited period: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
Limited area:Also it was difficult to collect the data regarding the competitors and their
financial information. Industry figures were also difficult to get.

PERIOD OF STUDY & DATA ANALYSIS

In the present study data is analyzed for five financial years i.e., from 2004 -05 to
2008-09. through ration analysis to know the liquidity position of the firm by
using different ratios as a tools.
The various ratios can be explained by the statements and graphs.

TOOLS
There are various tools used in the financial management. One of the most
important tool is ratio analysis.
Some of the important ratios. .

1) Current ratio
2) Quick ratio
3) Cash ratio
4) Working capital turnover ratio
5) Inventory turnover ratio
6) Debtors turnover ratio
7) Gross profit ratio
8) Net profit ratio

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 of distress
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.

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 thebritish governments approach towards dairying was
confined to milk requirements of the military only. After 1923,diploma course in
dairy were started at Bangalore.
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 the country.

10

2.India is country of villages, of which most inhabitants are small, marginal farms
and landless laborers.
In 1937, the Lucknow Milk producers 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-operative lines.

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 Anands 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 Indias villages with funds mobilized from
foreign donations. Producers 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 to sustained

11

2. Production increases, raising per capita availability of milk to early 200 grams
Per day.
3. The dependence on commercial imports of milk solids are alone away with.
4. Modernization and expansion of the dairy industry and its infrastructure,
Activating milk grid.
5. Marketing expanded to supply hygienic and fair priced milk to some 300
Million consumers in 550 cities and towns.
6. A nationwide network of multi-tier producers 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 and environment.
7. Dairy equipment manufacture has expanded to meet most of the industrys
needs.

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.

12

During its first phase, the project aimed at linking Indias 18 best milk sheds with
the milk markets of the four metropolitan cities of Delhi, Mumbai, Calcutta and
Madras.
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 selfsustaining system of 43,000 villages 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
producers co-operatives resulting inn the transfer of profits from milk contracts
increased by several million liters per day.

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
provide better veterinary first-aid health care services to their producers members.

13

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. The countrys milk production in the early sixties which was about 20
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 milk products.
MILK SHEDS/UNIONS:
Operation flood programmer has been identified into milk sheds/unions.
NO
1
2
3
4
5
6
7
8
9

MILK SHEDS / UNIONS

Visakha
Godavari
Krishna
Guntur-Prakasam
Chittoor
Cuddapha
Kurnool
Nalgonda-Ranga Reddy
Medak-Nizamabad

DISTRICTS
Srikakulam, Vizianagaram, Vizag
East and West Godavari
Krishna
Guntur-Prakasam
Chittoor
Cuddapha
Kurnool
Nalgonda-Ranga Reddy
Medak-Nizamabad

14

Growth of the Industry:

Before the independence of India, in the first half of the 20 th 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 the west
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 the early
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)".

LIST OF MILK DAIRIES

15

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

16

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 (P) 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 (P) Ltd.
Products meet stringent quality control tests and cater to the premium segment of
the market for Dairy Products. Tirumala Milk Products (P) Ltd. is presently
implementing an expansion programme and proposes to launch new products in
the near future.
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.

17

Tirumala Milk Products (P) 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 (P) Ltd. are:

Milk Procurement Network

Superior sales and marketing process
Strategic technological & infrastructural advantage
Efficient human investments

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 (P) 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 of Directors:
Tirumala Milk Products (P) Ltd. has a seasoned Board of Directors with a
collective blend of visionary leadership, consumer marketing expertise and
technological prowess.
B.Brahma Naidu

Managing Director

D.Brahmanandam

Joint Managing Director

18

 B.Nageswara Rao

Director

Dr. N.Venkata Rao

Director

E.N.Rao

Executive Director

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 across India.

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
(P) Ltd. has won many awards and certificates.

19

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 (P) Ltd. is an ISO 9001:2000 and an ISO 2000:
2005 Certified company. The dairy is following Quality Management System and
Food Safety Standards.
Apart from ISO certification, It has Certificate from SGS on SMP Analysis too.
Tirumala Milk Products (P) Ltd. has ISI Licence, Agmark Licence and adheres to all
other statutory standards as per requirements.

