A SUMMER TRAINING PROJECT REPORT ON

An Analytical Study of Financial Analysis

At INDIAN FARM FORESTRY DEVELOPMENT CO-OPERATIVE LTD.

Submitted for the partial fulfillment of the requirement for the award Of Post Graduation Diploma in Management Academic Session

2013-2014
SUBMITTED BY: KANCHAN KAHNANI (121127)

UNDER THE SUPERVISION OF

Consultant (F&A), IFFDC Mr. S. K. De Faculty Mentor: Mr. Prashant Kumar Yadav

ACKNOWLEDGEMENT
During my course of study in Indian Farm Forestry Development Co-operative Ltd., many played an important role in my life. I take this opportunity to thank them for their constant support, inspiration and encouragement during the completion of my course. I would like to profusely thank Mr. S.K.DE,Consultant (F&A),IFFDC my supervisor, for his suggestions and opinions and for promptly answering all my queries regarding the project. Without his guidance, support and inspiration, this report would not have materialized. I take this opportunity to express my deepest sense of gratitude to Mr.Prashant Dev Yadav , my Faculty Mentor who has spared his precious moments whenever I needed..He has been very kind and helped me to prepare my project. Last but not the least I pay reverence to the supreme the Almighty God for his benevolence and blessings bestowed upon me.
.

Kanchan Kahnani

DECLARATION
I declare that the project report entitled An Analytical Study of Financial Analysis At INDIAN FARM FORESTRY DEVELOPMENT CO-OPERATIVE LTD has been prepared under the guidance of Mr.S.K.De, Consultant (F&A), IFFDC. I further declare that this is my original work as part of our academic course.

Date: Place:

Kanchan Kahnani

EXECUTIVE SUMMARY
The audited attached Balance Sheet of Indian Farm Forestry Development Cooperative Ltd. as at 31st march 2013 and also the Profit and Loss Account and Cash Flow Statement of the year ended on 31ST March 2013.The company responsibility is to express an opinion on the fianancial statements based on the company audit. The audit report in accordance with the auditing standards generally accepted in India.The Financial Statement are the responsibility of the social management.The Financial statement signify the company turnover,asset and liability.The comparative statement,ratio,cash flow statement,fund flow statement based on regular studies.

TABLE OF CONTENT
Introduction to the topic Fund flow Analysis Cash Flow Analysis Comparative Statement Objective of Study Company Profile Product Profile Research Methodology Finding and Analysis Limitation of Study Bibliography Annexure

INTRODUCTION
Meaning of Financial Statement
Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: The Balance Sheet Profit And Loss Account

They provide some extremely useful information to the extent that balance sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm.

Meaning of Financial Analysis

The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection, relation and evaluation.

Features of Financial Analysis

To present a complex data contained in the financial statement in simple and understandable form. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various

conclusions.

Purpose of Analysis of financial statements

To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of management. To provide useful information to management

Procedure of Financial Statement Analysis

The following procedure is adopted for the analysis and interpretation of financial statements: The analyst should acquaint himself with principles and postulated of accounting. He should know the plans and policies of the managements that he may be able to find out whether these plans are properly executed or not. The extent of analysis should be determined so that the sphere of work may be decided. If the aim is find out. Earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary. The financial data be given in statement should be recognized and rearranged. It will involve the grouping similar data under same heads. Breaking down of individual components of statement according to nature. The data is reduced to a standard form. A relationship is established among financial statements with the help of tools & techniques of analysis such as ratios, trends, common size, fund flow etc. The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for help indecision making. The conclusions drawn from interpretation are presented to the management in the form of reports.

Analyzing financial statements involves evaluating three characteristics of a company: its liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is primarily interested in the ability of the borrower to pay obligations when they come due. The liquidity of the borrower is extremely important in evaluating the safety of a loan. A long-term creditor, such as a bondholder, however, looks to profitability and solvency measures that indicate the companys ability to survive over a long period of time. Long-term creditors consider such measures as the amount of debt in the companys capital structure and its ability to meet interest payments. Similarly, stockholders are interested in the profitability and solvency of the company. They want to assess the likelihood of dividends and the growth potential of the stock.

Comparison can be made on a number of different bases. Following are the three illustrations:

1. Intra-company basis:This basis compares an item or financial relationship within a company in the current year with the same item or relationship in one or more prior years. For example, Sears, Roebuck and Co. can compare its cash balance at the end of the current year with last years balance to find the amount of the increase or decrease. Likewise, Sears can compare the percentage of cash to current assets at the end of the current year with the percentage in one or more prior years. Intracompany comparisons are useful in detecting changes in financial relationships and significant trends.

2. Industry averages:This basis compares an item or financial relationship of a company with industry averages (or norms) published by financial ratings organizations such as Dun & Bradstreet, Moodys and Standard & Poors. For example, Searss net income can be compared with the average net income of all companies in the retail chain-store industry. Comparisons with industry averages provide information as to a companys relative performance within the industry.

3. Intercompany basis:This basis compares an item or financial relationship of one company with the same item or relationship in one or more competing companies. The comparisons are made on the basis of the published financial statements of the individual companies. For example, Searss total sales for the year can be compared with the total sales of its major competitors such as Kmart and WalMart. Intercompany comparisons are useful in determining a companys competitive position.

Tools of Financial Statement Analysis:The analysis and interpretation of financial statement is used to determine the financial position and results of operations as well. A number of methods or devices are used to study the relationship between different statements. A financial analyst may use following methods:-

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 Ratio Analysis Fund Flow Statement Cash Flow Analysis Comparative Statement Ratio Analysis:
Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future.

Meaning of Ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many times. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. 11

Meaning of Ratio Analysis:Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.

This technique is called cross-sectional analysis. Cross-sectional analysis compares financial ratios of several companies from the same industry. Ratio analysis can provide valuable information about a company's financial health. A financial ratio measures a company's performance in a specific area. For example, you could use a ratio of a company's debt to its equity to measure a company's leverage. By comparing the leverage ratios of two companies, you can determine which company uses greater debt in the conduct of its business. A company whose leverage ratio is higher than a competitor's has more debt per equity. You can use this information to make a judgment as to which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You obtain a better indication of the direction in which a company is moving when several ratios are taken as a group.

Objective of Ratios:12

Ratios are worked out to analyze the following aspects of business organizationA) Solvency1) Long term 2) Short term 3) Immediate B) Stability C) Profitability D) Operational efficiency E) Credit standing F) Structural analysis G) Effective utilization of resources H) Leverage or external financing

Steps in Ratio Analysis:The ratio analysis requires two steps as follows: 1] Calculation of ratio 2] Comparing the ratio with some predetermined standards. The standard ratio may be the past ratio of the same firm or industrys average ratio or a projected ratio or the ratio of the most successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared with some predetermined standard. The importance of a correct standard is oblivious as the conclusion is going to be based on the standard itself.

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;lClassification of Ratio:-

CLASSIFICATION OF RATIO

BASED ON FINANCIAL STATEMENT

BASED ON FUNCTION

BASED ON USER

1] BALANCE SHEET RATIO 2] REVENUE STATEMENT RATIO 3] COMPOSITE RATIO

1] LIQUIDITY RATIO 2] LEVERAGE RATIO 3] ACTIVITY RATIO 4] PROFITABILITY RATIO 5] COVERAGE RATIO

1] RATIOS FOR SHORT TERM CREDITORS 2] RATIO FOR SHAREHOLDER 3] RATIOS FOR MANAGEMENT 4] RATIO FOR LONG TERM CREDITORS

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Based on Financial Statement:Accounting ratios express the relationship between figures taken from financial statements. Figures may be taken from Balance Sheet, P& L A/C, or both. One-way of classification of ratios is based upon the sources from which are taken. 1] Balance sheet ratio: If the ratios are based on the figures of balance sheet, they are called Balance SheetRatios. E.g. Ratio of current assets to current liabilities or debt to equity ratio. While calculating these ratios, there is no need to refer to the Revenue statement. These ratios study the relationship between the assets & the liabilities, of the concern. These ratios help to judge the liquidity, solvency & capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio. 2] Revenue ratio: Ratio based on the figures from the revenue statement is called revenue statement ratios. These ratios study the relationship between the profitability & the sales of the concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio, Stock turnover ratio. 3] Composite ratio: These ratios indicate the relationship between two items, of which one is found in the balance sheet & other in revenue statement. There are two types of composite ratiosa) Some composite ratios study the relationship between the profits & the investments of the concern. E.g. return on capital employed, return on proprietors fund, return on equity capital etc.