Products:
Tirumala Milk Products (P) Ltd. covers the entire spectrum of dairy
products sold in markets. The complete range of Tirumala Milk Products (P) Ltd.
are highly nutritious, healthy and bring you a world of goodness.
Tirumala Milk Products (P) Ltd. pasteurizes and packages all fresh dairy
products in technologically superior and hygienic conditions to ensure pure natural
freshness.
Tirumala Milk Products (P) 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 (p) ltd. Handles milk in the following locations:Pacing Locations
Gudur

Handling Capacity per day

4.0 Lakh litres

20

Vellala Cheruvu
Bhimadolu
Palamaner
Gungal

2.0 Lakh litres

1.0 Lakh litres
2.0 Lakh litres
4.0 Lakh litres

PROCUREMENT OF MILK
Tirumala Milk Products (P) 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 (P) Ltd. is to procure more than
6.0 lakh liters of milk directly from agents/farmers using state-of-the-art
machinery and professionally trained staff.
PRODUCTION

Tirumala Milk Products (P) 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 local units.

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 insulated puffs.

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

21

Tirumala Milk Products (P) Ltd. has its own supply chain management,
which is the key to timely distribution.

At Palamaner unit processes and supplies 1.00 lakh liters of milk and
20000 liters of curd to Bangolore city.

Vellalacheruvu & Bhimadolu packing stations processes and supplies 2.0

lakh liters of milk to Vijayawada., Guntur , Eluru, Visakhapatnam,
Kakinada and Rajahmundry.

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

22

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:
Flavored Milk,
Lassi, Khava,
Milk Cake,
Mysore pak,
Panner,
Ice Cream,
Curd,
Buttermilk

23

Sales Information

Year

Sales in Rs

2010-11

1240400781

2011-12

1483468207

2012-13

2852734310

2013-14

3738023759

2014-15

4707947739

GRAPHICAL REPRESENTATION

24

Sales in Rs.
5000000000
4500000000
4000000000
3500000000
3000000000
2500000000
2000000000
1500000000
1000000000
500000000
0
2010-11

2011-12

25

2012-13

2013-14

2014-15

INTRODUCTION

26

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 relevant 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. It
yields significant inferences.

27

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 more things.
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
firms 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:-

28

 In the pure ratio.

As a rate.
As a percentage.
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 following points.
(a) Liquidity Position: With the help of ratio analysis conclusions can
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 this respect.
(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 its components.

29

(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 the firm.
(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 great significance.
Basis of comparison:
The ratio analysis involves several types of comparison. They are Below:a. A comparison of present ratio with the past and expected future
Ratios for same firm.
b. A comparison of the ratio with those of similar firm or with industry
averages at the same point time.

30

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 have changed.
d. The other comparison may relate to comparison of items with a single
years financial statement of a firm comparison with standards or plans.
TYPES OF RATIOS:
The ratios are divided into 4 types. They are
Liquidity ratio
Leverage ratios
Activity ratios
Profitability ratios.
1) Liquidity ratios:
Liquidity means prerequisites for the survival of firm. The liquidity Ratios
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
of current liabilities. The ratio is

more, the firms ability to

obligation and the grater the safety of funds on short term creditors.
Current assets
Current Ratio =

--------------------------Current liabilities

31

meet current

(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 current liabilities
Current Assets - Inventories
Quick Ratio =

--------------------------------------Current liabilities

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 capital employed.
Total debt
Debt Equity Ratio =

-------------------

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

32

(b) Dividend

coverage Ratio:

It shows the relationship between the profits

after payment of interest and taxes and preference dividend.

Profit after tax
Dividend Coverage Ratio =

--------------------------------Preference dividend

1. Interest Coverage Ratio : It shows the relationship between the

profits before payment of interest and taxes and fixed interest charged.
EBIT
Interest Coverage Ratio=

--------------------Interest

2. Capital Equity Ratio: This ratio indicates long-term solvency of the

Organization. It is computed by dividing capital employed by Net worth.
Capital Employed
Capital Equity Ratio =

------------------------------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 average inventory.

33

Cost of Goods sold

Inventory Turnover Ratio =

-----------------------------------Average Inventory

Inventory Turnover Period:

No. Of. Days in a year
Inventory Turnover Period =

(b) Debtors Turnover ratio:

--------------------------------------Inventory turnover Ratio

The second major activity ratio is the debtors

turnover Ratio. The debtors turnover ratio is a test of the liquidity of the debtors
of a firm. The debtors turnover ratio is found out by dividing credit sales by
average debtors.
Net credit sales
Debtors turnover ratio = -------------------Average debtors
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
Debtors collection period

------------------------------------Debtors Turnover Ratio

34

(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
(d) Fixed Assets to Capital Employed:

This ratio shows the relationship

between the fixed assets and capital employed.