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b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend payout ratios, & debt service ratios.

Based on Function:Accounting ratios can also be classified according to their functions in to liquidity ratios, leverage ratios, activity ratios, profitability ratios & turnover ratios. 1] Liquidity ratios: It shows the relationship between the current assets & current liabilities of the concern e.g. liquid ratios & current ratios. 2] Leverage ratios: It shows the relationship between proprietors funds & debts used in financing the assets of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios. 3] Activity ratios: It shows relationship between the sales & the assets. It is also known as Turnover ratios & productivity ratios e.g. stock turnover ratios, debtors turnover ratios. 4] Profitability ratios: 1. It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios, operating net profit ratios, expenses ratios 2. It shows the relationship between profit & investment e.g. return on investment, return on equity capital. 5] Coverage ratios: It shows the relationship between the profit on the one hand & the claims of the outsiders to be paid out of such profit e.g. dividend payout ratios & debt service ratios. 16

Based on User:1] Ratios for short-term creditors:

Current ratios, liquid ratios, stock working capital ratios

2] Ratios for the shareholders:

Return on proprietors fund, return on equity capital 3] Ratios for management: Return on capital employed, turnover ratios, operating ratios, expenses ratios 4] Ratios for long-term creditors: Debt equity ratios, return on capital employed, proprietor ratios.

Liquidity Ratio: Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below

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Current Ratio:This ratio compares the current assets with the current liabilities. It is also known as working capital ratio or solvency ratio. It is expressed in the form of pure ratio. E.g. 2:1

Formula:

Current ratio =

Current Assets Current Libilities

The current assets of a firm represents those assets which can be, in the ordinary course of business, converted into cash within a short period time, normally not exceeding one year. The current liabilities defined as liabilities which are short term maturing obligations to be met, as originally contemplated, with in a year. Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills receivable; and prepaid expenses. 18

Liquid Ratio:Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1. The term quick assets refer to current assets, which can be converted into, cash immediately or at a short notice without diminution of value.

Formula: Liquid ratio =

Quick Assets Quick Liabilitie s

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. Quick assets refers to those current assets that can be converted into cash immediately without any value strength.Quick assets include cash and bank balances, short-term marketable securities, and sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required. Quick Ratio indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current assets, which are highly liquid. Inventories are excluded from the numerator of this ratio because they are deemed the least liquid component of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts and payments. 19

Cash Ratio:This is also called as super quick ratio. This ratio considers only the absolute liquidity available with the firm. Formula:

Cash ratio

Cash Bank Marketable Securities Total Current Liabilitie s

Since cash and bank balances and short term marketable securities are the most liquid assets of a firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to the current liabilities then it may affect the profitability of the firm.

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Investment/ Shareholder

Earnings Per Share:Earnings per Share are calculated to find out overall profitability of the organization. Earnings per share represent earning of the company whether or not dividends are declared. If there is only one class of shares, the earning per share are determined by dividing net profit by the number of equity shares. Earnings per Share measures the profits available to the equity shareholders on each share held. Formula:

Earnings per share =

Net Profit No.of Equity Share

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The higher Earnings per sharewill attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time. But remember not all profit earned is going to be distributed as dividends the company also retains some profits for the business.

Dividend Per Share:Dividend Per Share shows how much is paid as dividend to the shareholders on each share held. Formula:
Dividend Paid to Ordinary Shareholde rs No.of Ordinary Shares

Dividend per Share =

Dividend Payout Ratio:Dividend Pay-out Ratio shows the relationship between the dividends paid to equity shareholders out of the profit available to the equity shareholders. Formula:
Dividend per share *100 Earning per share

Dividend Payout ratio =

Dividend Payout ratio shows the percentage share of net profits after taxes and after preference dividend has been paid to the preference equity holders. 22

Gearing:-

Capital Gearing Ratio:Gearing means the process of increasing the equity shareholders return through the use of debt. Equity shareholders earn more when the rate of the return on total capital is more than the rate of interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio shows the relationship between two types of capital viz: - equity capital & preference capital & long term borrowings. It is expressed as a pure ratio. Formula:
Preference capital secured loan Equity capital reserve & surplus

Capital gearing ratio =

Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a concern. 23

Profitability:These ratios help measure the profitability of a firm. A firm, which generates a substantial amount of profits per rupee of sales, can comfortably meet its operating expenses and provide more returns to its shareholders. The relationship between profit and sales is measured by profitability ratios. There are two types of profitability ratios: 1. Gross Profit Margin 2. Net Profit Margin.

Gross Profit Ratio:This ratio measures the relationship between gross profit and sales. It is defined as the excess of the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit that remains after the manufacturing costs have been met. It measures the efficiency of production as well as pricing. This ratio helps to judge how efficient the concern is I managing its production, purchase, selling & inventory, how good its control is over the direct cost, how productive the concern , how much amount is left to meet other expenses & earn net profit. 24

Gross profit ratio=

Gross Profit *100 Net Sales

Net Profit Ratio:-

Net Profit ratio indicates the relationship between the net profit & the sales it is usually expressed in the form of a percentage. Formula: Net profit ratio =

NPAT *100 Net Sales

This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios provide an understanding of the cost and profit structure of a firm.

Return on Capital Employed:The profitability of the firm can also be analyzed from the point of view of the total funds employed in the firm. The term fund employed or the capital employed refers to the total longterm source of funds. It means that the capital employed comprises of shareholder funds plus long-term debts. Alternatively it can also be defined as fixed assets plus net working capital.

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Capital employed refers to the long-term funds invested by the creditors and the owners of a firm. It is the sum of long-term liabilities and owner's equity. Return on Capital Employed indicates the efficiency with which the long-term funds of a firm are utilized. Formula:

Return on capital employed =

NPAT *100 Net Sales

Financial:These ratios determine how quickly certain current assets can be converted into cash. They are also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in managing assets. These ratios are based on the relationship between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. The important turnover ratios are debtors turnover ratio, average collection period, inventory/stock turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described below:

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Debtors Turnover Ratio (DTO):Debtors Turnover Ratio is calculated by dividing the net credit sales by average debtors outstanding during the year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus returns, if any, from customers. Average debtors are the average of debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are collected. The higher the Debtors Turnover Ratio, the better it is for the organization.

Formula:

Debtors turnover ratio =

Credit Sales Average Debtors

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Inventory or Stock Turnover Ratio (ITR):Inventory Turnover Ratiorefers to the number of times the inventory is sold and replaced during the accounting period.

Formula:

Stock turnover ratio =

Cost of goods sold Average stock

Inventory Turnover Ratio reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also result from a low level of inventory, which may lead to frequent stock outs and loss of sales and customer goodwill. For calculating Inventory Turnover Ratio, the average of inventories at the beginning and the end of the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories).

Fixed Assets Turnover (FAT):The Fixed Assets Turnover ratio measures the net sales per rupee of investment in fixed assets. Formula:

Fixed assets turnover =

Net Sales Net fixed assets

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This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low).