Fixed Assets
Fixed asset to Capital Employed =

----------------------------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 two types:
1. Profitability and relation to sales.
2. Profitability in relation to investment.
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:
Profit Margin: This profit measures the relationship between profit and Sales.
There are two types of profit margins.

35

(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
Gross profit =

---------------------------------------- x 100
Sales

(b) Net profit: This ratio is also known as net margin. This measures the
Relationship between net profit and sales of a firm.
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) Return on Investment: It is also known as overall profitability ratio. It
indicates earning gained from investment. It shows relationship
Between Earnings before interest and taxes to Capital employed.
EBIT
Return on Investment =

------------------------------- x

100

Capital Employed
(b) Return on Equity: In this ratio, the earnings after taxes are related
to the market value of total share holders fund.
Profit after Tax
Return on Equity =

-----------------------------Net worth

36

(c) Return on Capital Employment: It shows relationship between profit after

taxes before interest to capital employed. Capital employed refers to long-term
funds provide by owners.
P.B.T
Return on Capital Employed

=-

-----------------------------Capital employed

(d) Return on Assets: The profitability ratios are measured in terms of the
relationship between net profits and assets.
Profit after Taxes
Return on 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 equity share.
Profit after Tax
Earnings per share =

-------------------------------No. Of Shares

(f) Dividend per share ratio: This ratio represents dividend paid to

The share holder and no of shares.

Dividend per share =

Dividend
--------------------------No. Of Shares

37

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
financial statements.
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 and planning.
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.

38

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 the firm.
(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 investors in
Marking up his mind whether financial position of the concern warrants further
investment or not.
(b) Utility to Creditors: The creditors are or suppliers extent Short-term credits
to the concerns. They are interested to know whether Their payments at a
specified time or not. The concerns pays short-term Creditors out of its current
assets. If the current assets are quite sufficient

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.

39

(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.

40

ADVANTAGES OF RATIO ANALYSIS:

The various advantages of ratio analysis are given below:
1. It becomes easier to analysis.
(a) Liquidity (b) Solvency (c) profitability (d) Efficiency
2. It helps the management in evolution of the present health and
The future planning can be based on the parameters.
3. The efficient with which the firm is utilizing its various assets in
Generating sales revenue.
4. The ratio analysis helps in decision-making process.
5. The ratio analysis is also helps in security analysis.
6. The details of cumbersome set of numbers are reduced to easily
Interpretable numbers.

41

LIMITATIONS OF RATIO ANALYSIS

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
for interpretation.
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 be detected.
3. Comparison between two variables proves worth provide basis of
Valuation is identical.
4. Ratios are computed on the basis of past result. It does help properly to
predict future, to prepare budgets and estimates.

42

DATA ANALYSIS AND INTERPRETATION

(A). Liquidity Ratios
1. Current Ratio:
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 current liability.

Current Assets
Current
Liabilities
TABLE
NO. 4.01

TABLE NO.4.0
GRAPHNO.4.01

Year

Current Assets

Current Liabilities

Ratio

2010-11

1714.89

505.79

3.39

2011-12

1760.75

686.49

2012-13

4819.52

1737.35

2.77

2013-14

4992.31

2054.62

2.43

2014-15

5973.15

2194.42

2.72

43

2.56

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
2010-11 where cash balance is more than requirement which came through
encashment of deposits.

2. Quick Ratio:
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.

44

Year

Quick Assets

Current Liabilities

Ratio

2010-11

624.14

505.79

1.23

2011-12

753.15

686.49

1.10

2012-13

2230.17

1737.35

1.28

2013-14

2278.03

2054.62

1.11

2014-15

2881.19

2194.42

1.31

Quick Assets
Current Liabilities

TABLE NO. 4.02

GRAPHNO.4.02
Quick Ratio

1.35
1.3
1.25
1.2
Ratio

1.15
1.1
1.05
1
0.95
2010-11

2011-12

2012-13

45

2013-14

2014-15

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 2012-13 & 2014-15 company has Rs.1.28 & 1.31 cash for every 1 rupee of
expenses; such a policy is called conservative policy of finance for working
capital. The company maintained sufficient quick ratio.

3. Cash Ratio:
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 current liabilities.

46

Cash + Bank balance

Current Liabilities
TABLE NO. 4.03

Year

Cash + Bank balance

Current Liabilities

Ratio

2010-11

263.67

505.79

0.52

2011-02

388.38

686.49

0.57

2002-13

1442.73

1737.35

0.83

2013-14

1295.70

2054.62

0.63

2014-15

1664.43

2194.42

0.76

GRAPHNO.4.03

47

Cash Ratio
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2010-11

2011-12

2012-13

2013-14

2014-15

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.

: (B). LEVERAGE RATIOS

4.Debt Equity Ratio:

48

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. 4.04

Year

Debt

Equity

Ratio

2010-11

1833.26

716.29

2.56

2011-12

1042.56

875.66

1.19

2012-13

3835.48

2031.60

1.89

2013-14

3368.48

3021.48

1.11

2014-15

4480.32

4248.74

1.03

GRAPHNO.4.04

49

Debt Equity Ratio

3
2.5
2
Ratio

1.5
1
0.5
0
2010-11

2011-12

2012-13

2013-14

2014-15

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 2010-11 and 2012-13 but remaining years the company
satisfied the idle ratio of debt equity ratio

5. Proprietary ratio:

50

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

between shareholders funds to total assets of the firm. The shareholders fund is
the 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. 4.05

Year

Shareholders fund

Total assets

Ratio

2010-11

716.29

2549.56

0.28

2011-12

875.66

2723.66

0.32

2012-13

2031.60

5867.07

0.35

2013-14

3021.48

6389.95

0.47

2014-15

4348.75

8829.06

0.49

GRAPHNO.4.05

51

Proprietory Ratio

0.6

0.5

0.4

0.3

Ratio

0.2

0.1

0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:

The above graph shows that the Proprietary ratio of Tirumal Milk Products
(P). Ltd was increased gradually from the year 2010 to 2015. 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.

(C). TURNOVER RATIOS

52

6. 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. 4.06

Year

Sales

Net Fixed Assets

Ratio (times)

2010-11

12404.07

1313.80

9.44

2011-12

14834.68

1623.10

9.13

2012-13

28527.34

2751.12

10.37

2013-14

37380.24

3418.40

10.93

2014-15

47079.47

5011.79

9.39

GRAPHNO.4.06

53

Fixed Assets Turnover Ratio

11.5
11
10.5
10
Ratio (times)

9.5
9
8.5
8
2010-11

2011-12

2012-13

2013-14

2014-15

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.

7. Working Capital Turn Over Ratio:

54

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 working capital.

Sales
Networking Capital
TABLE NO. 4.07

Year

Sales

N.W.C

Ratio (times)

2010-11

12404.07

1209.10

10.25

2011-12

14834.68

1074.26

13.80

2012-13

28507.34

3082.17

9.25

2013-14

37380.23

2937.69

12.72

2014-15

47079.47

3778.72

12.45

55

GRAPHNO.4.07
Working Capital Turnover Ratio

16
14
12
10
8

Ratio (times)

6
4
2
0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:
High working capital ratio indicates the capability of the organization to
achieve maximum sales with the minimum investment in working capital.
Companys working capital ratio shows mostly more than ten, except for the year
2008-09 because of excess of cash balance in current assets which occurred due to
encashment of deposits. In the year 2011 the ratio was around 14, it indicates that
the capability of the company to achieve maximum sales with the minimum
investment in working capital.

56

8. 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. 4.08

Year

C.G.S

Inventory

Ratio

2010-11

10235.06

1090.75

9.38

2011-12

17942.18

1007.61

11.66

2012-13

23382.61

2589.36

9.03

2013-14

30035.22

2714.29

11.07

2014-15

37040.17

3091.92

11.98

57

GRAPHNO.4.08

Inventory Turnover Ratio

14
12
10
8
Ratio

6
4
2
0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:

The above table shows that the company maintained its inventory turnover
ratio was increased gradually from 2011 to 2015. In the year 2015 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 the inventory.

9. Creditors Turnover Ratio:

58

This Ratio is similar to the debtors 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
bills payable.

Net Credit Purchases

Average Net worth

TABLE NO. 4.09

Year

N.C.P

Avg N.W

Ratio

2010-11

10410.34

358.14

29.06

2011-12

11976.25

437.82

27.35

2012-13

23843.78

1015.79

23.47

2013-14

29893.66

1510.73

19.78

2014-15

37695.27

2174.37

17.33

59

GRAPHNO.4.09

Creditors Turnover Ratio

35
30
25
20
Ratio

15
10
5
0
2010-11

2011-12

2012-13

20 13-14

2014-15

INTERPRETATION:

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

ratio of Tirumala Milk Products (P). 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.