Proprietors Ratio:Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders fund to total assets. This ratio determines the long term or ultimate solvency of the company. In other words, Proprietary ratio determines as to what extent the owners interest & expectations are fulfilled from the total investment made in the business operation. Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the form of percentage. Total assets also know it as net worth. Formula:

Proprietary ratio=

Proprietary fund Total fund

OR

Proprietary ratio

Shareholders fund Fixed assets currentliabilitie s

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Stock Working Capital Ratio:This ratio shows the relationship between the closing stock & the working capital. It helps to judge the quantum of inventories in relation to the working capital of the business. The purpose of this ratio is to show the extent to which working capital is blocked in inventories. The ratio highlights the predominance of stocks in the current financial position of the company. It is expressed as a percentage. Formula:

Stock working capital ratio=

Srock Working capital

Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means that the amount of liquid assets is lower.

Debt Equity Ratio:This ratio compares the long-term debts with shareholders fund. The relationship between borrowed funds & owners capital is a popular measure of the long term financial solvency of a firm. This relationship is shown by debt equity ratio. Alternatively, this ratio indicates the relative proportion of debt & equity in financing the assets of the firm. It is usually expressed as a pure ratio. E.g. 2:1

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Formula: Debt Equity Ratio =

Total long - term debt Total share holder fund

Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing the equity shareholders return through the use of debt. Leverage is also known as gearing or trading on equity. Debt equity ratio shows the margin of safety for long-term creditors & the balance between debt & equity. Return on Proprietor Fund:Return on proprietors fund is also known as return on proprietors equity or return on shareholders investment or investment ratio. This ratio indicates the relationship between net profits earned & total proprietors funds. Return on proprietors fund is a profitability ratio, which the relationship between profit & investment by the proprietors in the concern. Its purpose is to measure the rate of return on the total fund made available by the owners. This ratio helps to judge how efficient the concern is in managing the owners fund at disposal. This ratio is of practical importance to prospective investors & shareholders. Formula:

Return on proprietors fund =

NPAT *100 Propriter' s fund

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Creditors Turnover Ratio:It is same as debtors turnover ratio. It shows the speed at which payments are made to the supplier for purchase made from them. It is a relation between net credit purchase and average creditors.

Credit turnover ratio =

Net credit purchase Average creditors

Average age of accounts payable =

Months in a year Credit turnover ratio

Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It enhances credit worthiness of the company. A very low ratio indicates that the company is not taking full benefit of the credit period allowed by the creditors.

Importance of Ratio Analysis:

As a tool of financial management, ratios are of crucial significance. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of interference regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects: 32

1] Liquidity position 2] Long-term solvency 3] Operating efficiency 4] Overall profitability 5] Inter firm comparison 6] Trend analysis.

1] Liquidity position: With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. A firm can be said to have the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the principal. This ability is reflected in the liquidity ratio of a firm. The liquidity ratio is particularly useful in credit analysis by bank & other suppliers of short term loans. 2] Long-term solvency: Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This respect of the financial position of a borrower is of concern to the long-term creditors, security analyst & the present & potential owners of a business. The long-term solvency is measured by the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power & operating efficiency.

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Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage ratios, for instance, will indicate whether a firm has a reasonable proportion of various sources of finance or if it is heavily loaded with debt in which case its solvency is exposed to serious strain. Similarly the various profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved. 3] Operating efficiency: Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of management, is that it throws light on the degree of efficiency in management & utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its assets- total as well as its components. 4] Overall profitability: Unlike the outsides parties, which are interested in one aspect of the financial position of a firm, the management is constantly concerned about overall profitability of the enterprise. That is, they are concerned about the ability of the firm to meets its short term as well as long term obligations to its creditors, to ensure a reasonable return to its owners & secure optimum utilization of the assets of the firm. This is possible if an integrated view is taken & all the ratios are considered together.

5] Inter firm comparison: Ratio analysis not only throws light on the financial position of firm but also serves as a stepping-stone to remedial measures. This is made possible due to inter firm comparison 34

&comparison with the industry averages. A single figure of a particular ratio is meaningless unless it is related to some standard or norm. One of the popular techniques is to compare the ratios of a firm with the industry average. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. An inter firm comparison would demonstrate the firms position vice-versa its competitors. If the results are at variance either with the industry average or with those of the competitors, the firm can seek to identify the probable reasons & in light, take remedial measures. 6] Trend analysis: Finally, ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present level may be satisfactory but the trend may be a declining one. Advantages of Ratio Analysis: Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insights into the financial performance of a company. The advantages of ratio analysis can be summarized as follows: Ratios facilitate conducting trend analysis, which is important for decision making and forecasting.

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 Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability and solvency of a firm. Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons.

The comparison of actual ratios with base year ratios or standard ratios helps the management analyze the financial performance of the firm.

Limitations of Ratio Analysis:Ratio analysis has its limitations. These limitations are described below:

1] Information problems
Ratios require quantitative information for analysis but it is not decisive about analytical output. The figures in a set of accounts are likely to be at least several months out of date, and so might not give a proper indication of the companys current financial position. Where historical cost convention is used, asset valuations in the balance sheet could be misleading. Ratios based on this information will not be very useful for decision-making.

2] Comparison of performance over time When comparing performance over time, there is need to consider the changes in price. The movement in performance should be in line with the changes in price. When comparing performance over time, there is need to consider the changes in technology. The movement in performance should be in line with the changes in technology. Changes in accounting policy may affect the comparison of results between different accounting years as misleading. 36

3] Inter-firm comparison
Companies may have different capital structures and to make comparison of performance when one is all equity financed and another is a geared company it may not be a good analysis.

Selective applications of government incentives to various companies may also distort intercompany comparison. Comparing the performance of two enterprises may be misleading. Inter-firm comparison may not be useful unless the firms compared are of the same size and age, and employ similar production methods and accounting practices. Even within a company, comparisons can be distorted by changes in the price level. Ratios provide only quantitative information, not qualitative information. Ratios are calculated on the basis of past financial statements. They do not indicate future trends and they do not consider economic conditions.

Purpose of Ratio Analysis:1] To identify aspects of a businesss performance to aid decision making 2] Quantitative process may need to be supplemented by qualitative factors to get a complete picture. 3] 5 main areas Liquidity the ability of the firm to pay its way

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 Investment/shareholders information to enable decisions to be made on the extent of the risk and the earning potential of a business investment Gearing information on the relationship between the exposure of the business to loans as opposed to share capital Profitability how effective the firm is at generating profits given sales and or its capital assets Financial the rate at which the company sells its stock and the efficiency with which it uses its asset.

Role of Ratio Analysis:It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the same figure & information, which is already appearing in the financial statement. At the same time, it is true that what can be achieved by the technique of ratio analysis cannot be achieved by the mere preparation of financial statement. Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of performance, either individually or in relation to those of other firms in the same industry. The process of this appraisal is not complete until the ratio so computed can be compared with something, as the ratio all by them do not mean anything. This comparison may be in the form of intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper comparison of ratios may reveal where a firm is placed as compared with earlier period or in comparison with the other firms in the same industry. Ratio analysis is one of the best possible techniques available to the management to impart the basic functions like planning & control. As the future is closely related to the immediate past, ratio calculated on the basis of historical financial statements may be of good assistance to 38

predict the future. Ratio analysis also helps to locate & point out the various areas, which need the management attention in order to improve the situation. As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e. liquidity, solvency, activity, profitability & overall performance, it enables the interested persons to know the financial & operational characteristics of an organisation & take the suitable decision.

39

Fund Flow Analysis

Fund may be interpreted in various ways as (a) Cash, (b) Total current assets, (c) Net working capital, (d) Net current assets. For the purpose of fund flow statement the term means net working capital. The flow of fund will occur in a business, when a transaction results in a change i.e., increase or decrease in the amount of fund. According to Robert Anthony the funds flow statement describes the sources from which additional funds were derived and the uses to which these funds were put. In short, it is a technical device designed to highlight the changes in the financial condition of a business enterprise between two balance sheets.