10. Debtors Turnover Ratio:

60

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 %

2010-11

12404.07

63.58

19.50

2011-12

14834.68

68.44

21.67

2012-13

28527.34

236.66

12.05

2013-14

37380.23

181.130

20.63

2014-15

47079.47

165.041

28.52

GRAPHNO.4.10

61

Debtors Turnover Ratio

30.00
25.00
20.00
15.00
10.00
5.00
0.00
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:

The above graph shows that the debtors turnover ratio of the company was
increased in the year 2010 and in the years 2011 and 2010 it was decreased after
that it was increased. The higher the value of debtors turnover the more efficient
is the management of debtors or more liquidity. So the company having good
position in management of debt.

(D). PROFITABILITY RATIOS

62

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
X 100

Net sales
TABLE NO. 4.11

Year

Gross Profit

Net sales

Ratio %

2010-11

2163.89

1209.10

1.79

2011-12

2768.99

1074.26

2.58

2012-13

5271.38

3082.17

1.71

2013-14

7586.94

2937.70

2.58

2014-15

9746.06

3778.73

2.58

GRAPHNO.4.11

63

Gross Profit Ratio

3
2.5
2
Ratio %

1.5
1
0.5
0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:

The gross profit ratio is increased from the year 2010-2011 to 2014-2015
and in the year 2008-09 it was increased highly. In all the years the ratio was
increased due to some reasons that are operating expenses of Tirumala Milk
Products (P). Ltd are decreased, however this ratio is satisfactory as it is showing
some increasing.

12. Net Profit ratio:

64

Net profit margin establishes a relationship between net profit and sales
indicates managements efficiency in manufacturing administrating and selling the
product. This ratio is the overall measure of the firms 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 firms 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

2010-11

485.79

12404.07

3.92

2011-12

645.16

14834.68

4.35

2012-13

1211.27

28527.34

4.25

2013-14

2201.25

37380.23

5.89

2014-15

3528.52

47079.47

7.49

GRAPHNO.4.12

65

Net Profit Ratio

8
7
6
5
4

Ratio

3
2
1
0
201 0-11

2011-12

2012-13

2013-14

2014-15

INTERPRETAION:

During the period 2011-15 the net profit ratio of the company is gradually
increased year by year except the year 2012. The reason why the operating
expenses of the company is reduced year by year so the net profit of the company
was increased.

13. Operating Profit ratio

66

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 %

2010-11

11971.35

12404.07

96.51

2011-12

13943.79

14834.68

93.99

2012-13

27489.00

28527.34

96.36

2013-14

35600.41

37380.23

95.23

2014-15

44019.99

47079.47

93.47

GRAPHNO.4.13

67

Operating Profit Ratio

97
96.5
96
95.5
95
94.5

Ratio %

94
93.5
93
92.5
92
91.5
2010-11

2011-12

2012-13

2013-14

2014-15

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 2012 to 2015 it was continuously decreasing the reason
why the operating expenses are increasing year by year from 2009 to 2015.

14. Return on Total Assets:

68

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
X 100

Total assets
TABLE NO. 4.14

Year

Net Profit A.T

Total Assets

Ratio %

2010-11

124.73

2549.55

4.89

2011-12

163.46

2723.66

6.00

2012-13

464.67

5867.07

7.92

2013-14

987.86

6389.95

15.46

2014-15

1347.36

8829.06

15.16

GRAPHNO.4.14

69

Return on Total Assets Ratio

18
16
14
12
10
Ratio %

8
6
4
2
0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:
The ratio of Tirumala Milk Products (P) 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.

15. Return on Equity:

70

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 the profitability of owners 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 %

2010-11

124.73

716.29

0.17

2011-12

163.46

875.65

0.19

2012-13

464.67

2031.59

0.23

2013-14

987.86

3021.47

0.33

2014-15

1347.36

4348.75

0.31

GRAPHNO.4.15

71

Return on Equity Ratio

0.35
0.3
0.25
0.2
Ratio %

0.15
0.1
0.05
0
2010-11

2011-12

2012-13

2013-14

2014-15

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 owners resources satisfactorily.

16. Return on investment:

72

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 the long-term.