Different names of Fund-Flow Statement

A Funds Statement A statement of sources and uses of fund A statement of sources and application of fund Inflow and outflow of fund statement

Objectives of Fund Flow Statement:The main purposes of fund flow statement are:] To help to understand the changes in assets and asset sources which are not readily evident in the income statement or financial statement. 40

To inform as to how the loans to the business have been used. To point out the financial strengths and weaknesses of the business.

Format of Fund Flow Statement

Sources Fund from operation Non-trading incomes Issue of shares Issue of debentures Borrowing of loans Acceptance of deposits Sale of fixed assets Sale of investments (Long Term) Decrease in working capital Increase in working capital Applications Fund lost in operations Non-operating expenses Redemption of redeemable preference share Redemption of debentures Repayment of loans Repayment of deposits Purchase of fixed assets Purchase of long term investments

Steps in Preparation of Fund Flow Statement:1. Preparation of schedule changes in working capital (taking current items only). 2. Preparation of adjusted profit and loss account (to know fund from or fund lost in operations). 3. Preparation of accounts for non-current items (Ascertain the hidden information). Preparation of the fund flow statement.

41

Cash Flow Analysis

Cash is a life blood of business. It is an important tool of cash planning and control. A firm receives cash from various sources like sales, debtors, sale of assets investments etc. Likewise, the firm needs cash to make payment to salaries, rent dividend, interest etc. Cash flow statement reveals that inflow and outflow of cash during a particular period. It is prepared on the basis of historical data showing the inflow and outflow of cash.

Objectives of Cash Flow Statement:1. To show the causes of changes in cash balance between the balance sheet dates. 2. To show the actors contributing to the reduction of cash balance inspire of increasing of profit or decreasing profit.

Uses of Cash Flow Statement

1. It explaining the reasons for low cash balance. 2. It shows the major sources and uses of cash. 3. It helps in short term financial decisions relating to liquidity. 4. From the past year statements projections can be made for the future. 5. It helps the management in planning the repayment of loans, credit arrangements etc.

Steps in Preparing Cash Flow Statement

1. Opening of accounts for non-current items (to find out the hidden information). 2. Preparation of adjusted P&L account (to find out cash from operation or profit, and cash lot in operation or loss). 42

3. Comparison of current items (to find out inflow or outflow of cash). 4. Preparation of Cash Flow Statement. To preparing Account for all non-current items is easier for preparing Cash Flow Statement. Cash from operation can be prepared by this formula also. Net Profit + Decrease in Current Assets OR Increase in Current Liabilities Increase in Current Assets OR Decrease in Current Liabilities.

Useful ness of the Statement of Cash Flows

The information in a statement of cash flows should help investors, creditors, and others assess the following aspects of the firms financial position. The entitys ability to generate future cash flows. By examining relationships between items in the statement of cash flows, investors and others can make predictions of the amounts, timing, and uncertainty of future cash flows better than they can from accrual basis data. The entitys ability to pay dividends and meet obligations. If a company does not have adequate cash, employees cannot be paid, debts settled, or dividends paid. Employees, creditors, and stockholders should be particularly interested in this statement, because it alone shows the flows of cash in a business. The cash investing and financing transactions during the period. By examining a companys investing and financing transactions, a financial statement reader can better understand why assets and liabilities changed during the period. 1. The reasons for the difference between net income and net cash

43

Net income provides information on the success or failure of a business enterprise. However, some are critical of accrual basis net income because it requires many estimates. As a result, the reliability of the number is often challenged. Such is not the case with cash. Many readers of the statement of cash flows want to know the reasons for the difference between net income and net cash provided by operating activities. Then they can assess for themselves the reliability of the income number. In summary, the information in the statement of cash flows is useful in answering the following questions. How did cash increase when there was a net loss for the period? How were the proceeds of the bond issue used? How were the expansions in the plant and equipment financed? Why were dividends not increased? How was the retirement of debt accomplished? How much money was borrowed during the year?

Is cash flow greater or less than net income?

Cash Flow Statement

Inflow of Cash Opening cash balance Amount *** Outflow of cash Redemption of preference shares Cash from operation Sales of assets *** *** Redemption of debentures Repayment of loans *** *** Amount ***

44

Issue of debentures Raising of loans Collection from debentures Refund of tax

*** *** *** ***

Payment of dividends Pay of tax Cash lost in debentures Closing cash balance

*** *** *** ***

Cash from operation can be calculated in two ways: Cash Sales Method Cash Sales (Cash Purchase + Cash Operation Expenses) Net Profit Method It can be prepared in statement form or by Adjusted Profit and Loss Account.

45

Comparative Statement
The comparative financial statements are statements of the financial position at different period; of time. The elements of financial position are shown in a comparative form so as to give an idea of financial position at two or more periods. From practical point of view, generally, two financial statements (balance sheet and income statement) are prepared in comparative form for financial analysis purpose. Not only the comparison of the figure of two periods but also be relationship between balance sheet and income statement may show:

i. ii. iii. iv.

Absolute figures (rupee amounts) Changes in absolute figures (increase or decrease in absolute figures) Absolute data in term of percentages Increase or decrease in terms of percentages

1.

COMPARATIVE BALANCE SHEET The comparative balance sheet analysis is the study of the trend of the same items, groups

of items and computed items in two or more balance sheets of the same business enterprise on different dates. The changes can be observed by comparison of the balance sheet at the beginning and at the end of a period and changes can help in forming an opinion about the progress of an enterprise. The comparative balance sheet has two columns for the data of original balance sheets. A third column is used to show increase in figures. The fourth column may be added for giving percentages of increases or decreases.

2.

COMPARATIVE INCOME STATEMENT The comparative income statement gives an idea of a business over a period of time. The

changes in absolute data in money values and percentages can be determined to analyze the profitability of the business. It has also four columns. First two columns give figures of various items for two years. Third and fourth columns are used to show increase or decrease in figures in absolute amounts and percentages respectivel. 46

Objective of Study
To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.

OBJECTIVES:1. 2. 3. 4. 5. 6. 7. 8. To analyze the liquidity position of the firm. To analyze the solvency position of the firm. To study and analyze the overall profitability of the firm. To study and analyze the changes in working capital and fund flow position. To relate the various items of profit and loss account with sales. To compare the assets and liabilities of the current year and previous year. To study and analyze the capital structure of the firm. To determine the efficiency with which the current assets are managed.

47

COMPANY PROFILE
Indian Farm Forestry Development Co-operative Ltd. (IFFDC) is committed for integrated rural development and ecological up-gradation through afforestation on abandoned wastelands with community participation by promoting village level Primary Farm Forestry Co-operative Societies (PFFCS) and Primary Livelihood Development Cooperative Societies (PLDCS) for livelihood enhancement of the landless, marginal and small farmers, tribal and women in particular. Indian Farmers Fertilizer Cooperative Limited (IFFCO), the promoter organization of IFFDC started its farm forestry activities for wasteland development since 1986-87 in the states of U.P., M.P. and Rajasthan which has been handed over to IFFDC in 1995. More than, 26,900 ha. of wastelands comprising sodic, rocky, graveled, waterlogged, ravine, nutrient poor soils etc. have been converted into sustainable multipurpose green forests through 145 village level Primary Farm Forestry Cooperative Society (PFFCS) with a total membership of 28,500 (38% landless, 51% marginal and small farmers). Special emphasis has been laid on women participation which is 30% of the total membership. During last 16 years, IFFDC has successfully implemented various rural development projects with the financial support from India-Canada Environment Facility (ICEF) of CIDA (Canada), DFID, UK Govt., World Bank through Rajasthan Government, USAID through SIFPSA, International Fund for Agriculture Development (IFAD) through Uttarakhand Government , International Labour Organization (ILO), State Governments, , National Bank for Agriculture and Rural Development (NABARD), Indian Council of Agriculture Research (ICAR) IFFCO and IFFCO-Chhattisgarh Power Limited (ICPL). 48

Membership
Indian Farmers Fertilizer Co-operative Ltd. (IFFCO), National Co-operative Development Corporation (NCDC), Primary Farm Forestry Co-operative Societies (PFFCS), and Primary Livelihood Development Cooperative Societies (PLDCS) are its members. As on March 31, 2010, 164 Societies are members of IFFDC.

Share Capital
The subscribed and paid-up capital as on 31.03.2013 is Rs. 13.23 crores against the authorized share capital of Rs.100 crores. Out of this, Rs. 12.54 crores have been contributed by IFFCO, 0.10 crores by NCDC, 0.59 crores by PFFCS, PLDCS and State Co-operatives.

Mission To enhance the socio-economic status of the people through collective action by Sustainable Natural Resources Management

49

Objectives

Wasteland development for ecological balance and generate additional employment. Development of wasteland and rural community through Integrated Farming Systems approach.

Peoples involvement including women empowerment through Co-operatives/SHGs. To provide Financial, Technical & Extension services to the members of PFFCS and PLDCS.

50

BOARD OF DIRECTORS OF IFFDC As on March 31, 2013 1. Shri G. P. Tripathi 2. Shri D.K.Bhatt 3. Shri A.Roy 4. Shri Lakhan Singh 5. Shri Narayan Lal Ahir 6. Smt. Shanta Rao 7. Shri Lakhan Singh 8. Dr. K.G. Wankhede (Chairman) (Vice-Chairman) (Director) (Director (Director) (Director) (Director) (Chief Executive)

PARTNERS OF IFFDC 1. 2. 3. 4. Indian Farmers Fertilizer Cooperative Limited (IFFCO). IndiaCanada Environment Facility (ICEF), Canada. Department for International Development (DFID), UK. National Bank for Agriculture and Rural Development (NABARD)

51

5. 6. 7. 8. 9.

Indian Council of Agricultural Research (ICAR) State Govts. Save the Children, UK. International Fund for Agriculture Development (IFAD). United Nations International Children Education Fund (UNICEF).

10. International Labour Organization (ILO). 11. Japan International Cooperation Agency (JICA) 12. WORLP (Orissa). 13. Programme for Advancement of Gender Equity (PAGE), Haryana.

14. United States Agency for International Development (USAID) State Innovations in Family Planning Services Agency (SIFPSA), U.P. 15. National Oilseeds and Vegetable Oil Development Board (NOVOD). 16. Ministry of Non-conventional Energy Sources (MNES). 17. National Afforestation and Eco Development Board (NAEB), 18. Govt. of India (NWDB, DNES, JRY & DRDA). 19. Co-operative Rural Development Trust (CORDET). 20. Uttarakhand Gram Vikas Samiti 21. Indicus Analytics Pvt Ltd, New Delhi.

52

RESEARCH INSTITUTES / UNIVERSITIES Forest Research Institute (FRI), Dehradun Tropical Forest Research Institute (TFRI), Jabalpur Arid Forest Research Institute (AFRI), Jodhpur Central Arid Zone Research Institute (CAZRI), Jodhpur Indian Council of Agriculture Research (ICAR), New Delhi International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), Hyderabad NationalResearchCenter for Soya bean, (NRCS), Indore (M.P.). NationalResearchCenter for Agro-Forestry, (NRCAF), Jhansi (U.P.). MaharanaPratapUniversity of Agriculture and Technology (MPUAT), Udaipur (Raj.)

Awards and Honors

IFFDC Ltd as an organization has been honored with following prestigious awards: 1. Indira Priyadarshini Vrikashamitra Puraskar 1999 conferred by the Ministry of Environment and Forest, Govt. of India for excellence in afforestation and wasteland development. Five of its promoted PFFCS (Sangwa & Rakhyawal in Rajasthan, Katari & Madwa in U.P. & Karaiya in M.P.) have also been honored with this award for their outstanding work in afforestation & wasteland development in different years. 2. IMC Diamond Jubilee Endowment Trust Award, titled Environment, Agriculture and Rural Development Award 2002 conferred by Indian Merchants Chamber, Mumbai for

53

outstanding contribution to the cause of promoting the growth of rural economy in the country. 3. Thrice the Certificate of Appreciation of Corporate Social Responsibility Award 2004-05, 2007 and 2008 conferred by The Energy and Resource Institute (TERI), New Delhi for efforts made by IFFDC towards initiatives for Corporate Citizenship and sustainability. 4. Earth Matter award conferred on Chairman IFFDC by Earth Matters Foundation, New Delhi for integrated development of wastelands through afforestation in the country. 5. Amity Corporate Excellence Award Noida 2008 for its conferred outstanding

byAmityInternationalBusinessSchool

(AmityUniversity),

contribution towards afforestation on wasteland, environment conservation and promoting the growth of rural economy. 6. Amity HR Workplace Environment Award 2008 conferred by Amity International

Business School (Amity University), Noida on the occasion of 5th Global HR summit for its consistent and inexorable efforts to create a conducive environment yielding success and growth.

54

PRODUCT PROFILE

1.0 INTEGRATED FARM FORESTRY PROJECT: Last sixty years have witnessed an unprecedented rapid growth of population registering almost three fold increased. These numbers coupled with rapid industrialization, consumerism and major shift in living style resulted in tremendous pressure on land and water resources to meet food, fiber, wood, fuel, fodder, medicines, shelter and several other demands of varied products. Consequently, there has been over exploitation of natural vegetation and other resources. There has been particularly, utter neglect of land care resulting in its degradation, due to water erosion (90 m ha), salinity and alkalinity (7m ha) and flooding (20m ha), wind erosion (50m ha). Another 20m ha canal irrigation areas are under risk of becoming degraded. The National Wasteland Development Board (NWDB) has reported 158 million ha of different categories of land under different types of wastelands. It is well recognized that a large area in the country is degraded due to soil erosion. On the other hand, continued deforestation and over exploitation has resulted in decline of forest density, and growing stock, unable to cope with the increasing demand of people and industry for wood, fuel, fodder and other products. Total 26,910 ha. Wasteland (11389 ha. in U.P., 9100 ha. in Raj., 6429 ha. in MP and 26 ha in Uttrakhand.) has been afforestated and converted in the lush green forests. At present 145 PFFCS are managing inventory of 98.17 lakhs plants (35.98 lakhs in UP, 21.86 lakhs in Rajasthan, 40.22 lakhs in MP and 0.10 lakh in Uttrakhand) of such diverse species as Shisham, Subabool, Accacia, Eucalyptus, Karanj, Bamboo, Neem, Aonla, Guava, etc. 55

Nursery Raising: To ensure good quality seedling as per choice of the community and suitability of the land, nurseries were raised either at PFFCS level (centralized nurseries) or individual / group level. The project office provided necessary inputs & trainings for nursery raising and the nurseries were maintained under technical supervision of IFFDC. Some other species like grafted Mango, Aonla, Ber etc have also been procured from the various scientific nurseries which are being raised under the technical supervision of research station. During the year, these PFFCS have raised 11.93 lakhs saplings of multipurpose species for sale to forest dept., Land Reclamation Corporation, IFFCO, CORDET and Govt agencies etc.