Earning before I&T

Shareholders equity
TABLE NO. 4.16

Year

E.B.I.T

Shareholders equity

Ratio

2010-11

270.14

716.29

37.71

2011-12

346.27

875.66

39.54

2012-13

844.10

2031.60

41.55

2013-14

1695.13

3021.48

56.10

2014-15

2233.54

4348.74

51.36

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GRAPHNO.4.16

Return On Investment
60
50
40
30
20
10
0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:

The above graph shows that the return on investment of Tirumala

Milk Products (P). Ltd having gradual increasing from 2010-11 to 2013-14 but in
the year 2011-12 it decreases when compared with 2014-15 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

2010-11

167.71

716.29

23.41

2011-12

311.80

875.65

35.60

2012-13

608.10

2031.59

29.93

2013-14

1324.01

3021.47

43.82

2014-15

1914.72

4348.74

44.02

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GRAPHNO.4.17
Return on Capital Employed Ratio
50
45
40
35
30
25
Ratio

20
15
10
5
0
2010-11

2011-12

2012-13

2013-14

2014-15

INTERPRETATION:

The above graph shows that the companys return on capital

employed ratio was gradually increased year by year except the year 2012. The
enhanced return on capital employed measures the return or profit on each Naira
of expended by the firm for the financial period.

FINDINGS
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 The current ratio of Tirumala Milk Products (P). Ltd does not maintain idle
Ratio of current ratio. It maintained 2.5:1 but the idle ratio of current ratio
is 2:1.
The quick ratio of Tirumala Milk Products (P). Ltd has some fluctuations.
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 (P). 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 the
year 2009, 2011, 2012 it maintained idle ratios of debt equity ratio. The idle
ratio of debt equity ratio is 1:2.
The proprietary ratio of Tirumala Milk products (P). Ltd was continuously
increased year by year.
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 be satisfactory.
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 satisfactory level.

77

 The inventory turnover ratio of the company is increased year by year. So

the company increasing efficiency of its management of inventory year by
year.
The creditors turnovers ratio of the Tirumala Milk Products (P). Ltd
maintained decreasing trend year by year. So it is beneficial to the
company.
The debtors turnover ratio of the company also maintaining increasing
trend year by year.
The total assets turnover ratio of the company it is not maintains the good
position.
It is found that the gross profit ratio of the company has been good overall
but it has been Fluctuating.
The net profit ratio of the company has been good during all the years.
Through the ratio has been in Ups and downs through out the period. The
fluctuations in the ratio are due to variation.
The operating profit ratio of the company having some fluctuations. The
overall period of the Ratio is the good position it is fluctuating is said to be
satisfaction.

78

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 the future.
It is suggested that the company should utilize its idle cash assets towards
appropriate investment to maintain an optimal absolute liquid ratio.
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 high risk.
As the proprietary ratio is suggested for the firm maintains effective level
so as to maintain in the Future also.
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
environmental conditions.
It is suggested that the working capital turnover ratio they maintained good
position. So it should maintain same in the future.
The inventory turnover ratio is suggested the overall observation so it is
good Position in the same future also.

79

 The company creditors turnover ratio having down trend. It is beneficial to

the company. So the company should maintain same in the future.
The company debtors turnover ratio having up trend. It is beneficial to the
company. So the company should maintain same in the future.
It is suggested that to improve the total assets turnover ratio by decreasing
the total assets especially fixed assets as the sales be demand is external to
organization.
It is suggested for the company to take necessary steps to maintain gross
profit ratio as they are Satisfactory.
It is suggested for the company to take necessary steps to maintain net
profit ratio as they are Satisfactory
It is suggested that the operating profit ratio is the good position it is said to
be satisfactory. It should maintain same in the future also

80

CONCLUSION
Tirumala Milk Products (P) 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 (P) 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 quite satisfactory.
At the end of the study certain suggestions are given to further enhance the
profitability and liquidity position of the company.

81

BIBLIOGRAPHY

NAME OF THE BOOK

AUTHOR NAME

FINANCIAL
MANAGEMENT

I.M. PANDEY

FINANCIAL
MANAGEMENT THEORY
AND PRACTICE

M.Y.KHAN
P.K.JAIN
R.P.TRIVEDI

COST AND MANAGEMENT

ACCOUNTING

MANO TRIVEDI

FINANCIAL
MANAGEMENT

K.GUPTHA

OTHER SOURCES

82

http://www.tirumalamilkproducts.com
www.google.com
www.encyclopedia.com

83