Trading of Carbon Credits: 56

The Afforestation & Reforestation absorb Carbon Di-oxide (CO2) and thus reduce the CO2 in atmosphere. This reduction of CO2 can be used for off-setting the emission of CO2 mainly through industries in developed countries as per the approved guidelines of United Nations Frame Work Convention for Climate Change (UNFCCC). It is estimated that by planting 1.00 lakh hectares of new forest, a removal of 10 lakhMT CO2 from atmosphere is possible. Such reduction in CO2 from atmosphere can betraded as Voluntary Emission Reduction (VER) and is in demand in developed countries particularly in US and Europe. 2.0 RURAL LIVELIHOOD DEVELOPMENT PROJECTS: Poor people in rural area tend to be the most dependent on the direct utilization of natural resources for their livelihoods and are therefore the first to suffer when the resource base is degraded or destroyed. Some estimates suggest that harvesting of wild plant and animal species account for up to 50% of the cash income of poor households and that this heavy reliance results from a lack of alternative livelihood options. Biodiversity, in particular, often offers the greatest potential for the development of new products which may in turn offer the most opportunity for alternative and higher levels of income. For Livelihood Development, IFFDC started several programmes through need based participatory methodologies and improved technologies, which are as follows 2.1 WESTERN INDIA RAINFED FARMING PROJECT: In April 1999, IFFDC took up a project entitled Western India Rain fed Farming Project (WIRFP) in District Pratapgarh of Rajasthan, supported by the Department for the International Development (DFID) UK Govt. in 25 core villages for first two years. The project was expanded to Ratlam district of M.P. in additional 50 core villages w.e.f. January 2002. The project with the aim to enhance the livelihood of 1,50,000 poor tribal people dominated by Scheduled Tribes 57

(ST) mainly Bhils and Meenas in 400 villages (75 core, 100 dissemination villages and 225 proximal villages) has been successfully completed on 31st March,2006. However, the follow up of project interventions after withdrawal are continuing for long term sustainability under the facilitation of IFFDC.

939 Self Help Groups formed during the project period have saved Rs 65.15 lakhs and are functioning well through providing micro-finance services to the members. 925 Jankars (paraprofessional) identified from project villages itself (33% women) and trained are supporting the village community in their respective fields for planning, implementation and monitoring of the group activities. 22 Primary Livelihood Development Cooperative Society (PLDCS) promoted by IFFDC are functioning well and providing marketing, credit, guidance and service facilities to the tribal community in the project area. SHGS & PLDCS members, Office bearers and Jankars are being imparted need based trainings to upgrade their knowledge and skills, to make the Community Based Organizations (CBOs) able to cope up with the build-on needs of the tribal community. During the year, 40

58

trainings on Income Generating Activities (IGA) for SHGs and 20 trainings on Farming System Development, Soil & Water Conservation technologies for Jankars have been imparted.

2.2 LIVELIHOODS

IMPROVEMENT

THROUGH

INTEGRATED

RURAL

DEVELOPMENT (LIIRD) PROJECT IFFDC is implementing this project since December 2005 in 77 villages covering 11 clusters of Puri, Nayagarh, Kendrapada, Ganjam, Jagatsinghpur, Kalahandi, Koraput, Bolangir, Rayagada, Nuapada and Boudh districts of Orissa. The project is based on its participatory approaches , tested methodologies and technologies on Five J (pentagonal component of rural development) viz. Jal (water), Jangle (forest), Jameen (land), Janwar (live stock) & Jan (human) with financial support of IFFCO. Main objectives of the project are to build capacity and confidence of individuals through institutional development like self help groups to ensure the up gradation of their skills for undertaking IGAs; to optimize the efforts with involvement of the concerned state departments/agencies working in the area of rural development; to federate the Self employed endeavor into cooperative institution for sustainability; build up the trust and confidence in cooperative system and strengthen IFFCO's field programmes to benefit the farming community.

2.3 LIVELIHOOD IMPROVEMENT THROUGH COOPERATIVE DEVELOPMENT (LICD) PROJECT IFFDC has started its activities since April 2007 to implement this Project in 50 villages covering 5 districts of Jharkhand viz: Chaibasa, Gumla, Plamu, Hazaribag and Dumka based on 59

the participatory approaches and tested methodologies and technologies to develop livelihood options for the poor rural community by promoting and strengthening villages level Cooperatives with the support of Dept. of Corporation Govt. of Jharkhand. To institutionalize the project intervention and its sustainability, 50 village level Primary Livelihood Development Autonomous Cooperative Society (PLDACS) (one in each village) with total membership of 1195 (Male 829, Female 366) have been formed by mobilizing and organizing the poor rural community. These PLDACS are being nurtured and strengthened through holding regular meetings of the executive committees to create awareness and sharing the concept of PLDACS amongst the members. IFFDC is facilitating these PLDACS for preparation of their annual plans for undertaking livelihood development activities in the coming years.

60

2.4 LIVELIHOOD IMPROVEMENT THROUGH CULTIVATION OF MEDICINAL PLANTS, AFFORESTATION AND SOCIAL DEVELOPMENT (LIMCAS) PROJECT: IFFDC is implementing this project in villages Salka, Namana, Narayanpur, Mudgaon, Raghunathpur and Kathmunda, Dist Sarguja for 4 years (April 07 to March 11) with financial assistance of IFFCO-Chhattisgarh Power Limited (ICPL) to rehabilitate the displaced families of the nearby area of the proposed power plant. The displaced and freckled families were organized into 52 SHGs with membership base of 563 in the project villages to provide them an effective platform to identify for need based sustainable livelihood options. These SHGs have saved Rs 2.18 lakhs out of which 1.21 lakhs revolved as inter-loaning benefited to 285 members. It helped in organized the women of the displaced villages, inculcated the saving habits in the poor tribal community, increased access of the illiterate women to the banks and increased awareness regarding benefits of the power plant to be established in this area. 46 SHG members have been covered under Janta Bima Yojna by ITGI.Total 1085 meetings were conducted

(A) 1. 2. 3. 4. 5.

IFFCO Supported Projects Farm Forestry Projects. Livelihood Improvement through Integrated Rural Development (LIIRD) Project in Orissa. Rural Area Livelihood Development Project (RLDP), West Bengal. Integrated Rural Development Project, Shivagangai (Tamil Nadu). Integrated Rural Development Project, Amravati (Maharashtra).

61

6.

Integrated Rural Development Project, Chhindwara (M.P.).

(B) NABARD Supported Projects 1. 2. 3. Karaiya-Surkhi Watershed Development Project, Sagar (MP). Watershed Development Projects, Kui, Kukdar, Khurubhata in Chhattishgarh. Watershed Development Projects, D.B.Thanda, Dammanapet, Govindapally in Nizamabad (Andhra Pradesh). 4. 5. 6. 7. Indo-German Watershed Development Project Pratapgarh (Rajasthan). Wadi Project, Pratapgarh (Rajasthan) & Kawardha (Chhattisgarh). Pilot Project for Integrated Development (PPID), Sagar & Damoh (M.P.). Village Adoption Programme, Bilaspur (C.G.), Mandsaur and Neemuch (M.P.).

(C) Projects Supported by other Agencies 1. Livelihood Improvement through Afforstation, Cultivation of Medicinal Plants and Social Development (LIMCAS) Project in Sarguja, supported by IFFCO-Chhattisgarh Power Ltd. (ICPL). 2. National Agriculture Innovation Project (NAIP), supported by ICAR, New Delhi. 3. Rural Non Farm Development Agency (RUDA), Udaipur supported by Govt of Rajasthan.

62

4. Clinic Based Reproductive Health Service Project in Allahabad funded by USAID through State Innovation in Family Planning Services Agency (SIFPSA). 5. Uttar Pradesh Health Systems Development Project (UPHSDP) by IDA in U.P. 6. Livelihood Improvement through Cooperative Development (LICD) in Jharkhand supported by Ministry of Cooperation, Govt . of Jharkhand. 7. Indus Child Labour Project supported by International Labour Organization (ILO) in M.P. 8. Uttarakhand Livelihood Improvement Project for Himalayas (ULIPH) supported by International Fund for Agriculture Development (IFAD) in Uttrakhand. 9. Integrated Watershed Development Projects at Chhattarpur & Sheopur supported by Govt. of M.P. under NAREGA. 10. Formation, management and Capacity Building of SHGs under Swarnjayanti Gram Swarojgar Yojana of Govt. of M.P.

63

64

RESEARCH METHDOLOGY

RESEARCH Research comprises defining and redefining the problems, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, making deductions and reaching conclusions. In other words this may be said that the systematic approach concerning generalization and the formulation of a theory is considered as the report. RESESARCH METHODOLOGY Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying that how research is done scientifically. In it we study various steps that are generally adopted by a researcher in studying his research along with the logic behind them. Thus when we talk about research methodology we not only talk of the research methods but also consider the logic behind the methods we use in the context of our research study and explain why we are using particular method or technique and why we are not using others so that research results are capable of being evaluated either by the researcher himself or by others.

TYPES OF THE RESEARCH There are various types of researches exist that are conducted as par the requirement of the problem and the situation. Some important and popular types of researches are being defined here that are very frequently used for the purpose of conducting the research study for any given problem. 65

DESCRIPTIVE RESEARCH Descriptive research includes surveys and facts finding enquiries of different kinds. The major purpose of the descriptive research is description of the state of affairs as it exists at present. In social science and business research we quite often use the word Ex post facto research for descriptive research studies. Ex post facto research studies include attempts by researchers to discover causes even when they can not control the variables. ANALYTICAL RESEARCH In the case of the analytical research, the researcher has to facts and information already available, and analyze these to make a critical evaluation of the material. So in the case of the analytical research the researcher does not primarily consider on the collection of the data by using the various methods of data collection.

This research is based on descriptive as well as analytical.

METHODOLOGY OF THE STUDY:Research refers to a search for knowledge. It can be defined as a scientific and systematic search for pertinent information on a specific topic. It is a careful investigation or inquiry specifically through search for new facts in any branch of knowledge. It is a systematized effort to gain new knowledge. Thus, research refers to the systematic method consisting of enunciating the problem, formulating a hypothesis, collecting the facts or data, analyzing the facts and reaching certain conclusions in the form of solution towards the concerned problem.

66

The training is basically an in house training which intimated me with various aspects of the project. Here, while conducting the study I have relied on two types of data, viz. primary data and secondary data. Based on the outcome of primary and secondary data, various statistics were prepared.

DATA SOURCES:Data collection is a very important work in the research process. There are two types of sources from which data can be collected. 1 PRIMARY DATA- Primary data are those which are collected afresh and for the first time and thus happen to be original in character. There are numbers of methods of collecting primary data. The data collected through meetings with various managers & employees of Finance and accounts department. I worked under guidance of Mr. Praveen Agarwal, who gave me his valuable time and information. He sent me to various sections of Finance & Accounts Dept. and other departments for collection of data.

Methods of Primary Data: Observation Method Interview Method Through Schedules

2. SECONDARY DATA- Secondary data means data that are already available i.e. they refer to the data which have already been collected and analyzed by someone else. Secondary data may either be published data or unpublished data. One must be very careful in using secondary 67

data. One must make a minute scrutiny because it is just possible that the secondary data may be unsuitable or may be inadequate in the context of the problem which one want to study.

Sources of collection of secondary data:

Balance Sheet Profit & Loss Account Annual Reports Budget Accounting Reports Financial Year Book

Research Design The research will be both descriptive and conclusive. Descriptive research is a kind of research where the description of the topic is given. Conclusive research is the kind of research in which the conclusion is given at the end of the report.

Other sources of information

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FINDING AND ANALYSIS

Calculation and Interpretation of Ratios

1] Current Ratio:
Formula: Current Ratio=

Current Assets Current Libilities

2010-2011
139,552,971.36

YEAR Current assets Current liabilities Current ratio

2011-2012
166,433,899.78

2012-2013
219,493,435.82

48,969,933.25 5.39

64,251,375.00 3.11

87508941.80 2.46

250000000 219493435 200000000 166433899 150000000 139552971 Current Assests Current Libilities 100000000 64251375 48969933 50000000 5.39 0 2010-2011 2011-2012 2012-2013 3.11 2.46 87508941 Current Ratio

69

Comments:-In IFFDC the current ratio is 5.39 in 2010-11, 3.11 in 2011-12 and 2.46:1 in 201213.Current ratio is decreasing in each year its proof that current ratio should be 2.1 which shows the company sound position.

2] Liquid Ratio:
Formula: Liquid ratio =
Quick Assets Quick Liabilitie s

YEAR Quick Assets Quick liabilities Liquid ratio

2010-2011
139,552,971.36 48,969,933.25 5.39

2011-2012
166,433,899.78 64,251,375.00 3.11

2012-2013
219,493,435.82 87508941.80 2.41

250000000 219493435 200000000 166433899 150000000 139552971 Quick Assests Quick Libilites 100000000 64251375 48969933 50000000 5.39 0 2010-2011 2011-2012 2012-2013 3.11 2.41 48508941.8 Liquid Ratio

Comments: 70

The liquid or quick ratio indicates the liquid financial position of an enterprise. In all 3 years the liquid ratio is different, which is not better for the company. The liquid ratio of the IFFDC has Decreased in all years. Liquid ratio of Company is favorable because the quick assets of the company are higher than the quick liabilities. The liquid ratio shows the companys ability to meet its immediate obligations promptly.

3] Proprietary Ratio:
Formula:

Proprietary Ratio = YEAR

Proprietryfund Total fund

2010-2011 2011-2012 2012-2013

Proprietary fund Total fund Proprietary ratio

132244271.89

132327000.00

132354000.00

20160857.7

40008770.91

11283053.69

6.56

3.31

11.73

71

140000000 132244271.9 120000000 100000000 80000000 60000000

132327000

132354000

Proprietary fund Total fund Proprietary ratio 40008770.91

40000000 20160857.7 20000000 6.56 0 2010-2011 20011-2012 2009-2010 3.31 11283053.69 11.73

Comments:
Proprietary ration shows relationship between proprietary fund and total fund .The percentage reduce in 2012 and gradually increase in 2013.Its shows a sound position of Company in terms of proprietary ratio.

4] Gross Profit Ratio:

Formula:

Gross Profit Ratio=

Gross Profit *100 Net Sales

2010-2011
(2314404.70) 1876646131.21 (0.12)%

Year
Gross Profit Net Sales Gross Profit Ratio

2011-2012
7511837.06 1961740395.95 0.38%

2012-2013
5422760.88 1681742954.09 0.32%

72

2E+09 1.8E+09 1.6E+09 1.4E+09 1.2E+09 1E+09 800000000 600000000 400000000 200000000 0

1876646131

1961740396 1681742954

Gross Profit Net Sales Gross Profit Ratio -0.12 7511837.06 0.38 5422760.88 0.32 2011-2012 2012-2013

-2314404.7 -2E+08 2010-2011

Comments:The gross profit is the profit made on sale of goods. It is the profit on turnover. In
the year 2010-2011 the gross Loss ratio is (.12)%. It has decreased to .38% in the year 20112012 due to increase in sales with corresponding more increase in cost of goods sold. It is declined in 2012-2013 due to high cost of purchases & overheads. Although the gross profit ratio is declined during the years2012-13. The net sales increased in 2010-11 and 2011-12 but declined in 2012-13. and gross profit is increased in 2011-12 but decline in 2012-13.

73

5] Operating Ratio:
Formula:

Operating ratio =

COGS *100 Net Sales

YEAR

2010-2011

2011-2012

2012-2013

COGS Net sales Operating ratio

1867127294.53 1876646131.21 99.492%

1950500362.6 1961740395.95 99.427%

1672248355.57 1681742954.09 99.435%

2E+09 1.8E+09 1.6E+09 1.4E+09 1.2E+09 1E+09 800000000 600000000 400000000 200000000 0 2010-11 2011-12 2012-13

COGS NET SALES OPERATING RATIO

Comments: The operating ratio shows the relationship between costs of goods sold & net
sales. Operating ratio over a period of 3 years when compared that indicate the change in the operational efficiency of the company. 74

The operating ratio of the company has decreased in 2 year and increase a little in last year. This is due to increase in the cost of goods sold, which in 2010-2011 was 99.49%, in 2011-2012 was 99.42% & in 2012-2013 it is 99.43%. Though the cost has increased in 2011-2012 as compared to 2010-2011, it is reduced in 2012-2013

6) Net Profit Ratio:

Formula:

Net profit ratio =

NAPT * 100 Net Sales

YEAR

2010-2011

2011-2012

2012-2013

NPAT Net Sales Net Profit Ratio

-2640235.70 1876646131.21 (0.14)%

6986837.06 1961740395.95 0.356%

4494735.22 1681742954.09 0.267%

75

2E+09 1961740396 1876646131 1681742954 1.8E+09 1.6E+09 1.4E+09 1.2E+09 1E+09 800000000 600000000 400000000 200000000 -2640235.7 -0.14 0.36% 2010-2011 2011-2012 2012-2013 6986837.06 4494735.22 0.27% -2E+08 0 NPAT Net Sales Net Profit Ratio

Comments:
The net profit ratio shows the relationship between NPAT & net sales. Net profit ratio over a period of 3 years when compared that indicate the change in the profit efficiency of the company. The net profit ratio of the company has decreased in 2 year and increase a little in last year. This is due to decrease in NPAT which in 2010-2011 was 0.14%, in 2011-2012 was 0.347% & in 2012-2013 it is 0.267%. Though the profit has increased in 2011-2012 as compared to 20102011, it is reduced in 2012-2013

76

7] Cost of Goods Sold Ratio:

Formula:

Cost of goods sold Ratio

COGS *100 Net Sales

2011-2012
1950500362.6 1961740395.95 99.427%

YEAR COGS Net sales

2010-2011
1867127294.53 1876646131.21

2012-2013
1672248355.57 1681742954.09 99.435%

Cost of goods sold 99.492% ratio

2E+09 1867127295 1950500363 1961740396 1876646131 1672248356 1681742954 1.8E+09 1.6E+09 1.4E+09 1.2E+09 1E+09 800000000 600000000 400000000 200000000 99.49% 2010-2011 99.43% 2011-2012 99.44% 2012-2013 0 COGS Net sales Cost of goods sold ratio

77

Comments:
The Cost of goods sold ratio shows the relationship between costs of goods sold & net sales. Operating ratio over a period of 3 years when compared that indicate the change in the operational efficiency of the company. The operating ratio of the company has decreased in 2 year and increase a little in last year. This is due to increase in the cost of goods sold, which in 2010-2011 was 99.49%, in 2011-2012 was 99.42% & in 2012-2013 it is 99.43%. Though the cost has increased in 2011-2012 as compared to 2010-2011, it is reduced in 2012-2013

8] Cash Ratio:
Formula:

Cash Ratio =

Cash Bank Total Current Liabilitie s

YEAR Cash + Bank

2010-2011
48938157.01

2011 -2012
67539746.61

2012-2013
65916903.84

Total Current Liabilities

14969933.25

34251375.00

48508941.8

Cash ratio

3.27

1.97

1.36

78

70000000 60000000 48938157.01 50000000 40000000 30000000 20000000 10000000

67539746.61 65916903.84

48508941.8

34251375

Cash + Bank Total current liabilities Cash ratio

14969933.25

3.27 0 2010-2011

1.97 2011 -2012

1.36 2012-2013

Comments:
Cash ratio is the relation between cash and bank and total liabilities.The company cash ration percentage decrease every year.In 2011 it was 3.27%,in 2012 it was 1.97% and in 2013 it is 1.36%.It shows the reduce in cash ratio.It shows a negative impact on company ration inreltion with cash,bank.

79

Calculations and Interpretation of Comparative Statement

INDIAN FARM FORESTRY DEVELOPMENT COOPERATIVE LTD. I) COMPARATIVE STATEMENT
A) Comparative Balance Sheet Particulars Assets Fixed Assets Investments Current Assets Inventories Sundry Debtors
59081.40 2975394.16 62697146.61 40702277.61 138291295.69 2520239.41 4112923.43 65916903.84 46943369.14 157025597.71 2461158.01 1137529.27 3219757.23 6241091.53 18734302.02 4165.71 38.23 5.14 15.33 13.55 5757395.91 26100000.00 6432161.89 31100000.00 674765.98 5000000.00 11.72 19.16

2012

2013

Increase/Decrease

%age

Cash & Bank Balance Loan and advances Total Assets Liabilities Liabilities Provisions Total Liabilities

33726375.00 525000.00 138291295.69

47713941.80 795000.00 157025597.71

13987566.80 270000.00 18734302.02

41.47 51.43 13.55

80

INDIAN FARM FORESTRY DEVELOPMENT COOPERATIVE LTD.

B) Comparative Income Statement Particulars Net Sales Less : Cost of Goods Sold Gross Profit 11240033.35 Operating profit/loss 11240033.35 Add: Other income 11704709.89
Project Contribution/Grant

2012 1961740395.9 5 1950500362.6 0

2013 1681742954.0 9 1672248355.5 7 9494598.52 9494598.52 15532223.15 34635466

Increase/Decrease (Rs). -279997441.86 -278252007.03 -1745434.83 -1745434.83 3827513.26 8000634.00

%age 14.27 14.27 15.53 15.53 32.70 30.04

26634832.00 Less: non-operating exp. Project exp. 29104268.46 Admin. Exp. Depreciation 890057.61 Net profit Before Tax 7511837.06 Less : Tax provision for wealth tax, taxation, fringe benefit tax & deferred tax 525000.00 Net profit After tax 6986837.06 12073412.11

42822481.51 10482801.48 934243.8 5422760.88

13718213.05 -1590610.63 44186.19 -2089076.18

47.13 13.17 4.96 27.81

928025.66 4494735.22

403025.66 2492101.84

76.77 35.67

81

Calculations and Interpretation of Cash Flow Statement Cash flow Statement (in Rs.).
Particulars Profit Before Tax Net Cash Flow Operating Activity Net Cash used in Investing Activity Net Cash used in Financing Net Inc/Dec in Cash & Equivalent Cash and Equivalent at the Begin of the Year Cash and Equivalent at the End of the Year 62697146.61 65916903.84 3219757.23 5.1354127 48938157.01 62697146.61 13758989.6 28.1150547 2012 7511837.06 9699274.53 13676261.49 82728.11 13758989.6 2013 5422760.88 3771208.34 3192757.23 27000 3219757.23 Increase/ Decrease -2089076.18 -5928066.19 -10483504.26 -55728.11 -10539232.37 %age -27.810457 -61.118656 -76.654752 -67.362968 -76.598883

82

CONCLUSION

1.

Comparative Balance Sheet reveals that total Assets of IFFDC increased during a year by 13.55%.

2.

Total Liabilities increased during a year by 41.63 %.

83

LIMITATION ON STUDY

The study is limited to three financial years i.e. from 2010-13 The data used in this study has been taken from the Balance sheet & their related schedules of IFFDC Ltd. New Delhi as per the requirement and necessarily, some data are grouped and sub-grouped.

Since this study is being done for academic purpose the time available does not allow the student to go in depth.

Information or the secondary data required for the study is also limited. Some of the information that was essential for this study cannot however be given in this report due to their confidential nature.

The scope and area of the study was limited to corporate office of IFFDC (Finance Division) New Delhi only.

84

BIBLIOGRAPHY

Books: P.TULYSYAN S.SIDDHIQUI

Websites: www.google.com iffdcho@iffdc.org.in www.iffdc.org.in

85

THANK YOU

86